Current Trends in Electronic Discovery



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Current Trends in Electronic Discovery
Copyright (c) 2006, 2007 O'Melveny & Myers LLP. All rights reserved.
By Amy J. Longo and Dale Cendali n1

I. Introduction

There are an estimated 105 million e-mail users in the United States, sending more than 1.5 billion e-mails daily, or approximately 547.5 billion e-mails per year. n2 Indeed, over 99% of new information currently being created and stored is being created and stored electronically; n3 only .01% of new information is created in paper form. n4


n1 Amy Longo and Dale Cendali are partners in O'Melveny & Myers' Los Angeles and New York offices, respectively, and can be reached at alongo@omm.com and dcendali@omm.com. Brian Neach and Julia Berman, associates in O'Melveny & Myers' Newport Beach office, assisted in preparing this article.

n2 The Sedona Principles: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, 4 (The Sedona Conference, July 2005) [hereinafter Sedona Principles].

n3 David Isom, Electronic Discovery Primer for Judges, 2005 Fed. Cts. L. Rev. 1 (Feb. 2005) (citing Peter Lyman and Hal R. Varian, How Much Information 2003?, at http://www.sims.berkeley.edu/research/projects/how-much-info-2003/).

n4 Peter Lyman and Hal R. Varian, How Much Information 2003?, at http://www.sims.berkeley.edu/research/projects/how-much-info-2003/ (last visited March 30, 2006).

The proliferation of electronic information has forever altered the way that parties conduct litigation, particularly discovery. Electronic data plays a role in nearly every lawsuit, and, more often than not, its role is critical. Recent high-profile cases from Silicon Valley to Capitol Hill to Wall Street have centered on parties' e-mails and other electronic records, and how those records have been maintained or destroyed. n5
n5 For example, Morgan Stanley recently agreed to pay $ 15 million to settle charges that it failed to produce tens of thousands of emails during the Securities and Exchange Commission (SEC) investigation of conflicts of interest in Wall Street brokerage houses. Associated Press, Morgan Stanley Paying $ 15M for E-Mails, N.Y. Times, May 10, 2006, available at http://www.nytimes.com/aponline/business/AP-Morgan-Stanley-Fined.html. The SEC charged that, in addition to failing to produce emails, Morgan Stanley made misstatements about the preservation and production of its email. Id. This was not the first time electronic discovery presented a problem for the company-in March 2005, a jury awarded $ 1.45 billion against Morgan Stanley, relying largely on an instruction from the court that the jury should consider the company's electronic discovery abuses when assessing liability. Jonathan W. Hughes and Simon J. Frankel, E-Discovery: Pre-Litigation Considerations for In-House Counsel (Nov. 22, 2005) (citing Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co. Inc., No. CA 03-5045, 2005 WL 679071 (Fla. Cir. Ct., Mar. 1, 2005), 2005 WL 674885 (Mar. 23, 2005)) at http://www.law.com/special/supplement/edd/trends06.shtml. The trial court ordered this adverse inference instruction upon finding that Morgan Stanley had failed to implement a litigation hold to halt destruction of evidence, failed to disclose the existence of relevant electronic information, and falsely certified that it had produced all evidence it was required to produce. Id. Now, as part of its settlement with the SEC, Morgan Stanley will improve the way it handles email by implementing policies and training practices about its preservation and production, and will engage an independent consultant to evaluate its reforms. Reuters, Morgan Stanley to Pay $ 15 Mln Over E-mail Requests, N.Y. Times, May 10, 2006, available at http://www.nytimes.com/reuters/business/business-financial-morganstanley-sec.html.

While many of the existing techniques for conducting discovery and marshalling evidence will continue to apply, there are several facets of this burgeoning area where litigants can benefit from particular strategies directed to electronic information. This outline addresses (1) the scope of electronic discovery; (2) how to request and respond to electronic discovery requests; (3) the production of electronic information - including limits on production, cost-shifting, and special considerations involved; and (4) spoliation.



II. The Scope of Discoverable Electronic Information

More so than ordinary discovery, electronic discovery requires practitioners to consider strategically the varied potential sources of discoverable information. A threshold issue is what types of electronic information are discoverable under the applicable procedural rules.



A. Procedural Rules

1. Federal Rules of Civil Procedure

Until about two moths ago, the Federal Rules of Civil Procedure did not directly address the scope of discoverable electronic information. n6 However, regulators recognized the growing importance of electronic discovery--in September 2005, the Judicial Conference approved changes to the Federal Rules of Civil Procedure "aimed at discovery of electronically stored information." n7 On April 12, 2006, the Supreme Court approved the proposed changes, and, on December 1, 2006, the Rule amendments took effect. n8


n6 Prior to the December 1, 2006 amendments, the Rules were last amended to comport with changes in technology in 1970 when references to "data compilations" were added to the Rules. Report of the Judicial Conference Committee on Rules of Practice and Procedure (Sept. 2005) at http://www.uscourts.gov/rules/Reports/ST09-2005.pdf [hereinafter JCC Report]; see Fed. R. Civ. P. 26(a)(1)(B); and Fed. R. Civ. P. 34(a).

n7 See JCC Report, supra note 6. For example, the amended title of Rule 34 is "Production of Documents, Electronically Stored Information, and Things, and Entry Upon Land for Inspection and Other Purposes," and it permits a party to serve a request that seeks to "inspect, copy, test, or sample any designated electronically stored information or any designated documents" including "data or data compilations in any medium."

n8 Court Rules, Applied Discovery Court Rules at http://www.lexisnexis.com/applieddiscovery/lawLibrary/courtRules.asp (last visited May 15, 2006).

With respect to the scope of discoverable information, the changes to the Rules clarify the scope of discovery by explicitly including electronic information. n9 The changes also outline a "two-tiered" discovery process for electronically stored information, making relevant and non-privileged information that is "reasonably accessible" discoverable as a matter of right. n10 Furthermore, to address the burdens of privilege review in large electronic productions, the changes suggest procedures parties can follow to help avoid waiver of privilege through inadvertent disclosure. n11


n9 See JCC Report, supra note 6; Kenneth J. Withers, Two Tiers and a Safe Harbor: The Electronic Discovery Amendments to the Federal Rules of Civil Procedure, (August 25, 2004, updated May 1, 2005) [Hereinafter "Withers"].

n10 Id.


n11 See JCC Report, supra note 6. As amended, Rule 26(f)(4) and Rule 16(b)6) now address privilege issues.

With the increase in prevalence of electronic data, several district courts' local rules now explicitly address electronic discovery. n12 In addition, the Ninth Circuit Judicial Council announced in 2004 that it will be circulating for review proposed model rules for electronic discovery for the district courts within the Ninth Circuit. n13


n12 See e.g. E.D. Ark. L.R. 26.1; D.N.J. L.R. 26.1(d); see also United States v. Boeing Co., No. Civ. A. 05-1073-WEB, 2005 WL 2105972 (D. Kan. Aug. 31, 2005) (declining to issue a preservation order directing defendant to preserve electronic and other evidence, finding that it would be sufficient for the parties to develop a discovery plan "in accordance with [the] court's Electronic Discovery Guidelines").

n13 Court Rules, supra note 8.



2. Federal Rules of Evidence

On April 25, 2006, the Advisory Committee on the Federal Rules of Evidence approved a new rule addressing the waiver of privilege through inadvertent disclosure, recognizing the burden presented by privilege review in large electronic productions. n14 While the recent changes to the Federal Rules of Civil Procedure offer suggestions to help avoid inadvertent waiver, the comments to the Rules note that whether a waiver has actually occurred would depend on the underlying substantive privilege law. n15 Proposed Federal Rule of Evidence 502 goes further and changes the substantive law to prevent a waiver: if the holder of a privilege "took reasonable precautions to prevent disclosure" and acted diligently once the inadvertent disclosure became (or should have become) known, there will be no waiver under the new rule. n16 At its June meeting, the Committee on Rules of Practice and Procedure approved the publication for public comment of Proposed Rule 502. The Proposed Rule has since been published for public comment, and the Committee will be accepting comments until February 15, 2007.


n14 See Following Mini-Conference, Advisory Committee Approves Proposed New FRE 502 for Publication, http://www.ediscoverylaw.com (May 5, 2006); Court Rules, supra note 8.

n15 See JCC Report, supra note 6. See also Hopson v. Mayor of Baltimore, 232 F.R.D. 228, 233-34 (D. Md. 2005) (emphasizing that though the proposed rule changes offer procedures that decrease the likelihood of a finding of inadvertent waiver, the comments make it clear that the substantive law will ultimately determine whether a waiver occurred).

n16 See Advisory Committee on Federal Evidence Rules to Consider New Rule Codifying Waiver of Privilege by Disclosure, http://www.ediscoverylaw.com (Mar. 1, 2006).

3. State Procedural Rules

Most states' procedural laws do not expressly address the scope of discoverable electronic information. n17 However, there are several notable exceptions. On January 17, 2006, New York amended its Uniform Commercial Court Rules to address the discovery of electronic information. n18 California's Code of Civil Procedure already explicitly refers to electronic information, including "electronic mail" and "every... means of recording upon any tangible thing" within its definition of "document" or "writing." n19 Texas's, Illinois's, Maryland's and Mississippi's procedural rules also explicitly provide for the discovery of computerized information. n20


n17 See, e.g., N.Y. C.P.L.R. § 3101 (Consol. 2006) (requiring "full disclosure of all matter material and necessary in the prosecution or defense of an action").

n18 http://www.courts.state.ny.us/rules/UniformRulesofCommercialDivision.pdf

n19 Cal. Civ. Proc. Code § 2016.020 (c) (referring to Cal. Evid. Code § 250).

n20 Tex. R. Civ. P. 192.3(b); Ill. Sup. Ct. R. 201(b)(1), 214; Md. R. Civ. P. Rule 2-504.3; Miss. Sup. Ct. R. 26(b)(5).



B. Civil Practice Standards

Signifying the importance of the issues raised by electronic discovery, several practitioners' groups have prepared sets of guidelines designed to assist litigants and the courts with different aspects of electronic discovery.



1. The Sedona Principles

In 2002, a group of practitioners formed the Sedona Conference Working Group on Electronic Document Production. The Sedona Conference first published its Best Practices, Recommendations and Principles For Addressing Electronic Document Production in March 2003. n21 After soliciting public comment, the Sedona Conference published a revised version in January 2004. n22 Most recently, the Sedona Conference published a revised version in July 2005. n23


n21 The Sedona Principles: Best Practices, Recommendations, and Principles for Addressing Electronic Document Production (The Sedona Conference, Mar. 2003).

n22 The Sedona Principles: Best Practices, Recommendations, and Principles for Addressing Electronic Document Production (The Sedona Conference, Jan. 2004).

n23 Sedona Principles, supra note 2.

The Principles, which are meant to "complement the Federal Rules of Civil Procedure," set forth, in comprehensive fashion, the basic concepts of electronic discovery. The Principles establish recommended standards for electronic document production, and provide commentary on those standards. n24 Topics covered include, among others, the different types of electronic documents, the differences between electronic and hard copy documents, burden and cost-shifting, preservation, privilege, and spoliation. n25


n24 Id. at iv.

n25 The Sedona Conference also released a glossary covering useful electronic discovery terminology. The Sedona Conference Glossary For E-Discovery and Digital Information Management (The Sedona Conference, May 2005). That glossary was recently cited by a federal court in response to a party's objection that certain terms in the opposing side's requests for production were vague and ambiguous--overruling the objection, the court noted that the terms at issue were defined in the Sedona Conference glossary. See Johnson v. Kraft Foods N. Am., Inc., No. 05-2093-JWL-DJW, 2006 WL 3302684, at *6 (D. Kan. Nov. 14, 2006).



2. The ABA Section of Litigation Electronic Discovery Standards

The American Bar Association has also devoted special attention to electronic discovery. In 2004, the ABA amended its Civil Discovery Standards to include new and revised guidelines that more specifically address issues arising in electronic discovery, including discovery conferences, meet and confer requirements, preserving and producing electronic data, the use of technology to facilitate discovery, cost-shifting, and privilege. n26


n26 See ABA DRAFT ELECTRONIC DISCOVERY STANDARDS (2004), available at http://www.abanet.org/litigation/taskforces/electronic/home.html. See also Gregory P. Joseph, Electronic Discovery Standards, 2004.

In addition, the ABA Section of Litigation was also actively involved in the amendment process for the Federal Rules of Civil Procedure, submitting formal comments to the Advisory Committee on the recent changes. n27


n27 See Henry R. Chalmers, Proposed Electronic Discovery Rules Prompt Comments from Section Leaders, 30 Litigation News 4 (May 2005).

C. Forms of Electronic Data

Electronic data exists in many forms. Understanding the different kinds of electronic information available in a given case is essential to both offensive and defensive electronic discovery.



Active or Online Data. This is electronic information readily available and accessible to the user - for example, word processing documents, spreadsheets, databases, e-mails, electronic calendars and contact managers, system files, and software files. n28
n28 See, e.g., Joan E. Feldman, Essentials of Electronic Discovery: Finding and Using Cyber Evidence 2-5 (Glasser LegalWorks 2003) [hereinafter Feldman]; Dale M. Cendali, Susan Rodihan and Emily Dorsett, Electronic Discovery, in Patents, Copyrights, Trademarks and Literary Property Course Handbook Series 621 (Practising Law Institute July 2003) [hereinafter Cendali, Rodihan & Dorsett].

Near-line Data. This consists of a robotic storage library that uses robotic arms to access the media, for example, on optical disks. n29
n29 See, e.g., Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 319 n. 52 (S.D.N.Y. 2003) [hereinafter Zubulake I] (describing near-line data).

Embedded Data or Metadata. This is computer-generated "data about the data" (e.g., last access date, creation date, identity of author and subsequent editors, etc.), including "hidden text." n30
n30 See Williams v. Sprint/United Mgmt. Co., 230 F.R.D. 640 (D. Kan. 2005) (holding that when a court orders that electronic data be produced in the manner in which it is regularly maintained, the production must include metadata unless the parties agree that metadata is not included, the producing party objects, or the producing party seeks a protective order); see also, e.g., Rodriguez v. City of Fresno, No. 1:05cv1017 OWW DLB, 2006 WL 903675 (E.D. Cal. Apr. 7, 2006) (ordering defendants to produce electronic documents, including metadata, pertaining to the plaintiffs' arrests and detentions, in a lawsuit concerning alleged civil rights abuses in connection therewith; noting plaintiffs were entitled to know what changes had been made to the documents that were produced to them).

Replicant Data or File Clones. These are copies automatically made and saved to a user's hard drive; for example, when a word-processing program periodically saves copies of an open document as a precaution against a system failure. Replicant data files are typically stored in a different directory than active data, and have file names with extensions such as .TMP or .BK!

Residual Data. These are deleted files that have not yet been overwritten. When a file is deleted, the file is not erased; rather, the computer has just removed the reference to the file and made the formerly occupied memory available to store new information. If the deleted file is not yet overwritten, or if the new files require a smaller amount of memory, then the deleted file may still exist on the hard drive in whole or in part. Commands such as "undelete" or "salvage" may be necessary to access residual data.

Backup Data. This is information that is copied and stored to non-network media, on a routine or individual basis, in case of a system failure. Commonly, network backups are stored onto magnetic tapes, and individual backups onto diskette. Network backups are typically run on a regular schedule, often recycling the tapes to store new backup data. n31 Network backups may be either of the full system, of selective files and directories, or of only those files that have changed since the prior backup (known as incremental backup). n32
n31 To access data stored on backup tapes, it is often necessary to decompress the data and restore it to a host drive. See Feldman, supra note 28, at 2-7.

n32 See Lesley Friedman Rosenthal, "Electronic Discovery Can Unearth a Treasure Trove of Information or Potential Land Mines," 75 N.Y.St.B.A.J. 32, 33 (Sept. 2003).



Legacy Data. This refers to information stored in an outdated format that cannot be read by current software.

There are also several types of electronic data associated with the Internet, including bookmarks, cache files, and cookies.



D. Sources of Electronic Data

The many forms of electronic data derive from a multitude of sources. A company's network server - a wide or local area network (WAN or LAN) - typically constitutes the most fruitful source of electronic data because it is the storage repository for all of the computers on the network. Network files typically include word processing documents, e-mails, databases and spreadsheets.

Depending on their practices for saving information, individuals' workstations may contain word processing documents, e-mails, or other data different than that on the WAN or LAN. In addition, relevant information may be stored on palm pilots, punch cards, closed circuit TV monitoring systems, home computers, laptops, voice-mail systems, accounting systems, cell phones, pagers, and digital cameras. Individuals may also transmit data to home computers or laptops via diskettes, CDs, and ZIP disks.

Third parties may also possess electronic data originated by companies or individuals. n33 For example, some businesses store their files on third-party web sites; others may share electronic files with subcontractors or consultants. Computerized information may even be collected by retailers, cable providers, and machines or appliances with memory capabilities in their central processing units. n34


n33 See, e.g., Pub. Relations Soc'y of Am., Inc. v. Road Runner High Speed Online, 116210/04, 2005 N.Y. slip op. 25227 (May 27, 2005) (where a party intending to file a defamation lawsuit against the author of certain e-mails used preaction disclosure rules to obtain discovery of those e-mails from an internet service provider).

n34 See Whitney Adams, A Guide Through the Minefield of Electronic Discovery for the Experienced Trial Lawyer 2 (Cricket Technologies Jun. 2003).



E. Overview of Computer Systems

Whether requesting or responding to requests for electronic discovery, litigants must be familiar with both their own and the opposing party's computer systems. Familiarity with these systems requires knowledge of certain foundational information:



System Configuration. This includes the types of computers and other hardware used by a company's system; network and desktop operating systems; and the types of network and communications software and hardware used.

Application Software and Utilities. This includes the names and versions of all application software, and all utilities used. These applications may be of the commercial variety or custom-made.

Backup Procedure. This includes the name and version of the backup software used; the medium for storage of backup information; the retention of backup data; and information as to how such data is stored.

Other Information. Other helpful information includes user names, logons, passwords, and information about any encryption programs used.

III. Formulating and Answering Electronic Discovery Requests

Before embarking on the request for or production of electronic discovery, practitioners may wish to formulate an electronic discovery plan, which can identify the relevant issues, tasks and costs upfront. The Manual for Complex Litigation suggests that electronic discovery plans should address issues such as "the search for... location, retrieval, form of production, inspection, preservation, and use at trial" of electronic information. n35


n35 Manual for Complex Litigation (Fourth) § 11.446 (2004) [hereinafter MCL].

A. Discovery Requests Targeted at Electronic Information

Prior to the December 1, 2006 amendments, the discovery Rules were couched in terms of discovering "documents" and "tangible things." n36 With the advent of electronic information, however, the term "document" was stretched to include microfiche, CDs and other media used to manifest such electronic data. n37 Thus, while the unamended Rules had been found to contemplate that responsive information should be produced whether stored in electronic or non-electronic form, the safer practice was to explicitly request electronic data like e-mails, data compilations and other electronically stored documents. n38 Indeed, even now, after the Rule amendments have taken effect, the safer practice continues to be to specifically include electronic data. And, when electronic data is explicitly identified in document requests, specific types of electronic data may be requested, such as backup tapes, image copies of hard drives, and data on PDAs. n39 However, the requesting party should give thought to the nature of electronic discovery that will be useful - for example, whether residual or replicant data is actually necessary. n40 One way to narrow the scope of electronic information requested is to limit the personnel or departments whose electronic files are sought, or the time period covered by the request. n41 Parties may also agree to limit discovery by agreeing to a specific search methodology. n42


n36 See Fed. R. Civ. P. 34(a).

n37 Withers, supra, note 9.

n38 The ABA Final Revised Electronic Discovery Standards suggest that parties consider not only the format of information to request, but whether the party seeks ancillary electronic information and/or the software necessary to interpret such information. ABA FINAL REVISED ELECTRONIC DISCOVERY STANDARDS, Standard 29(b).

n39 See, e.g., Feldman, supra note 28, at 6-10 - 6-11.

n40 See Dort & Spatz, Discovery in the Digital Era: Considerations for Corporate Counsel, 9 Computer and Internet Lawyer 11, 14 (Sept. 2003) [hereinafter Dort & Spatz]; Sedona Principles, supra note 2, at 22 (suggesting that rather than requesting "all" of any form of electronic record, requests should "target particular electronic data that the requesting party contends is important to resolve the case").

n41 See Feldman, supra note 28, at 6-14 to 6-15.

n42 See Treppel v. Bioval Corp., 233 F.R.D. 363 (S.D.N.Y. 2006). After the plaintiff propounded discovery requests, the defendant proposed that the parties cooperate and define the scope of the search, including the files to be searched and the terms to be used. The plaintiff refused to stipulate to a discovery methodology, and the defendant therefore refused to produce any documents. The court criticized both parties, saying that the plaintiff missed an "opportunity" by not participating in defining the search, but indicating the "the plaintiff's recalcitrance [did] not excuse [the defendant's] failure to produce any responsive documents whatsoever."



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