III. “In The Trenches Issues” Arising Out of Plan and Preserve, Collect, F.I.N.D., Review, and Produce

The eDiscovery process is comprised of five steps: (1) plan (and preserve); (2) collect; (3) F.I.N.D. (File Identification Narrowed by Definition)-also known as “culling” or “winnowing”; (4) review; and (5) produce. As to issues arising under each of those five steps, the law is in flux. However, one thing is certain: in modern-day litigation, eDiscovery has become a pivotal issue. Hot topics in eDiscovery include: preservation and retention obligations; collection of evidence, including assessing cost allocation; litigation strategies, including potential collaboration as to search criteria during the winnowing process; form of review and production; and doing the utmost to avoid inadvertent disclosure that waives either privilege or work product protection.

A. Plan, Preserve-Case Studies in Lack of Compliance

1. MetOpera: Plaintiff Union's Deficiencies Enumerated

In MetOpera, the plaintiffs and their counsel exhibited a lack of good faith regarding the discovery process.71 Among the litany of bad acts warranting the supreme sanction of entry of judgment were:

In response to [Plaintiff] Met[Opera's] counsel's continuing assertions of lack of an adequate document search and demonstrations of non-production, the [Defendant] Union's counsel repeatedly represented to the Court that all . . . [responsive] documents . . . had been produced when . . . a thorough search had never been made and counsel had no basis for so representing;

counsel knew the Union's files were in disarray and that it had no document retention policy but failed to cause a retention policy to be adopted to prevent destruction of responsive documents, both paper and electronic;

counsel failed to explain to the non-lawyer in charge of document production . . . that a document included a draft or other non-identical copy and included documents in electronic form;

the non-lawyer the Union put in charge of document production failed to speak to all . . . who might have relevant documents, never followed up with the people [to whom] he did speak . . . and failed to contact all of the Union's internet service providers ('ISPs') to attempt to retrieve deleted e-mails as counsel represented to the Court that [the non-lawyer] would;

no lawyer ever doubled back to inquire of the Union employee in charge of document production whether he conducted a search and what steps he took to assure complete production; [and]

in the face of Met counsel's constant assertions that no adequate document search had been conducted and responsive documents had not been produced, Union counsel failed to inquire of several important witnesses about documents until the night before their depositions. 72

The list of bad faith acts in MetOpera serves as a veritable guidebook on the notification aspects of the preservation, collection, and production obligations.

2. Zubulake V: Expansion of Corporate Counsel's Obligations

Since the summerof 2004, under the new regime ushered in by Zubulake V,73 notice of an employee dispute triggers significant and expanded legal obligations. A company and its counsel must take all reasonable steps to locate and preserve all relevant electronic and hardcopy information.74 Outside counsel and in-house counsel are responsible for coordinating and overseeing the preservation and production process75 by: (1) instituting immediately, and periodically re-issuing,76 a litigation hold on deletion or destruction of information; (2) communicating immediately and directly with all key players, i.e., those individuals identified in a party's initial and supplemental disclosures;77 and (3) safeguarding all pertinent electronic archival/back-up media.78

In Zubulake, some key employees had deleted relevant e-mails after being instructed by in-house counsel to retain them.79 In addition, some relevant e-mails stored on an active server had been produced only after thirteen depositions (and four re-depositions).80 Moreover, some backup tapes had been lost after a specific preservation directive had been issued.81 Finally, counsel had not issued “litigation hold” instructions to a senior Human Resources staffer intimately involved with the plaintiff's termination.82

The court imposed sanctions for willful spoliation, including an adverse inference instruction as to deleted and lost e-mails83 -with the imposition of the costs of re-depositions required by tardy productions84 -as well as the costs of additional restoration85 and of the sanctions motion.86 Not surprisingly, eight months later, the jury awarded Plaintiff Laura Zubulake $29.2 million in damages.87

3. Broccoli v. EchoStar: “Litigation Hold” Failings

The case of Broccoli v. Echostar Communications illustrated the point that one cannot blindly follow a retention policy and be protected from potential legal ramifications.88 In that case, the employer had an “extraordinary” and “risky” retention, destruction, and purging policy.89 First, unsorted e-mails were auto-purged every twenty-one days and not retained anywhere. “Sent Items” over seven days old were automatically migrated to “Deleted Items,” and then “Deleted Items” over fourteen days old were purged.90 Second, an employee's folders of electronic files and e-mails were deleted thirty days after he or she left the company.91

The court quoted Arthur Andersen v. United States92 to assess a post-trial sanctions motion and explain its prior adverse inference jury instruction:

'Document retention policies,' which are created in part to keep certain information from getting into the hands of others, including the Government, are common in business . . . . It is not wrongful for a manager . . . to instruct its employees to comply with a valid document retention policy under normal circumstances. 93

The Echostar court then found that, “[u]nder normal circumstances, [a twenty-one-day purge] policy may be a risky but arguably defensible business practice undeserving of sanctions.”94 Yet, the employer had not satisfied its Zubulake V “litigation hold” obligation:

Echostar plainly had a duty to preserve employment and termination documents when its management learned of [the plaintiff's] potential Title VII claim . . . .

. . . [Yet] none of the [e-mails] exchanged between [the plaintiff], [his] supervisors, and Echostar's upper management regarding his complaints . . . were preserved. Moreover, Echostar admits that it never issued a company-wide instruction regarding the suspension of any data destruction policy . . . .

Given Echostar's status as a large public corporation with ample financial resources and personnel management know-how, the court finds it indefensible that such basic personnel procedures and related documentation were lacking. 95

The court thus sanctioned the defendant for “gross spoliation” and “bad faith.”96

4. Other Anti-Spoliation Cautionary Tales

In other non-employment litigation contexts, a responding party has paid a huge price for non-compliance with preservation and production obligations. In a notable Florida state court securities fraud case, Defendant Morgan Stanley repeatedly failed, not only to produce responsive e-mails, but also to be frank with its adversary or with the court about the status of collecting those e-mails.97 The consequences were disastrously outcome-determinative.

The Morgan Stanley suit entailed claims of fraud and conspiracy as to an acquisition in which the plaintiff sold its 82% stake in Coleman Inc. to Sunbeam. The Sunbeam shares the plaintiff had received turned out to be undesirable once Sunbeam filed for bankruptcy. Morgan Stanley had been Sunbeam's financial adviser and underwriter.

On March 1, 2005, Judge Elizabeth Maas granted the plaintiff's motion for an adverse inference jury instruction,based on the defendants' knowingly failure to: stop the systematic overwriting of e-mails every twelve months; conduct proper searches for back-up tapes that might have contained e-mails; promptly retract a previously submitted certificate of compliance it knew to be false (there were 1,400 outstanding back-up tapes); notify the plaintiff when additional tapes had been located; use reasonable efforts to search the newly discovered tapes in a timely manner; process and search data it had isolated for production; or draft search protocols consistent with previously entered court orders.98

The March 1 Order granted the plaintiff's request for an adverse inference instruction based on the defendant's violation of its “affirmative duty . . . to produce its e-mails.”99 The Order went as far as to delineate the judge's agreement to read to the jury, at a time chosen by opposing counsel, a three page “conclusive” statement of facts detailing the defendant's eDiscovery failings.100

Two weeks later, when the defendant had still not fully complied, the plaintiff renewed a prior motion for entry of default judgment. On March 23, in partially granting the motion, the judge found that the defendant had “deliberately and contumaciously violated numerous discovery orders” and committed to reading a redacted version of the twenty seven page amended complaint to the jury.101 The prior March 1 three-page fact statement was to be supplemented with additional eDiscovery-failure facts found in the subsequent March 23 order, then also read to the jury.102 The impact of the adverse fact findings was not limited to consciousness of guilt. Per the March 23 order, the jury was also to be “instructed that it may consider [the e-mail destruction] facts in determining whether [the defendant] sought to conceal its offensive conduct when determining whether an award of punitive damages is appropriate.”103

When the trial began in early April, the defendants' searches and retrievals were not yet completed and had to be abandoned. As planned, Judge Maas read the nine-person jury a lengthy statement, saying, in part: “Morgan Stanley participated in a scheme to mislead [the plaintiff company] and others and cover up the massive fraud at Sunbeam until Morgan Stanley and Sunbeam could close the purchase of Coleman.” A few weeks later, a $608 million verdict was reached in favor of the plaintiff, with a further award of punitive damages over $800 million.104 Athough on appeal, the case remains a cautionary tale.

5. New “Safe-Harbor” Amendment to Federal Rules

Help has arrived for entities that have their houses in order. Though the defense bar did not get everything it wanted in the newly amended version of FRCP 37,105 the change does provide a safe harbor.106 The “safe harbor” in the newly amended Rule 37(f) provides that: “Absent exceptional circumstances, a court may not impose sanctions under these rules for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”107

This change should provide some relief to entities called upon to preserve-and thus not, in bad faith, overwrite-electronic information.108 However, an accompanying change will expand a litigant's obligations by forcing it to keep abreast of its electronic information, anywhere that data resides. Whereas an earlier draft of the new Rule 37(f) had referenced “the party's” electronic information system,109 the current draft describes “an electronic information system.”110 This broadening is an intentional effort to encompass and “protect[] a party who has contracted with an outside firm to provide electronic information storage, avoiding potential arguments whether the system can be characterized as 'the party's.' The party remains obliged to . . . avoid loss of information . . . by the outside firm.”111 The protection consists of the safe harbor coverage obtained by acting in good faith.

6. TIPS and Takeaways

Zubulake V placed the following duties on in-house and outside counsel: “to effectively communicate to her client its discovery obligations;”112 to “become fully familiar with her client's document retention policies [and] . . . data retention architecture;”113 and to “take affirmative steps to monitor compliance so all sources of discoverable information are identified and searched.”114

The ominous implications of Zubulake V-especially the specter of an adverse inference jury instruction-are evident. In addition, practically speaking, the sooner in-house and outside counsel learn of the scope and contents of the universe of an entity's relevant information, the better. Pinning down those parameters early will enable counsel to provide the most effective, efficient legal and strategic advice.

Additionally, a strict preservation and notification regime can go a long way toward keeping a client from getting blind-sided down the line. When previously missing e-mails crop up months or years later in accessible electronic message strings or in hardcopy printouts, it can be a major blow to the confidences of the client and counsel in both the quality of their collection efforts and in each other.

At the earliest possible juncture, try to identify key time frames, key players (including those in Human Resources), and key subject matter (including pertinent acronyms, if any). Ascertain whether retention, destruction or recycling protocols exist and are being followed, not only in general but also once litigation should have been anticipated, let alone commenced. If such procedures do not exist or have not been triggered, then advise your client post haste to implement them. Do your best to obtain from your client the identities and contact information for all key Information Technology personnel.115

As to the litigation hold notice, advise your client as to the ideal content, recipients and dissemination method (perhaps using the e-mail system's return receipt confirmation feature). Prepare a draft cover e-mail and draft message. Follow up periodically. Make sure you and your client document all preservation steps taken.

7. Meet and Confer-26(f) Conference

An efficient approach could be to address with opposing counsel many eDiscovery issues early. The recent changes to Federal Rules 26 and 16 (and to Form 35) contemplate a wide-ranging Rule 26(f) conference.116 Examples of helpful topics are whether one or more parties will be requesting the restoration of relatively inaccessible data,117 potential collaboration as to search criteria,118 format(s) of exchange of electronic information,119 and avoiding inadvertent waivers of privilege.120

The newly amended rules identify those topics as warranting early discussion, as well as the parties' respective information systems technology, the scope and sources of discovery and “individuals with special knowledge” of same (likely to be the litigants' IT leaders).121 There were already multiple examples of court-ordered IT involvement in the interim period leading up to the official enactment of the new rules.122

B. Collect

1. Some Lessons from Recent Collection Case Law

A thorough array of effective employee agreements and policies, coupled with additional prior planning, can lead to relatively easy collections. Contracts governing employees' use of employer-provided networks and computers can trump any ultimate employee arguments as to the reasonableness of a purported expectation of privacy.123

Furthermore, as soon as there is concern that a particular employee may bring a claim, an employer should consider obtaining a forensically sound image of each computer and laptop provided to that employee.124 Similarly, where misappropriation of trade secrets is suspected, prompt confiscation of computers, if possible, would be a sound proactive approach.

If prompt action is not, or cannot be, taken, then it may take multiple courthouse trips-for temporary restraining orders, “freeze” orders, and/or search orders-to prevent alteration or spoliation.125 Note, though, that even if early confiscation or imaging does not occur, later uses-especially mass deletions of any pertinent computer files-will only make matters worse for the party who engages in such activity.126

2. eDiscovery Costs Allocation

One key legal and logistical issue at the “Collect” step is which side(s) will foot the bill for extraordinary costs. Nowadays, responding parties have a tougher row to hoe. Frequently, requesting parties-often plaintiffs-successfully argue that, as in the paper world, they should not be forced to bear an eDiscovery cost burden that is “a product of the defendant[s] record-keeping scheme over which the [p]laintiffs have no control.”127

Furthermore, given a more technologically savvy judiciary, responding parties can no longer count on a judge to have a knee-jerk reaction of engaging in cost-shifting analysis whenever there is a discovery dispute regarding electronic evidence.128

i. Zubulake I's Tripartite Framework

The landscape on the cost-shifting issue changed129 in 2003 due to the multi-factor test pronounced in Zubulake I.130 There, a grant of a motion to compel arose in a case entailing claims for gender discrimination and retaliation.131 The court criticized prior decisions as having engaged in a cost-shifting analysis as a knee-jerk reaction based on the faulty “assum[ption] that an undue burden or expense may arise simply because electronic evidence is involved.”132 “[C]ost-shifting may effectively end discovery, especially when private parties are engaged in litigation with large corporations.”133

As discussed in Section II(B) above, the threshold issue in Zubulake I divided the world of electronic information into two distinct but broad categories:

Thus, under Zubulake I, cost-shifting is contemplated only when there is a pending request to restore relatively inaccessible data to status as accessible, active data.

Zubulake I then modified the multi-factor test espoused by a prior decision.137 Once a small sample of inaccessible data has been produced,138 the court held that, “in conducting the cost-shifting analysis, the following factors should be considered, weighted more-or-less in the following order”:139

1. The extent to which the request is specifically tailored to discover relevant information;
2. The availability of such information from other sources;
3. The total cost of production, compared to the amount in controversy;
4. The total cost of production, compared to the resources available to each party;
5. The relative ability of each party to control costs and its incentive to do so;
6. The importance of the issues at stake in the litigation; and
7. The relative benefits to the parties of obtaining the information.140

This new test was applied to ninety-four back-up tapes previously identified as responsive. The court ordered the defendant to: (1) produce “all responsive e-mails that exist on its optical disks or on its active servers . . . ;” (2) produce “responsive emails . . . from any five backups [sic] tapes selected by [the plaintiff];” and (3) “prepare an affidavit detailing the results of its search, as well as the time and money spent.”141 After reviewing the contents of the . . . tapes and [the] certification, the Court will conduct the appropriate cost-shifting analysis.”142

A month later, in a hearing that would generate Zubulake III,143 the parties came back to court and, of course, expressed different views as to their respective results of analyzing the small sample. The court applied the seven-factor test to the information pulled from the five back-up tapes chosen by the plaintiff from what turned out to be seventy-seven (rather than ninety-four) responsive back-up tapes. Restoration (conducted by a vendor) plus production (including attorney and paralegal review fees) had cost the defendant $19,000.144

Per Zubulake I, thelist of factors was a guide rather than a rigid directive to mechanically count, add, and compare.145 The court assigned heavy weight to the first two factors, namely narrow tailoring and (lack of) availability from other sources.146 The weighing of the first two factors led the court to conclude that the sample restoration, resulting in the production of relevant e-mail, had demonstrated that the plaintiff's discovery request was indeed narrowly tailored to discover relevant information.147 While some subject matter had been addressed in other documents, the additional e-mails containing the related content were only available from the back-up tapes.148

Given the nature of the claims, the court reasoned that direct discrimination evidence might only be available through restoration.149 Thus, the marginal utility of the requested further discovery might be quite high.150 Given that the existence of such evidence was still speculative at best, the plaintiff had shown “that the marginal utility was potentially high.”151 In that the defendant bore the burden of proving that cost-shifting was warranted, the two-factor marginal utility test tipped slightly against shifting.152

As to the five other less important factors, the court found that factors 3 and 4 militated against cost-shifting, factors 5 and 6 were “neutral,” and factor 7 supported cost-shifting.153 When weighing the likelihood of recovery of additional valuable information against some factors that cut slightly in the other direction, the court deemed it appropriate to shift a minority of the costs to the plaintiff, i.e., the requesting party.154

The Zubulake III court concluded that a 25% cost assignment to the requesting party comported with the policies behind the two key countervailing pitfalls of (1) “chill[ing] the rights of litigants to pursue meritorious claims,” and (2) “unduly burdening” the defendant with too much of the expense of a “somewhat speculative” search.155 Once the 25/75 split was pronounced, a pivotal issue remained: whether the 25% shift should apply to the entire $274,000 cost, or only to the $166,000 portion needed to restore the remaining seventy-two backup tapes.156 So, the big practical difference was whether there would be a shift of $68,000 or of $41,500.

Under the Zubulake III approach, two basic principles govern allocation. First, only restoration and search costs could be subject to shifting in that “[r]estoration[,] the act of making inaccessible material accessible[, is a] 'special purpose' or 'extraordinary step,'”157 and “[s]earch costs should also be shifted because they are so intertwined with the restoration process; a vendor . . . will not only develop and refine the search script, but also necessarily execute the search as it conducts the restoration.”158 “[C]ost-shifting is only appropriate for inaccessible-but otherwise discoverable-data.”159 Second, “the responding party should always bear the cost of reviewing and producing electronic data once . . . converted to an accessible form.”160 “[T]echnology may increasingly permit litigants to reconstruct lost or inaccessible information, but once restored to an accessible form, the usual rules of discovery apply.”161

For the most part, over the past year and a half the Zubulake approach has become the benchmark in federal eDiscovery cost allocation case law. Give or take a factor or two,162 many decisions have followed the seven-factor marginal-utility-based approach. Some recent decisions have shifted a percentage of costs to the requesters;while others have ordered that all costs remain the burden of the responding party.163

As the cliché goes: don't try this at home. Though the Zubulake framework has generally been gaining approval in the United States District Courts, remember that this decision is not binding anywhere, let alone in state courts. Indeed, as two bi-coastal decisions made clear last year, some states' procedural rules mandate that the requesting party bear production costs.

In New York's inaugural eDiscovery decision,165 a judge invoked the general rule of C.P.L.R. § 3103(a) to preclude cost-shifting from even being contemplated:

[C]ost shifting of electronic discovery is not an issue in New York since the courts have held that, under the CPLR, the party seeking discovery should incur the costs incurred in the production of discovery material. CPLR 3103(a) specifically grants the court authority to issue a protective order to prevent a party from incurring unreasonable expenses in complying with discovery demands. Therefore, the analysis of whether electronic discovery should be permitted in New York is much simpler than it is in the federal courts. The court need only determine whether the material is discoverable and whether the party seeking the discovery is willing to bear the cost of production of the electronic material. 166

Thus, the judge would not compel production until the plaintiffs agreed to pay for “the costs incurred for the production of [the] data.”167 However, the following year, a different New York decision pointed out that the same statute contemplates an after-the-fact motion for cost allocation if needed “to prevent unreasonable annoyance, expense,. . . or other prejudice.”168

California's highest court's let stand the first published cost allocation decision in late 2005 in Toshiba v. Superior Court (Lexar Media).169 There, the Sixth District Court of Appeals relied on the “data compilations” translation exception of California Code of Civil Procedure 2031(g)(1)170 to reverse an order that had declined to shift any back-up tape restoration costs.171 Toshiba started with the premise that the responding party bears its own costs.172 It then addressed California's statutory exception for “data compilations translation” in the context of back-up tapes requiring manipulation to be restored to “reasonably usable form.”173 Thus, California law apparently diverges from the federal Zubulake approach-the latter ostensibly applying the three-phase framework whenever there is a dispute as to “relatively inaccessible data,” such as back-ups.174

The appellate court ruled that cost-shifting of reasonable expenses should occur wherever the trial judge finds that the at-issue restoration is indeed a “translation.”175 However, the appellate court did stop short of ruling that “the demanding party must always pay all the costs associated with retrieving usable data from backup tapes,” instead pointing out that “Section 2031(g)(1) is clear that the demanding party is expected to pay only its reasonable expense for a necessary translation.”176 Nor did Toshiba identify the categories of the costs to be covered therein.

Unlike Zubulake III, which opined on the cost categories that are “shift-able” (e.g., restoration and searching) and those that are not (e.g., review and production), Toshiba characterized these issues as “purely factual” ones left to the trial judge's discretion.177 On remand, the trial court was to assess the applicability of Section 2031(g)(1) to the back-up tapes. In that those tapes ostensibly required much manipulation to be restored to “reasonably usable form” and the utility of their contents was still unclear, the appellate court suggested that a Zubulake-Step-2-type “small sample” approach might be wise.178

C. F.I.N.D. (File Identification Narrowed By Definition)

Technologists and eDiscovery tools provide their greatest value by processing and culling the collected data to greatly narrow the size and scope of the amount of data that will proceed to the “Review” phase. Winnowing methods can include data de-duplication, keyword searching, metadata parameters and other data definitions. If required by the project's plan, it is also possible during this phase to use a variety of litigation tools to convert native files to either TIFF or PDF images for review and/or production. This conversion process can also occur following the Review phase.

Unless there are countervailing strategies, there may be benefits to be derived from collaborating with opposing counsel regarding selection criteria.179 If that is the case, the question of when a propounding party gains input into the responding party's selection criteria can be very tricky.180 A responding party will tend to insist on the right to “go it alone” in the first instance.181 That approach, especially when coupled with sweeping early representations that “everything” has already been produced, may ultimately lead to an implicit finding of an ethical violation of the fraud-on-the-court variety.182 In contrast, a requesting party will want to have input ab initio,183 unless of course, it fears a reciprocal request from its litigation adversary.

Yet, the alternative and more adversarial approach may result in inefficiencies as well as failure to comply with the types of obligations discussed in Section III(A) above.184 Thus, potential selection criteria collaboration is an apt topic for the beefed-up Rule 26(f) conference found in the recent Federal Rule amendments.185

D. Review-Form and Format Of Exchange

1. Introduction

The focus of the Review and Produce steps is on the format(s) in which the parties exchange information. Some of the most frequently litigated sub-issues have been whether paper production suffices,186 discoverability of metadata and/or embedded data, and whether to request and produce in native format or in “uniform image format” (TIFF or PDF).187 Other oft-disputed issues beyond the scope of this paper are the (in)sufficiency of unorganized sets of electronic information and the produce-ability of databases and/or software proprietary to the responding party.188

2. Key Definitions

Metadata is “data about data.”189 In eDiscovery, the three principal kinds of such data are: e-mail, file system, and document (imbedded/embedded). Each such type of data requires slightly different review and production strategies.

A “native data” file is one “[i]n the original file format in which [it was] created (i.e., in the specific software applications used to create each individual document).”190 Some examples of native data are Microsoft Word, Microsoft Excel, and WordPerfect.

In contrast, “uniform” or “standard” image format is an agreed-upon file format into which all different types of native files are converted solely for review and/or production in civil litigation.191 Often tagged image format (TIFF) plus searchable index is a uniform format; sometimes portable document format (PDF) is used as a uniform format as well.

“Searchable TIFF” is an oxymoron. It is a litigation fiction reflecting the exchange of a set of imaged electronic files that are accompanied by searchable text associated with those files.

3. Native vs. Electronic-Evidence Discovery (EED) Platforms

Many strategies and cost issues inform the decision of whether to review, produce, and/or seek files in their native format(s).192 The relative technological and financial resources of the parties are likely to play a big role, as well as the significance, or lack thereof, of metadata-such as spreadsheet formulas, tracked changes, creation date, e-mail fields, cross-file links, etc.-its relationship to the matter at hand.193 In some instances, it may be better for a party to review and/or produce in native format. In other instances, an EED platform or database may be preferable.

In the past year, the trend toward reviewing and producing in native file formats has accelerated. In their meet and confer discussions, civil litigants are often agreeing to exchange in native. However, at times, strategies may militate against requesting native. One consideration is reciprocity, namely that a party requesting native can expect to, in turn, be asked for native.

When a requesting party assesses whether to ask for native, some factors a party might weigh entail the relative position of the opposing party as to whether the party is: (1) a plaintiff; (2) a defendant who has interposed cross-claims or counter-claims; (3) an individual or an entity likely to produce much data; and/or (4) an individual or entity able to expend or marshal the monetary and technology resources needed to deal effectively with native file formats.

When the parties cannot agree, the current judicial trend continues to be toward native production and away from TIFF. For example, one recent decision deemed TIFF files to be inadequate because their content and design differ from native file formats.194 Another recent opinion required native file production, so that the requesting party could run searches and review the metadata.195

4. Metadata-When Discoverable?

Metadata or Imbedded-Data is discoverable when needed or relevant to a matter at hand.196 A stark example of a past context in which metadata was discoverable was when a contention of back-dating a file was at issue.197 Yet the trend toward native may tip the balance in other types of situations.

The recent amendment to Federal Rule 26(b)(2)(B)-(C)intentionally avoids specific reference to metadata, yet the associated comment evinces a desire to keep metadata from being produced absent an affirmative showing of need.198

However, last year in the employment case Williams v. Sprint/United Management,199 a federal judge attempted to fill the gap in this area of law. The court analyzed the then-pending Federal Rules changes, found them inconclusive, and came up with a framework of its own.

Williams found that, absent a timely objection or a stipulation to the contrary, an order to produce in native format presumptively encompasses metadata-even if the request for production did not explicitly reference metadata.200 Consequently, the court lambasted an employer/defendant that had responded to a native-production order by scrubbing metadata out of thousands of Excel spreadsheets.

Williams was a class action reduction-in-force (RIF) case based on allegations of age discrimination.201 Relatively late in the discovery process, the parties stipulated in open court that the employer would produce thousands of Excel spreadsheets in native format. The stipulation did not authorize the employer to scrub metadata or lock cells in the spreadsheets. Yet the employer unilaterally took both actions before producing the spreadsheets in electronic form. It did not make a log of its activities.

The court found that the then-pending new version of Federal Rule 34(b) and its accompanying reports and notes were inconclusive.202 It analyzed, but then deviated from, the non-binding Sedona Principles' presumption against producing metadata absent a showing of relevance.203 Instead, the Williams court analyzed the new Rule 34's phrase “as . . . maintained in the ordinary course of business” to mean electronic files “with their metadata intact.”204 Williams further ruled that, in the context of meet-and-confer discussions as to native, metadata is to be produced even if not specifically sought in the request for production.205

As to the significance of metadata found in various computer applications, Williams held that, on a spectrum of metadata's relative importance, Excel spreadsheets were in between the extremes of: (1) word processing applications, “where the metadata is usually not critical to understanding the substance of the document;” and (2) database applications, where any given “database is a completely undifferentiated mass of tables of data [and t]he metadata is the key to showing the relationships between the data.”206

In that factual situation, since the beginning of the lawsuit, the class of plaintiffs had alleged that the defendant had, based upon workers' ages, re-worked employee pools to improve distribution so as to pass adverse-impact analysis. Hence, the spreadsheets' metadata's relevance included: the content of changes; the dates of changes; the identities of individuals who had made changes; and any other metadata useable to determine the relative contents of drafts and final versions of the respective files. Thus, when it knew it had to produce in native format, absent first making a timely objection, it was disingenuous for the producing party, at the eleventh hour, to unilaterally decide to scrub metadata and to lock formulas and then produce anyway.

E. Produce-Inadvertent Disclosure

1. Privilege Waiver-Introduction

The larger the amounts of electronic material produced in native format, the greater the odds that privileged content and/or metadata will get disclosed.207

Electronic information is protected by the same traditional legal privileges applicable to paper, including the attorney-client privilege and the work product doctrine.208 There are three case law approaches to privilege waiver: strict (intent is irrelevant);209 lenient (no waiver absent intentional conduct);210 and case-by-case multi-factor balancing tests.211

The majority view is the case-by-case approach,212 with factors including: the reasonableness of the precautions taken relative to the production's size; the number of inadvertent disclosures; the extent of the disclosure(s); and the remedial measures taken (and whether the producing party exhibited delay in effectuating them).213

A waiver may extend beyond the file(s) and document(s) in question to encompass the entire covered subject matter.214

2. Privilege Waiver-Recent eDiscovery Case Law

Until recently, most eDiscovery waiver decisions had addressed disclosure of hardcopy printouts of e-mail.215 Yet, as can be gleaned even from the non-electronic decisions summarized below, the same principles also apply to purely electronic information.

In Spring 2004, two subject-matter waiver decisions came down. First, in a wrongful discharge action in June 2004, an Ohio state court ruled that voluntary disclosure of an e-mail in a prior proceeding had triggered the dreaded consequence of a subject-matter waiver.216 There, in a separate unemployment benefits matter, the defendant's counsel had examined the plaintiff/employee at a hearing and produced an e-mail from defendant's Human Resources Vice President to defendant's senior counsel. The e-mail summarized why the employee had been fired.217

In the subsequent discharge case, the same e-mail was produced, purportedly involuntarily.218 Claiming a subject-matter waiver, the employee sought production of related documents.219 The trial court ordered the plaintiff to return the e-mail and denied the plaintiff's motion to compel. The appellate court reversed, finding abuse of discretion in ordering the return of a voluntarily disclosed e-mail.220 The trial court should have ordered the supplemental production of the e-mails and other documents (e.g., deposition testimony) reflecting related communications with the defendant's legal department.221

Similarly, a few weeks earlier, an inadvertent production argument failed to carry the day for a defendant in a securities class action lawsuit in Massachusetts federal court.222 In that case, a hardcopy of an e-mail to in-house counsel was in a redacted document that had been produced in a group of eleven boxes of documents.223 Another e-mail had been redacted because that e-mail was sent from a non-lawyer to the same in-house counsel.224

In the subsequent class action, the producing party, an accounting firm, claimed that its disclosure of a manager's e-mail to an in-house lawyer was inadvertent.225 The court was not persuaded by the fact that the attorneys were reviewing the relevant documents two years after the original listing of the pertinent e-mail on an SEC privilege log.226 It held that they were still to be charged with knowing that the e-mail had been sent to an in-house counsel.227 A knowing or inadvertent disclosure of a document protected by attorney-client privilege effects a waiver as to other communications on the same subject.228 Therefore, the defendant had to produce related privileged e-mails.

An earlier decision had found limited waiver via voluntary, but inadvertent, production of a second copy of an e-mail attached to an “undeliverable” e-mail message from a system administrator.229

3. Stipulations to Avoid Waiver Peril

A litigant can guard against a subsequent privilege waiver, perhaps in conjunction with the Rule 26(f) conference, by entering into a “quick peek”230 or “claw back”231 stipulation with its litigation opponent. It has become “[i]ncreasingly popular” for a stipulation to have “explicit provisions as to how [it] . . . will deal with documents inadvertently produced.”232

4. New FRCP Clawback Process; Proposed FRE Waiver Rule

The newly amended versions of FRCP 26(b)(5)(B) and 45(d)(2)(B) lay out a procedure to guard against inadvertent privilege waivers.233 New Rule 26 states, in pertinent part:

If information is produced in discovery that is subject to a claim of privilege or of protection as trial-preparation material, the party making the claim may notify any party that received the information of the claim and the basis for it. After being notified, a party must promptly return, sequester, or destroy the specified information and any copies . . . and may not use or disclose the information until the claim is resolved. A receiving party may promptly present the information to the court under seal for a determination of the claim. 234

However, new Rule 26(b)(5)(B) is only procedural; it does “not address the substantive questions whether privilege or work product protection has been waived or forfeited. Instead, [it] sets up a procedure to allow the responding party to assert a claim of privilege or of work-product protection after production.”235 The same goes for new Rule 45(d)(2)(B).236

In late 2005, a federal court decision essentially analyzed new Rule 26(b)(5)(B) as if it were already in force.237 That opinion warned that the new Rule would present multiple traps for the unwary: (1) unless incorporated into a scheduling order or protective order, any non-waiver stipulations (of the claw back variety) will be risky and not necessarily determinative of future disputes;238 (2) as to the substance of a privilege or work-product dispute, applicable state law principles will control (and privilege standards differ from state to state);239 (3) a given circuit court's view on waiver may consist of the above “strict accountability” approach;240 and (4) “selective waiver” concerns.241

In May 2006, the Federal Advisory Committee on Evidence Rules entered the fray by publishing for comment a proposed new Federal Rule of Evidence, namely FRE 502.242 In part, FRE 502 and its accompanying report and hearing transcript tackle the concerns raised by the Hopson decision.243

New FRE 502(b) would preclude a waiver if two elements are satisfied: first, if there were an inadvertent disclosure in discovery in federal or state litigation or administrative proceedings; and second, if “the holder of the [attorney-client] privilege or work product protection took reasonable precautions to prevent disclosure and took reasonably prompt measures once it knew or should have known of disclosure, to rectify the error,” under putative FRCP 26(b)(5)(B).244

In terms of the spectrum of the three varying waiver standards, proposed FRE 502(b) thus takes a “middle ground” approach.245 In other words, it rejects the strict-liability approach, such that inadvertent disclosure does not automatically affect a subject matter waiver. In addition, proposed FRE 502(c) allows for selective waiver as to the government.246

FRE 502(b) also attempts to make a federal court non-waiver order (e.g., one establishing a claw-back) binding, even as to third parties, not only in federal but also in state proceedings. The Advisory Committee concedes that such a grant of extraterritorial power would require Congress to enact the rule directly as a statute under the Commerce Clause.247 Thus, a broad-sweeping rule would likely face due process challenges.248 Only time will tell how this jurisdictional issue will resolve itself.

5. Takeaways on Privilege

Absent a superseding strategy, try to stipulate to a protective order early; namely, at the 26(f) conference. Heed the warnings of Hopson and of proposed FRE 502 by making sure that all such stipulations are court-endorsed. Note that while new FRCP 26(b)(5) took effect this December 1, the content of new FRE 502 is still being hashed out and cannot take effect until a year later.249

In addition, regarding lawyer-created files, ethical guidelines and/or decisional law have little, if any, practical effect. Once privileged matter has been disclosed to an opponent, the recipient will not be able to erase it from his or her memory. One cannot un-ring the bell.250 Therefore, as to lawyer-created files, one prophylactic measure can and should be taken by practitioners in both the transactional and litigation settings:251 counsel should run metadata-scrubbing software252 on any electronic files before disseminating such files via e-mail or portable media or file-transfer-protocol (ftp).253