(October 16, 2007) - It has been almost a year since the Federal Rules of Civil Procedure (FRCP) were amended with respect to discovery of electronic data. As can be seen, the stakes are enormous, as failure to comply with electronic production obligations can lead to serious sanctions, sometimes to the tune of millions of dollars. Let's examine important issues that have arisen and how courts have ruled in the aftermath of the FRCP amendments that became effective on December 1, 2006.
Under amended FRCP 16(b), parties must get ready for a scheduling conference to consider electronic discovery plans within 120 days of the start of a lawsuit. Also, pursuant to amended FRCP 26(f), twenty-one days in advance of this scheduling conference, parties must meet and confer to try to agree upon electronic discovery procedures for the case. As a consequence, parties need to develop their electronic discovery plans within the first 100 days of the inception of a lawsuit.
While the amendments were designed to reduce litigation costs, reality since enactment suggests otherwise. From the very start of a case parties need to evaluate with their IT teams and outside counsel where they stand with respect to electronic data. This is no easy task.
Ferreting out electronic information relevant to a lawsuit can take time and money. Data can be located live on networks, servers, hard drives, laptops, PDAs and on backup tapes. Indeed, because the amendments broaden the definition of items that may be subject to discovery from "documents" or "data compilations" now to include all electronically stored information, parties conceivably can demand from each other everything from Word documents and emails to voicemail messages, instant messages, blogs, backup tape and database files.
It is worthwhile to delve into electronic discovery issues that have cropped up in recent cases:
Retention Policies/Litigation Holds
It is not unusual for companies to have document retention policies that provide timeframes after which they purge hard copy and electronic information (although deleted electronic information often can be recovered from backup tapes, at a cost). Such systematic purging is not usually problematic. For example, under FRCP 37(f), a company will not ordinarily be sanctioned for deleting emails as part of a "routine, good-faith operation."
Once a company becomes aware of potential or actual legal action, however, it must institute a litigation hold to preserve relevant information, notwithstanding pre-existing retention policies. In addition, the hold must not be a mere policy to preserve relevant information - the policy must be followed in practice. Indeed, in one case, United Medical Supply v. United States, the responding party was required to come forward and establish that the litigation hold was effective in practice.
The question also arises whether parties possibly can escape their electronic discovery obligations because they do not have adequate financial, manpower or technical resources to comply. Some courts simply are not sympathetic to such a plea.
In Williams v. Taser International, the responding party was a relatively small company of about 245 employees. When faced with electronic discovery obligations, the company hired and trained a technology employee to manage the discovery process. The judge nevertheless did not agree that this was enough; rather, the company had to make all reasonable efforts, including retaining additional information technology professionals to get the job done.
No Reasonable Accessibility
Responding parties frequently argue that electronic discovery materials are not reasonably accessible and therefore need be produced. Unfortunately for them, 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 argued that the cost of recovering the information would be in the six figures. Nevertheless, the judge ordered production, and on top of that, ordered production within a mere 28 days.
Format Of Produced Materials
Disputes arise as to the format of electronic material to be produced. 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, which includes features such as file owner, date of creation, senders, recipients, routing data and subject lines.
In the recent case Columbia Pictures Industries v. Justin Bunneli (commonly known as the BitTorrent case), the court disagreed with the responding party, and ordered the production of information temporarily stored in random access memory (RAM), even though such information might only be stored for extremely short periods of time.
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 in producing electronic information.
In PSEG Power New York, Inc. v. Alberici Constructors, Inc., the responding party argued that it should not have to pay the heavy freight of producing a large volume emails along with attachments. The court disagreed, especially because it was on the watch of the responding party that a software problem caused the emails to be produced originally without the attachments intact.
Getting it wrong when it comes to fulfilling electronic discovery obligations can have major repercussions in terms of the potential for sanctions. For example in the case of z4 Technologies v. Microsoft Corporation, when it came to light during trial that certain email evidence had not been produced during discovery on a timely basis and that the existence of a database was not disclosed in a forthright manner, the judge ordered Microsoft to pay additional damages of $25 million, as well as practically $2 million in attorney's fees, for litigation misconduct. This is no small price tag, indeed.
Disclosure of Privileged Information
Finally, 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 circumvent the attorney work product doctrine and the attorney-client privilege. This has come up recently in the Qualcomm, Inc. v. Broadcom Corporation case. Attorneys sought to invoke the "self-defense" privilege exception to explain their electronic discovery role to the judge. While the judge did rule that the attorneys could come forward with respect to work product, they were not allowed to get around the attorney-client privilege. There likely will be further developments in this area.
This is just the beginning. The FRCP was amended less than one year ago. Plainly, rather than streamline and limit litigation, electronic discovery causes yet another expensive track for legal disputes.
Eric Sinrod is a partner in the San Francisco office of Duane Morris LLP (http://www.duanemorris.com) where he focuses on litigation matters of various types, including information technology and intellectual property disputes. His Web site is http://www.sinrodlaw.com and he can be reached at firstname.lastname@example.org. To receive a weekly email link to Mr. Sinrod's columns, please send an email to him with Subscribe in the Subject line.
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.