(January, 2007) – In December 2006 new amendments to the Federal Rules of Civil Procedure became effective regarding “E-Discovery.”  These rules affect not just parties to federal lawsuits, but also any business which has electronic information which could be subpoenaed.

The financial consequences of non-compliance

Electronically stored information has always been important to businesses and lawsuits.

• In 2004, a federal judge in the District of Columbia fined Philip Morris and its parent company $2.75 million for failing to preserve electronic information in U.S. v. Philip Morris.

• In 2005, a federal jury in New York rendered a $29 million verdict against an employer in Zubulake v. UBS Warburg, LLC.  In this case the judge had instructed jurors that they could infer that electronic information, which UBS had failed to preserve, would have been unfavorable to UBS.

The December 2006 amendments to the federal rules

The new rules now specifically address electronically stored information (“ESI”).  This will lead judges and parties to focus even more on the importance of ESI.  The new rules emphasize that the discovery of ESI stands on equal footing with the discovery of paper documents.  The rules include any type of information that is stored electronically.

Preservation of Electronically Stored Information

The parties to a law suit have a legal responsibility to preserve relevant electronic information.  When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, intervention and adjustments in the normal routine operations of their information systems is required.  For example, a business may need to stop deleting certain emails or stop recycling certain back-up tapes.  The series of steps taken to stop the alteration and destruction of information relevant to a case is known as a “litigation hold.”

As seen in the examples above, significant sanctions can be imposed if a party does not properly take steps to preserve ESI.  On the other hand, if a party has taken proper steps to preserve relevant ESI, the new rules state that sanctions will not be imposed due to the loss of electronic information during the normal routine and good faith operations of electronic information systems.  This is called the “safe harbor.”

Early discussions regarding Electronically Stored Information and E-Discovery

Early discussions regarding “E-Discovery” are required by the new rules.  The aim is to identify issues, avoid misunderstandings, expedite proper resolution of problems, and reduce overall litigation costs.

The lawyers from both sides of the case need to become familiar with the information systems and electronic information of their own client and of the opposing party.  The new rules contemplate that each side will obtain information about their client’s information systems (IT) systems and data before the initial discovery planning conference.

At the initial conference the parties should discuss the following:

• The information systems infrastructure of both parties
• Location and sources of relevant electronic information
• Scope of electronic information requirements
• Time period of required information
• Accessibility of information
• Retrieval information formats
• Cost and effort to retrieve information
• Preservation of discoverable information
• Assertions of privileges and protection of litigation materials

Retrieving and Producing Electronically Stored Information

The new rules specifically require parties to include ESI in their initial disclosures of evidence that they may use to support their claims or defenses.

During the discovery process, the parties must produce ESI that is relevant to the case, not privileged and reasonably accessible.  The information must be provided in a reasonable usable form, and in the format requested by the opposing party.

Technical issues will arise.  For example, the new rules contemplate that a party may need to provide technical support so that the electronic information can be used by the opposing party.  Also, information provided in the original electronic format may provide “metadata,” that is, details about the ESI such as when it was last modified.

Information that is not reasonably accessible

The new rules contemplate that some ESI may not be reasonably accessible due to undue burden or cost.  The parties should identify from the outset the categories of ESI that they believe are not reasonably accessible.

A party seeking the ESI may test a sample of such information to determine how burdensome it would be to retrieve it.  A party may be able to challenge a claim that retrieval is not technically feasible.  Also, a party may offer to pay for the cost of retrieval of such information.

Subpoenas to parties not involved in the litigation

The parties involved in a case often subpoena records, including ESI, from third parties.  The subpoena can designate the format of the requested ESI.  Otherwise, the party served with the subpoena must provide the information in the format that it is normally maintained or a format that is reasonably usable.  The responding party does not have to provide the ESI if it is not reasonably accessible unless the court orders such discovery for good cause.  In the subpoena process, testing and sampling of the information are allowed.

How an IT expert from Enterprise Risk Management can help

Enterprise Risk Management is a consulting firm which provides a wide range of IT related services to a variety of businesses including publicly traded corporations, banks, utility companies, hospitals, universities, cruise lines, and manufacturers.

Enterprise Risk Management can help businesses and their counsel to properly handle ESI and E-Discovery.  Enterprise Risk Management’s IT experts can:

• Assist businesses and their counsel to comply with the new rules to avoid sanctions.

• Assist attorneys in gaining an understanding of the information system infrastructure of their client as well as the system infrastructure of the opposing side.

• Assist attorneys in identifying the ESI that needs to be preserved by their client and by the opposing party.

• Assist attorneys in testing whether the opposing side has properly preserved ESI.

• Assist attorneys with the IT issues related to identifying the scope, time period, sources and formats of the ESI that their client will be providing.

• Assist attorneys in formulating requests for discovery from the opposing party.

• Assist attorneys in testing the opposing side’s assertion that certain data is not reasonable accessible.

• Assist attorneys in analyzing ESI obtained from the opposing side.

• Assist attorneys with depositions concerning information systems, ESI and data analysis.

• Assist businesses and their attorneys during the entire litigation process by providing information systems and data analysis expertise needed to deal with the opponent’s requests, assertions and objections.