In-house attorneys and their outside counsel know that the discovery provisions in the current Federal Rules of Civil Procedure are out of touch with modern business practice in the age of electronic documents and data. The United States Supreme Court recently approved amendments to the Rules that will help bring the discovery rules regarding electronic data into the modern era. Absent Congressional action, these amendments will go into effect on December 1, 2006. This blog article summarizes the much-discussed “safe harbor” provision and other changes that should make life a little easier for corporate counsel who must balance the risk of litigation with the realities of modern business.
New Rules Provide a “SafeHarbor” from Sanctions
Perhaps the most important provision of the 2006 amendments is the new Rule 37(f): “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” This new provision clarifies that businesses do not have a duty to store electronic information indefinitely, provided that the processes by which such information is deleted are both “routine” and employed in a “good-faith” manner. Accordingly, Rule 37(f) provides a “safe harbor” that shields a party from discovery sanctions for following its standard procedures for deleting electronic information if the deleted information subsequently becomes the subject of a discovery request.
For example, assume that the settings on ABC, Inc.’s email server automatically delete employees’ sent emails after 60 days. Assume that Plaintiff files suit against ABC on September 1, and requests production of all emails sent by ABC employees in the past year that mention him. The reality is that there are no responsive emails earlier than July 1; older emails that might have been responsive were deleted by ABC’s automatic deletion process. Rule 37(f) makes clear that ABC cannot be hammered with discovery sanctions for deleting the older emails according to its standard policies—provided that it did not know of Plaintiff’s claim before September 1.
The protection afforded by Rule 37(f) is not absolute. First and foremost, if a lawsuit is pending or anticipated, a company cannot allow its routine deletion policy to destroy evidence that would be relevant to a possible claim or defense. When a claim is made or threatened, what was once mere data is now evidence, and the company is obligated to preserve it. The new Rule 37(f) is not a license to abandon standard “litigation hold” practices or other procedures that in-house counsel implement once litigation is threatened or contemplated. Second, the wording of the Rule stipulates that the protection from sanctions will not apply under “exceptional circumstances.” This term is undefined in the Rule. It will be up to the courts to determine what are “exceptional circumstances” on a case-by-case basis.
The good news is that Rule 37(f) is a step forward in bringing the legal duties imposed by the Federal Rules in line with commercial practices and real-world feasibility. Uncertainty over exactly what constitutes “exceptional circumstances,” “good-faith,” and the like will present some risk in certain circumstances, but not an unmanageable one. By establishing and maintaining a consistent policy regarding the storage and deletion of electronic information, businesses can ensure that electronic housekeeping today will not lead to discovery sanctions tomorrow.
Unduly Burdensome or Costly Materials may be Exempted from Discovery
Another significant innovation of the December 2006 amendments is a change to Rule 26(b)(2), which sets limitations on the scope of discovery in federal court. Under the new Rule 26(b)(2)(B), a party responding to discovery requests should produce responsive, electronically stored information that is relevant, not privileged, and “reasonably accessible.” The responding party must also identify categories or types of electronically stored information that may contain responsive information which it is not searching or producing in response to the request. Such sources might include, for example, computer back-up tapes that would be expensive and time consuming to load and search or an old database file that runs on a software program that the company no longer licenses. This is a change from current practice, which requires the responding party to seek a protective order before responding to discovery. (Note: the responding party must still preserve electronically stored data that it does not produce.)
Hopefully, the parties will be able to use information from the discovery that is reasonably accessible and produced to determine if the less accessible electronic data is truly relevant and necessary to the case. Absent an agreement, either party can bring the issue before the court; when that happens, the cost savings from the rule change will likely be lost. If court intervention is required, the party responding to discovery must prove the “undue burden or cost” that was its rationale for not searching the electronic data source at issue. Assuming that showing is made, the requesting party can attempt to show “good cause” for why the search should be performed despite the burden and cost. The terms “undue burden or cost” and “good cause” are undefined; courts will use the discretion provided by Rule 26 to fashion an equitable resolution. Companies that hold back reasonably available data or that do not have a truly “good cause” to seek court intervention may find the Court’s broad discretion used against them.
Amended Rule 26(b)(2) recognizes that the costs and burdens incurred in producing electronically stored information often outweigh the benefits of such production. The change from requiring a responding party to get a protective order to requiring only a list of unsearched sources should help lower litigation costs. This savings will be lost, however, if the parties ask the court to determine the burden, cost, and good cause associated with electronic discovery rather than working it out themselves.
Electronically Stored Information is Discoverable
The December 2006 amendments are linked by their common recognition that electronically stored information is within the scope of discovery. This will not come as a surprise to most litigation-savvy counsel. Rule 26(a)(1)(B) now expressly states that a party must provide copies or descriptions of electronically stored information in its initial disclosures. Rule 33 clarifies that electronically stored information should be consulted in answering interrogatories involving the review of “business records.” Rule 34 explicitly provides for the production of “electronically stored information” as a concept distinct from the production of “documents,” and allows the requesting party to specify the format in which that information is to be produced. Rule 26(f) requires that, parties must discuss any issues relating to the discovery of electronically stored information at their Rule 26 conference, including the form in which such information should be produced and any claims of privilege. Accordingly, in-house and outside counsel must work with the CIO or another qualified IT expert to understand their client’s systems (and their opponents’ likely systems) early in the litigation.
Recovering Inadvertantly Disclosured Material
Finally, in the event that privileged electronically stored information is disclosed inadvertently, Rules 26(b)(5) and 45 require the receiving party to return it upon request. The amendment does not appear to change existing law with regard to waiver by production; it only provides a clear procedure for return of the privileged material until and unless the court finds that the privilege was waived. The Comments about this amendment note that electronic information is more prone to inadvertent disclosure than are paper documents. In appropriate cases, Courts may be more receptive to an inadvertent disclosure argument about electronic evidence than they would be to the same argument about paper that was (or was supposed to be) physically touched and reviewed by a lawyer before being produced.
The December 2006 amendments to the Federal Rules of Civil Procedure should go a long way toward bringing the discovery rules regarding electronically stored information into line with the realities of modern business practice. For a more detailed discussion of these amendments, please see the complete text of the amendments and their accompanying comments at http://www.uscourts.gov/rules/Reports/ST09-2005.pdf.