Facing the Changes in the Federal Rules of Civil Procedure

Important changes in the rules around electronic discovery that took effect on December 1, 2006 will forever transform the way you manage your electronic content. These changes came in the form of amendments to the Federal Rules of Civil Procedure (FRCP) and are designed to acknowledge the significance of electronic evidence and address some of the practical discovery issues associated with it.

For some, there may not be a sense of urgency about FRCP because:

• The rules changes are seemingly complex and executives are not sure how to tackle the problem;
• Companies do not feel at risk because they incorrectly assume that their organizations are unaffected by the rules changes; and 
• Oftentimes, electronic discovery—a non-revenue generating activity—is viewed as a relatively low IT priority.

Approaching the FRCP changes unprepared may be a costly mistake. Even before these changes, electronic discovery was a widespread and costly exercise for enterprises (averaging $1.5 million per case to defend a corporate lawsuit). These new changes will demand an even greater level of IT infrastructure and services for US companies, as well as some multinational organizations.

The amendments to the FRCP will have a dramatic effect on the amount of time and money spent preparing for litigation. This is due in large part to the fact that, unlike other regulations in recent past such as Sarbanes-Oxley (SOX), the FRCP rules changes specifically reference electronically stored information—including email, a truly vast information source in size and scope—as content that should be preserved for possible analysis and production.

Companies need to be able to identify the sources of electronic evidence they have, be clear on where it resides and know how to produce it for opposing counsel if necessary. If your organization is not prepared to do so, it may be vulnerable to costly "rush-job" discovery requests, unnecessary and costly settlements of frivolous litigation and even lost lawsuits.

Immediate preparation is critical to avoiding these problems. While seemingly overwhelming, meeting the new requirements is a readily achievable goal if you understand what each rule means and take appropriate steps to modify your IT infrastructure and processes accordingly.

Best Practices for Addressing the FRCP Amendments

1. Establish "good faith" data loss. The so-called "safe-harbor" language of Rule 37 is important in establishing a practice for the deletion and disposition of electronically stored information. The underlying mandate here is setting a corporate policy; until case law is fully established, it's critical to demonstrate good faith in all actions and operations. The key to the good-faith concept is two-fold: (a.) you should establish a legitimate business reason for the deletion of data and make sure that your policies are implemented uniformly and consistently across all sources of electronic information, and (b.) you must ensure that your procedures allow you to quickly and reliably implement and maintain "litigation holds" on your data, so that data which should be maintained pursuant to a litigation is not destroyed during your routine, automated process.

Good-faith data deletion requires that you take reasonable steps to execute your duty to preserve information for litigation. We recommend the following procedure:

• Gather all information about data preservation requirements.
• Confirm that all preservation information is comprehensive to that date and ensure all appropriate people sign off on it. 
• Scan information against all records scheduled for deletion.
• Tag records to be placed on litigation hold.
• Hold litigation-related records in a secure location. u Update preservation information and check against any new or changed preservation criteria one last time.
• Verify that the preservation criteria used to scan the records targeted for deletion is complete, final and signed off.
• Delete records not tagged for litigation hold and in accordance with your standard policies.
• Log the deletion action by preserving at least the date of deletion, the preservation criteria and the identities of authorizing entities1.

2. Know what data you have and in which format it exists. Rule 26(f) requires the parties to meet and discuss issues regarding the disclosure or discovery of electronically stored information, including "sources" of information. Rule 26(a)(1)(B) requires you to identify, by category and location, all electronically stored information you intend to use to support your claims or defenses. Rule 26(b)(2)(B) allows a party a mechanism by which it can claim that it need not search certain sources of information due to undue burden or cost, but to take advantage of this rule the party must identify these sources and it must have enough information to defend its argument.

A clear theme emerges from these amendments: Very early on in the litigation, you need to be able to identify, with as much specificity as possible: (a.) what sources of electronic information you have; (b.) what electronic information you plan to use in support of your claim; (c.) what sources of information you do not intend to search due to undue burden or cost; and (d.) with respect to those sources you do not intend to search, how much would they cost to search and what level of likelihood would there be that they will turn up any relevant information.

Not knowing the contents of media does not mean that that data in the repository is "not reasonably accessible," and you may be held responsible for failing to produce the data. If you have relied on backup tapes and other backup media to store legacy data, the same responsibility applies—you must be able to identify, at least in general terms, the contents of those backup tapes and to produce data from them if requested. To help you prepare for such a scenario, you should catalog enough information about your tapes for this purpose using a third-party service. Tape cataloging allows you to immediately identify what electronic data you have on tape and the level of effort and cost required to obtain it so you know what is "reasonably accessible" and what is not. This saves you valuable time and money if you are faced with any sort of litigation.