EDiscovery Policy and Case Law Update

1
E-Discovery Policy and Case Law Update

• Thomas Allman
• Charles Beach
• David Dukes
• LCJ Membership Meeting
• (Co-Sponsored by the US Chamber Institute for
  Legal Reform)
• May 10, 2005

2
E-Discovery Update

• What are the key recent issues?
• Types of Spoliation Sanctions
• Preservation Failures
• Safe Harbors
• Litigation Holds

3
Sanctions

• Sunbeam litigation, 2005 WL 674885 (2005)(Florida
  state court jury ordered to treat allegations of
  complaint as proven as penalty for willful
  discovery abuse)
• Mosaid, 348 F. Supp.2d 332 (D.NJ 2005) (jury
  permitted to infer that e-mails not produced
  because of failure to institute litigation hold
  would have been unfavorable)
• Phillip Morris (2004) (2.7M fine based on
  failure of 11 executives to save e-mail)

4
Preservation Failures

• To avoid common law spoliation, a party must
  effectively preserve e-mails, backup tapes and
  other tangible and potentially discoverable
  information once notice of potential or actual
  litigation
• Types of Failures
• Sunbeam (did not identify and recover e-mail in
  timely fashion)
• Mosaid (did not institute litigation hold on
  e-mail of key actors)
• Phillip Morris (did not adequately enforce broad
  preservation order or internal records retention
  policy)

5
Safe Harbor

• Preservation obligations apply only to
  information which has some semi-permanent
  existence (See Convolve v. Compaq, 223 F.R.D.
  162, 2004 U.S. Dist.LEXIS 16164 (SD NY
  2004)(Magistrate Judge James Francis)
• Such as E-mail
• (transmitted to others, stored in files, and are
  recoverable as active data until deleted, either
  deliberately or as a consequence of automatic
  purging)
• But not
• wave forms (which are ephemeral and no
  business purpose requires even brief retention),
• Instant Messenger functions ( may be a close
  question since some programs can store
  messages)
• Where a party acts in good faith and without an
  existing business reason to retain information,
  no sanctions will issue absent a specific
  preservation order

6
Litigation Holds

• Described
• Has emerged as key process to (1) execute
  preservation obligations and (2) defend against
  sanctions for loss of information
• Often involves freezing of information as of
  time of notice. See Zubulake v. UBS Warburg LLC,
  220 FRD 212, 219 (S.D. N.Y. 2003) (Zubulake IV)
  ( a mirror-image of the computer system taken at
  the time the duty to preserve attaches)
• Distinguish between past and forward looking
  obligations
• Manual and automatic systems
• Must Implement in a timely Fashion
• Mosaid
• Requires suspension of otherwise routine deletion
  and destruction
• Dynamic databases involve unique issues

7
Amending the Rules

• Where does the process stand and what are the
  proposals?

8
Process to Date

• Comments received on Proposals
• www.uscourts.gov/rules/comment2005/CVAug04.pdf
• Total filings 254 through February 15, 2005
• www.uscourts.gov/rules/e-discovery.html (lists
  all comments with access to oral testimony)
• Public Hearings SF (1 day), Dallas (1 day), DC
  (2 days) (January/February, 2005)
• Civil Rules Committee Meeting April 14-15 (with
  revisions)
• Next Steps Standing Committee Review
• June, 2005
• Thereafter to Judicial Conference

9
Participants

• Professional Groups (many on both sides)
• ATLA opposed
• LCJ/US Chamber strongly supportive
• Bar Associations (split)
• Academics
• Arthur Miller supportive
• Governmental
• DOJ strongly supportive
• Corporations
• Strongly supportive Intel, GM, Microsoft, JJ,
  Exxon
• Outside counsel (badly split)
• Plaintiff strongly oppose
• Defense Counsel strongly support

10
Timeline
www.uscourts.gov/rules/index.html
June 2004 Court Standing Committee authorized the
Advisory Committee to circulate proposal
By May 2006 Supreme Court adopts the amendment
June 2005 Standing Committee Action
I
IV
VI
V
VII
Fordham conference Feb. 2004
III
II
Advisory Committee Mini-conferences FJC
Correspondence Research
Sept. 2005 Judicial Conference approves and
transmits to Supreme Court
Dec. 2006 Deadline for Congressional action (can
reject, change, or defer). If no action, the
amendment becomes law
Aug. 2004 Feb. 15, 2005 6 month comment period
April 2005 Advisory Committee considers
comments, sends final amendment to the Standing
Committee
Sedona Principles ABA Standards Local Rules
11
Key Proposals

• Early Discussions of key issues (Rule 26)
• Default form of production (Rule 34(b))
• Inadvertent production of privileged information
  (Rule 26(f))
• Two-Tier production of inaccessible information
  (Rule 26(b)(2)
• Limited Safe harbor from sanctions (Rule 37(f))

12
Early Discussion

• Rule 16(b), Rule 26(f), Form 35 Parties must
  meet and confer about any issues relating to
  preserving discoverable information
• Also authorizes incorporation of agreements
  relating to privilege waiver and form of
  production
• Applies to all forms of information
• Comments
• Corporate Support despite concerns about
  excessive use of broad preservation orders
• Plaintiffs bar Support because will mandate
  more early discussion about preservation

13
Form of Production

• Rule 34(b) (Default) production in a form in
  which it is ordinarily maintained or in an
  electronically searchable form
• Anticipates parties will discuss early and agree
• Allows requesting party to specify a choice
• Comments
• Native format cannot be bates stamped or
  redacted
• LCJ/Chamber Better approach Use Rule 34(a)
  language re translating information into
  reasonably usable form
• Amended Proposal either in a reasonably
  useable form or as ordinarily maintained

14
Privileged Information

• Rule 26(b)(5)(B) Once notified of inadvertent
  production of privileged information, a party
  must return or destroy all copies
• Applies to all forms of production
• Comments
• Serious concerns about impact in jurisdictions
  which do not recognize non-waiver concept
• Difficult to apply to electronic information
• Lack of framework for ultimate resolution
• Revisions
• Must take reasonable steps once notified

15
Two-Tier

• Rule 26(b)(2) Party need not provide discovery
  of electronically stored information from sources
  that a party identifies as not reasonably
  accessible because of undue burden or cost
• Typical examples backup tapes, deleted data
• Court may require cost shifting if production
  ordered
• Arguably eliminates need to preserve inaccessible
  information unless special reasons exist to know
  it is unavailable from other sources
• Procedure
• On motion to compel or if protective order
  sought, burden on responding party to justify
  inaccessible label
• Production of inaccessible information will be
  ordered if producing party cannot defend label or
  if requesting party shows good cause for
  production, considering limitations of Rule
  26(b)(2)(C)

16
Two-Tier, Cont

• Pro Reflects current best practice
• Most cases do not involve inaccessible
  information
• Identification requirement for sources of
  inaccessible information need only be very
  general
• Cost shifting if court orders production of
  inaccessible information
• Con Will encourage stonewalling
• Not needed (existing rules give enough
  protection)
• Creates an unfair limit because can self-declare
  inaccessibility
• Based on a technologically obsolete distinction
• Will increase motion practice
• Will may encourage parties to make information
  inaccessible

17
Safe Harbor

• As agreed on April 15 (text of explanatory
  Committee Note still under discussion)
• Rule 37(f) Absent exceptional circumstances, a
  court may not impose sanctions for failing to
  provide electronically stored information deleted
  or lost as a result of routine, good faith
  operation of the electronic information systems
• Applies only to sanctions issued pursuant to the
  Federal Rules - does not restrict inherent
  power of courts to issue sanctions
• Exceptional Circumstances doctrine will
  likely reflect evolving case law
• Focus is on the good faith operation of systems
  - not abstract preservation obligations and
  preservation orders

18
Safe Harbor, Cont

• Pro Needed signal to Courts do not penalize
  for routine operations necessary to business
  enterprise
• Protection should be lost only if willful or
  intentional failure to meet obligations
• Should not be conditioned on meeting vague
  preservation obligations
• Con Could encourage parties to destroy
  evidence
• Not needed (sanction never imposed here)
• Could distort focus of corporate retention
  policies

19
Conclusions

• Proposals to amend Rules are useful and
  responsive
• They acknowledge that national e-discovery
  standards are need which
• openly address excessive volume issues
• alert practitioners to need to pay early
  attention and work cooperatively
• and preserve right to full discovery of
  inaccessible information where appropriate
• Provides an important signal to Courts on the
  role of good faith operation of business systems
• However
• Tough fight can still be expected to secure full
  passage
• Active support for proposals essential