Electronic Data Retention and FRCP Rule 26

Changes were proposed to the Federal Rules of Civil Procedure (FRCP) that will impact litigation and the eDiscovery process.  The FRCP lays out rules that are applied in civil cases that are held in US federal courts.  FRCP rules attempt to create a uniform standard that is applied across federal courts.  Many states also model their civil trial rules on those of the FRCP.

New changes to the FRCP provide more details on how companies need to handle their business records stored as electronic information to be able to comply with discovery requests.  Discovery happens during the pre-trial phase of a lawsuit where parties can request or subpoena documents and evidence from other parties.

New changes were proposed in April 2005 and will go into effect on December 1, 2006 unless Congress takes action.  Of particular interest among the proposed changes is Rule 26.  Rule 26 defines what is considered as discoverable Electronically Stored Information (ESI).  eDiscovery is the legal discovery process as applied to ESI. 

ESI includes email, email attachments, voicemail, instant messaging, backup tapes, transaction logs, and video files.  Records Management involves the process of ‘declaring’ a document to be a record, and in effect, creates a subset of all company electronic documents.  ESI seems to be much more far reaching and apply to all company electronic data.

Maintaining ESI for eDiscovery is challenging and will be easy to get wrong.  The costs related to in-house legal and IT resources can be high.  Privacy issues need to be addressed in any solution.  Companies that don’t comply can be subject to large fines and damaged reputations.  Morgan Lewis Resources has an excellent slide set describing the new requirements and a checklist for creating an eDiscovery Strategy.

FRCP Rule 26 requires the parties in the litigation meet and discuss the format ESI is to be delivered, and the responding party may be forced to provide a specific requested electronic format.  For example, the requesting party might specify the ESI to be delivered in the original authored format, PDF, or image, and whether or not metadata should be included as well. 

A party may claim that ESI can’t be produced because of undue or burdensome costs and the court may agree, but the requesting party may argue that there is “good cause” and force the delivery of the ESI.

On request, a company will need to provide a complete data map of all company data repositories for all company locations.  For large companies with no pre-planning, producing an ESI data location directory will be difficult to do quickly.

The volume of ESI for a company can be staggering, but there is another twist that further complicates the problem.  Some ESI is proprietary and might include privileged trade secrets or financial information.  This kind of privileged information may be exempt from the eDiscovery process, but being able to identify and extract it from non-privileged ESI will be difficult.  Rule 26 provides a “clawback” clause where any privileged data released inadvertantly during eDiscovery and the producer can request that it be removed and destroyed.

Data retention for eDiscovery parallels in many ways or may even extend a company’s strategy for handling Records Management.  Companies need to determine what kind of data can potentially be requested, how to retain the data, and for how long the data should be kept.

Failure to have a good plan in place to address eDiscovery can result in significant fines and potential criminal sanctions.  FRCP 26 echoes again the need to have sound data retention policies.  While some are seeking to reduce or limit the data retention requirements of Sarbanes-Oxley, similar requirements keep popping up elsewhere that will in the end just make data retention a requirement that becomes standard practice for a company doing business.