Editor’s note: Linda Markus Daniels is a co-founder of the RTP-based law firm Daniels Daniels & Verdonik.
RESEARCH TRIANGLE PARK, N.C. – Over the last week or so there have been a number of articles about new rules related to litigation, portending that there could be punishments for undertaking routine computer backups or destroying legacy data from obsolete systems. Don’t panic!
Many of these articles are either misinformed or taking a broad brush to a complex and yet untested amendment to the Federal Rules of Civil Procedure, the rules under which parties to a lawsuit in federal court (only) request and receive documents and other information in the possession the opposing party.
To be clear, these rules are for litigation and do not apply to actions taken in normal, every day business when there is no litigation pending or threatened. It is, however, important to understand what will happen with respect to your electronically stored information or “ESI” if litigation occurs, as this may determine how you want to maintain and retain information.
At the outset it is necessary to recognize that there are many courts. The United States District Courts, Courts of Appeal and Supreme Court are the courts to which these rules apply. Other courts in North Carolina or other states have different rules that may or may not be similar. Over time, the rules tend to coalesce but they are rarely wholly identical. When a lawsuit is filed the parties engage is what is called “discovery,” which is the process of each party obtaining information, including documents, from the other party.
From the inception of the rules in the 1930s until relatively recently, documents meant things written on pieces of paper. With most information now stored electronically, however, the definition of documents as only tangible objects became obsolete and there has been a struggle to determine exactly what is within the scope of discovery. With the amendment to the rules effective on Dec. 1, 2006, we now have at least a partial answer.
What Can Be Discovered
Subject to limitations discussed below, the opposing counsel can ask for production of all ESI that the other party may use to support its claims or defenses. As a first step the opposing party is entitled to all reasonably accessible data, which is generally data that does not require an undue burden to collect or review. This would be, for example, active data in current databases. It may also include offline data or data in storage if it is indexed and easily retrievable.
On the other hand, there is a second set of ESI that, at least initially, a party is not required to provide in response to a discovery request. This is information from sources that the party to which the request has been made identifies as not reasonably accessible because of undue burden or cost. This could be, for example, unlabelled backup media, data from a computer system where no hardware or software exists within the entity to read the data, or “deleted” data that remains in fragmented form but which would require forensic reconstruction specialists. The responding party is required to indicate this second set of information exists and provide details to enable the requesting party to evaluate the burden and costs of providing the discovery and the likelihood of finding responsible information that cannot be found elsewhere.
Once this has happened, the requesting party can ask the court to require production of the any part of the second set of information. This is where a lot of time (and money) will be spent and law will be made over the next several years as norms and guidelines are set as to what will be deemed accessible and not burdensome. The “Notes to the Rules” provide some guidance by indicating that a decision on whether ESI is readily accessible depends not only on burdens and costs but also on appropriate other considerations, including: (1) the specificity of the discovery requires; (2) the quantity of information available for other and more easily accessed sources; (3) the failure to produce relevant information that seems likely to have existed but is no longer available on easily accessible sources; (4) the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessible sources; (5) predictions as to the importance and usefulness of further information; (6) the importance of the issues at stake in the litigation, and (7) the parties’ resources.
Finally, even if the court does find that the ESI is not reasonably accessible if the requesting party can show the need for discovery is critical then it may still be ordered to be produced…but in that instance the requesting party may be required to foot all or part of the bill for the production.
What Is The Obligation To Maintain ESI For Discovery
The fact that ESI is not reasonably accessible does not mean there is no duty to preserve it. As a general rule, once litigation begins (or in many cases is threatened) you cannot intentionally destroy potential evidence (think Enron). On the other hand, absent exceptional circumstances, there are no sanctions available for the loss of ESI as the result of the “routine, good-faith operation of an electronic information system.”
This exception focuses on the fact that part of normal computer operations are the alteration and deletion of information. The Notes indicated that many steps essential to computer operations may alter or destroy information for reasons wholly unrelated to the litigation. It is recognized that the routine operation includes alteration and overwriting of information, often without the operator’s specific instructions…meaning that there is no direct counterpart in hard-copy documents.
Examples of routine practices that could be considered to come within the scope of the rule are: (1) programs the recycle storage media kept for brief periods against the possibility of disaster that broadly affects computer operations; (2) programs that change metadata to reflect the latest access to electronically stored information; (3) programs that automatically discard information that has not been accessed within a defined period; and (4) database programs that automatically manipulate information without user input.
What Does This Mean?
In part the change in the Federal Rules of Civil Procedure means that there will be a lot of litigation to determine what they newly implemented amendments mean and that it will be years before a comfort level is generally reached as to the meaning of the new Rules…and further as the Rules expand to fit newly created technologies. The extent to which it will become the norm to seek the right to obtain ESI that is not readily accessible and whether the granting of such requests will become routine or scarce can only be guessed.
On the other hand, it is now absolutely clear that ESI is subject to discovery and that all readily accessible (however this terms ends up being generally defined) ESI must be produced just as if it were hard-copy information. Limitations on the form or production, e.g., word or pdf, are now included in the Rules as well as limitations on requiring production in different forms.
Once a business is reasonably aware that litigation may commence, it must be careful not to destroy potential ESI evidence as well as become ready for an expensive search of all email (including attachments), word processing documents, spreadsheets, graphics, web sites, audio and video recordings and voicemail that exists on whatever hardware, including computers, servers, back up systems, storage media, PDAs, and even mobile phones. It is at this time that a hold needs to be placed on actions by humans that would destroy evidence…but the extent of the modification of major machine-implemented business processes required may not be determinable until there are an adequate number of decisions to set a pattern.
Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. Linda Markus Daniels concentrates her practice in the representation of entrepreneurial and technology-based businesses, focusing on corporate, technology and international matters. Comments or questions can be sent to ldaniels@d2vlaw.com.
