On March 15, 2012, the American Bar Association’s Electronic Discovery (ESI) in Bankruptcy Working Group (the “Working Group”) published an interim report addressing certain principles and suggested best practices for electronic discovery in bankruptcy cases (the “Interim Report”). The Working Group was formed to study and prepare guidelines or a “best practices” report on the scope and timing of a party’s obligation to preserve ESI in bankruptcy cases. The Interim Report, which is designed to invite and stimulate comments from a wider audience, draws distinctions between three separate groups of bankruptcy cases: (1) large Chapter 11 (corporate reorganization) cases; (2) middle-market and smaller Chapter 11 cases; and (3) Chapter 7 (liquidation) and Chapter 13 (personal reorganization) cases.
The Interim Report sets forth four general principles that apply in the bankruptcy context. First, the duty to preserve ESI and other evidence applies in bankruptcy cases. The duty may arise prior to the filing of the petition (e.g., when the filing of the petition or other potential litigation is reasonably anticipated). Second, debtors do not need to preserve every piece of information in their possession. Rather, the duty to preserve applies to information that a debtor “reasonably anticipates may be needed in connection with the administration of the bankruptcy case or the proceedings therein or operation of the business or affairs of the debtor.” Third, proportionality concerns are important in the bankruptcy context. A party’s obligation to preserve ESI “should be proportional to the significance, financial or otherwise, of the matter in dispute and the need for production of ESI in the matter.” Fourth, interested parties are encouraged to confer regarding preservation and production issues, as this can help resolve unnecessary disputes that would otherwise delay a bankruptcy.
The Working Group also notes that for large Chapter 11 cases, best practices include: (i) reviewing ESI-related matters with the client; (ii) gaining an understanding of the client’s electronic information systems; (iii) implementing appropriate preservation measures (e.g., litigation holds); and (iv) appointing a primary point of contact (both internally and externally) for ESI-related issues. At the filing of a large Chapter 11 case, counsel should consider whether there is a need for court approval of an interim ESI protocol that addresses pertinent ESI issues (e.g., preservation efforts). The Working Group also recommends that the debtor “consider formulating and proposing” such ESI protocol at or before the final hearing on Rule 4001 matters. The ESI protocol should include a provision in accordance with Federal Rule of Evidence 502(d) that addresses the non-waiver of privileges and work product protection when ESI is disclosed inadvertently.
Although the Working Group’s recommended best practices change for smaller Chapter 11 and Chapters 7 and 13 bankruptcy cases (e.g., the timing of and necessity for ESI protocols), the main thrust of the Interim Report is that ESI is an important aspect of bankruptcy cases, and parties are well served to consider ESI (including preservation obligations) at an early stage. The full text of the Interim Report is available here.