Managing Electronically Stored Information: Best Practices Under Federal E-Discovery Rules
I. INTRODUCTION
The U.S. Supreme Court recently approved amendments to the Federal Rules of Civil Procedure. The amended Rules are designed to assist practitioners and federal courts resolve electronic discovery issues that arise in litigation. This article provides an overview of the amended Rules, as well as current electronic discovery trends in state court proceedings. The article concludes with concrete recommendations for companies to manage their electronically stored information in light of the amended Rules.
In order to understand the rationale behind the amendments, it will be helpful to understand the discovery issues typically presented by electronically stored information. The sheer volume of such information imposes unique burdens on companies and their litigation counsel. For example, a traditional floppy disk holds 1.44 “megabytes” of information, which is the equivalent of 720 typewritten pages of plain text.1 A CD-ROM, on the other hand, holds up to 650 megabytes, which is the equivalent of 325,000 typewritten pages.2 Large corporate computer networks store and create data measured in “terabytes,” or 1,000,000 megabytes.3 Thus, each terabyte represents the equivalent of hundreds of millions of typewritten pages of plain text.4 A company asked to print or photocopy a single terabyte of information would need more than 33,000 bankers’ boxes – roughly equivalent to 1,000 pick-up trucks filled with textbooks – to store their document production.
When one considers that electronically stored information grows at an almost exponential rate, it is easy to understand why companies measure data by terabytes. An average employee sends or receives 25 e-mail messages a day.5 A company with just 50 employees generates more than 300,000 e-mail messages a year, many with attachments. A single document sent to employees for comment may generate dozens, if not hundreds, of different copies or versions of that document. Further complicating matters is the fact that e-mail messages and attachments may be stored in dozens of locations, including the company’s network servers, e-mail servers, hard drives, and backup tapes; outside hard drives, laptops and home computers; private e-mail accounts (such as those offered through “Yahoo” or “AOL”); personal data assistants, and even cell phones.
Another challenge posed by electronically stored information is its inherent volatility. Computer systems automatically recycle and reuse memory space, overwrite documents, reallocate file locations and free disk space, and take other routine maintenance steps. Consequently, computer data can be automatically altered or destroyed, even without the intent or knowledge of the user. At the same time, computers automatically retain certain types of data, even against the user’s instructions. For example, deleted documents are not really “deleted” at all – instead, the user has simply instructed the computer to: (a) ignore the deleted information, and (b) note that the physical space taken up by the data on the hard drive is now available for overwriting. Deleted documents are therefore discoverable, if one knows how to ask for them and where to look. In addition, electronically stored documents are typically embedded with “metadata,” which includes information such as the date the document was created, its author, history of revisions, and other identifying data. The existence of metadata – which can be crucial when a party is attempting to prove “who knew what, and when” – together with the possibility that “deleted” files can be retrieved, creates a huge incentive for litigants to engage in electronic discovery on the broadest possible scale. It also creates a temptation for parties to engage in protracted “scorched earth” discovery battles, which significantly increase litigation costs.
If an electronic discovery dispute seems expensive, a court’s resolution of that dispute can be downright “outcome determinative,” given the potentially extraordinary costs attendant to complying with the court’s order. For example, the plaintiff in Murphy Oil USA, Inc., v. Fluor Daniel, Inc., sought an order compelling the production of all e-mail messages responsive to its discovery requests.6 The defendant objected to the request, on the ground of undue burden and expense.7 According to the defendant, compliance with the discovery request would require searching through 2.3 million e-mail messages (consisting of more than 19.7 million pages) from 650 e-mail boxes, which were stored on 93 back-up tapes.8 In support of its objection, the defendant produced a detailed affidavit from a forensic computer consultant, who estimated that it would take $6.2 million and more than six months to produce the e-mail messages.9 These costs did not account for the time and expense that would be incurred by the defendant’s attorneys in conducting a privilege review of the e-mail messages prior to production.10 While the court attempted to balance the respective burdens of the parties, it ultimately concluded that the e-mail messages would need to be produced.11
The case of Rowe Entertainment, Inc. v. The William Morris Agency, Inc., is similar.12 In that case, one of the defendants presented evidence that it would cost $9.75 million to restore 200 e-mail back-up tapes.13 If the plaintiff elected to sample only eight of the back-up tapes to see if they contained any responsive evidence, the cost would be $395,000.14 The court concluded that the e-mail messages would need to be produced, but at the plaintiff’s cost.15 However, the court also ruled that the defendants would be responsible for any costs associated with conducting a privilege review of the e-mail messages before they were produced.16
The recent amendments to the Federal Rules of Civil Procedure address the unique characteristics and burdens of electronic discovery, and clearly establish that electronically stored information “stands on equal footing” with traditional, paper documents.17
II. AMENDED FEDERAL RULES OF CIVIL PROCEDURE
Given the potential costs of electronic discovery disputes (not to mention the actual production costs), it would be helpful to know exactly what constitutes “electronically stored information.” Unfortunately, the amended Rules do not offer a bright-line definition of the term. At best, amended Rule 34 – which governs requests for the production of documents – parenthetically refers to electronically stored information as “including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations stored in any medium from which information can be maintained.”18 The Committee Comments to the amended Rules provide additional guidance, and reveal that the drafters did not want the concept of electronic discovery to be limited by a statutory definition: “[t]he 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.”19 Thus, the Rules are “expansive and include any type of information that is stored electronically,” and are purposefully “intended to be broad enough to cover all current types of computer-based information, and flexible enough to encompass future changes and developments.”20 The 2006 amendments involve Rules 16, 26, 33, 34, 37 and 45, and are discussed in detail below.
A. RULE 16 (Pre-Trial Conferences, “Claw-Backs,” and “Quick Peeks”):
Rule 16 of the Federal Rules of Civil Procedure governs pre-trial conferences, which provide an opportunity for courts to control and manage a case by, inter alia, establishing deadlines and limitations on discovery. The amended language is found in Rule 16(b), and permits a court to enter a scheduling order that includes “provisions for disclosure or discovery of electronically stored information,” as well as “any agreements the parties reach for asserting claims of privilege or as protection of trial-preparation material after production.” The purpose of the amendment is to alert the court of the need to address electronic discovery early in the litigation process, if such discovery is expected to occur.21
The amended Rule also allows the court to memorialize any agreements the parties make during their Rule 26(f) conference (discussed below) regarding the inadvertent disclosure of privileged information. This issue is vitally important, because a party’s disclosure – even unintentional – of a privileged document often creates the argument that the privilege has been waived not only to that document, but to all other documents within that category.22 The risk that privileged information could be inadvertently disclosed is exacerbated by the enormous volume of electronically stored information. Therefore, the amended Rules encourage parties to facilitate discovery by agreeing to a protocol for handling the inadvertent disclosure of privileged information. The most common protocols are “claw-back” and “quick peek” agreements.
A “claw-back” agreement is a formal understanding between the parties that the production of privileged information is presumed to be inadvertent, and does not waive any applicable privileges; the producing party may notify the receiving party of the privilege, at which point the receiving party must return the privileged materials.23 Under a “quick peek” agreement, counsel are allowed to conduct a preliminary “attorneys-eyes-only” review of each other’s entire data collection before production, and designate those items that they believe are responsive to their discovery requests. The producing party then reviews the smaller universe of materials and produces non-privileged documents together with a privilege log.24
B. RULE 26 (Scope of Discovery, Mandatory Disclosures):
Federal Rule of Civil Procedure 26(a) requires parties to voluntarily disclose, without waiting for a discovery request, certain categories of information regarding their claims and defenses. Not surprisingly, the amended Rule 26(a) requires a party to voluntarily produce (or describe and disclose the location of) all electronically stored information that the party may use to support its claims or defenses.25
Rule 26(b)(2) governs the scope and limits of discovery, and has been substantially amended to address the unique challenges of electronic discovery. Specifically, the Rule relieves a party from providing electronically stored information from sources that are not reasonably accessible because of undue burden or cost.26 The party who has been asked to produce the information bears the initial burden of showing
that the information is not reasonably accessible.27 If that showing is made, then the party requesting theinformation may nonetheless obtain a court order for that discovery, if the requesting party shows “goodcause, considering the limitations of Rule 26(b)(2)(C).” 28 In turn, Rule 26(b)(2)(C) permits a court tolimit discovery if the court determines that:
(i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from someother source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity by discovery in the action to obtainthe information sought; or
(iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking intoaccount the needs of the case, the amount in controversy, the parties’ resources, theimportance of the issues at stake in the litigation, and the importance of the proposeddiscovery in resolving the issue.
The Committee Comments to the amended Rule 26(b)(2) note that “electronic discovery systems oftenmake it easier to locate and retrieve information,” which should be taken into account when determiningthe scope of discovery in a case.29 However, the Comments also note that “[i]t is not possible to define ina rule the different types of technological features that may affect the burdens and costs of accessingelectronically stored information.”30 Thus, when a party seeks to avoid producing electronically storedinformation on the ground that it is not reasonably accessible due to burden and cost, the party “must alsoidentify, by category or type, the sources containing potentially responsive information that it is neithersearching nor producing. The identification should, to the extent possible, provide enough information toenable the requesting party to evaluate the burdens and costs of providing the discovery and the likelihoodof finding responsive information on the identified sources.”31
Moreover, a requesting party is entitled to conduct limited discovery in order to test the respondingparty’s assertion that the requested electronically stored information is not reasonably accessible. “Suchdiscovery might take the form of requiring the responding party to conduct a sampling of informationcontained on the sources identified as not reasonably accessible; allowing some form of inspection ofsuch sources; or taking depositions of witnesses knowledgeable about the responding party’s informationsystems.”32
When a court is called upon to weigh the parties’ relative burdens and costs to determine whether torequire a responding party to search for and produce information that is not reasonably accessible, theCommittee Comments identify the following as relevant considerations: (1) the specificity of thediscovery request; (2) the quantity of the information available from other and more easily accessiblesources; (3) the failure to produce relevant information that seems likely to have existed but is no longeravailable on more easily accessed sources; (4) the likelihood of finding relevant, responsive informationthat cannot be obtained from other, more easily accessed sources; (5) predictions as to the importance and usefulness of the further information; (6) the importance of the issues at stake in the litigation; and (7) theparties’ respective resources.33
Rule 26(b)(5) of the Federal Rules of Civil Procedure has also been substantially revised, and nowprovides an automatic “claw-back” for privileged documents and information. Under the amended Rule,a disclosing party may notify a receiving party that it has received privileged information; the receivingparty must then return, sequester or destroy the information (including all copies) until the privilege claimis resolved.34 Moreover, if the receiving party had already disclosed the privileged information before itr eceived notice from the disclosing party, the receiving party must take reasonable steps to retrieve the information.35 Although the amended Rule is not limited to electronically stored information, the Committee Comments again note the unique burdens imposed by electronic discovery:
The Committee has repeatedly been advised that the risk of privilege waiver, and thework necessary to avoid it, add to the costs and delay of discovery. When the review isof electronically stored information, the risk of waiver, and the time and effort requiredto avoid it, can increase substantially because of the volume of electronically storedinformation and the difficulty in ensuring that all information to be produced has in factbeen reviewed.36
C. RULE 34 (Request for Production of Documents, Electronically Stored Information):
Federal Rule of Civil Procedure 34 provides a mechanism for one party to request another party toproduce and permit the inspection, copying, testing or sampling of documents, electronically storedinformation, and tangible things. The amendments to Rule 34 all deal with the logistics of requesting andproducing electronically stored information. Specifically, Rule 34(b) outlines the procedure for makingsuch a request, and allows a requesting party to “specify the form or forms in which electronically storedinformation is to be produced.”37 In turn, the producing party may object to the requested format forproducing electronically stored information.38
If the producing party does object to the requested format of production – or if the requesting party failsto specify the format in which electronically stored information is to be produced – then the producingparty must: (a) state the format it intends to use; and (b) produce the information in a format in which it isordinarily maintained or in a format that is reasonably usable.39 However, a party is not required toproduce the same electronically stored information in more than one format.40
A producing party is not permitted to render the electronically stored information less usable prior toproduction. Thus, if the responding party “ordinarily maintains the information it is producing in a waythat makes it searchable by electronic means, the information should not be produced in a form thatremoves or significantly degrades this feature.”41
One should also note that Rule 33 of the Federal Rules of Civil Procedure – which governs interrogatories– has been amended to the extent that a party who elects to respond to an interrogatory by the productionof documents or electronically stored information must comply with the new requirements of amendedRule 34.
D. RULE 45 (Subpoenas):
Federal Rule of Civil Procedure 45 governs third-party subpoenas, and its amendments mirror those ofRule 34. Accordingly, a subpoena can be used to compel a non-party to produce electronically storedinformation, and can even specify the format in which that information is to be produced.42 Importantly,a non-party subpoena respondent is also afforded the protections of an automatic “claw-back” provision,virtually identical to the protections afforded to parties under Rule 26(b)(5).43 Thus, a subpoenarespondent who inadvertently produces privileged material may notify the receiving party, which mustthen promptly return, sequester or destroy the material (and all copies) until the claim is resolved.44
E. RULE 37 (Motions to Compel, Sanctions, and Tort Liability):
Rule 37 of the Federal Rules of Civil Procedure provides fairly draconian sanctions for a party’s failure tocooperate in discovery or respond to a proper discovery request. Of particular interest is the new Rule37(f), which essentially renders the good-faith destruction of electronically stored information “nonsanctionable.”The Rule provides:
Absent exceptional circumstances, a court may not impose sanctions under these ruleson a party for failing to provide electronically stored information lost as a result of theroutine, good-faith operation of an electronic information system.45
The purpose of Rule 37(f) is simple and self-evident: the Committee acknowledges that computer systemsroutinely destroy, modify and overwrite data as part of their normal maintenance, and through no fault orintent of their users. Moreover, companies often have well-established document retention anddestruction policies that provide for the automatic purging of outdated electronically stored information.The purpose behind these policies is not to destroy evidence or thwart an opponent’s access to proof; rather, the policies are designed to maximize the stability and performance of the company’s information technology.46 Rule 37(f) is therefore a necessary “safe haven” from the traditional sanctions mechanisms.
However, the protections afforded under Rule 37(f) apply only if the information loss was caused by the“good-faith” operation of a computer system. The “good faith” requirement means – at a minimum – thata party is not permitted to exploit the routine operation of an information system to thwart discoveryobligations by allowing that operation to continue in order to destroy specific stored information.47 Thus,in some instances “good faith” may require a party’s intervention to modify or suspend certain features ofthe routine operation of a computer system to prevent the loss of information, if that information issubject to a preservation obligation.48 A preservation obligation may arise from many sources, includingcommon law, statutes, regulations or a court order.49
Accordingly, if a company knows or reasonably suspects that: (a) electronically stored information is relevant to current or threatened litigation, and (b) the routine operation of the company’s computer system will overwrite, delete, or modify that information, then the company is required to put a “litigation hold” on the operation of its computer system until the information can be preserved. If, armed with this knowledge, the company nonetheless refuses to stop the routine maintenance of its computer system, it will not have acted in “good faith,” and the protections afforded under Rule 37(f) will be unavailable. While the addition of Rule 37(f) affords some level of comfort, it does not relieve a party of its obligations to preserve evidence.
III. TORT LIABILITY – SPOLIATION OF EVIDENCE
The scope of Federal Rule 37(f) is expressly limited to the issuance of sanctions “under these rules.”50 Accordingly, a party who inadvertently destroys electronically stored information – even if that information is lost as a result of the routine, good-faith operation of a computer system – remains subject to liability in tort, not withstanding the protections afforded under Rule 37(f). Specifically, the party who allows information to be destroyed may find themselves defending against a “spoliation of evidence claim.” This is consistent with the Committee Comments that “[a] party’s identification of sources of electronically stored information as not reasonably accessible does not relieve the party of its common law or statutory duties to preserve evidence.”51
In order to pursue and prevail on a spoliation of evidence claim, a plaintiff must plead and prove facts establishing the following elements: (a) the existence of a duty to preserve evidence owed by the defendant to the plaintiff, (b) a breach of that duty, (c) an injury proximately caused by the breach, and(d) damages.52 As a general rule, a party owes no duty to preserve evidence.53 However, a duty may arise through an agreement, a contract, or the assumption of a preservation duty through affirmative conduct (for example, by investigating a complaint).54 Whether or not a duty exists is a fact-intensive question that must be decided on a case-by-case basis. Thus, even if it acts in good faith, a company that allows crucial documents to be destroyed – even as part of a routine computer maintenance procedure – could still wind up paying hundreds of thousands of dollars in litigation costs defending against a spoliation claim.
IV. ELECTRONIC DISCOVERY IN STATE COURT PROCEEDINGS
State courts are governed by their own procedural rules, and are unaffected by the recent amendments tothe Federal Rules of Civil Procedure. Some states model their procedural rules after the Federal Rules,and are likely to be the first to adopt similar (or identical) rules for electronic discovery.55 Other states,such as Illinois, have not adopted the Federal Rules, and rely upon their own Code of Civil Procedure.
Under Illinois law, discovery is governed by the Rules of the Illinois Supreme Court.56 Unfortunately, the Illinois Supreme Court has not yet adopted rules to address the discovery of electronically stored information. In fact, the only reference to computer data is found in Rule 214 (which governs the production of documents and tangible things, akin to Federal Rule 34). Rule 214 requires a producing party to produce documents “as they are kept in the usual course of business or organized and labeled to correspond with the categories in the request, and all retrievable information in computer storage in printed form.”57 Under a technical reading of Rule 214, then, a party who is asked to produce a terabyte of electronically stored information would need to print out all 500 million pages and produce the paper documents.
In reality, litigants in Illinois state court proceedings routinely exchange electronically stored information, typically via e-mail or CD-ROM. If there is a dispute regarding the production of such information, the parties’ respective trial counsel are required to meet and confer in an effort to resolve that dispute.58 If the parties are unable to reach an accord, they may seek the court’s assistance through a motion to compel or motion for protective order.59 The court will then evaluate the particular facts of the case and resolve the dispute, typically by balancing the parties’ respective demands.
As state courts struggle with electronic discovery disputes, they may turn to the recently-adopted guidelines promulgated by the Conference of Chief Justices (“CCJ”). In August of 2006, the CCJ adopted formal Guidelines for State Trial Courts Regarding Discovery of Electronically-Stored Information. Although these Guidelines are not binding on state courts, they represent the next trends in state court procedure. The CCJ proposed ten guidelines, which are summarized below:
1. Definitions
The CCJ largely adopted Section 29 of the American Bar Association’s Standards Relating to Civil Discovery, and posited the following definitions of “electronically stored information” and “accessible information”:
Electronically-stored information is any information created, stored, or best utilized with computer technology of any type. It includes but is not limited to data; word processing documents; spreadsheets; presentation documents; graphics; animations; images; e-mail and instant messages (including attachments, audio, video and audio visual recordings; voicemail stored on databases; networks; computers and computer systems; servers; archives; back-up or disaster recovery systems; discs, CDs, diskettes, drives, tapes, cartridges and other storage media; printers; the Internet; personal digital assistants; handheld wireless devices; cellular telephones; pagers; fax machines; and voicemail systems.60
Accessible information is electronically-stored information that is easily retrievable in the ordinary course of business without undue cost and burden.61
What constitutes an “undue burden” will be determined on a case-by-case basis. However, examples of information that may not be reasonably accessible include data stored on legacy systems, material that has been deleted, and residual data.62
2. Responsibility of Counsel to be Informed about Client’s Electronically Stored Information
The Guidelines impose a duty upon litigation counsel to become familiar with the operation of their clients’ relevant information management systems, including how information is received, stored, retrieved and deleted.63
3. Agreements by Counsel; Pre-Conference Orders
The Guidelines further direct courts to encourage counsel to meet and confer, and pro-actively address any electronic discovery issues early in the case. In the event counsel are unable to reach an agreement,the court should require the parties to exchange information that will enable the discovery process to move forward. Such information includes: (a) a list of the persons most knowledgeable about the relevant computer systems; (b) a list of the likely custodians of electronically stored information; (c) a list of each electronic or computer storage system that was operating during the matters in dispute; (d) any information regarding the limited duration or accessibility of data or information (e.g., by virtue of acompany’s record retention and destruction policy); (e) a list of relevant data that is stored off-site; (f) a description of all efforts undertaken to preserve electronically stored information; (g) the parties’ preferred format for production; and (h) advanced notice of any anticipated problems that may occur in connection with the disclosure or production of electronically stored information.64
4. Initial Discovery Hearing or Conference
Courts are encouraged to quickly schedule a hearing or conference to address such issues as the format of production, inaccessibility of data, inadvertent disclosure of privileged information, procedures to preserve information, and how to allocate the costs attendant to electronic discovery.65
5. The Scope of Electronic Discovery
The Guidelines recommend that when a court is called upon to resolve a discovery dispute regarding electronically stored information, the court should first determine if the requested information is relevant. Assuming it is relevant, the court should balance a number of factors, on a case-by-case basis, to determine whether the information should be produced. Those factors include, inter alia: (a) the ease of access to the information; (b) the total cost of production compared to the amount in controversy; (c) the materiality of the information and its availability from other sources; (d) the complexity of the case and the importance of the issues addressed; (e) the need to protect confidential, proprietary and trade secret information, as well as to preserve privileges and, in particular, whether the software needed to access the information is itself proprietary; (f) the breadth of the request; and (g) the relative ability of each party to control costs, as well as the resources of each party compared to the cost of production.66
6. Format of Production
In the absence of an agreement between the parties, the court should require electronically-stored information to be produced in only one format, and the court should select the format in which the information is ordinarily maintained.67
7. Reallocation of Discovery Costs
The Guidelines adopt the three-tiered approach of Zubulake v. UBS Warburg LLC, to determine how (and if) a court should shift the cost of producing electronically stored information.68 The first tier involves a determination of whether the information is accessible.69 The second tier requires a determination that a less-costly method of obtaining the information – such as restoration of a sample set of data – would not be feasible.70 The final step is a cost-benefit analysis, taking into account the same factors identified above in Guideline 5.71
8. Inadvertent Disclosure of Privileged Information
The Guidelines depart significantly from the Federal Rules regarding the disclosure of privileged information. Instead of adopting an automatic “claw-back,” or encouraging parties to enter “quick peek” agreements, the Guidelines suggest that a court should consider five factors in determining whether an inadvertent disclosure constitutes a waiver of the attorney-client or work product privileges: (a) the total volume of information produced by the responding party; (b) the amount of privileged information disclosed; (c) the reasonableness of the precautions taken to prevent the inadvertent disclosure of privileged information; (d) the promptness of the action to notify the receiving party of the inadvertent disclosure; and (e) the reasonable expectations and agreements of counsel.72
9. Preservation Orders
When faced with a motion for document preservation order, the Guidelines suggest that the court first make a threshold determination that the continuing existence and integrity of the information is threatened. Assuming there is such a threat, the court should consider the following factors in determining whether to enter a preservation order: (a) the nature of the threat; (b) the potential for irreparable harm; (c) the capability of the responding party to maintain the information sought; and (d) the physical, technological and financial burdens attendant to such an order.73
10. Sanctions
Consistent with the Federal Rules of Civil Procedure, the Guidelines suggest that a court should refrain from sanctioning a party if the destruction of electronically stored information was part of the good faith operation of a computer system.74
V. RECOMMENDATIONS
The recent amendments to the Federal Rules of Civil Procedure send a clear message: electronic discovery is here to stay, and companies would be well-advised to proactively manage their electronically stored information. Toward that end, companies can take the following four steps to place themselves in the best possible position – both before a lawsuit is filed, as well as during the litigation process – for handling electronic discovery.
The first step is for companies to understand and appreciate the magnitude of the potential burden posed by electronically stored information. As noted above, a single draft document sent to a handful of employees for review and comment could generate hundreds of different versions of that document, with equal or greater number of e-mail strings, each of which would need to be produced. Companies also need to be mindful of the hidden “metadata” associated with electronically stored documents, and should install “scrubbing software” that automatically removes as much metadata as possible before the document is attached to an external e-mail message. But, companies also need to understand that metadata is itself discoverable. The Federal Rules of Civil Procedure clearly contemplate discovery requests for documents as well as “data or data compilations” related to those documents.75 This is also consistent with a recent ABA ethics opinion, stating that lawyers who receive electronic documents – even transactional lawyers who receive draft agreements in a non-litigation context – are free to examine metadata.76 Accordingly, a company should amend its computer training program to ensure that every employee who has computer access understands the concept of metadata, as well as the potential pitfalls of sending documents via e-mail. Where appropriate, the company should also adopt (or amend) a formal computer usage policy addressing these issues. The policy would be presented to and agreed upon by all employees as a condition of employment. Second, companies should adopt (or amend) a formal record retention and destruction policy – separate from the company’s “disaster recovery plan” – that addresses electronically stored information. There is no general rule that companies must retain all information created or received in the ordinary course of business (although there are certain statutory and regulatory retention obligations for specific types of documents). Indeed, it is generally expected that companies will destroy information as part of their business operations.77 However, any legitimate record retention and destruction policy would need to be “reasonable,” and therefore individually tailored to the needs of the particular company. There is no “standardized” policy that can satisfy each company’s need to balance inherently unique operational requirements, information technology infrastructure, regulatory and compliance responsibilities, and litigation requirements. Every policy should contain the following elements, however: (a) statutory and regulatory record retention requirements must be satisfied; (b) the destruction of information should occur at planned, routine intervals; (c) any destruction of information should be documented; and (d) there must be a “litigation hold” mechanism that allows the routine to be suspended for information relevant to pending or threatened litigation.78
Furthermore, companies must realize that a record retention and destruction policy is only effective if it is followed. Companies will often continue to keep electronically stored information – even in violation of their own policy – because they do not perceive any cost associated with storing it. The Murphy Oil v. Fluor case teaches an important lesson about the importance of following company policy.79 In that case, the defendant neglected to follow its own destruction policy, and consequently was asked to produce email messages from 93 backup tapes, at an estimated cost of $6.2 million:
Fluor’s e-mail retention policy provided that backup tapes were recycled after 45 days. If Fluor had followed this policy, the e-mail issue would be moot. Fluor does not explain why, but it maintained its backup takes for the entire fourteen month period. As a consequence it has 93 e-mail backup tapes. Each tape includes not only the e-mail communications for the 37 persons involved in the Murphy turnaround, but also from the 650 other e-mail boxes….[Fluor’s expert] estimates that it will take $6.2 million and more than 6 months to complete this project.80
Third, if a company is currently engaged in litigation, or if a lawsuit is imminent, the company and its counsel should retain an expert to assist them with electronic discovery. Even the best lawyer will never be as good as a forensic expert when it comes to obtaining, analyzing and reconstructing electronically stored information. Assuming the parties agree to manage electronic discovery with a “quick peek” arrangement, the forensic consultant will know how to identify deleted documents, missing e-mail messages, and crucial metadata, and therefore should be directly involved in the initial review of the opponent’s information systems. Even if the parties elect to use a “claw back” agreement (or if they fail to reach an agreement at all), a forensic expert should still be used to analyze the opponent’s electronically stored information. At the same time, a forensic expert will be an invaluable tool as the company prepares its own electronically stored information for production.
Finally, companies need to anticipate and appreciate the increased costs associated with electronic discovery, and should significantly increase (perhaps even double) their current litigation reserves. Given the enormous volume of electronically stored information, as well as the use of highly trained forensic experts, it is not unreasonable for a mid-sized company to spend $500,000 (or more) navigating electronic discovery. Companies who contend they should be relieved of the burden of producing electronically stored information because of inaccessibility and undue expense should take heed: they will be required to prove that contention, and will need to submit to discovery on that point. There is a very real risk that, after the company’s information technology personnel are deposed (and the company has spent thousands of dollars on that narrow discovery battle), the court will still force the company to fully produce its electronically stored information. For additional information on managing electronic discovery, please contact Christopher S. Griesmeyer at Greiman, Rome & Griesmeyer, P.C. (cgriesmeyer@grglegal.com).
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1 Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, Report of the Civil Rules Advisory Committee, p. 3 (Washington, D.C., August 3, 2004). 2 Id. 3 Id. 4 Id. 5 Conference of Chief Justices, Guidelines for State Trial Courts Regarding Discovery of Electronically-Stored Information, p. v (August 2006).
6 2002 WL 246439 (E.D. La. Feb. 19, 2002). 7 2002 WL 246439 at *2. 8 Id. 9 Id. 10 Id. 11 Id. at *10. 12 205 F.R.D. 421 (S.D.N.Y. 2002). 13 205 F.R.D. at 425. 14 Id. 15 Id. at 433. 16 Id.
17 Fed. R. Civ. P. 34, Committee Comments to 2006 Amendment, Subdivision (a). 18 Fed. R. Civ. P. 34(a), as amended (emphasis added). 19 Fed. R. Civ. P. 34, Committee Comments to 2006 Amendment, Subdivision (a). 20 Id. In addition, section 29 of the American Bar Association’s Standards Relating to Civil Discovery (August 2004) identifies the following types of information as “electronic data” for discovery purposes: e-mail (including attachments); word processing documents; spreadsheets; presentation documents; graphics; animations; images; audio, video and audiovisual recordings; and voicemail. In addition, the following platforms should be searched for electronic data: databases; networks; computer systems, including legacy systems (hardware and software); servers; archives; back up or disaster recovery systems; tapes, discs, drives, cartridges and other storage media; laptops; personal computers; internet data; personal digital assistants; handheld wireless devices; mobile telephones; paging devices; and audio systems, including voicemail. See also, Super Film of Am., Inc. v. UCB Films, Inc., 219 F.R.D. 649, 657 (D. Kan. 2004) (“Computerized data and other electronically-recorded information includes, but is not limited to: voice mail messages and files, back-up voice mail files, e-mail messages and files, backup e-mail files, deleted e-mails, data files, program files, backup and archival tapes, temporary files, system history files, web site information stored in textual, graphical or audio format, website log files, cache files, cookies, and other electronically-recorded information”). Such examples should be unnecessary, however, because the Committee Comments to the amended Rules clearly contemplate that all forms of “data” fall within the purview of “electronically stored information.” Fed. R. Civ. P. 34, Committee Comments to 2006 Amendment, Subdivision (a). 21 Fed. R. Civ. P. 16, Committee Comments to 2006 Amendment.
22 The Committee Comments ably articulate this problem:
Frequently, parties find it necessary to spend large amounts of time reviewing materials requested through discovery to avoid waiving privilege. These efforts are necessary because materials subject to a claim of privilege or protection are often difficult to identify. A failure to withhold even one such item may result in an argument that there has been a waiver of privilege as to all other privileged materials on that subject matter. Efforts to avoid the risk of waiver can impose substantial costs on the party producing the material and the time required for the privilege review can substantially delay access for the party seeking discovery. These problems often become more acute when discovery of electronically stored information is sought. (Fed. R. Civ. P. 26(f), Committee Comments to 2006 Amendment).
23 Id. See also, Fed. R. Civ. P. 26(f), Committee Comments to 2006 Amendment. 24 Id. 25 Specifically, the amendment requires a party to voluntarily disclose “a copy of, or a description by category and location of, all documents, electronically stored information, and tangible things that are in the possession, custody or control of the party and that the disclosing party may use to support its claims or defenses, unless solely for impeachment.” (Fed. R. Civ. P. 26(a)(1)(B), as amended). 26 The Rule reads in full:
A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions forthe discovery. (Fed. R. Civ. P. 26(b)(2)(B), as amended).
27 Fed. R. Civ. P. 26(b)(2)(B), as amended.
28 Id.
29 Fed. R. Civ. P. 26(2), Committee Comments to 2006 Amendment.
30 Id.
31 Id.
32 Id.
33 Id.
34 The Rule reads in full:
If information is produced in discovery that is subject to a claim of privilege or of protection astrial-preparation material, the party making the claim may notify any party that received theinformation of the claim and the basis for it. After being notified, a party must promptly return,sequester, or destroy the specified information and any copies it has and may not use or disclosethe information until the claim is resolved. A receiving party may promptly present theinformation to the court under seal for a determination of the claim. If the receiving partydisclosed the information before being notified, it must take reasonable steps to retrieve it. Theproducing party must preserve the information until the claim is resolved. (Fed. R. Civ. P.26(b)(5)(B), as amended).
35 Id.
36 Fed. R. Civ. P. 26(b)(5), Committee Comments to 2006 Amendment.
37 Fed. R. Civ. P. 34(b), as amended.
38 Id.
39 Fed. R. Civ. P. 34(b)(ii), as amended.
40 Fed. R. Civ. P. 34 (b)(iii), as amended.
41 Fed. R. Civ. P. 34(b), Committee Comments to 2006 Amendment.
42 Fed. R. Civ. P. 45(a), 45(d), as amended.
43 Fed. R. Civ. P. 45(d)(2)(B), as amended.
44 Id.
45 Fed. R. Civ. P. 37(f).
46 Fed. R. Civ. P. 37(f), Committee Comments, 2006 Amendment (“Many steps essential to computer operationmay alter or destroy information, for reasons that have nothing to do with how that information might relate tolitigation. As a result, the ordinary operation of computer systems creates a risk that a party may lose potentiallydiscoverable information without culpable conduct on its part.”).
47 Id.
48 Id.
49 Id. (“When a party is under a duty to preserve information because of pending or reasonably anticipatedlitigation, intervention in the routine operation of an information system is one aspect of what is often called a‘litigation hold.’”).
50 Fed. R. Civ. P. 37(f).
51 Fed. R. Civ. P. 26(b)(2), Committee Comment, 2006 Amendment.
52 Boyd v. Travelers Ins. Co., 166 Ill.2d 188, 194-95 (1995). Importantly, “a spoliator may be held liable in anegligence action only if its loss or destruction of evidence causes a plaintiff to be unable to prove the underlyingsuit.” Id. at 198 (emphasis original). The Illinois Supreme Court recently confirmed that the Boyd opinion “remains our watershed pronouncement on spoliation of evidence.” Dardeen v. Kuehling, 213 Ill.2d 329, 335 (2004).Although Illinois does not recognize “negligent spoliation” as a separate and distinct tort, an action for negligentspoliation may nonetheless be stated under traditional negligence jurisprudence. Boyd, at 193. Illinois has neverrecognized the concept of “intentional spoliation” as a tort, and courts have taken great pains to avoid doing so. See,e.g., Boyd; Kelley v. Sears Roebuck and Company, 308 Ill. App. 3d 633 (1st Dist. 1999).
53 Boyd, 166 Ill.2d at 195.
54 Id. Moreover, a plaintiff is not required to first lose the underlying action in order to satisfy the “proximate cause”and “damages” elements of a spoliation claim. Id. at 196.
55 See, e.g., Arizona, Colorado, Georgia, Kansas, New Mexico, North Carolina, Oklahoma, and Utah.
56 735 ILCS 5/2-1003(a).
57 IL. Sup. Ct. R. 214.
58 IL Sup. Ct. R. 201(k).
59 IL Sup. Ct. R. 219(c), 201(c).
60 Conference of Chief Justices, Guidelines for State Trial Courts Regarding Discovery of Electronically-Stored Information, at p. 1 (August 2006) (hereafter, the “Guidelines”).
61 Id.
62 Id.
63 Id., at pp. 1-2.
64 Id., at pp. 2-4.
65 Id., at p. 4. 66 Id., at pp. 5-6. 67 Id., at pp. 6-7. 68 216 F.R.D. 280 (S.D.N.Y. 2003). 69 Guidelines, at p. 7. 70 Id. 71 Id.
72 Id. at pp. 8-9. Cf., Fed. R. Civ. P. 26(b)(5) 73 Guidelines, at pp. 9-10. 74 Id., at pp. 10-11. 75 Fed. R. Civ. P. 34(a). 76 ABA Ethics Opinion 06-442, Review and Use of Metadata, (August 5, 2006).
77 See, e.g., Arthur Andersen, LLP v. United States, 544 U.S. 696, 704 (2005) (“‘Document retention policies,’ which are created in part to keep certain information from getting into the hands of others, including the Government, are common in business. It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances.” (internal citations omitted); Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003) (“Must a corporation, upon recognizing the threat of litigation, preserve every shred of paper, every e-mail or electronic document, and every backup tape? The answer is clearly ‘no.’ Such a rule would cripple large corporations, like UBS, that are almost always involved in litigation.”); Wiginton v. Ellis, 2003 WL 22439865, at *4 (N.D. Ill. Oct. 27, 2003) (a company “does not have to preserve every single scrap of paper in its business.”); Concord Boat Corp. v. Brunswick Corp., 1997 WL 33352759, at *4 (E.D. Ark. Aug. 29, 1997) (“to hold that a corporation is under a duty to preserve all e-mail potentially relevant to any future litigation would be tantamount to holding that the corporation must preserve all e-mail…such a proposition is not justified.”). 78 As discussed above, the protections afforded by Federal Rule of Civil Procedure 37(f) do not extend to state court proceedings, and do nothing to prevent an ancillary spoliation of evidence claim. 79 Murphy Oil USA, Inc. v. Fluor Daniel, Inc., 2002 WL 246439 (E.D. La. Feb. 19, 2002). 80 2002 WL.246439, at*2.
