e-Discovery Rules at One Year: How Much Help?

A little more than a year after their adoption, changes to federal rules for civil litigation have provided companies some answers on how to navigate discovery in the electronic age, but they have raised just as many questions.

The Federal Rules of Civil Procedure were amended on Dec. 1, 2006, aiming to help companies and courts deal with the complicated issues surrounding “e-discovery” in civil litigation. The amendments went right down to basic issues such as what electronic data actually is, and parties’ responsibility to search for it.

Most legal experts say it’s still too early to assess the effect of the rules, but they do praise the amendments for bringing questions of how to handle electronically stored information, or ESI, to the forefront of litigation.

Prignano

The rules “have forced courts and litigants to deal with e-discovery issues at an earlier stage,” says Stephen Prignano of the law firm Edwards Angell Palmer & Dodge. “From that perspective they’ve been successful.”

That’s not to say the new rules have brought e-discovery practices to where they should be. Prignano describes the overhaul as “more a slow evolution as opposed to revolution.” The amendments have fixed legal officers’ minds on the importance of having your house in electronic order, he says, but “I don’t think they’ve required companies … to drastically alter the way they do business.”

Others say most companies are still getting a handle on the changes.

Carroll

According to Timothy Carroll, head of the records management practice at the law firm Vedder Price, many companies still haven’t adopted policies and procedures that let them assert they have met the new federal rules’ requirements.

In a recent survey of 200 U.S. in-house counsel commissioned by Kroll Ontrack, a provider of evidence and data recovery services, 21 percent said unmanageable volumes of ESI will be the biggest challenge their legal department faces in the next five years. Only one-quarter say they are current with all case law, developments, and regulations relating to ESI, and only 43 percent say their companies have a strategy in place for how to deal with ESI in litigation or investigations.

Nimsger

“These are large companies unprepared to deal with this issue,” says Kristin Nimsger, president of Kroll.

While companies involved in frequent litigation may be ahead of the curve on some issues, Prignano says, “Even the best of companies are struggling to get a handle on everything, given the magnitude of electronic data.”

Where the Rules Help and Hurt

James Daley of the law firm Redgrave Daley Ragan & Wagner, says the e-discovery rules have brought a much-needed uniformity to civil litigation; even if companies don’t know how to handle them, “having one set of federal rules avoids a patchwork quilt of different and inconsistent standards among federal courts,” he says. “Companies are more able to predict what’s expected of them.”

Daley says many companies are “shoring up” their policies and procedure for records retention, preservation and litigation holds; adding resources to in-house legal functions; consolidating vendors; and establishing better protocols for e-records collection—all to reduce the time and costs associated with e-discovery.

In particular, experts say the meet-and-confer rules have been helpful. Those rules obligate litigants to sit down early in a dispute to set ground rules for what electronic records they want and what parties believe they can reasonably search for and obtain. “They’ve required companies to increase self-knowledge of their own electronically stored information landscape … so they know what kind of ESI containers they have and can make accurate representations to the court and opposing counsel as to what’s readily accessible and what’s not,” Daley says.

Andrew Cohen, vice president of compliance solutions and associate general counsel at EMC Corp., says the rule amendments have heightened corporate awareness of just how much information employees create at their desks, often with little oversight or control from any centralized records management function.

“There’s a tremendous amount of content created at desktops every day that’s not really being managed,” Cohen says. “That problem becomes expensive and risky when the subpoena hits, because the more information you have, the harder it is to find what you need.”

As a result, companies are getting a better handle on where their electronic information is stored, “not only what’s on servers, but places they may never have thought of looking, such as Blackberries, memory sticks and voice recordings,” says Prignano.

Then there are the unanswered questions. The rules provide little guidance on when a party must shoulder some of the expense for a search request, for example. They also don’t define when a duty to preserve electronic evidence arises and are largely silent on the circumstances where courts should view the loss of electronic evidence as sanctionable.

Unfortunately, Prignano says, case law on those questions is limited. “At the end of day, the details regarding how e-discovery issues get resolved are still being worked out by the parties and courts, and there are different results in different cases,” he says.

The e-discovery rules also create extra headaches for some multinationals involved in litigation and regulatory investigations due to tension between the liberal discovery procedures here and stringent international data privacy regulations.

Daley

Daley says European Union data privacy regulations in particular “create a huge roadblock in complying with U.S.-based discovery orders and requirements.”

EU regulators, however, are helping to develop a framework for best practices to deal with such cross-border conflicts, in coordination with The Sedona Conference, a law and policy think tank. Daley, co-chair of the working group, says that guidance is expected in the first quarter of 2008.

Being Reasonable

Companies are also still learning their obligations regarding data deemed not reasonably accessible, Prignano says. There has been a mistaken belief, he says, that if data is not reasonably accessible, companies don’t need to produce it—and, therefore, don’t need to preserve it, he says.

While companies may not have an immediate obligation to produce data not reasonably accessible, that classification can later be changed. “If you’re determined to have a duty to produce it later, you can’t do that if you haven’t preserved it,” he says. “Litigants are starting to wake up to that reality that the rules don’t necessarily get them off the hook” for producing data not reasonably accessible.

The rules have also highlighted the importance of monitoring compliance by employees—particularly departing ones—which Daley describes as “a potential minefield.”

Before deleting the e-mail or hard drive of an outgoing employee, Daley says companies must examine all their existing litigation holds and determine whether anything should be preserved. “There have been cases where a company has done everything right except that one thing, and that one thing is enough to get them sanctioned,” he says.

Carroll, meanwhile, says the next issue companies will litigate is whether instant messaging, which is quickly becoming a common communication tool for businesses, can be deemed ESI and subject to the e-discovery rules. He says debate about how IM fits into the definition of ESI continues.

Before they decide to archive and preserve IMs, Carroll says companies should first determine whether IMs are subject to the same retention and production requirements as their other business records. Since IM chats occur in real time, like telephone calls, employer monitoring of IM conversations could violate privacy laws, such as the Federal Electronic Communications Privacy Act.