November 28, 2006
The new Federal Rules of Civil Procedure, which take effect on December 1, 2006, recognize the importance of electronic discovery in a legal action. The new rules address the following four areas: mandating early attention between the parties to electronic discovery issues, recognizing that some electronic information is more accessible than others, determining form and method for production of electronic information, and presenting guidelines for the creation of a “safe harbor” or the imposition of sanctions for the deletion or failure to disclose information during discovery. These rule changes will have a significant impact on the ways organizations should keep, archive and destroy electronic information and prudent companies will modify their practices to gain the protections these rules afford as well avoid the sanctions now imposed for failing to adhere to these practices. Here is a brief overview.
Early Attention to Electronic Discovery: Rules 16 and 26 (f) mandate early and meaningful meetings and conferences with respect to electronically stored information. Parties must address such issues as preservation of stored information, the scope of discovery, related costs and burdens, the form by which electronic information is ultimately produced, and claims of privilege or protection as trial-preparation material. The rules are designed to alert the court early if electronic discovery is expected to occur. Organizations should consider the impact of this rule and reassess their document storage solutions to minimize both the cost of discovery and the degree of intrusion electronic discovery can cause within a company.
Accessibility to Electronic Information: Rule 26 (b) addresses the scope and limits of discovery. A party need not initially provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. Once it is shown that a source of electronically stored information is not reasonably accessible, the requesting party may still obtain discovery by showing good cause, considering the limitations of Rule 26(b)(2)(C) that balance the costs and potential benefits of discovery. The decision whether to require a responding party to search for and produce information that is not reasonably accessible depends not only on the burdens and costs of doing so, but also on whether those burdens and costs can be justified in the circumstances of the case. Appropriate considerations may include: the specificity of the discovery request; the quantity of information available from other and more easily accessed sources; the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources; the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources; predictions as to the importance and usefulness of the further information; the importance of the issues at stake in the litigation; and the parties’ resources.
This is a significant change from the prior version of the rules to the extent that the rules recognize that it is neither practical nor possible to produce all responsive electronic information. Organizations should take this change in paradigm into consideration when they develop storage and archival solutions for their electronic information.
Storage and Production of Information: Rule 34 (b) addresses the form or forms in which electronically stored information is produced. If an objection is made to a requested form or forms for producing information, or if no form was specified in the request, the responding party must state the form or forms it intends to use. If a request does not specify the form or forms for producing electronically stored information, a responding party must produce the information in a form or forms in which it is ordinarily maintained or in a form or forms that are reasonably usable. A party need not produce the same electronically stored information in more than one form.
Court Sanctions: Rule 37 addresses the sanctions a court may or may not impose in a failure to produce information. It is important to note that absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system. Good faith may require that a party intervene to modify or suspend certain features of the routine operation of a computer system to prevent the loss of information, if that information is subject to a preservation obligation.
Organizations would be well advised to ensure that the record retention policies account for its electronic information as well as its paper records since this protocol will form the basis for the court’s assessment on whether the destruction was done in good faith.
Observations: Under the new rules, there is no question that if documents are deleted, companies and organizations face charges of spoliation and chances of court sanctions. In a recent precedent setting case, a company and the law firm representing the company in a particular dispute were both sanctioned for not disclosing electronic information stored on a secret partition of a repurposed company computer server. The case gives good reason for companies to formulate and implement a records retention program that states when documents may be deleted to avoid a chance of spoliation. According to a national study, in the next four years, 75 percent of all global companies will be involved in a regulatory or legal action requiring a systematic approach to legal discovery. Without a formalized records retention policy, businesses will spend more money on gathering and producing documents than on the actual legal services for these actions.
Information Overload: The amount of information being created, stored, and produced electronically is staggering. Consider these facts from the School of Information Management & Systems of the University of California, Berkeley:
- In 2002, 92 percent of information was kept electronically.
- In 2002, 5 exabytes (1018 bytes) of new information was created.
- Paper documents comprised less than 0.01 percent of new information.
- Between 1999 and 2002, information grew at 30 percent per year.
- Instant messaging generates five billion messages a day (750 gigabyte), or 274 terabytes a year.
- E-mail generates about 400,000 terabytes of new information each year worldwide.
- 800 megabytes of information is created per person per year.
It would be a daunting task to sift through the vast amounts of information that may be merely earlier versions, stale or non-responsive in the shadow of litigation. It is good business sense for organizations to define their electronic information prior to any legal action so as to best respond to a future action in a reasonable and cost efficient manner.
If you have any questions about this or any other matter related to the use of electronic discovery, please contact Alan M. Winchester 212-313-5403 or the Harris Beach attorney with whom you usually consult.
This Legal Alert provides a brief analysis or comments on matters related to the Federal Rules of Civil Procedure. This alert does not purport to be a substitute for advice of counsel on specific matters.
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