Bankruptcy Litigation Committee

ABI Committee News

The E-Discovery Amendments to the Federal Rules of Civil Procedure

The recent amendments to the Federal Rules of Civil Procedure, effective Dec. 1, 2006, will have a significant impact on discovery practices relating to electronically stored information. The amendments, which are discussed below, will have the practical effect of requiring counsel to (1) become knowledgeable of its client’s electronic data architecture and (2) play a more active role in overseeing the production of such electronic data during discovery.

Parties Must Meet and Confer Regarding E-Discovery

The amendments require parties to meet and confer early to address e-discovery issues. The amended Rule 26(f) requires discussion of (1) any issues relevant to preserving discoverable information; (2) issues relating to disclosures or discovery of electronically stored information, including the form in which it should be produced; and (3) any issues relating to claims of privilege, including if the parties agree on a procedure to assert such claims after production, and whether to ask the court to include such agreements in an order.

Amended Rule 16 provides that the pre-trial scheduling order may include “provisions for disclosure or discovery of electronically stored information” and “any agreements the parties reach for asserting claims of privilege or protection as trial-preparation material after production.”

Practically, to have a constructive discussion with opposing counsel, counsel must be able to talk intelligently about its client’s electronic information storage systems. Therefore, counsel should talk directly with its client’s information technology group to ascertain (1) what electronic data exists (remember, electronic data is more than simply e-mails), (2) where it exists, (3) whether policies exist relating thereto and (4) whether any such policies are followed.

E-Discovery Materials Must Be Initially Disclosed, but There Is a Limited Duty to Produce Data Not Reasonably Accessible

The rule governing initial disclosures, Rule 26(a)(1)(B), provides that a party must, without awaiting a discovery request, provide to the parties a copy of, or a description by category and location of, all documents, electronically stored information and tangible things in its possession, custody or control that the disclosing party may use to support its claims or defenses.

Amended Rule 26(b)(2)(B) provides that a producing party need not produce – at least initially – electronic documents that are not reasonably accessible because of undue burden or cost. (Examples of inaccessible data include (1) backup tapes used for disaster recovery purposes only and (2) legacy data from obsolete systems.) The responding party bears the burden on any subsequent motion relating to that party’s claim to show the undue burden or expense. The requesting party must then show good cause – that its need for discovery outweighs the burdens and cost of production. The court may set the parameters of the compelled production.

Practically, these amendments require counsel to (1) determine how its client maintains and utilizes electronic data and (2) determine what electronic data is “reasonably accessible” and what is not.

The Amendments Provide a Procedure for Handling Inadvertently Produced Privileged Documents

Rule 26(b)(5)(B) provides a mechanism for dealing with the inadvertent production of purportedly privileged information (but does not resolve the merits of the underlying legal issue). The producing party must provide “reasonable notice” to the receiving party of the inadvertent production of the privileged documents. The receiving party must return, sequester or destroy the purportedly privileged information and may not use the information until the claim of privilege is resolved. A receiving party may present the information under seal to the court for a ruling on the claim of privilege. If the receiving party disclosed the information prior to receiving notice of the claim of privilege, it must take reasonable steps to retrieve the information.

Because electronic data productions are often voluminous, parties may be tempted to short-cut the time needed to conduct a responsiveness and privilege review. However, parties should give careful consideration to the use of agreements that attempt to streamline waiver issues (e.g., claw-back and quick-peek agreements) because they are often not enforceable against third parties. Remember, these amendments deal only with procedure, not the substantive law of waiver.

Parties May Produce Electronic Data in Response to Interrogatories

Rule 33(d) has been amended to specifically incorporate the option of producing electronic data in response to interrogatories. Of course, to invoke this option, a party must satisfy the existing requirements: (1) the answer to an interrogatory must be derived or ascertained from the electronic business records and (2) the burden of deriving the answer is the same for both parties.

The Amendments Create a Separate Category of “Electronically Stored Information”

The amended Rule 34 now includes a separate category of documents – “electronically stored information.” This underscores the broad scope of electronic data and vitiates the argument that electronic data is a subset of “documents,” which was common before the amendments.

Under Rule 34(b), the requesting party may specify the form in which the electronically stored information is to be produced. The responding party may object to the requested form of production and state the reasons for the objection. If objection is made – or if no form is requested – the responding party must state the form of production it intends to use. If the request does not specify how electronic documents shall be produced, a responding party must produce information in a form in which it is ordinarily maintained or in a “reasonably useable” form. The rules do not mandate production in native format, but the committee notes state that a party cannot limit the functionality of how the data is maintained in the usual course of business. Thus, if the electronic data is searchable as the data is ordinarily maintained, the producing party must preserve the search function in the production of the electronic data. Moreover, the amendments make clear that a party need not produce electronically stored information in two formats.

Practically, these provisions will require counsel for the requesting party to determine with its client the preferred format of production. There are several factors that may influence this determination – cost, ease or speed of review, importance of metadata – so careful consideration is required.

The Amendments Provide a Limited Safe Harbor for the Good Faith, Routine Destruction of Electronic Data

Amended Rule 37 purportedly creates a safe harbor from sanctions, absent exceptional circumstances, for failing to produce electronic data lost as a result of the routine, good-faith operation of an electronic information system. But considering counsel’s common law obligations to preserve evidence when there is a reasonable expectation of litigation, the applicability of this safe harbor will likely be narrow. See generally, Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004).

Conclusion

The e-discovery amendments require counsel to become familiar with its client’s electronically stored information early in the case. Counsel must be familiar with what electronic data exists, how it is stored, and the costs and burden of collecting and producing such information. Because the producing party is not required to produce electronic data that it deems not reasonably accessible, disputes with the requesting party may arise earlier, moving motion practice forward in the case. However, because the rules require the parties to meet and confer early, many potential disputes may be avoided through a thoughtful discussion of the issues with opposing counsel.