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Outside the Box: Recent Developments in Electronic Discovery The
law governing electronic discovery is developing at a pace not much
slower than electrons themselves.
While standards for preserving electronic data are emerging,
predicting what standards will apply remains out of reach in many
cases. by Michael C. McCarthy Discovery
of electronic documents in civil litigation is long past the point
of being a novelty. High profile
disputes invariably involve discovery of indiscreet email. Numerous vendors have sprung up to assist lawyers
and paralegals in processing electronic documents. The legal publishers have generated a number
of single-volume treatises on the topic.1
And, in the last several years, a number of judicial and other
organizations interested in civil litigation have formed committees
or working groups to study the issues and recommend improved procedures. The While
these developments may be of interest to many lawyers, the policy
issues that these task forces, working groups, and treatise authors
have attempted to address become of greatest interest when they move
from the realm of policy preferences to implementation.
Many courts have recently faced these issues, sometimes choosing
to impose significant burdens on parties from whom electronic discovery
is sought, but often acting without clear guidance either from the
governing rules or from controlling precedent.5
And in August 2004, the Advisory Committee on the Federal Rules
of Civil Procedure of the Judicial Conference of the United States
promulgated proposed amendments to the Rules that, if adopted, will
significantly change the requirements governing electronic discovery
in federal court. Given the
frequency with which state courts (including Minnesota’s) enact nearly
identical rules to those adopted by the federal courts, these proposed
amendments are likely, if adopted, to become the standard governing
most civil litigation. The Developing Caselaw
Although
various courts have had occasion to address the issues surrounding
electronic discovery, the case that has generated the most widely
followed decisions is Zubulake v. UBS Warburg LLC, which is before U.S.
District Judge Shira A. Scheindlin
in the Southern District of New York.
In that case, which involves claims by an equities trader of
gender-based employment discrimination and illegal retaliation, Judge
Scheindlin has generated four opinions that
address electronic discovery.6 Judge Scheindlin was
particularly well-suited to this task, having previously authored
a law review article on the topic of electronic discovery,7 and from
her very first decision in May 2003, she has treated the case as an
opportunity to explore the issues surrounding electronic discovery
in detail. The first
Zubulake opinion
addressed the question, “To what extent is inaccessible electronic
data discoverable, and who should pay for its production?” In answering that question, Judge Scheindlin concluded that courts should follow a “three-step
analysis: First, it is necessary to thoroughly understand the responding party’s
computer system, both with respect to active and stored data. For data that is kept in an accessible format,
the usual rules of discovery apply:
the responding party should pay the costs of producing responsive
data. A court should consider
cost-shifting only when
electronic data is relatively inaccessible, such as in backup tapes. Second, because the cost-shifting analysis is fact-intensive, it
is necessary to determine what data may be found on the inaccessible
media. Requiring the responding
party to restore and produce responsive documents from a small sample
of the requested backup tapes is a sensible approach in most cases. Third, and finally, in conducting the cost-shifting analysis, the
following factors should be considered, weighted in more-or-less the
following order: 1. The
extent to which the request is specifically tailored to discover relevant
information;
2.
The availability of such information from other sources;
3. The total cost of production, compared to the amount in controversy; 4.
The total cost of production, compared to the resources available
to each party;
5. The relative ability of each party to control costs and its incentive to do so; 6. The importance of the issues at stake in the litigation; and 7.
The relative benefits to the parties of obtaining the information.
In forming
her seven-factor test, Judge Scheindlin
reviewed what she considered the “most influential” decision on cost-shifting
to that time, the ruling by U.S. Magistrate Judge James C. Francis
IV, also of the Southern District of New York, in Rowe
Entertainment, Inc. v. William Morris Agency, Inc.8 Judge Francis had enunciated an eight-part
test to be applied when determining who should pay for restoration
of otherwise inaccessible electronic data.
Although the parties agreed that the Rowe
test governed, Judge Scheindlin examined
the test and found it wanting, rejecting two of Judge Francis’s factors
and adding one of her own.9
Nonetheless, she cautioned that while seven factors
should be considered, they are not to be weighed equally and the focus
must always remain on the “central question”:
“does the request impose an ‘undue burden or expense’ on the
responding party?” Judge
Scheindlin then directed UBS Warburg to produce all of its
“active” electronic data at its own expense, and to further produce
(also at its own expense) responsive documents from five backup tapes
selected by Zubulake. That led
to Zubulake III, in which Judge Scheindlin
determined (based on her review of the data from the selected backup
tapes) that some costs should be borne by Zubulake. After acknowledging that cost-shifting “is a
matter of judgment and fairness rather than a mathematical consequence
of the seven factors,” she ruled that Zubulake
should pay one-fourth of the estimated $166,000 cost of restoring
all of the backup tapes, but that once the tapes were restored, the
data should be treated as “active” data, and accordingly UBS Warburg
should pay all of the estimated $108,000 cost of producing the requested
emails from the restored data. Allegations
of spoliation and failure to retain backup tapes led to Zubulake IV, in which Judge Scheindlin ordered UBS
Warburg “to pay for the re-deposition of several key UBS employees
… so that Zubulake could inquire about the newly restored emails.”10 Those depositions
led to Zubulake V, in which Zubulake
“presented evidence that UBS personnel deleted relevant e-mails, some
of which were subsequently recovered from backup tapes (or elsewhere)
and thus produced to Zubulake long after
her initial document requests, and some of which were lost altogether.
Zubulake . . . also presented evidence that some UBS personnel
did not produce responsive documents to counsel until recently, depriving
Zubulake of the documents for almost two
years.” In response
to Zubulake’s renewed motion for sanctions, Judge Scheindlin determined that UBS had failed to preserve and
timely produce relevant information, which led her to focus on its
culpability. Judge Scheindlin
had earlier ruled that once UBS Warburg reasonably anticipated litigation,
it was obligated to suspend its document retention/destruction policy
and put in place a “litigation hold” to ensure the preservation of
relevant documents. This obligation
did not extend to backup tapes, unless such tapes are “actively used
for information retrieval” or unless it is possible to identify where
the documents of certain employees who are key to the anticipated
litigation are located on backup tapes.
Judge Scheindlin now expanded upon
her earlier ruling and held that counsel must become familiar with
the client’s document retention policies and its “data retention architecture. This will invariably involve speaking with information
technology personnel, who can explain system-wide backup procedures
and the actual (as opposed to theoretical) implementation of the firm’s
[backup tape] recycling policy.” Counsel
must also interview the key employees to determine their individual
data storage practices (for example, where and how do they keep electronic
files or do they keep only printed copies of electronic documents?). A system-wide keyword search may also suffice,
so long as all “hits” responsive to the search are then retained. In the words of Judge Scheindlin,
“it is not sufficient to
notify all employees of a litigation hold
and expect that the party will then retain and produce all relevant
information. Counsel must take affirmative steps to monitor
compliance so that all sources of discoverable information are identified
and searched.” The issue is
not whether counsel succeeds in preserving all relevant documents
but that counsel and the client “take some
reasonable steps to see that sources of relevant information are
located.” Applying
these standards to UBS Warburg’s conduct, Judge Scheindlin
concluded that counsel and the key witnesses had failed to communicate
as required regarding the preservation of electronic documents. In addition, she ruled that despite the issuance
of a blanket litigation hold, UBS Warburg employees deleted relevant
email. Accordingly, Judge Scheindlin ruled the conduct willful and granted Zubulake (1) an adverse inference instruction to the jury,11 (2) payment by UBS Warburg of the costs of further depositions
or re-depositions, and (3) payment by UBS Warburg of the costs incurred
by Zubulake in bringing the motion. The Zubulake decisions
have been widely cited by other courts in the 18 months since Zubulake I. At
the close of Zubulake V, Judge Scheindlin
notes that many developments have occurred in the area of electronic
discovery since that case began and that “national standards are developing,”
which place “parties and their counsel … fully on notice of their
responsibility to preserve and produce electronically stored information.” In light of these developments, Judge Scheindlin expresses hope that counsel will work to ensure
the preservation of such documents so that the recurrence of such
spoliation issues may be “limited, if not eliminated.” Proposed Federal Rules Based
on the proposed amendments to the Federal Rules of Civil Procedure
that were issued for public comment in August 2004,12
it appears that the Advisory Rules Committee (of which Judge Scheindlin
is a member) shares Judge Scheindlin’s goal
of reducing the existing confusion regarding one’s obligations in
connection with electronic documents, but it does not fully share
her understanding of the scope of those obligations. The proposed
amendments are the result of several years of work on the part of
the advisory committee. Just
as it completed the last significant revisions to the discovery rules
in 1999 — which made the previously optional initial disclosure requirements
mandatory nationwide and narrowed the scope of generally permissible
discovery to matters “relevant to the claim or defense of any party,”
rather than relevant to the “subject matter” of the lawsuit — the
committee started work on electronic discovery issues.
Although it held several small conferences on the topic in
2000, the committee concluded that it was too early to propose rules
on electronic discovery, and it wanted to see how the changes to Rule
26 were going to work in practice before it made further changes. In 2002, the committee circulated proposed rule
changes informally and solicited comments from a small group of academics
and practitioners, a process that culminated in a conference held
earlier this year at Fordham Law School and, eventually, the promulgation
of the proposed amendments for public comment in August.13
The proposed amendments address the meet-and-confer process;
the form of production of electronic “documents”; the distinction
between readily available and inaccessible electronic data; the process
of handling privilege issues; and sanctions for failure to preserve
electronic data. The committee will hold three public comment
sessions in Meet-and-Confer Requirements. The committee proposes
amending Rule 26(f), Rule 16(b), and Form 35 to require counsel to
discuss, at the commencement of a lawsuit and in addition to the other
discovery and scheduling matters already included in Rule 26(f), preservation
of “discoverable information”; “issues relating to disclosure or discovery
of electronically stored information, including the form in which
it should be produced”; and “whether, on agreement of the parties,
the court should enter an order protecting the right to assert privilege
after production of privileged information.”
In other words, the Rules would expressly authorize discussion
and agreement of issues that, in appropriate cases, are already discussed
by counsel under the existing Rules.
Although these issues are not presently discussed in every
case, and even under the proposed amendments they would not need to
be discussed in cases in which electronic discovery is not anticipated,
it is not uncommon for these issues to be discussed (and for agreements
to be reached) currently, albeit often at a later stage in the discovery
process than at the initial scheduling conference. Production of Electronic “Documents.” Rules
33 (governing interrogatories), 34 (document requests), and 45 (subpoenas)
would be amended to include “electronically stored information.”
Rule 34 would also be amended to refer to “sound recordings”
instead of “phonorecords.” While these amendments either update the language
in the Rules or make explicit what has largely been understood, further
amendments permit testing or sampling (in addition to inspection and
copying) of such data, and dictate in what form electronic data must
be produced. Rules 34 and 45
would be amended to permit the requesting party to “specify the form
in which electronically stored information is to be produced” and
provide a default rule for the form of production in the event the
request fails to specify the form of production.
In that circumstance, absent an agreement by those involved,
the responding party or non-party must produce the information either
(but not both) in a form in which it is ordinarily maintained or in
an electronically searchable form. From
a technology standpoint, the significant development with respect
to form of production is that image-based electronic formats (such
as scanned PDF or TIFF documents) cannot be used unless that is the
form in which the data is ordinarily maintained or the data is made
electronically searchable. The proposed amendments also fail to address
what happens when data is ordinarily maintained in a proprietary format,
review of which requires use of software not readily available to
the opposing party. As drafted,
the rule would not appear to require a producing party to export the
data to a standard data format (readable by many software packages),
even if the proprietary software made such exporting of data relatively
easy, unless the requesting party knows enough about the electronic
data to specify in the request that it is to be produced in an exported
nonproprietary format. Uncertainty
in that regard may militate in favor of interrogatories or a deposition
on the responding party’s electronic information system prior to service
of a request for production so that the request can be as specific
as possible about the form of production. “Reasonably Accessible” Data. Consistent
with the distinction in Fed. R. Civ.
P. 26(b)(1) between discovery of information relevant to claims and
defenses (which is freely discoverable) and discovery of information
that is merely relevant to the subject matter involved in the action
(which is discoverable only upon a showing of good cause), the committee
proposes to distinguish between electronic data that is “reasonably
accessible” and that which is not by adding the following language
to Rule 26(b)(2):
Similar
language is to be added to Rule 45, governing the duties of a non-party
in responding to a subpoena. This
procedure for handling inaccessible data lacks the detail of Judge
Scheindlin’s three-step analysis for determining
when cost-shifting may be appropriate (one step of which involves
the seven enumerated factors), but it is consistent in approach.
By implication, “reasonably accessible” electronic data, if
otherwise discoverable, must be produced in the ordinary course.
In the first instance, it suffices for a producing party to
label certain data “not reasonably accessible,” but if the requesting
party brings a motion, the producing party must then substantiate
its claim of inaccessibility, and the court may then (as with all
discovery) specify the terms and conditions on which it may proceed,
including, presumably, a provision for cost-shifting. Privilege And Waiver. Although not unique to the production of electronic
data, the problem of inadvertent disclosure may be exacerbated when
dealing with electronic data either because of the volume of data
or because of the extent to which electronic “documents” contain data
that is not visible on the surface (e.g.,
so-called “metadata” or “embedded edits”).
The committee proposes an amendment to Rules 26 and 45 that
authorizes what is already a common practice, sometimes referred to
as a “claw back” agreement: an
agreement that a party or non-party that has produced information
in response to a discovery request may, within a fixed period of time
after the production, assert that a document was inadvertently produced
and demand to have it returned. The party that received the information must
then “promptly return, sequester, or destroy the specified information
and any copies.” The proposed
amendment contemplates disputes regarding privilege in this circumstance
being presented to a court for resolution (as with any other privilege
dispute) and requires the producing party or non-party to “preserve
[the returned information] pending a ruling by the court.” The proposed
amendment also authorizes the less common “quick peek” agreements,
in which the producing party discloses information and reserves the
right, by agreement, to later assert privilege.
While such agreements may be more efficient in that they permit
the producing party to only review for privilege information that,
after a “quick peek,” the requesting party has determined is responsive
to its request, they also include substantial risk that third parties
will argue such disclosure vitiated any claim of privilege.
The committee has not, however, with respect to either “claw
back” or “quick peek” agreements addressed the substantive privilege
law that governs the effect of such agreements on the ultimate determination
of whether privilege has been waived.
The proposed amendment simply authorizes a procedure for implementing
such agreements. Sanctions and Duty of Preservation. Finally, the committee
recommends an amendment to Rule 37, which governs discovery sanctions,
to address an issue that is unique to electronic discovery — the routine
and automatic deletion of electronic data that occurs in the ordinary
operation of computer systems. This
proposal was made in response to a concern that the filing of a lawsuit
should not, in the usual case, require a defendant to “freeze” all
activity on its computer system. The
committee proposes a new Rule 37(f):
The committee
also proposed for comment an alternate formulation (representing a
minority view on the committee) that would authorize sanctions only
if a “party intentionally or recklessly failed to preserve the information.” The proposed
Rule 37(f) does not attempt to impose a duty of preservation nor does
it speak to preservation prior to the commencement of a lawsuit. The committee notes allude to duties of preservation
that are imposed by other entities, and it appears that the committee
correctly concluded that imposition of such duties generally, and
prior to commencement of a lawsuit, fall outside its purview.14 The proposed
Rule does use Judge Scheindlin’s formulation
of having taken “reasonable steps,” and the committee notes speak
of so-called “litigation holds” being issued.
The Rule plainly does not go as far as Judge Scheindlin’s
ruling in outlining the steps that she feels counsel are required
to take to avoid sanctions relating to the “routine” deletion of electronic
information after a lawsuit has commenced.
To the extent the Rule permits sanctions only with respect
to the preservation of information that a party “knew or should have
known was discoverable,” it arguably excepts from its scope data that
is “not reasonably accessible” under proposed rule 26(b)(2), for such
data is presumptively not discoverable. Interestingly,
this is one area in which The 8th
Circuit has also recently addressed the appropriate sanction for spoliation
of evidence that occurs through implementation of a document retention/destruction
policy. Although earlier an
8th Circuit case had suggested that an adverse inference instruction
to the jury would be appropriate if the party unable to produce requested
documents “knew or should have known” that the document would be relevant
to anticipated litigation, the court has rejected that statement as
dictum and ruled that, before an adverse inference instruction may
be given, “there must be a finding of intentional destruction indicating
a desire to suppress the truth.”16 That ruling by its terms applies to prelitigation destruction, and proposed Rule 37(f) applies
only after a lawsuit has commenced, suggesting that the standard for
imposing sanctions for spoliation that occurs as a result of a document
retention/destruction policy may differ significantly depending on
whether the destruction occurs before or after a lawsuit has been
commenced. This approach differs somewhat from that suggested
by Judge Scheindlin, who would draw the
line at when a party reasonably anticipates litigation rather than
at when a lawsuit has been commenced. Conclusion The law
governing electronic discovery is rapidly developing. For the lawyer advising a client about such
matters, and particularly about the obligation to preserve electronic
data, it is difficult to predict with any certainty what standards
will ultimately apply when the issue is litigated.
With luck, the multiyear process of amending the Federal Rules
of Civil Procedure will result in standards that permit greater certainty
in some areas, but it is also clear that the proposed Rules do not
address all of the issues that may arise, and the governing standards
in the areas that are not addressed by the Rules will continue to
evolve on a case-by-case basis, almost certainly resulting in instances
in which even the most careful and knowledgeable lawyers will be unable
to predict how a given court will rule and what additional three-factor
analyses or seven-part tests may yet be created. Notes 2
See www.abanet.org/litigation/taskforces/electronic/home.html. 3
See www.thesedonaconference.org/miscFiles/SedonaPrinciples200401.pdf. 4
See www.fjc.gov/newweb/jnetweb.nsf/pages/196 (listing state and local
rules). 5
See www.krollontrack.com/legalresources/topic.pdf
(summarizing court decisions on electronic discovery by topic). 6 The
case has generated at least five opinions to date, but only four address
electronic discovery. See Zubulake
v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (“Zubulake
I”); Zubulake v. UBS Warburg LLC, 216 F.R.D.
280 (S.D.N.Y. 2003) (“Zubulake III”); Zubulake
v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) (“Zubulake
IV”); Zubulake v. UBS Warburg LLC, No. 02
Civ. 1243 (SAS), 2004 WL 1620866 (S.D.N.Y. 7 See
Shira A. Scheindlin & Jeffrey
Rabkin, “Electronic Discovery in Federal
Civil Litigation: Is Rule 34
Up to the Task?” 41 B.C. L. Rev. 327 (2000).
8 205
F.R.D. 421 (S.D.N.Y. 2002), aff’d, 2002
WL 975713 (S.D.N.Y. 9 In
a later opinion, Judge Scheindlin explained
that she modified the Rowe test in response to commentators’ concerns
that Judge Francis’s test “‘tend[ed] to favor the responding party,
and frequently result[ed] in shifting the costs of electronic discovery
to the requesting party.’” Zubulake III, 216
F.R.D. at 284 (quoting what was then an advance copy of Adam I. Cohen
& David J. Lender, Electronic Discovery: Law and Practice §5.04(c)
(Aspen Law & Business, publication forthcoming 2003)). 10 Zubulake V, 2004 WL 1620866, at *3. 11 An
adverse inference instruction permits a jury to infer that documents
that were destroyed or lost would have been unfavorable to the party
who failed to produce them. See
id. at *15 (providing specific instruction
that is to be given at trial). 12 A
copy of the proposed amendments is currently available at www.uscourts.gov/rules/comment2005/CVAug04.pdf.
Additional information can be found at www.uscourts.gov/rules/newrules1.html. 13 See
Ken Withers, “Two Tiers and a 14 See
id. at 32. 15 See
The Gorgen Co. v. Brecht, No. C2-01-1715,
2002 WL 977467 ( 16
Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 746 (8th Cir. 2004). |
