Implications Of Proposed Changes To FRCP On E-Discovery

Monday, April 23, 2012 - 14:38

The Editor interviews Karl Wetzel, Vice President of eDiscovery Services, VeDISCOVERY, LLC. VeDISCOVERY’s new technology, VeAGENT, allows automated forensic collection and processing of relevant data for direct export to a review platform. Among other benefits, this technology can provide substantial cost savings. VeDISCOVERY has developed a Business Case Calculator tool that can compare e-discovery costs and quantify the savings achieved by using VeAGENT. Download from: http://www.vediscovery.com/resources/cost-calculator.

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Editor: Please talk about current initiatives toward amending the Federal Rules of Civil Procedure that affect e-discovery and litigation hold responsibilities.

Wetzel: The current initiative took root in May 2010 at the Duke University School of Law Civil Litigation Conference, where judges, lawyers, experts and professors discussed whether preservation and sanction challenges in e-discovery warranted amendments to the Federal Rules of Civil Procedure (FRCP). A driving force of that discussion was corporate counsel’s concern that uncertainty surrounding preservation requirements and criteria was leading to unnecessary sanctions and excessive costs. This growing anxiety, coupled with massive data growth, inspired the original call for amendments. Next, the Advisory Committee on Rules of Practice and Procedure met in June 2011 and then again in September 2011, when the Committee set forth a preliminary draft of the proposed amendment. The latest action occurred in March 2012 when the Committee issued a 644-page report outlining the proposed changes and answering commentary behind its actions. Although its original objective was to create more extensive preservation rules through amendments to Rule 26, the eventual outcome reflected a shift in the Committee’s thinking toward centralizing proposed amendments to the FRCP via clarification of Rule 37 primarily.

Editor: Please tell us about your background.

Wetzel: I’ve been an attorney for over 25 years and litigated civil and criminal cases during the first 20 years. During the past five-plus years with VeDISCOVERY, I’ve been providing consultation to law firms, corporations and government entities regarding best practices in e-discovery. Currently my focus has shifted to assisting corporations with litigation readiness, e-discovery protocols and legally defensible methods for responding to e-discovery requests and government investigations. I also have served as a special master and e-discovery coordinator for various courts and as a retained expert for clients. Also, I am in the process of attaining an LLM in intellectual property law, the inspiration for which was my prior experience in patent and trademark litigation. My goal with this degree is to cement and expand my understanding of intellectual property law and its requirements in both litigation and discovery.

Editor: In general, what rules are potentially affected by the proposed changes to the FRCP as it relates to e-discovery?

Wetzel: Initially, the committee focused on Rules 26, 37 and 45, but the focus moved away from extending Rule 26 toward clarifying Rule 37 sanctions for spoliation and modifying Rule 45 to permit nationwide service of subpoenas. Previously, under Rule 45, one had to issue a discovery subpoena in the same court where the compliance of the subpoena was expected, but in the future, the subpoena also can be issued in the trial court. Amendments to Rule 45 also will allow for the compelling of a witness to travel more than 100 miles for good cause shown and for a requirement that all parties receive notice of the issued subpoena. As to Rule 37, subsections (g) and (e) are the specific areas slated for change that adds clarity to what a court should consider in imposing sanctions for inadequate preservation efforts and what sanctions are appropriate dependent upon the parties’ state of mind.

Editor: What is the current status of these proposed changes?

Wetzel: It is hoped that the current proposed rule changes will have undergone final scrutiny and be ready for publication by the end of 2013 and that they will be approved by mid-2015. This may seem like a long timeframe, but in fact it is very optimistic. If you look back, the 2006 amendments to the FRCP addressing e-discovery and ESI took over seven years to adopt after original discussion began in 1999.

Editor: How would the proposed changes to Rule 37 affect a party’s litigation hold responsibility?

Wetzel: Rule 37 addresses the failure to make disclosures or to cooperate in discovery, and section (g) speaks directly to the remedy for failure to preserve ESI. Without stating each component, Rule 37 generally sets forth remedies that a court may impose for failure to preserve discoverable ESI that reasonably should have been preserved in anticipation of litigation. The court may require a party to provide additional discovery, take curative measures, or pay reasonable expenses, including attorney’s fees. The Rule further provides that, absent exceptional circumstances, the court may not impose any sanctions listed in 37(b)(2) or give adverse injurious instructions without a determination of bad faith – and then further provides the criteria for such determinations. The proposed amendments to Rule 37(e) go hand-in-hand with sections 37(g) and 37(e), which speak to sanctions for failure to make disclosures or cooperate in discovery. Ironically, there is no decision yet as to whether proposed changes will apply only to ESI or to traditional paper discovery as well.

Editor: What would be the advantage of having Rule 37 changes codified?

Wetzel: There are many layers to a complete answer, but the overall hope is that standardization will create certainty for corporations about establishing preservation policies and understanding the consequences of failure. A desired corollary effect is fostering uniform treatment across jurisdictions nationwide on the issue of sanctions as they relate to spoliation and inadequate preservation efforts. Certainly, amending an FRCP Rule is a tedious and lengthy process, not undertaken unless there is a call for change. As it stands, parties on both sides of the courtroom struggle with the ambiguity of Rule 37 as originally amended in 2006, so this further clarification will offer welcome guidance to corporations and courts alike.

Editor: Does codification place additional burdens on corporations when issuing litigation holds?

Wetzel: Codification puts corporations on notice that inaccurate preservation methods will trigger defined and certain consequences. In other words, legal arguments intended to justify failed preservation efforts will be more difficult to assert post amendments to Rule 37. The prevailing wisdom seems to converge on the idea that clarifying expectations is a positive long-term development.

Editor: Please talk about discovery strategies in intellectual property litigation. What are the issues currently at stake in the courts, and how important is it for companies to seek specialized consultation on IP e-discovery processes?

Wetzel: IP matters are like other complex litigation in that the discovery process is critical and reliant on the FRCP; however, they are unique in their objectives, and many districts have tried to establish a separate set of rules to address IP discovery. E-discovery in patent cases, for instance, can add many layers of specified requests, versus other types of litigation, for both the patentee and the accused infringer in an effort to identify and narrow the scope of discovery. Claim construction positions, identification of alleged prior art, invalidity and infringement contentions, dates of conceptions and reductions of practice, licenses and royalties are just a few of those layers.

Further, attorney-client and work-product privilege issues are significantly different in IP, and in patent cases particularly, with potentially different analysis required in order to identify and then protect privileged information. Some of that information may be discoverable but not admissible. Further, the U.S. Court of Appeals for the Federal Circuit and U.S. District Court of Appeals in the Eastern District of Texas recently released model e-discovery orders that specifically set forth the criteria and burdens in patent cases. The overall theme of these model orders, and others like them, is to limit the amount of ESI and e-discovery by limiting email production, shortening deadlines and honing certain methodologies. The intended result is a more focused and relevant e-discovery interchange at a lower cost.

With these and other limitations set forth in the model orders, the margin of error is finer than ever before; therefore, there is a higher risk of incomplete or inaccurate ESI identification preservation, collection and production. Coupling these with proposed changes to Rule 37 makes it increasingly necessary for corporations to have the requisite resources and experts at hand to ensure that preservation and discovery efforts can withstand scrutiny.

Editor: How can a corporation manage its obligation to identify and preserve information intelligently, particularly with IP matters?

Wetzel: IP information and data are unique, as demonstrated by the various courts’ imposing specific e-discovery rules for patent matters, so being methodical and deliberate in source identification is critical. Utilizing technology along with custodial interviews is the best practice to insure that relevant data is not left unaccounted for. Also, in IP matters, the collection and culling of the identified data is like trying to find a diamond without dulling its sharp edges: patient chiseling takes time and wit in order to get the job done correctly. Lastly, as it relates to requesting discovery, corporations should ensure that requests for information are specific enough to yield the desired results and avoid needless arguments of undue burden and excessive costs posed by the opposing party.

Editor: Tell us about VeDISCOVERY.

Wetzel: VeDISCOVERY is a recent event in our company’s history, specifically created to address our growing corporate base; the company was spun off from Visual Evidence this past spring due to a significant growth in our e-discovery business. For a quarter century, Visual Evidence has been providing litigation support in the way of trial graphics in courtrooms and was providing e-discovery service to our law firm and corporate clients for the six years preceding the company split. VeDISCOVERY is now focused solely on e-discovery, in particular addressing corporate client demands, while Visual Evidence continues to provide its core services. The split of the company is new, but our management team, locations and key staff remain constant.

Editor: What can a corporation do to prepare for these changes? How can VeDISCOVERY’s agent-based technology assist?

Wetzel: More then ever, corporate legal and IP departments must collaborate to handle an unending data explosion in a legally defensible way, right at the outset of litigation or an investigation. Both departments must identify resources from a technology and personnel standpoint that are reliable and sustainable and then identify technology that can ease their budgetary and legal burdens. The spotlight should be on the left side of the EDRM model, where data management and litigation readiness intersect.

Regardless of whether the proposed rule changes are adopted and codified, the fundamental building block for avoiding sanctions is leveraging effective technology and establishing cost-effective, efficient e-discovery and litigation hold processes. Desirable technological capabilities toward that goal include the ability to automate the processes of identification, preservation and forensic collection – and thereby to streamline processing and ultimate review of ESI – and key components of selecting a technology are cost and flexibility. Toward that goal, we have developed VeDISCOVERY’s agent-based litigation hold application: VeAGENT.

Agent-based technology has three major advantages. First, it is scalable so that both large/global and small corporations can utilize it without a substantial outlay in capital. Second, it does primary processing – such as deduplication, missing date range and keyword filtering – all at the source of the ESI, resulting in less data collected in the first place and dramatically reducing costs. Lastly, the technology offers the flexibility to determine whether to house data on servers within corporate firewalls or in a secure cloud

Once in place, agent technology enables legal departments to activate litigation holds with little or no assistance from the IT department. In our experience, attorneys want this kind of control and real-time discretion over the data management process.

Please email the interviewee at kwetzel@vediscovery.com with questions about this interview.