The amendments to the Federal Rules of Civil Procedure which took effect on December 1, 2006 represent the culmination of nearly seven years of effort by the Advisory Committee to address the discovery of electronically stored information (“ESI”) – an increasingly prominent issue over the past decade. Some estimates suggest that as much as 90% of all newly created information is now stored electronically, and much of it will never be reduced to paper. There was initially debate over whether it was necessary to single out ESI for special mention, but the Committee determined that certain characteristics of ESI raise issues different from those in conventional “paper” discovery and had to be addressed. These include the sheer volume of ESI, its dynamic and readily-changeable nature, and its link to a particular electronic format or storage system. The new Rules address these issues by

  1. listing ESI (broadly defined) as discoverable information;
  2. requiring the parties to consider and address electronic discovery issues early in the litigation;
  3. addressing the format(s) in which ESI may be produced;
  4. distinguishing between ESI that is “reasonably accessible” and that which is not; and
  5. creating limited safeguards which may protect against inadvertent waivers of privilege and discovery sanctions.

The implications of these amendments for the cost and burdens of discovery, preservation requirements and spoliation issues, and the waiver of the attorney-client privilege and/or work product protection are beyond the scope of this brief article and will be negotiated between litigants and clarified by the courts one case at a time. This article lays out the new framework for managing electronic discovery and certain practice tips for litigation counsel.

  1. ESI is Discoverable.

The amendments add the phrase “electronically stored information” to Rules 26(a)(1), 33, 34, 37 and 45 to acknowledge expressly that such information is discoverable. This phrase means exactly what it says and is intended to be broad enough to cover all types of computer-based information now and in the future. The addition of ESI to the Rules merely reflects what counsel and the courts have been dealing with for years, but the devil is in the details.

  1. The Parties Must Discuss ESI at the Outset of the Case.

The new Rule 26(a)(1) requires that ESI be included in a party’s initial disclosures, and the new Rule 16(b)(5) identifies the discovery and disclosure of ESI as items which may be included in the scheduling order. The new Rule 26(f) requires the parties to develop a discovery plan addressing the discovery of ESI – including the production format(s). That rule also requires the parties to discuss issues relating to the preservation of discoverable ESI and the handling of post-production claims of privilege or work product protection. Thus, litigants must now evaluate and expressly address the appropriate scope and nature of electronic discovery in their case.

Practice Tips: Litigants may still forgo electronic discovery if the court permits, but the new rules ensure that this choice will be knowing, after at least some consideration and discussion by the parties. Before or immediately after the litigation begins, outside and in-house litigation counsel must understand their client’s IT system(s) and the volume, locations, and formats of their potentially discoverable ESI. This may require client IT personnel to be brought into the discovery planning process early on – and not only to design and implement a proper “litigation hold.” Ask the right questions during the discovery meet and confer to gather the same sort of knowledge about the potential ESI available from the adversary. With this knowledge, make informed assessments of the desirable scope of electronic discovery and avoid unintentionally committing to asymmetrical or exorbitantly expensive discovery obligations. Send an early letter to the other side defining the minimum scope of potentially relevant ESI and expressly requesting its preservation. Take early discovery on your opponents’ IT systems – through a Rule 30(b)(6) deposition or otherwise – with time to follow up.

  1. Discovery Requests and Responses Should Consider ESI Formats.

The new Rule 33(d) permits interrogatory responses to direct the requestor to ESI as well as paper documents. The new Rule 34(b) permits, but does not require, the requesting party to designate the format(s) in which it wants to receive ESI. In the absence of such instruction, the default is to produce ESI in its native format or another “reasonably usable” file format. If the producing party objects to the requested format, it must indicate the format it intends to use. Practice Tips: Carefully consider the requirement that, for interrogatory responses under Rule 33(d), the burden of deriving the answer must be “substantially the same” for the requestor as for the respondent. When a respondent identifies ESI, this may require the respondent to provide the requestor with direct access to its IT systems, and technical support or other information to assist the search. The risks involved might tip the scales towards providing the requested discovery by other means. Also, consider and clearly define the desired format for ESI produced in response to Rule 34 requests – which may vary with the nature of the document. In doing so, consider the cost and potential benefit of accessing and reviewing the various levels of metadata associated with each file.

  1. Discovery of ESI Based on “Reasonable Accessibility.”

The new Rule 26(b)(2) creates a two-tiered approach to the production of ESI by permitting a respondent to distinguish between ESI that is reasonably accessible and that which is not due to undue burden or cost. However, a respondent is required to expressly identify any source(s) of ESI it has classified as inaccessible and will not search and bears the burden to prove inaccessibility if it comes before the court. The court may still order the production of “inaccessible” ESI for good cause and under specified conditions (e.g. cost-shifting) under the conventional Rule 26(b)(2)(C) analysis.

Practice Tips: Draft initial discovery requests broadly enough to encompass all sources of ESI, but require that responsive information be produced in a “reasonably accessible” file format (defined if necessary). If the respondent identifies certain sources of inaccessible ESI, consider requesting a test search or “sampling” of that inaccessible data to help determine if you need to dig further, and consider more focused requests for specific inaccessible data. A respondent identifying certain data sources as “inaccessible” must marshal detailed information on the scope, formats, and volume of ESI potentially covered by the discovery requests, as well as the projected cost of identification, retrieval, conversion (if needed) and review. These facts are needed to carry the respondent’s burden of proof and/or limit discovery under Rule 26(b)(2)(C).

  1. The Limited Protections of the “Claw-Back” and the “Safe Harbor.”

The amended Rule 26(b)(5)(B) adopts a “claw-back” procedure for addressing post-production claims of privilege and/or work product similar to those which had become common through protective orders or side agreements. Once the producing party claiming privilege or work product protection notifies the receiving parties of the claim and the grounds for it, the receiving parties must return, sequester, or destroy the specified information, and “may not use or disclose the information until the claim is resolved.” Similarly, the producing party must preserve the information until the claim is resolved. The Committee adopted this procedure largely because the tremendous volume of ESI makes privilege review far more difficult, and more inadvertent disclosure is expected, but this rule does NOT address the substance of whether a waiver occurred.

The amended Rule 37(f) provides what has been called a “safe harbor” against discovery sanctions, stating that “absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” This responds to the routine modification, overwriting, and deletion of information that attends the normal use of computer systems, often without the specific direction or awareness of any person. The good faith requirement, which, at a minimum, requires a respondent to have acted reasonably to preserve relevant ESI and avoid spoliation as required by the case law.

Practice Tips: Discuss the handling of claims of inadvertent production of privileged documents early in the litigation, and have any agreement memorialized in the scheduling Order where possible. Remember that the substance of any such claims will be resolved by the court, and that some jurisdictions do not accept standing agreements between parties that there can be no waiver from “inadvertent production.” Do not rely for protection on this “claw-back” rule, and consider whether the volume of ESI being produced requires some sort of electronic screening for privilege and/or work-product.

As to the “safe harbor” – the limits and effect of Rule 37(f) remain largely undefined and untested. Review the applicable case law and design and implement a reasonable litigation hold as soon as possible – which will require you to understand the client’s IT systems and operations. “Good faith” may still require a party to suspend routine IT operations to some extent if under a preservation obligation and to preserve back-up tapes beyond the normal cycle. Always consider the likelihood that the data in question is relevant and/or reasonably accessible from other sources. This “safe harbor” applies only to discovery sanctions and provides no protection against statutory or regulatory sanctions or presumptions, or the inherent power of the courts.