Computers, with the capability to store and process large amounts of information, have fast become the most important tool of major businesses around the world. In the modern age, information processed and stored on computers and other electronic media has been a lightning rod for controversy in litigation.

Current discovery rules have proven a clumsy mechanism for addressing discovery disputes over electronic data. Complying with discovery requests for such material is often incredibly costly and, in some instances, financially prohibitive or simply impossible.

New Federal Rules

In the wake of these growing concerns, the Judicial Conference Committee on Rules of Practice and Procedure's Advisory Committee on Civil Rules embarked on a path in 1999 which ended in 2005 with a set of proposed revisions to the federal discovery rules. These revisions will become law on December 1, 2006, absent further revisions.

The Practical Impact of the Proposed Revisions

If adopted, the new rules represent a sea change in e-discovery in a wide range of cases - antitrust, securities, products liability and commercial, among others. They may also require businesses to anticipate and prepare for litigation and perhaps modify, in the process, business practices by which electronic information is generated and stored. Data generated by perhaps thousands of employees and stored electronically may be subject to discovery under the proposed revisions. This prospect requires an understanding of just what the new rules require, and what they do not.

The New E-Discovery Rules

Rule 26(f) - Early litigant conference to plan discovery and prepare proposed case management and scheduling orders.

  • Proposed Rule 26(f)(3) requires the parties to discuss prior to the Rule 16 conference with the trial judge "any issues relating to disclosure or discovery of electronically stored information, including the form or forms in which it should be produced."

  • Rule 26(f), as amended, also requires the parties "to discuss any issues relating to preserving discoverable information in preparing a discovery plan to propose to the trial court."

  • The Advisory Committee felt that because the parties are to discuss the preservation of electronic files "does not imply that courts should routinely enter preservation orders." It also cautioned against the ex parte entry of such orders except "in exceptional circumstances."

Rule 16 - Incorporating realistic discovery provisions into the initial case management or scheduling orders and planning for e-discovery.

  • The Rule 16 conference anticipates the parties' early consideration of electronic discovery issues by providing that the court's scheduling order "may include ... provisions for disclosure or discovery of electronically stored information." As the Committee's Note states: "The amendment to Rule 16(b) is designed to alert the court to the possible need to address the handling of discovery of electronically stored information early in the litigation if such discovery is expected to occur."

Rule 26(a) - Changes to self-executing disclosures by the parties.

  • The proposed amendment of the voluntary initial disclosure Rule 26(a)(1) adds an additional category of information subject to disclosure very early in the case: electronically stored information.

Rule 26(b)(2) - When is electronically stored information "not reasonably accessible"?

  • Perhaps the amendment creating the most controversy, especially among plaintiff's lawyers, is the proposed revision to Rule 26(b) which requires a party responding to discovery requests to identify sources of electronically stored information that are "not reasonably accessible" because of undue burden or cost.
  • The proposed rule contemplates that once a responding party has identified information as "not reasonably accessible," it may either move for a protective order or the requesting party may file a motion to compel. Either way, unless the parties can negotiate a compromise (and they are required to confer beforehand), the trial judge will have to decide the issue. However, even if the responding party has established that the electronic information is not reasonably accessible, the court may allow the discovery on a showing of "good cause."
  • Since the court may order "focused discovery, which may include sampling of the sources, to learn more about what burdens and costs are involved in accessing the information, what the information consists of, and how valuable it is for the litigation in light of information that can be obtained by exhausting other opportunities for discovery," it may be wise for responding counsel to take the initiative by anticipating this possibility and furnishing in its response to the requested discovery persuasive reasons why sampling or further discovery would not satisfy the "good cause" criteria.
  • Given the range of possibilities depending on the issues in the case, the age of the data sought, the methods and sources of storage, and a multitude of other factors, it is not surprising that the Advisory Committee illustrated but declined to create a compendium of all of the factors complicating e-discovery. However, "reasonable" accessibility is most frequently hampered by a need to recreate the environment in which the electronic files were originally created, by lost or deleted data, the deterioration of data backup tapes, or the significant costs - in labor and dollars - of tape restoration, data preservation and the conversion of the electronic information to a usable format.

Rule 26(b)(5) - The "clawback" of privileged material inadvertently disclosed in the production of e-discovery.

  • This proposed amendment establishes a procedure to assert privileges and work-product protections following production.

  • Under the so-called "clawback" amendment, a party producing electronically stored information has the right to assert at some point after production that certain material is privileged or protected from disclosure, requiring the receiving party to return, sequester or destroy the information and not to use or disclose it to any third party. If the receiving party disputes the validity of the producer's privilege or work-product claims, or believes the producing party has waived these claims, she may file a motion to have the trial court resolve the issue. Until the dispute is resolved, however, amended Rule 26(b)(5)(B) prohibits the receiving party from using or disclosing the contested information. If such information has been disclosed prior to the receipt of the producing party's privilege claim, the receiving party "must take reasonable steps to retrieve it."

Rules 33 and 34(a) and (b) - Interrogatories and document requests involving electronically stored information.

  • Amended Rule 33(d) permits a party served with interrogatories to designate electronically stored information in lieu of an answer, provided that "the burden of deriving or ascertaining the answer is substantially the same for the party serving the interrogatory as for the party served."

  • In its Note to amended Rule 33(d), the Committee contemplates that to utilize the Rule 33(d) option, the producing party may have to furnish its adversary with technical support. This may entail the use of third-party vendors capable of performing computer forensics.

  • The proposed amendment to Rule 34(a), adding "electronically stored information" as a production category in addition to "documents," also permits a party requesting electronically stored information to "test or sample" as well as inspect and copy such information.

  • The Committee's Note to amended Rule 34(a) cautions, however, that testing and sampling a respondent's electronic data "is not meant to create a routine right of direct access to a party's electronic information system" and that "[c]ourts should guard against undue intrusiveness resulting from inspecting or testing such systems."

  • Amended Rule 34(b) allows the party requesting electronically stored information to specify the procedure to be used in its production.

  • If the request fails to specify the form in which the electronically stored information is to be produced, the 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," and (2) the responding party "need not produce the same electronically stored information in more than one form."

Rule 37(f) - Sanctions for the loss or destruction of electronically stored information.

  • This amendment provides what the Advisory Committee has characterized as "limited" protection against sanctions for a party whose electronically stored data has been lost by the routine, good-faith operation of its computer system.
  • Under this new rule, called the "safe harbor" provision, "[a]bsent exceptional circumstances, a court may not impose sanctions ... 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."
  • Whether, and under what circumstances, the loss or destruction of information subject to a "litigation hold" is sanctionable is left open by amended Rule 37(f).
  • The rule does not contain a litmus test of culpability for lost or destroyed electronic data since any sanction will depend on multiple factors such as the steps taken by the party to implement a litigation hold, whether the information is stored on the party's own system or that of a third party, and whether the lost information is discoverable and relevant. Clearly, if the destruction of the electronically stored information at issue was not pursuant to a computerized storage system's "routine operation," or the party with control over the information is found to have acted recklessly or intentionally in failing to preserve the information, a court may conclude that sanctions are appropriate.

Rule 45 - Conforming changes to the Subpoena Rule to allow for the production of electronically stored information.

  • Rule 45 has been amended to conform to the other changes proposed by the Advisory Committee for the discovery of electronically stored information. Just as such information can be obtained from a party under Rule 34(a), Rule 45 allows the same kind of information to be sought by subpoena from a non-party.

For Further Information

Businesses that routinely utilize electronic media to generate and store data should seek out experienced counsel who have studied and mastered the nuances of the proposed revisions to the federal Rules. Litigation preparation and planning will be crucial in reducing the financial burdens and costs associated with complying with the new rules.

If you have any questions about this Alert, please contact Alan Klein or Michael S. Zullo of the Duane Morris Trial Practice Group.

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