e-discovery 2.0

On November 28, 2011, The White House issued a Presidential Memorandum that outlines what is expected of the 480 federal agencies of the government’s three branches in the next 240 days.  Up until now, Washington, D.C. has been the Wild West with regard to information governance as each agency has often unilaterally adopted its own arbitrary policies and systems.  Moreover, some agencies have recently purchased differing technologies.  Unfortunately,  with the President’s ultimate goal of uniformity, this centralization will be difficult to accomplish with a range of disparate technological approaches.

Particular pain points for the government traditionally include retention, search, collection, review and production of vast amounts of data and records.  Specifically, these pain points include examples of: FOIA requests gone awry, the issuance of legal holds across different agencies leading to spoliation, and the ever present problem of decentralization.

Why is the government different?

Old Practices. First, in some instances the government is technologically behind (its corporate counterparts) and is failing to meet the judiciary’s expectation that organizations effectively store, manage and discover their information.  This failing is self-evident via  the directive coming from the President mandating that these agencies start to get a plan to attack this problem.  Though different than other corporate entities, the government is nevertheless held to the same standards of eDiscovery under the Federal Rules of Civil Procedure (FRCP).  In practice, the government has been given more leniency until recently, and while equal expectations have not always been the case, the gap between the private and public sectors in no longer possible to ignore.

FOIA.  The government’s arduous obligation to produce information under the Freedom of Information Act (FOIA) has no corresponding analog for private organizations, who are responding to more traditional civil discovery requests.  Because the government is so large with many disparate IT systems, it is cumbersome to work efficiently through the information governance process across agencies and many times still difficult inside one individual agency with multiple divisions.  Executing this production process is even more difficult if not impossible to do manually without properly deployed technology.  Additionally, many of the investigatory agencies that issue requests to the private sector need more efficient ways to manage and review data they are requesting.  To compound problems, within the US government there are two opposing interests are at play; both screaming for a resolution, and that solution needs to be centralized.  On the one hand, the government needs to retain more than a corporation may need to in order to satisfy a FOIA request.

Titan Pulled at Both Ends. On the other hand, without classification of the records that are to be kept, technology to organize this vast amount of data and some amount of expiry, every agency will essentially become their own massive repository.  The “retain everything mentality” coupled with the inefficient search and retrieval of data and records is where they stand today.  Corporations are experiencing this on a smaller scale today and many are collectively further along than the government in this process, without the FOIA complications.

What are agencies doing to address these mandates?

In their plans, agencies must describe how they will improve or maintain their records management programs, particularly with regard to email, social media and other electronic communications.  They must also move away from such a paper-centric existence.  eDiscovery consultants and software companies are helping agencies through this process, essentially writing their plans to match the President’s directive.  The cloud conversation has been revisited, and agencies also have to explain how they will use cloud-based services and storage solutions, as well as identify gaps in existing laws or regulations that presently prevent improved management.  Small innovations are taking place.  In fact, just recently the DOJ added a new search feature on their website to make it easier for the public to find documents that have been posted by agencies on their websites.

The Office of Management and Budget (OMB), National Archives and Records Administration (NARA), and Justice Department will use those reports to come up with a government-wide records management framework that is more efficient, maintains accountability by documenting agency actions and promotes “appropriate” public access to records.  Hopefully, the framework they come up with will be centralized and workable on a realistic timeframe with resources sufficiently allocated to the initiative.

How much will this cost?

The President’s mandate is a great initiative and very necessary, but one cannot help but think about the costs in terms of money, time and resources when considering these crucial changes.  The most recent version of a financial services and general government appropriations bill in the Senate extends $378.8 million to NARA for this initiative.  President Obama appointed Steven VanRoekel as the United States CIO in August 2011 to succeed Vivek Kundra.  After VanRoekel’s speech at the Churchill Club in October of 2011, an audience member asked him what the most surprising aspect of his new job was.  VanRoekel said that it was managing the huge and sometimes unwieldy resources of his $80 billion budget.  It is going to take even more than this to do the job right, however.

Using conservative estimates, assume for an agency to implement archiving and eDiscovery capabilities as an initial investment would be $100 million.  That approximates $480 billion for all 480 agencies.  Assume a uniform information governance platform gets adopted by all agencies at a 50% discount due to the large contracts and also factoring in smaller sums for agencies with lesser needs.  The total now comes to $240 billion.  For context, that figure is 5% of what was spent by Federal Government ($4.76 trillion) on the biggest bailout in history in 2008. That leaves a need for $160 billion more to get the job done. VanRoekel also commented at the same meeting that he wants to break down massive multi-year information technology projects into smaller, more modular projects in the hopes of saving the government from getting mired in multi-million dollar failures.   His solution to this, he says, is modular and incremental deployment.

While Rome was not built in a day, this initiative is long overdue, yet feasible, as technology exists to address these challenges rather quickly.  After these 240 days are complete and a plan is drawn the real question is, how are we going to pay now for technology the government needed yesterday?  In a perfect world, the government would select a platform for archiving and eDiscovery, break the project into incremental milestones and roll out a uniform combination of solutions that are best of breed in their expertise.

The New Year has now dawned and with it, the certainty that 2012 will bring new developments to the world of eDiscovery.  Last month, we spotlighted some eDiscovery trends for 2012 that we feel certain will occur in the near term.  To understand how these trends will play out, it is instructive to review some of the top eDiscovery cases from 2011.  These decisions provide a roadmap of best practices that the courts promulgated last year.  They also spotlight the expectations that courts will likely have for organizations in 2012 and beyond.

Issuing a Timely and Comprehensive Litigation Hold

Case: E.I. du Pont de Nemours v. Kolon Industries (E.D. Va. July 21, 2011)

Summary: The court issued a stiff rebuke against defendant Kolon Industries for failing to issue a timely and proper litigation hold.  That rebuke came in the form of an instruction to the jury that Kolon executives and employees destroyed key evidence after the company’s preservation duty was triggered.  The jury responded by returning a stunning $919 million verdict for DuPont.

The spoliation at issue occurred when several Kolon executives and employees deleted thousands emails and other records relevant to DuPont’s trade secret claims.  The court laid the blame for this destruction on the company’s attorneys and executives, reasoning they could have prevented the spoliation through an effective litigation hold process.  At issue were three hold notices circulated to the key players and data sources.  The notices were all deficient in some manner.  They were either too limited in their distribution, ineffective since they were prepared in English for Korean-speaking employees, or too late to prevent or otherwise ameliorate the spoliation.

The Lessons for 2012: The DuPont case underscores the importance of issuing a timely and comprehensive litigation hold notice.  As DuPont teaches, organizations should identify what key players and data sources may have relevant information.  A comprehensive notice should then be prepared to communicate the precise hold instructions in an intelligible fashion.  Finally, the hold should be circulated immediately to prevent data loss.

Organizations should also consider deploying the latest technologies to help effectuate this process.  This includes an eDiscovery platform that enables automated legal hold acknowledgements.  Such technology will allow custodians to be promptly and properly apprised of litigation and thereby retain information that might otherwise have been discarded.

Another Must-Read Case: Haraburda v. Arcelor Mittal U.S.A., Inc. (D. Ind. June 28, 2011)

Suspending Document Retention Policies

Case: Viramontes v. U.S. Bancorp (N.D. Ill. Jan. 27, 2011)

Summary: The defendant bank defeated a sanctions motion because it modified aspects of its email retention policy once it was aware litigation was reasonably foreseeable.  The bank implemented a retention policy that kept emails for 90 days, after which the emails were overwritten and destroyed.  The bank also promulgated a course of action whereby the retention policy would be promptly suspended on the occurrence of litigation or other triggering event.  This way, the bank could establish the reasonableness of its policy in litigation.  Because the bank followed that procedure in good faith, it was protected from court sanctions under the Federal Rules of Civil Procedure 37(e) “safe harbor.”

The Lesson for 2012: As Viramontes shows, an organization can be prepared for eDiscovery disputes by timely suspending aspects of its document retention policies.  By modifying retention policies when so required, an organization can develop a defensible retention procedure and be protected from court sanctions under Rule 37(e).

Coupling those procedures with archiving software will only enhance an organization’s eDiscovery preparations.  Effective archiving software will have a litigation hold mechanism, which enables an organization to suspend automated retention rules.  This will better ensure that data subject to a preservation duty is actually retained.

Another Must-Read Case: Micron Technology, Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011)

Managing the Document Collection Process

Case: Northington v. H & M International (N.D.Ill. Jan. 12, 2011)

Summary: The court issued an adverse inference jury instruction against a company that destroyed relevant emails and other data.  The spoliation occurred in large part because legal and IT were not involved in the collection process.  For example, counsel was not actively engaged in the critical steps of preservation, identification or collection of electronically stored information (ESI).  Nor was IT brought into the picture until 15 months after the preservation duty was triggered. By that time, rank and file employees – some of whom were accused by the plaintiff of harassment – stepped into this vacuum and conducted the collection process without meaningful oversight.  Predictably, key documents were never found and the court had little choice but to promise to inform the jury that the company destroyed evidence.

The Lesson for 2012: An organization does not have to suffer the same fate as the company in the Northington case.  It can take charge of its data during litigation through cooperative governance between legal and IT.  After issuing a timely and effective litigation hold, legal should typically involve IT in the collection process.  Legal should rely on IT to help identify all data sources – servers, systems and custodians – that likely contain relevant information.  IT will also be instrumental in preserving and collecting that data for subsequent review and analysis by legal.  By working together in a top-down fashion, organizations can better ensure that their eDiscovery process is defensible and not fatally flawed.

Another Must-Read Case: Green v. Blitz U.S.A., Inc. (E.D. Tex. Mar. 1, 2011)

Using Proportionality to Dictate the Scope of Permissible Discovery

Case: DCG Systems v. Checkpoint Technologies (N.D. Ca. Nov. 2, 2011)

The court adopted the new Model Order on E-Discovery in Patent Cases recently promulgated by the U.S. Court of Appeals for the Federal Circuit.  The model order incorporates principles of proportionality to reduce the production of email in patent litigation.  In adopting the order, the court explained that email productions should be scaled back since email is infrequently introduced as evidence at trial.  As a result, email production requests will be restricted to five search terms and may only span a defined set of five custodians.  Furthermore, email discovery in DCG Systems will wait until after the parties complete discovery on the “core documentation” concerning the patent, the accused product and prior art.

The Lesson for 2012: Courts seem to be slowly moving toward a system that incorporates proportionality as the touchstone for eDiscovery.  This is occurring beyond the field of patent litigation, as evidenced by other recent cases.  Even the State of Utah has gotten in on the act, revising its version of Rule 26 to require that all discovery meet the standards of proportionality.  While there are undoubtedly deviations from this trend (e.g., Pippins v. KPMG (S.D.N.Y. Oct. 7, 2011)), the clear lesson is that discovery should comply with the cost cutting mandate of Federal Rule 1.

Another Must-Read Case: Omni Laboratories Inc. v. Eden Energy Ltd [2011] EWHC 2169 (TCC) (29 July 2011)

Leveraging eDiscovery Technologies for Search and Review

Case: Oracle America v. Google (N.D. Ca. Oct. 20, 2011)

The court ordered Google to produce an email that it previously withheld on attorney client privilege grounds.  While the email’s focus on business negotiations vitiated Google’s claim of privilege, that claim was also undermined by Google’s production of eight earlier drafts of the email.  The drafts were produced because they did not contain addressees or the heading “attorney client privilege,” which the sender later inserted into the final email draft.  Because those details were absent from the earlier drafts, Google’s “electronic scanning mechanisms did not catch those drafts before production.”

The Lesson for 2012: Organizations need to leverage next generation, robust technology to support the document production process in discovery.  Tools such as email analytical software, which can isolate drafts and offer to remove them from production, are needed to address complex production issues.  Other technological capabilities, such as Near Duplicate Identification, can also help identify draft materials and marry them up with finals that have been marked as privileged.  Last but not least, technology assisted review has the potential of enabling one lawyer to efficiently complete the work that previously took thousands of hours.  Finding the budget and doing the research to obtain the right tools for the enterprise should be a priority for organizations in 2012.

Another Must-Read Case: J-M Manufacturing v. McDermott, Will & Emery (CA Super. Jun. 2, 2011)

Conclusion

There were any number of other significant cases from 2011 that could have made this list.  We invite you to share your favorites in the comments section or contact us directly with your feedback.

For more on the cases discussed above, watch this video:

William Butterfield is a partner at Hausfeld LLP with over 33 years of experience as a trial attorney and a track record of success.  In addition to serving as a leader in several legal think tanks and teaching law, Mr. Butterfield’s achievements include reaching multiple settlements in the neighborhood of $100 million in complex legal matters.  Last week Mr. Butterfield had the rare opportunity to testify before Congress regarding the Costs and Burdens of eDiscovery in Washington D.C.  The following dialogue captures his experiences and observations testifying before the House Judiciary Committee’s Subcommittee on the Constitution.

Matthew Nelson: What was it like testifying before Congress and why did you feel compelled to testify?

William P. Butterfield: It was my first time testifying before Congress, so I wasn’t sure what to expect.  But it was a positive experience for me, and I’m glad that I was asked to testify.  While there is an organized, and well-financed effort by some in the corporate community to make drastic revisions to the Federal Rules of Civil Procedure, or civil rules, there is also a large segment of the bar (including many attorneys who are thought leaders in this area) who think that the types of “cures” under consideration will do more harm than good.  I think it’s important to give voice to that view, and that is why I testified.

Nelson: What were some of the key points you and other witnesses with different viewpoints made during the hearing?

Butterfield: Rebecca Kourlis, executive director of the Institute for the Advancement of the American Legal System (IAALS), testified that the cost of litigation is in part responsible for fewer trials.  She said that IAALS supports a three-pronged approach to address the problem:  1) More effective judicial case management, 2) Increased cooperation and 3) Rules revisions.  Importantly, Justice Kourlis said that we should defer to the Standing Committee and the Civil Rules Advisory Committee of the Judicial Conference, which is addressing the issues.

William Hubbard, assistant professor of law at the University of Chicago, testified about the costs of preservation and eDiscovery, noting that the costs are relatively modest in most cases.  He testified that most of the high discovery costs are occurring in a very few (5%) cases.

Thomas Hill, associate general counsel at General Electric, testified that the current Federal Rules of Civil Procedure (FRCP) result in American companies waste billions of dollars on unnecessary document preservation and production.  He indicated that part of the problem is that companies must preserve documents before a lawsuit is filed, and often they preserve where no lawsuit is ever filed.  He provided examples of occasions where GE spent more in preservation than the money at stake in the litigation.

My testimony focused on three things:  1) Our legal system depends on discovery and some of the proposals from those seeking drastic rules changes would undermine our goal of searching for the truth in litigation and resolving disputes on the merits; 2) The fear of sanctions that some companies claim are causing them to over-preserve is overblown, given that sanctions are sought in just 1/15th of 1% of federal court cases, and are granted in only about half of those cases; 3) A review of sanctions decisions demonstrates that parties are not getting sanctioned where they acted in good faith.  Rather, they are being sanctioned for egregious conduct.

Nelson: Did you sense a split among party lines or among certain members of Congress or some kind of overwhelming consensus on any issues?

Butterfield: Predictably, there appeared to be some differences between parties, although it is hard to say what reflects the views of Republicans on the committee, because only one of their members participated.  The Democrats expressed two general views:  1) Although eDiscovery presents challenges to litigants, it has been valuable in uncovering critical evidence and is very beneficial to the goals of discovery in general, 2) Congress should not interfere with the Rules Committee, which is carefully studying these issues.  The Republicans, represented by the Subcommittee Chair, Trent Franks, took the position that the current discovery rules do not promote the objectives of Rule 1, which provides that litigation should be just, speedy and inexpensive.  Franks said that the civil rules regarding preservation and spoliation sanctions are too vague, and parties are therefore required to preserve excessive amounts of information.  But despite those differences, I didn’t observe any member calling for congressional intervention at this time.

Nelson: What struck you as interesting or important and what do you expect will be the outcome or next steps for Congress?

Butterfield: What struck me as interesting (and surprising) was that only one member from the majority participated in the hearing.  Nothing during the hearing led me to believe that Congress would interfere with the Rules Committee’s work and process.

For those interested in hearing more, visit the United States Courts website to listen to a full recording of the hearing. To learn more about FRCP developments follow Matt Nelson on Twitter at @InfoGovlawer

The eDiscovery frenzy that has gripped the American legal system over the past decade has become increasingly expensive.  Particularly costly to both clients and courts is the process of preserving, collecting and producing documents.  This was supposed to change after the Federal Rules of Civil Procedure (FRCP) were amended in 2006.  After all, weren’t the amended rules designed to streamline discovery, allowing parties to focus on the merits while making discovery costs more reasonable?  Instead, it seems the rules have spawned more collateral discovery disputes than ever before about preservation, collection and production issues.

As a solution to these costs, the eDiscovery cognoscenti are emphasizing the concept of “proportionality.”  Proportionality typically requires that the benefits of discovery be commensurate with its corresponding burdens.  Under the Federal Rules of Civil Procedure, the directive that discovery be proportional is found in Rules 26(c), 26(b)(2)(C) and Rule 26(b)(2)(B).  Under Rule 26(c), courts may generally issue protective orders that limit or even proscribe discovery that causes “annoyance, embarrassment, oppression, or undue burden or expense.”  More specifics are set forth in Rule 26(b)(2)(C), which enables courts to restrict discovery if the requests are unreasonably cumulative or duplicative, the discovery can be obtained from an alternative source that is less expensive or burdensome, or the burden or expense of the discovery outweighs its benefit.  In the specific context of electronic discovery, Rule 26(b)(2)(B) restricts the discovery of backup tapes and other electronically stored information that are “not reasonably accessible” due to “undue burden or cost.”

Despite the existence of these provisions, they are often bypassed.  The most recent and notable example of this trend is found in Pippins v. KPMG (S.D.N.Y. Oct. 7, 2011).  In Pippins, the court ordered the defendant accounting firm to continue preserving thousands of employee hard drives.  In so doing, the court sidestepped the firm’s proportionality argument, citing Orbit One v. Numerex (S.D.N.Y. 2010) for the premise that such a standard is “too amorphous” and therefore unworkable.  Regardless of cost or burden, the court reasoned that “prudence” required preservation of all relevant materials “until a more precise definition [of proportionality] is created by rule.”

The Pippins order and its associated costs for the firm – potentially into the millions of dollars – has given new fuel to the argument that an amended federal rule should be implemented to include a more express mandate regarding proportionality.  Surprisingly enough, a blueprint for such an amended rule is already in place in the State of Utah.  Effective November 1, 2011, Utah implemented sweeping changes to civil discovery practice through amended Civil Procedure Rule 26.  The new rule makes proportionality the standard now governing eDiscovery in Utah.

Proportionality Dictates the Scope of Permissible Discovery

Utah Rule 26 has changed the permissible scope of discovery to expressly condition that all discovery meet the standards of proportionality.  That means parties may seek discovery of relevant, non-privileged materials “if the discovery satisfies the standards of proportionality.”  This effectively shifts the burden of proof on proportionality from the responding party to the requesting party.  Indeed, Utah Rule 26(b)(3) specifically codifies this stunning change:  “The party seeking discovery always has the burden of showing proportionality and relevance.”  This stands in sharp contrast to Federal Rules 26(b)(2) and 26(c), which require the responding party to show the discovery is not proportional.

The “standards of proportionality” that have been read into Utah Rule 26 incorporate those found in Federal Rule 26(b)(2)(C).  In addition, Utah Rule 26 requires that discovery be “reasonable.”  Reasonableness is to be determined on the needs of a given case such as the amount in controversy, the parties’ resources, the complexity and importance of the issues, and the role of the discovery in addressing such issues.  Last but not least, discovery must expressly comply with the cost cutting mandate of Rule 1 and thereby “further the just, speedy and inexpensive determination of the case.”

Proportionality Limits the Amount of Discovery

To further address the burdens and costs of disproportionate discovery, Utah Rule 26(c) limits the amount of discovery that parties may conduct as a matter of right based on the specific amounts in controversy.  For those matters involving damages of $300,000 or more, parties may propound 20 interrogatories, document requests and requests for admissions.  Total fact deposition time is restricted to a mere 30 hours.  For matters between $50,000 and $300,000, those figures are halved.  And for matters under $50,000, only five document requests and requests for admissions are allotted to the parties.  Fact depositions are curtailed to three hours total per side, while interrogatories are eliminated.

If these limits are too restrictive, parties may request “extraordinary discovery” under Rule 26(c)(6).  However, any such request must demonstrate that the sought after discovery is “necessary and proportional” under the rules.  The parties must also certify that a budget for the discovery has been “reviewed and approved.”

A Potential Model for Federal Discovery Rule Amendments

Utah Rule 26 could perhaps serve as a model for amending the scope of permissible discovery under the Federal Rules.  Like Utah Rule 26, Federal Rule 26 could be amended to expressly condition discovery on meeting the principles of proportionality.  The Federal Rules could also be modified to ensure the propounding party always has the burden of demonstrating the fact specific good cause for its discovery.  Doing so would undoubtedly force counsel and client to be more precise with their requests and do away with the current regime of “promiscuous discovery.”  Calcor Space Facility, Inc. v. Superior Court, 53 Cal.App.4th 216, 223 (1997) (urging courts to “aggressively” curb discovery abuses which, “like a cancerous growth, can destroy a meritorious cause or defense”).

Tiering the amounts of permitted discovery based on alleged damages could also reduce the costs of discovery.  With limited deposition time and fewer document requests, discovery of necessity would likely focus on the merits instead of eDiscovery sideshows.  Coupling this with an “extraordinary discovery” provision would enable courts to exercise greater control over the process and ensure that genuinely complex matters are litigated efficiently.

If all of this seems like a radical departure from established discovery practice, consider that the new Model Order on E-Discovery in Patent Cases has also incorporated tiered and extraordinary discovery provisions.  See DCG Systems v. Checkpoint Technologies (N.D. Ca. Nov. 2, 2011) (adopting the model order and explaining the benefits of limiting eDiscovery in patent cases).

For those who are seeking a vision of how proportionality might be incorporated into the Federal Rules, new Utah Rule 26 could be a blueprint for doing so.

Few people on the planet know more about federal rulemaking than John Rabiej, The Sedona Conference’s Director for Judicial Outreach.  John’s experience is the result of serving as the Chief of the Rules Committee Support Office for nearly two decades, where he routinely worked with federal judges, including current Chief Justice of the U.S. Supreme Court, John Roberts.  A key part of supporting the rulemaking process included building consensus among many different groups and individuals who sometimes held vastly different notions of whether and how rules should be changed.

In addition to his role with The Sedona Conference, John is an accomplished author who has written extensively on rules related issues.  His publications include contributions to Moore’s Federal Practice, the Federal Lawyer, and Weinsten’s Federal Evidence.  I’m pleased to provide John’s take on the increasingly public debate about whether or not the Federal Rules of Civil Procedure (FRCP) should be amended.

Nelson: You are recognized as one of the leading experts on the Federal Rule making process.  How did you gain that experience and notoriety?

Rabiej: I established the rules committee office within the Administrative Office of United States Courts nearly two decades ago to provide staff support to the Judicial Conference Committee on Rules of Practice and Procedure and its five advisory rules committees.  In this capacity, I had the privilege and honor of working very closely with 31 federal circuit, district, and bankruptcy judges who chaired a rules committee. These chairs were personally selected by the Chief Justice and represented the very best of the federal judiciary.  I learned from each of them and put their wise counsel to good use when I, in turn, provided advice to their successors.  At the same time, I worked closely with the committee reporters, who are each stellar academics with national reputations for excellence.  Over the years, I built up an institutional knowledge of rule amendments based on first-hand experiences.

I soon realized that rulemaking is a transparent, formal, quasi-legislative process, which typically requires a great deal of information gathering, consultation with interested groups, and consensus building.  I played a unique role because I coordinated the rules work among the rules committees, other Judicial Conference committees, members of the Judicial Conference, Supreme Court staff, Congressional members and staff, Executive Branch officials, major bar organizations, academics, and interest groups.  Because the federal rules have the force of law, buy-in from all these various major actors was a critical component of success.  And many of my responsibilities were to ensure that the rules committees were advised of the concerns and different points of view of these various individuals and entities.

Nelson: Are there any interesting stories or life lessons you can share about working with any of the committee chairs and members?

Rabiej: Without exception, every rules committee chair in my experience has not only been exceptionally bright and intelligent, but also considerate and kind on a personal human level. They each displayed the highest level of judicial temperament.  A good example is Chief Justice (then Judge) John Roberts’ patience in handling a particularly difficult public hearing.  Several years ago, an elderly lawyer requested to testify on a proposed amendment to the Appellate Rules.  I was unable to persuade the lawyer to withdraw the request, even though his request was the only one.  Judge Roberts generously agreed to preside over the hearing by himself on the committee’s behalf.  Witnesses testifying at rules hearings typically are given 10 minutes to make their presentations.  With only Judge Roberts, a stenographer, and me in the hearing room, the lawyer made a 30-minute rambling presentation, which solely addressed a local incident allegedly involving criminal misconduct.  It had absolutely nothing to do with the procedural appellate rule proposal under consideration.  Judge Roberts never interrupted the lawyer.  He patiently listened, genuinely was interested in the lawyer’s story, and responded with courtesy to all the lawyer’s questions.  At the end, the lawyer was satisfied that he had his day in “court” and walked away content.  This is only one of many examples of my experiences with rules committee judges acting in the finest traditions of the federal judiciary.

Nelson: Who is lobbying for changes to the Federal Rules of Civil Procedure (“Rules”) and why?

Rabiej: Most rule amendment proposals are not controversial and are supported by general consensus.  But a few have been especially contentious.  Though rules are designed to apply to all parties in a neutral fashion, they can and do affect parties differently.  When large amounts of money hang in the balance, parties and their representatives go to great pains to make sure that the rules committees take into consideration their concerns and points of view. The current debate on preservation and sanctions issues is the most recent example.  The rules committees welcome such attention and close scrutiny because it leads to better and more informed rulemaking and greater buy-in from the affected parties and interest groups.

A loose coalition of officers from large corporations, corporate counsel, lawyers from large law firms, and interest groups, including Lawyers for Civil Justice, representing corporate and business clientele, is forming to advocate bold changes to the scope of discovery, which would narrow a party’s preservation obligations and limit a party’s vulnerability to spoliation sanctions.  They argue that the cost of preservation is skyrocketing and that the vast bulk of information preserved is unnecessary and has little to do with the merits of a case. They contend that all too often they are compelled by law to preserve voluminous information even though a law suit will never be filed. Opposing them is a similarly loose coalition of plaintiffs’ lawyers, law firms, and interest groups, including the Association for American Justice, representing interests of plaintiff lawyers, who defend the rules’ status quo, contending that little, if any, change is necessary and that any narrowing of the preservation obligation or discovery scope would deny the rights of their clients.  They contend that corporations are obligated under many different sources of law and regulations to preserve records irrespective of litigation demands.  They also contend that any change to the rules would unnecessarily increase the risk of destruction of evidence that is critical to the merits of the case.

Nelson: Are there viable alternatives to changing the Rules?

Rabiej: Lawyers in many cases do not raise any preservation or spoliation sanction issues with the court.  It is unclear to me whether such inaction in an individual case is a consequence of the lawyers’ ignorance of potential eDiscovery issues or of the lawyers’ cooperation in addressing eDiscovery issues before they become problems, which The Sedona Conference® strongly advocates.  (See The Sedona Conference® Cooperation Proclamation).  In wrestling with preservation and spoliation sanction issues, the rules committees recognize that rules rarely provide the entire answer and, in fact, rules typically have only a very limited effect.  Instead, judicial education, training of the bar, and changes in litigation culture offer more promising and permanent solutions.   The rules committees are actively exploring each of these avenues with outside groups, including the Federal Judicial Center and The Sedona Conference® among others, to promote such solutions.

Though the Judicial Conference of the United States strongly opposes direct amendment of the rules by legislation, it recognizes the Congressional prerogative to do so.  Congress has rarely exercised its prerogative, however, giving due deference to the rulemaking process and recognizing that the rules produced under the process are the best.  At the same time, rules committees understand that the Rules Enabling Act limits their authority to promulgating only procedural rules, which do “not abridge, enlarge or modify any substantive right.”  Rules committees are very circumspect about their rulemaking authority.  They are justifiably reluctant to pursue rules proposals that might be viewed by some to exceed their authority and encroach on Congress’s domain.  This “Rules Enabling Act” issue has been raised regarding some aspects of the preservation proposals under consideration. So the rules committees are confronted with issues that raise several exquisitely delicate questions of policy and comity.

Nelson: You’ve been involved in a lot of discussions regarding Rule amendments throughout your career.  How does the current discussion rate in terms of importance?

Rabiej: The current debate on preservation and spoliation sanctions raises issues about the scope of discovery, a major litigation cost.  Because the preservation costs incurred in some cases can be extremely large, the extent of spoliation sanctions for failing to preserve relevant information can be damaging, and the destruction of potentially critical evidence devastating.  It is not surprising that representatives of both plaintiffs and defendants are so passionately pressing their positions before the rule committees.  In my experience, the level of interest in these issues equals the interest shown in only a very few past controversial amendments, including proposals affecting class actions, Daubert evidentiary procedures, and the earlier discovery scope amendments in 2000.   The keen degree of interest in the issues under consideration is reflected by the extent of Congressional participation.  Five House Judiciary Committee members of the minority and majority staffs attended the recent Civil Rules Committee meeting on preservation-related amendments in Washington DC in November.  A hearing before the House Judiciary Subcommittee on the Constitution on preservation costs was recently scheduled, but later postponed until December 13, 2012.  It is clear to me that Congress will take a hard look at preservation costs and burdens.  The rules committees are not blind to Congressional interest.  The rulemaking process is a responsibility shared with Congress and the Executive Branch, and the rules committees give the views of the other two Branches due respect in their deliberations.

John Rabiej is an attorney, The Sedona Conference’s Director for Judicial Outreach, and former Chief of the Rules Committee Support Office.  To learn more about FRCP developments email Matt Nelson at Matt_Nelson@Symantec.com or follow Matt on Twitter at @InfoGovlawer.

As 2011 comes quickly to a close we’ve attempted, as in years past, to do our best Carnac impersonation and divine the future of eDiscovery.  Some of these predictions may happen more quickly than others, but it’s our sense that all will come to pass in the near future – it’s just a matter of timing.

1. Technology Assisted Review (TAR) Gains Speed.  The area of Technology Assisted Review is very exciting since there are a host of emerging technologies that can help make the review process more efficient, ranging from email threading, concept search, clustering, predictive coding and the like.  There are two fundamental challenges however.  First, the technology doesn’t work in a vacuum, meaning that the workflows need to be properly designed and the users need to make accurate decisions because those judgment calls often are then magnified by the application.  Next, the defensibility of the given approach needs to be well vetted.  While it’s likely not necessary (or practical) to expect a judge to mandate the use of a specific technological approach, it is important for the applied technologies to be reasonable, transparent and auditable since the worst possible outcome would be to have a technology challenged and then find the producing party unable to adequately explain their methodology.
2. The Custodian-Based Collection Model Comes Under Stress. Ever since the days of Zubulake, litigants have focused on “key players” as a proxy for finding relevant information during the eDiscovery process.  Early on, this model worked particularly well in an email-centric environment.  But, as discovery from cloud sources, collaborative worksites (like SharePoint) and other unstructured data repositories continues to become increasingly mainstream, the custodian-oriented collection model will become rapidly outmoded because it will fail to take into account topically-oriented searches.  This trend will be further amplified by the bench’s increasing distrust of manual, custodian-based data collection practices and the presence of better automated search methods, which are particularly valuable for certain types of litigation (e.g., patent disputes, product liability cases).
3. The FRCP Amendment Debate Will Rage On – Unfortunately Without Much Near Term Progress. While it is clear that the eDiscovery preservation duty has become a more complex and risk laden process, it’s not clear that this “pain” is causally related to the FRCP.  In the notes from the Dallas mini-conference, a pending Sedona survey was quoted referencing the fact that preservation challenges were increasing dramatically.  Yet, there isn’t a consensus viewpoint regarding which changes, if any, would help improve the murky problem.  In the near term this means that organizations with significant preservation pains will need to better utilize the rules that are on the books and deploy enabling technologies where possible.
4. Data Hoarding Increasingly Goes Out of Fashion. The war cry of many IT professionals that “storage is cheap” is starting to fall on deaf ears.  Organizations are realizing that the cost of storing information is just the tip of the iceberg when it comes to the litigation risk of having terabytes (and conceivably petabytes) of unstructured, uncategorized and unmanaged electronically stored information (ESI).  This tsunami of information will increasingly become an information liability for organizations that have never deleted a byte of information.  In 2012, more corporations will see the need to clean out their digital houses and will realize that such cleansing (where permitted) is a best practice moving forward.  This applies with equal force to the US government, which has recently mandated such an effort at President Obama’s behest.
5. Information Governance Becomes a Viable Reality.  For several years there’s been an effort to combine the reactive (far right) side of the EDRM with the logically connected proactive (far left) side of the EDRM.  But now, a number of surveys have linked good information governance hygiene with better response times to eDiscovery requests and governmental inquires, as well as a corresponding lower chance of being sanctioned and the ability to turn over less responsive information.  In 2012, enterprises will realize that the litigation use case is just one way to leverage archival and eDiscovery tools, further accelerating adoption.
6. Backup Tapes Will Be Increasingly Seen as a Liability.  Using backup tapes for disaster recovery/business continuity purposes remains a viable business strategy, although backing up to tape will become less prevalent as cloud backup increases.  However, if tapes are kept around longer than necessary (days versus months) then they become a ticking time bomb when a litigation or inquiry event crops up.
7. International eDiscovery/eDisclosure Processes Will Continue to Mature. It’s easy to think of the US as dominating the eDiscovery landscape. While this is gospel for us here in the States, international markets are developing quickly and in many ways are ahead of the US, particularly with regulatory compliance-driven use cases, like the UK Bribery Act 2010.  This fact, coupled with the menagerie of international privacy laws, means we’ll be less Balkanized in our eDiscovery efforts moving forward since we do really need to be thinking and practicing globally.
8. Email Becomes “So 2009” As Social Media Gains Traction. While email has been the eDiscovery darling for the past decade, it’s getting a little long in the tooth.  In the next year, new types of ESI (social media, structured data, loose files, cloud context, mobile device messages, etc.) will cause headaches for a number of enterprises that have been overly email-centric.  Already in 2011, organizations are finding that other sources of ESI like documents/files and structured data are rivaling email in importance for eDiscovery requests, and this trend shows no signs of abating, particularly for regulated industries. This heterogeneous mix of ESI will certainly result in challenges for many companies, with some unlucky ones getting sanctioned because they ignored these emerging data types.
9. Cost Shifting Will Become More Prevalent – Impacting the “American Rule.” For ages, the American Rule held that producing parties had to pay for their production costs, with a few narrow exceptions.  Next year we’ll see even more courts award winning parties their eDiscovery costs under 28 U.S.C. §1920(4) and Rule 54(d)(1) FRCP. Courts are now beginning to consider the services of an eDiscovery vendor as “the 21st Century equivalent of making copies.”
10. Risk Assessment Becomes a Critical Component of eDiscovery. Managing risk is a foundational underpinning for litigators generally, but its role in eDiscovery has been a bit obscure.  Now, with the tremendous statistical insights that are made possible by enabling software technologies, it will become increasingly important for counsel to manage risk by deciding what types of error/precision rates are possible.  This risk analysis is particularly critical for conducting any variety of technology assisted review process since precision, recall and f-measure statistics all require a delicate balance of risk and reward.

Outcry from many in the legal community has caused a number of groups to consider whether the Federal Rules of Civil Procedure (FRCP) should be amended.  The dialogue began in earnest a year ago at the Duke Civil Litigation Conference and picked up speed following an eDiscovery “mini-conference” held in Dallas last month (led by the Discovery Subcommittee –  appointed by the Advisory Committee on Civil Rules).  The rules amendment topic is so hot that the Sedona Conference (WG1) spent most of its two day annual meeting discussing the need for amendments and evaluating a range of competing proposals.

During this dialogue (which I can’t quote verbatim) a number of things became clear to me…

1.  This rules amendment quandary is a bit of a chicken and egg riddle — meaning that it’s hard to cast support wholeheartedly for a rules change if there isn’t a good consensus for what a particular change would accomplish and what the long term consequences might be as technology quickly morphs.  As an example, if there was a redefined preservation trigger that started the duty to preserve when there was a reasonable “certainty” of litigation (versus a mere “likelihood”), would this really make a material impact?  Or, would this inquiry still be as highly fact specific as it is today?  Would this still be similarly prone to the 20/20 hindsight judgment that’s inevitable as well?

2. While it is clear that preservation has become a more complex and risk laden process, it’s not clear that this “pain” is causally related to the FRCP.  In the notes from the Dallas mini-conference, a pending Sedona survey was quoted, referencing the fact that preservation challenges were overwhelmingly increasing:

“[S]ome trends can be noted. 95% (of the surveyed members) agreed that preservation issues were more frequent. 75% said that development was due to the proliferation of information.”

3. Another camp of stakeholders complain that the existing rules (as amended in 2006) aren’t being followed by practitioners or understood by the judiciary.  While this may be the case, it then begs the critical question: If folks aren’t following the amended rules (utilizing proportionality, leveraging FRE 502, etc.) is it really reasonable to think that any new rules would be followed this time around?

4. The role of technology in easing the preservation burden represents another murky area for debate.  For example, it could be argued that preservation pains (i.e., costs) are only really significant for organizations that haven’t deployed state of the art information governance solutions (e.g., legal hold solutions, email archives, records retention software, etc.) to make the requisite tasks less manual.

5. And finally, even assuming that the FRCP is magically re-jiggered to ease preservation costs, this would only impact organizations with litigation in Federal court. This leaves many still exposed to varying standards for the preservation trigger, scope and associated sanctions.

So, in the end, it’s unclear what the future holds for an amended FRCP landscape.  Given the range of divergent perspectives, differing viewpoints on potential solutions and the time necessary to navigate the Rules Enabling Act, the only thing that’s clear is that the cavalry isn’t coming to the rescue any time soon.  This means that organizations with significant preservation pains should endeavor to better utilize the rules that are on the books and deploy enabling technologies where possible.

We’ve all heard the phrase that “everything is bigger in Texas” and the little “mini-conference” held in Dallas, TX last Friday was no exception.  The Discovery Subcommittee held a small, one-day conference to tackle some big issues related to preservation and sanctions that could ultimately lead to amendments to the Federal Rules of Civil Procedure (Rules).

The Subcommittee’s primary purpose was to discuss “preservation and sanctions issues” by using the following topics as guidelines:

• The nature and scope of the current “problem”
• The role of technology
• Possible solutions to the problem

Counsel from large companies like Google, General Electric, and Exxon Mobil participated side by side with outside counsel from both plaintiffs’ and defense bar to discuss what some characterized as a lack of clear direction in the current Rules.  Government lawyers, academics, and federal judges including Judges David Campbell (D. Az.), Shira Scheindlin (S.D.N.Y.), Paul Grimm (D. Md.), John Facciola (D.D.C.), Lee Rosenthal (S.D. Tx.), Michael Mosman (D. Ore.), and Nan Nolan (N. D. Ill.) helped round out the field to make for a lively discussion with multiple perspectives represented.  The following summary highlights some of the key viewpoints and areas of contention debated throughout the day.[1]

The nature and scope of the problem

An underlying theme throughout the day was whether or not preservation and sanctions challenges warrant amending the Rules.  Not surprisingly, counsel for large organizations that commonly bear the brunt of large and frequent document requests lobbied for rule amendments that provide more certainty around when the duty to preserve evidence is triggered, the scope of that duty, and how sanctions are applied.

In support of this position, some corporate attorneys argued that the lack of certainty in the current Rules unfairly requires organizations to err on the side of preserving evidence early and broadly to avoid the risk of sanctions.  Since preserving evidence can be extremely expensive and the duty may be triggered before litigation even begins, they argue that changes to the Rules are necessary.  One corporate attorney framed the issue by providing specific details about costs associated with preserving data for different cases.  He explained that in one situation, his organization has spent more than $5 million to locate, collect, preserve, and maintain data for an ongoing matter even though a complaint has never been filed.  He went on to explain the dilemma by stating: “not preserving asks us to take a chance with our reputation.”

In response, a few attendees questioned how preservation related expenses could spiral so high even before attorney review.  Others pointed out that if the current Rules were better utilized, specifically the meet-and-confer provisions of Rule 26(f), then many preservation challenges could be minimized.  Supporters of better Rule 26(f) engagement complained that counsel for large organizations often refuse to discuss preservation related issues and thereby fuel problems related to the scope of preservation themselves.   Others suggested that if organizations enforced better information management policies instead of keeping “everything forever”, then the magnitude of the problem could be reduced.

Technology

The Subcommittee members generally agreed that the evolution of technology has led to massive data growth which creates new electronic data challenges.  Electronically stored information (ESI) is often duplicative, typically resides in many different technology systems, and can be difficult to locate on a case by case basis.  There was some thoughtful discussion about how data archiving and cloud computing technology are important tools for helping organizations manage these information problems more effectively.  Another commentator acknowledged that although “predictive coding” may be helpful for “reviewing” data, it requires significant human involvement and simply does not solve the problem at hand.

Surprisingly, aside from the comments above, the technology discussion focused mainly on the issue of what constitutes “possession, custody or control” under Rule 34 in today’s environment of social media, cloud computing, and mobile devices.  Unfortunately, there was no discussion of either the role legal technology solutions play in minimizing risk and cost or of the impact the current Rules have on public policy.  For example, the Subcommittee did not address whether organizations that invest in technology in order to automate their internal data management and electronic discovery process should be afforded more protection under Rule 26(b)(2)(B) (“not reasonably accessible because of undue burden or cost”) than organizations that choose not to invest in technology.  If an organization’s technology investment (or lack thereof) is not a factor, does Rule 26(b)(2)(B) have the unintended effect of stifling meaningful legal technology investment by some organizations?  Similarly, do advancements in legal technology diminish the need for a Rule amendment that, at its core, is geared toward reducing costs?  In my opinion, the manner in which organizations are using technology today is an important factor that warrants deeper discussion and a subject I intend to address in a future publication soon.  Stay tuned.

Possible solutions

Discussion about possible solutions to the problem revealed more about the contrasting viewpoints in the room.  Notably, the Department of Justice representatives and those typically aligned with the plaintiffs’ bar tended to lobby for better adherence to the framework contained in the existing Rules in lieu of drafting new Rules.  These folks generally appeared to fall into the “No New Rule” or “Not Yet” camp, and cited the relative newness of the 2006 Rule Amendments and the fact that only about one percent of federal cases involve sanctions in support of their position that Rule amendments are premature or not needed.  Along the same lines, many called for further study and evaluation of the issues through organizations such as The Sedona Conference and the 7th Circuit Electronic Discovery Pilot Program.  Others referenced the importance of looking to evolving case law for more guidance before moving forward with Rule amendments.

In stark contrast, those on the other side of the aisle that typically represent large organizations, lobbied for bright line rules or at least “guideposts” to provide more certainty regarding preservation.  For example, one participant suggested that the duty to preserve evidence should begin when a complaint is served.  Another suggested that the duty should be triggered when a potential litigant is “reasonably certain to be a party to litigation” – a standard that is arguably narrower than the commonly applied “reasonably anticipates litigation” standard articulated in Judge Scheindlin’s frequently cited Zubulake v. UBS Warburg line of decisions.

Those calling for more certainty regarding triggering events also provided recommendations for addressing the scope of the preservation duty and the application of sanctions.  A suggestion to incorporate language that presumptively limits the number of custodians (10) and documents (by age) met resistance on the grounds that trying to apply a one-size-fits-all rule fails to acknowledge that the facts and circumstances of every case are different and so too are the litigants.  Similarly, recommendations to limit sanctions for evidence spoliation to situations where a litigant’s conduct is “intentional” or “willful” were met with a chilly reception by those favoring better adherence to the current Rules.

Conclusion

Time did not permit comprehensive discussion and analysis of every perspective, but the mini-conference highlighted the complexity surrounding preservation and sanctions issues and revealed some polarized viewpoints about how to solve those issues.  Perhaps one glimmer of consensus was the acknowledgement that “pre-litigation” obligations to preserve evidence before service of a complaint is often challenging for large organizations.  However, whether this and other issues should be addressed through better education, more stringent enforcement of existing rules, or by modifying the existing rules to include more “guideposts” remains unsettled.

What do you think?  Please respond to the poll, above right, to let us know whether you think amending the Federal Rules of Civil Procedure (FRCP) is necessary to address some of the preservation and sanctions issues discussed above.

To join the conversation and receive automatic updates when new information is posted to this blog, please subscribe to e-discovery 2.0.

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[1] A more exhaustive list of participants and sample questions was incorporated into the Federal Rules Advisory Committee’s June 29, 2011 memorandum announcing the mini-conference.  Similarly, the events leading up to the mini-conference are described in more detail as part of my previous postings on the same subject.

If you have been following my previous posts regarding possible amendments to the Federal Rules of Civil Procedure (Rules), then you know I promised a special interview with former United States Magistrate Judge Ron Hedges.  The timing of the discussion is perfect considering that a “mini-conference” is being hosted by a Federal Rules Discovery Subcommittee today (September 9th) in Dallas, TX.  The debate will focus on whether or not the Rules should be amended to address evidence preservation and sanctions.  I am attending the mini-conference and will summarize my observations as part of my next post.  In the meantime, please enjoy reading the dialogue below for a glimpse into Judge Hedges’ perspective regarding possible Rule amendments.

Nelson: You were recently quoted in a Law Technology News (LTN) article written by Evan Koblentz as saying, “I don’t see a need to amend the rules” because these rules haven’t been around long enough to see what happens.  Isn’t almost five years long enough?

Judge Hedges: No.  For the simple reason that both attorneys and judges continue to need education on the 2006 amendments and, more particularly, they need to understand the technologies that create and store electronic information.  The amendments establish a framework within which attorneys and judges make daily decisions on discovery.  I have not seen any objective evidence that the framework is somehow failing and needs further amendment.

Nelson: You also said the “big problem” is that people don’t talk enough.  What did you mean?  Hasn’t the Sedona Cooperation Proclamation made a difference?

Judge Hedges: The centerpiece of the 2006 amendments (at least in my view) is Rule 26(f).  I think it is fair to say that the legal community’s response to 26(f) has been, to say the least, varied. Civil actions with large volumes of ESI that may be discoverable under Rule 26(b)(1) cry out for extensive 26(f) meet-and-confer discussions that may take a number of meetings and require the presence of party representatives from, for example, IT.  There is an element of trust required between adversary counsel (with the concurrence of the parties they represent) that may be difficult to establish – but some cooperation is necessary to make 26(f) work.  Overlay that reality with our adversary system and the duty of attorneys to zealously advocate on behalf of their clients and you can understand why cooperation isn’t always a top priority for some attorneys.

However, “transparency” in discussing ESI is essential, along with advocacy and the need to maintain appropriate confidentiality. That’s where the Sedona Conference Proclamation can make a big difference. Has the Proclamation done that? It’s too early to reach a conclusion on that question, but the Proclamation is often cited and, as education progresses in eDiscovery, I am confident that the Proclamation will be recognized as a means to realize the just, speedy, and inexpensive resolution of litigation, as articulated under Rule 1.

Nelson: You also mentioned that the Federal Rules Advisory Committee might be running afoul of the Rules Enabling Act.  Can you explain?

Judge Hedges: There is a distinction between “procedural” and “substantive” rules.  The Rules Enabling Act governs the adoption of the former.  Rule 502 of the Federal Rules of Evidence is an example of a substantive rule that was proposed by the Judicial Conference.  However, since Rule 502 is a rule dealing with substantive privilege and waiver issues, it had to be enacted into law through an Act of Congress.  I am concerned that proposals to further amend the Federal Rules of Civil Procedure may cross the line from procedural to substantive.  I am not prepared to suggest at this time, however, that anything I have seen has crossed the line.  Stay tuned.

Nelson: If you had to select one of the three options currently being considered (see page 264), which option would you select and why?

Judge Hedges: To start, I would not choose option 1, which presumes that the Rules can reach pre-litigation conduct consistent with the Rules Enabling Act.  My concern here is also that, in the area of electronic information, a too-specific rule risks “overnight” obsolescence, just as the Electronic Communications Privacy Act, enacted in 1986, is considered by a number of commentators to be, at best, obsolescent.  Note also that I did not use the word “stored” when I mentioned electronic information, as courts have already required that so-called ephemeral information be preserved.  Nor would I choose option 2.  Absent seeing more than the brief description of the category on page 264, it seems to me that option 2 is likely to do nothing more than be a restatement of the existing law on when the duty to preserve is “triggered.”

So, by default, I am forced to choose option 3.  I presume a rule would say something like, “sanctions may not be imposed on a party for loss of ESI (or “EI”) if that party acted reasonably in making preservation decisions.”  There are a number of problems here. First, in a jurisdiction which allows the imposition of at least some sanction for negligence, all the rule would likely do is be interpreted to foreclose “serious” sanctions. Isn’t that correct? Or is the rule intended to supersede existing variances in the law of sanctions?  At that point, does the rule become “substantive”?   Second, how will “reasonableness” be defined?  Reasonableness supposes the existence of a duty – in this case, a duty to preserve.  For example, is there a duty to preserve ephemeral data that a party knows is relevant?  We come back full circle to where we began.

Remember, Rule 37(f) (now 37(e)) was intended to provide some level of protection against the imposition of sanctions, just as the categories are intended to.  Right?  And five years later 37(e) remains defined variously to be a “safe harbor” or a “lighthouse” by some lawyers such as Jonathan Redgrave or an “uncharted minefield” by others like me.

Nelson: What about heightened pleading standards after the Iqbal and Twombly decisions?  Do these decisions have any relevance to electronic discovery and the topic at hand?

Judge Hedges: Let me begin by saying that I am no fan of Twombly or Iqbal. The decisions, however well intended, have led to undue cost and delay all too often.  Not only is motion to dismiss practice costly for parties, but it imposes great burdens on the United States Courts and, as often as not, leads to at least one other round of motion practice as plaintiffs are given leave to re-plead.  All the while, parties have preservation obligations to fulfill and, in the hope of saving expense, discovery is often stayed until a motion is “finally” decided.  I would like to see objective evidence of the delay and cost of this motion practice (and I expect that the Administrative Office of the United States has statistical evidence already).  I would also like to see objective evidence from defendants distinguishing between the cost of motion practice and later discovery costs.

Putting all that aside, and if I had to accept one option, I would choose to allow some discovery that is integrated to the motion practice.  First, even without the filing of a responsive pleading, there should be a 26(f) meet-and-confer to discuss, if nothing else, the nature and scope of preservation and the possibility of securing a Rule 502(d) order. Second, while I have serious concerns about “pre-answer discovery” for a number of reasons, I would have the parties make 26(a)(1) disclosures while a motion to dismiss is pending or leave to re-plead has been granted in order to address the likely “asymmetry of information” between a plaintiff and a moving defendant.  Once the disclosures are made, I would allow the plaintiff to secure some information identified in the disclosures to allow re-pleading and perhaps obviate the need for continued motion practice.

All of this would, of course, require active judicial management.  And one would hope that Congress, which seems so interested in conserving resources, would recognize the vital role of the United States Courts in securing justice for everyone and give adequate funding to the Courts.

In my last post I announced that discussions are taking place that could change the way preservation and sanctions issues are handled within the federal court system.  The next round of discussions about possible amendments to the Federal Rules of Civil Procedure (FRCP) is scheduled to take place on September 9th in Dallas, Texas as part of a “mini-conference” led by the Discovery Subcommittee – a committee appointed by the Advisory Committee on Civil Rules.  This post discusses three different rule amendment approaches that attendees have been asked to consider in order to help them prepare for the mini-conference.  A complete list of attendees, preparation materials, and questions the group will consider are included in the Advisory Committee’s June 29, 2011 memorandum to the participants.

The debate about whether or not rule amendments are even required is far from over.  A 452-page document located on the U.S. Courts’ website chronicles many of the meetings, notes, and submissions driving the current discussion.  Page 265 of the document contains a memorandum prepared by the Civil Rules Advisory Committee earlier this year, stating that:

“the Subcommittee has reached no conclusion on whether rule amendments would be a productive way of dealing with preservation/sanctions concerns, much less what amendment proposals would be useful.”

Despite concerns that amending the current rules now would amount to jumping the gun, there is an undeniable desire for more clarity around when the duty to preserve electronically stored information (ESI) is triggered, what must be preserved, and when the duty expires.  This momentum has resulted in the crafting of draft proposals that are likely to help frame the discussion on September 9th. The “proposals” are really draft approaches that have been broken down into three general categories described in the Civil Rules Advisory Committee’s memorandum, titled: “PRESERVATION/SANCTIONS ISSUES” (see page 263).  The Category 1 approach can best be described as providing a higher degree of specificity than the other approaches.  For example, the Category 1 approach provides a fairly detailed explanation of the duty to preserve evidence (Rule 26.1(a)) and details possible triggers (26.1(b)), the scope of the duty to preserve (26.1(c)), and sanctions (Rule 37).  Category 2 proposes a more general preservation rule, while Category 3 only addresses sanctions as a tool for influencing behavior.  The three categories are discussed in more detail below.

Category 1: Specific Rule

This draft includes many different exemplary lists, alternative approaches, and footnotes that highlight the fact that one of the key challenges with drafting a specific rule is trying to foresee all of the challenges that might lie in the road ahead.  For example, the draft rule provides a long list of events that could trigger the duty to preserve evidence, including everything from serving a pleading to taking “any other action” in anticipation of litigation.   The rule also provides a list of information types that are “presumptively excluded” from the preservation duty, such as deleted data on hard drives, temporary internet files, and physically damaged media.

The lists are helpful in that they provide guidance.  However, each list also includes a “catch-all” provision to address scenarios that might not be foreseeable.  The inclusion of catch-all provisions highlights the inherent challenge of providing more clarity and certainty without creating rules that are so inflexible that they are difficult to apply to unforeseen factual scenarios or technological developments.  Some might argue that trying to provide a laundry list of examples will make passage of new rules difficult because each item on the list will stir debate.  Others contend that the lists add little value because the catch-all provisions will still require litigators to pass the sniff test of “reasonableness.”

Despite the inherent challenges related to drafting rules with specificity, most practitioners would likely support the inclusion of lists or examples that provide at least some direction.  What is likely to be far more controversial with respect to Category 1 is the use of alternative language proposing fixed limits around custodians and litigation holds.  For example, one alternative would limit data preservation requirements to a fixed number of custodians and the duty to preserve evidence would similarly expire after a fixed number of years.  Bright line rules like these may be easier to understand, but they also tend to be controversial since they lack the flexibility necessary to fairly address every conceivable situation.

Category 2: General Rule

Like the Category 1 proposal, the Category 2 proposal uses lists and outlines several alternative approaches throughout the rule.  However, the Category 2 proposal fundamentally differs from Category 1 by outlining a more general approach.  For example, one of the alternatives essentially states that the duty to preserve evidence is triggered whenever a “reasonable person” would expect to be a party to an action.  Similarly, the ongoing duty to preserve information after the duty has been triggered would be evaluated based on what is described as a “reasonable period” under the circumstances.

The beauty of this more general approach lies in its simplicity and flexibility.  The idea is that evaluating conduct based on the “reasonableness” of a person’s actions is much easier than attempting to draft bright line legal guidelines that account for every possible factual scenario.  The flip side is that reasonable minds could differ and results could be inconsistent if there are no bright line rules.  What this means in the context of the federal rule discussion is that one judge might find a party’s conduct with respect to data preservation efforts reasonable, while another judge might issue sanctions based on the same set of facts.  In large part, it is this lack of certainty and guidance in the current rules that sparked the current debate in the first place.

Category 3: Sanctions-Based Rule

Unlike the first two categories, the Category 3 approach focuses only on sanctions and would act like more of a “back-end” rule.  In other words, the rule would not contain any specific directives about preservation, but it would provide direction in the areas of when and how sanctions might be applied.

Despite the draconian image a “sanctions” based rule might conjure up, the Category 3 rule may seem surprisingly lenient to some.  For example, absent extraordinary circumstances, the court would be prohibited from imposing any of the sanctions listed in Rule 37(b)(2) or from giving an adverse-inference instruction unless:

“the party’s failure to preserve discoverable information was willful or in bad faith and caused [substantial] prejudice in the litigation.”

The sanctions based approach would almost certainly have an impact on how parties handle upstream preservation related issues.  However, the key ingredients that will impact what kind of behavior this rule drives are the severity of the threatened sanction as well as the applicable standard.  For example, a party facing severe sanctions for conduct that is either negligent, willful or in bad faith is likely to take their preservation obligations seriously.  On the other hand, if the realm of possible sanctions is trivial, parties are less likely to take their preservation related obligations seriously.

Conclusion

The three rule approaches represent very early attempts at framing possible approaches to amending the FRCP.  If the Discovery Subcommittee chooses to recommend rule amendments following the September 9th mini-conference in Dallas, the proposed language is likely to be closer to final form and easier to assess than the current proposals.  I will continue to monitor the rule making discussion and provide commentary in future posts.  Stay tuned for my next post where former US Magistrate Judge Ron Hedges explains why he thinks the rule changes are unnecessary and why the current proposals might run afoul of the Rules Enabling Act.