e-discovery 2.0

There’s a lot of excitement (and corresponding uncertainty) about the recent passing of Federal Rule of Evidence 502 (FRE 502), which was signed into law on Sept 19th.  The main reason that the legal community is excited about FRE 502 is because of the potential for cost savings by reducing the amount of money associated with the e-discovery review process, which is routinely viewed as the most expensive area in the entire e-discovery process.

In combination with the codification of a national standard to determine when a privilege has been waived, FRE 502 is primarily designed to make the use of claw-back agreements a truly viable prospect when doing e-discovery privilege review.  It should provide some panacea (ideally) for rapidly escalating e-discovery costs.  Or, at least that was the impetus behind the rule’s creation - according to the Comments:

“The proposed new rule facilitates discovery and reduces privilege-review costs by limiting the circumstances under which the privilege or protection is forfeited, which may happen if the privileged or protected information or material is produced in discovery. The burden and cost of steps to preserve the privileged status of attorney-client information and trial preparation materials can be enormous. Under present practices, lawyers and firms must thoroughly review everything in a client’s possession before responding to discovery requests. Otherwise they risk waiving the privileged status not only of the individual item disclosed but of all other items dealing with the same subject matter. This burden is particularly onerous when the discovery consists of massive amounts of electronically stored information.”

In short, FRE 502 is designed to establish uniform, nationwide standards for waiver of attorney-client privilege and work product protection, with the main goal being to protect producing parties against the inadvertent disclosure of privileged materials or work product in either federal or state proceedings.  The salient section is subsection (b) which states that when a disclosure of privileged information is made in a federal proceeding or to a federal agency, the disclosure does not constitute a waiver if:

1. the disclosure is inadvertent;
2. the holder of the privilege or protection took reasonable steps to prevent disclosure; and
3. the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).

The end game here is presumably to increasingly leverage automated review methodologies to save costs.  But, in order to facilitate this type of review methodology without taking on unhealthy levels of risk means that claw-back provisions must be as airtight at possible to prevent inadvertent electronically stored information (ESI) productions.  And yet, exactly how FRE 502 will work in practice is up to debate since there isn’t any case law interpreting it yet.

One area that’s top of mind is how this new Rule will impact the recent decisions on e-discovery search, including the Victor Stanley case authored by Chief Magistrate Judge Grimm.  Since FRE 502 contains a core “reasonableness” prong in section (b) it’s likely that Grimm’s proclamation about e-discovery search will still be controlling.  Grimm fundamentally had to evaluate whether the producing party’s search protocols and procedures were in fact reasonable.

“Defendants, who bear the burden of proving that their conduct was reasonable for purposes of assessing whether they waived attorney-client privilege by producing the 165 documents to the Plaintiff, have failed to provide the court with information regarding: the keywords used; the rationale for their selection; the qualifications of M. Pappas and his attorneys to design an effective and reliable search and information retrieval method; whether the search was a simple keyword search, or a more sophisticated one, such as one employing Boolean proximity operators; or whether they analyzed the results of the search to assess its reliability, appropriateness for the task, and the quality of its implementation.” (footnotes omitted).

In Victor Stanley, the producing party wasn’t able to demonstrate reasonableness because they didn’t strategically craft out their strategy nor conduct any sampling to make sure that the e-discovery search worked as designed.  This type of analysis would still seem to come into play under FRE 502 and so, as Grimm states, the use of either a best practices or collaborative approach to e-discovery would seem to be as important as ever.

Given that backdrop it’s just as important as ever that parties “show their work” when it comes to e-discovery search.   Whether FRE 502 will really make parties feel safe enough to use automated review processes (thereby reducing costs) will remain to be seen.  But, this first step which unifies standards and expectations is at least a very positive step.

There have been several recent press releases from enterprise software companies proclaiming FRCP “compliance,” which certainly sounds appealing.  But, the use of that term begs the question:  how does a search technology (or methodology) become FRCP “compliant” and is that goal even possible?

IBM launched the first salvo:

“The software will allow companies to move from scattered, point-solution approaches to a disciplined approach that controls electronic information, helps support Federal Rules of Civil Procedure (FRCP) compliance,…”

And, Autonomy quickly followed suit:

“The Autonomy pan-enterprise search platform automates the retrieval, processing, and management of all information throughout a global organization irrespective of languages, operating systems, and file types, avoiding non-FRCP compliant search techniques.”

I’m more than tolerant of both puffery and marketing-speak (though woe to those who forward such releases to Monica Bay), but this notion of “FRCP compliance” seems to take advantage of an already bombarded buying public, who have likely grown weary of FRCP articles, CLEs, and maybe even blogs posts.  Nevertheless, it seems useful to really tease out what the FRCP means and does not mean in relationship to e-discovery and enterprise search.

So, in an attempt to debunk this “compliance” myth, I thought I’d devote this blog post to demystifying some of the inaccurate notions about the FRCP.

Federal First

Initially, it’s important to note that the Rules only apply to litigation within the United States Federal court system.  State court litigation, international lawsuits, arbitrations and administrative actions (just to name a few) aren’t under the aegis of the Rules.  While it’s true that certain state courts (Minnesota for example) have selectively adopted the new discovery provisions, most have not.  So, the first step is to check your venue.  Then, assuming the Rules do apply because your organization is in Federal litigation, the impact, while still not crystal clear, does take on more definition.

Relevancy Filters

As a starting place, the discovery process (as part of litigation) is fundamentally limited by Rule 26 to information (electronic and otherwise) that is “relevant” to the case at hand (i.e., “relevant to the claim or defense of any party”).  This distinction is critical because for the most part it prevents the responding party from having to cast a company wide net for all data, a task envisioned by many content management systems.   Certainly, the ability of certain systems to access all user created data is valuable when searching for relevant data, but there are many ways to skin that cat.

No Express Retention or Preservation Duties

Legions of articles proclaim that the amended Rules create wholly new duties to retain information in general, as well as infusing new duties to preserve electronic data once litigation is anticipated.  Instead however, the new Rules expressly disavow creating truly new retention or preservation duties.  While it is undoubtedly a good practice to have a retention policy, given the welter of statutes and regulations that do create retention duties, the Rules do not mandate that a company create one ahead of litigation.

What is true, however, is that the new Rules have powerful implications for preservation once litigation is likely because of the requirements to understand, negotiate and produce relevant information early in the litigation process.  Under the new Rules, it is critical to be able to identify and retain potentially relevant data once litigation is filed (or is “reasonably likely”).  And yet, the burden of placing a legal “hold” on data, while often significant, certainly can be achieved without a formal document retention/deletion policy.  Again, the litigation “trigger” is key.

“Records” Aren’t the Focus

Continuing on this theme, but in a slightly different vector, there are differing opinions about the impact that the Rules have on “business records.”  This issue is nebulous since it is easy to confuse potentially relevant data corresponding to litigation with “business records,” which are often used in two different contexts.  Initially, there is the “business records” exception to the hearsay rule, which is quite specific and affects the admissibility of evidence in court.

The second, broader definition applies to organizations as they attempt to define a records management program to meet the numerous state, local and Federal mandates.  Commonly, as part of this complex initiative, companies will create records retention programs that specifically define official “records,” unofficial “records,” “non-records,” as well as specific retention periods for certain types of records.  Once the company’s records protocol is put into place there may be some downstream nexus with the Rules, but it won’t manifest itself until Federal court litigation arises, as described above.   The most common intersection occurs when a records retention policy prescribes a deletion event that contradicts the legal “hold” requirements for a record that is likely to be relevant to litigation.

In sum, the foregoing describes the role the FRCP plays in Federal court litigation.  It should be clear that the important, yet relatively narrow, use cases do not include any general compliance mandate in the absence of specific litigation.  I think it’s important to separate myth from reality when it comes to understanding how and when the revised Rules really do come into play.  Failure to do so can create an unpleasant scenario where your organization will either under- or over-prepare for these important litigation guidelines.