Electronic discovery: 2006 amendments to the Federal Rules of Civil Procedure.

In Rowe Entm't v. William Morris Agency, Inc., (40) a racial discrimination case, defendants objected to plaintiff's request to restore backup tapes, explaining that the cost of restoring the tapes to an accessible format and the legal cost of reviewing the data for privileged information was prohibitive. (41) The defendant estimated that the total cost of cataloging, restoring and processing all backup tapes would reach $9,750,000. (42) The court found that the information sought was potentially relevant but rejected previous federal court reasoning that "the defendants' 'choice' to use electronic storage dictated that the defendants should bear the burden of electronic discovery." (43) Instead, Rowe considered an eight factor balancing test that included:

Considering the factors above, the court ordered the plaintiff to pay only for the costs associated with the restoration of backup tapes. (45) Noting that the Rowe factors generally favor shitting the cost of production to the requesting party, the same court reworked the cost-shifting analysis in the following year. (46)

In Zubulake I, a sex discrimination case, the defendant objected to the production of emails explaining it would cost $175,000 to produce, not including the time it would take to review for privilege. (47) In conducting the cost-shifting analysis, the court rejected the Rowe factors and created a new seven-factor test. (48) The Zubulake I court explained that (1) the Rowe eight-factor test was incomplete and redundant, (2) certain Rowe factors should predominate as opposed to being applied equally, and (3) that courts following Rowe did not always have a full record to support its conclusion. (49)

To address these concerns, Zubulake I proposed a three-part analysis. First, a court would have to determine whether the data sought is accessible, and cost-shifting can only be considered where the data is deemed inaccessible. (50) Second, if cost shifting is warranted, a court should require the responding party to restore and produce a sample from the inaccessible data to determine whether relevant data may be found. (51) Third, a court should consider whether producing the requested data would place an undue burden or expense on the responding party. (52) In order to do so Zubulake I formulated a new seven-factor test to replace the Rowe factors. (53) The factors include:

Although the Zubulake I factors are perhaps the most followed set, some federal courts are in disagreement and have adopted their own set of factors as cases appeared before them. (55)

D. Privilege

Maintaining privilege when producing electronic data can be considerably more difficult and costly than when producing paper documents. (56) The high cost of privilege screening is a byproduct of the volume of electronic data and also of the nature of that data, particularly email. (57) While other costs can be mitigated by the use of technology, the privilege screening process still requires attorney time to manually read and make privilege decisions. (58)

Contributing to the cost of the privilege review process is the fact that in many jurisdictions, inadvertent production of privileged data constitutes a waiver of privilege. For example, in Marrero-Hernandez v. Esso Standard Oil Co., (59) the defendant tried to claim privilege attached to electronic data produced a year earlier (60). The defendant learned of the inadvertently produced data after privileged documents were attached to the plaintiffs counterclaim. (61) The defendant explained that as result of an "errant mouse click" files containing privileged information merged with documents what were not privileged, leading to the production of "approximately 1500 potentially privileged documents." (62) The court responded by stating: "[i]f the parties opt to use technological resources to store privileged information, they should also provide the necessary protection for precisely that information." (63) There have been other cases with facts similar to Marrerro, but with differing positions on the waiver of privileged communications. (64) In addition to potential waiver within a matter, inadvertent production of privileged data in one matter could also serve as waiver in another other matter. (65) Therefore, law firms are often times caught in a predicament where they must spend enormous time and money to make certain that potentially privileged or protected information is not produced inadvertently.

E. Preservation & Spoliation

Perhaps the most uncertain and problematic aspect of e-discovery is the duty to preserve electronic data. A party's duty to preserve potentially relevant data arises when litigation is reasonably anticipated. (66) Due to the large volumes of electronic data and continuing changes in information technology, there is a potential for failing to identify, preserve or produce relevant data even after a party is aware of the duty to preserve.

The failure to preserve data raises the issue of spoliation of evidence. Electronic data can be spoiled or destroyed by willful deletion, negligence or a user's unfamiliarity with computer technology. Furthermore, "it can be very difficult to interrupt or suspend 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...." (67) Sanctions for spoliation of ESI vary from the imposition of fines, shifting the cost of production, and awarding attorney's fees, to instructions of adverse inference, excluding evidence, and even dismissing claims. (68)

In Morgan Stanley, many potentially relevant e-mails were lost because Morgan Stanley continued its policy of deleting e-mails after a duty to preserve data had attached. (69) As a result, the court sanctioned Morgan Stanley by giving an adverse inference instruction for spoliation of evidence. (70) The jury awarded the plaintiff approximately $1 billion based on the adverse inference without reaching the merits of the case or finding that the lost emails were relevant. (71) Ironically, the 1722 case of Armory v. Delamirie (72) illustrates the problem with the Morgan Stanley decision. In Delamirie, a chimney sweep found what he though to be a gemstone and took it to a jeweler for appraisal. (73) The jeweler never returned the gemstone and the chimney sweep sued the jeweler for return of the gemstone. (74) Upon failure to produce the stone in court, the judge instructed the jury to "presume the strongest against [the jeweler], and make the value of the best jewels the measure of their damages." (75)

Like Delamirie, the court in Morgan Stanley had no basis to conclude that the lost emails would have been the "smoking gun" proving fraud or have any value to plaintiff' s claims. The nature of electronic data and information systems can not guarantee that all possibly relevant data can be preserved, even under a party's best efforts. Sometimes there is no way to ascertain the nature or volume of destroyed data.

Federal courts attempted to create a standard to determine when sanctions, and in particular adverse inferences, should apply. The most popular test requires that the spoliator (1) have a duty to preserve, (2) have a culpable state of mind, and (3) that the destroyed evidence was relevant to the opponent's claims or defenses. (76) However, discrepancies among the federal courts with regard to the level of culpability and the content of the destroyed data remained. The Eighth and Tenth Circuits, for example, require intentional misconduct or bad faith to impose adverse inference sanction (77), where the Second Circuit has held that neither bad faith nor intentional misconduct is required. (78)

III. THE 2006 AMENDMENTS

As a result of the e-discovery issues faced by federal courts, the Advisory Committee on the Federal Rules of Civil Procedure (Advisory Committee) proposed amendments to the FRCP. (79) Recognizing that the then-current FRCP did not adequately address the discovery problems posed by electronic data, and that local rules enacted to fill the gap created a patchwork of rules, the Supreme Court approved the Amendments on April 12, 2006. (80) The hope was that the Amendments would "provide effective support and guidance for managing discovery practice as it changes with technology." (81) Particularly, the Advisory Committee's goal was that the Amendments would "reduce the cost of discovery, [] increase its efficiency, [] increase uniformity of practice, and [] encourage the judiciary to participate more actively in case management...." (82) The Amendments address this by (1) expanding the definition of discoverable materials, (2) requiring parties to focus on potential e-discovery issues early on, (3) providing guidelines on the accessibility of electronic data, (4) addressing privilege issues, and (5) limiting sanctions for the loss of electronic data. (83)

A. Defining ESI

The term "electronically stored information" (ESI) is introduced in Rule 26. (84) The Advisory Committee notes warn against assigning a precise definition but states that ESI includes information that is stored electronically and "is intended to be broad enough to cover all current types of computer based information, and flexible enough to encompass future changes and development." (85) In theory, defining ESI broadly allows the FRCP to adjust to new technologies, but in practice, the broad definition has allowed e-discovery to expand into areas not otherwise thought to be discoverable before or after the Amendments.

In Columbia Pictures Indus. v. Bunnell (86), a suit for copyright infringement, the court ruled that data stored on random access memory (RAM) (87) constitutes ESI. The district court held that RAM is "'stored' information under the plain meaning of the unambiguous language of Rule 34." (88) This holding expands the definition of ESI to include data not supported by the Amendments, including data is that burdensome and costly to preserve.

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