Impact of Electronic Data upon an Attorney's Client[dagger], The

Hill, Terry L

I.

INTRODUCTION

Technological advancements within the past decade have affected virtually every aspect of modern life. Many of these effects are positive. People have greater knowledge, and they can access the sources of that knowledge more quickly. In addition, businesses function more efficiently, thereby increasing productivity and creativity. The processes and procedures of today's institutions are more streamlined and more easily manipulated by those who need them. Communication, both on an individual and a global level, has become sophisticated and instantaneous. While the accolades could continue, fairness demands an admission that today's high-tech gadgets and computerized operations also create consequences that are not so desirable.

One of the problem areas associated with the intense influx of electronic tools is the current struggle within the legal profession to adapt its practices to this new Technology Age. While the advancements created by computers are beneficial to attorneys and their clients in many ways, they also create burdens for counselors who are professionally responsible for the impact they have on legal relationships and, specifically, litigation. Those burdens can include:

1. the multi-level difficulty of drafting working policies for clients in order to safeguard against the uncertainty of potential electronic discovery;

2. the immense effort involved in responding to discovery requests for electronic information so as to protect all privileges and to zealously represent the client;

3. the intrusiveness of discovery requests that can entail vast searches for data hidden deep within a client's electronic systems; and

4. the financial cost of complying with electronic discovery requirements, not only in hours spent reviewing and rebuilding data, but also in a client's business interruption.

These burdens have compromised the practice environment for litigation attorneys and overwhelmed them with electronic discovery demands. Thus, this article will examine some of the most troublesome issues confronting the legal profession with regard to electronic document production:

1. inadvertent waiver of privilege;

2. electronic document management;

3. preservation of electronic information; and

4. the cost allocation of electronic document production.

In order to discuss these issues knowledgeably, however, it is necessary first to establish the currently existing framework of the legal duty to produce electronic documents and the potential scope of that duty.

II.

DUTY TO PRODUCE ELECTRONIC INFORMATION

Federal Rule of Civil Procedure 26 was amended in 1993 to create a mandatory disclosure requirement. Although the amended rule initially was adopted by most federal district courts, a provision was adopted in December 2000 that compelled all federal district courts to comply with the mandatory disclosure rule.1 This amendment requires attorneys to produce certain materials relevant to issues in the pending litigation without a specific discovery request. Instead of waiting for a list of limited items from opposing counsel, attorneys now must conduct a broad, general review of all the information held by their clients in order to locate those items that are relevant to the dispute. Significantly, that review must include electronic evidence as well as paper documents.

Federal Rule 26(a)(l) states in pertinent part:

(1) Initial Disclosures. Except in categories of proceedings specified in Rule 26(a)(I)(e) or to the extent otherwise stipulated or directed by order, a party must, without awaiting a discovery request, provide to other parties:

(B) a copy of, or a description by category and location of, all documents, data compilations, and tangible things that are in the possession, custody, or control of the party and that the disclosing party may use to support its claims or defenses, unless solely for impeachmentf.]2

The potential penalties for failing to comply with this disclosure requirement are substantial. Not only will a party forfeit the right to use the evidence that the party failed to disclose,3 the party also may suffer monetary sanctions4 or even the loss of a judgment.5

While most attorneys are familiar with the mandatory disclosure requirements in some form, a smaller number have made the connection between the rule and the computer systems of their clients. Attorneys are accustomed to examining paper documents during discovery; yet almost every paper document today derives from an electronic format. Electronic documents, whether word processed items or databases, or data stored within the computer system itself, consist of any information that is communicated and stored electronically. The Civil Rules Advisory Committee was aware of this expanded document concept as early as 1970, when it amended Federal Rule 34 to include "data compilations" in the list of items that might be requested by litigating parties.6 Since that amendment, courts consistently have interpreted the term "document" to include information that is stored electronically, and no case since 1970 has interpreted the term "document" to exclude from discovery any form of electronic data. One court went so far as to say that "it is black letter law that computerized data is discoverable if relevant."7

This development creates a new twist for attorneys prepared to review and produce client materials pursuant to Rule 26(a)( I)(B): filing cabinet drawers are no longer the place to begin. Today, the vast majority of business records - including contracts, financial data, and correspondence - are stored within computer systems. Many attorneys, however, still consider themselves technically illiterate and do not understand how or where to look for this information. Some are frustrated by the sheer volume of documents that may exist, failing to produce anything not evident after a cursory review. Nevertheless, courts are clear that the duty imposed by Rule 26 includes the production of materials that attorneys "should have known" existed.8 It is likely that this frustration will intensify as attorneys become aware of the particularly incriminating nature of electronic evidence. The lack of "hard evidence" in paper form can lull some clients into a false sense of security with regard to the existence of electronic data, and e-mail messages sometimes can be downright dangerous for litigation strategy.

The unique nature of e-mail suggests a potential litigation landmine for many reasons: (1) the sheer quantity of e-mail messages produced by clients increases the chance that one of them will contain material relevant to a disputed legal matter; (2) the content of e-mail messages generally is more casual and more likely to contain information unavailable from other sources, and (3) an e-mail message is actually very difficult to destroy. In addition, even the general public is aware of the "smoking guns" discovered in e-mail messages in high-profile cases such as Iran-Contra, the Salt Lake City Olympic bid scandal, the Microsoft antitrust case, the impeachment of President Clinton, and the collapse of Enron Corporation.

Nor is it good enough simply to review and produce the paper copies provided by one's client. Recent court decisions have affirmed that attorneys not only have a duty to thoroughly investigate and disclose potentially relevant documents,9 they also must disclose whether or not those documents are available in electronic form.10 Failures regarding the adequate production of electronic information can result in discovery sanctions. ' ' Regardless of the concerns expressed by the legal community, the duty to produce relevant information, which very probably exists in electronic form, is clear.

III.

SCOPE OF DISCOVERY OF ELECTRONIC INFORMATION

Rules 26 to 37 of the Federal Rules of Civil Procedure govern discovery procedures in federal civil actions. In theory, they enable parties to obtain all the information necessary to prepare for trial and to resolve their legal disputes. These rules were uniquely formulated to allow for broad searches in order to gain the "fullest possible knowledge of the issues and facts before trial."12 For example, Rule 34(a) allows any party to serve on any other party a request:

to produce and permit the party making the request, or someone acting on the requestor's behalf, to inspect and copy, any designated documents (including writings, drawings, graphs, charts, photographs, phone records, and other data compilations from which information can be obtained, translated, if necessary, by the respondent through detection devices into reasonably usable form), or to inspect and copy, test, or sample any tangible things which constitute or contain matters within the scope of Rule 26(b) and which are in the possession, custody or control of the party upon whom the request is served[.]13

The Notes to the 1970 Amendment to Rule 34 explain in part:

The inclusive description of "documents" is revised to accord with changing technology. It makes clear that Rule 34 applies to electronic data compilations from which information can be obtained only with the use of detection devices, and that when the data can as a practical matter be made usable by the discovering party only through respondent's devices, respondent may be required to use [its] devices to translate the data into usable form. In many instances, this means that respondent will have to supply a print-out of computer data. . . . Similarly, if the discovering party needs to check the electronic source itself, the court may protect respondent with respect to preservation of [its] records, confidentiality of nondiscoverable matters, and costs.14

Rule 34(b) supplies the procedure for the discovery of documents:

The request shall set forth, either by individual item or by category, the items to be inspected, and describe each with reasonable particularity. The request shall specify a reasonable time, place, and manner of making the inspection and performing the related acts. Without leave of court or written stipulation, a request may not be served before the time specified in Rule 26(d).

The party upon whom the request is served shall serve a written response within 30 days after the service of the request. A shorter or longer time may be directed by the court or, in the absence of such an order, agreed to in writing by the parties, subject to Rule 29. The response shall state, with respect to each item or category, that inspection and related activities will be permitted as requested, unless the request is objected to, in which event the reasons for the objection shall be stated. If objection is made to part of an item or category, the part shall be specified and inspection permitted of the remaining parts. The party submitting the request may move for an order under Rule 37(a) with respect to any objection to or other failure to respond to the request or any part thereof, or any failure to permit inspection as requested.

A party who produces documents for inspection shall produce them as they are kept in the usual course of business or shall organize and label them to correspond with the categories in the request.15

In combination, Rule 26(b)(l) defines the general, broad scope of discoverable information:

Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. all discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and(iii).16

Although these rules initially allow the parties to cast enormous nets in order to fish for data, it must be noted that even these broad parameters demand that the information sought be relevant to the issues involved in the litigation. Therefore, relevance should be considered the first, albeit most overlooked, limitation on the scope of electronic discovery.

As noted above, Rule 34 governs the discovery of electronic information in the same way that it governs any other kind of information, and it allows broad access to relevant items. However, the rules also recognize that there are additional limits on how far discovery should reach. For example, matters protected by the attorney-client privilege and the work product doctrine are excluded from the scope of discovery by Rules 26(b)(l) and 26(d). In addition, Rule 26(b)(2) includes a proportionality limitation that permits the court to intervene when "the burden or expense of the proposed discovery outweighs its likely benefit."17 This judicial power exists whether or not a party has applied for a protective order or filed a motion to compel, allowing a judge to establish specific discovery procedures or set specific limitations before a potential problem becomes a nightmare. Once electronic information is requested under Rule 34, the responding party faces two threshold questions that could limit or completely preclude production of the requested items: (1) is the information discoverable under Rule 26(b)(2), and (2) is the information privileged? While an inquiry about whether certain electronic documents contain privileged information is easily navigated by most legal professionals (though such an inquiry may require enormous amounts of time, effort, and expense), a Rule 26(b)(2) inquiry demands more attention in the context of electronic media.

Rule 26(b)(2) provides in relevant part:

The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. The court may act upon its own initiative after reasonable notice or pursuant to a motion under Rule 26(c).18

The proportionality test of Rule 26(b)(2)(iii) is particularly applicable to requests for the production of electronic information simply because the nature of electronic information can range from words typed onto a computer screen to coded data stored on magnetic tapes that can be retrieved only through a complicated and expensive forensic process.

When discovery was concerned primarily with paper documents, attorneys had to search through central filing devices, storage boxes, and even people's desks. With electronic documents, however, the number of places to look has increased exponentially. This increase is necessitated by the variety of forms that electronic data can assume. In a very basic sense, electronic data can include any of the following:

1. active data,

2. metadata or hidden data,

3. databases and spreadsheets,

4. system data,

5. "deleted" data,

6. ghost or residual data, or

7. legacy data.

Active data is information created intentionally and with an understanding that it is easily retrievable and available in the ordinary course of business.19 Such data includes word processing documents and saved e-mail messages.

Metadata is information embedded in an electronic file about that file, such as the date of creation, author, editing history, and source. This information very seldom appears on a computer screen or in a printed version of the document. Instead, it is often created automatically by the software the author is using, without the author's knowledge or intent.

Databases and spreadsheets are collections of information that have no structure or meaning without the metadata. They are the structure behind what may be called a "nondocument document," or a document that is never evidenced in a permanent form. These items are not really documents at all but electronic processes, most frequently used in the ordinary course of business. For example, a banker might make a loan decision after accessing a number of databases containing information such as an applicant's credit history, tax records, insurance claims, and police reports, to which the banker then applies a risk assessment program in order to calculate the applicant's risk. The banker's decision will be based on a large analysis that is never reduced to one computer file or printed on paper. Another example involves a transportation ticket that is purchased electronically. The traveler's purchase, travel information, payment information, etc., are recorded in a database that exists somewhere, but the collected data entered by the traveler will disappear when the transaction is completed. A request for the traveler's "e-ticket" essentially is a request for a business process that cannot be reduced to a simple document.

System data is information generated by the computer system itself about a user's activity on the computer or network.20 This information is created without the user's knowledge. It can include records detailing when the user logged on or off, which software applications or passwords were used, which web sites were visited, and which documents were printed or faxed.

Deleted data is a misnomer for electronic information that has been renamed and marked as physical space on a hard drive that can be overwritten by the computer later, if the physical space is needed. The data itself is still there; changing its name does not erase such data from the hard drive. However, it can be difficult and expensive to retrieve.

"Ghost" or residual data is random data chosen by a computer to consume leftover space in the sectors of a hard drive.21 This data can be anything that has ever been created on a computer system, including information that its author never intended to save.

Finally, legacy data is information that has been saved, although it was created on an obsolete computer system using obsolete operating and application software.22 Accessing this information would require incredible effort and cost.

In addition to these categories, most businesses store all of their computer information on backup tapes as a security mechanism. The tapes are generally recycled on a regular basis so that existing records are replaced with new records. These tapes essentially take a photograph of every piece of data existing within a computer system at a particular moment, potentially allowing any piece of that data to be retrieved in the event of a disaster involving the system itself. Retrieval, however, requires that the backup tapes be restored to a workable system and then converted into a format that will allow individual files to be organized, searched, and read. This process is difficult, expensive, and lengthy. Yet all of the data described above can be included in a request for production of electronic documents.

The challenge presented by Rule 26(b)(2) requires the parties to determine when the potential benefit of a request is outweighed by the burden of data production. It is conceivable, of course, that some scenario exists in which any of the information above could be considered important enough to the litigation to make the effort of production worthwhile. In a majority of the cases, however, the reasonable limitations invoked by Rule 26(b)(2) will curtail unreasonable requests. It should also be noted that the list generated above enumerates types of electronic data in an order that ranges from easy to produce to insurmountably burdensome. Therefore, as the list progresses, so does the difficulty in surviving the Rule 26(b)(2) proportionality test.

For example, with regard to many discovery requests for deleted e-mails, it certainly can be argued that the scope of requested information is too expansive. In a way, this situation is analogous to a request for paper correspondence that was received, read, wadded into a ball, and thrown into the garbage several weeks prior to any discovery request. The idea that such a document could be discovered by a litigation opponent and appear as evidence in a civil case is laughable, but because it is actually possible and even foreseeable with regard to an e-mail message, no one should be amused.

Because of the uncertainty involved in whether or not a particular electronic discovery request will be enforced by a court of law, some have argued that the appropriate scope of electronic discoveiy should be defined by a legal rule. Texas has attempted to do just that by adopting Rule 196.4 of its Rules of Civil Procedure. This rule reads as follows:

To obtain discovery of data or information that exists in electronic or magnetic form, the requesting party must specifically request production of electronic or magnetic data and specify the form in which the requesting party wants it produced. The responding party must produce the electronic or magnetic data that is responsive to the request and is reasonably available to the responding party in its ordinary course of business. If the responding party cannot - through reasonable efforts - retrieve the data or information requested or produce it in the form requested, the responding party must state an objection complying with these rules. If the court orders the responding party to comply with the request, the court must also order that the requesting party pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information.23 No Texas court has yet construed which electronic data categories are "reasonably available . . . in [the] ordinary course of business,"24 but counsel might presume that the restoration of backup tapes and deleted data would be excluded from such "reasonable efforts." At any rate, the Texas rule clearly intends to restrict the scope of electronic discovery on the basis of accessibility and cost.

Some courts have used the language of Rule 26(b)(2) as the basis for ruling that parties need not produce archived or deleted materials.25 In response, the Advisory Committee amended Rule 26(b)(l) in 2000 by adding a final sentence: "All discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii)."26 The Advisory Committee Notes explain this addition:

[A] sentence has been added calling attention to the limitations of subdivision (b)(2)(i), (ii), and (iii). These limitations apply to discovery that is otherwise within the scope of subdivision (b)(l). The Committee has been told repeatedly that courts have not implemented these limitations with the vigor that was contemplated. This otherwise redundant cross-reference has been added to emphasize the need for active judicial use of subdivision (b)(2) to control excessive discovery.27

The limitations of Rule 26(b)(2) on the scope of discovery have been used effectively by courts to specifically tailor or deny electronic discovery requests.28

Distinct from the Rule 26(b)(2) analysis, the nature of the electronic information requested in some situations may be such that its provision would divulge important proprietary assets - a matter both detrimental to the respondent and unauthorized by Rule 34. For example, a request might be made for all documents relating to the time and location of certain sales transactions entered by a party. While the actual information regarding the time and location of those sales may be discoverable, the respondent might choose to keep that information stored in a computerized data base that also includes customer data. Not only is the respondent faced with a request that could expose valuable trade secrets, the respondent also is being compelled to disclose to a potential competitor its method for compiling customer data. In this setting, the database itself could represent a trade secret held by the respondent. As a result of this Rule 34 request, which asks for electronic information beyond the proper scope of discovery, the respondent must seek the protection of Rule 26(c).

IV.

INADVERTENT WAIVER OF PRIVILEGE

Within the context of a request for the production of electronic information, the attorney faces another pitfall connected to certain documents. This pitfall concerns the inadvertent waiver of privilege. It can occur as a mistake in the process of document production or as a mistake in the electronic distribution of information.

A. Waiver by Inadvertent Production

Electronic data is protected by the same legal privileges that apply to the discovery of paper evidence, including the attorney-client privilege and the work product doctrine.29 These and other traditional privileges were created to protect certain special relationships and to encourage greater communication within those relationships.30

While attorneys have an ethical duty to maintain client confidentiality, the attorneyclient privilege itself is held by the client. This privilege allows the client to protect completely the communications that exist between the client and the client's attorney. The protection of this privilege extends to documents that contain attorney-client communications, as well as those documents prepared for the purpose of seeking an attorney's advice. The privilege, however, is deemed to have been waived if the confidential communication is disclosed or somehow revealed to a third party, which can be done intentionally or inadvertently.31 Once the privilege has been waived, it cannot later be invoked by the attorney.

1. Scope of the Waiver

Some case law holds that a producing party can waive his or her right to assert the attorney-client privilege if a document is produced by mistake during discovery.32 In some cases, that mistake could waive the entire subject matter covered by the item produced.33 Therefore, once a privileged document has been disclosed, "all communications between the same attorney and the same client on the same subject" that occurred before the time of disclosure would lose protection of the privilege.34 (It should be noted that such a harsh penalty does not apply to information covered by the work product doctrine, however.35) Thus, when a jurisdiction follows this broad "mistake" rule, one simple error could eventuate in the waiver of a large quantity of otherwise-protected communications.

On the other end of the spectrum, another trend rejects the subject matter rule within the context of inadvertent waiver of the attorney-client privilege. cases occupying this trend restrict the scope of the waiver to the communication at issue.36 Because there is no case law discussing a waiver of privilege through the inadvertent release of electronic information, particularly in an e-mail document, it is unclear how far such a waiver might extend.

2. judicial Approaches to Inadvertent Waiver

The courts currently are divided as to whether or not the inadvertent disclosure of electronic information waives the attorney-client privilege. Essentially, three approaches appear to govern this issue: the strict approach, the lenient approach, and the case -by-case approach.

The strict view holds that any disclosure of privileged information, whether inadvertent or not, constitutes a waiver of the privilege. This approach invokes the policy underlying the rule of privilege and argues that the rule is useless if its policy is ignored. The court in FDIC v. Singh31 explained:

The purpose of the privilege is to protect the confidences of clients so they may freely discuss their legal concerns with counsel. However, when a document is disclosed, even inadvertently, it is no longer held in confidence despite the intentions of the party and thus, "the privilege is lost 'even if the disclosure is inadvertent.'"38

In the case of Underwater Storage, Inc. v. United States Rubber Co.,39 the court likewise held that the inadvertent disclosure of a privileged document by an attorney waived the privilege, stating: "[o]nce the document was produced for inspection, it entered the public domain. Its confidentiality was breached thereby destroying the basis for the continued existence of the privilege."40

An obvious advantage to this approach is its uniformity in application: no one need guess the consequence for an inadvertent disclosure. Likewise, courts applying this strict rule maintain that it will prompt attorneys to secure covered information by taking necessary precautions. However, even under the best of circumstances, human beings make mistakes, and regardless of the precautions taken, a mistaken disclosure will precipitate waiver. In addition, it seems harsh to punish clients for what may be nothing more than clerical error.

The second approach affords greater leniency, invoking a limited waiver test. This theory accepts that the waiver must be intentional and urges that the concept of inadvertent waiver presumes an inherent contradiction.41 Since the client actually holds the privilege, the client should not be vulnerable to the possibility of clerical mistake by its attorney. Therefore, jurisdictions that adopt this test generally will find no waiver of privilege when the disclosure of confidential information is inadvertent. However, critics of this approach argue that it provides no incentive for attorneys to carefully guard a client's communications.42

The trend adopted by a majority of courts when determining whether an inadvertent disclosure results in waiver continues to espouse a case -by-case approach that employs a multi-factor balancing test. This test usually includes some form of the following factors:

(1) the reasonableness of the precautions taken to prevent inadvertent disclosure in view of the extent of the document production; (2) the number of inadvertent disclosures; (3) the extent of the disclosure; (4) any delay and measure taken to rectify the disclosure; and (5) whether the overriding interests of justice would or would not be served by relieving a party of its error.43

Under this approach, a waiver of confidential information essentially occurs only when a party fails to take reasonable precautions in maintaining the privilege.44 By measuring each case under a multi-factor test, the disadvantages posed by the other two approaches are addressed: the result is more equitable, but attorneys still must be diligent about protecting client communications. Despite these characteristics, however, this approach has been criticized for its lack of predictability.43 Because the analysis is limited to a case -by-case application, it is difficult for parties to find and use precedent, and attorneys are without guidance about governing protocol. In addition, this approach may prompt additional litigation over the many factors that must be defined and weighed under a given set of facts.

3. Recommendations for Change to Waiver Rules

Despite its inherent predicaments, electronic storage and access has improved the discovery process in many ways. Documents specifically requested can be found easily using computerized search tools, alleviating hours spent manually sifting through boxes of file folders. Likewise, enormous collections of information can be transferred to a computer disk in seconds and presented to the requesting party, rather than copying each individual page, organizing the production, and then transporting the results. These advantages, however, may be overshadowed by the onerous nature of a "privilege review." Because of existing uncertainty regarding the permanence of an inadvertent waiver, attorneys are forced to review each potentially responsive document manually in search of privileged information.

In order to alleviate such uncertainty, courts might broaden the scope of inadvertent waiver protection. Currently, parties expend unreasonable amounts of time and money providing a thorough review of requested electronic documents in order to preclude the escape of protected information that might jeopardize an entire category of evidence. Much of this effort could be saved if the discovery rules provided for automatic return of material that was inadvertently disclosed. If the nature of the allegedly protected material was in dispute, relief could be sought from the court. Such a practice is already invoked by agreement in complex litigation involving voluminous document production. In fact, the court in Rowe Entertainment, Inc. v. William Morris Agency, Inc.,46 recommended this procedure, although the opinion noted that the procedure could not be required.

In 1999, Texas adopted a specific rule to address this problem. Rule 193.3(d) of the Texas Rules of Civil Procedure reads as follows:

A party who produces material or information without intending to waive a claim of privilege does not waive that claim under these rules or the Rules of Evidence if - within ten days or a shorter time ordered by the court, after the producing party actually discovers that such production was made - the producing party amends the response, identifying the material or information produced and stating the privilege asserted. If the producing party thus amends the response to assert a privilege, the requesting party must promptly return the specified material or information and any copies pending any ruling by the court denying the privilege.47

Comment 4 to Rule 193.3(d) further explains its purpose:

Rule 193.3(d) is a new provision that allows a party to assert a claim of privilege to material or information produced inadvertently without intending to waive the privilege. The provision is commonly used in complex cases to reduce costs and risks in large document productions. The focus is on the intent to waive the privilege, not the intent to produce the material or information. A party who fails to diligently screen documents before producing them does not waive a claim of privilege. . . . The ten-day period (which may be shortened by the court) allowed for an amended response does not run from the production of the material or information but from the party's first awareness of the mistake.48

Another suggestion for reducing the strain caused by privilege review calls for amending the rules and allowing a party who is producing electronic evidence to reserve any privilege objection until trial. Such a reservation would prevent the parties from having to examine every document handed over during discovery, saving both time and money. While this reservation would seem to delay the necessity of a privilege review until just before trial, the vast majority of civil actions settle before then, obviating any delayed costs. Unfortunately, this suggestion seems to create more problems than it solves. How could the opponent prevent a party from using any privileged information, once received, to seek additional, follow-up discovery? How could an opponent prevent a party from sharing the privileged information with third parties? And how would any limitation of this sort be enforced?

A final approach advocates the adoption of a new minimum precautions rule. This standard would apply uniformly to cases involving inadvertent disclosure of privileged information in confidential e-mail communications and would measure the risks associated with each questioned transmission. Courts would then determine whether the appropriate security measure had been taken in light of the corresponding risk.

4. Procedures That Help Prevent Inadvertent Waivers

Several courts have developed specific discovery protocols to help parties avoid the inadvertent production of privileged information. In Playboy Enterprises, Inc. v. Welles,*9 the plaintiff requested access to the defendant's computer in order to restore any deleted email messages that had not been overwritten. Obviously, the defendant objected. Looking to resolve the conflict, the court allowed the plaintiff access to defendant's computer, but grafted several restrictions on the recovery process in order to protect any privileged information. First, the plaintiff was forced to provide statements from experts affirming a likelihood that the deleted e-mails actually could be recovered and estimating the likelihood of damage to the defendant's computer system. In addition, once a copy of the computer's hard drive had been made, it was first given to the defendant, who could review it and remove any e-mails that were outside the scope of the discovery request.

In Tulip Computers International B. V. v. Dell Computer Corp.,50 the court allowed the plaintiff access to the e-mail records of the defendant's senior executives, implementing a procedure that the court described as "fair, efficient, and reasonable:"51 (1) the defendant provided the e-mails in electronic form to the plaintiff's consultant, (2) the plaintiff's consultant searched the e-mails using an agreed upon list of search terms, (3) the e-mails containing those terms were given to the defendant, and (4) the defendant reviewed the e-mails in order to ensure that any relevant information was not privileged or confidential. As distinct from the procedure adopted in Rowe Entertainment, the neutral expert in Tulip Computers International conducted the discovery search, turning relevant files over to the attorneys for the requesting party. Those attorneys then selected the documents germane to their requests and presented them to the opposing counsel, who could raise appropriate objections.

Sampling is another method sometimes considered by the courts. This process generally involves turning over to the requesting party a random sample of the information sought by the discovery request in order to determine whether there is a reasonable likelihood that a more extensive review will yield relevant documents.52

B. Waiver by Inadvertent Electronic Distribution

Because the nature of e-mail messaging allows the message to be forwarded easily or copied to other parties, e-mail messages often can become part of a lengthy string of communication that is constructed and read by a number of participants. If any of these participants is an attorney, the issue of attorney-client privilege becomes important. In that situation, if a participant alters the subject of the original message somewhere along the way, the process of forwarding or copying the altered e-mail may have the unintended consequence of waiving any protective privilege that might have applied to the e-mail or its attachments. In order to avoid this possibility, attorneys carry an obligation to carefully monitor the information that they include in e-mail messages and to instruct their clients to do so as well.53

Another danger posed by the electronic distribution of information involves expert witnesses. The general work product rule provides that its protection is "waived by disclosure of confidential communications to expert witnesses."54 This proscription certainly applies to information contained in an e-mail message that is forwarded or copied to an expert witness by an attorney or client. Because e-mail allows parties to communicate easily about business matters, including pending litigation, it is foreseeable that expert witnesses might be copied in the string of communications, thereby waiving either work product protection or the privilege attached to attorney-client discussions.

V.

ELECTRONIC DOCUMENT MANAGEMENT

Given the inevitability of electronic document discovery and the problems associated with it, an attorney should consider several matters in order to foresee and forestall potential difficulties that will affect the attorney or the client. Some of these matters, such as company e-mail policies, serve to manage electronic document issues in a pre-litigation context. Others, such as Rule 26(f) meeting agendas, offer assistance for managing electronic document issues in the midst of litigation.55 All of these, however, can be discussed within the confines of the ethical obligations that generally attend the practice of law.

A. Electronic Document Management before Litigation

In general, attorneys are ethically obligated to promote justice. Model Rule of Professional Conduct 8.4 prohibits "dishonesty, fraud, deceit, or misrepresentation"56 and "conduct that is prejudicial to the administration of justice."57 While this prohibition can affect any legal act, when dealing with electronic documents, it is often related to the understanding that exists between counsel and client with regard to handling electronic information. If there is a good understanding about the matter, the attorney's behavior is probably beyond reproach. If the understanding is sketchy or unspecified, it is likely that the attorney failed to gather knowledge about the client's electronic framework or failed to provide some necessary advice regarding electronic documents held by the client.

1. E-mail Management

Transmitting information between attorneys and clients in e-mail messages causes specific concern because the transmission itself is not secure. An e-mail message is "[a] document created or received on an electronic mail system including brief notes, more formal or substantive narrative documents, and any attachments, such as word processing and other electronic documents, which may be transmitted with the message."58 When an e-mail message is sent, the information travels in digital form through telephone lines in various routes to a recipient's computer mailbox. As noted earlier, this information inadvertently can be delivered to an unintended third party. It is also, however, susceptible to interception by computer hackers.

Prior to 1986, the FCA prohibited unauthorized publication or use of radio or telephone communications. The development of the Internet and e-mail messaging made it necessary for Congress to pass the Electronic Communications Privacy Act ("ECPA") to include protection for electronic communications as well. The ECPA prohibits "intentionally intercept[ing], endeavor[ing] to intercept, or procur[ing] any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication."59 In addition, the ECPA expressly states that "[n]o otherwise privileged wire, oral, or electronic communication intercepted in accordance with, or in violation of, the provisions of this chapter shall lose its privileged character."60

Although the information contained within an e-mail message may retain its privileged character, an attorney also must ensure compliance with the ethical requirements of the rules of professional conduct. For example, Model Rule of Professional Conduct 1.6(a) prohibits an attorney from revealing confidential client information absent the client's consent after consultation, and imposes a duty on the lawyer to take reasonable steps under the circumstances to protect such information against unauthorized disclosure.61 Given this rule, can an attorney ethically send confidential information through an unprotected e-mail?

On March 10, 1999, the ABA Standing Committee on Ethics and Professional Responsibility issued a formal opinion stating:

A lawyer may transmit information relating to the representation of a client by unencrypted e-mail sent over the Internet without violating the Model Rules of Professional Conduct (1998) because the mode of transmission affords a reasonable expectation of privacy from a technological and legal standpoint. The same privacy accorded U.S. and commercial mail, land-line telephonic transmissions, and facsimiles applies to Internet e-mail. A lawyer should consult with the client and follow her instructions, however, as to the mode of transmitting highly sensitive information relating to the client's representation.62

Attorneys should note the Committee's specific warning, however, that if the transmitted information is so sensitive that extraordinary protective measures are warranted, the lawyer should consult with the client about whether another mode of communication might be more advisable and should follow the client's instructions in that regard.63 In that situation, e-mail messaging probably should not be used without additional safeguards. Of course, this situation simply begs for common sense: an attorney is expected to exercise greater care with information that demands extreme protection, regardless of the form of communication. Obviously, an attorney would not trust such information to a voice mail message left on a telephone system, nor would the attorney casually drop it in the post.

Reliance on the ECPA, other statutes, and even on the ABA opinion as a sufficient justification for sending sensitive information over the Internet is probably not a good idea. These decisions should not replace good judgment. The bottom line is that e-mail messaging simply is not suitable in all situations.

a. Protective Measures for E-mail

There are a variety of protective measures available when an attorney is not comfortable with unencrypted e-mail:

1. Encryption. Encryption programs permit e-mail messages to be transmitted in code so that they are unreadable to anyone except a reader who possesses the "key" that will decode the message.64 These programs are fairly easy to use, and many feel that they provide a reasonable precaution for protecting the attorney-client privilege. However, encryption does not make the transmission invulnerable; access to the decoding keys is not impossible for groups who want them badly enough. In addition, attorneys who represent international clients must consider that some governments prohibit encryption. Finally, the cost and complication associated with establishing a compatible encryption system with clients can sometimes eliminate the advantages of using e-mail in the first place.

2. Internal E-mail. An internal e-mail system is designed for communication through an internal network within a company. These private networks can be accessed only through another closed network, which protects against outside sources. If the e-mail system is opened to the Internet, however, the entire system can be exposed to the public.

3. Passwords. Another option suggests the use of Internet providers and servers that provide a password protection option for access to e-mail messages.

4. Disclaimer. Including a disclaimer with each e-mail message can alert the recipient that the e-mail message contains confidential information. The disclaimer also should state that if the recipient was not intended to possess the information, he should not read, copy, or forward the message. This warning prevents those who may receive the message by mistake from creating a situation in which the consequence could be waiver of privilege.

5. Digital Signature. The presence of a digital signature can authenticate the sender's identity and assure that the integrity of the documents and their contents has been maintained.

6. Suggestions for Managing E-mail

Because e-mail messages may be broadly discovered and difficult to destroy, attorneys should recommend that their clients use caution in this area of business practice. In fact, counsel could provide many suggestions to clients regarding the use of e-mail messaging:

1. Establish e-mail retention policies that retain only the absolute minimum amount of electronic evidence for the absolute minimum amount of time.

2. Restrict the use of e-mail for personal purposes.

3. Restrict the types of communication that can be sent by e-mail, suggesting commonly understood standards such as, "if you wouldn't want this message published in a newspaper, don't send it in an e-mail."

4. Instruct employees not to use humor or sarcasm in e-mail messages, and

5. Consider using special software to permanently delete e-mail messages as soon as they are read.

The obvious disadvantage to implementing such procedures is that the procedures may condemn e-mail to the transmission of unimportant, "sterile" business information. Unfortunately, one of the best tools for business communication may come to operate in a greatly diminished capacity.

2. Other Pre-litigation Issues

One of the most important things that should occur (before a threatened lawsuit makes the parties wish it had) is the sharing of information between the attorney and client. The attorney should share preventive measures, and the client should share basic information about its computer system.

In addition to the measures discussed earlier, an attorney would be well advised to inform the client that electronic information is discoverable in the event a lawsuit is filed against it and to inform the client of its duty to preserve evidence, including electronic evidence. Although discussed more thoroughly in Section II, it is worth noting here that clients should be aware of this duty before litigation strikes and should be reminded that this duty is not to be taken lightly.

It is also advisable for an attorney to learn the basic aspects of the client's computer system. Helpful information would include the structure of the system, locations and sources of electronic information, current preservation methods for electronic data, and current back-up routines. Awareness of these system aspects beforehand will assist the attorney during discovery - from improving search techniques for requested information to lodging objections to an opponent's far-reaching demands.

B. Electronic Document Management during Litigation

Electronic document management becomes much more specific during litigation, as each party attempts to construct and protect a case strategy, while at the same time complying with discovery requests. Model Rule of Professional Conduct 3.4(a) provides that a lawyer shall not "unlawfully obstruct another party's access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value [and] . . . shall not counsel or assist another person to do any such act[.]"65 Aside from this caution, there are other guides for litigation discovery tactics.

1. Responding to Electronic Discovery Requests

Electronic document requests often may leave an attorney with more questions than answers, particularly when the request is vague or overbroad, or if it asks for something that will be particularly difficult to produce. One incipient issue involves the Rule 34(b) requirement that parties must produce documents for inspection "as they are kept in the usual course of business or shall organize and label them to correspond with the categories in the request."66 Although courts have interpreted this rule to allow a party initially to produce documents in the manner of its choice, courts will demand clearer identification of the documents if the receiving party demonstrates sufficient need.67 Importantly, a court also may require a party to compile electronic data into a particular format or structure requested by the opposing party.68 This issue, however, is not addressed consistently by all jurisdictions.69 Because it can be difficult for courts to analogize electronic documents to their paper counterparts, it remains unclear exactly what parties will be expected to produce in response to an electronic document request.

As mentioned earlier, responding to a discovery request sometimes will require a party to disclose information that is protected as a trade secret. Such information can take the form of a database or even the specific organization of a computer program. This potential makes it important to petition the court for help in tailoring a production request to avoid such a disclosure.

Requiring the production of electronic evidence in the form in which it is stored also may lead to formatting and translation problems. For example, if the two parties involved in the production request own different brands of word processing software, the requested data may not be accessible. This creates a need for the requesting party to use the opponent's word processor, which can violate licensing agreements and raise questions about adequate protection for the intellectual property of third parties, such as software vendors.

Discovery requests also can include inspection of an opponent's computer system to search for electronic information. Because of the extreme nature of such a request, courts typically require evidence that the search will locate responsive information, that any inconvenience will be justified, and that the chances for harm will be minimized.70

In the case of Sattar v. Motorola, Inc.,71 the court rejected a demand for hard copies of an enormous number of e-mail messages. Instead, it required the producing party (who had initially produced the information on inaccessible tapes) to: (1) download the data onto disks or a hard drive, (2) loan the other party a copy of the necessary software, or (3) allow the other party on-site access to its own system.

For similar reasons, the court in Jones v. Goord72 declined to grant the plaintiffs' request for electronic records and databases maintained by state correctional authorities. The court recognized that the databases were not simply collections of data that could be easily extracted for statistical analysis. Rather, the structure, the layout, the meaning of codes, and the sources for those codes would need to be explained to anyone unfamiliar with the computer system and its purpose. However, in Guillen v. Pierce County,73 the court ruled that electronic reports and databases containing historical traffic accident reports were discoverable. Notably, the court observed that:

As governments everywhere move from paper and microfiche documentation into the age of twenty-first century information technology, public records are increasingly being stored - even created - in digital format, then added to virtual databases that are accessed, in streams of bits and bytes, by vast networks of governmental agencies, often across jurisdictional boundaries.74

As more courts become aware of the valuable resources represented by these collections of electronic data, more discovery requests that include such collections will be granted. Attorneys must be educated to know not only what to request, but how to protect what should be unreachable.

2. Suggestions for Handling Electronic Discovery

A few simple suggests are in order to guide an attorney's conduct in handling electronic discovery requests.

(1) Keep in mind that whatever one party requests, the opponent likely will seek reciprocal information at some point during the discovery process. Therefore, make certain that the client's collection and preservation efforts are adequate.

(2) If an attorney intends to request documents that are not kept in the ordinary course of business, the attorney should do so as early as possible in order to ensure that the opponent has an opportunity to preserve them. A reminder of the obligation to preserve evidence, including electronic data, would not be out of place.

(3) When wording an electronic discovery request, do not use broad terms such as "all electronic documents;" instead, be as specific as possible about the type of information needed and the format preferred.

(4) Use the conference required by Federal Rule of Civil Procedure 26(f) as an opportunity to discuss the logistics of electronic discovery.

(5) Use interrogatories to obtain preliminary information about an opponent's computer system and then follow up with document requests and/or deposition notices (to question, for example, the opponent's Information Technology Director).

(6) If the opponent is refusing to produce electronic information and a compromise cannot be reached, seek help from the court promptly. Electronic data is constantly modified, deleted, and/or compromised. Carefully limit electronic data requests to information that is necessary; be prepared to demonstrate that the request is not a fishing expedition.

(7) At depositions, ask questions to assess whether the opponent's electronic search efforts and production are adequate.

(8) Respond quickly to a preservation letter and include any objections and inquiries about the basis for the demand. If the requests seem unreasonable or excessive, consider seeking a protective order.

(9) Advise a client of the duty to preserve evidence. Employees should be instructed not to delete, alter, destroy, or recycle any electronic data that could be relevant to the litigation.

(10) Become familiar with the client's computer system and the people who maintain it, keeping records of any electronic search efforts.

(11) If backup tapes become an issue, pursue a strategy that involves an ongoing and thorough search for pertinent electronic data, attempting to eliminate the need for discovery of the tapes themselves.

(12) If a large amount of electronic information is significant to the case, consider early retention of a computer forensics expert.

3. Recommendation of Early Intervention

Increasingly, parties are learning that many problems inherent in electronic discovery can be prevented or at least alleviated by discussing them as early as possible in the litigation process. In a report prepared by the Federal judicial Center for the Civil Rules Advisory Committee in September 2002, a group of attorneys and judges were polled for suggestions to help accommodate computer-based discovery.75 Many of those questioned responded that early disclosure of computer information, particularly within the context of meetings and documents required under Federal Rule of Civil Procedure Rule 26(f), would greatly ease the strain that currently plagues litigation.

Both federal district courts in Arkansas have adopted matching local rules that require the parties to meet and confer regarding electronic discovery under Rule 26(f). The parties also must file a report with the court, stating: (1) whether there will be electronic discovery, (2) the anticipated cost and schedule, (3) the format and media for production, (4) any efforts taken to preserve data pending discovery, and (5) any other anticipated problems.76

The federal district court in Wyoming has a similar rule which targets e-mail as a particular problem. Under Wyoming Local Rule 26.1, the parties must meet and confer regarding: (1) data preservation, (2) the scope of e-mail discovery, (3) how to deal with inadvertent production of privileged e-mail, (4) whether they plan to discover deleted data, and (5) whether they plan to discover backup data.77 This rule also requires counsel, in preparation for a Rule 26(f) conference, to review the contents of the clients' computer files, investigate the clients' computer systems, and be prepared to disclose how the information is stored and how it can be retrieved.78

The lesson derived from case law and from observation by those involved in such discovery is that early intervention, using Rules 16 and 26, can be decisive. This intervention necessitates that computer-based information be included in Rule 26(a) disclosures and that computer-based discovery be included in Rule 26(f) plans and Rule 16 orders. Many courts are recognizing the preventive nature of these measures and expect parties to meet and confer about the relevant electronic information.79

VI.

PRESERVATION OF ELECTRONIC EVIDENCE

A. General Information

It is clear that attorneys have a duty to advise their clients to take reasonable steps to preserve all records, including electronic data, that may be subject to discovery.80 It is less clear, however, what may be required of attorneys and their clients beyond this specific duty. The destruction of evidence can preclude a requesting party from obtaining relevant information, it can harm the integrity of the judicial proceedings, and it can harm the party responsible for the destruction.

The duty to preserve evidence arises when there is reasonably foreseeable litigation.81 Therefore, knowledge of a potential claim is sufficient to obligate a party to begin preservation efforts.82 If there is no prior knowledge of impending litigation, then the duty to preserve evidence begins with service of the complaint and before receipt of a production request.83 The responsibility not to lose or destroy pertinent information only intensifies once the discovery process is under way.

Once the duty to preserve has arisen, a party is obligated "to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request."84

B. Scope of the Preservation Duty

Increasingly, parties are serving document requests that seek "all" electronic data, including deleted and backup files, demanding as well that all destruction or alteration of relevant information must cease. While this demand appears to be overbroad, the facts of each case will dictate whether or not certain information must be produced.

For example, while case law does not indicate whether a diligent search for responsive information includes a search for deleted files, there have been cases in which a party was granted access to the opponent's computer system to search for deleted files.85 In general, if there is concrete evidence that electronic information has been destroyed, accompanied by a basis for believing that such information may be discovered through a "deleted file" search of a hard drive, a court may grant the request. However, the requesting party must: (1) establish that the burden and intrusion are justified by the need and (2) show a reasonable basis for concluding that the search will turn up otherwise unavailable, responsive information.86 At least three court decisions have granted access to an opponent's computers under these circumstances.87

Similarly, a request for backup tapes may or may not be appropriate, depending on several factors specific to each case. Because backup tapes represent the data held by the computer system itself at a particular time, it is reasonable to assume that the discovery request could be met by accessing the information easily available on the system. Whether that is enough, however, can be affected by several contingencies, including: (1) the judge, (2) the facts of the case, (3) the specific requests of the parties, (4) the sufficiency of the responding party's efforts to search for and preserve data, and (5) whether discoverable information is regularly being produced in the party's normal business operations. Courts have enforced preservation obligations with regard to backup tapes and have imposed sanctions on parties who failed to preserve them.88

In a more recent decision, the court in McPeek v. Ashcroftm noted that "[t]here is certainly no controlling authority for the proposition that restoring all backup tapes is necessary in every case."90 Aware of the costs involved and the lack of precedent, this court "decided to take small steps and perform, as it were, a test run"91 to determine if the costs associated with a backup search were justified by relevant results. This trend of examining whether or not parties should recover data stored on backup tapes was continued in the case of Residential Funding Corp. v. DeGeorge Financial Corp.92 The bottom line appears to be that routine recycling of computer storage media should be halted during discovery when that is the most reasonable means of preserving the available data.93

Another concern for clients is the very real possibility that satisfying the obligation to preserve relevant electronic evidence may jeopardize their right to continue managing electronic information in the best interest of the business. In order for many enterprises to continue functioning profitably, electronic information may be overwritten on a routine basis through applications in various computer systems. It has yet to be determined whether such "ordinary" and routine destruction will violate any duty to preserve.

C. Penalties for Violating the Preservation Duty

The consequences for failing to preserve electronic evidence vary, but their impact is frequently significant. In Danis v. USN Communications, Inc.,94 the failure to take reasonable steps to preserve data at the outset of discovery resulted in a personal fine levied against the defendant's CEO. Likewise, in the case of In re Prudential Insurance Co. of America Sales Practice Litigation,95 the defendant's pattern of failure to prevent unauthorized document destruction resulted in a $1 million fine and court-ordered measures to enforce the document preservation order.

In GTFM, Inc. v. Wal-Mart Stores, Inc.,96 the defendant's attorney provided inaccurate information to the plaintiffs about computer records early in discovery, and discoverable computer records were later destroyed. The court ordered the defendant to pay the plaintiffs' attorney's fees and costs associated with the sanction motion and with recovery of the data.97

The case of Metropolitan Opera Ass'n, Inc. v. Local 100, Hotel Employees & Restaurant Employees International Union,98 represents a worst case scenario. In this case, the court found that the defendant had failed to conduct a reasonable investigation in response to discovery requests, failed to prevent the destruction of documents, failed to adequately instruct the person in charge of document collection, and had allowed discoverable computers to be replaced with new computers shortly before a scheduled on-site inspection. In addition, the defendant's counsel had represented to the court that these failures had not occurred. The court described the defendant's behavior as a "combination of outrages"99 and ordered judgment against the defendant with attorney's fees.

D. Implementing an Electronic Document Preservation Program

In October of 2002, the Sedona Conference Working Group met to discuss the development of "best practices" for the legal profession in the area of electronic document production in civil litigation.100 The members of this group included private practice lawyers, in-house counsel for large corporations, and a select group of consultants in the electronic evidence and records management fields. As a result of that meeting, the group published a report.101 This publication was in a stage of peer review until June 1, 2003; with the passage of that date, the group will assess any comments and revise the original report.

The Sedona Principles includes fourteen principles, with comments, regarding electronic document production. As a part of the first principle, the report discusses the need for organizations to adopt policies for the treatment of electronic documents. Those policies involve:

* Establishing a thorough but practical records management program and training individuals to manage and retain business records created or received in the ordinary course of business;

* Helping business units establish practices and customs, tailored to the needs of their businesses, to identify the business records they need to retain;

* Implementing a system of presumptive limits (based on time or quantity) on retaining e-mails that are not business records and developing communications policies that promote the appropriate use of the e-mail and other company-owned systems;

* Structuring the recycle time applicable to backup tapes based on business needs;

* Developing and implementing appropriate procedures to identify and notify relevant individuals and business units of the need to preserve electronic and other records for pending litigation; and

* Establishing and maintaining awareness of the importance of preserving potential evidence in the case of threatened litigation, and training lawyers and business people on when and how to carry out their responsibilities.102

VII.

COST ALLOCATION OF ELECTRONIC PRODUCTION

The general rule of civil discovery is that the responding party pays the costs of production incurred in responding to discovery requests. In the context of electronic discovery, however, those costs can be substantial. For example, the case of Murphy Oil USA, Inc. v. Fluor Daniel, Inc.,103 involved ninety-three backup tapes in a discovery dispute. In order to provide the requested information, the tapes would have to be restored to a system and then converted to a readable and searchable format. The cost of such a process was estimated at $6.2 million before the necessary review for privileged material conducted by the attorneys. Likewise, in Rowe Entertainment, Inc. v. William Morris Agency, Inc.,104 which has become an important precedent on the issue of discovery cost allocation, the court summarized cost estimates from computer experts for the four defendants. For the first defendant, complete restoration of 200 backup tapes would cost $9,750,000, but restoration of eight randomly selected tapes could be done for a mere $400,000. For the second defendant, 200,000 e-mail messages could be retrieved at a cost between $43,000 and $84,000, but the attorney review of those messages was estimated at $247,000. The third defendant estimated that the total cost of retrieving and restoring its e-mails would approach $395,000 at a minimum. For the fourth defendant, restoring forty-seven backup tapes and retrieving e-mail messages from 126 desktop computers was estimated to cost just over $400,000.

Until recently, federal courts appeared unsympathetic to the complaints of responding parties who have borne enormous financial burdens in order to comply with requests for archived and/or deleted electronic data. After all, if a party chooses a computer-based business system, the cost of retrieving information is an ordinary and foreseeable risk.105 However, due in part to a growing concern that electronic discovery can impose extraordinarily harsh monetary burdens on parties, absent appropriate limitations, courts have begun to allow discovery context implications to dictate a more equitable allocation of costs.106

In this regard, courts sometimes adopt a cost-shifting model based on the likelihood that the search will prove successful. As one opinion noted:

A fairer approach borrows, by analogy, from the economic principle of "marginal utility." The more likely it is that the backup tape contains information that is relevant to a claim or defense, the fairer it is that the government agency search at its own expense. The less likely it is, the more unjust it would be to make the agency search at its own expense. The difference is "at the margin."107

Another existing method involves a balancing test that examines a number of factors in order to determine which party should bear the financial burden of producing archived or deleted information. In Rowe, the court considered the following factors:

(1) the specificity of the discovery requests; (2) the likelihood of discovering critical information; (3) the availability of such information from other sources; (4) the purposes for which the responding party maintains the requested data; (5) the relative benefit to the parties of obtaining the information; (6) the total cost associated with production; (7) the relative ability of each party to control costs and its incentive to do so; and (8) the resources available to each party.108

One month later, another federal district court adopted the same multi-factor test to decide the burden of producing e-mails from backup tapes.109 Both courts held that the cost should be shifted to the requesting party.

These recent cases seem to indicate a trend toward shifting the cost of producing deleted and/or archived electronic data to the requesting party, although the factors considered could tip the balance either way. Interestingly, in most cases where the cost of production was shifted to the requesting party, production of large quantities of electronic documents proceeded nonetheless.110 The amount and nature of the electronic data requested is not likely to diminish so long as the requesting party believes that the cost of production is worthwhile, given the possible rewards.

In 1999, Texas amended its Rules of Civil Procedure to codify this cost-shifting approach. Its new rule states as follows:

To obtain discovery of data or information that exists in electronic or magnetic form, the requesting party must specifically request production of electronic or magnetic data and specify the form in which the requesting party wants it produced. The responding party must produce the electronic or magnetic data that is responsive to the request and is reasonably available to the responding party in its ordinary course of business. If the responding party cannot - through reasonable efforts - retrieve the data or information requested or produce it in the form requested, the responding party must state an objection complying with these rules. If the court orders the responding party to comply with the request, the court must also order that the requesting party pay the reasonable expenses of any extraordinary steps required to retrieve and produce the information.111

This attitude is echoed by the ABA Discovery Standard 29(b)(iii) which states: "The discovering party generally should bear any special expenses incurred by the responding party in producing requested electronic information." While ordinary and predictable costs of discovery continue to be fairly borne by the producing party, courts are expected to shift costs where the demand is unduly burdensome because of the nature of the effort involved to comply.

Although the multi-factor balancing test and other approaches that attempt to tie the cost burden to the likelihood that relevant evidence is found are more equitable, they present practical problems for the courts. First, a cost allocation scheme often will require extensive judicial supervision over the discovery process, thereby increasing the already troublesome judicial backlog. Also, a fair outcome in cost allocation assumes that the trial court has a strong familiarity with the particular case and can accurately assess the likelihood that relevant information will be found. Because discovery disputes usually arise early in litigation, however, judicial familiarity with a case probably will be minimal.

VIII.

CONCLUSION - ARE RULE CHANGES NEEDED?

Because the discovery of electronic information has pervaded the legal system so thoroughly and so quickly, nearly every participant in the litigation process must grapple with how best to adapt the system to the changes wrought by technology. Both the federal and state court systems are currently exploring the discovery implications of electronic information.

At the federal level, the Discovery Subcommittee of the U.S. Advisory Committee on Civil Rules began to assess whether electronic information would warrant proposed amendments to the Federal Rules of Civil Procedure as early as October, 1999. After initial discussion and investigation, the Subcommittee determined that no immediate action on rule amendments was necessary or desirable."2 This conclusion resulted from widely varying opinions on whether rule changes were needed. Furthermore, because the amendment process takes so long to complete, there was concern that advancing technology would moot any new rule. Therefore, the Discovery Subcommittee decided to work with the Research Division of the Federal judicial Center in order to analyze the issue more thoroughly. At its May 2002 meeting, the Civil Rules Advisory Committee summarized all of the problems created by electronic document production but noted that there was "not much enthusiasm for any particular solutions."113 The Research Division of the Federal judicial Center then presented its "Qualitative Study of Issues Raised by the Discovery of Computer-Based Information in Civil Litigation" to the Civil Rules Advisory Committee at its October 2002 meeting. At its june 2002 meeting, the Technology Subcommittee of the judicial Conference Committee on Rules of Practice and Procedure likewise reported that they were studying whether any other changes are needed in the federal rules to accommodate the proliferation of technology in the courts.

On a state level, the National Center for State Courts has become involved in these issues through its Civil justice Reform Initiative, a program dedicated to improving the state civil justice system. The Initiative represents a number of projects that address problems existing in civil proceedings. In 2002, one of those projects was an ongoing study related to the discovery of electronic evidence.

Many believe that the impact of electronic discovery is so large that significant changes to discovery rules and procedures eventually will be necessaiy. The Federal Rules of Civil Procedure make almost no reference to electronic evidence and provide no guidance for operations such as the discovery of e-mail. They were written at a time when information was stored primarily on paper rather than in digital form on tiny chips or magnetic tapes. Indeed, as the world becomes increasingly paperless, it would be prudent to consider overhauling the rules in order to adapt them to a digitalized society.

Among the several problems with the rules, the various committees and task forces have recognized that Rule 37 requires an order before sanctions can be imposed.114 Nor do the discovery rules adequately address spoliation in the context of electronic information since there are no guidelines for record preservation. Discovery of e-mail information does not adequately protect privacy interests either. Some electronic information defies the definitions of Rule 34, and the expense of complying with electronic discovery requests has become overwhelming.

On the other hand, courts and litigants appear to have adapted the existing "antiquated" federal discovery rules on a case -by-case basis as production issues are disputed, examined, and resolved. In a report submitted by the Federal judicial Center to the Advisory Committee on Civil Rules for its October 2002 meeting, the authors detail their findings, generated from a number of case studies involving magistrate judges and attorneys. One finding notes that a clear majority of the judges and attorneys who were interviewed did not think that the Civil Rules had a major effect on how the computer-based discovery issues were resolved within the case studies.115 In fact, several case -study participants observed that the rules already covered computer-based discovery. One judge commented, "It's pretty clear that documents in other forms are covered by the rules, and we don't need a whole lot more detail than that.""6 Some of the attorneys who participated also argued against changing the rules. One stated that the context in which electronic discovery issues arise "varies so much that you need to do things on a case -by-case basis."117 Another attorney said that changing the rules to address electronic discovery specifically would "add complication, increase costs, and send litigants to state court."118

On a private level, the Sedona Conference was formed as a nonprofit, 501(c)(3) research and education institute dedicated to the advancement of law and policy in specific legal areas, including complex litigation. One of the goals that predominates their Working Group Series is to produce peer-reviewed, authoritative sets of principles on difficult issues confronted daily by participants in the legal system. In March of 2003, they published their first collection, entitled The Sedona Principles: Best Practices, Recommendations, & Principles for Addressing Electronic Document Production. The fourteen principles discussed in this publication will influence not only the governmental committees examining the same issues, but also practitioners themselves, as they struggle to understand the unique application of electronic systems to an existing system that is not quite prepared to handle them.

Whether rule changes eventually are approved or not, it is evident that the issues raised by electronic document production have snared attention in nearly every facet of the legal system. While judges labor to parse discovery disputes in accord with long-established rules, attorneys labor to protect their clients from the consequences of unfamiliarity with electronic information manipulation. And as technology inexorably marches on, the ensuing legal tangles may leave proposed solutions far behind.

RELEVANT WEBSITES

http://www.applieddiscovery.com/lawLibrary/default.asp (last visited Dec. 22, 2003). This web site is provided by Applied Discovery, an electronic discovery firm, in order to keep current and prospective clients up-to-date on the law. The site provides case law and other basic information.

http://www.kenwithers.com (last visited Dec. 22, 2003). This web site is maintained by Ken Withers, a member of the Research Division of the Federal Judicial Center, but it is unofficial. It contains a wealth of information about electronic discovery and provides easy access to many other relevant sources, such as The Sedona Principles.

http://www.krollontrack.com/LawLibrary/CaselawList (last visited Dec. 22, 2003). This web site provides an excellent and up-to-date compilation of electronic discovery case summaries.

BIBLIOGRAPHY

Lisa M. Arent et al., Ediscovery: Preserving, Requesting & Producing Electronic Information, 19 COMPUTER & HIGH TECH. L.J. 131 (2002).

Matthew J. Boettcher & Eric G. Tucciarone, Concerns Over Attorney-Client Communication Through E-Mail: Is the Sky Really Falling?, 2002 L. REV. M.S.U. -D.C.L. 127 (2002).

Karen M. Coon, Note, United States v. Keystone Sanitation Company: E-mail and the Attorney-Client Privilege, 7 RICH. J.L. & TECH. 30 (2001), available at http://law.richmond.edu/jolt/.

Jonathan B. EaIy & Aaron M. Schutt, What - If Anything - Is an E-Mail? Applying Alaska s Civil Discovery Rules to E-Mail Production, 19 ALASKA L. REV. 119 (2002).

Molly Treadway Johnson et al., A Qualitative Study of Issues Raised by the Discovery of Computer-Based Information in Civil Litigation, September 13, 2002, Report by Federal Judicial Center submitted to judicial Conference Advisory Committee on Civil Rules, available at http://www.uscourts.gov/rules (last visited March 4, 2004).

Richard L. Marcus, Confronting the Future: Coping with Discovery of Electronic Material, LAW & CONTEMP. PROBS., Spring/Summer 2001, at 253.

Michael Marron, Discoverability of "Deleted" E-Mail: Time for a Closer Examination, 25 SEATTLE U. L. RKV. 895 (2002).

Carey Sirota Meyer & Kari L. Wraspir, E-Discovery: Preparing Clients For (and Protecting Them Against) Discovery in the Electronic Information Age, 26 WM. MITCHELE L. REV. 939 (2000).

Gregory I. Rasin & Joseph P. Moan, Fitting a Square Peg into a Round Hole: The Application of Traditional Rules of Law to Modern Technological Advancements in the Workplace, 66 Mo. L. REV. 793 (2001).

Martin H. Redish, Electronic Discovery and the Litigation Matrix, 51 DUKE L.J. 561 (2001).

Hon. Shira A. Scheindlin & Jeffery Rabkin, Electronic Discovery in Federal Civil Litigation: Is Rule 34 up to the Task?, 41 B.C. L. REV. 327 (2000).

Sherry L. Talton, Note, Mapping the Information Superhighway: Electronic Mail and the Inadvertent Disclosure of Confidential Information, REV., LITIG., Winter 2001, available at WL 20 REVLITI 271.

The Sedona Principles: Best Practices, Recommendations & Principles for Addressing Electronic Document Production, A Project of the October 2002 Sedona Conference Working Group (March 2003), available at http://www.thesedonaconference.org/publications_html (last visited Dec. 30, 2003).

Kenneth J. Withers, Computer-Based Discovery in Federal Civil Litigation, 2000 FED. CTS. L. REV. 2 (2000), available at WL 2000 FEDCT LR2.

Terry L. Hill is a partner in the law firm of Manier & Herod, Nashville, Tennessee. he is a past president of the Tennessee Defense Lawyers Association and was recently selected for inclusion in BEST LAWYERS IN AMERICA. Mr. Hill has served as Chairman of the FDCC Workers ' Compensation section, and presently chairs its Management & Economics of Trial Practice section. he is Editor of TENNESSEE WORKERS ' COMPENSATION LAW-A PRACTICAL GUIDE, now in its second printing.

Jennifer S. Johnson is a former associate with the law firm of Manier & Herod, Nashville, Tennessee. Currently, she is a professor in the Honors College of Freed-Hardeman University, Henderson, Tennessee.

Copyright Federation of Defense & Corporate Counsel, Inc. Winter 2004
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