A New Compliance Challenge: Meeting The Mandates Of The Revised Rules For Discovery

Editor's Note: On December 1, 2006, amendments to Federal Rules governing court procedure in civil litigation changed the compliance landscape for U.S. companies. These revisions are having an impact on how companies address litigation from both a procedural and a technical perspective.

Editor: Chris, what exactly was the big change made to the Federal Rules and why should corporate counsel care?

Anderson: The new Federal Rules of Civil Procedure were implemented to align formal discovery rules with what was becoming standard discovery practice around electronic evidence. The Rules' specific inclusion of "electronically stored information" (ESI) as discoverable material represents an important modernization with a far-reaching impact. The scope of discoverable material hadn't been modified since 1970, when the term "documents" was expanded to include "data compilations" in order to "accord with changing technology."

Not much has changed since 1970, of course. Except for the invention of the personal computer. And the mobile phone. And the Internet. And the translation of business processes and communications into an almost entirely digital form - with the consequence that where companies previously had "documents" and records that measured out in the hundreds or thousands of bankers boxes, they now have ESI that is measured in something stranger even than the metric-system: bytes, megabytes, gigabytes, terabytes, petabytes and beyond.

For corporate counsel these new Rules can present a sudden seismic shift in the litigation process and a tremendously challenging mandate for changed practices.

The express inclusion of ESI as discoverable material ends any lingering debate about whether these terabytes of e-mails and spreadsheet files stored as ones and zeroes on servers and hard-disks are "documents" or "data compilations" or something else potentially outside the scope of discovery. But the breadth of the term "electronically stored information" also embraces the information contained on, for example (but certainly not limited to): PDAs, cell phones, thumb drives, CDs, DVDs, portable audio and video players, voicemail systems, security-access devices, cellular companies' records of your cell phone usage history and cell-tower triangulated location, and the black box built into your late-model car that records performance and maintenance history. The outer limits of electronically stored information - and of what ESI courts might expect parties to be capable of preserving, collecting, and producing in discovery - are difficult to predict.

Editor: What should counsel do to understand the changes effected by the amended Federal Rules?

Anderson: Understanding the changed demands of discovery in the electronic age may begin with a close reading of the Federal Rules, but it can't end there. Counsel should also carefully review the Advisory Committee Notes (appended to the published Rules) and the various Reports from the Advisory Committee. These materials provide significant insight into the concerns and reasoning entertained during the amendment process.

Counsel should also stay informed on the decisions and orders of federal courts construing the new FRCP, or, in the case of state courts, implementing their own e-discovery rules and practices. A judge from the U.S. District Court of Maryland, for example, recently promulgated a suggested protocol that sets out in fairly thorough detail the scope and stages of ESI discovery in that court.

Materials from industry thought-leaders such as the Sedona Conference - which is composed of lawyers, consultants, academics, and judges - can play an important but not (yet) precedential role in setting a widely-accepted baseline for discussion and redress of the issues involved in ESI discovery.

Editor: How familiar does counsel have to be with technology in order to operate under these new Federal Rules?

Anderson: The new Rules are designed to make the discovery of ESI more manageable and predictable by building greater structure around the process. But emerging from these specific rules is an obligation even more expansive than schedules and mandatory disclosure: In order to "comply" with the new Federal Rules, counsel must learn to love technology. Well, maybe you need not "love" - nor even "be friends with" - technology. Perhaps it's simply a matter of knowing your enemy. Regardless, the e-discovery age requires that attorneys acknowledge the power and promise of technology: what it is, where it is, how it can be valuable, and how it can be problematic.

Counsel's quest for tech savvy should focus on two distinct areas: (1) familiarity with the internal IT resources that give rise to discoverable ESI and (2) a critical appreciation of the technologies, tools, and service providers that can be used for preservation, collection, review, and production of that discoverable ESI.

In-house counsel should understand their company's IT systems and applications. This includes reasonable familiarity with the software applications and systems currently (and historically) used for the creation of business-related ESI, the hardware locations where such ESI can reside, and the technologies used to back-up and archive such information. Attorneys need not know minute technical details about the deployment and operation of these layers of software, hardware, and backup systems, but they should know enough to be comfortable discussing the preservation and collection processes, and to be capable of gathering specific technical details when necessary.

The second - and nearly as important - layer of tech savvy comprises knowledge and reasonable facility with the range of technologies available for data preservation, collection, internal review, and eventual production of ESI. Attorneys should be actively involved in the evaluation and selection of the tools most appropriate to their company's situation, so that they can put these tools to expert use quickly and efficiently.

Editor: This sounds like a lot for in-house counsel to know. Does knowledge of technology rest solely with the general counsel's office?

Anderson: The charge to "know your technology" doesn't require lawyers to know it all on their own. Corporate ESI is incredibly voluminous, volatile, and varied, and it's unlikely that any individual - including IT experts, much less tech-shy attorneys - will be in a position to know all that should be known for smooth and efficient e-discovery.

Effective preservation and discovery of ESI involves a combination of expertise and effort from lawyers, IT professionals, corporate records managers, and potentially others - such as human resources staff, forensics specialists, or litigation consultants. But attorneys, who are the primary locus of accountability to the court, should assume the responsibility of cultivating and maintaining well-integrated teams or resource-networks, which they can quickly and confidently call upon in response to challenges that fall outside of their immediate area of expertise.

Editor: When should we begin dealing with electronic discovery issues?

Anderson: Right away. The Rules' timelines and mandates mean that once litigation is commenced, attorneys no longer have a chance to slow the discovery process while they learn for themselves critical bits of information about their company's IT systems and data locations. A company's attorneys are expected to have a working knowledge of ESI-related issues early on in the case, and are expected to be able to make reliable representations about how those issues will impact the discovery process.

From a different vantage point, it is tremendously difficult to revamp relevant corporate processes and procedures while major or expansive litigation is pending. Anti-spoliation obligations and the need to avoid even the "appearance of impropriety" while engaged in litigation complicate efforts at revising document retention and destruction policies, information management systems, and litigation response practices.

Corporate counsel should actively investigate current IT systems and records management practices now, rather than waiting until after litigation is reasonably anticipated. Counsel should review and comment on current document retention, e-mail usage, and corporate technology policies (e.g., laptop or mobile computing policies, telecommuting policies) - any policy that touches on corporate ESI should be assessed and kept as a reference resource. Counsel should consider the value of "data mapping," which surveys and assesses the wide range of systems, applications, formats, locations, and work-flow processes through which ESI is created and stored. Such data maps can serve as quick reference guides for understanding the technologies and ESI issues likely to arise in any given case, and can be used as expanding repositories for tracking corporate IT change and recording the kinds of details (e.g., what backup hardware and procedures are used, projected access and restoration costs, etc.) that may be useful in litigation and negotiation.

Editor: How does the legal hold process fit into the new Federal Rules and the management of electronic discovery?

Anderson: Attorneys should view the legal hold process as the keystone of successful electronic discovery, in both substantive and defensive ways. Substantively, the legal hold is the basic method for preserving potential evidence - if the hold notice is appropriately targeted and complied with, the loss of any relevant information will be minimized. Defensively, a well-designed and implemented legal hold process demonstrates to the fact-finder that a company is conscientious and diligent in meeting its obligations. Lax attention to the legal hold stage exposes companies to substantial risk - if information is lost, even inadvertently, there is no good record of the company's commitment and effort at preservation.

The legal hold process comprises two parts: the hold notice and the on-going maintenance of the hold. As soon as possible, the litigation's key players should receive the hold notice, and a variation should also be delivered to key "data stewards" who manage the technologies and storage systems on which the key players create, transmit, and store potentially relevant information. The hold notice should explain the litigation's subject matter with sufficient specificity to allow recipients to intelligently evaluate the relevance of any given information in their control. The notice should offer examples of possible locations of relevant information - such as desktops, laptops, shared network drives, etc., but it should also explain that the anti-spoliation and disclosure obligations extend to all relevant information, irrespective of the form of the information. In addition to describing what information is subject to the legal hold, the notice should also give guidance as to how relevant information is to be preserved - a methodology which presumably will require coordination with appropriate IT experts. Finally, the notice should identify appropriate contacts for any questions on the legal hold.

Editor: My understanding is that there is some kind of "safe harbor" provision in the new Rules. Can you comment on that?

Anderson: Rule 37(f) has been called a safe harbor provision. It says that 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. Note the caveats: "routine" and "good faith." This provision underscores the need for counsel to keep abreast of corporate records retention procedures, and maintain careful records of any issues faced, the reasoning employed, and the decisions and actions taken during the discovery process.

Editor: Do you have any one point that you'd like corporate counsel to take away regarding the impact of the new Rules?

Anderson: Perhaps the new Rules' simplest, but most important, mandate is the command to counsel to discuss the complex raft of e-discovery issues early on in the litigation, and readily as often as issues arise. Counsel should be prepared to intelligently negotiate - and inform the court about - issues such as the appropriate form of production, the relevance of metadata, procedures for the preservation of privilege against inadvertent disclosure, and others. Successful electronic discovery is less about rule-by-rule "compliance" with the amended FRCP than it is about a general shift in attorneys' attention to and understanding of their companies' information management practices.

Published April 1, 2007.