Proposed E-Discovery Rules
October 6, 2004
Page 1
M E M O R A N D U M
October 6, 2004
To: / Sedona Working Group
From: / T. Allman

Re: / The Sedona Production Principles and the Proposed Federal Rules addressing E-Discovery

The proposed amendments to the Federal Rules of Civil Procedure (the “Proposed Amendments” or “Rules”) seek to address gaps and inadequacies in rules governing discovery of “electronically stored information,” the term adopted by the Civil Rules Advisory Committee for use in Rule 34 (and elsewhere). See Report of the Civil Rules Advisory Committee, available at as revised August 3, 2004 (hereinafter cited as Report, p. ___ or Amendments, p. ____)).

To assist in evaluating the scope and effectiveness of the proposals, I have summarized the relevant excerpts from the Sedona Production Principles (available at “Sedona Principles”)which touch on three of the key recommendations by the Civil Rules Advisory Committee(the “Committee”). As will be seen below, theSedona Principles are consistent with and supportive of the proposals, subject, of course, to some exceptions.

1.“Two-Tiered”Discovery of Electronically Stored Information

The principal innovation of the Proposed Amendments is to enshrine a self-managed distinction among types of “electronically stored information” for purposes of discovery without court intervention. Thus, Rule 34(a) would be amended to extend discovery to “electronically stored information” and Rule 26(b)(2) would identify the need for a court order for production of electronically stored information which “[a] party identifies as not reasonably accessible.” The approach echoes the distinction successfully embodied in 1999 in the Texas Rule, 196.4, which requires production without a court order of “electronic or magnetic data” which is “reasonably available to the responding party in the ordinary course of its business.” While a Texascourt can order production of information not reasonably available, theTexas rule mandates payment of the “reasonable costs” of any “extraordinary steps” required to retrieve and produce the information. The absence of a similar mandate in the Proposed Amendment to Rule 26(b)(2) forms the principal distinction between the Texas Rule and the Proposed Federal Rule.

Comment 1 (Inaccessible Information)

The Sedona Principles support the approach that, over objection, a party need not produce information not purposely stored for business use or otherwise inaccessible due to its special characteristics.

  • Sedona Principle 8 states that the “primary source of electronic data and documents for production should be active data and information purposely stored in a manner that anticipates future business use and permits efficient searching and retrieval” and that “[r]esort to disaster recovery backup tapes and other sources of data and documents requires the requesting party to demonstrate need and relevance that outweigh the cost, burden and disruption of retrieving and processing the data from such sources.”
  • Sedona Principle 9 provides that “[a]bsent a showing of special need and relevance a responding party should not be required to preserve, review or produce deleted, shadowed, fragmented, or residual data or documents.”
  • Sedona Principle 12 provides that “[u]nless it is material to resolving the dispute, there is no obligation to preserve and produce metadata absent agreement of the parties or order of the court.”
  • Sedona Principle 13 provides that if electronic information sought for production “is not reasonably available to the responding party in the ordinary course of business,” the costs of “retrieving and reviewing such electronic information should be shifted to the requesting party.”

The proposed Committee Note alsocontrasts “active data” which is routinely accessed or used with information which is costly and time consuming to restore. That includesinformation that is stored solely for disaster-recovery purposes (and not actually accessed), “legacy” data retained in obsolete systems and deleted information which can be restored only through extraordinary efforts. Amendments at pps. 11-12. Sedona Principle 8 reminds us thata robust retrieval capability is often a crucial characteristic of such “active” information (“purposely stored in a manner that anticipates future use and permits efficient searching and retrieval”). With the experience that will come with time, the distinction between information that is “reasonably accessible” and that which is not should be manageable.

Comment 2 (Identification of Information Not Produced)

Both Sedona Principle 4 and Proposed Rule 26(f) require that a producing party communicate something about electronically stored information that is not being produced because it is deemed not “reasonably accessible.” However, unlike Proposed Rule 26(f), the Sedona Principle works within the existing discovery structure wherethe emphasis is on expecting a clear request by the party seeking production, to which the producing party can interpose an objection framed by the request.

  • Sedona Principle 4 requires discovery requests to “make as clear as possible what electronic documents and data” are being sought while responses and objections “should disclose the scope and limits of what is being produced.”

The approach of Sedona Principle 4 seems preferable. For example, proposed Committee Note to Rule 26(b)(2), presumably unintentionally, expands the obligation to “identify” information which is not reasonably accessible into a requirement that the party identify what information “[a producing party] is neither reviewing nor producing.” Amendments, p. 13. While the Proposed Note minimizes the burden by saying one can merely “describe a certain type of information,” this could improperlylead to debate over the internal decision-making process of producing parties. Accordingly, the language should be revised to avoid the problem by merely stating the principle in positive terms: “[A] party need not provide discovery of information that is not reasonably accessible except by a court order on a showing of good cause.” This would allowthe accompanying Committee Note to explain the proper role of identification of information believed to not be reasonably accessible by the producing party in a discovery response.

Comment 3(Good Cause for Production )

Sedona Principle 2, like Proposed Rule 26(b)(2), contemplates that a decision on whether to order production of inaccessible material requires application of a “balancing standard.” However, the Sedona Principles focus primarily on the objective factors of producing the information, not subjective factors involving the litigants themselves.

  • Sedona Principle 2 suggests that when seeking to establish the need for an order requiring production under a “balancing standard,” courts should consider “the technological feasibility and realistic costs of preserving, retrieving, producing, and reviewing electronic data, as well as the nature of the litigation and the amount in controversy.”
  • Sedona Principle 8 requires the requesting party to demonstrate need and relevance that outweigh the cost, burden and disruption of retrieving and processing [inaccessible] data.

The proposed Committee Note relies on the Manual for Complex Litigation for the point that requiring good cause will“discourage costly, speculative, duplicative, or unduly burdensome discovery of computer data and systems.”

Comment 4 (Cost-Shifting)

The Sedona Principles differ from Proposed Rule 26(b)(2) in regard to the potential allocations of costsassociated with the production of inaccessible information. While Proposed Rule 26(b)(2) would allow a court to “order discovery of [inaccessible] information for good cause and may specify terms and conditions for such discovery,” the Proposed Committee Notesuggests, but does not mandate, “provisions regarding the cost of production.” Amendments at p. 14. Sedona Principle 13 is quite different.

  • Sedona Principle 13 provides that if electronic information sought for production “is not reasonably available to the responding party in the ordinary course of business,” the costs of “retrieving and reviewing such electronic information should be shifted to the requesting party.”

Given the positive experience with mandatory cost-shifting in Texas state practice, such as that cited at Fordham by the author of the Texas Rule (S. Susman), it may be useful to re-consider the role of mandatory cost-shifting or, consistent with the Sedona Principles, including a strong comment urging cost shifting where extraordinary costs are incurred.

2.Early Discussion of Contentious Issues

A second key reform in the Proposed Rules is to mandate early discussion of contentious issues involved with electronically stored information. Two types of issues are singled out.

Rule 26(f) would be amended to require parties to “discuss” issues relating to “preserving discoverable information” prior to and at the Scheduling Conference, with related changes in Rule 16(b)(5) and Form 35. The Proposed Rules do not purport to spell out the scope of preservation obligations which arise under state and other substantive law and which precede litigation. However, the proposed Committee Note suggests that parties could agree to “specific provisions” which balance the need to “preserve relevant evidence with the need to continue routine activities critical to ongoing business [since] [w]holesale or broad suspension of the ordinary operation of computer disaster-recovery systems, in particular, is rarely warranted.” Amendments at p. 19.

Rule 26(f) would also be amended to require early discussion of any issues relating to “disclosure or discovery of electronically stored information,” including the “form in which it should be produced” and whether an order should issue “protecting the right to assert privilege” after production of information.

Comment 1 (Preservation Obligations)

Sedona Principle 6 emphasizes that responding parties, not the courts, can best determine the most efficient manner in which to address preservation obligations involving their electronic information. Indeed, the Committee is properly reluctant to extend the Rules to pre-litigation conduct. See proposed Committee Note to Rule 37(f) (“Rule 37(f) addresses only sanctions [imposed] under the Civil Rules and applies only to the loss of electronically stored information [which occurs] after commencement of the action in which discovery is sought.” Amendments, at p. 34). The Sedona Principles speak eloquently to this point.

  • Sedona Principle 5 states that the preservation obligation “requires reasonable and good faith efforts to retain information that may be relevant [but] it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant data.”
  • Sedona Principle 6 emphasizes that “[r]esponding parties are best situated to evaluate the procedures, methodologies, and technologies appropriate for preserving and producing their own electronic data and documents.”

A key methodology used to implement preservation obligations is the familiar “litigation hold” process. An excellent discussion of this approach is now available in the companion publication to the Sedona Principles issued by the Sedona Working Group and known as the “Best Practice Guidelines and Commentary for Managing Information & Records in the Electronic Age” (released on September 1, 2004 for public comment and available at Chapter 5 provides practical suggestions for and commentary about appropriate means and methods for preserving information relating to actual or reasonably anticipated litigation, governmental investigations or audits.

Comment 2 (Early Discussion of Preservation)

The early discussion of contentious matters, including preservation issues, was and is a core recommendation of the Sedona Principles. The focus, however, is on the voluntary resolution of contentious matters alreadyat issue, not on debating the responsibility for determining how best to meet preservation obligations. This fine line between encouraging parties to resolve their disputes and creating ones that do not exist by a “checklist” approach will require great care.

  • Sedona Principle 3 suggests that “[t]he parties should confer early in discovery regarding the preservation and production of electronic data and documents when these matters are at issue in the litigation and seek to agree on the scope of each party’s rights and responsibilities.”
  • Sedona Principle 11 provides that “[a] responding party may satisfy its good faith obligation to preserve and produce potentially responsive electronic data and documents by using electronic tools and processes, such as data sampling, searching, or the use of selection criteria, to identify data most likely to contain responsive information.”

Nothing in the Sedona Principles or in the Proposed Rules suggests that the Courts should attempt to dominate preservation planning. Above all, the parties, including the Court, must avoid the temptation to focus only on the needs of an individual case without taking into account the legitimate needs of producing parties with multiple concurrent litigation to balance operational and litigation needs. The Committee has properly resisted efforts to routinely mandate the issuance of preservation orders, andit may be appropriate to describe the limited circumstances under which they should be employed.

3.“SafeHarbor” for Deletions Due to Routine Operations.

The third major provision in the Proposed Rules is the creation of a “safe harbor” from the unintended consequences of routine computer operations. A major concern of in-house counsel has been that deletion or other loss of electronic information is a natural byproduct of the use of computer-based technology. It is not, however, indicative of an intent to avoid preservation obligations or production requirements and should not yield sanctions. Thus, Proposed Rule 37(f) would provide a limited “safe harbor” for the loss of information due to the “routine operation of the party’s electronic information system” if the “party [also] took reasonable steps to preserve the information after it knew or should have known the information was discoverable in the action.” The protection would be lost if the party “violated an order in the action requiring it to preserve electronically stored information” and would apply only to sanctions for post-litigation conduct by the entity.

Proposed Alternative Formulation:Rule 37(f) would deny the safe harbor if the party “intentionally or recklessly failed to preserve the information” or violated an order requiring preservation of that information. (See Footnote, Amendments at pps. 33-34).

Comment 1(Preservation Obligations in Rule 37(f))

Sedona Principle 14 suggests requirements for the imposition of sanctions in a multi-facet approach requiring clear duties, intentional or reckless conduct and a link to material prejudice.

  • Sedona Principle 14 prohibits sanctions unless it is shown that a party had a “clear duty” to preserve, that there was an “intentional or reckless” failure to do so and that there was a “reasonable probability that the loss of evidence has materially prejudiced the adverse party.”

The Committee proposes to apply parts of this approach to one relatively unique situation – the loss that occurs when routine business operations cause a failure to produce discoverable information - to provide a form of certainty to business planners. Proposed Rule 37(f) would, if enacted, have useful application where it is not practical, because of the volume of ongoing litigation, to shut down portions of ongoing systems and processes which are serving the enterprise as a whole, such as disaster recovery systems. See Allman, The Case for a PreservationSafeHarbor in Requests for E-Discovery, 70 Def. Counsel Journal 417 (2003).

The Proposal in Rule 37(f) would not apply in a situation where it is later concluded that the very information lost by the routine operation (by then long gone) should have been preserved. This concern for a highly theoretical possibility seems unnecessary. The protection sought by the “safe harbor” would be limited solely to the effects of the routine effects of those business systems. As Zubulake v. UBNS Warburg LLC (“Zubulake V”), No. 02 Civ. 1243 (SAS), 2004 U.S. Dist. LEXIS 13574, 2004 WL 1620866 (S.D. N.Y. July 20, 2004), has shown, inappropriate actions undertaken with regard to other sources of that same information – such as an individual deleting active information after notice of a litigation hold – would still be subject to potential sanctions without regard to the safe harbor.

The Committee proposal for Rule 37(f), however, conditions the availability of the “safe harbor” on whether or not the party undertook “reasonable steps to preserve” the information [presumably the information ultimately lost by the routine operation] at a time it should have known that the information was “discoverable.” While understandable as a concept,a less confusing course would be torespect the intention of the limited proposal - an attempt to achieve certainty in planning - and rely upon the implicit concept of good faith to handle the circumstances where it would seem inappropriate, with hindsight, to allow the safe harbor to apply. A court convinced that a party seeking safe harbor had blatantly failed to act in good faith would have no difficultly in reaching such a conclusion.

Comment 2(Court Ordered Preservation)

The Proposed Committee Note to Rule 37(f) states that “[i]n most instances, a party acts reasonably by identifying and preserving reasonably accessible electronically stored information that is discoverable without a court order.” Accordingly, the proposed Committee Note could state that the safe harbor will apply to any information lost unless a specific order requiring its preservation is violated. This would focus the initial “meet and confer” conference on the steps, if any, needed in regard to preserving any inaccessible information that might be requested by the party seeking discovery.

Comment 3 (Culpability)

Sedona Principle 14 requires, as a pre-condition to any spoliation findings, a showing that the party acted with an “intentional or reckless” intent. The Committee has asked for comments onits alternative to Proposed Rule 37(f) whichwould deny a safe harbor if a party “intentionally or recklessly failed to preserve the information [presumably referring to the information lost by the routine operation].” This would restore some of the certainty and would be more practical thanProposed Rule 37(f) as written.

Conclusion: Support for Federal Rule Amendments

In its covering Report, the Committee concludes that amending the Federal Rules now is preferable to the current practice of ad hoc evolution of lower court case law supplemented by local district court rules. Report, pps. 3-4. A very clear example of the compelling logic behind this conclusion is seen in the “Default Standard” adopted by the District of Delaware, which requires identification of a “retention coordinator” who then has seven (7) days to “implement” procedures to prevent modifications of documents. If multiple District Courts were to enact contrasting requirements of this type, the risk of inconsistent demands and differing hindsight evaluations is obvious. Uniform national standards, properly confined to appropriate rule-making subjects are needed, and deserve our support.