Discovery has always been an important part of the litigation process, but electronic information has added new dimensions to the discovery process, for a number of reasons, including headline-grabbing sanctions:
- Magistrate Judge recommended $345 million in fines because party “stalled and mishandled the production of documents.”(1)
- $2.75 million sanction because eleven senior executives failed to preserve e-mails that might have been relevant to a lawsuit, amounting to $250,000 per employee.(2)
So much information is now created, processed and maintained electronically, rather than in paper form, paper-based document retention policies and discovery practices are dangerously limited.
What are some of the key things to think about as you prepare for the realities of electronic discovery? This article will address a few: (1) sources of discoverable information; (2) litigation holds; (3) practical considerations; and (4) proposed amendments to the Federal Rules of Civil Procedure.
1. Sources of Discoverable Information.
The first step in preparing for discovery of your company’s records is to identify all sources and locations of potentially relevant data. This includes not only file cabinets and boxes of paper documents, but all locations of potentially relevant electronic information. Potential sources of information include network servers, desktop hard drives, laptop hard drives, floppy disks, CDs/DVDs, backup tapes, voice mail and portable devices used by employees, such as PDAs, Blackberries, Treos, cell phones and pagers.
2. Litigation Holds.
Most companies have document retention policies, and most IT systems are set up to automatically delete e-mails and other records after a certain time. Destroying records under the company policy is fine, until you know or should know that an investigation or litigation is likely. Courts have ruled that “once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to insure the preservation of relevant documents.”(3) The obligation to preserve evidence extends to e-mail and electronic documents as well as, in certain circumstances, servers, metadata and backup tapes.(4) Individuals at the company who may have relevant information must also understand the duty to preserve information, including any information generated or maintained on home computers or hand-held devices.
3. Practical Issues for Discovery in Litigation.
Electronic information adds new dimensions to the discovery process, for a number of reasons, including the sheer volume and added sources of potentially relevant data. Other issues include:
Accessibility. Information that is stored in a readily usable format is generally considered “accessible.” Data contained on backup tapes is of more limited accessibility, because it is not organized on the tape, and special restoration software is needed to restore the tape. Data that has been deleted or damaged may require skilled computer forensics to be restored.
Format. Electronic information can be produced either in its “native” format (the electronic format in which it was originally generated and maintained) or in an image format such as .pdf or .tiff. Documents produced in their “native” format can only be viewed electronically, with appropriate software, and may be difficult to view in any other format. Information produced in an image format may be easier to search for certain terms or names and is typically compatible with litigation management software.
Privilege. In some cases, the volume of electronic information to be reviewed may make it too timely and costly to conduct a detailed document-by-document privilege review or create a detailed privilege log with an entry for each document. Even if each document is reviewed, parties may inadvertently produce privileged documents. For these reasons, parties engaged in electronic discovery need to be creative about approaching these privilege issues.
4. Proposed Amendments to the Federal Rules of Civil Procedure.
Proposed amendments to the Federal Rules of Civil Procedure are scheduled to take effect on December 1, 2006. Some of the key amendments that impact electronic discovery include revisions to rules concerning discovery conferences and scheduling orders, which will address issues relating to discovery of electronic information and agreements concerning privilege protections. The rules will also specify that initial disclosures and document requests may include electronically stored information. A new provision will also allow a party to withhold electronically stored information from sources that are “not reasonably accessible because of undue burden or cost.” The new rule then provides a mechanism for the requesting party to challenge that designation and get a court ruling.
This article only scratches the surface of electronic information’s implications for discovery. Please join us for a more detailed discussion of these issues at one of the following events:
- March 22, 2006 at the Capitol City Club in the Capitol City Center at 1201 Main Street, Columbia, South Carolina.
- March 29, 2006 at Parker Poe’s offices in the Wachovia Capital Center, 150 Fayetteville Street Mall, Suite 1400, in Raleigh, North Carolina.
Both programs will begin at 9:00 a.m. and conclude with lunch, which will be served at noon.
If you are interested in registering for the seminar or would like more information, please go to http://www.parkerpoe.com/seminar.
(1) Christopher Montgomery, Firm could face $345 million in fines. . . Cleveland Plain Dealer, January 12, 2005, at C1.
(2) United States v. Philip Morris USA, Inc., 327 F.Supp.2d 21 (D.D.C., 2004), at 26.
(3) Zubulake v. U.B.S. Warburg, LLC, 220 F. R. D. 212, 216, 218 (S.D.N.Y. 2003) (“Zubulake IV”); DaimlerChrysler Motors v. Bill Davis Racing, Inc., 2005 WL 3502172 (E.D.Mich. Dec. 22, 2005)
(4) Zubulake IV, at 218.
This update is intended to inform its readers of current developments in the law. It should not be considered as providing conclusive answers to specific legal problems. If you have any questions concerning any aspect of the discovery process, please feel free to contact one of the following members of our E-Discovery Committee, Bob Spearman, Charlie Castner, Dwight Floyd, Ken Harris, Josephine Hicks or Charles Raynal.