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1 BENCH-BAR DIALOGUE on Federal Civil Discovery Practices: The New Federal e-Discovery Rules Damon W.D. Wright Venable LLP (202) 344-4937

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Presentation on theme: "1 BENCH-BAR DIALOGUE on Federal Civil Discovery Practices: The New Federal e-Discovery Rules Damon W.D. Wright Venable LLP (202) 344-4937"— Presentation transcript:

1 1 BENCH-BAR DIALOGUE on Federal Civil Discovery Practices: The New Federal e-Discovery Rules Damon W.D. Wright Venable LLP (202) 344-4937

2 2 The New Term Of Art Is ESI Or "Electronically Stored Information." 1)Take Into Account Realities Of The Electronic Information Age. There Is Far More ESI Retained Than Hard-Copy Documents (Most ESI Is Never Printed), ESI Is Dynamic Not Static, And ESI May Be Incomprehensible When Separated From The System That Created It. 2)Try To Minimize Potentially Exorbitant Cost Of Electronic Discovery And Substantial Risk Of Disruption To Regular Operation Of Business. Because Of Volume And Burden, A New Industry Has Developed To Support And Manage Production Of ESI. The Federal Rules Amendments: Two Goals In Mind:

3 3 The Amendments: Rules 16 and 26(f) require discussion of ESI at outset of case; Rule 26(b)(5) provides a procedure for post-production assertions of privilege; Rules 33 and 34 address the form in which ESI is to be produced; Rule 26(b)(2) provides parameters to limit ESI that is not reasonably accessible; and Rule 37 addresses "safe harbor" provisions and sanctions in the context of destroyed ESI.

4 4 A "Play By Play" Of Discovery In The 21st Century: I.Litigation Hold II.Understanding Client's IT Systems / 26(f) Conference III.Understanding Other Side's IT Systems IV.Serving And Answering Written Discovery V.ESI Production / Privilege Issues VI.Discovery Motions Practice / Reasonably Accessible VII.Safe Harbor / Avoiding Spoliation And Adverse Inference VIII.Conclusion

5 5 I.LITIGATION HOLD: Don't Leave It To Employees … The Critical Importance And Requirements Of A Proper "Litigation Hold" "The Dynamic Nature Of ESI, And The Fact That Routine Operation Of Computer Systems Changes And Deletes Information, Make It Important To Address Preservation Issues Early In Cases Involving Discovery Of Such Information." Notice of Potential Litigation – Synonymous With Assertion of Attorney Work Product Privilege Lessons From Zubulake: Counsel Must Take Proactive And Well-Documented Steps To Communicate With Client And Its Personnel

6 6 LITIGATION HOLD, cont'd Identify All Persons Who May Have Discoverable ESI; Send Written Notice To And Speak With All Such Persons; Identify The Nature Of The Underlying Action And The Specific Types Of Records (E-Mail Files, Database Files, Word Processing Files, Electronic Calendars, Spreadsheet Applications, Etc.) To Be Preserved; In Written Notice And Oral Communications, Emphasize "DO NOT DELETE OR ALTER ANY FILES; FILES MUST BE PRESERVED IN ORIGINAL FORMAT" And Instruct Persons To Not Load New Software On Computers, To Not Run Defrag Programs And To Not Run Data Compression Programs;

7 7 LITIGATION HOLD, cont'd: In Written Notice And Oral Communications, Emphasize That Failure To Comply With Terms Of Written Notice Could Have Adverse Legal Effects. Involve IT Staff In ESI Preservation And, Depending On Issues And Magnitude Of The Case, Ensure That All Back-Up Tapes Or Other ESI Stored On A Computer Network Be Preserved; Temporarily Suspend Operation Of Record Retention Policy, Automatic Deletion Processes, Computer And Server Recycling, System Upgrades And Recycling Of Back-Up Tapes; and Preserve All Removeable Or Portable Media, All Public Folders And Network Shared Folders, And Forensically Image (Clone Or Copy) All Hard Drives Potentially Containing Relevant ESI. However, "Complete Or Broad Cessation Of A Party's Routine Computer Operations Could Paralyze The Party's Activities."

8 8 II.UNDERSTANDING CLIENT'S IT SYSTEMS / RULE 26(f) AND 16(b) CONFERENCES: Come Prepared … The Key To Cost-Effective Discovery And Preventing Disruption To Business. Rule 26(f) Directs Parties To "Meet And Confer" About ESI Issues, Including: Capabilities Of Computer Systems Used By Parties; The Form Or Forms In Which ESI Could Be Produced; Whether The Information Is Reasonably Accessible; The Preservation Of Discoverable ESI; and How Claims Of Attorney Client Privilege Or Work Product Protection Are To Be Addressed. Advisory Committee Notes Emphasize That Identification And Early Discovery From Persons With Knowledge Of Party's Computer System(s) Could Be Useful In Identifying Sources Of Information Within Party's Control That Should Be Searched.

9 9 UNDERSTANDING CLIENT'S IT SYSTEMS / RULE 26(f) AND 16(b) CONFERENCES, cont'd: Rule 26(f)(3): Directs Parties To Discuss "Any Issues Relating To Disclosure Or Discovery Of ESI, Including The Form Or Forms In Which It Should Be Produced." Rule 26(f)(4): Directs Parties To Discuss "Any Issues Relating To Claims Of Privilege Or Of Protection As Trial Preparation Material, Including – If Parties Agree On A Procedure To Assert Such Claims After Production – Whether To Ask The Court To Include Their Agreement In An Order." The Committee Notes Explain: "The Parties' Discussion Should Pay Particular Attention To The Balance Between The Competing Needs To Preserve Relevant Evidence And To Continue Routine Operations Critical To Ongoing Activity."

10 10 UNDERSTANDING CLIENT'S IT SYSTEMS / RULE 26(f) AND 16(b) CONFERENCES, cont'd: Things To Know Include: Characteristics Of Client's Computer System Today And At Time Period Of Relevant Events; Client's Compliance With Litigation Hold In Preserving ESI; Client's ESI Retention Policy And Implementation; Software Applications Used By Client's Personnel (e.g. Lotus Notes, Excel, PowerPoint); Rate Of IT Dep't Back-Ups (daily, weekly, monthly); How Long Back-Ups Are Kept; Procedures For Handling Hard-Drives Of Departed Employees; And Use Of Auto-Delete Features In E-Mail Systems.

11 11 UNDERSTANDING CLIENT'S IT SYSTEMS / RULE 26(f) AND 16(b) CONFERENCES, cont'd: Parties' Agreements Are Memorialized For Adoption By Court: Form 35: "Disclosure Or Discovery Of Electronically Stored Information Should Be Handled As Follows: [Brief Description of Parties' Proposals]") Rule 16(b) Conference:Parties Can Raise ESI Issues With Court. Rule 16(b): "The Scheduling Order May Also Include … (5) Provisions For Disclosure Or Discovery Of Electronically Stored Information; (6) Any Agreements The Parties Reach For Asserting Claims Of Privilege Or Of Protection As Trial-Preparation Material After Production." Best Practices: Alert The Court Early On About Any Complications With Handling ESI Discovery. 14 Days After Conference, Parties Must Make Initial Disclosures.

12 12 UNDERSTANDING CLIENT'S IT SYSTEMS / RULE 26(f) AND 16(b) CONFERENCES, cont'd: Thus, Rule 26(a)(1) Disclosures May Require Disclosure Of: Aspects Of The Source Computer System; Current Back-Up And Archiving Procedures; Procedures Undertaken To Preserve Disclosed Relevant ESI; Location Of Computer Files Containing Relevant ESI; And Whether Any ESI Will Be Recovered From Legacy Or Deleted Files. Rule 26(a)(1): "[A] Party Must, Without Awaiting A Discovery Request, Provide To The Other Parties … A Copy Of, Or A Description By Category And Location Of, All Documents, Electronically Stored Information, And Tangible Things That Are In The Possession, Custody, or Control Of The Party And That The Disclosing Party May Use To Support Its Claims Or Defenses, Unless Solely For Impeachment."

13 13 III.UNDERSTANDING OTHER SIDE'S IT SYSTEMS: Taking Advantage Of The Rules – Especially Where There Is Symmetry Between The Parties. All E-Mail Held By Certain Personnel; ▪All E-Mail Containing Information About Certain Subjects; ▪All Databases Containing Information About Certain Subjects; ▪ All Logs Of Activity On Computer Systems Used To Process Or Store ESI Containing Information About Certain Subjects; ▪ All Word Processing Files Containing Information About Certain Subjects; And ▪ All Files Created Or Used By Spreadsheet, Billing Or Accounting Programs Containing Information About Certain Subjects. Letter Demanding Preservation: Should Request That Party Immediately Preserve All Documents And ESI With Any Potential Relevance To The Dispute. Depending On Case, Preservation Request Should Demand Preservation Of ESI Including:

14 14 UNDERSTANDING OTHER SIDE'S IT SYSTEMS, cont'd: On-Line Data Storage On Mainframes – Unless Complete Forensic Image Is Made; Off-Line Data Storage, Back-Ups And Archives, Tapes And Other Removable Media; Desk-Top And Lap-Top Computers – Unless Complete Forensic Image Is Made; And Home Computers, Cell Phones Or Other Portable Electronic Devices Used By Party's Personnel In Connection With Employment. Depending On Case, Preservation Request Should Also Demand Preservation Of Sources Of ESI Including:

15 15 UNDERSTANDING OTHER SIDE'S IT SYSTEMS, cont'd: Take Early Rule 30(b)(6) Deposition, With Topics Including: Litigation Hold Activities; Adherence With Standard ESI And Documentation Retention Policies; Networking of Desktop Computers; Details About Creating, Storing and Retrieving Back-Up Tapes; Details About Disaster Recovery Procedures; Details About Retention Period For E-Mail System; Personnel Use Of Home Computers And Personal Digital Assistants; And ESI Production In Other Lawsuits (Can Be Critical Info For Later Motions).

16 16 IV.SERVING AND ANSWERING WRITTEN DISCOVERY: Identify The "Form" Rule 33(d): Allows Party To Substitute Access To Documents Or ESI For An Answer Only If Burden Of Deriving The Answer Will Be Substantially The Same For Either Party; Satisfying This Burden With ESI, May Require That Responding Party Provide Technical Support, Information On Application Software Or Direct Access To IT System; Thus, Responding Party's Interest In Saving Costs Or Protecting Privacy Or Confidentiality Interests May Make It More Sensible To Just Answer.

17 17 SERVING AND ANSWERING WRITTEN DISCOVERY cont'd Rule 34(b): Permits Requesting Party To Specify The Form Or Forms It Wants ESI Produced; But Directs Responding Party To State Form(s) It Intends To Use In The Production. Advisory Committee Notes Emphasize "The Form Of Production Is More Important To The Exchange Of ESI Than Of Hard-Copy Documents. … Specification Of The Desired Form Or Forms May Facilitate The Orderly, Efficient, And Cost-Effective Discovery Of ESI. … [Thus], "The Requesting Party May Ask For Different Forms Of Production For Different Types Of ESI" (e.g. e-mail, Word documents, spreadsheets). If Requesting Party Does Not Identify "Form," Party Must Produce ESI In Form In Which It Is Ordinarily Maintained Or Form That Is Reasonably Usable, But May Not Produce ESI In Form Less Useful Or Searchable Than Form In Which It Is Normally Maintained.

18 18 V.ESI PRODUCTION / PRIVILEGE ISSUES: The Form Of Production And Post-Production Privilege Claims. ESI Can Be Produced In Many Different Formats: Native Format: The Form In Which The ESI Was Created, Which Includes Metadata (e.g. file name, location, format, dates on which file was created, modified and accessed) and Embedded Data (e.g. formula behind spreadsheets, comments or red-line edits in word documents). Benefit To Recipient: Can See Everything. Problem To Recipient: Authentication Issues. Problem To Producing Party: ESI Can Be Altered; License Issues For Unusual Software Applications; Difficult To "Bates-Number"; Not Cost-Effective; May Implicate Privacy Or Confidentiality Concerns If Responsive ESI Cannot Be Carved Out; Also Privileged Info Cannot Be Easily Carved Out.

19 19 ESI PRODUCTION, cont'd: Native Data Solutions : Identify And Agree Upon Particular Few Documents To Be Produced In Native Format (e.g. particular spreadsheets or word documents); Have Database Created Allowing Receiving Party Access To Each File In Native Application – With Documents (Not Pages) Identified By Number; Rather Than Produce Native Data, Produce TIFF Image With Field Showing Extracted MetaData and Embedded Data – Although Extraction Must Be Done Properly; Use Third Party Computer Forensic Expert And Permit Access To Recipient's IT System Under Agreed Protocols With Responding Party Review Before Production; For Authentication Issues, If No Stipulation, Take 30(b)(6) Deposition Of Records Custodian / Forensic Computer Expert During Which Computer And Native Form Is Reviewed On Record.

20 20 ESI PRODUCTION, cont'd: TIFF Format: Production Of The ESI Via Scanned Images, Although May Contain Metadata. Benefit To Recipient: Can Be Searched Through Database With Key Words Or Concepts. Problem To Recipient: Cannot See Embedded Data. Paper Format: The Old-Fashioned Way. Benefit To Producing Party: Know Exactly What Document Is. Problem To Recipient: Not Easily Searchable; Cannot See Metadata or Embedded Data.

21 21 ESI PRODUCTION, cont'd: Privilege Issues Because Of Volume Of Potentially Relevant ESI And Substantial Cost Of Human Review, There Is Substantial Risk Of Privilege Waiver; To Avoid This, Rule 26(f) Encourages Agreement On Post- Production Privilege Issues And Rule 26(b)(5) Allows For Post- Production Privilege Claims. Advisory Committee Notes To Rule 26(f): "Parties [can] enter agreements – sometimes called 'clawback agreements' – that production without intent to waive privilege or protection should not be a waiver so long as the responding party identifies the documents mistakenly produced."

22 22 ESI PRODUCTION, cont'd: Privilege Issues Rule 26(b)(5): When a party asserts a post-production claim or privilege to certain documents, the recipient may not use or disclose the information at issue until the claim is resolved. Further, the recipient must promptly return, sequester or destroy the specified information and must take reasonable steps to retrieve the information if received by any third parties. Nonetheless, Advisory Committee Notes Explain: "[Rule 26(b)(5)] Does Not Address The Substantive Questions Whether Privilege Or Work Product Has Been Waived Or Forfeited. Instead, The Amendment Sets Up A Procedure To Allow The Responding Party To Assert A Claim Of Privilege Or Of Work-Product Protection After Production." Best Practices: Do Not Rely On "Clawback Agreement" Or Rule 26(b)(5) And Thus Conduct Cursory Privilege Review. While ESI May Be Retrieved And Privilege May Not Be Waived By Production, Receiving Party Still Knows Privileged Information.

23 23 VI.DISCOVERY MOTIONS PRACTICE / NOT REASONABLY ACCESSIBLE: Whether By Motion to Compel or for a Protective Order, The Issue Is Whether The Responding Party Needs To Retrieve ESI From Additional Sources. Rule 26(b)(2)(B): A Party May Respond To A Discovery Request by Identifying Sources Of ESI That Are Not "Reasonably Accessible" Because Of Undue Burden Or Cost. Typical Context: For Disaster Recovery Purposes, ESI Is Often Stored On Back-Up Tapes Which May Be Periodically Recycled. Retrieving ESI From Back-Up Tapes Is Costly, Time-Consuming And Complex And May Require Reprogramming Of Back-Up Systems Or Purchasing New Tapes Or Hardware. Another Frequent Context Is Data Recovery Of Fragmented Files On Desk- Top Or Lap-Top Computers. Advisory Committee Notes Do Not Promote Such Discovery: "The Volume Of – And The Ability To Search – Much ESI Means That In Many Cases The Responding Party Will Be Able To Produce Information From Reasonably Accessible Sources That Will Fully Satisfy The Parties' Discovery Needs."

24 24 DISCOVERY MOTIONS PRACTICE / NOT REASONABLY ACCESSIBLE, cont'd Rule 26(b)(2): The Burden Is On Responding Party To Show That ESI That May Be Located In Certain Sources Is Not "Reasonably Accessible." However, Court May Still Order Discovery If Requesting Party Can Show Good Cause And Costs Are Outweighed By Potential Benefits Of Production. In Assessing Undue Burden And Good Cause, Court Examines: The Specificity Of The Discovery Request; The Quantity Of Information Available From Other More Accessible Sources; The Failure To Produce Relevant Information That Seems Likely To Have Existed But Is No Longer Available From More Accessible Sources; The Likely Importance And Utility Of The Additional ESI; The Importance Of The Issues At Stake In The Litigation; and The Parties' Resources.

25 25 DISCOVERY MOTIONS PRACTICE / NOT REASONABLY ACCESSIBLE, cont'd Other Considerations: Cost-Shifting: In Determining Whether To Require Production Of ESI From Sources Not "Reasonably Accessible," Courts May Also Shift The Costs To The Requesting Party. "The Conditions May Also Include Payment By The Requesting Party Of Part Or All Of The Reasonable Costs Of Obtaining Information From Sources That Are Not Reasonably Accessible." Sampling: To Establish "Undue Burden," Responding Party Should Use Outside Consultant To Conduct Sample Recovery Of Data From The Back- Up Tapes Or Fragmented Files And Provide Factual Basis For Court To Understand Cost Versus Benefit. To Minimize Burden, Committee Notes Recommend A "Two-Tiered Practice" – "First Sort Through The Information That Can Be Identified From Easily Accessed Sources And Then Determine Whether It Is Necessary To Search The Difficult-To-Access Sources."

26 26 VII.SAFE HARBOR / AVOIDING SPOLIATION AND ADVERSE INFERENCE: Protecting The Client Before And During The Litigation. "A Data Producer Can Warehouse Large Volumes Of Paper Without Affecting Ongoing Activities And Can Maintain And Manage Hard-Copy Records Separately From The Creation Of Products Or Services." "By Contrast, … It Can Be Difficult to Interrupt The Routine Operation Of Computer Systems To Isolate And Preserve Discrete Parts Of The Information They Overwrite, Delete, Or Update On An Ongoing Basis, Without Creating Problems For The Larger System." Rule 37(f): Recognizes That Computer Systems May Automatically Overwrite Or Delete ESI After Period Of Time Or Certain Data Capacity.

27 27 SAFE HARBOR / AVOIDING SPOLIATION AND ADVERSE INFERENCE, cont'd Safe Harbor: Under Rule 37(f), Absent Exceptional Circumstances, Court May Generally Not Sanction Party For Failing To Produce ESI When Routine, Good Faith Operation Of Computer System Caused Loss Or Destruction Of Information. In Assessing "Good Faith," Court Focuses On Steps Taken By Party To Implement "Litigation Hold" And On Party's Compliance With Preservation Agreements. "Good Faith In The Routine Operation Of An Information System May Involve A Party's Intervention To Modify Or Suspend Certain Features Of The Routine Operation To Prevent The Loss Of Information, If That Information Is Subject To A Preservation Obligation."

28 28 SAFE HARBOR / AVOIDING SPOLIATION, cont'd The Rule "Is Not Intended To Provide A Shield For Parties That Intentionally Destroy Information Because Of Its Relationship To Litigation By, For Example, Exploiting The Routine Operation Of An Information System To Target Specific ESI For Destruction In Order To Avoid Producing That Information In Discovery." Moreover, Unlike Plain Text Of Rule, Advisory Committee Notes Emphasize That Failure To Comply With Company's ESI Retention Policy Or Failure To Implement Adequate "Litigation Hold" May Be Considered As Lack Of "Good Faith" And Result In Spoliation Sanctions Including An Adverse Inference. Sanctions Could Include Payment Of Fees; Barring Party From Introducing Certain Evidence; Precluding Certain Claims Or Defenses; And/Or Instruction That Jury Can Infer That Destroyed ESI Would Have Been Harmful To Party Responsible For Destruction And Favorable To Party Seeking Discovery.

29 29 SAFE HARBOR / AVOIDING SPOLIATION, cont'd The Back-Up Tapes Dilemma: No Clear Guidance -- "Whether Good Faith Would Call For Steps To Prevent The Loss Of Information On Sources That The Party Believes Are Not Reasonably Accessible Under Rule 26(b)(2) Depends On The Circumstances Of Each Case." If Party Knows Relevant ESI Is Available Only On Back-Up Tapes, Failing To Preserve Presents Serious Risk Of Sanctions. See Zubulake. The Best Approach: If Back-Up Tapes Cannot Be Preserved Without Undue Cost And Disruption To Business, Thoroughly Execute "Litigation Hold" On All Other ESI Sources And Thoroughly Document All ESI Preservation Efforts By Counsel, Client, And Outside Vendor To Confirm Serious Effort And Commitment To Preserve All Potentially Relevant, Reasonably Accessible ESI.

30 30 VIII.CONCLUSION The Rules Could Increase The Costs of Discovery And Lead To Early And Higher Settlements Especially In Asymmetrical Cases. However, In An Effort To Minimize Costs, The Rules Require That Counsel Should Seek To Agree At Outset Of Case On ESI Issues. The Rules Also Try To Minimize The Costs By Restricting ESI From Sources Not "Reasonably Accessible," By Identifying That "Native Data" Production May Not Always Be Warranted, By Providing A Procedure For "Post-Production Privilege Claims," And By Restricting Sanctions If ESI Destruction Occurred From "Good Faith" Operation Of Computer System. In Prosecuting And Defending Cases, Critical Point Is To Take Control Of ESI Discovery By Understanding Client's And Other Side's IT Systems. This publication is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations.

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