The Brave New World of E-discovery - Part I - August 2007 - the Civil Litigator

• Publication year: 2007
• Pages: 83

36 Colo.Law. 83 Colorado Lawyer 2007.

2007, August, Pg. 83. The Brave New World of E-Discovery - Part I - August 2007 - The Civil Litigator

The Colorado Lawyer
August 2007
Vol. 36, No. 8 [Page 83]

Articles
The Civil Litigator

The Brave New World of E-Discovery - Part I

by Jeanine M. Anderson, Richard P. Barkley

The Civil Litigator articles address issues of importance and interest to litigators and trial lawyers practicing in Colorado courts. The Civil Litigator is published six times a year.

Article Editors:

Don Kelso, Denver, of Holme Roberts &; Owen LLP - (303) 861-7000, donald.kelso@hro.com; Eric Bentley, Colorado Springs, of Holme Roberts &; Owen LLP - (719) 473-3800 eric.bentley@hro.com

About the Authors:

Jeanine M. Anderson, Denver, is a Shareholder in Brownstein Hyatt Farber Schreck's Commercial Litigation and Employment Groups - janderson@bhfs.com. Richard P Barkley, Denver, is a Shareholder in Brownstein Hyatt Farber Schreck's Litigation Group, where he specializes in appellate and complex civil litigation - rbarkley@bhfs.com

This two-part article examines the obligations of parties and their counsel to preserve and manage electronic documents under evolving case law and the new federal rules on e-discovery. Part I addresses the obligations imposed prior to litigation and at the start of the case. Part II will address the obligations imposed in the later stages of litigation.

For a century or more, courts have imposed duties on parties to preserve evidence that is relevant to litigation.(fn1) With the explosive growth of electronically stored information (ESI or e-documents),(fn2) courts - particularly those in the federal system - have imposed additional, extensive duties on parties and their counsel with respect to document preservation even before the commencement of litigation. Concurrently, amendments to the Federal Rules of Civil Procedure (Rules) - particularly, Rules 16, 26, and 37 - have delineated new, elaborate procedures for ESI management and production after litigation begins. In so doing, the amendments and judicially adopted court rules have dramatically changed the traditional discovery process.(fn3)

E-document preservation, management, and production have become minefields in which a single misstep can have dramatic and deleterious impacts on a lawsuit. As one commentator declared recently, document management is now:

an undertaking of monumental proportions spawning a new industry of information technology forensic experts, generating serious and debilitating litigation entirely separate from and collateral to the primary lawsuit; and creating exposure to draconian sanctions and other remedies for noncompliance.(fn4)

This two-part article provides practical suggestions to help guide practitioners through the ESI minefield. Part I addresses two key issues that arise before the commencement of formal discovery: (1) the preservation of documents; and (2) the Rule 26(f) conference. Part II, which will be published in the September 2007 issue of The Colorado Lawyer, will address three specific problems that arise with the production of ESI: (1) the disclosure of privileged documents; (2) inaccessible documents and the cost of their production; and (3) penalties for failing to preserve or produce e-documents.

Preservation of Documents Prior to Litigation

The maintenance and storage of documents by a business imposes costs on the business. Therefore, a business has an interest in expunging documents, including e-documents, as soon as they outlive their usefulness. Documents that are not worth retaining from a business perspective, however, might have substantial importance in litigation. Thus, the judicial system has an interest in ensuring that businesses preserve documents that are important in litigation. The rules applicable to the preservation of documents attempt to balance these two interests by addressing two distinct issues: (1) When does the duty arise? and (2) What is its scope?

Duty to Preserve Documents

In evaluating the duty to preserve documents (including e-documents), the first question is: When does the duty arise?(fn5) Almost all courts, including Colorado courts,(fn6) agree that the duty of preservation may, at least under certain circumstances, arise before the formal commencement of litigation. How long before litigation is initiated, however, is unclear; courts use a variety of formulations,(fn7) sometimes interchangeably,(fn8) in attempting to describe when the duty to preserve begins. (See accompanying sidebar entitled "When the Duty to Preserve Documents Arises" for examples.) As a result, depending on which formulation is used,(fn9) a court may hold that a party's preservation obligations arise when litigation is "imminent," when it is "likely," when it is "reasonably anticipated," or even when "there is only a potential for litigation."(fn10) A party that delays preservation, therefore, runs the risk that a court will find the party's preservation efforts were inadequate, because the "potential for litigation" existed, litigation should have been "reasonably anticipated," or litigation was "likely," well before the party acted.

One possible way to avoid this dilemma - particularly in a jurisdiction that has not yet adopted a particular formulation of the duty to preserve - is for a party to argue that its duty to preserve did not arise until it received "notice." Notice is a persistent theme that runs through many cases considering the duty of preservation.(fn11) Colorado law provides that a party receives notice when it has actual knowledge of a claim, or when it "becomes aware or should have become aware of certain facts which, if investigated, would reveal the claim of another."(fn12) Under this standard, a strong argument can be made to a court that a party does not receive notice - and thus has no preservation duty - until it learns that another party is seriously contemplating litigation by, for example, taking an affirmative step toward litigation.

For example, in the employment context, if an employee is discharged, that fact alone will not provide notice, because there is no indication that the discharged employee is seriously considering a lawsuit. In fact, even if the employee made a threat to sue, absent other evidence, it could be argued persuasively that the employer still had not been given notice. It is not uncommon for employees to respond to discharge by making emotional threats to file suit or to take some other legal action. Accordingly, a threat to sue at the time of discharge is evidence of the employee's anger and hurt, and may not be evidence that the employee is seriously considering a lawsuit.(fn13) But if the discharged employee subsequently writes a letter to the former employer requesting information about the bases for the discharge, retains a lawyer, sends a demand or litigation-hold letter, or files a charge with the Equal Employment Opportunity Commission, a court likely would find that the duty to preserve evidence had been triggered.(fn14) The discharged employee has taken an affirmative step toward litigation, and the employer is obligated to take affirmative steps to prevent the destruction of documents, including e-documents.(fn15)

In other words, an effective argument can be made that passive behavior, or acts that require no expenditure of resources, are too unreliable as predictors of litigation to require adverse parties to undertake efforts to preserve ESI. An affirmative act that entails the expenditure of time, effort, or money, by contrast, is a sufficiently strong indicator that a party is seriously considering litigation that it is not unreasonable to require adverse parties with notice to preserve evidence.

When the Duty to Preserve Documents Arises

Courts use a variety of formulations in attempting to describe when the duty to preserve begins.

"[E]ven where an action has not been commenced and there is only a potential for litigation, the litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action."

Fire Ins. Exch. v. Zenith Radio Corp., 747 P.2d 911, 914 (Nev. 1987).

"[D]estructive acts occurring prior to the filing of a complaint where the potentiality of litigation is clear may also merit sanctions."

McGuire v. Acufex Microsurgical, Inc., 1175 F.R.D. 149, 154 n.5 (D.Mass. 1997).

"The obligation to preserve evidence arises when a party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation."

Phoenix Four, Inc. v. Strategic Res. Corp., No. 05 Civ. 4837 (HB), 2006 WL 1409413 at *4 (S.D.N.Y. May 23, 2006).

The most widely used description is that a party's duty to preserve documents arises when litigation was, or should have been, "reasonably anticipated."

See, e.g., Zubulake v. UBS Warburg LLC, 2220 F.R.D. 212, 217, 218 (S.D.N.Y. 2003); Rambus, Inc. v. Infineon Techs. AG, 222 F.R.D. 280, 288 (E.D.Va. 2004); Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, "Report of the Civil Rules Advisory Committee" 87 (May 27, 2005).

Recently, Judge Craig B. Shaffer, a Magistrate Judge sitting in the U.S. District Court for the District of Colorado, adopted an alternative standard: "Putative litigants have a duty to preserve documents that may be relevant to pending or imminent litigation."

Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., No. 04-cv-00329-WYD-CBS, 2007 WL 684001 at *6 (D.Colo. March 2, 2007).

What Documents Must Be Preserved

Once a duty to preserve documents arises, the next question is what...