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

I. INTRODUCTION

On December 1, 2006, the "E-discovery Amendments" (Amendments) to the Federal Rules of Civil Procedure (FRCP) went into effect. (1) The Amendments were approved to address a myriad of issues associated with electronic discovery (e-discovery) by attempting to (1) define discoverable electronic information, (2) control the costs associated with the discovery and production of electronic information, and (3) protect privileged or otherwise protected information. However, a year after the Amendments went into effect, lawyers are still puzzled by the intricacies of e-discovery, and the cost of production is still rising. The Amendments have instead created confusion and, to some extent, created fears reminiscent of "Y2K" (2) which is in part responsible for the rise in e-discovery costs.

This note will look at the reasons why the Amendments fall short of creating uniform and efficient standards governing e-discovery and will suggest practical solutions lawyers can implement to make navigating e-discovery easier. Section II will focus on the impact e-discovery has had on the litigation process and the courts' attempt to deal with issues related to electronic information, leading to the Amendments' approval. Section III will examine the Amendments. Section IV will discuss ways practitioners can prepare themselves for e-discovery through practical solutions.

II. IMPACT OF DIGITAL INFORMATION ON THE DISCOVERY PROCESS

In the past, the majority of business records, communications and other documents created by a company during the course of business were in paper format. (3) When litigation occurred, attorneys simply looked through the paper documents to find relevant documents. Today, the proliferation of computers in the corporate workplace and the dependency of email as a tool of communication and transactions have led to an explosion of electronic information being generated, stored, sent and received during the course of a normal work day. (4) Information and data traditionally created and stored in paper format is now routinely created and stored in electronic format. (5) Additionally, the decreasing prices in data storage systems (6) have led to companies storing vast amounts of electronic data on their live networks, desktop and laptop computers, and archives. The distinct characteristics of electronic data (a product of the way it is created, stored, transmitted and disposed of) have created discovery problems not seen during the course of a paper discovery.

A. Volume

The most significant characteristic is the sheer volume of potentially discoverable electronic information. In the past, the lack of technology limited the amount of paper documents produced. Today, computers make it relatively easy to create an electronic document. As a result, the majority of a corporation's work product and communications are created and stored in electronic format. (7) For example, a company of 100,000 employees may store an average of 1.5 billion emails annually. (8)

Unlike the static nature of paper, electronic documents are dynamic and computer programs can create new data and multiple copies during routine computer operations (9) without a user's knowledge. While a paper document can physically be moved from one filing cabinet to another without creating a copy, moving an electronic document from one location to another creates multiple copies and new documents. For example, sending a document via email requires that: (1) the sender's computer make a copy of the document which will reside on the email program's directory, (2) the email and document "pass" through a corporate network or internet service provider (ISP), creating a copy on the network, and (3) the recipient's computer make a local copy of the email and document for viewing. (10) A minimum of three additional copies are made in the course of an email transmission. Moreover, as a user works on an electronic document, multiple copies and revisions of the document are automatically saved in temporary folders to prevent the lost of data. (11) Users are usually unaware that additional copies are being saved as the temporary folders are usually buried deep within an operating system's directories.

Electronic documents also contain additional information that is not provided by paper documents. When a digital document is created, modified, or transmitted, new data associated with the document is also created. (12) This new data, called metadata, is stored in the associated electronic document and is typically hidden. (13) However, extracting metadata will create a new electronic document of its own. (14)

Digital documents are not disposed of in the same manner as paper documents. While a paper document can be torn up and thrown away, deleting digital information does not really dispose of the document. Pressing the "delete" key on a keyboard only allocates the space taken up by the file for later use by other data; it does not erase the contents. (15) "The actual file stored on the disk is left untouched.... [T]hose files then might be overwritten by new files or by additions to old files, but unless and until that happens the data that makes up the file, itself, remains untouched." (16) Therefore, paper documents that no longer serve a business purpose can be discarded while their electronic equivalents remain intact and may be retrieved during data inspection.

B. Accessibility

Arguably, the second most important characteristic of electronic data that produces discovery problems is its accessibility--the ability to retrieve and produce electronic data in a readable format without undue burden or expense. "Paper records, while often voluminous, could be reviewed without any intermediate and costly steps. But [electronic data] may be stored on outdated systems, or in an inaccessible and disorganized format, such that no review ... can be done, absent the significant expense of restoring data to a useable format." (17)

What was considered accessible or inaccessible electronic data under the pre-Amendment FRCP was unclear. Prior to the Amendments, changes to the FRCP relevant to e-discovery where last done in 1970. In that year, FRCP Rule 34 was amended to include "data compilations" to the list of documents a party was required to produce upon request. (18) Although pre-Amendment Rule 26 protected parties from producing documents that were unduly burdensome or unnecessary, it did not provide guidance to determine inaccessibility, nor did it address formats in which data compilations should be produced. (19) Federal courts were left to interpret the issue of accessibility of electronic data.

The problem of accessibility due to sheer volume of electronic data can be illustrated by the often cited case of Coleman (Parent) Holdings, Inc. v. Morgan Stanley (20). As a business practice, Morgan Stanley routinely backed up its network data on tapes and stored them in various locations. (21) At the discovery phase, Morgan Stanley repeatedly struggled to locate, review and produce backup tapes as ordered by the trial court. Morgan Stanley failed to discover 2,330 backup tapes because the tapes numbered in the thousands and were located in warehouses across the country. (22) The plaintiff was awarded over $1 billion in damages. (23)

Accessibility also includes the ability to review electronic data and the ability to produce it in a readable format. Often times the data stored on backup tapes is in a format that that is not in a reasonably useful format. In Morgan Stanley, even if the backup and disaster recovery tapes were located, it would have taken a considerable amount of time and effort to retrieve, review, and produce the data. The data residing on the tapes were in an outdated proprietary format, and were not stored in an organized way that would have made search methods useful. (24) Production of these tapes would have "cost[ed] at least hundreds of thousands of dollars and require several months to complete." (25)

C. Cost-Shifting

In the early days of e-discovery, the cost of producing electronic data was borne by the responding party, supported by the idea that it was the cost of doing business. (26) The cost of searching thorough and sorting electronic data may have been inexpensive at times. (27) But the cost of producing electronic data is usually high due to the voluminous nature of electronic data and the fact that some data may be inaccessible, requiring time to retrieve and expense to convert into a useable format. (28)

The issue of who should pay the cost of production has led to many disputes, and many times courts have taken inconsistent approaches to resolving the issue. In what may be the first case addressing e-discovery cost-shifting, Adams v. Dan Rivers Mills, Inc. (29), the plaintiffs requested computer payroll information explaining that they needed the information to determine if the defendant acted discriminatorily. (30) Defendants objected, arguing they had already produced the information via computer printouts. (31) The court, however, held that the FRCP did not preclude the production of electronic versions of previously produced information, but shifted the cost of production to the plaintiffs. (32) While the court in Dan Rivers did not provide a reason for shifting the costs, other courts have based their decision on the fact that a responding party would need to create the electronic data as opposed to making copies of existing data. (33) In cases where a party needed to create the data the requesting party would be responsible for production costs. (34)

In an attempt to address the cost shifting issue, federal courts began to consider the burden a party has in producing electronic data. In Hines v. Widnall, (35) the defendant made electronic copies of employment records relevant to a claim of discrimination for its own use at a cost of approximately $250,000. (36) The plaintiffs requested the electronic version of the employment records, even thought they had already received paper versions. (37) The court rejected the defendant's objections because the defendant chose to create the electronic versions and it had "virtually unlimited assets," compared to the plaintiffs. (38) The court ordered the production of the electronic version, at defendant's cost, citing no undue burden on the defendant. (39)