December 2, 2006

Supreme Court Releases New E-Discovery Rules

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In case you missed the news, today new Supreme Court rules went into effect regarding e-discovery. There were several good articles on the wires today: Yahoo; Washington Post; Investor’s Business Daily.

The problem with all these articles is that they don’t provide links to the actual rules published by the court. Since I have no life, I searched the Supreme Court’s website for the published rules. The new rules (http://www.supremecourtus.gov/orders/courtorders/frcv06p.pdf) were released by the Supremes last April. Based on my reading, there is both good and bad news in the rules with regards to e-discovery.

(Legal Disclaimer: I am not a lawyer; Do not rely upon my opinions; When in doubt hire a real lawyer and make sure he’s a good one; I am not responsible if you rely upon my analysis.)

The good news is contained in Rules 26(b)(2)(B) & 37(f):
Rule 26 (b)(2)(B) “A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause…”

Rule 37 (f) “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”

These rules are good for two reasons:

First, there is now a potential release from e-discovery based upon “undue burden or cost.” As an example, if a company can show that it would be prohibitively expensive to search every pc in the company for a document that the other party suspects exists, but has no proof, this rule allows for the potential to have this request waived. Of course, if the requester can “show good cause,” the court can still order the discovery, but at least this rule provides a potential cost exclusion where it did not exist before.

Second, sanctions cannot be imposed for “information lost as a result of the routine, good-faith operation…” So if a company stores its archive tapes at a secure off-site storage facility, and that facility burns down, the loss of those tapes will not trigger court sanctions. This is a big change, but the key provision is “good-faith operation.” A company that doesn’t backup its data, or store it in a manner consistent with its data retention obligations is not operating in good-faith and could still be subject to sanctions if the data is not produce-able.

The bad news is contained in Rule 34 (a):
Rule 34 (a) Any party may serve on any other party a request (1) to produce and permit the party making the request, or someone acting on the requestor’s behalf, to inspect, copy, test, or sample any designated documents or electronically stored information — including writings, drawings, graphs, charts, photographs, sound recordings, images, and other data or data compilations stored in any medium from which information can be obtained — translated, if necessary, by the respondent into reasonably usable form, or to inspect, copy, test, or sample any designated 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…

Rule 34 (a) expands the types of electronic data to include sound recordings, images, and other “data compilations.” This is being interpreted in the press to include things like instant messaging and text messages on cell phones and Blackberrys. If you have a VOIP system that integrates your voice mail system with your e-mail system, such as Cisco’s UNITY product, be prepared for your voice mail messages to become discoverable.

Rule 34 (a) also specifies data “stored in any medium from which information can be obtained.” This would appear to include cell phones, PDAs, and USB flash drives. Not withstanding the cost exclusion of Rule 26 (b)(2)(B), companies have an expanded duty to track where their data is stored, and how it is maintained.

Last September, I published a white-paper regarding designing an e-mail archive system for compliance. The topics discussed in that article are even more important under the new rules. To meet obligations under these new rules, companies must act in “good-faith” to identify their electronic data, establish policies regarding the storage and retention of their data, and then design systems to enforce the retention policies. Also, if you work for a public company, pay close attention to Sarbanes-Oxley section 802. SOX 802 crimializes the destruction of business documents.

The new Supreme Court rules apply to all companies involved in Federal litigation. Unfortunately, if you wait until you are involved in litigation, it is too late. You must prepare for these rules before they apply.

-Bill

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1 Comment »

  1. Ledokin » New Court Rules Allow Companies to Subpoena Cell Phones, PDAs & IMs said,

    November 2, 2007 @ 10:42 am

    […] read more | digg story […]

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