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Employers Face New Challenges in Electronic Discovery
By Bruce G. McCarthy and Aaron A. Roblan
[January 2007]
Through desktops, laptops, PDAs, cell phones, and even memory sticks, companies and their employees now create, store and transmit literally thousands of documents each day. Where litigation and its discovery rules traditionally contemplated only paper documents - what we now call “hard copies” - the law is catching up to address these new electronic forms of records. The latest development, amendments to the Federal Rules of Civil Procedure (FRCP), came into effect on December 1, 2006. Although these amendments are directed at the rules for discovery during litigation, their reach is far greater, since they directly impact the obligations of an employer to retain and be able to retrieve all relevant electronically stored information (ESI) during discovery. Further, California and other courts, although not necessarily bound by the FRCP, likely will follow some (if not all) of the amended provisions in state court actions.
Five basic components of the new amendments
The FRCP amendments generally require litigants to focus on the type and source of ESI and how it must be produced during the discovery phase of a lawsuit. These sources of electronic information may include not only the documents and information themselves, but various forms of metadata that contain electronic information about when information was created or changed, how it was changed, and who changed it.
Employers need to know five major components of the amendments applicable to all federal cases:
- Preserving ESI for litigation. At the commencement of a lawsuit, parties are required to meet and confer regarding issues related to ESI, including a discussion of the steps taken to preserve ESI and the form in which discoverable ESI will be produced.
- Making request to produce ESI. During formal discovery, when making demands for the production of documents and electronic records, the parties are entitled to specify the form in which ESI will be produced.
- Dealing with inaccessible ESI. Not all ESI is easily accessed or retrieved, particularly when stored on back-up tapes or other electronic storage media. Although parties can claim that certain ESI would be too difficult or costly to produce, the amendments establish a court-directed procedure to determine if and how such otherwise inaccessible ESI will be produced. The amendments also address the allocation of costs associated with retrieval and production of inaccessible ESI.
- Protecting privileges and work product. Recognizing some of the perils of producing an inordinate amount of electronic information in a relatively short amount of time, the amendments allow a procedure for asserting claims of privilege or work product protection after inadvertent production of privileged material.
- Avoiding sanctions for failure to comply. Ordinarily, the FRCP allows monetary and evidentiary sanctions to be imposed against a party that fails to comply with discovery obligations. The amendments provide limited protections from such sanctions, when the loss of ESI is the result of good-faith and routine operation of computer systems.
The obligations to preserve ESI apply to the potential litigant, as well. For example, in a leading ESI case, Zubulake v. UBS Warburg LLC, a federal district court addressed claims for sex discrimination and allegations by the former employee that her employer failed to preserve (and indeed destroyed) certain emails that the plaintiff claimed were relevant to her claim. In ruling on the employer’s obligations for electronic discovery, the court held that “once a party reasonably anticipates litigation it must suspend its routine documents retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Thus, not only is an employer obligated to identify and preserve relevant documents and information once a lawsuit is filed, it is required to act quickly in identifying and preserving all such documents and information, for potential disclosure, once litigation is reasonably anticipated.
Special issues in employment litigation
The unique burdens placed on employers in the new rules are due to the somewhat one-sided nature of discovery in employment litigation. Unlike other forms of litigation, in employment lawsuits, the vast majority of discoverable information is often in the hands of the employer. Consequently, both the employer and the plaintiff (current or former employee) rely upon the presence or absence of employer records to prove their case. In the electronic discovery context, this reliance poses a number of issues.
While most employers maintain personnel policies and files that contain the basis for employee discipline and discharge, the vast majority of information potentially relevant to an employment case often goes far beyond what is contained in these two data sources. For example, the underlying documentation for disciplinary notices or performance evaluations may be found in e-mails, on supervisor’s personal data assistants, on calendar entries maintained by the employer and even on the plaintiff’s own workplace computer. Similarly, electronic time-clock and electronic key-card data could be discoverable in a wide variety of employment matters.
Employers are responsible for identifying and preserving all potentially relevant data, whether helpful or harmful to the employer’s case. The failure to timely and adequately preserve relevant ESI can lead to substantial monetary sanctions against the employer. For example, in a series of discovery orders the Zubulake Court issued sanctions against the employer of several hundred thousand dollars. The Court also imposed evidentiary sanctions entitling the plaintiff to an evidentiary inference at trial (adverse to the employer) that the missing ESI would have been helpful to the plaintiff’s case.
Employers also need to be aware that the financial burden of recovering destroyed or deleted electronic data is more likely to fall on employers than employees, if such recovery is ordered by a court. This is because the framework established by the rules for allocating burdens of data recovery not only takes into account the need for the evidence, it also considers the relative ability of the parties to pay for the recovery. In employment litigation, the employer is most often the party with the ability to pay such costs. For these reasons, and many more, employers are advised to take a number of proactive steps, outlined below, to maximize their ability to respond effectively and expediently to electronic discovery requests.
Steps to deal with ESI in discovery
While challenges posed by ESI discovery may seem insurmountable, there are a number of steps that every employer can take to make the process more manageable and effective.
Document retention/destruction schedule. The safe harbor set forth in the FRCP provides that employers not be sanctioned for good faith destruction of documents and electronic records in the regular course of business and prior to the anticipation of litigation. The purpose of this safe harbor rule is to recognize that employers have a need, as a part of their normal business operation, to purge files at regular intervals. Accordingly, employers should adopt a written records retention and destruction schedule in compliance with applicable state and federal law. Doing so will permit employers to take advantage of the safe harbor in appropriate circumstances.
Litigation hold policy. Employers should adopt policies that designate the persons responsible for maintaining relevant documents and electronic records when litigation is reasonably anticipated. In addition, employers should ensure that information-management and information-technology personnel, as well as managers and supervisors, are made aware of the potential litigation and are instructed to preserve all potentially relevant information. Notices to these individuals should provide a basic explanation how such ESI should be preserved.
Notice procedures. Employers should develop procedures to ensure that relevant personnel receive regular updates and reminders as the litigation continues. These notices should ensure that documents are not destroyed, even after they have been produced to counsel so that the integrity of the data is not compromised. Furthermore, a custodian of records should be responsible for retaining employee-created or controlled ESI when such key personnel leave the company.
Identification of privileged material. As already noted, while the amendments provide a post-production means to claim ESI as privileged, these procedures are not a substitute to creating a system to identify and segregate privileged, or otherwise sensitive, information at the outset of litigation. Not only can these post-production procedures prove ineffective and/or costly, such sensitive data as trade secrets and proprietary information are not subject to them.
Conclusion
Employers can expect to face these issues in employment cases, both in federal and state courts. To ensure compliance with the new rules, employers should consider the myriad sources of ESI and the most appropriate methods for managing this information in compliance with the rules.
Davis Wright Tremaine lawyers regularly assist clients in the development of such protocols and policies both before and during the course of litigation.
For further information about the new federal rules, please contact:
Davis Wright Tremaine has employment and labor lawyers in Alaska, Oregon, Washington state, California and Washington, D.C. We represent many clients nationally. For a specific referral for a DWT employment and labor attorney in your state, please contact the above attorneys. Thank you.
This advisory is a publication of the Employer Services Department of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent developments in employment law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may be given only in response to inquiries regarding particular situations.
Copyright © 2007, Davis Wright Tremaine LLP.
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