Practice Tip: New Federal Rules for Electronic Discovery May Become Effective in 2006

In June 2005, the Committee on Rules of Practice and Procedure of the Judicial Conference of the United States approved comprehensive amendments to the Federal Rules of Civil Procedure regarding discovery of electronically stored information ('ESI'). These amendments were next presented to the Judicial Conference on Sept. 20, 2005 and then to the U.S. Supreme Court and Congress. In their present forms, the amendments would become effective as of Dec. 1, 2006. These e-discovery rule amendments include changes to FRCP Rules 16, 26, 33, 34, 37, and 45, and focus on five areas: 1) early attention to e-discovery issues, 2) discovery of ESI that is not reasonably accessible, 3) procedure for asserting privilege after production, 4) interrogatories and requests for production of ESI,and 5) sanctions and a safe harbor for certain lost ESI.

These proposed amendments will create uniformity in the federal courts regarding e-discovery rules and procedures. The amendments acknowledge that existing discovery rules that were originally adopted to deal with paper documents are not sufficient to handle electronic information. ESI is different from paper documents in that 'electronically stored information is retained in exponentially greater volume than hard-copy documents; electronically stored information is dynamic, rather than static; and electronically stored information may be incomprehensible when separated from the system that created it.' Report of the Civil Rules Advisory Committee, May 27, 2005 ('Committee Report'), p. 24. Accordingly, the proposed rule changes establish a framework that is flexible enough to handle these differences.

Early Attention to E-Discovery Issues

Under the proposed amendments to FRCP Rules 16(b), 26(a), 26(f) and Form 35, the parties must identify and discuss e-discovery issues during the beginning stages of the case. More specifically, Rule 26(a) is expressly amended to make 'electronically stored information' part of a party's required initial disclosures.Under the amendments, the parties now will be required at their Rule 26(f) conference to discuss 'any issues relating to disclosure or discovery of electronically stored information, including the form or forms in which it should be produced.' Proposed Rule 26(f). Form 35 is amended to call for a report to the court about the results of this discussion. Rule 16(b) is likewise amended to permit the court to issue a scheduling order that includes provisions for disclosure or discovery of ESI.

The Committee Note to proposed Rule 26(f) suggests that the parties 'may specify the topics for such discovery and the time period for which discovery will be sought. They may identify the various sources of such information within a party's control, which should be searched for electronically stored information. They may discuss whether the information is reasonably accessible to the party that has it, including the burden or cost of retrieving and reviewing the information.' Committee Note to 26(f), Committee Report, p. 45. The requirement to discuss the form of production (such as whether the information will be produced as a non-searchable TIF image or some other form) is in conjunction with the proposed amendment to Rule 34(b), which permits a party to specify the form or forms in which it wants the discovery produced.

Rule 26(f) also will be amended to require the parties to discuss preservation of discoverable information. Although not limited to e-discovery, preservation issues are especially important for e-discovery because even normal operation of computers involves 'automatic deletion or overwriting of certain information.' Id. at 46. However, the Committee Note emphasizes that this requirement to discuss preservation does not mean that courts should routinely enter preservation orders: 'A preservation order entered over objections should be narrowly tailored. Ex parte preservation orders should issue only in extraordinary circumstances.' Id. at 47.

The new Rule 26(f) also will require the parties to confer as to 'any issues relating to claims of privilege or protection as trial-preparation material, including if the parties agree on a procedure to assert such claims after production [and] whether to ask the court to include their agreement in the order.' Proposed Rule 26(f). This provision indicates that the parties may agree to protocols that allow the parties to produce ESI and later assert claims of privilege, while minimizing the risk of being found to have waived privilege. The parties can then ask the court to include the agreement in its Rule 16(b) scheduling order. The benefit of such an agreement is that the producing party saves money that would have to be spent for a complete privilege review (due to concerns of inadvertently waiving privilege) and the receiving party gets the information quicker.

The two main types of such agreements are 'quick peek' and 'clawback' agreements. In a quick peek agreement, the responding party will provide certain sample requested ESI for examination, without waiving privilege, and the requesting party will then designate the ESI it actually wants produced. In a clawback agreement, the parties agree that production of ESI will not waive privilege, and that if the responding party identifies ESI that should not have been produced, it will be returned to the responding party. Although these agreements minimize the danger of waiver of privilege, they do not prevent others who are not part of the agreements from claiming that the parties waived privilege by such production.

Discovery of ESI That Is Not Reasonably Accessible

Pursuant to the proposed amendment to Rule 26(b)(2), a party need not produce ESI from sources that the party identifies as 'not reasonably accessible because of undue burden or cost.' Proposed Rule 26(b)(2). This identification does not require the responding party to search and retrieve the information. Committee Report, p. 57. Instead, the responding party must 'identify, by category or type, the sources containing potentially responsive information that it is neither searching nor producing. The identification should, to the extent possible, provide enough detail to enable the requesting party to evaluate the burdens and costs of providing the discovery and the likelihood of finding responsive information on the identified sources.' Committee Note to 26(b)(2), Committee Report, p. 64.

Following receipt of this identification of sources that contain potentially responsive information, and following a conference under Rule 37, the requesting party can then move to compel discovery or for a protective order. Proposed Rule 26(b)(2). The burden is on the responding party to show that the information is not reasonably accessible because of undue burden or cost. Id. Before bringing such a motion the parties must confer under Rule 37. The court can also permit the requesting party to obtain discovery as to whether the information is reasonably accessible. Committee Report, p. 65. This could 'take the form of requiring the responding party to conduct a sampling of information contained on the sources identified as not reasonably accessible; allowing inspection of such sources; or taking depositions of witnesses knowledgeable about the party's information systems.' Id.

Even if the court finds that the source of ESI is not reasonably accessible, the court may still order discovery from such sources if the requesting party 'shows good cause, considering the limitations of Rule 26(b)(2)(C),' which considers factors such as whether the discovery sought is cumulative, duplicative, can be obtained from some other source, or if the burden or expense of the proposed discovery outweighs the likely benefit. Proposed Rule 26(b)(2)(B). The court may also set limits on the discovery, such as to the amount, type or sources of discovery. Id.; Committee Note to 26(b)(2), Committee Report, p. 67.

Procedure for Asserting Privilege After Production

The proposed amendment to Rule 26(b)(5)(B) provides a mechanism to assert privilege and work product protection after the documents have already been produced. This amendment applies both to paper documents and to ESI, but it is especially important for ESI because 'the risk of waiver, and the time and effort required to avoid it, can increase substantially because of the volume of electronically stored information and the difficulty in ensuring that all information to be produced has in fact been reviewed.' Committee Note to 26(b)(5), Committee Report, p. 77. However, the agreements between the parties under Rule 26(f)(4) 'ordinarily control if they adopt procedures different from those in Rule 26(b)(5)(B).' Id. at 78. Rule 26(b)(5)(B) does not address the merits of whether the party waived privilege by its production. Id.

In any event, the proposed amendment states that a party can make a claim of privilege or work product protection for information that it has already produced. Proposed Rule 26(b)(5)(B). The party claiming the privilege must notify the receiving party and inform it of the basis of the claim of privilege. Id. After being notified, the receiving party must 'promptly return, sequester, or destroy the specified information and any copies it has.' Id. Alternatively, rather than returning or destroying the information, the receiving party may contest the claim of privilege in court by 'promptly present[ing] the information to the court under seal for a determination of the claim.' Id.

In the meantime, the receiving party 'may not use or disclose the information until the claim is resolved.' Id. Also, if the receiving party has disclosed it to anyone, it must take 'reasonable steps' to retrieve the information. Id. These last two points were moved from the original Committee Note into the text of the proposed amendment after public comment. Committee Report, p. 80.

Interrogatories and Requests for Production of ESI

Interrogatories

Rule 33(d) is amended to state that a party may answer an interrogatory by providing access to ESI, rather than by providing a written answer to the interrogatory. Proposed Rule 33(d). However, in order to satisfy fully the requirement that the receiving party must be given a 'reasonable opportunity to examine, audit, or inspect,' the responding party may also have to 'provide some combination of technical support, information on application software, or other assistance.' Committee Note as to 33(d), Committee Report, p. 92. Because of privacy concerns, the responding party is not required to grant direct access to its information system, but the responding party may have to derive or ascertain the answer to the interrogatory by itself if it does not want the receiving party to obtain such direct access. Id.

Requests for Production and Listing of 'ESI' as Separate

from 'Documents'

Amended Rule 34(a) lists 'electronically stored information' as separate from 'documents.' Although a number of public comments argued that 'electronically stored information' should just be listed as a subset of 'documents,' the Committee concluded that rather than trying to stretch the word 'documents' to include things such as dynamic databases, it is better to list ESI as a separate category. However, the Committee Note stresses that even if a document request asks for 'documents' without expressly asking for ESI, the responding party still must produce ESI. Committee Report, pp. 87, 98-99.

Amended Rule 34(b) deals with the important questions of whether ESI must be produced in a particular format and what procedure should be used to handle disputes. Under the rule, a party may request ESI be produced in a specific form, but the responding party can object and respond by informing the requesting party as to what form it intends to use. Proposed Rule 34(b). The parties then can confer and the requesting party may move for an order to compel production in a specific form.

Unless the parties agree otherwise or the court orders otherwise, such as by agreements under Rule 26(f)(4) and Rule 16(b) orders including such agreements, if the request does not specify the form in which the ESI should be produced, the ESI must be produced 'in a form or forms in which it is ordinarily maintained or in a form or forms which are reasonably usable.' Proposed Rule 34(b). However, in response to concerns raised during the comment period, the Committee Note stresses that 'the option to produce in a reasonably usable form does not mean that a responding party is free to convert electronically stored information from the form in which it is maintained to a different form that makes it more difficult or burdensome for the requesting party to use the information efficiently in the litigation.' Committee Note, Committee Report, p. 103. The Committee Note provides the example that 'If the responding party ordinarily maintains the information it is producing in a way that makes it searchable by electronic means, the information should not be produced in a form that removes or significantly degrades this feature.' Id.

The proposed amendment also states that ordinarily a party need not produce the same ESI in more than one form. Proposed Rule 34(b).

Sanctions and a Safe Harbor for Certain Lost ESI

Proposed Rule 37(f) states:

Electronically stored information. Absent exceptional circumstances, a court may not impose sanctions under these rules upon a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.

This proposed rule 'focuses on a distinctive feature of electronic information systems, the routine modification, overwriting, and deletion of information that attends normal use.' Committee Report, p. 111. Because of the inextricable nature of computer systems, it is often unrealistic to expect parties to stop routine operations of their systems as soon as the parties anticipate litigation. Id. at 112. Accordingly, this rule provides what commentators have termed a 'safe harbor,' whereby a party will not be sanctioned for loss of ESI due to routine, good faith operations. However, this safe harbor protection is not unlimited, since good faith may require that a party impose a litigation hold to satisfy its obligations under common law, statutes and regulations. Id. at 113. Also, a 'party cannot exploit the routine operation of an information system to evade discovery obligations by failing to prevent destruction of stored evidence that it is required to preserve.' Id. at 117.

The proposed rule strikes a balance by indicating that sanctions for loss of ESI due to routine operations can still be imposed in 'extraordinary circumstances.' Proposed Rule 37(b). The Committee Note indicates that if the requesting party can demonstrate that such a loss is highly prejudicial, then sanctions may be appropriate. Id. at 118. However, 'severe sanctions would not be appropriate unless the party acted intentionally or recklessly.'

Beth L. Kaufman is a partner and David Black is an associate at Schoeman, Updike & Kaufman, LLP, in New York. Telephone: 212-661-5030.

In June 2005, the Committee on Rules of Practice and Procedure of the Judicial Conference of the United States approved comprehensive amendments to the Federal Rules of Civil Procedure regarding discovery of electronically stored information ('ESI'). These amendments were next presented to the Judicial Conference on Sept. 20, 2005 and then to the U.S. Supreme Court and Congress. In their present forms, the amendments would become effective as of Dec. 1, 2006. These e-discovery rule amendments include changes to FRCP Rules 16, 26, 33, 34, 37, and 45, and focus on five areas: 1) early attention to e-discovery issues, 2) discovery of ESI that is not reasonably accessible, 3) procedure for asserting privilege after production, 4) interrogatories and requests for production of ESI,and 5) sanctions and a safe harbor for certain lost ESI.

These proposed amendments will create uniformity in the federal courts regarding e-discovery rules and procedures. The amendments acknowledge that existing discovery rules that were originally adopted to deal with paper documents are not sufficient to handle electronic information. ESI is different from paper documents in that 'electronically stored information is retained in exponentially greater volume than hard-copy documents; electronically stored information is dynamic, rather than static; and electronically stored information may be incomprehensible when separated from the system that created it.' Report of the Civil Rules Advisory Committee, May 27, 2005 ('Committee Report'), p. 24. Accordingly, the proposed rule changes establish a framework that is flexible enough to handle these differences.

Early Attention to E-Discovery Issues

Under the proposed amendments to FRCP Rules 16(b), 26(a), 26(f) and Form 35, the parties must identify and discuss e-discovery issues during the beginning stages of the case. More specifically, Rule 26(a) is expressly amended to make 'electronically stored information' part of a party's required initial disclosures.Under the amendments, the parties now will be required at their Rule 26(f) conference to discuss 'any issues relating to disclosure or discovery of electronically stored information, including the form or forms in which it should be produced.' Proposed Rule 26(f). Form 35 is amended to call for a report to the court about the results of this discussion. Rule 16(b) is likewise amended to permit the court to issue a scheduling order that includes provisions for disclosure or discovery of ESI.

The Committee Note to proposed Rule 26(f) suggests that the parties 'may specify the topics for such discovery and the time period for which discovery will be sought. They may identify the various sources of such information within a party's control, which should be searched for electronically stored information. They may discuss whether the information is reasonably accessible to the party that has it, including the burden or cost of retrieving and reviewing the information.' Committee Note to 26(f), Committee Report, p. 45. The requirement to discuss the form of production (such as whether the information will be produced as a non-searchable TIF image or some other form) is in conjunction with the proposed amendment to Rule 34(b), which permits a party to specify the form or forms in which it wants the discovery produced.

Rule 26(f) also will be amended to require the parties to discuss preservation of discoverable information. Although not limited to e-discovery, preservation issues are especially important for e-discovery because even normal operation of computers involves 'automatic deletion or overwriting of certain information.' Id. at 46. However, the Committee Note emphasizes that this requirement to discuss preservation does not mean that courts should routinely enter preservation orders: 'A preservation order entered over objections should be narrowly tailored. Ex parte preservation orders should issue only in extraordinary circumstances.' Id. at 47.

The new Rule 26(f) also will require the parties to confer as to 'any issues relating to claims of privilege or protection as trial-preparation material, including if the parties agree on a procedure to assert such claims after production [and] whether to ask the court to include their agreement in the order.' Proposed Rule 26(f). This provision indicates that the parties may agree to protocols that allow the parties to produce ESI and later assert claims of privilege, while minimizing the risk of being found to have waived privilege. The parties can then ask the court to include the agreement in its Rule 16(b) scheduling order. The benefit of such an agreement is that the producing party saves money that would have to be spent for a complete privilege review (due to concerns of inadvertently waiving privilege) and the receiving party gets the information quicker.

The two main types of such agreements are 'quick peek' and 'clawback' agreements. In a quick peek agreement, the responding party will provide certain sample requested ESI for examination, without waiving privilege, and the requesting party will then designate the ESI it actually wants produced. In a clawback agreement, the parties agree that production of ESI will not waive privilege, and that if the responding party identifies ESI that should not have been produced, it will be returned to the responding party. Although these agreements minimize the danger of waiver of privilege, they do not prevent others who are not part of the agreements from claiming that the parties waived privilege by such production.

Discovery of ESI That Is Not Reasonably Accessible

Pursuant to the proposed amendment to Rule 26(b)(2), a party need not produce ESI from sources that the party identifies as 'not reasonably accessible because of undue burden or cost.' Proposed Rule 26(b)(2). This identification does not require the responding party to search and retrieve the information. Committee Report, p. 57. Instead, the responding party must 'identify, by category or type, the sources containing potentially responsive information that it is neither searching nor producing. The identification should, to the extent possible, provide enough detail to enable the requesting party to evaluate the burdens and costs of providing the discovery and the likelihood of finding responsive information on the identified sources.' Committee Note to 26(b)(2), Committee Report, p. 64.

Following receipt of this identification of sources that contain potentially responsive information, and following a conference under Rule 37, the requesting party can then move to compel discovery or for a protective order. Proposed Rule 26(b)(2). The burden is on the responding party to show that the information is not reasonably accessible because of undue burden or cost. Id. Before bringing such a motion the parties must confer under Rule 37. The court can also permit the requesting party to obtain discovery as to whether the information is reasonably accessible. Committee Report, p. 65. This could 'take the form of requiring the responding party to conduct a sampling of information contained on the sources identified as not reasonably accessible; allowing inspection of such sources; or taking depositions of witnesses knowledgeable about the party's information systems.' Id.

Even if the court finds that the source of ESI is not reasonably accessible, the court may still order discovery from such sources if the requesting party 'shows good cause, considering the limitations of Rule 26(b)(2)(C),' which considers factors such as whether the discovery sought is cumulative, duplicative, can be obtained from some other source, or if the burden or expense of the proposed discovery outweighs the likely benefit. Proposed Rule 26(b)(2)(B). The court may also set limits on the discovery, such as to the amount, type or sources of discovery. Id.; Committee Note to 26(b)(2), Committee Report, p. 67.

Procedure for Asserting Privilege After Production

The proposed amendment to Rule 26(b)(5)(B) provides a mechanism to assert privilege and work product protection after the documents have already been produced. This amendment applies both to paper documents and to ESI, but it is especially important for ESI because 'the risk of waiver, and the time and effort required to avoid it, can increase substantially because of the volume of electronically stored information and the difficulty in ensuring that all information to be produced has in fact been reviewed.' Committee Note to 26(b)(5), Committee Report, p. 77. However, the agreements between the parties under Rule 26(f)(4) 'ordinarily control if they adopt procedures different from those in Rule 26(b)(5)(B).' Id. at 78. Rule 26(b)(5)(B) does not address the merits of whether the party waived privilege by its production. Id.

In any event, the proposed amendment states that a party can make a claim of privilege or work product protection for information that it has already produced. Proposed Rule 26(b)(5)(B). The party claiming the privilege must notify the receiving party and inform it of the basis of the claim of privilege. Id. After being notified, the receiving party must 'promptly return, sequester, or destroy the specified information and any copies it has.' Id. Alternatively, rather than returning or destroying the information, the receiving party may contest the claim of privilege in court by 'promptly present[ing] the information to the court under seal for a determination of the claim.' Id.

In the meantime, the receiving party 'may not use or disclose the information until the claim is resolved.' Id. Also, if the receiving party has disclosed it to anyone, it must take 'reasonable steps' to retrieve the information. Id. These last two points were moved from the original Committee Note into the text of the proposed amendment after public comment. Committee Report, p. 80.

Interrogatories and Requests for Production of ESI

Interrogatories

Rule 33(d) is amended to state that a party may answer an interrogatory by providing access to ESI, rather than by providing a written answer to the interrogatory. Proposed Rule 33(d). However, in order to satisfy fully the requirement that the receiving party must be given a 'reasonable opportunity to examine, audit, or inspect,' the responding party may also have to 'provide some combination of technical support, information on application software, or other assistance.' Committee Note as to 33(d), Committee Report, p. 92. Because of privacy concerns, the responding party is not required to grant direct access to its information system, but the responding party may have to derive or ascertain the answer to the interrogatory by itself if it does not want the receiving party to obtain such direct access. Id.

Requests for Production and Listing of 'ESI' as Separate

from 'Documents'

Amended Rule 34(a) lists 'electronically stored information' as separate from 'documents.' Although a number of public comments argued that 'electronically stored information' should just be listed as a subset of 'documents,' the Committee concluded that rather than trying to stretch the word 'documents' to include things such as dynamic databases, it is better to list ESI as a separate category. However, the Committee Note stresses that even if a document request asks for 'documents' without expressly asking for ESI, the responding party still must produce ESI. Committee Report, pp. 87, 98-99.

Amended Rule 34(b) deals with the important questions of whether ESI must be produced in a particular format and what procedure should be used to handle disputes. Under the rule, a party may request ESI be produced in a specific form, but the responding party can object and respond by informing the requesting party as to what form it intends to use. Proposed Rule 34(b). The parties then can confer and the requesting party may move for an order to compel production in a specific form.

Unless the parties agree otherwise or the court orders otherwise, such as by agreements under Rule 26(f)(4) and Rule 16(b) orders including such agreements, if the request does not specify the form in which the ESI should be produced, the ESI must be produced 'in a form or forms in which it is ordinarily maintained or in a form or forms which are reasonably usable.' Proposed Rule 34(b). However, in response to concerns raised during the comment period, the Committee Note stresses that 'the option to produce in a reasonably usable form does not mean that a responding party is free to convert electronically stored information from the form in which it is maintained to a different form that makes it more difficult or burdensome for the requesting party to use the information efficiently in the litigation.' Committee Note, Committee Report, p. 103. The Committee Note provides the example that 'If the responding party ordinarily maintains the information it is producing in a way that makes it searchable by electronic means, the information should not be produced in a form that removes or significantly degrades this feature.' Id.

The proposed amendment also states that ordinarily a party need not produce the same ESI in more than one form. Proposed Rule 34(b).

Sanctions and a Safe Harbor for Certain Lost ESI

Proposed Rule 37(f) states:

Electronically stored information. Absent exceptional circumstances, a court may not impose sanctions under these rules upon a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.

This proposed rule 'focuses on a distinctive feature of electronic information systems, the routine modification, overwriting, and deletion of information that attends normal use.' Committee Report, p. 111. Because of the inextricable nature of computer systems, it is often unrealistic to expect parties to stop routine operations of their systems as soon as the parties anticipate litigation. Id. at 112. Accordingly, this rule provides what commentators have termed a 'safe harbor,' whereby a party will not be sanctioned for loss of ESI due to routine, good faith operations. However, this safe harbor protection is not unlimited, since good faith may require that a party impose a litigation hold to satisfy its obligations under common law, statutes and regulations. Id. at 113. Also, a 'party cannot exploit the routine operation of an information system to evade discovery obligations by failing to prevent destruction of stored evidence that it is required to preserve.' Id. at 117.

The proposed rule strikes a balance by indicating that sanctions for loss of ESI due to routine operations can still be imposed in 'extraordinary circumstances.' Proposed Rule 37(b). The Committee Note indicates that if the requesting party can demonstrate that such a loss is highly prejudicial, then sanctions may be appropriate. Id. at 118. However, 'severe sanctions would not be appropriate unless the party acted intentionally or recklessly.'

Beth L. Kaufman is a partner and David Black is an associate at Schoeman, Updike & Kaufman, LLP, in New York. Telephone: 212-661-5030.