Just over one year has passed since the amendments to the Federal Rules of Civil Procedure governing discovery of electronically stored information (ESI) took effect. Over the course of that year, several courts have grappled with important questions about how to interpret the rule changes. This article will discuss some of these courts’ most significant and interesting decisions.

As an initial matter, here is a brief recap of some of the electronic discovery amendments to the Federal Rules:

  • Rule 26(a)(1) specifically includes ESI as a category of producible discovery.
  • Rule 26(b)(2) provides that a party that receives a discovery request is not required to produce ESI if it is not “reasonably accessible” because of undue burden or cost. However, even if ESI is not reasonably accessible it may need to be preserved, and a court may order its production for good cause.
  • Rule 26(f )(3) requires parties to discuss issues relating to ESI at the discovery planning conference.
  • Rule 34(b) allows a requesting party to specify the format in which ESI should be produced. If not specified, the producing party must produce ESI as it is kept in the usual course of business or in a form that is “reasonably usable.”
  • Rule 37(f ) provides a “safe harbor” for a party that has destroyed ESI as part of the “routine, good faith operation of an electronic information system.”

While the amendments provide much clarity to the once largely unchartered terrain of electronic discovery, they are still general enough that parties have turned to the courts to interpret their scope and application to specific disputes. This article summarizes the most significant court decisions concerning the amendments of the last year.

The Scope of Discoverable ESI

At least one court has grappled with the kind of electronic data that qualifies as producible under the new amendments. In Columbia Pictures Indus. v. Bunnell, 245 F.R.D. 443 (C.D. Cal. 2007), a copyright infringement action against operators of a search engine website that allegedly facilitated unauthorized copying and distribution of movies and television programs, defendants argued that random access memory (RAM) could not constitute ESI because the period of storage — at most six hours — was “too temporary,” and the information written and held in RAM was not “stored.” Id. at 446. The court rejected these arguments and explained that, under the factual circumstances of the case, RAM was discoverable because the RAM of defendants’ computers could, in fact, be obtained by defendants. Id. at 446-47. Moreover, the court stated that it was clear that “Rule 34(a)’s scope was intended to be as broad as possible, and cover data stored ‘in any medium from which information can be obtained,’ [which] leaves no room to interpret the Rule to categorically exclude information written in a particular medium simply because that medium stores information only temporarily.” Id. at 447 (quoting Rule 34 Advisory Committee Notes).

Another copyright case further illustrates the broad scope of ESI under the Federal Rules amendments. In Warner Bros. Records, Inc. v. Does 1-20, 2007 WL 1655365 (D. Colo. June 5, 2007), plaintiffs brought an action against a number of “John Does” who allegedly distributed or duplicated plaintiffs’ copyrighted sound recordings without authorization. Because plaintiffs were only able to identify defendants by a unique internet protocol address, they sought permission from the court, ex parte, to obtain expedited discovery from non-party Quest Communications, defendants’ internet service provider, whose subscriber activity logs would allow plaintiffs to discover defendants’ identities. Id. at *1. Plaintiffs argued that they had good cause for expedited discovery of this data because Quest typically kept these records for only a brief period of time before erasing them. Id. The court agreed and ordered the production of the data. Id. at *2 (allowing Quest to move to quash the subpoena within ten days).

Another major issue considered by courts in the past year is under what circumstances a party can avoid producing ESI because it is not “reasonably accessible.” In Cenveo Corp. v. Slater, 2007 WL 442387 (E.D. Pa. Jan. 31, 2007), plaintiff sought to create a digital image of defendants’ hard drives, and to turn the image over to a third party computer forensics expert who would search the image for relevant information. Defendants objected, arguing that plaintiff ’s proposed imaging method might result in the disclosure of privileged information, and therefore would impose undue burden or cost. The court, in applying Rule 26(b)(2)(C), weighed defendants’ burden in producing the information against plaintiff ’s interest in accessing the information. The court held that because of the close relationship between plaintiff ’s claims and defendants’ computer equipment, plaintiff could select an expert to oversee the imaging of defendants’ computer equipment. Id. at *2.

In contrast, the court in National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Clearwater Insurance Co., 2007 WL 2106098 (S.D.N.Y. July 21, 2007), denied defendant’s motion to compel plaintiff to produce archived e-mails. Plaintiff had already produced the requested emails, except for those that, if they existed, were available only on backup tapes. Plaintiff estimated that the cost to restore backup data would total between approximately $45,000 and $79,000, plus attorney review time. Applying Rule 26(b)(2), the court held that the “burden or expense” of the proposed discovery outweighed its likely benefit. Id. at *3. Defendant had not sufficiently demonstrated that responsive e-mails existed on the backup tapes, which, in any event, covered periods several months after a settlement had been reached. The court did, however, state that if defendant wished to pay to restore the data on the backup tapes, defendant could do so.

When courts find that the 26(b)(2) balancing test weighs in favor of requiring production of data that is not reasonably accessible, they may then determine whether cost-shifting is appropriate. In In re Veeco Instruments, Inc. Securities, 2007 WL 210110 (S.D.N.Y. March 30, 2007), the court granted plaintiff ’s motion to compel production of data on backup tapes, despite defendants’ argument that data restoration and searching would be unduly burdensome and costly. The court found that the data on backup tapes might constitute relevant evidence and was not readily available from any other easily accessible source. Although the court ordered defendant to produce backup ESI at its own cost, the court also allowed defendant to later submit an affidavit detailing its results and costs, so that the court could then assess the appropriateness of cost-shifting.

Form of Production of ESI

Another question considered by courts in the last year is what forms of ESI production are acceptable. Several recent cases address this issue.

In MGP Ingredients, Inc. v. Mars, Inc., 2007 WL 3010343 (D. Kan. Oct. 15, 2007), plaintiff argued that although defendants had produced ESI as it was kept in the usual course of business, defendants had placed an undue burden on plaintiff by requiring it to determine which documents were responsive to each of its requests. Plaintiff, therefore, sought an order requiring defendants to identify what particular ESI was responsive to each of plaintiff’s requests. The court rejected plaintiff ’s argument, holding that amended Rule 34(b) “contains a provision that would have allowed Plaintiff, prior to propounding its requests, to ask the Court for an order requiring Defendants to correlate the Bates Numbers of the documents produced to the particular request for production.” Id. at *4. Since plaintiff had made no such specifications, defendants’ production satisfied Rule 34(b).

In 3M Co. v. Kanbar, 2007 WL 1725448 (N.D. Cal. June 14, 2007), plaintiff produced hard copies of electronic documents and made the hard copies available for inspection. Defendant argued that plaintiff failed to comply with the requirements of Rule 34 that it either (i) produce the documents as they were kept in the usual course of business, or (ii) organize and label the documents to correspond with the categories in the request. The court denied defendant’s request for plaintiff to organize the documents, arguing that defendant was in “a predicament essentially of its own making,” having made broad document requests, not having demanded electronic production, and having insufficient staff to digest the production. Id. at *3. The court further noted that although the production was voluminous, there was no evidence that plaintiff had purposefully produced the documents in a disorganized manner. However, the court did order plaintiff to produce ESI in an “electronic and reasonably usable format,” because it appeared that plaintiff had delayed its production, and because it would not be onerous for plaintiff to do so. Id.

Similarly, the court in PSEG Power N.Y., Inc. v. Alberici Constructors, Inc., 2007 WL 2687670 (N.D.N.Y. Sept. 7, 2007), required plaintiff to re-produce ESI in a more acceptable format. At the time of its first production, plaintiff had inadvertently separated e-mails from their attachments; this mistake was caused by an incompatibility between plaintiff ’s computer software and its outside vendor. The court found that because an e-mail and its attachment are kept together in the regular course of business, Rule 34(b) generally required production of e-mail with linked attachments. Plaintiff then invoked the discovery limitation of Rule 26(b)(2)(B) — which states that a party need not provide discovery of ESI from sources that the party identifies as not reasonably accessible because of undue burden or cost — to argue against reproduction of its ESI. The court applied the factors enumerated in the Advisory Committee Note to Rule 26(b)(2): (i) the specificity of the discovery request; (ii) the quantity of information available from other and more easily accessed sources; (iii) the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources; (iv) the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources; (v) predictions as to the importance and usefulness of the further information; (vi) the importance of the issues at stake in the litigation; and (vii) the parties’ resources. Id. at *11. Weighing these factors — and specifically noting that plaintiff ’s resources rivaled or exceeded defendant’s resources — the court found that the potential for discovery outweighed the cost and burden of re-production. The court thus ordered plaintiff to bear the entire cost of the re-production, or to itself review the hard copies it had already produced and identify which attachments corresponded to which e-mails.

“Safe Harbor”

Yet another area of the new Federal Rules amendments addressed by courts last year is the circumstances under which Rule 37(f)’s “safe harbor” provision will protect a party from sanctions for spoliation of ESI as a matter of routine business practice.

In Disability Rights Council of Greater Washington v. Washington Metro. Transit Auth., 242 F.R.D. 139 (D.D.C. June 1, 2007), plaintiffs moved for an order to compel defendant to produce backup tapes of certain electronic documents written and received after plaintiffs had filed suit. Defendant conceded that it had done nothing to stop its e-mail system from automatically erasing all e-mails after 60 days, even after being put on notice of litigation. The court held that while the newly amended Rules initially relieve a party from producing ESI that is not reasonably accessible, they should not “permit a party who has failed to preserve accessible information without cause to then complain about the inaccessibility of the only electronically stored information that remains.” Id. at *147.

Citing Disability Rights Council, the court in Peskoff v. Faber, 244 F.R.D. 54 (D.D.C. 2007), held that the Rule 37(f ) “safe harbor” provision “does not exempt a party who fails to stop the operation of a system that is obliterating information that may be discoverable in litigation.” Id. at *60. In Peskoff, defendant, a managing partner, failed to turn off his automatic e-mail deletion feature once informed of pending litigation by a former managing partner. Reading Rule 37(f ) in conjunction with the discovery guidelines of Rule 26(b)(2)(C), the court required defendant to participate in a process to ascertain whether a forensic examination could yield the deleted e-mails. The court added, however, that once the expert determined the cost of additional searches, the court might distinguish between e-mails from over six months of plaintiff ’s departure and e-mails sent within six months before plaintiff ’s departure.

In In re Krause, 367 B.R. 740 (Bankr. D. Kan. 2007), the United States Bankruptcy Court for the District of Kansas issued a severe spoliation sanction against a defendant who allowed anti-virus software to delete files from his hard drive even after the government, which was investigating defendant’s back-taxes obligation, had made a request for ESI. The court issued a partial default judgment against defendant, and also ordered him to produce the ESI the government had requested — namely, all computers on his home network, external hard drives and storage devices. The court held that defendant should have disabled the anti-virus software’s cleaning feature, and that his failure to do so constituted bad faith. This was particularly so because defendant had run the cleaning program after the government had begun proceedings against him and, therefore, after his duty to preserve had commenced. The court also rejected defendant’s argument that his use of the cleaning program qualified under Rule 37(f )’s allowance for “good-faith routine operations,” as the evidence established that defendant’s hard drives were not at full capacity, rendering it improbable that ESI had been overwritten or deleted by routine operation.

Conclusion

The last year has seen a number of cases providing guidance on the scope and application of the new electronic discovery amendments to the Federal Rules of Civil Procedure. In 2008, courts will continue to shape these rules, and it is therefore critical for litigants to stay abreast of further developments.