Chapter 6 DISCOVERY BATTLES OVER ELECTRONICALLY STORED INFORMATION

• Jurisdiction: United States

Chapter 6 DISCOVERY BATTLES OVER ELECTRONICALLY STORED INFORMATION

Kathy Bazoian Phelps

With each passing day, the amount of information and documentation stored electronically increases at a dizzying pace. Almost everyone has a computer or cell phone and at least one email address. Information and documents fly back and forth between parties, leaving a trail of who was thinking what at any given moment.

When a business or individual ends up in bankruptcy, one of the first jobs of a trustee is to gather up all of the books and records to begin the task of locating and administering assets for the benefit of the creditors of the estate. In a fraud case, however, much of the information that a trustee needs is not likely to be neatly arranged, tabbed and contained in labeled file folders in a file cabinet at the business premises. Rather, it is likely to be missing, stored on the debtor's computer servers or the laptops of employees, or in the hands of third parties such as phone companies or Internet service providers.

This chapter discusses the issues that may arise in the discovery battles over electronically stored information (ESI), including the scope of discovery requests, scope and cost of production, and preservation, spoliation and privilege issues. Given the broad and complex nature of ESI, these disputes can become particularly contentious and costly.

The court's role in managing and resolving disputes is critical. While there is often a need for the information stored electronically, there is also a risk that a party may seek to abuse the proper scope of ESI discovery and engage in scorched-earth tactics designed to increase the costs and burdens to the other side. The court must strike a balance between relevance and cost in evaluating how much discovery to permit. Amendments to the Federal Rules of Civil Procedure in 2006 included changes that expressly provide for discovery of ESI and provide some guidance to courts and parties on these complex issues.

I. What Is ESI?

In both civil and criminal legal actions, parties use the discovery process to identify, collect, review, analyze and produce information for the purpose of developing relevant information for pre-trial motions and ultimately for trial. E-discovery is the extension of the discovery process to information that is stored electronically and includes things such as email, instant messages, word processing files, spreadsheets, information on social networking sites, or any other information that is stored electronically on devices such as on computers, servers or smartphones.

A forensic accountant walking into a case will want to gather up as much ESI as quickly and cost-effectively as possible. Some ESI will be easily obtained, while other data may be more challenging to access. As for all ESI that is obtained in the discovery process, it is important that a proper chain-of-custody log be maintained so that the discovered information may later be admitted into evidence at trial.⁸⁷

II. Special Discovery Rules as Between the Parties for Production of ESI

A. Federal Rule of Civil Procedure 34

Prior to the 2006 amendments, the Federal Rules of Civil Procedure related to the discovery of "documents and things," which courts and parties were required to interpret to include ESI. The term "electronically stored information" was not defined in the 2006 Amendments, probably intentionally so because of its ever-changing nature. The general discovery rules apply to ESI, however. The more difficult questions arise on whether ESI should be produced and, if so, in what form.

Fed. R. Civ. P. 34 was amended to specifically include ESI. Rule 34 deals with the form of ESI and recognizes that different forms of production may be appropriate for different types of ESI and for different purposes for which the information is needed. The rule provides as follows:

Rule 34: Producing Documents, Electronically Stored Information, and Tangible Things, or Entering onto Land, For Inspection and Other Purposes
(a) In General. A party may serve on any other party a re-
quest within the scope of Rule 26(b):

(1) to produce and permit the requesting party or its representative to inspect, copy, test, or sample the following items in the responding party's possession, custody, or control:

(A) 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 either directly or, if necessary, after translation by the responding party into a reasonably usable form; or
(B) any designated tangible things; or

(2) to permit entry onto designated land or other property possessed or controlled by the responding party, so that the requesting party may inspect, measure, survey, photograph, test, or sample the property or any designated object or operation on it.

(b) Procedure.

(1) Contents of the Request. The request:

(A) must describe with reasonable particularity each item or category of items to be inspected;
(B) must specify a reasonable time, place, and manner for the inspection and for performing the related acts; and
(C) may specify the form or forms in which electronically stored information is to be produced.

(2) Responses and Objections.

(A) Time to Respond. The party to whom the request is directed must respond in writing within 30 days after being served. A shorter or longer time may be stipulated to under Rule 29 or be ordered by the court.
(B) Responding to Each Item. For each item or category, the response must either state that inspection and related activities will be permitted as requested or state an objection to the request, including the reasons.
(C) Objections. An objection to part of a request must specify the part and permit inspection of the rest.
(D) Responding to a Request for Production of Electronically Stored Information. The response may state an objection to a requested form for producing electronically stored information. If the responding party objects to a requested form—or if no form was specified in the request— the party must state the form or forms it intends to use.
(E) Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information:

(i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request;
(ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and
(iii) A party need not produce the same electronically stored information in more than one form.

B. Unique Nature of ESI

ESI is, by its very nature, dynamic and mutable. While there is always the risk that paper documents can be damaged or destroyed, or even altered, ESI may mutate even without any intervening acts. For example, memory space on computers is often reused, which can alter information in the process. Or the simple act of opening a digital file can change the stored information about that file. Many email systems also have settings to save on storage and memory usage and provide for the automatic deletion of email messages after a certain period of time.

Additionally, ESI may not be usable if it is separated from the software used to create it. For example, data entered, created or stored in Excel or Quickbooks may not be readable if produced without those software applications.

ESI may also be produced in different formats which may not be compatible with all computer systems. Consequently, a party requesting ESI may find that metadata cannot be read or a document cannot be opened.

Another unique characteristic of ESI is that it is not easily destroyed or deleted. Paper documents can go missing, be altered or destroyed without a trace, but ESI makes a footprint that may not be erasable. ESI can often be recovered from a hard drive or server if it has not been overwritten, or prior exchanges of information may reveal that the information is available on other computers or backup devices.

The unique characteristics of ESI make the application of the general discovery rules problematic. Amendments to the Federal Rules of Civil Procedure sought to address some of the issues unique to ESI.

C. Form of Production

Rule 34 requires a party to produce ESI as it is kept in the usual course of business or to organize and label it to correspond to the categories in the request.⁸⁸ Since ESI can be maintained and produced in many different formats, Rule 34 allows a requesting party to specify the form or forms for the ESI production.⁸⁹ The responding party may object to a requested form or, if no form was specified in the request, then the party must state the form or forms it intends to use.⁹⁰ If the form of production is not specified, ESI must be produced in the "form or forms in which it is ordinarily maintained or in a reasonably usable form or forms."⁹¹

1. "Ordinarily Maintained"

The term "ordinarily maintained" suggests that the production should be in the native format, which would also presumably include the associated metadata. In Williams v. Sprint/United Mgmt. Co., the court held that "when a party is ordered to produce electronic documents as they are maintained in the ordinary course of business, the producing party should produce the electronic documents with their metadata intact, unless that party timely objects to production of metadata, the parties agree at the metadata should not be produced, or the producing party requests a protective order."⁹² However, in Wyeth v. Impax Lab. Co., the court found that TIFF production without metadata was sufficient because defendant did not show a need for the metadata and...