Federal Courts and Discovery of Electronically Stored Information

There are several issues to be explored pertaining to the discovery of electronically stored information, including the basis under the federal rules for the discoverability of this information, cost-shifting associated with this type of discovery, sanctions for spoliation of evidence, as well as recent local rules adopted by federal district courts to address the discovery of electronically stored information.

Cost-Shifting

One of the benefits of storing information electronically is that substantial amounts of information can be kept in a small space at virtually no cost. It is only when a party to a litigation needs to retrieve this information that the costs can begin to mount, and the expense associated with production is often the source of dispute. As a result, courts have often been called upon by parties to address who should bear the burden of these expenses.

Historically, there has been a presumption in federal practice that the responding party bears the expense of complying with discovery requests. Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309, 316 (S.D.N.Y. 2003) (Zubulake I) (quoting Oppenheimer Fund Inc. v. Sanders, 437 U.S. 340, 358 (1978)).The federal rules, however, enable courts to protect the responding party from undue burden or expense by shifting some or all of the production costs to the requesting party. Fed. R. Civ. P. 26(c). Consequently, courts have balanced the broad scope of discovery set forth in Fed. R. Civ. P. 26(b)(1) with the cost-conscious limitations outlined in Fed. R. Civ. P. 26(b)(2) to determine that there are situations where cost-shifting is appropriate. The determination of whether a discovery request for electronically stored information is unduly burdensome or expensive focuses on whether the information sought is maintained in an accessible or inaccessible format. Id. at 318. To determine if electronically stored information is accessible or inaccessible, one must look at the media in which the information is stored. Id. at 318-319 (There are five categories of media storage, ranging from the most accessible, “active online date,” to the least accessible, “erased, fragmented or damaged data.”)

In 2003, in Zubulake I, the court set forth several factors to be weighed in resolving electronic discovery cost disputes. (Zubulake I involved a dispute between an employee and her former employer in which the employee climaed gender discrimination and illegal retaliation. Plaintiff Zubulake contended that critical evidence to support her claims was contained in e-mails exchanged between UBS employees; those e-mails were, by the time she sought discovery, available only on “back-up” tapes and other archived media.) The Zubulake I factors to be considered were: 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. Id. at 322. These factors are not weighed equally. Instead, they are looked at in descending order of importance. Factors three, four, and five, which address cost issues such as “How expensive will this production be?” and, “Who can handle that expense?” are considered less important. Factor six rarely comes into play, and factor seven has been deemed the least important, since it is presumed that the discovery response will benefit the requesting party. However, where the production of the information may also benefit the responding party, the last factor may weigh against shifting costs.

Data Preservation, Spoliation and Sanctions

Other issues commonly associated with the production of electronically stored information are the duty to preserve the information, and the penalties for spoliation. A party's obligation to preserve information arises when either the party is put on “notice that the evidence is relevant to litigation,” or “the party should have known that the evidence may be relevant to future litigation.” Zubulake v. UBS Warburg LLC, 2003 U.S. Dist. Lexis 18771 at *8 (October 22, 2003) (Zubulake IV). Once the threat of litigation is known, or at least reasonably anticipated, a party must delay any further routine information destruction and, instead, create a retention plan that assures the preservation of all relevant information. Id. at * 16.This does not mean that the party cannot destroy or recycle any information, but that party may not destroy information that 1) should reasonably be known to be relevant to the litigation; 2) could reasonably be anticipated to be sought in a pending or future discovery request; or 3) could reasonably lead to the discovery of other admissible evidence. Id. at *13 (quoting Turner v. Hudson Transit Lines Inc., 142 F.R.D. 68, 72 (S.D.N.Y. 1991)).

Pursuant to Fed. R. Civ. P. 26, parties have a continual obligation to disclose non-privileged information and documents pursuant to discovery requests absent any “undue hardship or expense.” Additionally, “Fed. R. Civ. P. 26(g) imposes on counsel an affirmative duty to engage in pretrial discovery responsibly and 'is designed to curb discovery abuse by explicitly encouraging the imposition of sanctions.'” Metropolitan Opera Ass'n, Inc. v. Local 100, Hotel Employees & Rest. Employees Int'l Union, 212 F.R.D. 178, 219 (S.D.N.Y. 2003) (quoting Fed. R. Civ. P. 26(g) Advisory Committee Notes to 1983 Amendment). Sanctions may be prescribed in accordance with Fed. R. Civ. P. 37, including delaying the start of a trial at the sanctioned party's expense, ordering a mistrial of an ongoing trial or instructing the jury that it may draw an adverse inference against the sanctioned party on the issue that was the subject of the sanction. Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 113 (2d Cir. 2002). In extreme cases, the court may even order the entry of judgment or the dismissal of a claim with prejudice. Metropolitan Opera, supra note 12, 212 F.R.D. at 220. Additionally, the sanctioned party may also be required to pay costs associated with its derelict conduct. Zubulake IV, 2003 U.S. Dist. Lexis 18771 at *30 (ordering that defendant bear the costs incurred to re-depose witnesses with information relating to destroyed email evidence).

New Federal District Court Rules on Electronic Discovery

Recognizing the increasing practice of storing information electronically, and the discovery disputes associated with production of this information, the U.S. District Court for the District of New Jersey adopted a local rule on Oct. 6, 2003, titled “Discovery of Digital Information Including Computer-Based Information.” N.J. Fed. Prac. R. 26.1(d). The rule creates several obligations of counsel prior to a Fed. R. Civ. P. 26(f) conference, including counsel's obligation to: 1) review their client's respective computer information management systems and files in order to understand how it stores information; 2) determine what information is subject to disclosure under Fed. R. Civ. P. 26(a)(1); 3) determine how that information may be retrieved; and 4) identify what person(s) have knowledge of the system. Id. at 26.1(d)(1).

In addition, parties seeking discovery of electronically stored information must advise all opposing parties of same before the Fed. R. Civ. P. 26(f) conference. Id. at 26 1(d)(2). Last, during the Fed. R. Civ. P. 26(f) conference, the parties must make efforts to agree on all other electronic discovery matters including preservation and inadvertent disclosures of privileged information and costs associated with production. Id. at 26 1(d)(3).

At present, only three other districts — the Eastern and Western Districts of Arkansas and the District of Wyoming — have adopted similar rules. The District of New Jersey's local rule, however, is the most comprehensive rule on this subject to date.

Conclusion

In light of the increasing practice of storing information electronically, it is likely that other courts will follow the lead of Arkansas, New Jersey and Wyoming by adopting provisions to specifically address new efficient and cost efficient methods of conducting discovery. Although such provisions may somewhat reduce the number of discovery disputes, given our expansive reliance on computer technology, we can anticipate that such disputes will continue to occur at least until there is uniformity in the rules that provides parties with manageable obligations of disclosure.

Although most medical malpractice actions are brought in state courts, some must be litigated in federal courts, usually because of diversity of citizenship. When it comes to discovery in these cases, it's important to understand the federal rules that come into play.

Since their invention more than 50 years ago, we have come to rely on computers to keep track of virtually every facet of our lives. Courts have acknowledged the central role of computers, understanding that individuals and corporations have used computers to cut costs, improve production, enhance communication, store countless data and improve capabilities in every aspect of human and technological development. Given the central role of computer technology in our personal and professional lives, discovery requests for electronically stored information have become commonplace. The costs associated with discovery frequently escalate when the information sought is stored electronically, because retrieval is often more complicated and nuanced than the production of hard copies of documents. Not surprisingly, the disclosure and production of electronically stored information is often the subject of discovery disputes.

Federal Rule of Civil Procedure 26(a)(1)(B) provides that mandatory initial disclosures should include a copy or description of all “documents … data compilations … and tangible things” in the possession of the disclosing party. Fed. R. Civ. P. 34 allows for any party to serve a request on another party to produce or make available for inspection “documents,” which include “data compilations from which information can be obtained,” and “tangible things” within the producing party's control. In addition, the 1970 Advisory Committee Notes to Fed. R. Civ. P. 34 provide that the rule amendment to include “data compilations” as a sub-category of “documents” was effected to account for “changing technology.” Some state courts follow similar rules.

There are several issues to be explored pertaining to the discovery of electronically stored information, including the basis under the federal rules for the discoverability of this information, cost-shifting associated with this type of discovery, sanctions for spoliation of evidence, as well as recent local rules adopted by federal district courts to address the discovery of electronically stored information.

Cost-Shifting

One of the benefits of storing information electronically is that substantial amounts of information can be kept in a small space at virtually no cost. It is only when a party to a litigation needs to retrieve this information that the costs can begin to mount, and the expense associated with production is often the source of dispute. As a result, courts have often been called upon by parties to address who should bear the burden of these expenses.

Historically, there has been a presumption in federal practice that the responding party bears the expense of complying with discovery requests. Zubulake v. UBS Warburg, LLC , 217 F.R.D. 309, 316 (S.D.N.Y. 2003) ( Zubulake I ) (quoting Oppenheimer Fund Inc. v. Sanders , 437 U.S. 340, 358 (1978)).The federal rules, however, enable courts to protect the responding party from undue burden or expense by shifting some or all of the production costs to the requesting party. Fed. R. Civ. P. 26(c). Consequently, courts have balanced the broad scope of discovery set forth in Fed. R. Civ. P. 26(b)(1) with the cost-conscious limitations outlined in Fed. R. Civ. P. 26(b)(2) to determine that there are situations where cost-shifting is appropriate. The determination of whether a discovery request for electronically stored information is unduly burdensome or expensive focuses on whether the information sought is maintained in an accessible or inaccessible format. Id. at 318. To determine if electronically stored information is accessible or inaccessible, one must look at the media in which the information is stored. Id. at 318-319 (There are five categories of media storage, ranging from the most accessible, “active online date,” to the least accessible, “erased, fragmented or damaged data.”)

In 2003, in Zubulake I, the court set forth several factors to be weighed in resolving electronic discovery cost disputes. (Zubulake I involved a dispute between an employee and her former employer in which the employee climaed gender discrimination and illegal retaliation. Plaintiff Zubulake contended that critical evidence to support her claims was contained in e-mails exchanged between UBS employees; those e-mails were, by the time she sought discovery, available only on “back-up” tapes and other archived media.) The Zubulake I factors to be considered were: 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. Id. at 322. These factors are not weighed equally. Instead, they are looked at in descending order of importance. Factors three, four, and five, which address cost issues such as “How expensive will this production be?” and, “Who can handle that expense?” are considered less important. Factor six rarely comes into play, and factor seven has been deemed the least important, since it is presumed that the discovery response will benefit the requesting party. However, where the production of the information may also benefit the responding party, the last factor may weigh against shifting costs.

Data Preservation, Spoliation and Sanctions

Other issues commonly associated with the production of electronically stored information are the duty to preserve the information, and the penalties for spoliation. A party's obligation to preserve information arises when either the party is put on “notice that the evidence is relevant to litigation,” or “the party should have known that the evidence may be relevant to future litigation.” Zubulake v. UBS Warburg LLC, 2003 U.S. Dist. Lexis 18771 at *8 (October 22, 2003) (Zubulake IV). Once the threat of litigation is known, or at least reasonably anticipated, a party must delay any further routine information destruction and, instead, create a retention plan that assures the preservation of all relevant information. Id. at * 16.This does not mean that the party cannot destroy or recycle any information, but that party may not destroy information that 1) should reasonably be known to be relevant to the litigation; 2) could reasonably be anticipated to be sought in a pending or future discovery request; or 3) could reasonably lead to the discovery of other admissible evidence. Id. at *13 (quoting Turner v. Hudson Transit Lines Inc. , 142 F.R.D. 68, 72 (S.D.N.Y. 1991)).

Pursuant to Fed. R. Civ. P. 26, parties have a continual obligation to disclose non-privileged information and documents pursuant to discovery requests absent any “undue hardship or expense.” Additionally, “Fed. R. Civ. P. 26(g) imposes on counsel an affirmative duty to engage in pretrial discovery responsibly and 'is designed to curb discovery abuse by explicitly encouraging the imposition of sanctions.'” Metropolitan Opera Ass'n, Inc. v. Local 100, Hotel Employees & Rest. Employees Int'l Union , 212 F.R.D. 178, 219 (S.D.N.Y. 2003) (quoting Fed. R. Civ. P. 26(g) Advisory Committee Notes to 1983 Amendment). Sanctions may be prescribed in accordance with Fed. R. Civ. P. 37, including delaying the start of a trial at the sanctioned party's expense, ordering a mistrial of an ongoing trial or instructing the jury that it may draw an adverse inference against the sanctioned party on the issue that was the subject of the sanction. Residential Funding Corp. v. DeGeorge Fin. Corp. , 306 F.3d 99, 113 (2d Cir. 2002). In extreme cases, the court may even order the entry of judgment or the dismissal of a claim with prejudice. Metropolitan Opera, supra note 12, 212 F.R.D. at 220. Additionally, the sanctioned party may also be required to pay costs associated with its derelict conduct. Zubulake IV, 2003 U.S. Dist. Lexis 18771 at *30 (ordering that defendant bear the costs incurred to re-depose witnesses with information relating to destroyed email evidence).

New Federal District Court Rules on Electronic Discovery

Recognizing the increasing practice of storing information electronically, and the discovery disputes associated with production of this information, the U.S. District Court for the District of New Jersey adopted a local rule on Oct. 6, 2003, titled “Discovery of Digital Information Including Computer-Based Information.” N.J. Fed. Prac. R. 26.1(d). The rule creates several obligations of counsel prior to a Fed. R. Civ. P. 26(f) conference, including counsel's obligation to: 1) review their client's respective computer information management systems and files in order to understand how it stores information; 2) determine what information is subject to disclosure under Fed. R. Civ. P. 26(a)(1); 3) determine how that information may be retrieved; and 4) identify what person(s) have knowledge of the system. Id. at 26.1(d)(1).

In addition, parties seeking discovery of electronically stored information must advise all opposing parties of same before the Fed. R. Civ. P. 26(f) conference. Id. at 26 1(d)(2). Last, during the Fed. R. Civ. P. 26(f) conference, the parties must make efforts to agree on all other electronic discovery matters including preservation and inadvertent disclosures of privileged information and costs associated with production. Id. at 26 1(d)(3).

At present, only three other districts — the Eastern and Western Districts of Arkansas and the District of Wyoming — have adopted similar rules. The District of New Jersey's local rule, however, is the most comprehensive rule on this subject to date.

Conclusion

In light of the increasing practice of storing information electronically, it is likely that other courts will follow the lead of Arkansas, New Jersey and Wyoming by adopting provisions to specifically address new efficient and cost efficient methods of conducting discovery. Although such provisions may somewhat reduce the number of discovery disputes, given our expansive reliance on computer technology, we can anticipate that such disputes will continue to occur at least until there is uniformity in the rules that provides parties with manageable obligations of disclosure.