As electronic information plays an increasingly vital role in the business of law, the retention of that data will be continually subjected to new methods of archiving and review. But can courts use the same rules for sanctioning abusive practices in e-discovery as they do in traditional discovery?
By Kevin F. Brady and Matthew I. Cohen|December 08, 2004 at 12:00 AM
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Traditionally, courts have sanctioned parties and their counsel for engaging inabusive discovery practices that prejudice their opponents, for intentionallydestroying evidence and, under certain circumstances, for negligently failing toprevent the destruction of evidence. In addition, disciplinary committees havepunished attorneys for engaging in discovery practices that violate ethics rulesgoverning attorney conduct. These rules have provided the courts with thenecessary tools to police traditional paper-based discovery. The question beforeus is whether these rules can also provide the tools the courts need to addressthe new challenges with respect to attorney and party conduct created bye-discovery. In the traditional discovery context, determining whether a party has failed tomeet its discovery obligations is fairly straightforward: It is not verydifficult to determine whether certain documents have been collected from aparty’s files and whether relevant documents that were collected were thenproduced. Likewise, determining whether there has been negligent or intentionalspoliation or alteration of evidence during the preservation, collection, reviewand production stages is also straightforward: A paper document either exists orit doesn’t, and altering paper documents without leaving traces of thealteration requires a great deal of skill-even when done with the greatest care,it can almost always be detected. Moreover, preserving, collecting, reviewingand producing paper documents is relatively straightforward because hard-copydocuments generally take one form and require no special devices to view them. On the other hand, e-discovery, which involves the preservation, collection,review and production of electronic data, is much more complicated because itgenerally involves data in different formats, such as e-mail and document files.These data may be stored in different locations, such as notebook or desktopcomputers, network servers and mainframe computers. Moreover, data storedelectronically are easily modified, intentionally and unintentionally, withoutleaving discernible evidence of the change-indeed, electronic data can bemodified and deleted by the computer itself, without human intervention. Merely determining what e-data are subject to preservation poses challenges notpresent in traditional discovery. The sheer volume of e-data can make itdifficult to identify data subject to preservation in some cases. For example,backup tapes generally include vast amounts of data, only a small portion ofwhich may be relevant, and therefore subject to preservation. Likewise, thepropensity of e-data to multiply exponentially can make the task of determiningwhat data must be preserved and how best to preserve it a monumental one. For example, a set of daily, weekly and monthly backup tapes of one computer mayeach contain one copy of every e-document that was on the computer at the timethe first backup was created, plus multiple copies of any e-documents created inthe interim. To complicate matters further, data stored on offline magneticmedia, such as backup tapes, may have to be restored�in some cases requiringthat obsolete computer systems be replicated-simply to determine what data arestored on the media. At times, it may seem to parties and their counsel that theonly way to meet their preservation obligations is to preserve every scrap ofe-data�every e-mail, every electronic document, every database record andevery backup tape created. However, such a strategy, while ensuring that theparty is meeting its preservation obligations, would cripple most companies andpreclude them from carrying on their day-to-day business. While there is a dearth of clear and consistent guidance from the courts forparties and their counsel with regard to the preservation and production ofe-data, counsel and parties who are prepared and take reasonable steps to complywith their obligations will be in a better position to defend their efforts topreserve and produce e-data than those who do not. Attorney conduct is governed by the rules of ethics, and it is a fundamentaltenet of the American Bar Association Model Rules of Professional Conduct (MRPC)that in all professional functions a lawyer should be “competent, promptand diligent.” MRPC preamble (2003). Indeed, the MRPC preamble chargeslawyers, as members of the legal profession and officers of the court, with a”special responsibility” for the quality of justice delivered, whichincludes knowing and complying with the Rules of Professional Conduct for thejurisdictions in which attorneys practice. Id. MRPC Rule 1.1, for instance, mandates that a lawyer shall provide competentrepresentation, which means he or she must possess the “legal knowledge,skill, thoroughness and preparation reasonably necessary for therepresentation.” Moreover, it is professional misconduct for a lawyer toengage in conduct that is prejudicial to the administration of justice. MRPC8.4(d). These fundamental tenets apply to all attorneys-litigation and corporatecounsel, in-house and outside counsel-alike. While these are fairly lofty mandates for lawyers, how do they relate toe-discovery? The answer is as clear as it is significant: With anever-increasing percentage of all data created being stored electronically, theretention, preservation and production of e-data will continue to play anincreasingly important role in litigation. As a result, lawyers must be preparedto act with “diligence and competence” and with a sense of urgencywith regard to meeting the obligations created by e-discovery. For example, once a party is on notice that certain e-data are relevant to thelitigation at hand, the obligation to preserve this evidence runs first tocounsel, who has the duty to timely advise his client of its obligation toretain pertinent documents that may be relevant to the litigation. See TelecomInt’l Am. Ltd. v. AT&T Corp., 189 F.R.D. 76, 81 (S.D.N.Y. 1999). Seealso MRPC 3.4(a) (2003). These ethics rules also form the framework that keeps the discovery process frombecoming a free-for-all; they are essential tools that courts use to policeattorney conduct during the e-discovery process. But by themselves, the rules ofethics do not provide the courts with what they need to handle e-discoveryproblems. Courts must rely on both applicable ethics principles and the rules ofcivil procedure to ensure that counsel and the parties that they represent donot engage in discovery practices that will prejudice their opponents. For example, federal courts look to the Federal Rules of Civil Procedure, whichset out the broad rules governing the behavior of litigants and their counselduring discovery. The obligation to comply with these rules falls from the veryoutset on the lawyer and, thereafter, on his client. Courts also have theinherent power to punish counsel or a party for litigation misconduct with abroad range of sanctions, including the imposition of fines, the award ofattorney fees, the preclusion of evidence and/or defenses and the ultimatesanction: dismissal of the case. See Shepherd v. American Broad. Cos., 62F.3d 1469, 1474-75 (D.C. Cir. 1995). THE RESPONSIBILITY OF COUNSEL The severity of the sanction imposed by courts is generally dictated in largepart by the presence of bad faith in the party abusing the discovery process ordestroying evidence, and by whether the party seeking the evidence issubstantially prejudiced by its unavailability, alteration or loss. While, atthe end of the day, the duty to preserve relevant electronic data rests with theparty to the litigation, courts will generally look to the attorneys for thoseparties in evaluating whether a failure to preserve and timely produce relevantinformation was excusable under the circumstances or whether the failure meritsthe imposition of sanctions on the party and/or its counsel. Indeed, becauseparties may be sanctioned for their lawyer’s misconduct, it is imperative thatparties and their counsel communicate and closely coordinate activities relatedto discovery of electronic data. See Link v. Wabash Railroad Co., 370U.S. 626, 633-34 (1962) (parties are bound by the acts and omissions of theircounsel). In the fifth and most recent opinion regarding electronic discovery in the Zubulakev. UBS Warburg LLC case, No. 02 Civ. 1243, 2004 WL 1620866 (S.D.N.Y. July20, 2004) (Zubulake V), Judge Shira Sheindlin noted that the centralquestion before the court was whether UBS and its counsel had taken “allnecessary steps to guarantee that relevant data was both preserved andproduced.” Id. at 7. In analyzing whether counsel had discharged their duty, Sheindlin stated thatcounsel have a duty to monitor compliance so that all sources of discoverableinformation are identified and searched to locate relevant information; tobecome fully familiar with their client’s document-retention policies anddata-retention architecture; to advise their client to issue a “litigationhold” at the outset of the litigation (or whenever litigation is reasonablyanticipated); to communicate directly with “key players” or personswho are likely to have relevant information; to instruct all employees toproduce electronic copies of their relevant active files; and, finally, toensure that all backup tapes (and other backup media) that are subject topreservation are identified and stored in a safe place. Another recent case from the Southern District of New York, MetropolitanOpera Ass’n Inc. v. Local 100, Hotel Employees & Rest. Employees Int’l Union,212 F.R.D. 178 (S.D.N.Y. 2003), prior opinion adhered to on reconsideration, asclarified, 2004 WL 1943099 (S.D.N.Y. Aug. 27, 2004), while an extreme example,also demonstrates the circumstances under which courts will sanction parties andtheir counsel for abusing the discovery process. The Metropolitan Opera court granted the plaintiffs’ motion for judgmenton liability and awarded attorney fees as a sanction in a case it described asone that “presented the unfortunate combination of lawyers who completelyabdicated their responsibilities under the discovery rules and as officers ofthe court and clients who lied and, through omission and commission, failed tosearch for and produce documents and, indeed, destroyed evidence-all to theultimate prejudice of the truth-seeking process . . . .[B]oth the lawyers andthe clients exhibited utter and complete disregard for the rules of the truthseeking process in civil discovery.” 212 F.R.D. at 181. The court found that counsel failed to meet their obligations under Fed. R. Civ.P. 26(g), which requires a certification ” ‘that the lawyer has made areasonable effort to assure that the client has provided all the information anddocuments available to him that are responsive to the discovery demand.’ ” MetropolitanOpera, 212 F.R.D. at 222 (quoting Fed. R. Civ. P. 26(g) advisory committeenote to 1983 amendment). In reaching this conclusion, the court stated that counsel “(1) never gaveadequate instructions to their clients about the clients’ overall discoveryobligations, what constitutes a ‘document’ or about what was specifically calledfor by the Met’s document requests; (2) knew the union to have no documentretention or filing systems and yet never implemented a systematic procedure fordocument production or for retention of documents, including electronicdocuments; (3) delegated document production to a layperson who . . . did noteven understand himself (and was not instructed by counsel) that a documentincluded a draft or other non-identical copy, a computer file and an e-mail; (4)never went back to the layperson designated to assure that he had ‘establish[ed]a coherent and effective system to faithfully and effectively respond todiscovery requests’ [citation omitted]; and (5) in the face of the Met’spersistent questioning and showings that the production was faulty andincomplete, ridiculed the inquiries, failed to take any action to remedy thesituation or supplement the demonstrably false responses, failed to askimportant witnesses for documents until the night before their depositions and,instead, made repeated, baseless representations that all documents had beenproduced.” Id. at 222 (citations omitted). FOCUS ON ETHICAL OBLIGATIONS While the court’s order was based primarily on Fed. R. Civ. P. 26(g) and 28U.S.C. 1927, the court repeatedly referred to counsels’ breach of their ethicalobligations, describing their conduct as “wholly inconsistent with [their]obligations to conduct discovery in good faith,” and stated that counsels’conduct “signal[ed] their continuing contempt for the discovery process andtheir preference for gamesmanship over their obligations as officers of theCourt.” 212 F.R.D. at 189, 202. Ultimately, none of the “duties” enumerated in the Zubulake Vand Metropolitan Opera cases are new; rather, these decisions are basedupon long-standing rules and case law governing party and attorney conduct intraditional discovery. However, these courts have put parties and their counselon notice that they must rise to the occasion with a sense of purpose andexigency and that they cannot use the “novelty” of e-discovery, thebreakneck pace at which the technology at issue is evolving and the slow pace atwhich the law is evolving to meet the new challenges created by e-discovery toexcuse a failure to timely preserve and/or produce relevant e-evidence. Parties and their counsel cannot engage in “know-nothing, do-nothing,head-in-the-sand behavior in an effort consciously to avoid knowledge of orresponsibility for their discovery obligations.” See Metropolitan Opera,2004 WL 1943099, at 25. These decisions also make perfectly clear that lawyers’ethical obligations as officers of the court have not changed at all as a resultof e-discovery-while being zealous advocates for their clients, lawyers alsomust protect and respect the judicial process, including the discovery process. In sum, while e-discovery has brought about a “sea change” in the wayparties and their counsel conduct some aspects of discovery, the underlyingprecepts governing the discovery process have not changed. Existing discoveryand ethics rules are up to the new challenges posed by e-discovery. Whileparties navigating the e-discovery shoals must proceed cautiously, yetexpeditiously, and must do their part to meet these new challenges by acting ingood faith and taking reasonable steps to preserve and produce e-data, existingdiscovery and ethics rules give the courts adequate tools to address parties’behavior in the rare circumstances where parties fail to meet their discoveryobligations. These existing rules also give the courts the tools they need tomaintain a level playing field and to prevent parties and their counsel fromengaging in discovery gamesmanship in an effort to gain an unfair advantage overtheir opponents. Kevin F. Brady is counsel, and Matthew I. Cohen is an associate, in thecomplex mass torts and insurance litigation group at Skadden, Arps, Slate,Meagher & Flom. Brady is resident in the firm’s Wilmington, Del., office,and Cohen in the firm’s New York office.
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