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The Federal Courts’ Experience in the Rule’s First Year

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The Federal Courts' Experience in the Rule's First Year

By George B. Murr

The most recent amendments to the Federal Rules of Civil Procedure — those governing the discovery of electronically stored informa- tion ("ESI") — have just turned one year old. In promulgating the new ESI rules, the Rules Committee sought to develop and propose amendments to address the qualitative differences between the discovery of paper documents and ESI as well as problems inherently unique to the discovery of ESI. In speaking to judges faced with ESI discovery, it becomes clear that they must balance two critical issues. The federal courts must be able to enforce the duty to locate and preserve ESI while, at the same time, ensuring that requests for ESI and the concomitant cost of its production are not used improperly.

First, the federal courts must ensure that responsive and relevant ESI is located, preserved, and, where appropriate, produced. The issue arises out of ESI's tendency to expand voluminously into various storage loca- tions. By its very nature, ESI, as evidence, is more easily lost or destroyed than paper documentation. In addition, there may be an incentive for a responding party not to search for and locate relevant ESI that may be harmful to its case.

Second, the federal courts must ensure that the concomitant costs of ESI discovery do not allow a party to exact a favorable settlement by ESI discovery requests.

On the one hand, courts are concerned that the such ESI requests could be used to exact favorable settlements by plaintiffs in litigation. On the other hand, courts are concerned that ESI responses could be used improperly to defeat a claim by attrition and by allowing a responding party to refuse to locate relevant and responsive ESI in a case. In Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc.,1 a federal district court in Colorado stated:

The tension between these competing interests has been exacerbated by the information technology revolution. Courts now face the chal- lenge of overseeing discovery at a time when potential access to elec- tronically stored information is virtually limitless, and when the costs and burdens associated with full discovery could be more outcome- determinative, as a practical matter, than the facts and substantive law.

The newly amended Federal Rule of Civil Procedure 26(b)(2)(B) is specifically designed to give the federal courts the tools and ability to bal- ance these opposing sides.

ENFORCING THE DUTY TO IDENTIFY POTENTIAL SOURCES OF RELEVANT AND RESPONSIVE ESI

Rule 26(a)(2)(B) allows a party to designate certain types of ESI as "not reasonably accessible" and refrain from production absent an order from the court. Rule 26(b)(2)(B) effectively creates a new presumption that electronic information that is unilaterally designated as "not reason- ably accessible" is not discoverable, absent further motion filing and showing. However, even if the producing party succeeds before the court in demonstrating that the sources of electronic information at issue are "not reasonably accessible," the court may still order the production and allocate the burden and costs of production between the parties. More important, the federal courts have made clear that asserting ESI is "not reasonably accessible" does not relieve the party of its common-law or statutory duties to locate and preserve evidence.2

In In re Seroquel Products Liability Litigation,3 the court was faced in multidistrict litigation with requests from plaintiffs for ESI stored on data- bases to be identified by the defendants.4 When the defendants were dila- tory in identifying the databases, the court noted that such identification is necessary to the very functioning of Rule 26(b)(2)(B) and its protections:

Identifying relevant records and working out technical methods for their production is a cooperative undertaking, not part of the adver- sarial give and take. … It is not appropriate to seek an advantage in litigation by failing to cooperate in the identification of basic evi- dence. The parties' mode of proceeding here has prevented the pre- sentation of any genuine issues as to the proper scope of production of material from the data bases. Both parties must bear some of the responsibility for the breakdown, but it is primarily AZ, as the creator and owner of the information, which has failed to make a sincere effort to facilitate an understanding of what records are kept and what their availability might be.5

Similarly, in Peskoff v. Faber,6 the District of Columbia District Court had detailed in a prior opinion locations where responsive ESI may be found and ordered that they be searched.7 Subsequently, when the responding party failed to comply sufficiently with the prior order, the dis- trict court again ordered the comprehensive search of all possible ESI databases and articulated the duty underlying such an order: Under the new pertinent rule, the producing party is relieved of pro- ducing specifically identified inaccessible data only upon a showing of undue burden or cost. Even then, the court may order discovery of the data identified as inaccessible "if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C)," i.e., the rule that balances the costs of the discovery demanded against its benefits. The obvious negative corollary of this rule is that accessible data must be produced at the cost of the producing party; cost-shifting does not even become a possibility unless there is first a showing of inaccessi- bility. Thus, it cannot be argued that a party should ever be relieved of its obligation to produce accessible data merely because it may take time and effort to find what is necessary.8

The district court then ordered: "The defendant must therefore con- duct a search of all depositories of electronic information in which one may reasonably expect to find all emails to [the plaintiff], from [the plain- tiff], or in which the [plaintiff's name] appears."9

Other courts reached similar results. For example, in Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc.,10 the federal district court in Colorado awarded monetary sanctions and, citing Federal Rule of Civil Procedure 26(g), stated "the consistent failure of defendant and its coun- sel to conduct reasonable factual inquiries prior to filing discovery responses are sanctionable under Rule 26(g) where the omitted documents and information should have been disclosed." A federal district court in North Carolina, in O'Bar v. Lowe's Home Centers,11 ordered discovery guidelines stating: "Identification of ESI that is or is not reasonably acces- sible without undue burden or cost, specifically, and without limitation, the identity of such sources and the reasons for a contention that the ESI is or is not reasonably accessible without undue burden or cost, the meth- ods of storing and retrieving that ESI, and the anticipated costs and efforts involved in retrieving that ESI. The party asserting that ESI is not rea- sonably accessible without undue burden or cost should be prepared to discuss in reasonable detail the basis for such assertion."

DETERMINING "REASONABLE ACCESSIBILITY," UNDUE BURDEN, AND GOOD CAUSE FOR PRODUCTION OF ESI

Generally speaking, the federal courts have performed admirably enforcing Rule 26(b)(2)(B) and its "two-tier" discovery scheme. First, the district courts have taken care to ensure that the Rule 26(b)(2)(B) proce- dure for determining "reasonable accessibility" and whether there is good cause to order production is followed. For example, in Pipefitters Local No. 636 Pension Fund, et al v. Mercer Human Resource Consulting,12 the district court struck the order issued by the magistrate judge requiring plaintiffs to pay for restoring electronic data and citing Rule 26(b)(2)(B), stating that "[d]ue to the lack of a record it is not apparent that the Magistrate Judge engaged in the proper analysis before shifting the cost of discovery to plaintiffs."

Second, the federal courts have not simply assumed that there is good cause to order production of ESI merely because it was requested. Thus, in Equal Employment Opportunity Commission v. Boeing Company,13 a federal district court in Arizona concluded that "defendant made the showing, pursuant to Rule 26[(b)(2)(B)] that 'the information sought is not reasonably accessible because of undue burden or costs,' and that plaintiff did not show good cause to justify the expense of the proposed discovery for purposes of Rule 26(b)(2)(B)." In Minnesota, a federal court, in Best Buy Stores, L.P. v. Developers Diversified Realty Corp.,14 affirmed a magistrate judge's rejection of "defendants' conclusory state- ments that compliance with their discovery obligations under Federal Rule of Civil Procedure 26 is cost prohibitive" and noted that "[t]he mag- istrate judge determined that defendants had not met their burden to estab- lish that the information sought 'is not reasonably accessible because of undue burden or cost [under Rule 26(b)(2)(B)].'"15

In determining whether the requested ESI is "reasonably accessible," the courts have looked to the Advisory Committee Notes to Rule 26(b)(2)(B) and the seminal case law that give rise to the procedure. Since each case will present the court with different circumstances regarding ESI, its nature and location, costs of production, and the relationship between the ESI and the relevant facts of the case, it is most important that the district court follow the procedures established in the amended rules and the case law. Regardless of the ultimate outcome, it is difficult to sec- ond guess a district court that is closer to the issues and that has assidu- ously followed and applied the law. In W.E. Aubuchon Co. v. Benefirst, LLC,16 the court ruled upon a motion for consideration in which the responding party claimed that documents ordered produced were not "rea- sonably accessible because the cost of their production far outweigh[ed] their value to the Plaintiffs."17 In determining "reasonable accessibility," the court turned to the same criteria used by the court in Zubulake v. UBS Warburg.18 There "the court found that the time and expense required to retrieve documents and electronic data depends primarily on whether such information 'is kept in an accessible or inaccessible format ... [further- more,] [w]hether electronic data is accessible or inaccessible turns large- ly on the media on which it is stored.'"19 After finding that the ESI requested was not reasonably accessible, the district court set out to deter- mine whether there was good cause to order its production, utilizing the two subsections to Rule 26(b)(2)(C) and the seven factors in the Advisory Committee Note to Rule 26(b)(2)(B).20 The court held that, "[o]n balance,… the Plaintiffs ha[d] clearly established good cause for requiring Benefirst to produce the requested information" but at the plaintiffs' own expense.21

CONCLUSION

In the first year under the amended Rule 26(b)(2)(B), the federal courts have sought to balance two conflicting issues. First, the federal courts heed the Advisory Committee's admonition that "[a] party's iden- tification of sources of electronically stored information as not reasonably accessible does not relieve the party of its common-law or statutory duties to preserve evidence."22 It is important that a responding party not use the ESI rules to avoid producing ESI or to hinder the production of relevant and responsive ESI. Accordingly, the federal courts ensure that relevant and responsive ESI is located and preserved so that its value to the case may be determined and the costs of its production, if necessary, allocated among the parties.

Second, the federal courts have sought to ensure that the costs of ESI discovery are not used to skew the settlement value of a claim. The courts have thus far properly applied the "reasonable accessible" criteria to the production of ESI. Where the responding party objected on the ground that the ESI was not "reasonably accessible because of undue burden or cost," the courts have examined the question utilizing the factors handed down from case law. Further, where the requesting party has succeeded in making such a showing, the courts have considered and applied the "appropriate considerations" set forth in the Advisory Committee Note to Rule 26(b)(2)(B), as well as the factors set forth in Rule 26(b)(2)(C). In this way, the courts have been able to take a measured approach: (1) to assay the ESI landscape and apportion costs of production where neces- sary; and (2) to avoid having ESI costs become a factor in the settlement- value of pending litigation.