Electronically Stored Information in Litigation

Transcription

1 Electronically Stored Information in Litigation By Timothy J. Chorvat and Laura E. Pelanek * I. INTRODUCTION In recent years, much of the action related to electronic discovery has taken place in the federal court system. 1 Developments in the case law, from Zubulake 2 to Pension Committee, 3 as well as amended rules of civil procedure 4 and court-based efforts to address the cost and burden of electronic discovery issues, 5 all have advanced the law of electronically stored information. In the past year, however, the focus has begun to shift as states address issues of scope, burden, and cost allocation through new rules and case law, even while federal law continues to move forward. II. STATE COURT ELECTRONIC DISCOVERY RULES AND GUIDELINES A number of states have taken steps toward updating their procedural rules to take account of electronically stored information; the efforts of Wisconsin and Delaware are particularly noteworthy. A. WISCONSIN Effective January 1, 2011, the Wisconsin Supreme Court adopted amendments to that state s rules of civil procedure to address electronic discovery. 6 According to * Mr. Chorvat is a partner, and Ms. Pelanek is litigation counsel, in the Chicago office of Jenner & Block LLP. Mr. Chorvat is the Chairman of the Working Group on Electronic Evidence of the American Bar Association s Cyberspace Law Committee. 1. For a summary of developments in the federal courts during , see Timothy J. Chorvat & Laura E. Pelanek, Electronically Stored Information in Litigation, 66 BUS. LAW. 183 (2010). 2. Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) ( Zubulake I ); Zubulake v. UBS Warburg, LLC, 230 F.R.D. 290 (S.D.N.Y. 2003) ( Zubulake II ); Zubulake v. UBS Warburg, LLC, 216 F.R.D. 280 (S.D.N.Y. 2003) ( Zubulake III ); Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) ( Zubulake IV ); Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422 (S.D.N.Y. 2004) ( Zubulake V ). 3. Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456 (S.D.N.Y. 2010). 4. See FED. R. CIV. P. 16, 26, 33, 34, 37, and SEVENTH CIRCUIT ELEC. DISCOVERY PILOT PROGRAM COMM., SEVENTH CIRCUIT ELECTRONIC DISCOVERY PILOT PROGRAM REPORT ON PHASE ONE MAY 20, 2009 MAY 1, 2010, at 1 (2010), available at discoverypilot.com/sites/default/files/phase1report.pdf. 6. Cf. In re Amendment of Wis. Stat , , , , & , No , 2010 WI 67 (July 6, 2010), available at pdf?content=pdf&seqno=51827 [hereinafter July Amends.]; In re Amendment of Wis. Stat , pass-10_Chorvat-r02.indd 1

2 2 The Business Lawyer; Vol. 67, November 2011 the court s published notes, the amendments are designed to encourage courts to be more active in managing electronic discovery, 7 with an express goal of limiting the costs of electronic discovery. 8 The amendments, many of which are modeled on the Federal Rules of Civil Procedure, 9 introduce important new procedures, including: (1) a mandatory meet-and-confer requirement for electronically stored information; (2) an option to produce business records that reflects the special difficulties presented by electronic information, which may require the producing party to provide technical support to the requesting party; (3) rules allowing requesting parties to specify the form of production in response to subpoenas and other discovery requests; and (4) an exception to sanctions for electronically stored information lost due to the routine and good-faith operation of an electronic-information system. 10 The amendment that generated the most discussion was the imposition of a mandatory meet-and-confer requirement. 11 Section (2)(e) prohibits a party from serving a discovery request until after the parties confer, unless excused by the court. 12 The parties must confer as to: (a) the subject of electronic discovery; (b) preservation of electronic information pending discovery; (c) the form of production for electronic information; (d) the method for asserting and preserving privilege claims; (e) the cost of the proposed discovery; (f ) the utility of a discovery referee or expert witness for protracted actions or actions involving complex issues or multiple parties. 13 If the parties cannot reach a consensus, the court may intervene. 14 The notes direct courts to compare the costs and potential benefits of electronic discovery when considering whether to issue such an order. 15 The notes also point courts toward the factors set out in the Advisory Committee notes to Fed. R. Civ. P. 26(b)(2)(B). 16 In a dissenting opinion, Justice Bradley objected to the mandatory meetand-confer requirement, saying that the majority was using a sledgehammer to crack a nut. 17 Justice Bradley wrote that problems with electronic discovery in the state s courts were few because, unlike the federal courts, the state court dockets are dominated by the more routine mortgage foreclosures, automobile accidents, collections and contract enforcement cases. 18 She noted that the Judicial Council recommended a discretionary meet-and-confer rule rather than requiring a , , , & , No A, 2010 WI 129 (Nov. 10, 2010), available at [hereinafter Nov. Amends.]. 7. July Amends., 2010 WI 67, at Id. at Id. at 5, 8, 12 & 14 (noting that (3) is modeled on FED. R. CIV. P. 33(d), (1) and (2) are modeled on FED. R. CIV. P. 34(a) and (b), (4m) is taken from FED. R. CIV. P. 37(e), and (2)(c) is modeled after FED. R. CIV. P. 45(a) and (d)). 10. Id. at 2 7, 10, Nov. Amends., 2010 WI 129, at Id. at Id. 14. Id. at Id. at Id. at Nov. Amends., 2010 WI 129, 1 (Nov. 10, 2010) (Bradley, J., dissenting). 18. Id. at pass-10_Chorvat-r02.indd 2

3 Electronically Stored Information in Litigation 3 meeting in all cases involving electronic records, in order to avoid significant added burden on litigants while yielding little benefit. 19 Justice Bradley expressed concern that the requirement could be used as a sword against unrepresented litigants, may spawn[] satellite litigation regarding compliance issues, and will increase the cost of litigation. 20 B. DELAWARE On January 19, 2011, the Delaware Court of Chancery issued its Guidelines for Preservation of Electronically Stored Information, 21 with the stated purpose of remind[ing] all counsel... of their common law duty to their clients and the Court with respect to the preservation of electronically stored information ( ESI ) in litigation. 22 The Guidelines state that the very minimum to preserve ESI means that the parties must develop and oversee a preservation process. Such a process should include the dissemination of a litigation hold notice to custodians of potentially relevant ESI. 23 The court warned that failure to take reasonable steps to preserve ESI may result in serious consequences for a party or its counsel. 24 The court acknowledged that the steps that are required may vary in particular situations, but in most cases parties should (1) take a collaborative approach to identify, locate, and preserve ESI; (2) distribute a litigation hold that provides instruction about the preservation of ESI; and (3) document the steps taken to prevent the destruction of potentially relevant ESI. 25 The court provided a nonexhaustive list of potential problem areas for ESI preservation, including business laptops, home computers, external or portage storage devices such as USB flash drives, and personal accounts. The list is designed to serve as a starting point for conversations with custodians about how they store their electronic information. The court noted that the implementation of a preservation process may not be sufficient by itself to avoid the imposition of sanctions for lost or destroyed ESI, but stated that courts will consider good-faith preservation efforts, reminding counsel that the duty to preserve attaches when litigation is reasonably anticipated. 26 III. DEVELOPMENT OF ELECTRONIC DISCOVERY PRECEDENT IN STATE COURTS In the past year, state courts, including several in New York, have addressed issues of scope, production format, and allocation of costs in connection with 19. Id. (quoting Letter from Judge Richard J. Sankovitz Explaining Reasoning of Judicial Council s Proposed Rules 1, 2 (Jan. 11, 2010)). 20. Id. at 10, COURT OF CHANCERY GUIDELINES FOR PRESERVATION OF ELECTRONICALLY STORED INFORMATION (Jan. 19, 2011 ), available at Id. at Id. 24. Id. 25. Id. 26. Id. at pass-10_Chorvat-r02.indd 3

4 4 The Business Lawyer; Vol. 67, November 2011 electronic discovery, reaching results similar but not identical to prior decisions by federal courts. In Schreiber v. Schreiber, 27 the court granted in part a motion that sought the confiscation and examination of a hard drive, or in the alternative, the cloning of the hard drive for forensic examination in a divorce action. The plaintiff asserted that the defendant had used escrow and brokerage accounts to conceal income and had failed to file tax returns in order to hide marital income and assets. 28 The court observed that parties in divorce actions are entitled to full disclosure of financial information related to marital assets, including business records, financial records, and both hard copy and computer stored data. 29 The court noted that all discovery devices provided by New York law are available in a divorce action, 30 and observed that electronic discovery may be crucial to provide vital information in divorce actions. 31 However, the court was wary that electronic discovery can be a weapon of abuse which will further clog a system that is already in dire need of relief. 32 After reviewing reported divorce cases that have addressed hard drive cloning, 33 the court noted that courts have been loath to sanction an intrusive examination of an opponent s computer hard disk drive as a matter of course. 34 Accordingly, the court concluded that the plaintiff was not entitled to an unrestricted turnover of the computer hard disk drive in either original or clone form. 35 Instead, the court directed that if the plaintiff wished to renew her request, she must propose a detailed, step-by-step discovery protocol. 36 That protocol must include a discovery referee, list an agreed forensic computer expert and file analysis procedure, limit the scope of discovery, including key word and other search parameters such as file extension, provide a procedure for privilege issues including first and second level review, determine a discovery deadline, and indicate whether the plaintiff will bear any additional discoveryrelated costs beyond the cost of the forensic expert. 37 In 150 Nassau Associates LLC v. RC Dolner LLC, 38 the court rejected an effort to require a party to re-provide information in electronic format to satisfy the requesting party that nothing was being hidden and to make reconciling the information easier. 39 The court noted that although New York courts sometimes look to the federal courts for electronic discovery guidance, New York law differs from N.Y.S.2d 886 (Sup. Ct. 2010). 28. Id. at Id. at 890 (quoting Etzion v. Etzion, 796 N.Y.S.2d 844, 846 (Sup. Ct. 2005)). 30. Id. 31. Id. (quoting Lee Rosenberg, Electronic Discovery and the Matrimonial Case, N.Y. L.J., June 15, 2005, at 4, col. 4). 32. Id. 33. Id. at Id. at Id. at Id. at Id. at No /04, 2011 WL (N.Y. Sup. Ct. Feb. 9, 2011). 39. Id. at * pass-10_Chorvat-r02.indd 4

5 Electronically Stored Information in Litigation 5 the Federal Rules of Civil Procedure as to who bears the cost of discovery. 40 Nassau sought to compel access to Dolner s electronic accounting records. Dolner had produced a disbursements log in PDF form as well as four sub-ledger records. 41 Nassau asserted that the information and documents were difficult to use but acknowledged that a data dump from Dolner s database would provide Nassau information to which they were not entitled and might adversely impact nonparties. 42 The court concluded that unsupported accusations that Dolner might be hiding something did not justify requiring Dolner to re-produce in native format data that it had already provided in PDF form or hard copy. 43 Silverman v. Shaoul 44 addressed the allocation of costs for electronic discovery. In that case, the defendants moved to compel the plaintiffs to pay the costs of collecting, processing, and hosting electronic data in connection with the plaintiffs discovery requests. 45 The defendants argued that (1) New York law places the costs of production on the requesting party, and (2) the data was not readily available, thereby excusing them from bearing the costs of production. 46 The defendants admitted that the data was available but that it was interspersed amongst data related to... other business entities. 47 The court concluded that New York precedent shows that the requesting party bears the costs of electronic discovery when the data sought is not readily available, which requires a showing of undue burden. 48 The court found that the data here was readily available, even if stored in a number of places, and that the costs of processing were part of the normal burden of litigation. 49 A recent Massachusetts case also addressed cost allocation. In Makrakis v. Demelis, 50 the court largely rejected the plaintiff s motion to compel the defendant to: (1) restore backup tapes going back to 1987; (2) retain a third-party vendor to search archived s for specified terms; and (3) produce all s ever sent or received by one custodian. 51 The defendant opposed the motion on the grounds that the restoration and search of the backup tapes would be unduly burdensome and duplicative of substantial discovery already received by the plaintiff. 52 The defendant submitted affidavits that complying would be extraordinarily costly in terms of both money and time. 53 The court concluded that the plaintiffs request would impose an unreasonable burden and expense on the defendants, 40. Id. at *5 (citing Zubulake v. UBS Warburg, LLC, 217 F.R.D. 209, 316 (S.D.N.Y. 2003) ( Zubulake I )). 41. Id. at * Id. at *2, * Id. at * N.Y.S.2d 870 (Sup. Ct. 2010). 45. Id. at 871 (internal citation omitted). 46. Id. 47. Id. at 872 (internal citation omitted). 48. Id. at Id. 50. No C, 2010 WL (Mass. Super. Ct. July 13, 2010). 51. Id. at * Id. 53. Id. at * pass-10_Chorvat-r02.indd 5

6 6 The Business Lawyer; Vol. 67, November 2011 citing in particular the lack of a time limitation. 54 The court also noted the plaintiffs failure to explain why other sources of discovery were insufficient to provide the information that they suspected the backup tapes would contain. 55 The court permitted the plaintiffs at their own expense to obtain a sample from the backup tapes. The court indicated that the plaintiff could seek further relief based on the results of that sampling. 56 IV. CONTINUING DEVELOPMENTS IN THE FEDERAL COURTS A. THE JUDICIAL CONFERENCE DISCOVERY SUBCOMMITTEE S MINI-CONFERENCE ON PRESERVATION AND SANCTIONS Recent developments hint at a future amendment to the Federal Rules of Civil Procedure to deal expressly with the preservation of electronically stored information, but it is not yet clear whether such an amendment will be promulgated or what provisions such a rule would include. On September 9, 2011, the Judicial Conference Advisory Committee on Civil Rules, Discovery Subcommittee, held a mini-conference to analyze issues related to preservation and sanctions, including the nature and scope of the problem, technology issues, and potential solutions. 57 The E-Discovery panel at the mini-conference, composed of Judges Scheindlin and Facciola as well as various practitioners, came to a consensus that a rule addressing preservation and spoliation would be valuable. 58 The panel members reached consensus on some aspects of what a potential preservation rule would look like, including that such a rule should treat large cases, with correspondingly larger volumes of electronically stored information, differently from smaller matters. 59 It also is clear that a preservation rule would apply after an action is commenced, but the panel did not reach a consensus as to whether or how a rule would govern preservation prior to the initiation of an action in federal court. 60 The panel recommended that the Advisory Committee on Civil Rules draft a preservation rule, and noted several elements that they agreed should be included in any proposed rule. First, any proposed rule should provide a trigger, whether the reasonably foreseeable litigation standard or specific events, identifying when the obligation to preserve attaches. 61 Second, any proposed rule should 54. Id. 55. Id. 56. Id. at * Memorandum from Honorable David Campbell and Professor Richard Marcus to Participants in Sept. 9 Mini-Conference on Preservation and Sanctions 2-5 (June 29, 2011), available at pdf. 58. E-DISCOVERY PANEL, JUDICIAL CONFERENCE DISCOVERY SUBCOMM., ELEMENTS OF A PRESERVATION RULE 1 (2011), available at rials/elements%20of%20a%20preservation%20rule.pdf. 59. Id. 60. Id. 61. Id pass-10_Chorvat-r02.indd 6

7 Electronically Stored Information in Litigation 7 precisely define the scope of the duty to preserve, including subject matter, time frame, types of data, the form in which information should be preserved, and should consider imposing presumptive limitations on types of data to be searched and the number of key custodians. 62 In addition, the panel suggested that any proposed rule on preservation should specify how long information must be stored (although the expectation is that a rule would not supersede any existing statutes or regulations), whether the duty is ongoing, and the impact of a litigation hold on the duty of care analysis, work product protection, and sanctions. 63 The panel also provided examples of possible sanctions rules dealing with spoliation, which address level of culpability as well as payment of costs. 64 Although the panel s work moves the ball forward, it is not yet clear whether or when any proposed amendment to the Federal Rules of Civil Procedure will be promulgated. B. THE SEVENTH CIRCUIT ELECTRONIC DISCOVERY PILOT PROGRAM On May 1, 2010, the Seventh Circuit Electronic Discovery Pilot Program Committee issued its report on Phase One. 65 At the same time, the Program entered Phase Two, expanding the use of the Program s Principles from thirteen judges and ninety-three civil cases to more than three dozen participating judges and hundreds of pilot cases. 66 The Committee also has continued its outreach and education efforts through webinars, a live seminar, and a new website, among other things. 67 Phase Two will run until May C. N ATIONAL DAY LABORER ORGANIZING NETWORK V. UNITED STATES IMMIGRATION AND CUSTOMS ENFORCEMENT AGENCY A decision of the U.S. District Court for the Southern District of New York in February 2011 focused national attention on issues relating to the role of metadata in the production of electronically stored information, although that opinion subsequently was withdrawn, leaving for future courts the question of how metadata fits into the electronic discovery puzzle. In National Day Laborer Organizing Network v. United States Immigration and Customs Enforcement Agency, 69 an action involving a request under the Freedom of Information Act, Judge Scheindlin decided that metadata is an intrinsic part of an electronic record, so that a producing party must include metadata in a production of electronically stored 62. Id. at Id. at E-DISCOVERY PANEL, JUDICIAL CONFERENCE DISCOVERY SUBCOMM., PRESERVATION/SANCTIONS ISSUES (2011), available at rials/preservation-sanction%20issues.pdf. 65. SEVENTH CIRCUIT ELEC. DISCOVERY PILOT PROGRAM COMM., SEVENTH CIRCUIT ELEC. DISCOVERY PILOT PROGRAM REPORT ON PHASE TWO MAY 2010 MAY 2011, at 1 (2011), available at pilot. com/sites/default/files/phase%20two%20-%20interim%20report.pdf. 66. Id. at Id. at Id. 69. No. 10 Civ. 3488(SAS), 2011 WL (S.D.N.Y. Feb. 7, 2011) pass-10_Chorvat-r02.indd 7

8 8 The Business Lawyer; Vol. 67, November 2011 information even if the requestor did not make a separate or express request for that metadata. The court noted, however, that the specific forms of metadata available depend on how the producing party maintains its records. 70 On June 17, 2011, Judge Scheindlin withdrew that opinion and order, noting that the parties had resolved their dispute regarding the form and format of production, and that the record in the case had not been fully developed or complete. Accordingly, Judge Scheindlin determined that her February opinion should have no precedential value. 71 Prior decisions have required a specific prior request for metadata as a prerequisite to relief for a failure to produce such metadata. 72 Accordingly, it remains to be seen whether future courts will require metadata to be produced as an intrinsic part of electronically stored information in the absence of a specific request. V. C ONCLUSION Even as state courts develop their electronic discovery rules and jurisprudence, it is likely that federal precedent will remain an important point of reference. In light of the universal predominance of electronically stored information, there will be more than enough disputes over electronic discovery to go around. 70. Id. at * Id. 72. See, e.g., Autotech Tech. Ltd. P ship v. Automationdirect.com, Inc., 248 F.R.D. 556, (N.D. Ill. 2008) (obtaining metadata relevant to claims or defenses in a case requires a party to specifically ask for it at the outset); D Onofrio v. SFX Sports Grp., Inc., 247 F.R.D. 43, 48 (D.D.C. 2008) (denying a motion to compel metadata where the party did not make it part of her initial request) pass-10_Chorvat-r02.indd 8 11/16/2011 6:55:39 PM