July 25, 2014
We’ve had quite a few discussions recently on pending changes to the Federal Rules of Civil Procedure (FRCP), and their potential impact on information governance practices. These changes, recently approved by the Advisory Council of Civil Rules, would be implemented in 2015 and address some very common concerns surrounding current eDiscovery, namely, that it takes too long, is too expensive, and is guided by preservation rules that – at best – remain foggy. Before discussing the impact on InfoGov, let me first provide some background on the proposed changes themselves.
The Judicial Conference Committee on Rules of Practice and Procedure (‘the Committee’) has recommended a number of amendments to FRCP that would significantly alter eDiscovery practices. From the perspective of information governance, these changes would be most impactful in two key areas:
1. Proportionality (Rule 26): In this area, the Committee is attempting to address the concern that eDiscovery often creates a burden that exceeds the value of the issue in dispute. While the initial premise is not without debate, the proposed change does attempt to create a more thorough cost-benefit analysis by limiting discovery scope with more precise verbiage to support the concept of proportionality. The new rule (with changes denoted in italics) would become:
Parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.
2. Failure to Preserve (Rule 37e): this rule attempts to address the wide variety of remedies that courts have put into place when the dog ate the homework. The current Rule 37(e) reads simply that 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”. Clearly, this does little to address what sanctions are appropriate when information is lost. In fact, the Committee itself noted that:
The Committee remains firmly convinced that a rule addressing the loss of ESI in civil litigation is greatly needed. The explosion of ESI in recent years has affected all aspects of civil litigation; the preservation of ESI is a major issue confronting parties and courts; and the loss of ESI has produced a bewildering array of court cases. These developments have caused litigants to expend excessive effort and money on preservation in order to avoid the risk of severe sanctions if a court finds they did not do enough.
In contrast, the revised ruling authorizes specifies the measures a court may use if information that should have been preserved is lost, and outlines the conditions necessary to justify these measures:
If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve the information, and the information cannot be restored or replaced through additional discovery, the court may:
(1) Upon a finding of prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice;
(2) Only upon a finding that the party acted with the intent to deprive another party of the information’s use in the litigation,
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
Impact on InfoGov
The advancement of proportionality and clearer guidance on the implications for failing to preserve should impact information governance practices in several areas. These include the following:
1. Increased focus on Identification and Collection practices: Increased emphasis on proportionality will serve to spotlight areas of inefficient ESI collection practices, namely the on-demand, reactive collection from unmanaged locations such as hard drives, PST files and back-up tapes. Collecting ESI from automated systems will enable organizations to more quickly and efficiently support its claim or defense of discovery scope
2. Improved enforcement of retention policies: Rule 37(e) creates uniformity and predictability around the conditions lead to spoliation – and should reduce the tendency to over-preserve ESI over fear of court sanctions. Enforcing retention and disposition practices often requires a change in corporate culture, but one of the key motivators behind the ‘keep everything forever, just-in-case’ mentality has just been removed
3. Reduced reliance on individual custodians for preservation: the key clause within the Rule 37(e) change is “failed to take reasonable steps to preserve”. Citing a number of factors, the Committee chose not address the question of when preservation begins or what is reasonable in defining preservation scope. As a result, a reasonable first step is to revisit preservation processes and those that entail highest risk – in particular those that rely upon action from individual custodians as opposed to automated systems and processes. Expect this clause to create demand for legal hold notification software and systems that enable the locking down of ESI without custodian intervention
4. Concrete Action to address ‘information in the wild’: As noted by the Committee, many of these rule changes are the result of ESI that continues to grow in ways never anticipated by litigation rules. The Committee notes:
One industry expert reported to the Advisory Committee that there will be some 26 billion devices on the Internet in six years — more than three for every person on earth. Significant amounts of ESI will be created and stored not only by sophisticated entities with large IT departments, but also by unsophisticated persons whose lives are recorded on their phones, tablets, eye glasses, cars, social media pages, and tools not even presently foreseen. Most of this information will be stored somewhere in the “cloud,” complicating the preservation task. In other words, the litigation challenges created by ESI and its loss will increase, not decrease, and will affect unsophisticated as well as sophisticated litigants.
The bottom line is that the premium to be prepared for eDiscovery has never been higher. This preparation includes bringing information under control, whether in managed repositories, or with processes and technologies to track ESI as moves throughout an organization. With these changes, steps taken now to automate collection, retention, and preservation practices will be more easily measureable with cost-benefit support – and with the consequences of the dog eating the ESI homework more clearly laid out.
Robert Cruz is Senior Director of eDiscovery and Information Governance, bringing 20+ years of Silicon Valley based subject matter expertise in the areas of eDiscovery and regulatory compliance. He works with Proofpoint customers via workshops, seminars, and industry conferences to share best practices and review changes in regulatory environments. He previously held similar posts within the ECM and eDiscovery markets, and holds an MBA from Stanford University.