by Tom O’Connor and Gavin W Manes of Avansic
In 2011, a strong movement established momentum and gave rise to a great deal of discussion about altering the Federal Rules on e-discovery to directly address preservation. The debate on the topic has been lively and heated at times. The strongest proponents for the changes have been corporate counsels, best exemplified by Thomas Hill, associate general counsel at General Electric, who testified before Congress last fall that the current Federal Rules of Civil Procedure (FRCP) result in companies wasting billions of dollars on unnecessary document preservation and production. He indicated that part of the problem is that companies must preserve documents before a lawsuit is filed, therefore they often preserve even when no lawsuit is ever filed. Hill cited occasions where GE spent more in preservation than the money at stake in the litigation.
The proposed changes are still being reviewed by the Committee on Rules and Practice and Procedure of the Judicial Conference of the United States and will likely be a hot issue at LegalTech in New York next week. But do the Federal Rules really need to change regarding preservation? We feel strongly that we do not need to change the rules, and so do other several other prominent observers (see Opinions from the Field below).
The crux of the preservation problem does not lie in the inadequacy of the FRCP guidelines but rather in corporations being unprepared for litigation, particularly for the rigors of e-discovery. Fixing the major issues in data preservation will require true preparedness, with companies being proactive and forward-thinking in storing their data with an eye towards future e-discovery needs. Although rule changes might provide further impetus or incentive for corporations to move in a proactive direction, what is really needed is a fundamental attitude shift in the legal and corporate worldview to adhere to the rules as they are today.
Refuting the Three Proposed Approaches To the Rule Change
A set of three proposed alternative changes to the rules was circulated at several Rules Advisory Committee and Subcommittee meetings at Duke University in Spring 2011 and Dallas in September 2011. The Category 1 approach provides a higher degree of specificity including a fairly detailed explanation of the duty to preserve evidence (Rule 26.1(a)) and details possible triggers (26.1(b)), the scope of the duty to preserve (26.1(c)), and sanctions (Rule 37). Category 2 proposes a more general preservation rule, while Category 3 only addresses sanctions as a tool for influencing behavior. The three categories are discussed in more detail below.
Category 1: Specific Rule
This draft includes many different examples of how difficult it is to draft a single rule to cover all the possible problems. For example, this draft contains a long list of trigger events for preservation as well as a list of types of ESI that would be “presumptively excluded” from the preservation duty, including deleted data residing on hard drives and physically damaged media.
Why Category 1 won’t work: The problem with this category is that IT would be presented with an enormous checklist of possible options to wade through for each case that came across their desk. A significant knowledge gap would continue to exist between IT and legal as to whether trigger events have happened, so preservation still may not be performed in a timely and comprehensive manner.
Category 2: General Rule
The Category 2 proposal also suggests lists for alternative approaches but is less detailed. For example, one proposal for preservation occurs when a “reasonable person” would expect to be a party to an action. However, since no definition of reasonableness is provided, the onus would be on IT to define and defend what is reasonable.
Why Category 2 won’t work: IT is not counsel – they are not generally in a position to know what reasonable is, or what a judge will think is reasonable.
Category 3: Sanctions-Based Rule
The Category 3 approach differs from the first two in that it focuses only on sanctions and would act like more of a “back-end” rule. In other words, the rule would not contain any specific directives about preservation, rather it would provide direction in the areas of when and how sanctions might be applied. Absent special circumstances, the court would be prohibited from imposing any of the sanctions listed in Rule 37(b)(2) or from giving an adverse-inference instruction. This option would seem to shift the responsibility more from IT to the Court, although it would still require IT to defend their actions.
Why Category 3 won’t work: It focuses only on sanctions and not solutions. Providing a roadmap for preservation is very important to moving forward, and merely indicating the punishment for failure to follow rules does not accomplish that goal. For a more detailed discussion of these three categories, see 1st September 2011 post Jumping the Gun? Three Approaches to Drafting New Federal Discovery Rules by Matt Nelson on the E-Discovery 2.0 blog. http://www.clearwellsystems.com/e-discovery-blog/2011/09/01/jumping-the-gun-three-approaches-to-drafting-new-federal-discovery-rules/
Reviewing Opinions from the Leaders in the Field
Other eDiscovery experts agree that the rules do not need to be changed. Former U.S. Magistrate Judge Ron Hedges, who is now an eDiscovery special master and Georgetown Law Center adjunct professor, has been very vocal with the opinion that the rules have not been in effect long enough to measure their true impact. And noted e-discovery commentator Ralph Losey feels that the answer lies in more education about e-discovery, a view shared by attorney and consultant Michael Arkfeld, who maintains that 95% of all attorneys don’t know enough about what to do with e-discovery.
So if rule changes aren’t necessary or if new rules would not lower the cost of e-discovery, then how can costs be reduced? Corporations being proactive and affirmative in preparing for e-discovery may well be the answer.
There are a number of components to preparedness, but it is critical to understand that every single decision made by IT has an impact on the cost of e-discovery. For example, if an IT administrator only allows employees to store their email on the main server instead of in .pst files on their local computers, then only the server’s stored data would be required during e-discovery. This not only dramatically reduces the number of data stores that will need to be preserved, collected and processed; it also reduces the potential for spoliation and collecting duplicate documents.
Other IT decisions that affect e-discovery include encryption settings, asset tracking, disposition of old computers, and backup procedures and formats. Asset tracking is one of the easiest ways to reduce litigation costs (and help with general business practice). Often, many hours are spent trying to track down the computers of target custodians. Knowing where that information resides can save time and corporate productivity. Backup procedures are another area where traditional IT “best practices” may actually hurt during litigation: keeping years of electronic information may mean having to go back through all of that data. Of course, this is a sensitive issue that requires input from legal, IT, and management since there may be litigation holds to adhere to, as well as solid business reasons to keep such information.
Another large step towards reducing litigation’s impact is to prevent the creation of large data sets in the first place. It is difficult to imagine the amount of data that any given user has created since digital waste is not as tangible as paper. Prevention can be accomplished by cataloging current documents and their storage locations, investigating and revising overbroad backup procedures, and identifying the types of electronic information that exist (i.e., emails, Word documents, CAD drawings, etc). When considered in relation to potential e-discovery requests, this thorough evaluation of a company’s electronic footprint will reveal areas of potential data reduction.
A balance can be achieved between the efficiency of a company’s IT department and the cost of e-discovery only when addressed before the onset of litigation. It is critical to include IT personnel, corporate management and legal counsel in all of these discussions. Some companies have found success by having the legal department use a portion of its own budget for any IT changes that would benefit the company during litigation. Analysis should take into consideration the particular challenges of each company’s industry, the documents they create, and the lawsuits they are most likely to face.
Although the issue of rule changes related to data preservation has been widely discussed and changes have even been proposed, there is no clear path forward. Opinions on the subject vary widely and we propose that even if the rules change, the issues of preservation cost, burden, and sanctions may not be resolved. The only clear way to reduce the probability of sanctions is for companies to work within their IT departments, management, and with their counsel to be careful and thorough with their e-discovery preparations far in advance of a lawsuit.
Performing an E-Discovery Readiness Assessment (http://bit.ly/A24XrB) helps to determine the level of litigation preparedness, and the results of that assessment provide a business with simple and affordable practices to maintain control over their documents.
The ED Readiness Assessment takes into consideration the potential litigation challenges of each company’s specific industry and the documents they create. Companies can see a direct cost benefit by implementing the recommendations of the assessment. This e-discovery preparedness eventually saves both time and money should litigation arise.
The rules may or not change but the preservation obligation exists today, whether companies choose to acknowledge or not. Only a comprehensive examination of their ESI content can prepare a corporation for litigation, regardless of what the rules say. Changing the rules won’t save litigants money; only knowledge and readiness will do that.
About the authors…
Gavin W. Manes PhD, President & CEO, Avansic
Gavin Manes is a nationally recognized expert in e-discovery and digital forensics who is currently the President and CEO of Avansic, a Tulsa-based company that provides ESI processing, e-discovery, and digital forensics services to law firms and companies across the nation. Having published over 50 papers on computer security and digital forensics, Manes holds a doctorate in computer science from the University of Tulsa. He has also briefed the White House, Department of the Interior, the National Security Council, and the Pentagon on computer security and forensics issues. email@example.com
Tom O’Connor, Director of Professional Services, Avansic
A nationally known lawyer and eDiscovery expert, Tom O’Connor is Director of Professional Services at Avansic. Based in New Orleans, Tom is best known for his work in e-discovery, which includes assisting firms and corporate counsel in matters of retention policies, litigation holds, and document exchange protocols. He has worked on a number of high-profile cases including asbestos litigation, the Keating case, California class actions against crematoriums, tobacco litigation on behalf of the Attorney General of Texas, and various phases of the Enron and BP litigation. firstname.lastname@example.org
by Tom O’Connor and Gavin W Manes of Avansic