The new electronic discovery rules set to take effect Dec. 1 in federal court are meant to clarify the obligations of parties to turn over emails and other electronically stored records—but ambiguity in some of the terminology assures that disputes will continue over when old information will have to be retrieved and what kind of programs companies need to have in place to show “good faith.”
Andrew Cohen, who heads the compliance practice at EMC Corp., notes that “a lot of litigation” is likely to brew over the issue of whether a company has demonstrated sufficient good faith to immunize itself from sanctions if information is lost.
Cohen
“Good faith is going to be determined on a case-by-case basis,” he says. “You’ve got millions of moving pieces here. The best you can do is to put together a reasonable process so, if something gets lost, you can stand up and say to the court, ‘This is what we’ve done.’”
And plaintiffs are sure to contest whether information is “reasonably accessible” as well, Cohen says. The rules make a distinction between accessible and inaccessible data, but that may be lost on lawyers itching to file suit. “If you’re a big company, some will be arguing that you can’t hide the ball just because [the information] happens to be on an old backup tape,” he says.
That may prod some companies to examine their legacy systems, to look at old data and decide what to do with it, Cohen says. “If you’re not obligated to preserve something for litigation or for some other reason, it might make sense to set some retention period and then get rid of it,” he says. “Why keep information around if it’s just going to be a set of materials that someone is going to argue I have to produce at some point?”
Stigi
John Stigi, however, a lawyer with the law firm Sheppard, Mullin, Richter & Hampton, says purging old information may not always be advisable. “I can defend against a document I have, good, bad or otherwise. I can’t defend it if there’s not a document,” he says. “The belief that fewer documents is better is just a fallacy.”
Michael Gold, a partner with the law firm Jeffer, Mangels, Butler & Marmaro, notes that until now, parties in litigation always could choose to ignore electronic discovery if they wanted. “The new rules don’t permit the kinds of gentlemen’s agreements we’d have in the past, where there would be no electronic discovery at all,” he says.
Gold
Gold contends that most companies “are in horrible shape” when it comes to e-discovery obligations, since few executives have ever considered it a priority worth addressing. But Gold says he expects to see “a lot more zeal applied to it” now that the new rules are looming—and as companies are sanctioned for failing to comply with them. (Think Morgan Stanley, and the $10 million slap it received last year for failing to maintain email records.)
Gibson
And Stanley Gibson, who also practices at Jeffer Mangels, says companies will catch on eventually to the cost-savings that may be had. “There’s a positive return on investment that corporations will generate if they comply with the rules and get their document-management houses in order,” Gibson stresses. “Knowing what your information is, and being able to mine that information, has a definite business advantage.”
All Lost Data Not Sinister
The new rules “basically tell judges and lawyers that all data lost is not sinister,” notes John Dougherty, a lawyer with the law firm DLA Piper. The rules’ safe-harbor provision—which protects companies from sanctions if information is lost despite a good-faith information-management program—“will help companies craft and execute compliance programs,” he says.
AMENDMENTS CONCERNING ESI
Below are excerpts from the “Committee Note” in the Amendments To The Federal Rules Of Civil Procedure,
describing what constitutes electronically stored information:
Subdivision (f) is new. It
focuses on a distinctive feature of computer
operations, the routine alteration and deletion of
information that attends ordinary use. Many steps
essential to computer operation may alter or destroy
information, for reasons that have nothing to do with
how that information might relate to litigation. As a
result, the ordinary operation of computer systems
creates a risk that a party may lose potentially
discoverable information without culpable conduct on
its part. Under Rule 37(f), absent exceptional
circumstances, sanctions cannot be imposed for loss
of electronically stored information resulting from the
routine, good-faith operation of an electronic
information system.
Rule 37(f) applies only to information lost due to
the “routine operation of an electronic information
system” — the ways in which such systems are
generally designed, programmed, and implemented to
meet the party’s technical and business needs. The
“routine operation” of computer systems includes the
alteration and overwriting of information, often without
the operator’s specific direction or awareness, a
feature with no direct counterpart in hard-copy
documents. Such features are essential to the
operation of electronic information systems.
Rule 37(f) applies to information lost due to the
routine operation of an information system only if the
operation was in good faith...
... The protection provided by Rule 37(f) applies
only to sanctions “under these rules.” It does not
affect other sources of authority to impose sanctions
or rules of professional responsibility.
This rule restricts the imposition of “sanctions.”
It does not prevent a court from making the kinds of
adjustments frequently used in managing discovery if
a party is unable to provide relevant responsive
information. For example, a court could order the
responding party to produce an additional witness for
deposition, respond to additional interrogatories, or
make similar attempts to provide substitutes or
alternatives for some or all of the lost information.
Source
Amendments To The Federal Rules Of Civil Procedure (Committee Note; See Page 41)
“For most sophisticated companies that have well-articulated document-retention policies geared toward their business needs, the loss of data is not going to be viewed as some sinister act,” Dougherty says. “The rules require the court to recognize that not everything needs to be retained ... That’s a welcome change, as there’s been some concern that the judiciary doesn’t understand the practical limits on a company’s ability to retain records.”
Dougherty
A good document-retention policy should apply (and be enforced) across the whole company, so that a litigant can’t come into court and say the failure to preserve emails is somehow in bad faith and should be sanctioned. “That’s the place where lots of companies have gotten into trouble,” Doherty says.
The new rules have “essentially created a new industry focused on what companies should do in terms of electronic document-retention policies,” says Ronald Stevens, a partner with the law firm Kirkpatrick & Lockhart Nicholson Graham in Los Angeles.
Stevens
Deciding what to put into those document-retention policies can be complicated, Stevens says. How long should companies maintain data as a matter of policy? Should information be handled differently if it exists on a PC, a server, or a backup tape? Will personnel records be handled differently than operational ones?
Stevens stresses that while the issues may be similar for every company, the answers may differ. “There is no pill that suits all illnesses. What’s cost-effective for one company is not necessarily cost-effective for another,” he says.
Steps To Show Good Faith
Tom Aleman, a principal with Deloitte Financial Advisory Services, says companies can take a number of steps to demonstrate to courts that they are acting in good faith, and help to avoid sanctions down the road. These steps include:
Having a records- and information-management program that covers retention and disposition of paper and electronic records;
Doing an electronic-records inventory “that, at a minimum, identifies the category and type of electronically stored information [and] where it’s currently retained”;
Classifying the identified data as either accessible or non-accessible;
Having an updatable database populated with information collected during the inventory;
Implementing a comprehensive “litigation-hold” program to tell employees when records should be secured for litigation purposes;
Training staff on the information-management and legal-hold programs and making sure to follow through to ensure that the training is effective; and
Being prepared to turn over to the court evidence of all of these activities to show good faith, when requested information cannot be produced.
“If you’ve put in place those things that show you tried to do things in a good-faith effort, then if something does happen—and with technology, things do happen—the judge is supposed to give you some latitude,” Aleman says. “The rules say if you’ve put in the good-faith measures and things go awry, the judge is not going to kill you.”
Related resources, coverage, and commentary on e-discovery and the amended Federal Rules of Civil Procedure can be found in the box above, right.
No comments yet