By Michael D. Gifford, Esq.

On April 12, 2006, the United States Supreme Court approved and forwarded to Congress certain revisions to the Federal Rules of Civil Procedure addressing preservation and discovery of data in electronic media, sometimes known as e-discovery.  Absent Congressional intervention, the new provisions will become effective on December 1, 2006.  The new rules address both discovery and preservation of evidence issues arising from the ever widening use of and reliance upon electronic data and data storage, in lieu of our beloved and accustomed paper files.  Both litigation managers and outside counsel must now clearly understand the company’s data storage systems and policies or they risk running afoul of the new rules.  Although not yet effective, businesses must start planning now to address the new requirements. Outside counsel must understand these new rules to give their clients proper advice and to avoid litigation nightmares such as sanctions and adverse jury instructions.  The explosion of litigation over preservation, discovery and use of electronic data is highlighted by the infamous Zubulake decisions. 

This article is intended to address the major issues of these revisions and is not offered as a comprehensive primer. Counsel is advised to review these new rules now, so that you may consider how they affect your clients and practice.

One foundation of these amendments is revision of Rule 34, and by extension Rule 33(d).  Although the scope of Rule 34 was originally limited to production of ‘documents and things’, it was subsequently expanded to include data compilations.  The new amendments go one step further, deleting data compilations in favor of ‘electronically stored information.’  The change is necessary because “it has become increasingly difficult to say that all forms of electronically stored information, many dynamic in nature, fit within the traditional concept of a “document.” Electronically stored information may exist in dynamic databases and other forms far different from fixed expression on paper.” (Committee Notes, Rule 34(a))  Similarly, Rule 33 is amended to clarify that opting to produce records in lieu of answering interrogatories must include production of electronically stored data as well as traditional documents.  Amendments to Rule 34 also allow the requesting party to specify the form in which it wants data produced, including production of paper copies, and the requestor may specify different modes of production for differing types of data.  The producing party may object to the requested form, or itself specify a form when none is requested, in its written response to the production request, allowing the court and counsel to address form and format issues prior to the actual production. A consultation requirement is included, requiring the parties to attempt to resolve their differences, similar to the provisions of Illinois Supreme Court Rule 201(k), before presenting them to the Court.  The underlying goal remains production of data in forms reasonably usable by the parties, although they may differ on how that is defined. Data need only be produced once, but a party may be required to translate that data into a different, more readily usable, format.

Federal Rule of Civil Procedure 16 is to be amended to add provisions in 16(b) that put issues of electronic data front and center early in the litigation, at the initial Rule 16 discovery planning conference.  Amendments to Rule 26(f) mandate that the parties, no later than their planning conference, discuss discovery of electronic data.

The amendments to Rules 16(b) and 26(f) also contemplate the parties’ discussion of privilege issues in production of such data.  The massive amounts of data that may be produced raise issues of expense and delay in conducting an appropriate review of all materials, even those with no relevance or use in the litigation, but which may be fairly subject to discovery under Rule 26.  Certain electronic formats provide for the retention of embedded or meta data , often reflecting additional information regarding the primary information not visible to an ordinary user of that data.  Whether this information is even subject to discovery and, if so, how to address privilege issues arising from such data, are appropriate subjects of discussion.

Latitude is given the parties to craft their own solution to these privilege issues, as the committee comments to new Rule 16(b) suggest:

For example, [the parties] may agree to initial provision of requested materials without waiver of privilege or protection to enable the party seeking production to designate the materials desired or protection for actual production, with the privilege review of only those materials to follow. Alternatively, they may agree that if privileged or protected information is inadvertently produced, the producing party may by timely notice assert the privilege or protection and obtain return of the materials without waiver. Other arrangements are possible. In most circumstances, a party who receives information under such an arrangement cannot assert that production of the information waived a claim of privilege or of protection as trial-preparation material.

Depending on the nature of the information produced and the litigation, standard pre-production review may still be the appropriate course. The comments appropriately clarify that a district court can enforce such an agreement, but have no power to order such an arrangement absent agreement.  Amended Rules 26(b)(5)(A) & (B) provide procedures for making privilege claims and to conduct in camera review of produced materials for which a subsequent claim of privilege is asserted.

Clarifying an ambiguity in the prior rule, Rule 34(a)(1) is also amended to allow sampling of data by opposing party, either by agreement or by motion.  Sampling may be appropriate where the parties truly do not know what sources may contain relevant data and therefore specific sources cannot be identified in a request to produce.  Issues of burden, intrusiveness, confidentiality and privilege are all implicated in sampling and the committee comments state that sampling “is not meant to create a routine right of direct access to a party’s electronic information system, although such access might be justified in some circumstances. Courts should guard against undue intrusiveness resulting from inspecting or testing such systems.”  As in Zubulake, it may be appropriate to have a third party conduct sampling, based on agreed search criteria. Such third party work, of course, raises additional issues of cost allocation.

There is much to understand about new Rule 37(f), which reads as follows:

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.

Rule 37(f) is totally new and, at first blush, provides protections for parties keeping electronic data. However, careful review of the committee comments may lessen that initial joy. One passage recognizes that:

Many steps essential to computer operation may alter or destroy information, for reasons that have nothing to do with how that information might relate to litigation. As a result, the ordinary operation of computer systems creates a risk that a party may lose potentially discoverable information without culpable conduct on its part. Under Rule 37(f), absent exceptional circumstances, sanctions cannot be imposed for loss of electronically stored information resulting from the routine, good-faith operation of an electronic information system.  (emphasis added)

The crucial question, then, is how we define good-faith operation of an electronic information system.  Here, the comments adopt much of the analysis of Zubulake: good faith may require affirmative and extraordinary measures to preserve data.  The Zubulake concept of a ‘litigation hold’ also continues.  That ‘hold’ status begins, and data must be protected, beginning at the point when a party “reasonably anticipates” litigation. At that point, affirmative steps to preserve electronic data from routine deletion are mandated.  Affirmative steps would include altering normal document retention and/or backup practices, where those practices could be expected to cause deletion of relevant data.  The comments state that:

Good faith in the routine operation of an information system may involve a party’s intervention to modify or suspend certain features of that routine operation to prevent the loss of information, if that information is subject to a preservation obligation. A preservation obligation may arise from many sources, including common law, statutes, regulations, or a court order in the case. The good faith requirement of Rule 37(f) means that a party is not permitted to exploit the routine operation of an information system to thwart discovery obligations by allowing that operation to continue in order to destroy specific stored information that it is required to preserve. When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, intervention in the routine operation of an information system is one aspect of what is often called a “litigation hold.” Among the factors that bear on a party’s good faith in the routine operation of an information system are the steps the party took to comply with a court order in the case or party agreement requiring preservation of specific electronically stored information. Whether good faith would call for steps to prevent the loss of information on sources that the party believes are not reasonably accessible under Rule 26(b)(2) depends on the circumstances of each case. One factor is whether the party reasonably believes that the information on such sources is likely to be discoverable and not available from reasonably accessible sources. (emphasis added)

This provision serves to continue the threat of sanctions, monetary and in the form of adverse jury instructions, where a party fails to take affirmative steps to protect data it reasonably anticipates may be subject to discovery in anticipated litigation.  The rule does little to warn what data may be subject to discovery and leaves us to understand decisions such as Zubulake for guidance on these questions. Zubulake, for example, determined that the defendant had an obligation to affirmatively protect and retain all readily available, directly accessed on line data (hard drive data), as well as data relating to certain ‘key players’ located on identifiable off line back up tapes, which were otherwise overwritten on a periodic basis. To reach this point, the Court had to very carefully consider and understand the nature and capabilities of defendant’s systems; counsel can do no less and must take steps to guide the client through this process.  Zubulake held that outside counsel had an obligation to consult not only with the client’s managers and ‘key players’ but also directly with its information technology staff to understand those systems and clarify the retention requirements.

If the Court determines that a failure to preserve data from routine deletion is not in good faith, sanctions may follow under the new Rule 37(f).

We have until December 1st to understand and prepare to practice these new rules.  Obviously, the sooner clients know about them and the duties they impose, the better.  Counsel will be well advised to monitor these rules as they pass before Congress and be alert for any revisions.

Michael Gifford is a member of the Labor & Employment Group at Howard & Howard. He  represents employers in a wide variety of labor and employment matters. For more information, please  contact Michael Gifford at (309) 672-1483 or email  mdg@h2law.com.

Copyright 2006 Howard & Howard Attorneys, P.C. This publication is intended to provide information only and does not constitute legal advice.