II. Electronic Production Responsibility

A. Modern Scope of Discovery

Broad discovery remains paramount in civil litigation such that, in the litigation context, the transition to a predominantly electronic mode has been accelerating at a rapid pace.39 Black letter case law now universally supports the assertion that electronic information is as susceptible to discovery rules and principles as paper.40 The recent changes to the Federal Rules of Civil Procedure codified that view by adding the phrase “electronically stored information” to Rule 34's title and to numerous of its sub-sections.41 Similar provisions are now components of some state procedural rules and some federal court local rules.42

B. Overview of Key Categories of Producible Electronic Information

In contemplating the scope of discovery, employers are now faced with the same challenges as are other modern day litigants. Employers must account for information stored in electronic form and consider the most effective and efficient means of accessing various types of such information. Hard drives, back-up tapes, storage devices, web server logs, databases, and “deleted”43 files are among the many formats and environments that often need to be navigated.44

The best judicial description of the world of electronic information was propounded in 2003 by Southern District of New York Judge Shira A. Scheindlin. Judge Scheindlin promulgated a two-part framework in the first of her several landmark electronic discovery decisions in an employment discrimination case, Zubulake I.45 As its threshold issue in assessing the plaintiff's motion to compel production and allocation of consequential costs, Zubulake I divided the world of electronic information into two distinct broad categories:

1. [D]ata that is kept in an accessible format,”broken down into three sub-categories, “listed in order from most accessible to least accessible:”
   1. “Active, online data,” such as hard drives;
   2. “Near-line data,” such as optical disks; and
   3. “Offline storage/archives . . . [which] lack[] 'the coordinated control of an intelligent disk subsystem,' . . . in the lingo, JBOD ('Just a Bunch of Disks').”46
2. “Electronic data [that] is relatively inaccessible,”broken down into two sub-categories, also ranked in order of accessibility:
   1. “Backup tapes;” and
   2. “Erased, fragmented or damaged data.”47

For the first category, accessible data, Zubulake I followed the traditional approach of having the responding party bear all costs.48 For the second category, relatively inaccessible data, following application of a seven-factor test, some cost-shifting to the requesting party could be appropriate but only if the marginal utility of restoring such data is evinced by a “fact-intensive” review of results of “small sample” restoration.49

The newly amended Rule 26(b)(2)(B) provides that, once the responding party shows undue burden, electronic information that is “not reasonably accessible” need not be produced unless a court so orders on a showing of “good cause.”50

The Zubulake I accessible/inaccessible divide is a construct for coping with the all-important civil discovery issue of spiraling costs. As discussed in more detail in Section III(B), infra, Zubulake I and the related follow-up decision in Zubulake III51 laid the groundwork for the potential future development of an overall multi-step eDiscovery process that is not only cost-sensitive but also conceptually sound and pragmatic.

C. Preservation and its Flip-Side, Spoliation

Modern-day judges treat with utmost seriousness the duty to preserve potentially relevant electronic information and paper documents. Once a dispute merely ripens to the point where litigation is “reasonably anticipated,” there is a “duty to suspend any routine document purging system . . . and to put in place a litigation hold to ensure the preservation of relevant documents-failure to do so constitutes spoliation.”52

Once the heightened duty kicks in, the “[d]estruction of evidence raises [a] presumption that disclosure of the materials would be damaging.”53 Thus, on top of potential criminal law and ethical violations,54 the litigation ramifications for spoliation can include: monetary penalties (such as attorney fees, costs, and/or pay-for-proof sanctions);55 exclusion of evidence; delay of the start of trial; mistrial; adverse inference jury instructions;56 and, in an extreme case, a dismissal or judgment on the merits.57

A court can deem a litigant's lack of compliance with preservation, collection, or production responsibilities to be an inappropriate, intentional, or negligent destruction of evidence, i.e., spoliation. The current trend is to sanction even unintentional-but-negligent destruction or untimely productions. The requisite “culpable state of mind”58 is, in some federal circuits, surprisingly low. In 2002, the Second Circuit found that “discovery sanctions, including an adverse inference instruction, may be imposed where a party has breached a discovery obligation not only through bad faith or gross negligence, but also through ordinary negligence.”59

On the other side of the coin, courts in other circuits have been more lenient.60 Additionally, the recent Andersen61 and Quattrone62 reversals, albeit in the criminal context, may have an impact on the civil culpability standard.63

In the civil employment litigation setting, a Southern District of New York judge went even farther than an adverse instruction in Metropolitan Opera Association v. Local 100 Hotel Employees64 (“MetOpera”). The misconduct was so extreme that the judge granted the plaintiff's motion for “final judgment as to liability against [the] defendants and for . . . attorneys fees necessitated by the discovery abuse[s] by [the] defendants and their counsel.”65 As a basis for the lawsuit's ultimate “result [being] driven by discovery abuse” rather than by resolution “on the merits,” MetOpera relied on Federal Rule of Civil Procedure (FRCP) 37, 28 U.S.C. § 1927, as well as the court's inherent power to sanction.66

D. What To Do: Retention/Destruction Policies

It is advisable for every client to adopt a formal, written retention (i.e., destruction) policy and concomitant implementation protocols. An effective regime can help shield the company from negative inferences or defaults due to deletion or other disposition of information. To be effective, a retention and destruction process must: (1) include an adequate suspension (“litigation hold”) provision,67 and (2) not have been instituted or followed in bad faith (i.e., suddenly followed to limit damaging evidence available to potential litigation adversaries).68

An effective litigation hold stops any and all purging of potentially relevant information upon reasonable anticipation of legal dispute. Thus, before implementing or changing a retention and destruction regime, a company should segregate and collect all electronic information (and paper) pertinent to all currently pending and reasonably anticipated disputes. In trying to assess whether a potential dispute is likely to develop into an actual litigation, proceeding, or investigation, the company might consider the frequency and scope of similar past disputes.

The company should divide its information into two categories; setting aside those items needing retention based on legal and/or business requirements from everything else. Whether or not litigation is pending, Information Technology leaders, legal leaders, and corporate officers need to communicate frequently to identify and map all storage locations and formats, including shared network drives, intranets, and back-up tapes.

Wherever possible, retention/destruction policies and protocols should reject printing to paper, and enable central storage rather than encourage local storage. However, each company's culture is unique, thus, a realistic, tailored approach is needed. Consistency in applying policies and protocols, commissioning outside audits, periodic training and quality control tests are advisable.

The goal is to walk the tightrope between saving too much and destroying too much. The end game is to have a defensible process in place in the event of a spoliation motion in a future litigation. In today's environment of huge data storage capacity, some business reasons for declining to retain all electronic information include improved retrieval capability, avoiding excessive storage costs, and streamlining operations and project transitions.

Although it is not an argument likely to wind up in a formal response to a motion to compel or a motion for sanctions, there is an elephant in the room. If one's metaphorical house is “not in order,” response times and costs can be overwhelming for the collection, review, and production needed to answer a government inquiry or litigation discovery request.

E. Spiraling eDiscovery Costs

The need for cost-sensitivity is great because the expenses associated with vast data sets of electronic information can be astronomical. One survey estimated the aggregate costs of preserving, collecting and producing commercial litigation in the United States has grown to almost $1.8 billion in 2006, and will expand to more than $3.1 billion by 2008.69 The reasons some firms handle as much eDiscovery activity in-house as possible are cost sensitivity and quality control.70