United States: Amendments To The FRCP Regarding E-Discovery

On December 1, 2006, new amendments to the Federal Rules of Civil Procedure (the "Amendments") will go into effect that attempt to address the problems associated with the discovery of electronically stored information ("ESI").

One of the key changes to the rules involves a requirement that parties discuss issues relating to electronic discovery early in the litigation, so that parties can no longer ignore such complex issues until conflicts arise. The days of the "Don’t Ask, Don’t Tell" approach to electronic discovery are numbered. The rules also now codify the distinction between "reasonably accessible" ESI and "not reasonably accessible" ESI, mandating that only the former need be produced (except under circumstances described below).

The Amendments also add a procedure for asserting privilege over materials that have been produced or made available for inspection, which may change the way parties produce ESI and review documents for privilege. The rules concerning interrogatories and requests for production have been amended to address, inter alia, the form of production of ESI. The Amendments also provide a safe harbor—albeit shallow—protecting litigants from sanctions for certain types of inadvertent loss of ESI. Finally, the rule concerning subpoenas has been updated to take into account changes relating to ESI that is "not reasonably accessible" as well as the form of production of ESI.

As anyone following the developing case-law on electronic discovery knows, a lot of added expense and unnecessary litigation could be avoided if the parties sit down and agree to a plan for electronic discovery early. Indeed, this is what the Sedona Principles have advocated for years. The Amendments now mandate that parties do exactly that.

The initial disclosures required by Rule 26(a)(1)(B) now require each party to provide "a copy of, or a description by category and location of, . . . [ESI] . . ." in addition to other types of discoverable materials. Furthermore, during the Rule 26(f) conference, parties are now specifically instructed to discuss matters pertaining to electronic discovery, such as the preservation of discoverable information, and the form in which discoverable ESI should be produced.

During this conference parties are also now instructed to discuss issues relating to claims of privilege, including how to handle asserting privilege after the materials have been produced. For example, the parties may enter into a "quick peek" or "clawback" agreement to deal with large volumes of ESI. A "quick peek" agreement gives the requesting party a chance to review potentially responsive ESI and identify which documents it wishes produced. The producing party then reviews only those identified documents for privilege. A "clawback agreement" provides for giving ESI to the adversary with little or no prior review, and permits the producing party to demand the return of privileged ESI if the requesting party tries to use it. If the parties are able to come to an agreement on these issues, the parties can choose to ask the court to include such agreements in a scheduling order. Rule 16(b) now states that after receiving the report from the parties under Rule 26(f), the scheduling order may include "provisions for disclosure or discovery of [ESI]" and "any agreements the parties reach for asserting claims of privilege or of protection as trial-preparation material after production."

The Committee Note to Rule 26(b)(2) also makes clear that the parties should confer and strive to agree on whether "sources identified as not reasonably accessible should be searched and discovery information produced…" The question of what type of materials may be designated "not reasonably accessible" is addressed next.

The amendment to Rule 26(b)(2) states that "a party need not provide discovery of [ESI] from sources that the party identifies as not reasonably accessible because of undue burden or cost." Fed. R. Civ. P. 26(b)(2)(B). The Committee Note makes clear that such a party must identify the sources containing potentially responsive information that it is neither searching nor producing. Neither the amended rule nor the Committee Note, however, defines the phrase "not reasonably accessible." In a 2003 decision discussing the burdens of producing ESI and which party should bear the costs, Judge Scheindlin stated that "[i]nformation deemed ‘accessible’ is stored in a readily usable format." Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 320 (S.D.N.Y. 2003). Information falling into this category includes: (1) active, on-line data used to create, process or access electronic records such as servers and hard drives; (2) near-line data, typically housed in a robotic stored device such as optical disks; (3) off-line storage or archives organized for retrieval, or "a bunch of disks." Id. at 318-21. "Inaccessible" data is generally considered to include: (4) back-up tapes of compressed data, which are typically not organized for retrieval; and (5) erased, fragmented, or damaged data, which may require processing to recover. Id.

A party from whom such ESI is being sought on a motion to compel has the burden of showing that the information is not reasonably accessible because of undue burden or cost. Even if that burden is met, the court "may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C)." The Committee Note to Rule 26(b)(2) states that the appropriate considerations for the "good cause analysis" include:

Finally, the Committee Note warns that "[a] party’s identification of sources of [ESI] as not reasonably accessible does not relieve the party of its common-law or statutory duties to preserve evidence." Again, neither the Amendments nor the Committee offer any guidance regarding a party’s preservation obligations. Indeed, one of the most difficult problems facing litigants today is whether a party must preserve backup tapes. Judge Scheindlin, in another of the Zubulake decisions concerning discovery of ESI, stated the rule regarding preservation of backup tapes as follows:

This rule is of little help, however, since it is difficult, if not impossible, to know whether backup tapes contain relevant information that is not stored elsewhere without searching those tapes.

Procedure for Asserting Claims of Privilege and Work Product Protection After Production

Rule 26(b)(5)(B) now provides for a procedure for asserting privilege after documents have been produced, electronic or otherwise, and was added to address concerns regarding the risk of privilege waiver, and the time and effort required to avoid it, especially when there are large volumes of potentially responsive ESI. The process allows a party to assert a claim of privilege after information is produced in discovery. The receiving party must then promptly return, sequester, or destroy the information and any copies, and may not use or disclose them until the claim is resolved. The receiving party may promptly request a determination of the claim from the court, after presenting the information to the court under seal.

This new procedure, and the "quick peek" and "clawback" agreement designed to permit parties to assert privilege after production (discussed supra), are not without problems. First, the Committee Note states that "Rule 26(b)(5)(B) does not address whether the privilege or protection that is asserted after production was waived by the production." Rather, it says that the "courts have developed principles to determine whether, and under what circumstances, waiver results from inadvertent production of privileged or protected information." It goes on to state that "[a]greements reached under Rule 26(f)(4) and orders including such agreements entered under Rule 16(b)(6) may be considered when a court determines whether a waiver has occurred. Such agreements and orders ordinarily control…" (Emphasis supplied). Therefore, it is possible that the agreements reached under these rules will not be binding. Second, third parties that are not parties to the agreement or order may be able to claim waiver in subsequent or related litigation. Finally, disclosing privileged information without prior review could result in giving your adversary information, such as internal assessments of claims or defenses, which would be invaluable even if such information must be returned and cannot be introduced as evidence.

Rule 33 has been amended to permit parties to respond to an interrogatory by "specify[ing] the records [including ESI] from which the answer may be derived or ascertained and afford[ing] to the party serving the interrogatory reasonable opportunity to examine… such records…" However, "the burden of deriving or ascertaining the answer [must be] substantially the same for the party serving the interrogatory as for the party served." Note that this policy of permitting adverse parties access to the underlying electronic documents may raise the same problems as with "quick peek" and "clawback" agreements discussed above.

Rule 34(a) adds language expressly including ESI within the scope of documents which may be requested. Rule 34(b), regarding procedure, now states, "[t]he request may specify the form or forms in which [ESI] is to be produced." It further states that "[t]he response shall…includ[e] an objection to the requested form or forms for producing [ESI], stating the reasons for the objection… . If objection is made to the requested form or forms for producing [ESI] – or if no form was specified in the request – the responding party must state the form or forms it intends to use." In addition, the rules provide that absent an agreement otherwise or a court order, "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." The Committee Note makes clear that "[i]f the responding party ordinarily maintains the information it is producing in a way that makes it searchable by electronic means, the information should not be produced in a form that removes or significantly degrades this feature." In other words, if the ESI is fully text searchable in native format, such ESI should not be produced as TIFF images which are not fully text searchable.

The Committee Note further provides that although Rule 34(a)(1) is amended to provide that parties may request an opportunity to test or sample ESI, "[t]he addition of testing and sampling to Rule 34(a) with regard to [ESI] 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." Indeed, the Committee Note states that "[c]ourts should guard against undue intrusiveness resulting from inspecting or testing such systems."

Rule 37(f), a new addition to the Rules, provides that "[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide [ESI] lost as a result of the routine, good-faith operation of an electronic information system." (Emphasis supplied).

The Committee Note provides that "[t]he ‘routine operation’ of computer systems includes the alteration and overwriting of information, often without the operator’s specific direction or awareness, a feature with no direct counterpart in hard-copy documents." Instances of such routine operation could include, for example, the overwriting of back-up tapes, auto-deletion of email on servers after a specified number of days, etc.

While this rule provides for a "safe harbor," the harbor is shallow:

As the Committee Note makes clear, the "good faith" inquiry is likely to be highly fact intensive, and will largely turn on whether, after the duty to preserve ESI was triggered, a party took adequate steps to identify and preserve relevant ESI.

Rule 45, concerning subpoenas, has been amended to conform to changes to Rule 26(b)(2)(B) addressing ESI that is "not reasonably accessible" (discussed above) and Rules 34(a) and (b) regarding form of production (also discussed above).

The Amendments are a step in the right direction insofar as they require parties to discuss discovery obligations concerning ESI early in the litigation process, and encourage parties to agree on issues relating to scope, preservation and production obligations. They are not, however, a panacea for all of the problems associated with the enormous volumes of ESI that may have to be reviewed and/or produced in litigation. Indeed, many open questions remain regarding the scope of a litigant’s preservation and production obligations and who should bear the cost associated therewith. Litigants, therefore, will have to continue to watch closely the evolving case law, and will have to make informed judgments about their discovery obligations concerning ESI.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.