United States: Litigation Going Paperless - An Introduction to The Complexities of E-Discovery

Today's business communications and data are routinely stored in digital media (e-mail, web pages, word processing files, computer databases, personal digital assistants, and telephone voicemails). For the typical business, a large percentage of this information is stored digitally and never printed to hard copy.

Legal scholars and practitioners alike have commented that the current Federal and State Rules of Civil Procedure have not kept pace with the realities of the digital age.¹ The following is an introduction to some of the complexities involved with preserving and producing e-discovery and proposals that are being made to address these issues.

Some of the complexities involved with preserving and organizing e-data for production derive from the sheer volume of e-files in comparison to traditional paper files. For example, telephone communications and informal water cooler talk now routinely take the form of e-mail. Communications such as these are saved on computer hard drives or system servers in folders with other e-files containing informal and formal communications - some of which include attachments or hyperlinks to other relevant or confidential documents.

Computer network systems frequently produce and store several copies of each file in temporary folders or on backup tapes. Employees, working at home, may also export files to their home computers. E-files generated as a copy or draft of a single document may be modified or reproduced independently of each other so that numerous - and not necessarily consistent-versions of a document have been perpetuated as part of company records. As a result, responding to e-discovery requests involves detailed segregation procedures and meticulous document review to avoid unnecessary and costly surprises down the road.

To avoid being inundated with unnecessary and outdated e-files, many employers have adopted sound business practices to archive or destroy files no longer needed for business operations. However, the threat of pending litigation may create a duty to preserve such files.

Unfortunately, the type of event triggering the duty to preserve e-files is ill-defined. At the pre-litigation stage the employer must preserve data where it knows or reasonably should know, that the data is relevant to pending, imminent, or reasonably foreseeable litigation. Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998). Under this standard, it is unclear whether an employee's request to see his or her personnel file or complaint to a department supervisor is sufficient to trigger the preservation obligation or whether there must be a more definitive act directed toward litigation, such as the filing of a report to a regulatory agency.

The preservation obligation becomes slightly more defined after the initiation of a lawsuit. Under these circumstances, an employer is obligated to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request. Wm. T. Thompson Co. v. General Nutrition Corp, 593 F. Supp. 1443, 1455 (C.D. Cal. 1984).

To be prepared to meet these stringent preservation obligations, an employer must have a written plan to preserve relevant documents on short notice. One of the complexities involved with developing such a plan is the simple fact that computers and their software systems were designed to meet business needs and not litigation needs. Therefore the time and effort involved with designing and implementing such a plan should not be underestimated. The plan must include a procedure for notifying employees to preserve data and to instruct employees on how to segregate it. The plan must also address the frequency that backup tapes are to be recycled and what events will trigger the preservation of these tapes. An employer should anticipate the possibility that collecting e-documents will require the temporary suspension of business activity.

To provide some certainty to document retention obligations, proposed amendments to the Federal Civil Rules have attempted to craft a safe harbor to protect employers from negligent destruction of backup tapes. Under such proposed amendments, an employer acting in good faith should not be required to halt the recycling of backup tapes absent a court order. See, LCJ Comments to the Civil Rules Advisory Committee (March 12, 2004) at p. 12. The proposed rule puts the onus on opposing counsel to alert the court and the employer of an event triggering an obligation to preserve backup tapes.

Under the current rules, if a party requests the production of material in a specific digital format, a responding party must produce the material in that format or seek a protective order from the court. This rule may put the employer in a precarious position. Either the employer must incur the cost of obtaining a protective order or incur the costs/risks of producing e-files in a format which is impracticable or does not adequately protect confidential information embedded in the files (metadata, hidden data). Such requests might also require costly "heroic" efforts to search backup tapes for responsive materials.

Proposed amendments to the existing Federal Civil Rules address both these concerns by permitting a producing party to provide electronic materials "in the form in which they are ordinarily created or stored or in any other reasonably usable form." The proposed amendments also restrict a responding party's search to documents which are "reasonably accessible." This restriction excludes the resurrection of files from backup tapes. See, LCJ White Paper: Reshaping the Discovery Rules for the 21st Century (November 2003) at p. 5.

Sanctions can be imposed for intentional or negligent destruction of responsive documents. Negligence may be inferred when a company fails to take reasonable steps to ensure a good faith effort to preserve relevant evidence. Residential Funding Corp. v. DeGeorge Fin. Corp. , 306 F.3d 99, 108 (2nd Cir. 2002). Sanctions fall into four general categories: 1) monetary sanctions; 2) instruction to the jury commanding them to infer that the destroyed documents would be adverse to the interests of the responding party; 3) striking a party's defenses; and, 4) a default judgment. Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003). Sanctions can severely impair counsel's ability to advocate on behalf of a client and frequently result in unfavorable settlements.

Under proposed amendments to the Federal Civil Rules, the issuance of sanctions are restricted to instances where a party's acts amount to culpability – not mere negligence. See, LCJ Comments to the Civil Rules Advisory Committee (March 12, 2004) at p. 13.

The use of electronic media will continue to dominate business communications. This article addresses only a few of the complexities involved with e-discovery and some of the potential rule amendments under discussion. Other equally important e-discovery issues include objections to e-discovery requests, eradication of meta data from files sent to third parties, methods to protect confidential and/or privileged files from inadvertent disclosure, e-discovery costs and strategies to shift costs to other parties. An employer's document retention and e-discovery preparedness plans should include careful consideration of all of these issues.

Sheryl Willert is a Member in the Seattle office and a past Managing Director of WK&G. She focuses her practice on counseling, investigations and litigation. Sheryl has litigated cases involving all aspects of employment law for both unionized and nonunionized employers in both the public and private sector.

Jeff Wolf is an Of Counsel attorney in the Seattle office. His practice emphasizes product liability litigation, commercial litigation, and toxic torts. Jeff is National Trial Counsel for the firm’s toxic tort asbestos clients.

These materials have been prepared by Williams, Kastner & Gibbs PLLC for information purposes only and are not intended to be used as legal advice.