Defense Digest

The Federal Rules Of Civil Procedure Catch Up With The Times And Assimilate Electronically Stored Information Into The Rules That Apply To And Govern The Discovery Of "Relevant Information"

In April 2006, the United States Supreme Court accepted and approved certain proposed amendments to the Federal Rules of Civil Procedure which were crafted to address the not-so-new medium of electronically stored information and the problems associated with disclosing such information. Consequently, effective December 1, 2006, unless deferred by Congress, discovery of electronically stored information or "e-discovery," as it is commonly called, will be guided by and subject to Rules 16, 26, 33, 34, and 37 of the Federal Rules of Civil Procedure. The purpose of this article is to provide a general overview of the amendments of the aforementioned federal rules and to highlight and discuss some of the salient issues related to e-discovery.

Initially, the following epitome is provided of the amendments to Rules 16, 26, 30, 34, and 37 to account for discovery related to electronically stored information. In order to bring early attention to discovery issues concerning e-discovery, Rule 16 – governing pretrial conferences, scheduling, and management – has been amended in subsection (b) to allow the trial court to issue a discovery scheduling order that specifically includes provisions for the handling of discovery of electronic information and to further recognize agreements between the parties to minimize the possibility of waiving privilege and work product in the context of producing electronically stored information. In addition, Rule 26 – providing the general provisions governing discovery and the duty of disclosure – has been amended in subsection (a)(1)(B) to specifically require parties to produce a copy of electronically stored information, as well as documents and tangible things, which that party may use to support its claims or defenses. Rule 26(f) has also been amended to require that the parties discuss issues related to the discovery of electronically stored information during their discovery planning conference, including, but not limited to, the form and protocol of any production requested, the costs involved, and any claims of privilege and work product.

Next, to account for e-discovery of information that is not readily accessible because of difficulties in locating, retrieving and producing it, Rule 26(b)(2) has been amended to add subsection (B), which authorizes a party to respond to discovery of electronically stored information by identifying sources that are not reasonably accessible because of undue burden or cost. If a motion to compel or a protective order is made, the responding party bears the burden of showing that the e-discovery is inaccessible because of undue burden or cost. Even in the face of the establishment of inaccessibility, a court may nonetheless order discovery subject to specific conditions upon the requesting party showing of good cause under Rule 26(b)(2)(C), which reflects pre-amendment limitations on discovery generally.

To address the risk of waiver of privilege, and the time and effort needed to review to avoid it, which can be significant with e-discovery, Rule 26(b)(5) has been amended to add subsection (B), which provides a procedure for asserting privilege after production of electronically stored information. Essentially, once notice is given of the assertion of a privilege, the receiving party must promptly return, sequester, destroy the information produced or, if it desires, submit the matter to the court for resolution.

Rules 33 and 34 have been also amended to clarify their application to e-discovery. Specifically, Rule 33 – concerning discovery through written interrogatories – has been amended in subsection (d) to allow a party answering interrogatories to, in lieu of providing a written response, specify the records, including electronically stored information, from which the response can be derived or ascertained in order to afford access to such electronically stored information. In responding in this way and giving direct access, the responding party may have to offer assistance, such as technical support or information on software. Rule 34 – governing production of documents and things – has been amended to include the production of electronically stored information and permits the designation of the form in which it may be produced. If no form of production is specified, the responding party may produce the electronically stored information in the form in which it maintains it or in a reasonably usable form. Rule 34 has also been amended to allow a party to object to the form in which the electronically stored information is to be produced. Finally, the amendments to Rule 34 also allow a party to test and sample, which was not expressly permitted under the former version of the Rule, electronically stored information. This later change may allow and justify direct access to a party's information systems, thereby possibly creating issues of confidentiality, intrusiveness, and privacy.

Finally, Rule 37 – addressing the failure to make a disclosure or to cooperate in discovery and provides for sanctions – has been amended to include a new subsection (f) specifically drafted to restrict sanctions and to provide some limited protection to a party who is unable to produce electronically stored information because it is lost, modified or overridden during the routine operation of the information system, so long as the operation is in good faith. Viewed another way, it may be incumbent on parties to make sure that electronically stored information is not lost, modified or overridden if litigation is contemplated or envisioned, or once it is initiated.

While it took until 2006 for the Supreme Court to formally recognize "e-discovery," many federal courts have already grappled with the issues it presents, including, but not limited to, privilege, retrieval, and expense to produce. For instance, in Zubulake v. UBS Warburg, 217 F.R.D. 309 (S.D.N.Y., decided May 13, 2003), the Southern District Court of New York considered the issues of whether electronic data in the form of e-mails is discoverable under the pre-amendment federal discovery rules, and, if so, who should bear the cost for its production. These discovery issues arose out of the plaintiff's, who was suing for employment discrimination, request for the production of documents, including electronic or computerized data compilations, containing communications by the defendant's employees that concerned the plaintiff. The defendant produced readily accessible e-mails and further responded that restoration and production of e-mails on back-up tapes and discs was cost prohibitive.

The District Court easily dispensed with the first issue, concluding that the broad scope of Rule 26(a) coupled with Rule 34, which concerns production of documents, permitted discovery of e-mail so long as the e-mail was relevant to the plaintiff's claims. Next, in considering who should pay for the production, the District Court set out to balance the broad scope of discovery permitted by Rule 26(a) with what it called the "cost-consciousness" of Rule 26(b). Initially, the District Court recognized that electronic data is usually archived onto discs or tapes and that its restoration is expensive and may require retention of a retrieval specialist. As a result, the District Court explored whether the costs of production should be shifted from the responding party, who typically bears the burden, to the requesting party, as would be within its discretion under Rule 26(c). Before doing so, however, the District Court stated that a cost-shifting analysis should only be conducted when e-discovery imposes "an undue burden or expense" on the responding party, which may turn on whether the electronic information is stored in an accessible or inaccessible format or medium. Without getting into specifics in this article, the District Court, recognizing that it had in the previous year articulated an eight-part test which had become the standard for the cost-shifting problem related to production of e-discovery in Rowe Entm't, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 429 (S.D.N.Y. 2002), created a new seven-part, fact-intensive test, which incorporated parts of Rowe. The District Court took pains to note, however, that the seven factors were merely guidelines and not a mechanical check list.

After ordering the defendant to restore and produce a sample of back-up tapes containing the electronic data sought, the District Court conducted what it viewed as a factually-grounded cost-shifting analysis in Zubulake v. UBS Warburg, 216 F.R.D. 280 (S.D.N.Y., decided July 24, 2003). The cost-shifting analysis conducted by the District Court resulted in its ordering the defendant to bear 75 percent and the plaintiff to bear 25 percent of the cost associated with restoring and searching the inaccessible electronically stored e-mails. As for the costs of reviewing and producing the e-mails, which included attorney and paralegal fees, the District Court ruled that they should be borne by the defendant, as those costs are within the control of the defendant. In conclusion, Zubulake is illustrative of some of the issues and problems associated with e-discovery that have been addressed by the amendments to the federal rules.

As with all things new, only time will tell what challenges may arise in the application and enforcement of the amendments to the federal rules to account for e-discovery. At least, however, a frame work has been put in place to give direction and insight into how the federal courts should and will handle the not-so-new medium of electronically stored information thereby allowing business entities, and even individuals, an opportunity to tailor their policies and practices concerning the creation, use, storage and even deletion or destruction of electronically stored information.

* Robert is an associate in the Philadelphia, Pennsylvania office and can be reached at (215) 597-1845 or rwjozwik@mdwcg.com