Civil Justice Reform - Law Firms New Rules On E-Discovery Likely And How To Cope In The Meantime - Interview From The Trenches

Tuesday, February 1, 2005 - 01:00

Editor: Why is so much attention being given to the topic of electronic discovery these days?

Donovan: Because of the sheer volume of electronic information in businesses today, discovery of that information can be incredibly expensive. As some have noted, with the relatively low cost of memory, electronic information is retained because there is no compelling reason to discard it. It is not just the time and expertise required to access and manipulate the data, but also the attorney time necessary to review ever increasing volumes of communications. We had one case recently where, despite our efforts to educate him, the judge seemed to think that millions of documents could be produced with the touch of a few buttons, so it took a monumental effort and substantial expense to comply with his schedule.

Unless we bring a strong dose of reason to the process, electronic discovery can change the litigation - settlement calculus. In more and more commercial cases, e-discovery threatens to undermine the stated goal of the Federal Rules to secure "the just, speedy, and inexpensive determination" of civil claims.

We are at the point where most judges and rule-makers realize that this is a problem, and are now evaluating how best to fix it. For example, amendments to the Federal Rules of Civil Procedure concerning discovery of electronically stored information were recently published for comment by the Committee on Rules of Practice and Procedure of the U.S. Judicial Conference ("Committee"). After several hearings, the Committee is scheduled to meet in April to decide whether to recommend that the proposed amendments be adopted. Because the Federal Rules have a nationwide impact, and many of the states use them as a model, how those rules are changed, if at all, will have an important impact on corporate litigation in the future.

Editor: What are the major changes proposed in the Federal Rules?

Donovan: There are 10 distinct amendments that the Committee has proposed, which can be summarized as follows: (1) add a Rule 26(f) to require early discussion of any issues relating to preserving discoverable information; (2) require that scheduling and discovery plans include reference to early resolution of any discovery issues involving electronically stored information; (3) electronically stored information that is "not reasonably accessible" is not required to be produced except on a showing of good cause, and then subject to such terms and conditions as the court may establish; (4) privileged information produced without an intent to waive the privilege must be returned if the producing party notifies the requesting party within a reasonable time; (5) if appropriate, the court may enter an order regarding inadvertent production; (6) Rule 33 would be amended to include electronically stored information as part of the option to produce business records in response to an interrogatory; (7) production requests under Rule 34(a) may include any designated electronically stored information, in any medium; (8) absent an order or agreement, the producing party must produce electronically stored information as "ordinarily maintained" or in "electronically searchable" form; (9) a safe harbor would be added to Rule 37(f) that would bar sanctions for failing to provide electronically stored information because of the routine operation of a party's electronic information system unless the party failed to take reasonable steps to preserve such information after it knew or should have known that the information was discoverable, or the party violated a preservation order referring to that information; and (10) conform third-party subpoena practice to these new provisions.

Editor: What corporate organizations are involved in trying to influence the debate on new rules for electronic discovery?

Donovan: Lawyers for Civil Justice, a nationwide coalition of defense and corporate and trial counsel, has been active in analyzing the issues and submitting comments to the Committee. I noticed that ACCA is sponsoring a webcast on February 1 with Ken Withers, who is on the staff of the Federal Judicial Center and one of the key resources for the federal bench on the topic of electronic discovery.1 The ABA has an Electronic Discovery Task Force within the Litigation Section, which has made its own proposals.2 The Sedona Conference is another group with thoughtful suggestions,3 which includes plaintiff's counsel as well as corporate and defense counsel.

Editor: What are the key issues of concern to corporate counsel at this point?

Donovan: First is how we deal with electronically stored information that is "not reasonably accessible." This has implications both for what companies do in preserving electronic information under threat of litigation, as well as the cost of discovery once litigation ensues. The debate here is about whether cost allocation should be mandatory, or whether there should at least be a presumption in favor of cost shifting to the requesting party, which could then be overcome by a strong showing of relevance and need.

Another important issue is whether the Committee, and also the state courts, adopt a form of safe harbor for information that becomes unavailable as the result of the routine operation of business information systems.

A third issue is how best to deal with the large volume of even readily accessible electronic documents in major commercial litigation. It has become common to use temporary or contract attorneys, which leads to certain issues . The law firms prefer to hire and manage those attorneys to maintain quality control and efficiency, but then there are questions about what to charge the client for their time. Some companies view the charges for such attorneys as just a disbursement that should be passed through, like the cost of faxes or copying, but that ignores the law firm's commitment of overhead and risk of liability for the attorneys' work. Some firms have hired a group of attorneys specifically for this purpose, paying them and charging less than junior associate rates but more than rates for temps. At the same time, vendors are competing to develop more sophisticated search engines to help winnow the volume of email and other electronic information that must actually be read by a lawyer.

Editor: What is the general approach to the discoverability of electronically stored information in the courts today and in the proposed amendments to the Federal Rules?

Donovan: Almost everyone nowadays seems to agree that, however you describe it, information stored in electronic form should be discoverable to the same extent as documents and other tangible evidence. Electronically stored information that is "reasonably accessible" is generally discoverable, subject to the same limitations as traditional discovery. Because of the volume of even "reasonably accessible" discovery, and the concomitant costs of production, there should be and usually is a greater focus on the relevance of the requested material and the cost/benefit to obtaining it.

The more difficult question comes with electronically stored information that is not "reasonably accessible." The proposed Federal Rules changes would require the producing party to identify but not produce such information. The requesting party would have to file a motion and demonstrate good cause for such discovery, and the court would be charged with specifying appropriate terms and conditions, including cost-shifting. This follows from the two-tier approach adopted by Judge Scheindlin (a member of the Committee) in the landmark Zubulake case.4 Texas Rule 196.4 is similar, allowing a producing party not to produce electronically stored information when it cannot "through reasonable efforts" retrieve the information or produce it in the form requested. Then, if a court orders production, it must also award the reasonable expenses of any "extraordinary" steps required to retrieve and produce the information.

Editor: How does the manifestation of these issues differ in different types of cases?

Donovan: What we are seeing is that in commercial cases between comparably sized businesses, counsel are usually able to work the problems out and agree on reasonable procedures and schedules, because both sides are comparably affected. It is more difficult to reach agreement when there is a disparity in size and the amount of electronically stored information between the parties, such as in employment litigation or consumer/shareholder class actions. In those cases, the plaintiff can ask for broad discovery without the concern that it will be reciprocal. Indeed, there is an incentive to ask for more because that will drive up the cost to litigate and sometimes push the defendant toward settlement, which is not how the system is supposed to work.

Editor: As this process is evolving, what can companies do now to cope with the problems posed by electronic discovery?

Donovan: First, heed the advice of the Boy Scouts and be prepared. Set up a team with legal and IT representatives of the company, and include outside counsel and/or an outside vendor if additional experience needs to be brought to bear. Make sure that the IT staff understands the demands of the litigation process, and adopt measures to make production easier and more efficient, such as labeling the contents/source of backup tapes as they are created. When a dispute arises, and before a complaint is served, alert the affected parties not to destroy electronically stored information without approval of a designated lawyer. Once involved in litigation, hope that you have a judge who is reasonably accessible and has some experience with electronic discovery, then use him or her to help craft case procedures that you can live with. If your judge is not as experienced as you would like, then use your IT staff and perhaps an outside vendor to educate the judge about the problems, using the traditional discovery framework of relevance and cost/benefit. Effective advocacy can yield major benefits in cost reduction at this stage.

Editor: Will we see changes in the Rules of Procedure to deal with electronic information?

Donovan: I believe so. Though there are some who believe that these issues involving electronic discovery can be addressed within the existing framework of rules, the majority seem convinced that at least some tweaking is necessary. Some courts like New Jersey and Arkansas have already adopted local rules that begin to address some of the issues.5 Without rule changes, we will end up with a patchwork of requirements and procedures across the country, which is not to the benefit of litigants or the bar. The changes in the Federal Rules regarding discovery over the last ten years were generally intended to reduce the burden and costs of discovery. Those advantages might well be lost without further changes to deal with this new development.

1 See

2 See

3 See Redgrave , The Sedona Principles: Best Practices Recommendations and Principles for Addressing Electronic Document Production, 4 Sedona Conf. J. 197, 229 (2003);

4 Zubulake v. UBS Warburg, 217 F.R.D. 309 (S.D.N.Y. 2003).

5 N.J. Local Civil Rule 26.1; Arkansas Local Civil Rule 26.1; Wyoming Local Civil Rule 26.1.

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