In this article, FindLaw columnist Eric J. Sinrod examines the responsibilities of the government and private enterprise pertaining to electronic information under the Federal Rules of Civil Procedure for electronic discovery and the Freedom of Information Act. This installment addresses electronic discovery; Part Two will cover the Freedom of Information Act.
The electronic age has arrived, and along with it, the Federal Rules of Civil Procedure (FRCP) and the Freedom of Information Act (FOIA) have been strengthened in terms of electronic and FOIA discovery requirements placed on companies and government.
Electronic Discovery In Civil Cases
The Amended FRCP
The FRCP was amended effective December 1, 2006.
Under amended Rule 16(b), parties must get ready for a scheduling conference to consider electronic discovery plans within 120 days of the start of a lawsuit.
Moreover, at least 21 days before this conference, the parties must meet and confer to discuss and try to agree upon electronic discovery procedures for the court, per Rule 26(f).
Thus, the parties must be formulating their electronic discovery plans within the first 100 days of the life of a case.
While the purpose of the amended rules was to provide early structure, uniformity and predictability, the truth is that right from the start of a lawsuit, a party must start evaluating with its IT team and outside counsel where it stands in terms of its own electronic data.
Data can be located live on the network, on various servers, in hard drives, in shared drives, on laptops, personal digital assistants, and on backup tapes.
Not surprisingly, electronic discovery is expensive. Before these new rules, cases were resolved before parties and counsel immersed themselves in the burden and expense of full-on discovery.
Now, however, with the new rules, parties in federal cases have no choice but to move forward with the burden and expense of electronic discovery at the start of a case.
Of particular importance is amended Rule 26(a), which broadens the definition of electronic items that may be the subject of discovery from "documents" or "data compilations" to include all electronically stored information.
Therefore, while previously parties might have been able to try to shield certain types of electronic information from discovery, the other side now can conceivably demand everything from standard Word documents and emails to voicemail messages, instant messages, blogs, backup tapes and database files.
Still, parties can argue that the burden of any particular demand outweighs the probative value of the electronic information sought. Of course, whether a judge will agree is another matter.
States Are Getting Into The Act
Electronic discovery is not being addressed only with respect to federal cases, as states now are getting into the act.
For example, the Judicial Council of California recently proposed its own set of electronic discovery amendments.
While the amended federal rules steer clear of providing a precise definition of what constitutes electronically stored information, it does cover information "stored in any medium" so long as it can be "retrieved and examined."
In this way, it avoids any specific definition that later could be outstripped by advances in technology.
The proposed California amendments take a different tack, referencing information that is stored in an electronic medium and relating to technology having "electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities."
While this comes across as quite broad, the federal definition might be better, as it later may be less capable of evasion by new technology.
The proposed amendments do differ markedly when it comes to the question of inaccessible information. The federal approach takes the position that a party seeking discovery must seek leave of court to force another party to produce information that the latter deems inaccessible.
If the California changes take effect, a responding party would have to seek a protective order from a court to avoid producing information on the grounds that it is inaccessible or unreasonably burdensome. This approach increases the risk for responding parties.
The proposed California amendments parallel the federal ones in allowing for cost-shifting if production proves burdensome and expensive. It also allows for relief from production if the information sought is available from less intrusive sources, or if its value is far outweighed by its burden.
When it comes to providing an actual safe harbor for information that has been "lost, damaged, altered, or overwritten" because of the routine and good faith operation of an electronic information system, the California proposed rule changes are more clear than the federal amendments.
That is good news, as lawyers and clients live in mortal fear of death-knell sanctions resulting from the failure to preserve and produce electronic information.
But California does not explicitly set forth a formal procedure when it comes to privileged information that has been inadvertently produced.
Rather, the state law would require the producing party to notify the receiving party of the problem. At that point, the receiving party would need to immediately sequester the information - either for return or for court determination.
While some state proposals relating to electronic discovery may come from good ideas, it would be beneficial if such proposals did not differ much, if at all, from the federal amendments.
All parties would benefit from a relatively uniform set of legal rules that they can count on.
Let's now look at some specific electronic discovery issues that already have arisen in cases.
Specific Electronic Discovery Issues
Retention Policies/Litigation Holds
It is not unusual for companies to purge hard copy and electronic information after the expiration of a predetermined time limit. (Deleted electronic information often can be recovered from backup tapes, but at a cost.)
A company will not ordinarily be sanctioned for deleting emails as part of what the law considers a "routine, good-faith operation."
However, if a company becomes aware of potential or actual legal action, it must institute a litigation hold to preserve relevant information, notwithstanding pre-existing retention policies.
And the hold must not just be a policy to preserve relevant information--the policy must be followed in practice. Indeed, in the case of United Medical Supply v. United States, the responding party was required to come forward and establish that the litigation hold was effective in practice.
Insufficient resources
Can parties ever escape their electronic discovery obligations because they do not have adequate financial, manpower or technical resources to comply?
Some courts are not sympathetic to such a plea. In Williams v. Taser International, the responding party was a relatively small company with about 245 employees. When faced with electronic discovery obligations, Taser hired and trained a technology employee to manage the discovery process.
The judge said this was enough. He maintained that the company still had to make all reasonable efforts, including the retention of additional information technology professionals to get the job done.
No Reasonable Accessibility
You often hear that electronic discovery materials are not reasonably accessible and would, therefore, not need to be produced. Unfortunately, that argument is not always accepted, especially where the probative value of the information outweighs the burden of production.
For example, in Best Buy v. Developers Diversified Realty, the responding parties argued that emails and other electronic information were not reasonably accessible because the information would have to be retrieved from a back-up system. They contended that the cost of recovering the information would be in the six figures.
The judge wasn't having any of it and ordered the information produced within a mere 28 days.
Format of Produced Materials
Disputes may arise over the proper format of electronic material the sides must produce.
In Williams v. Sprint, the court ruled that electronic documents had to be produced in native format. This meant that metadata had to be intact, including features such as file owner, date of creation, senders, recipients, routing data and subject lines.
In the more recent case of Columbia Pictures Industries v. Justin Bunnel, the court disagreed with the responding party. The judge ordered the production of information temporarily stored in random access memory--even though such information might only be stored for extremely short periods of time.
Cost Shifting
Responding parties have argued that costs of complying with electronic discovery demands should, under certain circumstances, be shifted to the propounding parties.
This is more likely to be the case where the costs associated with electronic discovery are expected to be high and the probative value of the discovery sought is relatively low.
More often than not, however, parties are required to pay for their own costs when producing electronic information.
In PSEG Power New York v. Alberici Constructors, the responding party argued that it should not have to pay the heavy freight of producing a large volume of emails along with attachments. The court disagreed.
Sanctions
Getting it wrong when it comes to fulfilling electronic discovery obligations can have major repercussions in terms of the potential for sanctions.
In the case of z4 Technologies v. Microsoft Corporation, a defense witness revealed at a deposition immediately before trial that an e-mail he had sent to Microsoft had been provided to Microsoft attorneys more than a year before the deposition.
It turned out Microsoft had withheld production of the email until responses to deposition questions revealed the existence of the email.
Once that was revealed, the presiding federal judge ruled that the email was favorable to the plaintiff's position, which did not help the cause of the defense in dealing with its failure to produce.
The judge's decision also pointed out that Microsoft failed to correct deposition testimony eight months before the start of the trial stating that an alleged database did not exist.
In addition, the judge concluded that Microsoft neglected to apprise the plaintiff that the database could be located in a sub-folder on a particular CD that had been produced.
As a result of this and other (mis)behavior, the judge determined that the defense had engaged in litigation misconduct and ordered Microsoft to pay additional damages of $25 million, as well as almost $2 million in attorney's fees to the plaintiff.
The judge noted that he had the discretion to award triple the jury's verdict because of the litigation misconduct. That would have amounted to an extra $345 million in damages. Luckily for Microsoft, he decided not to pull the trigger.
The z4 case demonstrates how even a company with the size and sophistication of a Microsoft can get it wrong when it comes to electronic discovery.
And if Microsoft can get it wrong, less sophisticated companies also can get it wrong--companies that may not have the financial wherewithal to afford the extra damages for e-discovery mistakes.
Many Companies Are Not Ready
LiveOffice, a provider of on-demand messaging security, archiving and compliance solutions, released findings less than a year ago from a survey that showed that many companies are not prepared to comply with the foregoing FRCP amendments.
Indeed, of the 400 IT managers and consumers polled on a nationwide basis, while 63 percent already have been required to produce email as part of litigation, 53 percent admit that they are not in a position to meet all of the requirements of the FRCP amendments, and 52 percent do not have an "e-discovery" plan that has been prepared by legal counsel.
This is troublesome. Indeed, 28.9 percent of the respondents were not even aware of their FRCP obligations.
Incredibly, nearly a third of respondents would not be able to produce an email that is a year old, if required. This might result from the fact that approximately 25 percent of companies purge their emails manually or automatically after 90 or fewer days.
While it is not against the law to have record retention/destruction practices under certain circumstances, data cannot be destroyed once a company is on notice that the data relates to issues relevant to potential or actual litigation.
It is no wonder, then, that IT managers cringe when it comes to e-discovery requests. Many respondents find that dealing with the Internal Revenue Service is the only activity more unpleasant than dealing with e-discovery demands, and more than half would rather have a cavity filled by a dentist than deal with an e-discovery request. I kid you not.
Companies need to recognize the imperative of meeting their e-discovery obligations, especially given the scope of related responsibilities.
According to the survey, an average employee will send and receive more than 135 emails daily. Thus, a midsize company with 500 employees will generate 17.5 million e-mails per year.
Moreover, the average employee spends 2.5 hours weekly managing his email box, meaning that a midsize company with 500 employees potentially loses 65,000 hours of productivity annually. Naturally, the magnitude of the e-discovery task is far greater for much larger companies.
Oftentimes, the most critical evidence is found in electronic communications, as people tend to be less formal and more spontaneous when responding quickly via emails and the like. Failure to understand how to preserve electronic evidence is not a legal defense, obviously.
If you are a company that fails to keep its electronic data house in order when it comes to e-discovery demands, now (frankly, yesterday) is the time to work with counsel skilled in this area and also to consider technological data management solutions.
Disclosure of Privileged Information
What happens when a judge appears inclined to issue sanctions, and attorneys want to seek to justify their conduct? This is a complicated matter.
On the one hand, attorney efforts geared toward electronic discovery can constitute confidential attorney work product and can involve privileged attorney-client communications.
On the other hand, if it is the client that is stonewalling appropriate electronic discovery, the attorneys for that client want to be able to explain that they should not be sanctioned based on the approach taken by the client. To make that argument, the attorneys might have to try to circumvent the attorney work product doctrine and the attorney-client privilege.
This came up recently in the Qualcomm v. Broadcom case. Attorneys sought to invoke the "self-defense" privilege exception to explain their electronic discovery role to the judge. While the judge ruled that the attorneys could come forward with respect to work product, they were not allowed to get around the attorney-client privilege.
This case has continued to evolve as it has proceeded through the court system, and the electronic discovery issues have taken on a life of their own.
This is just the beginning. The Federal Rules of Civil Procedure were amended little more than one year ago. But as we've seen, rather than streamline and limit litigation, electronic discovery causes yet another expensive track for legal disputes.
Biography
Eric Sinrod is a partner in the San Francisco office of Duane Morris. His focus includes information technology and intellectual property disputes. To receive his weekly columns, send an e-mail to with the word "Subscribe" in the subject line.
Disclaimer: This column is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.
Reprinted with permission of Findlaw.com