According to a study by the University of California, Berkeley, while 93 percent of all corporate documents are created electronically, only about 30 percent are ever printed(1). Another study reports that over 31 billion e-mails are sent daily, up from just 12 billion three years ago(2).

These trends have transformed the discovery process. Electronic discovery, only a few years ago occasionally encountered in large cases, now is commonplace in federal litigation. In the process, differences between conventional and electronic records have heightened costs and confusion regarding the handling of electronic records under the present federal Rules of Civil Procedure, most of which were formulated prior to the information age. The result is producing a number of inconsistencies in legal doctrine regarding discovery of electronic versus paper records.

The Standing Committee on Rules of Practice and Procedure of the Judicial Conference of the United States has attempted to respond to these concerns through proposed changes to the Federal Rules of Civil Procedure. The proposals would establish the means of addressing electronic discovery issues early in the trial process, protect privileged documents by use of "claw back" and "quick peek" procedures and the introduction of a limited safe harbor when electronic documents have been deleted or destroyed. If adopted, the Proposed Rules will take effect by December 1, 2006. Although in need of certain refinements, these proposals are widely welcomed.

The Proposed Rules

The Standing Committee has proposed amendments to FRCP 16, 26, 33, 34, 37, and 45 affecting electronically stored records. The proposed amendments address five related areas:

1. Early attention to electronic discovery matters;
2. Discovery of electronically stored data that are not "reasonably accessible"
3. Assertion of privilege after the unintentional disclosure of electronic information;
4. Modifying Rules 33, 34 and 45 to specify electronically stored information; and
5. Creation of a Safe Harbor when a party has taken "reasonable" steps to preserve evidence.

1. The first area provides for open discussion of e-discovery matters from the start of litigation, and would include form of production, preservation of electronically stored data, and the review of such data for privilege.
2. The second area concerns electronically stored information that is not considered "reasonably accessible" and provides that, in appropriate cases, discovery materials should be converted to electronic format. In a somewhat controversial move, the rule also places limitations on the discovery of electronic information that is not "reasonably" accessible. In doing so it creates a two-tiered approach to e-discovery whereby data that is not accessed in the ordinary course of business are treated as subject to discovery only upon a showing of good cause.
3. The third area involves asserting privilege after the inadvertent production of otherwise privileged information. It provides procedures to assert privilege and establishes a process for challenges to privilege claims.
4. The fourth area applies Rules 33, 34 and 45 specifically to electronically stored information by modifying the language in these rules to reflect current changes in technology.
5. The fifth and most controversial area involves placing limits on Rule 37 sanctions for the loss of electronic data that has been the result of ordinary computer operations. It effectively creates a "safe harbor" limit on sanctions for the routine or automated deletion of data provided certain conditions are met.

1. Early Attention to Discovery Issues

   According to the proposed amendments, parties would be required to discuss issues involving the discovery of electronically stored data at the discovery-planning conference. This discussion would include the form of production, assertions of privilege, and any matters involving the preservation of electronically stored data. The results of the conference would be included in the discovery plan given to the court.

   This proposed change is widely welcomed as many e-discovery costs can be avoided or mitigated through early attention to potential problems. As such, this amendment is essentially sound and will likely be approved much as it is currently written.

2. Difficult-to-Access Data

   One of the most important amendments would change the long-held presumption regarding who must demonstrate whether requested information is relevant in a case. Under the proposed amendments, the requesting party would have to show that the requested information is pertinent and accessible.

   Other changes to Rule 26 would include a two-tiered approach that creates a distinction between so-called "reasonably accessible" and "inaccessible" data. Reasonably accessible data would be subject to discovery. Inaccessible data would not.

   A prime example of information that would likely be deemed not reasonably accessible is "legacy data." This kind of data includes deleted or currently unused data stored on an obsolete system, and data stored on magnetic tapes for disaster recovery. The information in these examples can be recovered but to do so would be cost-prohibitive.

   Because this amendment mirrors the two-tiered approach to disputed discovery in Rule 26(b)(1), many people believe it is unnecessary. Instead, critics of this amendment believe the rule should address whether the cost of producing information that is not reasonably accessible should shift to the requesting party.

   But if there is to be protection for information that is not "reasonably accessible," there needs to be more guidance as to what is reasonable, including specific examples in the Commentary. Without this, parties have too ready an excuse for failing to comply with discovery requests for data that is not immediately available and easy to extract.

   Further, the Rules need to be refined so that they more articulately balance all parties' interests including the stated need for the electronic data weighed against the potential disruption it will cause the requested party, the danger it creates to expose non-discoverable information, and additional costs imposed. As currently drafted, many critics believe the Rules fail to do this.

3. Disclosure of Privileged Information

   Also proposed are changes to Rules 26 and 45, which were prompted by concern that electronically stored information can be so voluminous and so much more difficult to review that there is an increased risk that privileged material will be inadvertently turned over in discovery.

   A new subsection to Rule 26(b)(5) would provide for so-called "sneak peek" and "claw back" agreements wherein a party who has unintentionally produced electronic information without intending to waive privilege, can, "within a reasonable time," notify the recipient, who would have to "promptly return, sequester, or destroy the specified information and any copies." The producing party would have to prepare a privilege log and otherwise comply with existing rules on withholding privileged material. Ethics rules would continue to require an attorney to stop reading once he or she realizes the document is privileged. Additionally, as the draft rules merely set out a procedure for dealing with privilege waiver issues, the courts will still decide whether a waiver has occurred. The proposed Rule 45 revision sets up similar requirements for subpoenas.

   There remains the danger that courts may be tempted to rely on these kinds of agreements as a mechanism to speed the discovery process. Law office staff often handle pre-disclosure reviews and cannot be reasonably expected to perform an adequate job of ensuring only appropriate data is turned over to opposing counsel.

   There is also the concern that even if there is no waiver of mistakenly divulged information, opposing counsel has still seen it. Moreover, state courts could conclude there has been a waiver with respect to any state proceedings. These are not insurmountable problems, but ones that should be carefully considered before final adoption of the amendments.

4. Electronically Stored Information

   The Committee also proposed changes to Rules 33, 34 and 45. For instance, Rule 33(d) would now state that responses to an interrogatory that are based on or can be obtained from business records should include electronic records. This means that a party responding to an interrogatory will now need to specify the source from which electronically-stored information can be derived and grant access to it. Likewise, the Rule 34 changes update its language and specifically mention electronically stored data. Rule 45 would similarly reflect updated language regarding electronic records. These modifications have met with little real criticism and should take effect in essentially the form in which they are now.

5. Safe Harbor

   An amendment to Rule 37 provides a safe harbor shielding parties from court sanctions if they take "reasonable steps to preserve" responsive information, or if failure to preserve such information results from the "routine operation" of information systems.

   The safe harbor would not apply if the court issues an order requiring the preservation of electronic data.

   Still unsettled is the standard of culpability. While the Standing Committee has proposed a negligence standard, in a note to the proposed rule, the Committee suggests that the standard could be one of intentionality or recklessness. Much testimony presented to the Committee has stated that the vast amounts of data and the difficulty of managing intricate modern business systems necessitate a higher standard than mere negligence.

   Generally speaking however, the higher the level of fault required, the more likely it is that parties will not establish strong standards for preserving their electronic files. Common sense dictates that if parties have processes that routinely delete data promptly and thoroughly, they face less risk parties of sanctions for intentional, willful deletion. The problem with the negligence standard is that vagueness remains regarding what is "reasonable" in terms of preserving electronic data. One solution is to simply articulate what is "reasonable" in terms of how long data must be retained and what kinds of safeguards must be employed.

   Some have argued convincingly that Rule 37(f) may very well be unnecessary because federal caselaw regarding spoliation is already sufficiently defined. If a party's preservation policy fails to comply with their legal duty to preserve, they are subject to sanctions. It seems to many that singling out information merely because it is stored in electronic format is somewhat arbitrary.

   For these reasons, the Safe Harbor, while having merit, should be strongly modified or eliminated altogether.

Conclusion

If adopted, the Proposed Rules would help contain the disruption and cost of electronic discovery and foster uniformity among the district courts with respect to many e-discovery matters. The difficulty is that such rules need to provide a balancing of fairness, certainty and adaptability for new technologies.

As far as the Rules encourage parties to discuss e-discovery matters at their initial conference and as far as the Rules reflect a more modern understanding of how electronic data is stored and searched, they are to be commended. But on the issues of safeguards from sanctions for deleted data, and under what circumstances companies must attempt to retrieve data, they are far from ideal. In these areas, the proposed rule changes employ vague standards, and, as written, will likely result in the ubiquitous deletion of emails with relative impunity for corporate defendants. A potentially more serious issue is that of technology and data retrieval outpacing the proposed amendments.

Nevertheless, while the Proposed Rules still leave many nagging questions in terms of fairness and effectiveness, they are without doubt a long-awaited and much-needed step in the right direction.

To read the proposed amendments, go to http://www.uscourts.gov/rules/proposed0205.html.

1. "Sarbanes-Oxley Has Major Impact on Electronic Evidence," The National Law Journal, viewed online at http://www.law.com January 2, 2003 (noting that "93 percent of all business documents [are] created electronically and only 30 percent [are] ever printed to paper").

2. Worldwide Email Usage Forecast, 2002-2006: Know What's Coming Your Way, http://www.mindbranch.com/listing/product/R104-10759.html.

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