The Multi-Faceted Evolution Of E-Discovery

Tuesday, May 31, 2011 - 01:00

The Editor interviews Sandra Tvarian Stevens, Partner, Wiley Rein LLP.

Editor: Please describe your practice for our readers.

Stevens: I represent clients in complex litigation before state and federal courts and also in alternative dispute resolution proceedings, including those involving insurance and reinsurance claims. The counseling component of my practice involves providing strategic advice regarding policy drafting and coverage issues arising under a variety of general liability, property and casualty, directors and officers liability and other professional liability insurance policies. Regardless of the arena - litigation or arbitration - if discovery is involved, e-discovery likely will play a significant role.

Editor: Have you found that e-discovery differs in arbitration versus in litigation?

Stevens: Because most business is conducted electronically, the key documents and communications involved in a dispute are likely to be in electronic form. While e-discovery is no less relevant in arbitration than in litigation, there is a difference with respect to the scope of discovery.

Discovery tends to be more limited in arbitration. In litigation, parties often engage in a wide variety of written discovery - interrogatories, requests for admissions and document requests - often followed by depositions. In arbitration, it is not unusual for discovery to be limited to one set of document requests and one or two depositions.

If discovery is limited, parties may use their allotted discovery to obtain information in support of their own case, focusing less on whether their adversary has complied with e-discovery obligations. For example, parties may decide not to use limited deposition slots to depose a custodian of records or a company's IT professional about e-discovery compliance.

Editor: Has e-discovery changed since the 2006 amendments to the Federal Rules of Civil Procedure (FRCP) regarding the production of ESI?

Stevens: Even before the FRCP amendments were enacted, many litigants recognized the increasingly important role of electronic communications, and they were making or responding to requests for e-discovery. Therefore, the amendments were not intended to change the face of discovery. Rather the goal was to provide additional guidance to litigants about how the e-discovery process should fit in with more traditional paper discovery and to encourage litigants to focus on their e-discovery obligations early into the litigation.

Shortly before the amendments were enacted, there were a number of very high-profile cases chronicling e-discovery abuses. In 2005, Morgan Stanley was accused of destroying emails and failing to comply with discovery orders. The court found that the opposing party was entitled to monetary sanctions and the issuance of adverse inference instructions.

The Morgan Stanley case was followed by other cases in which courts awarded sanctions, entered default judgments, or even dismissed entire causes of action. While these cases made clear that a party's intentional disregard for its e-discovery obligations could result in severe sanctions, they also were instructive insofar as they emphasized the importance for corporations and their counsel to have a thorough understanding of their electronic files and systems.

In a way, the amendments were catching up with the existing case law, both in acknowledging the importance of e-discovery and in ensuring that litigants understood their e-discovery obligations.

Editor: How is this situation playing out among the states with respect to adoption of the federal amendments? What is the likelihood that a unified set of standards will be established?

Stevens: A number of states already track the federal rules of civil procedure with respect to e-discovery. However, differences at the state level continue to exist, and it remains to be seen whether there will be broad adoption of federal requirements at the state level.

Editor: Is there a lack of clarity regarding acceptable measures to preserve information?

Stevens: There are fairly well-established preservation guidelines. Courts have held that the duty to preserve relevant information arises when a party reasonably anticipates that information is or may become relevant to future litigation. It's also fairly well established that once a party reasonably anticipates litigation, it must ensure the preservation of relevant documents by suspending its document retention/destruction policy and instituting a litigation hold.

To the extent that uncertainties may exist, it is because the duty to preserve can arise from many different sources, including common law, statutes, regulation or a court order. Moreover, because determining when litigation is reasonably anticipated, such that the duty to preserve is triggered, can involve a fact-intensive inquiry, it can be difficult to adopt a one-size-fits-all approach for every situation. Therefore, there are some uncertainties, but not necessarily a lack of clarity, in the process.

Editor: In your experience, do uncertainties with respect to sanctions for spoliation lead to over-preservation?

Stevens: The courts have made it very clear that a party's intentional disregard for its e-discovery obligations can trigger severe repercussions, including monetary sanctions or adverse inference instructions.

Litigants understand the importance of complying with preservation and discovery obligations, and sometimes they may err on the side of caution with respect to preservation. It is important to remember, however, that courts typically reserve sanctions for egregious discovery abuses, such as where there is evidence of bad faith or willful misconduct. Even before the Zubulake line of cases, the courts made it clear that the preservation obligation is subject to reasonable limitations, and that, for example, parties are not obligated to keep or retain every document or file in their possession to comply with their preservation and discovery obligations.

Editor: To what extent do preservation and e-discovery costs play a role in your advice to clients?

Stevens: Clients want to keep preservation and e-discovery costs under control. In providing advice to clients regarding both preservation obligations and discovery needs, it is important to emphasize that both preservation and discovery obligations are subject to reasonable limitations. While litigants do not need to preserve everything, courts generally expect litigants to maintain and consistently apply a document retention and destruction policy, and to suspend that policy and issue a litigation hold when litigation is reasonably anticipated. In addition, discovery needs should be assessed on a case-by-case basis, and a cost-benefit analysis should be conducted to see how the proposed discovery might impact the bottom line. Generally speaking, the discovery needed for a multi-million-dollar case involving complex issues and multiple parties is likely to differ from the discovery needed in a small-dollar dispute that involves discrete issues. Therefore, keeping costs in proportion is key.

Editor: Have any new e-discovery practices emerged since the amendments to the FRCP?

Stevens : In the last five years, there has been a growing emphasis on the need to address e-discovery issues during the early stages of the case. Rule 26 obligates the parties to address e-discovery issues at their initial meet-and-confer conference. Because the scope of discovery the parties agree to at that conference can be incorporated into a scheduling order setting forth the parties' discovery obligations, it's never too early to think about e-discovery. Ideally, early in the litigation, corporations and their counsel should assess the company's ability to retrieve and produce responsive documents and information. With respect to electronically stored information ("ESI"), this means determining where responsive ESI is likely to be found, the format in which it is stored, and the related time and cost involved in producing it.

Best practices with respect to minimizing e-discovery costs also have emerged. Rule 26 allows parties to seek to limit production of ESI from sources that are not reasonably accessible because of undue burden or cost. Courts have applied Rule 26 to back-up tapes and have held generally that a party doesn't have to incur the costs of producing information from back-up tapes if that information can be obtained from another source that's less costly and more reasonably accessible. It's worth mentioning, however, that some e-discovery vendors are marketing new technology to facilitate obtaining information stored on back-up tapes. Future cases likely will address whether such technological advances make back-up tapes reasonably accessible and therefore subject to e-discovery.

Editor: Are any new issues arising with respect to the scope of e-discovery?

Stevens: New issues relating to cloud computing and social networking sites have arisen. In simple terms, cloud computing allows users to remotely access and interact with data via a third-party service provider. Some common examples include web-based email, such as Yahoo! mail, and online document storage applications, such as Google Docs. According to an October 2010 survey, 30 percent of U.S. companies reportedly use cloud computing. As the use of cloud computing grows, we can expect discovery requests relating to cloud computing to increase as well.

The same is true with regard to discovery from social networking sites. Facebook, for example, reportedly has more than 50 million individual and corporate users. Corporations with a presence on social networking sites should be prepared to receive discovery requests relating to their social networking posts and communications. Conversely, corporations should consider whether they want to affirmatively request such discovery in litigation.

Editor: What are the factors to consider in discovery from cloud computing and social networking sites?

Stevens : While so far only one court appears to have addressed discovery issues relating to cloud computing generally, a number of courts have heard disputes regarding discovery from social networking sites.

Some courts have drawn distinctions between private messages exchanged between social network users and wall posts that are more broadly visible. For example, last year a federal court in California found that private messages sent through social networking sites were protected from disclosure by the Stored Communications Act while wall postings were not.

A New York State court reached a contrary result in ordering a personal injury litigant to produce both private and public information from her social media accounts. Relying on New York law holding that litigants who place their physical condition at issue cannot shield from discovery material that is necessary to the defense of the action, the court found that the information sought - which included photos of the plaintiff on vacation and appeared to contradict her claim that she was bedridden - was material and necessary to the defense of the action and could lead to the discovery of admissible evidence.

A federal court in Indiana recently summed up emerging issues in noting that discovery from social networking sites requires courts to apply basic discovery principles in a novel context, and that the main challenge is to define appropriate limitations on the discoverability of social networking communications in a way that provides meaningful guidance to the parties.

Editor: What reforms would you like to see in e-discovery practices?

Stevens: There should be more proportionality between the discovery requested and the costs associated with complying with such discovery. Generally speaking, the e-discovery process can be improved if litigants make an effort to conduct a cost-benefit analysis in each case to make sure that the cost of the e-discovery requested doesn't outweigh the perceived benefits of obtaining that discovery.Litigants also should remember that they can seek to appropriately limit overly broad or irrelevant discovery requests. A litigant's ability to seek to reasonably limit discovery is no different whether the discovery requested involves paper documents, electronic files, emails accessed through the cloud, or social networking posts from Facebook.

Please email the interviewee at sstevens@wileyrein.com with questions about this interview.