Courts are becoming increasingly focused on electronic discovery. They are requiring companies to take a proactive approach to preserving e-data. At the same time, they are increasing penalties for failing to meet these emerging standards. Employment cases are particularly susceptible to electronic discovery concerns in that e-mail is an ever-increasing way for employees and managers alike to exchange inappropriate and potentially unlawful comments about employees, while exercising less discretion than they might have in a memorandum, letter or formal performance evaluation. Moreover, discovery of an employee's in-office Internet searches could reveal search patterns - to web pages that offer pornography or focus on racist themes - that plaintiffs could attempt to use to give credence to their claims of sexual harassment or discrimination.
The current judicial and legislative trends represent a material change in the focus of courts and litigants, and call for a re-assessment of the way that in-house counsel and human resources departments educate themselves, educate their employees, and plan to address this particularly invasive form of discovery.
This article provides guidance on that process by discussing the most prominent judicial and legislative trends, and offers a road map for evaluating and improving human resources policies, e-data systems and employee training, to ensure your company is prepared for litigation in this new age of electronic discovery.
I. Judicial Trends
The two most prominent judicial trends in the area of electronic discovery have been towards increasing accountability of corporations and their counsel to ensure proper preservation and production of e-data, and towards shifting disclosure costs to control abuse of electronic discovery.
The most explicit standards for preservation and production have been set down in a series of opinions by the Southern District of New York in an employment discrimination case known as Zubulake v. UBS Warburg LLC, 02 Civ. 1243 (SAS). In Zubulake, employees were given clear instructions to preserve electronic data. Notwithstanding these instructions, certain UBS employees deleted e-mails and failed to preserve back-up tapes. In response, the court sanctioned UBS for violating its duty to preserve evidence and required UBS to pay for the re-deposition of certain of its own employees.
In doing so, the court set forth detailed mandates on how in-house and outside counsel are to preserve and produce electronic data. Specifically, the Zubulake court found that: (i) document preservation notices must be sent on a periodic basis - once is not enough; (ii) the corporation must involve its IT department in preservation efforts to ensure that backup media containing potentially relevant evidence are identified and preserved; (iii) it is not sufficient to merely direct employees to preserve evidence; rather, counsel must actively monitor the employees to ensure compliance with the request; and (iv) outside counsel cannot rely on in-house counsel to ensure preservation; rather, they should communicate directly with all relevant employees.
Another prominent trend in this area is towards cost shifting. In an effort to protect litigants from abusive requests for discovery, courts have begun to adopt various versions of a balancing test to assess when costs of production should shift to the requesting party. This trend is exemplified by Rowe Entertainment, Inc. v. The William Morris Agency, Inc., 205 F.R.D. 421 (2002), in which defendants sought a protective order to preclude discovery of data that it asserted would be excessively costly for it to produce. In response, the court adopted a balancing approach, consisting of eight factors, pursuant to which it shifted nearly all costs of production to plaintiffs.
II. Legislative Trends
In addition to understanding how judicial opinions are changing the litigation playing field, in-house counsel also need to understand how changes to the Federal Rules of Civil Procedure will soon impact electronic discovery. The Civil Rules Advisory Committee, the committee that is responsible for promulgating the rules of civil procedure, has proposed amendments to the Federal Rules of Civil Procedure that will directly address electronic discovery. While these rules will not come into effect until at the earliest December 2006, it is important for counsel to understand the proposals to ensure that the changes they make to policies and procedures now will enable their company to effectively and efficiently comply with the new rules when they are rolled out.
The proposed rules contemplate addressing electronic discovery issues from the very outset of the litigation. They would require parties to discuss electronic discovery issues and develop a discovery plan, including the form in which electronically stored documents should be produced. This is a material change in that it will cause employee's counsel to focus on whether they should pursue electronic data - something which, to date, plaintiff's counsel do not always do. In addition, it will complicate virtually every litigation matter, in that the rules contemplate that counsel will be prepared to address electronic discovery as a matter of course - meaning that for each case, counsel will have to know enough about their client's data-control systems to make meaningful objections and strategically intelligent concessions in setting the discovery plan.
The proposed rules also offer a reasonableness standard to address the inherent difficulties with accessibility of information. They provide that electronically stored information that is not reasonably accessible does not have to be produced unless a court orders it on a showing of good cause. The qualification of reasonably accessible depends on a number of variables including whether the party itself routinely accesses that information and how time consuming and costly restoring the data would be.
One of the more controversial proposals is for a limited safe harbor that would only apply to information destroyed or lost as a result of routine operations of computer systems. According to the proposed rule, a court will not impose sanctions on a party that did not violate a court order if the party took reasonable steps to preserve information when it knew or should have known it would be discoverable and the loss of information resulted from routine operation of the party's system.
III. Planning For Electronic Discovery
There are a number of steps that in-house counsel can take now to prepare for, and be ready to respond to, e-discovery demands and the anticipated amendments to the Federal Rules of Civil Procedure.
A. Implement Policies Regarding the Use of E-mail and the Internet
Increasingly, employers are adopting or updating existing policies regulating employee use of the company's e-mail system and access of the Internet through company computers. Generally speaking, these policies prohibit the use of e-mail for personal reasons (except in an emergency), prohibit the sending of harassing messages and restrict e-mail to legitimate business purposes. Similarly, the use of company computers to access pornographic, racist or other inappropriate sites is prohibited. Indeed, as with e-mail, many company policies prohibit the use of the Internet for any reason other than a legitimate business purpose.
In addition to implementing and disseminating these policies, employers need to enforce them. A key component of e-mail and Internet policies is to put employees on notice that they have no expectation of privacy in any e-mail that they send or receive, or in any web site that they visit. There are a number of ways to monitor e-mail and Internet use either with the assistance of the company's IT department or an outside expert skilled in data retrieval. Enforcement is important both to identify problems before they mature into a claim of harassment or discrimination and to limit the creation of e-data that may be harmful to the employer in discovery.
B. Protect Privileged Data
Most companies generate, maintain and distribute a high volume of e-mail and other e-data. As a result, it is inevitable that e-discovery will implicate issues regarding confidential and privileged information. By taking steps now to identify and protect this information, you will be better able to ward off demands for its production and to prevent its inadvertent disclosure. For example, you might require that documents be appropriately labeled in their electronic version and educate employees how to identify e-data as confidential, proprietary, privileged, work product or related to efforts to settle. Alternatively, you might want to create an electronic prompt, asking users to add an appropriate designation to an e-mail before it is sent.
C. Learn How Your Computer and Electronic Systems Work
Before you encounter litigation involving e-discovery, learn how your computer and electronic systems are structured and how they actually operate. Identify the individuals and/or departments responsible for your systems and understand the chain of command so you can quickly and effectively disseminate information pertinent to discovery when necessary. In addition, familiarize yourself with document retention, e-mail and Internet policies.
D. Preserve Potential Evidence
Plaintiff's lawyers not infrequently claim that the employer has failed to preserve evidence and, as a result, seek and sometimes obtain a wide variety of sanctions, including monetary sanctions, adverse inference jury instructions, orders of preclusion, default judgments and so-called "rummaging" orders (which gives the discovering party hands-on access to the other side's computer system). To avoid these unwanted consequences, organizations must create and consistently follow a document retention policy that: (1) complies with any statutory and/or regulatory obligations governing the different types of documents to be retained; (2) specifies the length of time each type of document will be retained; (3) establishes a destruction schedule and a method of destruction; and (4) provides a detailed protocol for halting the routine destruction of documents in the event of anticipated or actual litigation (a "litigation hold" or "freeze").
Published November 1, 2004.
