Recent Amendments to the Federal Rules
Apr 2007
© Copyright 2007. All rights reserved, Emergency Envelopes, Volume II, Issue 2
Recent amendments to the Federal Rules of Civil Procedure herald a sea change in the legal arena. These modifications, which took effect on December 1, 2006, have an impact on businesses and on the prosecution of federal criminal matters.
Generally, the amendments acknowledge advances in technology and recognize the significant impact that electronically stored information ("ESI") has had on the civil discovery process. In particular, Rules 16, 26, 33, 34, 37, and 45 of the Federal Rules of Civil Procedure-the heart of the rules directing the discovery process-have changed to better accommodate the maintenance, collection, and sharing of ESI. The amendments to Rules 5, 32.1, and 41 of the Federal Rules of Criminal Procedure also addressed improvements in technology. The impact of these changes is discussed below.[1]
The Civil Discovery Rules
Several years of thought, committee work, public hearings, and redrafting went into the new Rules 16, 26, 33, 34, 45 and Form 35 of the Federal Rules of Civil Procedure. Many view these amendments as a seminal point in our discovery jurisprudence.[2] Just a few examples illustrate the impact of these changes:
- Preservation of ESI is no longer debatable. Parties must preserve all potentially relevant ESI-even information that may be "inaccessible."
- Production of ESI is no longer debatable. ESI-like paper documents-is discoverable and litigants must produce it. Gone are the days of extensive discovery requests identifying various sources of ESI.
- Mandatory early discussions mean knowing your client's ESI within weeks of starting a case.
- Even ESI that is difficult to obtain may still be discoverable depending on various factors.
Given the scope and impact of the rules, data and/or document retention policies should be addressed, with the changes to the rules kept in mind.
The Heart of the ESI Amendments: Rule 34
Rule 34 forms the core of the Civil Rule amendments. Most of the amended rules refer to it, and its definition of ESI is central to the other amendments. Specifically, Rule 34(a) provides that ESI-"including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations ‘stored in any medium'"-may be subject to a discovery request, including a request "to inspect, copy, test, or sample[.]" Fed. R. Civ. P. 34(a). This means that a party can lawfully request that its opponent produce nearly any conceivable type of information that can be stored electronically. Rule 34(a)'s expansive wording is intended to be broad enough to cover all known types of computer-based information, and flexible enough to encompass ESI that may emerge from future technological developments.
Though broadly drafted, Rule 34(a) does not give the requesting party the unbridled right to search through the entirety of another party's records.[3] Similarly, Rule 34(a)'s reference to "testing" and "sampling" does not create an automatic right of direct access to a party's electronic information system. Fed. R. Civ. P. 34(a), cmt.[4] A court may, however, use the Rule 26(b)(2) factors to determine whether to allow forensic inspection of an adversary's computer.[5]
Rule 34(b) and its committee notes also give direction regarding the form in which ESI may be produced as well as a "default" procedure if the parties cannot agree on the appropriate form or forms. Under the new rule, the requesting party may select the form in which its opponent must produce ESI. See Fed. R. Civ. P. 34(b). But if the requesting party fails to do so, or if the responding party objects to the form requested, the responding party must identify the form or forms it intends to use. Id. If the parties cannot reach agreement, the default rule requires that the responding party either produce the information as it is "ordinarily maintained" or in a form that is "reasonably usable." Id., 34(b)(ii). Producing documents as they are "ordinarily maintained" means as the documents were kept, used, and organized by the responding party-metadata included-and does not likely include downloading electronic documents into a specially created electronic database, thereby producing the documents in a random, disorganized fashion.[6] In selecting an alternative "reasonably usable" form, parties must keep in mind the Advisory Committee's proviso that data ordinarily kept in electronically searchable form "should not be produced in a form that removes or significantly degrades this feature." Fed. R. Civ. P. 34(b), cmt. No matter what form is picked on, ESI need only be produced in one form. Fed. R. Civ. P. 34(b)(iii).[7] The Rule 34(b) amendment can also be read to define how often the same ESI must be produced-once.[8]
Several recent cases have addressed issues relating to the form of production, including disputes over producing metadata.[1] For instance, in Wyeth v. Impax Labs., Inc., defendant moved to compel plaintiff to produce electronic documents in their native format with metadata, rather than in the TIFF format in which they were produced.[9] The Wyeth court initially pointed out that the default standard for discovery of electronic documents used in the District of Delaware set image files (PDF or TIFF) as the default form in the absence of an agreement to the contrary. Id. at *2. Then, noting that the parties never agreed on a particular format, the court held that the plaintiff complied with its discovery obligation by producing TIFF files. Id. The court also observed that the defendant never argued that accessing metadata was generally necessary or that it had a particularized need for it. Id. Although, the Wyeth court denied plaintiff's motion to compel native files, it is important to note that because a court could order a party to produce native files if there was a particularized need, parties must preserve the integrity of all electronic documents produced even if the documents were in fact produced as image files.
The Eastern District of New York's decision in In re Payment Card Interchange Fee & Merchant Discount Litig., underscores the point as soon as one party requests metadata or native file production, the responding party may have to produce it unless they can establish an undue burden.[10] In this case, in response to defendants initial document requests, which did not specify a form of production, individual plaintiffs printed all the electronic documents they planned to produce and scanned them to create TIFF images, essentially stripping the text-searchable electronic documents of metadata and then converting them back into searchable electronic documents without the subset of metadata. Id. at *1. After substantial production in this form, defendants objected to the production between it "degraded the searchability" of the documents and requested that plaintiffs produce all electronic data in the form "in which it is ordinarily kept."[11] While acknowledging that plaintiffs elected to produce a "reasonably usable" form of electronic data in accordance with Rule 34, the court concluded that they had "run afoul of the Advisory Committee's proviso that data ordinarily kept in electronically searchable form should not be produced in a form that removes or significantly degrades this feature." Id. at *4. Then, analyzing the dispute under Rule 26(c), the court held that it would impose too great a burden on plaintiffs to require them to re-produce data that they have already produced, but noted that they would not be protected from being compelled to produce in native format-metadata included-going forward. Id. at *4-5.
Courts often mandate parties to produce documents in native electronic format. If this occurs, the producing party could be forced into producing the electronic documents with the metadata intact, unless the party timely objects, the parties agree that metadata should not be produced, or the producing party requests a protective order.[12]
Planning for ESI: Rules 16, 26(f), and Form 35
Under the new amendments, parties must address ESI and privilege issues at the outset of a lawsuit. Amended Rule 16(b) contemplates that details regarding the disclosure or discovery of ESI, as well as agreements reached by the parties for asserting claims of privilege or work-product protection, may be included by the court in its scheduling order. Fed. R. Civ. P. 16(b)(5), (6). The court will use the agreements reached in the parties' Rule 26(f) report to enter the scheduling order. Fed. R. Civ. P. 16(b).
Accordingly, Rule 16's cousin, Rule 26(f), explicitly requires that the parties attend to ESI issues early, including during the meet and confer, and develop a discovery plan that addresses ESI. Fed. R. Civ. P. 26(f)(3). Discussions should focus on "any issues relating to disclosure or discovery of electronically stored information"-a broad and powerful instruction. Thus, at a minimum, the parties should address (1) data preservation, (2) the form and method of production, and (3) protocols for asserting claims of privilege and incorporate these issues into a proposed order for the court. See Fed. R. Civ. P. 26(f)(3), (4), cmt. Form 35 "Report of Parties' Planning Meeting" has been amended to reflect the changes to Rule 26(f), and now requires a brief description of the parties' proposals for disclosing and discovering ESI as well as any agreement between the parties on how to handle privilege or work product issues.
One cannot overemphasize the importance of planning and preparing in regard to ESI, especially privilege waiver issues. Long before the amendments were passed, courts were echoing the comments to Rule 26(f) regarding the "acute" issues that arise with privilege waiver "when discovery of electronically stored information is sought," in part due to the difficulty and expense of conducting privilege review.[13] Although courts will take into account the sheer amount of electronic documents to review for privilege in determining whether inadvertent disclosure of privileged documents will result in waiver,[14] this should not tempt parties to avoid addressing privilege waiver issues right up front.
Producing and Protecting ESI: Rule 26
Initial Disclosures
Rule 26(a)(1)(B) adds ESI to the list of items that must be included in initial mandatory disclosures. Fed. R. Civ. P. 26(a)(1)(B). This means that a party, without awaiting a discovery request, must provide to other parties a description by category and location of all ESI.
Production of ESI: What to Produce?
Rule 26(b)(2)(B) applies a phased, two-tier structure to producing ESI, the first is party-managed and the second is available only by court order. A party must provide all relevant, non-privileged, "reasonably accessible" ESI, or what is known as first-tier discovery, without a court order. As for second-tier discovery-ESI that is "not reasonably accessible" because of undue burden or cost-the party must identify these hard-to-retrieve sources, but need not automatically produce the information contained in the identified locations. Fed. R. Civ. P. 26(b)(2)(B).[15]
Although a party need not review or produce ESI identified as "not reasonably accessible" because of the undue burden and/or expense involved in its production, the party must thoroughly search for, accurately identify, and preserve the sources of potentially relevant information or risk being found negligent.[16] The identification of these sources should provide enough detail to enable the requesting party to evaluate the costs of providing the discovery and the likelihood of finding responsive information on the identified sources. Fed. R. Civ. P. 26(b)(2)(B), cmt.
Once identified, information contained in this "second tier" is subject to discovery only if the requesting party can show good cause for a court to order production. Fed. R. Civ. P. 26(b)(2)(B). Thus, if a party wants this "second tier" information, it will likely move to compel discovery. The burden then shifts to the responding party to demonstrate that the information is "not reasonably accessible." Id. If the responding party so demonstrates, the burden shifts back to the requesting party to establish "good cause" for the production, considering the limitations of Rule 26(b)(2)(C).[17] As always, the court has final say in the process as a whole, as the rule directs that "[t]he court may specify conditions for the discovery," including but not limited to, payment by the requesting party of part of the reasonable costs of obtaining the information. See Fed. R. Civ. P. 26(b)(2)(B).
Applying the foregoing burden-shifting analysis, the Eastern District of Missouri, in a recent computer fraud, trade secrets, and business tort case, required defendants to produce a mirror image of all hard drives on the computers defendants used to conduct their business (including home computers) even though the hard drives were "not reasonably accessible."[18] Defendants resisted production of the mirror images, arguing that they had already produced the information that plaintiffs sought from their computers.[19] But when plaintiffs brought forward an email produced by a third party that defendants had failed to produce, the court rejected defendants' contention.[20] The defendants continued to protest, however, submitting affidavits describing the significant costs of copying the hard drives, recovering deleted information, and translating the recovered data into searching and reviewable formats.[21] Based on the affidavits, the court found that the hard drives were "not reasonably accessible."[22] But, citing Rule 26(b)(2)(B), the court went on to find that, although the hard drives were "not reasonably accessible," the plaintiffs had established "good cause" for their production by demonstrating discrepancies in the defendants' production.[23] The court also noted that due to the substantive allegations in this case-that a defendant downloaded trade secrets onto a computer-the need to obtain a mirror image of the hard drive was particularly relevant.[24] The court did, however, require the plaintiff to incur the entire cost involved in creating the mirror images, recovering the information, and translating the information into searchable formats.[25]
In Zurich Am. Ins. Co. v. Ace Am. Reins. Co., plaintiffs requested that the insurer defendants produce all documents related to any claims denied on the basis of allocation.[26] Defendant refused to produce the documents, claiming that its computer system was incapable of segregating claims by the amount and type of claim and by the reason the claim was denied.[27] Although expressing little sympathy for the sophisticated defendant reinsurer using an outdated storage system, the court acknowledged that a search of the entire database was not feasible.[28] The court ordered the parties to propose a protocol for sampling defendant's claim files to find examples where issues of the allocation of policy limits had been addressed.[29]
Another emerging question is whether a data producer that has saved information on inaccessible sources may shift costs under Rule 26(b)(2)(B). In Quinby v. WestLB AG, the plaintiff asked for a broad range of e-mails from a number of individuals, including former employees.[30] The defendant-employer had followed a long-standing practice of deleting former employees' e-mails from the accessible database and maintaining them on back-up tapes.[31] The defendant had saved these back-up tapes containing the old e-mails and sought to shift to the plaintiff the costs for restoring and searching these tapes.[32] The Quinby court noted that the defendant could choose how to meet its preservation obligation and should not be sanctioned for choosing one format over another, even if the one format was inaccessible.[33] In coming to this conclusion, the court disagreed with another case from Treppel v. Biovail Corp.,[34] a case which held that the same district, storing information in a less accessible format does not meet a party's preservation obligation and may be sanctionable.[35] Although the Quinby court did not sanction the defendant, the court did hold that the defendant could not shift all costs because it chose to store certain e-mails on backup tapes after it should have "reasonably foreseen" the e-mails were discoverable.[36]
Privilege Issues
Protecting privilege should be an issue at the forefront of any ESI production. Amended Rule 26(b)(5)(B) addresses ESI privilege issues by formally recognizing a procedure for protecting potentially privileged information inadvertently produced during the discovery process. Although it is not meant to supplant doctrines such as waiver, Rule 26(b)(5)(B) does give instruction on how the parties should behave once the error is brought to light. According to Rule 26(b)(5)(B), if a party has inadvertently produced information that it claims is protected, the party may notify the receiving party of the claim, preferably in writing, stating the basis for the assertion. Fed. R. Civ. P. 26(b)(5)(B). After receiving notice, the receiving party must return, sequester, or destroy the information until the claim is resolved. The producing party must then preserve the returned information pending the court's ruling on whether the information is privileged or protected and whether any protection has been waived or forfeited by the production.
The Rule's notes also suggest nonwaiver "quick peek" agreements, which would permit production before a thorough, full-blown review, as a possible alternative to foster the ready exchange of information without losing a later-discovered privilege claim. Fed. R. Civ. P. 26(b)(5)(B), cmt.
Rules 33 and 45
Like Rule 26(a)(1)(B) on mandatory disclosures, Rule 33(d) stresses the Rules' new focus on ESI and allows parties to answer interrogatories by specifying the business records stored as ESI from which the answer may be derived or ascertained, just as with paper business records. Fed. R. Civ. P. 33(d). This rule allows a responding party to substitute access to ESI for an answer only if the burden of finding the answer will be substantially the same for either party. This may require that the responding party provide technical assistance to the requesting party. Similarly, Rule 45 allows ESI to be included in subpoena requests.
Rule 37(f)-A Not so Safe "Safe Harbor"
During the drafting process, Rule 37(f) was often referred to as the "safe harbor" provision because it was meant to protect from sanctions those parties that lose ESI despite making reasonable efforts to preserve evidence under a litigation hold. Absent 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 of an electronic information system.[37] As adopted, Rule 37 gives some guidance and protection, but only in particular circumstances. For example, it only limits sanctions under the Federal Rules. Given its potential effect, the amendment has been more appropriately described as "a cudgel" to establish proper ESI management systems.
At a minimum, amended Rule 37(f) provides more protection than the well-known Zubulake negligence standard by requiring greater culpability before sanctions will issue. But to what degree? The Advisory Committee notes that the "routine operation of an electronic information system" encompasses the ways in which such systems are generally designed and programmed to meet the party's technical and business needs and includes the alteration and overwriting of information that often takes place without the operator's specific direction or awareness. In other words, losing information as a result of a "routine, good-faith operation of an electronic system" may only mean losing information when the computer does something without human instruction.[38]
"Good faith" is not specifically defined in the Rule, but the Notes state that good faith "may require that a party intervene to modify or suspend certain features of the routine operation of a computer system to prevent the loss of information, if that information is subject to a preservation obligation." Fed. R. Civ. P. 37(f), cmt. Stated differently, acting in "good faith" means not allowing the operation of a computer system to continue to destroy specific stored information that a party is required to preserve. Thus, Rule 37(f) may only protect against sanctions those who, pursuant to a litigation hold, suspend or modify certain features of the computer system to prevent the loss of relevant, discoverable information, but lose ESI anyway due to a computer malfunction. On the other hand, perhaps Rule 37(f) will be interpreted more broadly to protect those who "failed to tell a computer to cease autodeletion or overwriting in the first place" or who, although properly executing a litigation hold, "failed to include a particular custodian in the hold."[39] What is clear is that absent reasonable and note and timely attempts to preserve, a court is not likely to find good faith for losing ESI. Rule 37(f) does not provide much of a harbor to hide behind.
The Criminal Rules Amendments
Though far less sweeping in effect, the amendments to the Federal Rules of Criminal Procedure also acknowledge the importance of technology. Rules 5, 32.1(a)(5)(B)(i), and 41, which have been amended to incorporate the term "reliable electronic means," are discussed briefly here.
Rule 5(c)(3)(D)(i) addresses initial appearances and the transfer of a criminal defendant to another district. The amendment to Rule 5 now permits the magistrate judge to accept a warrant from the district where the offense was allegedly committed by "reliable electronic means." Fed. R. Crim. P. 5(c)(3)(D)(i). Thus, if an initial appearance occurs in a district other than where the offense was allegedly committed and the government produces "the warrant, a certified copy of the warrant or a reliable electronic form of either" from the district where the allegations originated, a magistrate must transfer the defendant.[40] The committee notes indicate that the concept of delivering the warrant via a "reliable electronic" method "reflects a number of significant improvements in technology."[41] Many federal courts allow, encourage, or even require electronic filing, including the use of mediums other than fax machines. The Committee rejected a proposal by the Federal Public Defender's Office that "non-certified electronic copies" of a warrant were per se "unreliable."
The remaining amendments to the Federal Rules of Criminal Procedure make allowances for using "reliable electronic" means to exchange information in other circumstances such as: initial appearances before district courts that lack jurisdiction but are handling a request for revocation or modification of probation or supervised release where a magistrate may accept a warrant by "reliable electronic means" (Fed. R. Crim. P. 32.1); issuing a warrant based on information received telephonically or by "reliable electronic means" (Fed. R. Crim. P. 41(d)(3)(A)); and transmitting the issued warrant to the applicant by "reliable electronic means." (Fed. R. Crim. P. 41(e)(3)(D)).
The committee notes to both Rule 5 and Rule 32.1 clarify that "reliability" is a determination to be made at the local level, while the word "electronic" is meant "to provide some flexibility" and "make allowance for further technological advances in transmitting data." Fed. R. Crim. P. 5, 32.1, cmts.
An Added Twist-Proposed Rule of Evidence 502
In June 2006, the Federal Standing Committee on Rules of Practice and Procedure approved a proposed amendment to Rule 502 of the Federal Rules of Evidence that would address issues of attorney-client privilege, work-product waiver, and inadvertent production and could help realize the potential benefits associated with the foregoing e-discovery amendments. The proposed amendment was drafted to address some of the issues raised by the inadvertent production of protected materials, given the increasing costs of reviewing electronic information for privilege.[42] All comments were to be delivered to the Committee by February 15, 2007.
Under the proposed rule, the disclosure of attorney-client or work-product protected material will not operate as a waiver in a proceeding if (1) the disclosure was inadvertent and (2) made in connection with federal litigation or administrative proceedings, and if (3) the holder of the privilege took reasonable precautions to prevent disclosure and (4) took reasonably prompt measures to rectify the error. Proposed Fed. R. Evid. 502(b). In addition, in a federal or state proceeding, a disclosure of protected material to a federal public office or agency in the exercise of its regulatory authority, will not operate as waiver of the privilege in favor of non-governmental persons or entities. Id.. This means that parties could disclose protected information to the federal government, without worrying about waiving the privilege as to third-parties. The effect of disclosure as to a state or local government agency depends on applicable state law. In sum, the rule rejects the notion that inadvertent disclosure automatically constitutes a subject-matter waiver.
Conclusion
The December 1, 2006 amendments emphasize early meet and confer sessions on electronic discovery issues and establish procedures for handling disputes over the form of production, relatively inaccessible electronic information, and privilege waiver. The rules have put procedures in place that should compel parties to raise problems with ESI early and try to reach agreement with opposing parties, ideally resulting in fewer spoliation arguments and unpleasant sanctions hearings later on.
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