International Society of Primerus Law Firms

Discovery of Electronically Stored Information

By: Alan B. Graves

Neil, Dymott, Frank, McFall & Trexler APLC

San Diego, CA

Technology has changed how people create, share, and store information. Digital information is produced in ever growing volumes. For example in 2007 the email volume per person was estimated to be four gigabytes. That would equal one hundred and four Bankers boxes of paper! This ever increasing creation of digital information means digital discovery issues will play an increasingly larger role in litigation.

As more and more communication is created, disseminated, and received in digital format traditional practice of litigation has been forced to adapt in order to investigate, protect, and discover evidence. In December 2006 amendments were made to the Federal Rules of Civil Procedure to civil discovery rules to address digital discovery and electronically stored information. (ESI) States are also moving to amend civil discovery rules. In California new amendments were just passed to amend the California Civil Discovery Act. (See Assembly Bill 5, Electronic Discovery Act, effective date July 1, 2009)

The importance of ESI discovery reached new heights after a large judgment was handed out against an employer in a wrongful termination case where ESI played a key role. This case also created a set of guiding principles concerning electronic discovery that must be followed. (Zubulake v. UBS Warburg, LLC (S.D.N.Y. 2003) 217 F.R.D. 309, 312)

Today, lawyers and their clients are faced with discovery dilemmas regarding ESI on a regular basis. Common issues include identifying and preserving electronic data; scope, burden and cost of producing ESI, and law and motion regarding protective orders or orders to compel production.

The role of the attorney in handling discovery of ESI is a crucial one. Aside from the attorneys duty to a client regarding discovery and preservation of ESI, an attorney also has other legal and ethical obligations in this new area. Certain important steps should be taken when handling ESI discovery in order for the attorney to serve the best interests of the client and avoid pitfalls and landmines which can get an attorney in hot water.

Identifying and Preserving Electronic Data:

Electronically stored information is potentially discoverable under Fed. R. Civ. P. 34 or its state equivalents. Organizations must properly preserve electronically stored information that can reasonably be anticipated to be relevant to litigation. As lawyers we are often faced with a new client who has little to no idea what information may be stored electronically. It is important from an early start in any litigation to have a client meeting to discuss your clients preservation of ESI and to put opposing counsel on notice of their duty to preserve their clients ESI.

A good resource for ESI discovery and understanding what steps should be taken to have your client preserve ESI is the Sedona Conference (See http://www.thesedonaconference.org) This group has focused specifically on ESI litigation and provides good resources on principles for electronic document production and preservation decision tree which helps attorneys and their clients better understand what needs to be preserved and what does not.

When is ESI Preservation Required?

Generally the duty to preserve ESI is triggered when (1) a company has notice that litigation is likely to be commenced; or (2) an unequivocal threat of litigation is made, as opposed to generalized complaint about a companys product, service, or practices; or (3) a demand to preserve ESI has been made by a potential litigation adversary; or (4) litigation has been filed.

Difficulty can arise for an organization which routinely recycles, destroys, or discards ESI and events happen under scenarios (1) or (2) above where it may not be clear litigation is forth coming. In any law and motion regarding spoliation of evidence a court will look at a partys good faith basis to be on notice of a credible threat of litigation, apply a reasonableness standard, evaluate the relevant facts and circumstances to the specific case, and look at the time the decision was made to destroy the evidence.

Therefore it is important at the initial meeting with the new client for the attorney to have the client identify sources of ESI and begin taking measures to preserve ESI immediately. For example it is important to discuss with the client and request them to begin preserving: ESI in all forms, including metadata, from company sources and key individuals; ESI from current employees and those who depart after duty to preserve has been triggered; ESI back up media; and hard drives from computers of key individuals.

The Ever Important Litigation Hold Letter:

Another important part of discussing ESI discovery with a new client is to memorialize this in writing. Best practices is to send your own client a litigation hold letter which outlines the importance of preserving ESI, the clients obligations to comply and the consequences if the client fails to comply with their preservation obligations. The American Bar Association provides a good example of a litigation hold letter (See The Electronic Evidence and Discovery Handbook Forms, Checklists, and Guidelines, ABA Law Practice Management Section)

The litigation hold letter is extremely important not only for your client so they have a complete understanding of what is at stake, but also because there are ramifications against the attorney for failing to address ESI discovery issues which could result in monetary sanctions, issue preclusion, terminating sanctions, and even bar disciplinary proceedings for misrepresentations to court or intentional or reckless destruction of documents.

Duty to Disclose ESI

Civil litigation in Federal Court has a specific procedural process for initial disclosure of discovery (See Fed. R. Civ. P Rule 26) Under Rule 26 the attorneys for all parties must describe and categorize the nature and location of documents, records, and information electronically stored that may be used to support a partys claim or defenses. During this initial disclosure it is very important for the attorney to have monitored their clients compliance in preserving evidence, sent opposing party a freeze letter at the beginning of litigation that it must make best efforts to preserve ESI, and identify important stipulations which need to be made with opposing parties regarding protective orders and handling privileged information.

A stipulation parties should make at this stage is to agree to a clawback provision in the event privileged information is inadvertently produced. Particularly with ESI it can be more common for an inadvertent disclosure to take place. Parties may agree that privileged information inadvertently produced may be recovered without waiver of the protection. In most circumstances a party who receives information under such an arrangement cannot assert that production of the information waived a claim of privilege. Federal Rules of Evidence 502 specifically provides under most circumstances an inadvertent disclosure does not waive the privilege. However, there is still the possibility if the opposing party can demonstrate the producing party was grossly negligent in its inadvertent disclosure the producing may have waived their right to assert the privilege.

Finally, at the initial disclosure parties will need to discuss the costs involved in producing discovery. Some ESI production can be very costly depending on how the information is stored, retrieved or what type of format discovery is to be produced. Under certain circumstances costs can shift from the producing party to the requesting party.

Cost Shifting Who Bears the Cost?

In Zubulake, the court provided a seven factor test the court should look at to make a determination if the burden of cost should shift from the producing party to the requesting party. The factors are (1) the extent the requested discovery specifically is tailored to relevant information; (2) the availability of such information; (3) the total amount of production v. amount in controversy; (4) total cost of production v. each partys available resources; (5) relative ability of each party to control costs and incentive to do so; (6) importance of the issues at stake; and (7) relative benefits to the parties of obtaining the information. (Zubulake, supra. 217 F.R.D. 309, 322) No one factor is determinative.

This can be a potentially important factor in ESI discovery. Given the shear volume of ESI that might potentially have to be produced, understanding and knowing these seven factors when working with opposing counsel to narrowly tailor discovery requests can limit costs and keep parties on track to address only relevant information. This is not always an easy process and at times many attorneys and clients feel they are at the mercy of IT people and their wizardly methods of recovering, organizing and producing ESI.

Conclusion:

The take away advice in dealing with ESI discovery is to meet with your client early on to identify ESI and make clear the clients duty to preserve ESI. Protect yourself and provide a litigation hold letter to your client. Put the opposing party on notice, send them a freeze letter to preserve their ESI. Map out ahead of time the parameters and cost of ESI discovery. Stipulate with opposing counsel on issues such as a protective order and clawback provision. This will assist in streamlining this process while protecting your clients interests.

Mistakes made either by the attorney or the client in ESI discovery can be costly, sanctions for spoliation of evidence and issue preclusion being a couple that sting.

All the above mentioned should be considered a minimum in best practices when dealing with a lawsuit which is likely to involve digital information discovery.

For more information, please visit http://www.primerus.com/law-firms/neil-dymott-frank-mcfall-trexler-aplc-san-diego-california-ca.htmor http://www.neildymott.com/.

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