Technology - Law Firms Making The Right Choices And Avoiding Sanctions In The E-Discovery Process

Thursday, September 1, 2005 - 01:00
St. John & Wayne, LLC
James P. Anelli

Editor: Why is electronic discovery keeping litigators busy today?

Anelli: As the area of electronic discovery continues its rapid growth, the courts are grappling with disputes over what has to be produced by whom, when and at whose cost. About 50 or so court decisions provide some general guidance. The evidentiary rules themselves are largely in the proposed amendment stage. Some of the local district courts, however, like the District Court in New Jersey, have adopted their own rules. Litigators receive guidance from these court decisions, the proposed amendments and relevant circumstances in determining how to prepare and respond to discovery requests. We look at these issues closely and try to come down on the right side of issues that have not been decided in many instances.

Editor: Please give a brief overview of the proposed amendments to the federal rules governing electronic documents and information.

Anelli: Proposed amendments to the federal rules to address electronic discovery have been debated by the various committees responsible for the rules. They will be pending before the Supreme Court for final review and are expected to be adopted some time in 2006.

We anticipate that Rule 26 will be amended to require that parties meet and confer in advance about the disclosure of electronic information and adopt various plans related to its production. The proposed amendments to Rule 34 would allow parties requesting electronic information to indicate in what form they want it. The proposed amendments to Rule 45 would allow production of electronic information in connection with subpoenas sent to entities that are not a party to the litigation. Production would be subject to the caveat that production would not be required if the information is not reasonably accessible.

The "not reasonably accessible" provision is also a part of the proposed amendment to Rule 26. This issue comes up time and time again where the benefits to the party requesting a particular type of disclosure may be somewhat small in comparison to the overall burden to the party producing the materials. Many times the courts offer the requesting party the ability to obtain some or all of the information, but at the requesting party's cost.

Editor: What "safe harbor" would be available under the proposed amendments?

Anelli: The proposed amendments to Rule 37 would allow a party to avoid sanctions if it took reasonable steps to preserve information after it knew or should have known that the information was discoverable, and the failure resulted from the routine operation of a party's computer system. The business community wanted a broader exemption, i.e., having to show some form of willfulness or recklessness or an intentional destruction of information. The proposed rule does not go that far but rather applies what is akin to a reasonableness standard. The problematic aspect is that computing environments differ from company to company. What is reasonable for one system may not be for another.

Editor: What sanctions do courts impose for failure to preserve or disclose electronically stored information?

Anelli: An overview of the sanctions imposed by courts is based on generalizations drawn from the reported cases. Many more cases are unreported. One of the most widely read and discussed is the series of electronic decisions in Zubulake v. UBS Warburg .

Sanctions can vary. The most common sanction is awarding attorneys fees and costs or requiring a party at its own cost to produce or restore information that may have been deleted. Some courts are going further and dismissing a complaint or entering a default judgment.

The severity of the sanctions can vary depending on the behavior of the responding party. Courts have acted most strongly against parties where court orders were in place requiring a party to produce specific materials. Conversely, if the requesting party has not been clear in its demands or has delayed in placing another party on notice, the courts have been more hesitant to grant sanctions.

Judge Shira A. Scheindlin, the district judge for the Southern District of New York who authored the Zubulake decisions, recently conducted a study of cases in which sanctions were imposed for failure to produce e-discovery. ( Editor's note: See Shira A. Scheindlin and Kanchana Wangkeo, Electronic Discovery Sanctions in the Twenty-First Century, 11 Mich. Telecomm. Tech. L. Rev. 71 (2004), which is accessible at The study noted that in more than 80 percent of the reported cases, sanctions were sought against defendants. That is largely due to the fact that it is usually the defendants that are storing electronic information. In the commercial setting where companies are on both sides of an action, then both parties are susceptible to electronic issues.

The courts also look at the behavior and the actions of the party. What steps did it take? What obligations was it under at the time? Were its actions intentional or reckless? What is the prejudice to the party if the information is not provided? What were the retention policies of the company at the time? If a company is diligent, takes appropriate steps at the beginning of litigation, and is careful to make a good faith attempt to produce what is requested, then the risk of sanctions will be reduced.

Editor: What suggestions do you have for complying with electronic discovery obligations and avoiding sanctions?

Anelli: At a minimum, it's important for in-house counsel to have a role in shaping the computing environment at a company. Storage has become much cheaper, and I think that trend is likely to continue. From a technological standpoint, it may be reasonable in the not-too-distant future, for companies to back-up information on their systems in a way which is complete. That would largely eliminate many electronic discovery issues. The cost of producing electronic documents is also likely to go down because the ability to search the files electronically is also getting better.

In-house counsel needs to make sure that the company has an effective document retention policy that includes practices and procedures for ensuring that documents are preserved beyond the regular retention period in the event of litigation or anticipated litigation.

Counsel needs to work very closely with their MIS experts in this area to understand the company's computing and communications environment. Some companies store electronic records locally; others use central repositories to back up their data. In large companies, practices and procedures for storing electronic data may vary from location to location.

The difficult part is determining what to save. You may have to discuss with your adversary what they would like to see saved. You're going to see more and more of these types of cases. New Jersey's local district court rule requires parties to have a plan at the beginning of a case that discusses the parameters of electronic discovery for that case. That goes a long way in determining how best to save information.

Another difficult area is determining how to protect confidential and privileged information. One of our recent cases involved the search of more than 50,000 emails. The issue was how to go through the documents in the most cost effective way since manually reading each document to determine whether it was confidential or privileged could be costly to the client. Fortunately, search tools are becoming increasingly sophisticated in automating the process of categorizing and segregating data.

On many legal staffs, both in-house and in law firms, we are seeing a new position created that requires candidates to have strong technical, as well as a legal background. They need to be able to quickly grasp the nature of litigation as well as the technical aspects to provide guidance for cost effective management of a company's electronic records and their production.

Editor: What is on the horizon for electronic discovery?

Anelli: Electronic discovery is changing the way attorneys litigate, in part because people do not "police" themselves when they use electronic communication tools. They document thoughts that they would not send in a letter. Litigators find electronic records increasingly important in finding evidence of intent or motive.

Also, the universe of electronic records continues to expand. They include not only computer generated data, but also data residing in audio files, PDAs, wireless devices and emerging technologies. Evidentiary rules today do not distinguish one type of device from another. If information is retrievable, litigators can anticipate that its production will be required.

When a case involves multiple witnesses, the complexity of determining where their electronic data resides is compounded. Increased use of home devices to access information needed for work adds to the complexity.

Evidentiary rules governing data forensics are uncharted at this point. Courts have yet to discuss in detail the extent to which metadata (that is, the record of the characteristics of the information rather than the information itself) must be preserved or to what extent deleted information needs to be restored. While it may be expensive to recover this information, the evidence may be helpful to a case.

Editor: What programs can our readers attend to learn more about these issues?

Anelli: I have two lectures scheduled in the near future on these issues. The first is at the New Jersey Corporate Counsel Association's Third Annual Full Day Conference. It will be held on September 22 in Whippany, NJ. We will discuss electronic discovery in one of the afternoon sessions. Registration information is available from Barbara Walder at The other program is being hosted by the New Jersey Institute for Continuing Legal Education on October 15 in New Brunswick. That presentation will focus on electronic discovery for employment lawyers. Registration information is available from

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