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Courts and litigants are grappling with how to apply discovery rules crafted in an age of paper records to massive amounts of electronic data. Contrary to some of the more alarmist commentary, the sky is not falling and there are ways of dealing with electronic discovery effectively. Nevertheless, as some recent highly publicized decisions sanctioning parties have made clear, the stakes are high and litigants need to be aware of the particular challenges of dealing with electronic data. In this article, we first review current developments on issues such as the duty to retain data, the scope of discoverable information and who should bear the costs of data production. We then outline some practical steps that organizations can take, to plan for appropriate retention of potentially discoverable electronic information, without overtaxing information technology systems. HOW WE GOT HERE There is no question that electronic data is discoverable. [FOOTNOTE 1] Although “the reality of the situation may require a different approach and more sophisticated equipment than a photocopier, there is nothing about the technological aspects involved which renders documents stored in an electronic media ‘undiscoverable.’” [FOOTNOTE 2] In short, it is now “black letter law that computerized data is discoverable if relevant.” [FOOTNOTE 3] Standards concerning electronic discovery often vary by jurisdiction. For example, in an Aug. 26, 2004 decision, the Nassau County Supreme Court declined to follow federal court standards concerning allocation of the cost of electronic discovery, noting that “cost shifting of electronic discovery is not an issue in New York since the courts have held that, under the CPLR, the party seeking discovery should incur the costs incurred in the production of discovery material.” [FOOTNOTE 4] The following sources of guidance, described briefly below, are available to litigants: proposed amendments to the Federal Rules of Civil Procedure addressing various issues raised by electronically stored information, the ABA’s 2004 amendments to its Civil Discovery Standards on Electronics, and an influential white paper released last year by the Sedona Conference. A set of proposed amendments to the Federal Rules of Civil Procedure was referred to the Standing Committee on Rules of Practice and Procedure in June 2005 that, if accepted, would be effective in late 2006. The amendments address five areas: (i) early attention to electronic discovery issues (amending Rule 26(b) to require parties to discuss electronic discovery at the planning conference and to report to the court, and amending Rule 16 to allow for the scheduling order to address such discovery); (ii) electronically stored information that is not reasonably accessible (amending Rule 26(b) to provide that a party need not provide electronic information in response to a discovery request if the information is not reasonably accessible because of undue burden or cost); (iii) the assertion of privilege after production (amending Rule 26(b) to create a procedure for resolving claims of inadvertent production without waiver of privilege with respect to such material); (iv) the application of Rules 33 and 34 to production of electronically stored information (amending Rule 33 to provide that a party may answer any interrogatory by providing access to such information, and amending Rule 34 to permit the requesting party to specify the form in which electronically stored information is to be produced, with the responding party having the opportunity to object to that form; in the absence of agreement on a particular form, the producing party may either produce the information in the form in which it is ordinarily maintained or in a form that is reasonably usable); and (v) a limitation on sanctions under Rule 37 for the loss of electronically stored information resulting from routine operation of computer systems (amending Rule 37 to bar courts, absent exceptional circumstances, from assessing sanctions on parties for failing to provide electronic information lost because of the routine, good faith operation of the party’s computer system). The proposed amendments are available at U.S. Courts: Federal Rulemaking. CIVIL DISCOVERY STANDARDS In August 2004, the ABA adopted amendments to its Electronic Discovery Standards which offer a detailed set of guidelines for courts to use in determining the allocation of costs of production and the scope of production generally. A copy of the Standards is available at the ABA Section of Litigation. In January 2004, the Sedona Conference Working Group Series published Best Practices, Recommendations & Principles for Addressing Electronic Document Production. Fourteen basic principles are set forth, with extensive comments addressing each one. The principles have been cited approvingly by a number of courts ruling on electronic discovery issues, and likely will continue to be influential. [FOOTNOTE 5] Among other significant points, the principles recognize that “it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant data.” A corporation, “upon recognizing the threat of litigation, [need not] preserve every shred of paper, every e-mail or electronic document, and every backup tape … Such a rule would cripple large corporations who are almost always involved in litigation.” [FOOTNOTE 6] The principles also address the important issue of preservation of backup tapes and note that “[a]bsent specific circumstances, preservation obligations should not extend to disaster recovery backup tapes created in the ordinary course of business.” [FOOTNOTE 7] The principles further affirm that “[a]bsent a showing of special need and relevance, a responding party should not be required to preserve, review, or produce deleted, shadowed, fragmented, or residual data or documents.” [FOOTNOTE 8] Nor should a party have an obligation to preserve or produce “metadata,” unless it is material to the dispute. [FOOTNOTE 9] As to counsel’s responsibilities, the principles affirm the need for counsel to advise the client to issue a litigation hold on relevant electronic data and to maintain effective communication. The principles encourage opposing counsel to confer with each other “early in discovery regarding the preservation and production of electronic data and documents” and to “seek to agree on the scope of each party’s rights and responsibilities.” [FOOTNOTE 10] The principles state that sanctions “should only be considered by the court if, upon a showing of a clear duty to preserve, the court finds that there was an intentional or reckless failure to preserve and produce relevant electronic data and that there is a reasonable probability that the loss of the evidence has materially prejudiced the adverse party.” [FOOTNOTE 11] Thus, when a party destroys electronic evidence “in good faith under a reasonable records management policy, no sanctions should attach.” [FOOTNOTE 12] Without a defensible plan for preserving electronic data, corporations risk allowing a plausible argument to be made that they should be sanctioned for destroying relevant data (whether knowingly or not). On the other hand, the panic-driven “save everything” approach can generate huge costs wreaking havoc on corporate IT and legal budgets. Another daunting fact is that while companies routinely dispose of unneeded documents and electronic data as part of their normal document retention and data management policies, an adversary who can make the case that the company did not take appropriate steps to preserve relevant information after notice of a dispute can claim spoliation of evidence. Bearing in mind that a large company may generate millions of electronic documents and e-mail messages per month stored in hundreds of locations, the challenge to get control of the data is formidable. Creating a reasonable and defensible plan in advance for a standard operating procedure to preserve data in the event that litigation or regulatory action arises or is reasonably anticipated can be an important step in avoiding unintentional noncompliance and the serious consequences that can follow. Following are eight action items for achieving a defensible, practical and economical approach to the electronic data preservation challenge: 1. Put the team together: Most attorneys are not technology experts. Thus, the most effective way to develop a defensible data preservation plan is to assemble an interdisciplinary team that can contribute knowledge about the technological, legal, regulatory, organizational and practical issues involved. 2. Win high-level support for the preservation plan: The first step is to garner the support of senior management. Such support can make it far more likely that adequate resources are brought to bear. The case for diligence and caution is clear, in light of recent headlines. Because preserving and collecting electronic data for litigation is not part of the IT mandate for an IT department, it is important that IT professionals understand that their participation is crucial to the success of the project. Without buy-in and active participation from IT professionals, any program to manage electronic data for litigation will be doomed to fail. 3. Assess and map the sources of data: A key to developing a sound preservation plan is an accurate assessment of what data is likely to be relevant to the types of litigation and regulatory issues the company typically faces and where the data is located. This is not a simple task. In a large company data is stored in many places: individual employees’ hard drives, network file and e-mail servers, disaster recovery backup tapes, document management systems and company-wide software applications such as those used for human resources and accounting. Still more data can often be found on portable media, such as CD’s, DVD’s, thumb drives, PDA’s, and home computers — and this is by no means an exhaustive list. Once litigation is underway or anticipated, counsel will need to move swiftly to locate and place holds on known sources of potentially relevant data. An IT architectural map illustrating the locations of various types of data can be a great help in this process. The alternative, to start from scratch every time a new litigation hits, is costly and inefficient. 4. Save disaster recovery tapes for ‘disasters’: In deciding on a protocol for preservation of electronic data, the organization should carefully consider how data on the company’s disaster-recovery backup systems is treated. Modern backup systems can be amazingly complex. An order to “preserve all backup tapes” or retrieve specific data from backups could be extremely expensive, time-consuming, and often practicably impossible. Complex backup systems are not designed for the preservation of evidence or for routine daily use. Their purpose is disaster recovery. So even if it is possible to use them to retain and collect data, this fundamentally alters their function from disaster recovery to regular business use or records retention. Nevertheless, it is hard to argue against a sophisticated opponent that your company should not be required to search its “disaster recovery” tapes if it is using them in the ordinary course of its day-to-day operations to retrieve lost documents. 5. Implementation and follow-up: The corporate graveyard is littered with data preservation plans that were not properly followed. It has often been said that having a plan that is not followed is worse than having no plan at all. Simply having a “preservation plan” may not only give the corporation a false sense of security, but also may give plaintiff’s counsel a roadmap of what the company itself believed it needed to do to comply with legal and regulatory requirements — but failed to do. Putting it mildly, this is not a battle you want to have to fight. So, creating a plan is only the start, not the end of the story. There needs to be a structured training program, consistent and thorough auditing for compliance on an ongoing basis, updates to accommodate new types of data and processes for suspending specific document disposition in the event of a litigation hold. 6. Battle stations: A good preservation plan may include a formal, documented protocol to follow once litigation is underway. As part of this process, the company should undertake a limited acquisition and review of a targeted data sample. This action should be underway as soon as possible and not put off until the opponent weighs in on what should be preserved and reviewed. Being ready to present an existing plan puts the company in a much better position to counter a broad preservation demand or production request. 7. Defeating a sweeping preservation order: It is not uncommon to encounter sweeping demands for data preservation or for courts to grant ex parte preservation orders based on claims that the corporation is planning or is actually in the process of destroying data. Assuming the company has a defensible plan to preserve potentially relevant data, such demands can be countered by demonstrating to the court that the company already has a reasonable and defensible process underway that will ensure the retention of relevant data. More often than not, judges favor sensible plans already in place over vague demands that the corporation preserve everything, relevant or not. 8. Who pays the freight?: In most jurisdictions, including the Federal courts, the cost of collecting and providing data is presumptively shouldered by the responding party (New York state procedure is an exception). But what if lawyers for the requesting party are unreasonable and demand preservation of everything under the sun? The general rule is that a company is required to do only what is reasonable — based on such factors as the amount in controversy in the case, the case schedule, and the significance of the issues involved. If the responding party adopts a reasonable and documented process and implements it, it will be in a stronger position to argue that anything beyond the reasonable amount undertaken should be borne by the requesting party. Even for a small organization, the challenge of preserving electronic data can be formidable. Rather than wait for an unreasonable preservation or production request or risk being sanctioned by the courts for not preserving electronic evidence, companies can plan ahead. This kind of advance preparation may well be worth the effort. Theodore Rogers is a partner and Thomas Barnett is special counsel at Sullivan & Cromwell. ::::FOOTNOTES:::: FN1 See Rowe Entertainment v. William Morris Agency, 205 F.R.D. 421, 428 (S.D.N.Y. 2002) (“Electronic documents are no less subject to disclosure than paper records.”) (citing Simon Prop. Group v. mySimon, Inc., 194 F.R.D. 639, 640 (S.D.Ind. 2000)). FN2 Linnen v. A.H.Robbins Co., No. 97-2307, 1999 Mass. Super. LEXIS 240, at *16 (Mass. Super. June 16, 1999). FN3 Anti-Monopoly, Inc. v. Hasbro, Inc., No. 94 Civ. 2120, 1995 U.S. Dist. LEXIS 6355 at *4 (S.D.N.Y. Nov. 3, 1995). FN4 Lipco Electrical Corp. v. ASG Consulting Corp., N.Y.L.J., Aug. 26, 2004, at 20 (Sup. Ct. Nassau County Aug. 18, 2004). FN5 See, e.g., Zubulake v. UBS Warburg, 2004 U.S. Dist. LEXIS 13574 at n. 122 (S.D.N.Y. July 20, 2004) (referring to Sedona Conference as providing “very useful guidance”); Zakre v. Norddeutschelandesbank Girozentrale, 2004 U.S. Dist. LEXIS 6026 at *2 (S.D.N.Y. April 6, 2004) (following Principle 11 concerning format for production of electronic data); Laguna v. United States, 60 Fed. Cl. 133, 138 (Ct. Claims March 19, 2004) (citing Principles’ standards for preservation order with approval); Zubulake v. UBS Warburg, 220 F.R.D. 212, n.22 (S.D.N.Y. 2003) (citing Principles’ statement that absent specific circumstances, preservation obligations should not extend to disaster recovery backup tapes). FN6 Principle 5 (citing Concord Boat Corp. v. Brunswick, 1997 WL 33342759 (E.D.Ark. Aug. 29, 1997)). FN7 Comment 5.h FN8 Principle 9. FN9 Principle 12. FN10 Principle 3. FN11 Principle 14. FN12 Comment 14.d.

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