ARTICLES

The Real Implications of the New Rules on EDD

By Scott Oliver
Special to Law.com
January 23, 2007

Effective Dec. 1, 2006, the Federal Rules of Civil Procedure were amended to provide definition, structure and predictability to electronic discovery. For many litigators, the rule changes represent a fundamental shift in the way we prepare for and manage the discovery of electronically stored information (ESI) for federal cases. Changes to state rules are not far behind. In fact, several states, such as California, Maryland and New Hampshire, are in various stages of implementing rule changes. Similar changes are already in effect in Idaho and New Jersey. While the objectives of the new Rules are clear, the necessary steps to comply with them are not. This article examines the major FRCP rule changes and their real implications. It provides a roadmap for becoming compliant while controlling business risks and understanding how the new rules can be leveraged in the courtroom.

EARLY ATTENTION TO ELECTRONIC DATA DISCOVERY
Rules 16 and 26 were amended to provide the court with early notice of e-discovery issues. Specifically, Rule 16(b) now states that the scheduling order must include "provisions for disclosure or discovery of electronically stored information" and "any agreements the parties reach for asserting claims of privilege or of protection as trial-preparation material after production." Rule 26(f) requires that parties "discuss any issues relating to preserving discoverable information and to develop a proposed discovery plan." Before the new Rules, this plan was often communicated well into the litigation process, years afterward in some cases. But since these new requirements are now part of the initial "meet and confer", the time frame has been significantly reduced. Under Rule 16(b), parties must "meet and confer" at least 21 days before the scheduling conference (which must occur within 120 days after filing the lawsuit). The bottom line is that parties must define and share their e-discovery plans within the first 99 days of a case.

The real implication of this rule change is that the number of cases subject to rapid case assessment, litigation holds, evidence preservation and collection will increase significantly. Large U.S. companies are already concurrently managing 556 cases on average, with an average of 50 new disputes emerging each year.[FOOTNOTE 1] Moreover, due to the increased number of requests and the large amounts of data now categorized as discoverable ESI -- e-mail being the most voluminous -- these rules will significantly impact corporate resources and e-discovery processes. This will be especially challenging in e-mail-related cases, where the job of finding and sifting through repositories of e-mail is notoriously costly and timely.

To cost-effectively scale and meet the new timeline, technology must play a role in the discovery process to:

1. accurately analyze terabytes of data, enabling rapid early case assessment and ensuring litigation readiness; and
2. audit the current e-discovery process to ensure it's cost-effective, predictable and defensible.

A defined, defensible e-discovery process will also be necessary for protection under Rule 37(f), the so-called "Safe Harbor Rule." The Rule states that "[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation." Rule 37(f) may offer companies protection if ESI is lost, but only if a "routine, good faith" discovery process is well-defined, documented and followed.

KNOW WHERE THE RELEVANT ESI LIVES
With the new Rules, the first step in any litigation with e-discovery will be to identify all relevant data sources and formats. Rule 26(a) states that initial disclosures during the meet and confer include a "copy of, or a description by category and location" of relevant ESI. A critical requirement to comply with this rule is the ability to rapidly identify all relevant data sources of ESI. If additional sources are added after the fact, a judge can impose costly sanctions.

The real implications for Rule 26(a) is that litigants must inventory ESI, classify data and communicate time and cost estimates for its discovery. This cannot be done in silos -- legal and IT departments must work together to understand the various forms of ESI, where they reside and how to access them. An inventory of ESI will also help companies that seek protection from e-discovery costs under Rule 26(b)(2), "protection due to undue burden or cost." In fact, it would be impossible to seek protection under Rule 26(b)(2) without it. Rule 26(b)(2) was designed to handle the difficulties in discovering information by stating that a party "need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost." This might sound like available protection for ill-prepared companies but be warned -- it's not a panacea for all e-discovery issues. It's widely accepted that business e-mail and documents -- comprising the vast majority of company ESI -- be readily accessible, so these type of documents won't normally be protected by this rule. The key here is to make the e-discovery process as scalable and cost-efficient as possible using sufficient resources and available technology. Make sure you determine the best way to:

• Efficiently access corporate data sources where ESI is created, stored and archived (e.g., e-mail systems, networked storage, archives);
• Rapidly find, hold, analyze and produce only the relevant ESI for each case;
• Minimize e-discovery costs by centralizing ESI repositories over time;
• Send only the relevant ESI to requesting parties.

The combination of inefficient e-discovery processes and large amounts of ESI make the inadvertent transfer of privileged or otherwise protected ESI a real possibility. Don't be lulled into thinking that Rule 26(b)(5), which provides a mechanism to "claw back" inadvertent transmission of privileged and protected ESI, offers suitable protection. That simply isn't the case. The real implication is that if inadvertent transmission does occur, it's almost impossible to completely recover all trade secrets, intellectual property, privileged information, etc., resulting in potentially significant legal, business and financial risks.

This rule should serve as an alarm to the real risk of privileged information disclosure. Because of potential damages, take heed and only produce relevant and nonprivileged ESI. Utilize readily available technology to expedite the process by analyzing and "culling down" ESI from an initially large set to a much smaller, relevant, nonprivileged set for production. By performing more analysis up front in the e-discovery process, litigants not only protect themselves against transferring privileged information but significantly lower the cost of production.

SUPPORT NATIVE FORMATS FOR ESI PRODUCTION
Rule 34(b) was amended to determine how ESI is produced. The rule states that it's the requesting party, not the responding party, which requests "the form or forms in which electronically stored information is to be produced." Rule 34(b)(ii) goes on to state that if the request does not detail the form(s) of production, the responding party must produce it "in a form or forms in which it is ordinarily maintained or in a form or forms that are reasonably usable." The real implication is that we are likely to see an increase in requests to produce ESI in native formats because of the importance of searching and reviewing metadata. The knowledge gained from close inspection of ESI's metadata, which is unavailable when ESI is produced as hard copy, can be extremely useful. For example, the date when a certain document was created or when an e-mail was forwarded can make or break a case.

CONCLUSION
The amended Federal Rules of civil Procedure dramatically change the way courts govern the use and discovery of ESI during litigation. As a result, e-discovery compliance is a subject that must be taken seriously -- or invite serious consequences. Technology is no longer a "nice to have"; with the rule changes it's a "must have." The best solutions will be technology or services capable of analyzing and producing ESI in native formats. As an industry, we cannot afford to ignore the rising costs of e-discovery or view ESI investigations as an ad hoc fire drill. To effectively comply with the new rules and turn the tide of e-discovery costs, e-discovery must evolve into an efficient, accurate and predictable process.

::::FOOTNOTES:::: FN1 2006 Jaworski Survey. Scott Oliver is a partner at Pooley and Oliver LLP. Oliver specializes in the litigation and trial of patent, copyright and complex technology-related cases in state and federal courts, as well as before the International Trade Commission. Prior to joining Pooley and Oliver, Oliver was a partner with Gray Cary Ware and Freidenrich, specializing in intellectual property litigation. Oliver spearheaded his firm's decision to implement the Clearwell E-Mail Intelligence Platform to automate its e-discovery process. Law.com's ongoing IN FOCUS article series highlights opinion and analysis from our site's contributors and writers across the ALM network of publications.