The Brave New World Of e-Discovery Rules

Electronic data has no natural lifecycle and can exist on an IT system forever—which sounds ideal, right until a subpoena lands on your desk.

As email and other computer information accumulate across the world at alarming rates, organizations are making the rationalization of records and information management (“RIM”) a top priority. According to a 2006 survey by the Business Roundtable, chief executives rank litigation as among a short list of top cost pressures, and a 2005 study by the Association of Corporate Counsel indicates that chief legal officers rate compliance, e-discovery and RIM as the highest risk areas for the next five years

What’s more, when the new Federal Rules of Civil Procedure take effect in December, every court case will involve early disclosure of electronically stored information, keeping RIM a top priority for years to come. As discussed below, the ESI rules will increase the burden on corporate law departments and substantially change the traditional model of outsourced litigation management.

Yet even if the new federal rules were not looming, escalating litigation risks should still force organizations to deal with the sprawling and decentralized IT systems that span most large companies. Email, instant messaging and the Internet are essential communication tools for business, but the vast content generated through these media seemingly lasts forever, or at least until technological obsolescence makes the data unreadable. So long as systems have worked smoothly for end-users and the cost of storage remained low, it has been hard to make a business case to invest in an enterprise content management system that users do not see, just to reduce volume and bring general order to the chaos.

Now, however, that flood of information has reached Biblical proportions, and it is gushing headlong towards the legal department—and seemingly overnight, the value proposition behind investment in RIM is becoming crystal clear. Since 2002 the volume of email generated by businesses worldwide is estimated to have increased to more than 60 billion messages every day. The weight of this data explosion has created significant concern for organizations across all industries and governments. Email has been the principal evidentiary source for plea bargains, early settlements and large sanctions over the last several years—yet nobody professes to have control over email. Indeed, a just-released study shows that most organizations are at “the beginning stages” of determining records management compliance.

Why the slow pace? A confluence of forces has created “information retention phobic” cultures, dominated by fear that destroying information might lead to civil or criminal liabilities. For the many who don’t ever consider legal risk, email and other information is retained from the anxiety of never being able to locate that file again. But executives know intuitively that “save everything” policies are not good practices, and would prefer balancing discovery compliance with information lifecycle management through enforced RIM policies. Will trepidation finally yield to bona fide investment in enterprise content management and lasting change? We shall find out soon enough.

Enter The Federal Rules

The amended federal rules are meant to bring clarity to how parties disclose and produce ESI in court proceedings. For reasons unintended by the drafters, however, the new rules are exposing a global information management crisis hardly conceivable when hearings on the new rules began a few years ago. It’s fair to say, then, that the movement to institute an effective RIM policy will gain traction and accelerate as we move closer toward the effective date for the new rules later this year. Indeed, several district courts are already using the federal rules, and states like New Jersey have similar procedures going into effect on Sept. 1.

E-DISCOVERY

The excerpt below is from the "Amendments To The Federal Rules of Civil Procedure" related to discovery:

Rule 34. Production of Documents, Electronically

Stored Information, and Things and Entry Upon

Land for Inspection and Other Purposes

Scope Any party may serve on any other party a

request (1) to produce and permit the party making

the request, or someone acting on the requestor’s

behalf, to inspect, copy, test, or sample any designated

documents or electronically stored information —

including writings, drawings, graphs, charts,

photographs, sound recordings, images, and other

data or data compilations stored in any medium from

which information can be obtained — translated, if

necessary, by the respondent into reasonably usable

form, or to inspect, copy, test, or sample any

designated tangible things which constitute or contain

matters within the scope of Rule 26(b) and which are in the possession, custody or control of the party upon

whom the request is served; or (2) to permit entry

upon designated land or other property in the

possession or control of the party upon whom the

request is served for the purpose of inspection and

measuring, surveying, photographing, testing, or

sampling the property or any designated object or

operation thereon, within the scope of Rule 26(b).

Procedure. The request shall set forth, either by

individual item or by category, the items to be

inspected, and describe each with reasonable

particularity. The request shall specify a reasonable

time, place, and manner of making the inspection and

performing the related acts. The request may specify

the form or forms in which electronically stored

information is to be produced. Without leave of court or written stipulation, a request may not be served

before the time specified in Rule 26(d).

The party upon whom the request is served shall

serve a written response within 30 days after the

service of the request. A shorter or longer time may be

directed by the court or, in the absence of such an

order, agreed to in writing by the parties, subject to

Rule 29. The response shall state, with respect to

each item or category, that inspection and related

activities will be permitted as requested, unless the

request is objected to, including an objection to the

requested form or forms for producing electronically

stored information, stating the reasons for the

objection. If objection is made to part of an item or

category, the part shall be specified and inspection

permitted of the remaining parts. If objection is made

to the requested form or forms for producing electronically stored information — or if no form was

specified in the request — the responding party must

state the form or forms it intends to use. The party

submitting the request may move for an order under

Rule 37(a) with respect to any objection to or other

failure to respond to the request or any part thereof, or

any failure to permit inspection as requested.

Unless the parties otherwise agree, or the court

otherwise orders:

a party who produces documents for inspection

shall produce them as they are kept in the usual

course of business or shall organize and label them

to correspond with the categories in the request;

if a request does not specify the form or forms

for producing electronically stored information, 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;

and

a party need not produce the same

electronically stored information in more than one

form.

Excerpt Of Related Committee Note

Subdivision (a). As originally adopted, Rule 34

focused on discovery of “documents” and “things.” In

1970, Rule 34(a) was amended to include discovery of

data compilations, anticipating that the use of

computerized information would increase. Since then,

the growth in electronically stored information and in

the variety of systems for creating and storing such

information has been dramatic. Lawyers and judges

interpreted the term “documents” to include

electronically stored information because it was

obviously improper to allow a party to evade discovery

obligations on the basis that the label had not kept

pace with changes in information technology. But it

has become increasingly difficult to say that all forms

of electronically stored information, many dynamic in

nature, fit within the traditional concept of a

“document.” Electronically stored information may

exist in dynamic databases and other forms far

different from fixed expression on paper. Rule 34(a) is

amended to confirm that discovery of electronically stored information stands on equal footing with

discovery of paper documents. The change clarifies

that Rule 34 applies to information that is fixed in a

tangible form and to information that is stored in a

medium from which it can be retrieved and examined.

At the same time, a Rule 34 request for production of

“documents” should be understood to encompass, and

the response should include, electronically stored

information unless discovery in the action has clearly

distinguished between electronically stored

information and “documents.”

Discoverable information often exists in both

paper and electronic form, and the same or similar

information might exist in both. The items listed in

Rule 34(a) show different ways in which information

may be recorded or stored. Images, for example, might

be hard-copy documents or electronically stored

information. The wide variety of computer systems

currently in use, and the rapidity of technological

change, counsel against a limiting or precise definition

of electronically stored information. Rule 34(a)(1) is

expansive and includes any type of information that is

stored electronically. A common example often sought

in discovery is electronic communications, such as email.

The rule covers — either as documents or as

electronically stored information — information “stored

in any medium,” to encompass future develop-ments

in computer technology. Rule 34(a)(1) is intended to

be broad enough to cover all current types of

computer-based information, and flexible enough to

encompass future changes and developments.

References elsewhere in the rules to

“electronically stored information” should be

understood to invoke this expansive approach...

Source

Amendments To The Federal Rules of Civil Procedure (See Complete Document For Additional Committee Notes And Related Details)

The new rules will require parties to meet and confer at the start of every case about the preservation, disclosure and discovery of electronically stored information with “a description by category and location of all documents … and tangible things that are in the possession, custody and control of the party.” The parties then must negotiate to develop an agreed discovery plan for approval by the federal district court. If the parties cannot agree, judges need to intervene or the parties might use mediation, special masters or other forms of dispute resolution. Outside counsel has a steep learning curve to understand the new problems that arise in these proceedings, such as:

Locating ESI and determining the extent of its accessibility;

Determining the effectiveness of RIM policies and procedures;

Converting ESI into formats suitable for collection and production;

Selecting forensic experts from a highly fragmented and rapidly maturing e-discovery industry; and

Identifying reliable search methodologies to isolate responsive and non-privileged information, beyond the passé document review on an hourly basis approach.

So while law departments continue to struggle with grasping their own information systems and developing defensible document preservation procedures, the new federal rules expect outside counsel to master these subjects too. Few organizations, if any, have begun educating their outside counsel on technology infrastructure and RIM policy compliance. This new frontier and its host of new legal issues will give headaches to federal judges and anyone else called upon to litigate or resolve discovery disputes. For law firms, these changes will have immediate consequences for litigation services, and could even erode revenue streams from document discovery review services.

For inside counsel, quite innocently, the new meet-and-confer obligations might forever change the way companies manage litigation. Once alerted to a situation giving rise to an actual or possible dispute, inside lawyers will need to rely on standardized procedures for sending preservation notices to employees with possible knowledge of (or information relating to) the issue—well before a law department decides to hire outside counsel. If the obstruction of justice law amendments in Sarbanes-Oxley did not stimulate improved RIM protocols in 2002, the Federal Rules of Civil Procedure of 2006 should do it.

Consider a scenario where the corporation is served with a summons and complaint, but inside counsel delays assigning the case to outside counsel or neglects to send a preservation notice to employees. With a gap between notice and action taken to preserve ESI, opposing counsel will have little difficulty bringing into question the effectiveness of the corporation’s RIM policies and procedures. An organization, therefore, needs to take a hard look at how its current RIM policies apply to ESI—if at all—and gain comfort around its ability to defend those policies in court. Even with good paper policies in place, gaps in compliance and control weaknesses will need to be minimized through periodic reviews or monitoring.

Perhaps to the chagrin of the general counsel, the law department has become directly involved in strategic discussions involving operations, IT and communication systems. Technology managers cannot be pleased to be thrust into meetings with the lawyers, either. With so few bilingual executives—that is, those able to speak and understand legal and IT—there is an immediate and growing demand to find these individuals or train rising stars to handle what might end up as a new corporate function. A new “content management” or “information management” function could emerge (or end up on graduate school curricula), producing professionals who blend the legal, compliance and technology expertise needed to harmonize IT systems with legal requirements and establish new standard operating procedures for ESI. Some companies are saddling these cross-functional duties on compliance officers, but no clear or consistent governance model for RIM exists yet. Law firms should consider adding a new practice area that blends litigation discovery, corporate compliance and technology expertise, and serve those organizations wanting RIM reform.

Until there is clear ownership for enterprise content management, corporate law and IT departments will continue to struggle with coordinating support for and handling of ESI initiatives. If chief executives are truly concerned about spiraling legal costs, reputation damage and compliance risks, now is the time to provide the leadership necessary to spawn meaningful change. Stemming the tide of email and establishing effective RIM will take resources, executive support and time. After all, Dec. 1 is not far away.