ARTICLES

Practical Responses to New Federal Rules on E-Discovery

By Steven C. Bennett
New York Law Journal
January 4, 2007

As of Dec. 1, 2006, amendments to the Federal Rules of Civil Procedure, aimed directly at regulating e-discovery, have gone into effect. The question now arises: What, in practical terms, should prospective litigants and their counsel do, to comply with (and take advantage of) the new rules?

This article is a brief attempt to summarize some of the most important practical points in dealing with the new rules. It is important to recognize, however, that there will be room for interpretation in the implementation of the rules. Thus, it will be useful for counsel and their clients to monitor developments, as courts around the country apply the new rules.

To a large extent, the new rules merely codify practices and understandings that have grown up over the past 30 years or so, as the impact of e-discovery on litigation has increasingly become apparent.

For example:

• It has been apparent since at least 1970 that the term "document" in Rule 34 includes "data compilations," i.e., electronic documents. Revisions to the language of Rule 34 (making clear that documents include "electronically stored information," or "ESI") simply reinforce this point.
• Similarly, since documents may include electronic documents, it has been apparent that one potential response to interrogatories is to point to (and produce) electronic documents. Revisions to Rule 33, again, make this technical point crystal clear.

EARLY ATTENTION
Increasingly, local rules and best practice recommendations have emphasized the importance of early attention to e-discovery issues. The revised rules make this requirement uniform, across all cases. Revised Rule 26 requires that parties address e-discovery issues in advance of the first conference in a case, and that they come to the first conference prepared to discuss e-discovery issues. Several important practical points derive from this requirement:

• Trial lawyers must become familiar with the basic language and issues of e-discovery, or be prepared to cede this area of pretrial preparation to more tech-savvy colleagues.
• Lawyers and their clients must begin to discuss e-discovery issues almost from the moment that they first learn of the dispute. Even if the client has no e-documents (a very rare case), the discussion must at least concern how the party will receive e-documents from the other side, and which e-documents may be essential to the party's case. Where a party has substantial quantities of discoverable e-documents of its own, moreover, an even more concerted discussion of the e-discovery process must be undertaken, as soon as possible.
• Lawyers and their clients must bring to the discussion with their adversaries (and ultimately with the court) a good understanding of the client's information and records storage systems. The new rules, for example, suggest that the parties should at least discuss the format for discovery (native files, images or paper). Without some understanding of what documents and information systems the client currently maintains, plus an understanding of any legacy data, off-site storage and data in the hands of vendors, the discussion of what is reasonable and possible in the way of e-discovery will suffer, and unnecessary disagreements and misunderstandings (with the court and opposing counsel) may be created.

PRESERVATION AND PRODUCTION
The new rules make clear that e-documents are subject to mandatory initial disclosures and further suggest that questions of data preservation may be an important part of the initial conferences with counsel and the court. Among the practical points that flow from the new rules:

• Parties and their counsel should be prepared to explain what data preservation policies are in place, from the outset of the litigation. Ideally, such policies will have been established well in advance of the onset of the dispute. A party should have a system to issue "litigation hold" notices, and to suspend routine destruction of data (such as deletion of e-mails on some fixed, periodic basis). The discussion at the outset of litigation should then focus (if necessary) on whether any additional, special preservation efforts (beyond those already embodied in the parties' pre-existing policies) are appropriate.
• The new rules recognize a distinction between "accessible" materials and materials that are "not reasonably accessible." For a party to obtain discovery of inaccessible materials (such as fragmented data), some showing of marginal value for the data (cost to retrieve versus benefit to retrieval) must be made. The new rules also suggest that some form of cost-shifting may be appropriate in such cases.
• What the new rules do not directly address is the question of preservation of arguably inaccessible data. It is unclear whether data that may never be produced (because it is inaccessible) must nevertheless be preserved (against the possibility that another party may call for the production of such information, and perhaps may agree to pay for its retrieval). Because the rule is unclear, some attention to this issue may be part of the agenda for initial discussions between the parties, at the outset of a case.
• The new rules also offer a "safe harbor," to avoid sanctions in circumstances where routine, good faith operation of an electronic information system may result in loss of data. Parties and counsel should consider the limits of this exception. The Advisory Committee Notes fully embrace the concept of a "litigation hold." A party certainly could not claim the benefits of the good faith safe harbor if it took no steps to impose a litigation hold. And the agreement of the parties (or direction from the court) regarding preservation, may do much to clarify the range of good faith preservation obligations in an individual case. The point, in short, is that parties and their counsel should not count on blanket after-the-fact claims of good faith, as a way of avoiding preservation obligations under the new Rules.

PRIVILEGE PROTECTION
The new rules suggest that one of the subjects for discussion between the parties at the outset of a case is entry into an agreement (typically "so ordered" by the court) that recognizes (at the very least) that inadvertent production of privileged material will not constitute a waiver of privilege (including work-product protection). This discussion must recognize the potential range, and limits, of such agreements:

• One form of privilege-protection agreement is a simple understanding that inadvertent production of privileged material will not constitute a waiver of privilege (as to the particular documents produced, or as to the broader subject matter encompassed by the privileged document). This form is often referred to as a "clawback" agreement (the point being that, in the event of inadvertent production of privileged documents, the producing party may "claw it back," by request to the other side, without waiver of privilege protection). Such agreements may be essential in the high volume, rapidly changing world of e-discovery, where 100 percent protection of privilege may be impossible, despite the best technology and the strictest human review.
• A more extreme form of clawback agreement (sometimes called the "quick peek" approach) takes as an organizing principle the notion that conventional privilege review takes too long and costs too much to be practical in an e-discovery world. Under the quick peek approach, the producing party makes all of its responsive documents available for review by the requesting party, without any initial effort to identify and withhold privileged documents. Instead, only when the requesting party designates specific documents for copying does a privilege review take place. At that point, the responding party, focusing only on the specific requested documents, may seek to withhold some of the documents on grounds of privilege. The quick peek agreement between the parties endorses this procedure, and confirms that no waiver of privilege will occur as a result of voluntary disclosure of privileged material (in the initial review process).
• The new rules suggest that the foregoing forms of nonwaiver agreement may be appropriate for discussion between the parties, at or prior to the first court conference in a case. The rules further suggest that the court itself may embody such an agreement in an order. Indeed, the better practice under the new rules may be to request such an order as a matter of course.
• What the new rules do not address, however, is the reach of such an order. Such an order technically only applies in the case in which it is entered. Consider, therefore, the party involved in multiple (perhaps serial) litigation. If it produces privileged information in one case, might a litigant in a subsequent case claim waiver of privilege (even though a nonwaiver agreement and order may be entered in the first case)? The answer is almost certainly affirmative, and the subsequent question (whether the second court will respect the initial court's nonwaiver order) cannot be answered strictly on the terms of the new rules. As a result, an amendment to the Federal Rules of Evidence (proposed FRE 502) has been developed. That proposed evidence rule amendment is still in the early stages of the approval process. For now, the new rules address some, but not all, of the problem.
• Finally, the new rules provide a procedural answer to the question of how to deal with allegedly privileged materials once they are in the hands of an adversary. The new rules make clear that, on request by a producing party, a receiving party must segregate (and not use) allegedly privileged materials, and must return such materials to the producing party, or seek direction from the court on the propriety of the privilege invocation. The new rules, however, do not address the substance of privilege and waiver claims. Rather, they establish a mechanism (arguably best practice, even before the new rules) to maintain the status quo, pending resolution of the privilege dispute.

HEIGHTENED AWARENESS
Perhaps the largest change engendered by the development of the new rules (a process that has unfolded over the course of the past five years) is the heightened awareness of e-discovery issues the rules have provoked, for bench and bar. The number of CLE and judicial training programs on the subject has steadily grown, and sophisticated parties and their counsel are preparing to exploit the procedures suggested by the new rules. It is fair to say that those who have not studied and embraced the new rules may find themselves at a distinct disadvantage. Steven C. Bennett is a partner at Jones Day and chairman of the firm's E-Discovery Committee. The views expressed, however, are solely those of the author, and should not be attributed to the author's firm or its clients.