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Chapter 1 An Introduction to Electronic Discovery

This chapter describes and defines electronic discovery, or “e-discovery,” for anyone involved in the processes of litigation or investigations. It should provide an introduction and overview of the basic concepts and terms you will need to begin any conversation around the practice of electronic discovery. Following chapters will dive into more nuanced and specific issues within the process of managing electronic evidence in litigation.

Introduction

The purpose of this guide is to describe the fundamentals of e-discovery. If you are involved in modern litigation or investigations, you will almost certainly encounter e-discovery. However, we should note that while the legal profession now recognizes e-discovery as a distinct practice area, the word is really an artificial construct.

E-discovery is really just another way to describe discovery, the process of obtaining and exchanging evidence, or information that might potentially become evidence, in litigation. But as the world has moved almost exclusively to electronic communications, some legal professionals began adding the “e” to make it clear that electronic records were now involved. So at a basic level, e-discovery describes the process of discovery, updated to address the challenges and complications of collecting, reviewing, and producing evidence in the modern, digital world.

What is e-discovery?

Discovery is the legal process governing the right to obtain and the obligation to produce non-privileged matter relevant to any party's claims or defenses in litigation. In other words, it is the legal procedure by which parties are required to exchange information and evidence with one another in state and federal courts. While we primarily describe discovery in the context of litigation, the process is also essential to investigations, arbitrations and, generally, other forms of dispute resolution whereby parties must gather facts.

Most discovery still comes in the form of testimony or recorded interrogations. Discovery can also involve physical items, like medical exams or a defective product. But increasingly, discovery is focused on electronically stored information (ESI), which is why lawyers often use the term e-discovery to distinguish the discovery of electronic records from other forms of discovery.

In years past, parties exchanged paper documents- often hundreds and hundreds of boxes of them. Over time, paper documents have been largely replaced with computer generated content, and the process of discovery was forever fundamentally changed. ESI can now be email, social media, cell phone data, digital audio or video recordings, global databases, apps, global positioning data, data stored in a household appliance, onboard computers in a car, or any of the thousands of digital records produced by an average person on an average day.

Why is e-discovery so hard?

Until recently, discovery was a relatively pro forma affair, involving written requests for production in which a party to a lawsuit asked another party or a third party to furnish information. To do this, they described the documents or records of interest or particular types of information they needed to support the claims of a case. The party responding to the request was expected to locate responsive and produce the evidence or copies of the evidence.

The responding party could withhold or redact items containing privileged information, such as confidential communications between lawyer and client, but was obliged to furnish a log describing what had been withheld. The court served as a referee, assessing when a request was unduly burdensome or compelling production when responses proved insufficient.

But with the mass adoption of personal computing and the internet in the 1990's, the processes and practices that had worked well for paper documents began to break down.

Today, what once was ink on paper are now pixels on screens, or are made up of database records which are incomprehensible masses of numbers and symbols except to trained computer experts.

Another important fact to understand is that the the United States has a long tradition of broad discovery, which allows litigants to request a wide range of information and document types for almost any matter. Attorneys in other countries are likely shocked and horrified at the amount of information discoverable in U.S. courts, as many countries have much more restrictive rules and regulations regarding the discovery of personal or private information.

To help you understand the scope of the problem, consider the volume of evidence now available for litigation. For example, in one recent patent dispute, Samsung collected and processed about 3.6 terabytes of data, or 11,108,653 documents in a case against Apple Computers. The cost to process that evidence during a 20-month period was over $13 million dollars.

Of course, this case is an extreme example, but e-discovery is a fact in matters of all sizes. In fact, digital evidence is playing an increasingly important role in even family law and criminal cases. As we all live increasingly digital lives, we are all leaving a daily trail of electronic evidence that often tracks our every move. And it is all available for discovery.

The basics of e-discovery

Understanding e-discovery begins with understanding the Federal Rules of Civil Procedure. Don't worry- we're not going to make you take a Civil Procedure class. However, it is important to understand that the Federal Rules of Civil Procedure describe and define the discovery of electronic information. In fact, the rules have been updated twice already to address the specific concerns of electronic discovery.

At the federal level, the Federal Rules of Civil Procedure (FRCP) govern the procedure for civil lawsuits in United States district courts. At the state level, each state has their own set of statutes and rules that govern the procedure for civil lawsuits in state court. However, we mainly refer to the FRCP, which most jurisdictions model their own rules after.

In December 2006, significant amendments to the FRCP shaped the landscape for how e-discovery works today. Among other changes, the 2006 amendments redefined discoverable material; encouraged early attention to issues relating to eDiscovery; introduced the concept of “reasonably accessible”; provided a procedure for asserting claims of privilege and work product after production; and provide a mechanism for "safe harbor" limits on sanctions related to loss of ESI as a result of routine operation of computer systems.

Arguably, the most important 2006 amendment was simply to include the words “electronically stored information” on the list of information that is discoverable throughout the discovery process. Specifically, FRCP Rule 34 dictated disclosure and discovery related to “producing documents, electronically stored information, and tangible things or entering onto land, for inspection and other purposes.” The phrase “electronically stored information” is broad enough to cover all current types of computer-based information and intended to be flexible enough to encompass future changes and technological developments.

The Rules were amended again in December of 2015. These more recent changes were less sweeping but no less important. The amendments were aimed primarily at addressing a few outstanding issues not adequately addressed in the 2006 changes.

The rule change that got the most attention was Rule 37. The amended Rule 37(e) allows sanctions for failure to preserve ESI, but limits sanctions for failure to preserve so that negligence, even gross negligence, will not be sufficient for imposition of most severe penalties.

Perhaps the most sweeping change was to FRCP 26(b)(1) regarding proportionality and the scope of discovery. Rule 26(b)(1) was rewritten to limit discovery to that which is “proportional to the needs of the case” and provided five factors for courts to consider. This Amendment redefined the scope of discovery so that parties must address concerns about whether the amount of discovery is reasonably necessary to resolve the case fairly.

The rules you need to know

Rule 26(f): Setting the Ground Rules

The actual negotiation will begin with what is known as a 26(f) Conference, which happens before any discovery can occur. The courts have made it clear these conferences should happen as early as possible and parties should agree on foundational principles like the forms of production. If parties can't agree within two weeks, they face the judge for what is known as the Rule 16 Conference. Once an actual discovery request is issued, the responding party may object, under Rule 26(c) and 37(a).

Rule 26(g): A Reasonable Inquiry

The Federal Rules of Civil Procedure mandates a standard of care, including “that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry: with respect to a disclosure, [the response] is complete and correct as of the time it is made.” However, “reasonable” is a matter for the court to decide on the totality of the circumstances.

If parties fail to cooperate and judges or magistrate judges become involved, parties lose much of their freedom to negotiate. Also note Rule 26(b)(3), which says discovery of opposing counsel's work- product is admissible only upon showing the party seeking it has substantial need and is unable to obtain equivalent materials by other means.

FRCP Rule 26(d)(2): There's More Than One Way to Do eDiscovery

Don't let opposing counsel or judges impose a set pattern on the process. Just because one approach has worked for them in the past, doesn't mean it's always the right way to proceed. In addition, don't let the other party's timeline get in the way of what you need to do. The rules clearly state that, “methods of discovery may be used in any sequence,“ and “discovery by one party does not require any other party to delay its discovery.”

Rule 34(b): Get Data How You Want It

Rule 34(b) allows the requesting party to decide how it wants information to be produced and lets the responding party object if impractical. Note that if the requesting party fails to specify the form for producing data, the producing party has the option to either produce the information in a form in which it is ordinarily maintained, or in an electronically search-able form. Courts have rebuked parties that produce data in printed or other non-native formats. (When in doubt, get the native format. It retains potentially useful metadata and is usually easier to access.)

Rule 37: Still a Safe Harbor?

Rule 37(f) used to be known as the “safe harbor” provision. However, few legal teams used this provision. The amended Rule 37(e) allows sanctions for failure to preserve ESI, but limits sanctions for failure to preserve so that negligence, even gross negligence, will not be sufficient for imposition of most severe penalties. Under the amended rule, courts may only sanction parties if one party is found to have “intent to deprive another party” of information and if that information cannot be recovered or produced from another source. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court may impose sanctions.

Rule Rule 26(b)(1): Keep it in Proportion

The old rule 26(b)(2)(C)(iii) was clear that a court could limit discovery when the burden outweighed benefit. However, new Rule 26(b)(1), implemented by the December 1, 2015 amendments, takes the factors in these old requirements and puts them at the heart of any discussion about the scope of discovery.

How it works: The Electronic Discovery Reference Model (EDRM)

In 2005, two consultants, George Socha and Tom Gelbmann created the Electronic Discovery Reference Model. The name is clunky, and the model is by no means perfect, but it is the best and most commonly accepted description of the e-discovery process. Not all litigation will follow all of the steps described (and new steps have been added over the years), but it remains a useful guide.

The EDRM consists of nine stages, which we will describe in more detail throughout this book. The process begins with information governance, identification, preservation, and collection. The data management functions include processing, review, analysis, production, and presentation.

Information Governance

Information governance is a more recent addition to the EDRM. In recent year, large organizations have begun looking for ways to reduce e-discovery costs before litigation happens, which means managing ESI from its initial creation through its final disposition.

Identification

Locating potential sources of ESI, the volume of data that might be discoverable, the custodians and locations of discoverable evidence. The key is not only identifying the evidence but addressing the potential scope and technical issues of the project at hand.

Preservation

Parties must ensure that ESI that is discoverable for litigation is not altered or destroyed. ESI is often deleted in the course of routine business, but when potentially discoverable information is deleted, that can be considered spoliation, a sanctionable offense in some cases.

Collection

Collecting ESI is a significant challenge. Data must be collected in a forensically sound manner so that evidence is not altered or changed.

Processing

In order to review evidence in a forensically secure manner, ESI is often converted to forms more suitable for review and analysis, often an image file. The original, native document is preserved as well for more detailed, forensic analysis.

Review

The heart of the process. Attorneys must review documents and evidence for relevant information while protecting privileged information from being accidentally produced to opposing counsel.

Analysis

Attorneys must review ESI for content and context,identifying key custodians, subjects, patterns, and discussions.

Production

Delivering ESI to others in appropriate forms. Parties still often produce evidence on hard drives or disks, although electronic production is also employed.

Presentation

Once ESI has been reviewed for relevance, a few key pieces or passages may actually be presented at a deposition, hearing, or trial. Evidence is presented to help witness testimony, demonstrate key facts, or persuade a jury or audience.

Key cases to know

Zubulake v. UBS Warburg L.L.C. (“Zubulake V”)
U.S. District Court, Southern District of New York
May 2004

Zubulake is the mother of e-discovery case law. This was not the first case to mandate parties make a reasonable inquiry to identify likely custodians or sources of information. However, Judge Shira Scheindlin wrote a series of long, detailed opinions with detailed balancing tests that were so thoughtful, complete, and persuasive that the issue was no longer possible to ignore. The defendants initially argued that recovering and reviewing ESI from backup tapes would be too expensive. Judge Scheindlin's seven-factor test compelled the defendants to produce the evidence, although the costs of recovery and review of the emails were shared by both parties.

Victor Stanley Inc. v. Creative Pipe Inc.
U.S. District Court, District of Maryland
May 2008

Victor Stanley sued Creative Pipe for copyright and patent infringement over the design of an end frame for a park bench. U.S. Magistrate Judge Paul Grimm ruled Creative Pipe had waived attorney-client privilege when it inadvertently produced several electronic documents. Grimm found Creative Pipe waived the privilege because it had failed to work out a privilege search protocol with the opposition, it had declined to use a “clawback” agreement, and it had not proven that its search process for privileged documents was reasonable. As such, Grimm deemed the documents to have been voluntarily disclosed. Victor Stanley prevailed at trial in September 2011, winning more than $2 million in damages and more than $1 million in a monetary sanction against Creative Pipe for destroying electronic evidence. The verdict was upheld on appeal in February 2013.

Mancia v. Mayflower Textile Services Co.
U.S. District Court, District of Maryland
October 2008

Once again, Grimm made his mark in e-discovery in this wage-and-hour case brought by several Mayflower employees. Grimm held that the failure of opposing counsel to cooperate and work out disputes on their own was the biggest reason why e-discovery costs were skyrocketing. He strongly advised counsel from both sides to work together and make the e-discovery phase move more smoothly. The parties settled in November 2009. Many judges have followed Grimm by advising attorneys before them to cooperate and hold regular conferences before even setting foot into court. The proposed e-discovery amendments to the Federal Rules of Civil Procedure also contain a duty to cooperate.

The Pension Committee of the University of Montreal Pension Plan, et al. v. Banc of America Securities
U.S. District Court, Southern District of New York
January 2010

Judge Scheindlin dealt with the question of spoliation of electronic evidence and found herself reiterating many of the points she had made in Zubulake. (She even called the case “Zubulake Revisited: Six Years Later.”) Investors in the pension plan had filed suit to recover lost funds. Several investors were accused of failing to preserve evidence, and Scheindlin focused heavily on the duties of counsel. She ruled that attorneys were obligated to issue written litigation holds in order to preserve electronic and paper records, and that failure to do so would be considered gross negligence. Scheindlin also reinforced the idea that sanctions should be mild, but that parties behaving recklessly, negligently and knowingly could be sanctioned, depending on the level of harm experienced by the other party. In this case, Scheindlin handed down monetary sanctions and the dreaded adverse inference. The parties eventually settled out of court.

Rimkus Consulting Group Inc. v. Cammarata
U.S. District Court, Southern District of Texas
February 2010

One month after Pension Committee, U.S. District Judge Lee Rosenthal refused to follow Scheindlin's jurisprudence in a case where a consulting group was trying to enforce a noncompete agreement with a group of former employees. Rimkus accused its ex-employees of intentionally deleting relevant emails and asked for sanctions. Rosenthal ruled sanctions were only appropriate in instances like this where a party behaves in bad faith. Rosenthal's opinion also highlighted a major split among federal circuits as to when sanctions were appropriate—a split that could only be resolved by the U.S. Supreme Court or the proposed new federal rules. In June 2010, the case was resolved when Rosenthal imposed a permanent injunction preventing the ex-employees from using certain facts and methods they had obtained while working at Rimkus.

Da Silva Moore v. Publicis Groupe & MSL Group
U.S. District Court, Southern District of New York
February 2012

U.S. Magistrate Judge Andrew Peck approved protocols to allow for both sides to use predictive coding in conducting e-discovery. The decision—believed to be the first to endorse the use of technology-assisted review—clearly states that “while some lawyers still consider manual review to be the ‘gold standard,' that is a myth, as statistics clearly show that computerized searches are at least as accurate, if not more so, than manual review.” However, the case, which remains open, got bogged down as attorneys representing Da Silva Moore filed a petition for Peck to recuse himself from the case, accusing him of being biased as a result of his previous public comments in favor of using predictive coding. The appellate courts backed Peck, and the U.S. Supreme Court declined to intervene in October 2013.

Arthur Andersen, LLP v. United States
United States Supreme Court
May 2005

In the conclusion to the famous criminal action against the Arthur Andersen accounting firm stemming from the collapse of Enron, the Supreme Court overturned Arthur Andersen's conviction for criminal obstruction of justice for shredding documents prior to receiving a subpoena from the SEC. The Court determined that the trial court's instruction to the jury omitted the essential element of scienter—actual knowledge of a proceeding (in contrast to the “reasonable anticipation of litigation” standard in civil actions) and the intent to obstruct that proceeding.

Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co.,

U.S. District Court, Florida March 2005 In a lawsuit alleging accounting fraud and misrepresentation in the sale of stock, the plaintiff filed a motion for sanctions, including an adverse inference jury instruction for the defendant's destruction of e-mails. The defendant had a practice of overwriting e-mails after twelve months, although it was required by the SEC to retain e-mails for two years. The court had ordered the defendant to review backup tapes, conduct searches, produce e-mails and a privilege log, and certify compliance with discovery obligations. The defendant certified discovery as complete despite having failed to review more than 1,400 backup tapes. In its order on March 23, 2005, the court revoked the pro hoc vice license of the defendant's trial lawyer and disqualified the law firm, forcing the defendant to seek substitute counsel two weeks before trial. Sanctions in the case were ultimately reversed, but the threat of punishment in this suit scared many lawyers straight when it comes to e-discovery.