New rules mean bytes of electronically stored info could have big bite

Insurance agents want to avoid litigation, but it is not always possible. When agents become involved in litigation in federal court, it is important for agents and their attorneys to understand the new Federal Rules of Civil Procedure governing electronically stored information (ESI). The rules went into effect on Dec. 1, 2006, and apply to all cases filed after that date, as well as apply to all pending cases to the extent “just and practicable.”

Understanding these new rules is important because much of an agent’s work is done on computer and transmitted electronically. Most contacts with clients and insurers are probably done electronically and computerized records are increasing all the time. The amended rules cover the following areas related to ESI.

1.Definition of discoverable material
The new amendments introduce the phrase “electronically stored information” to the rules, to acknowledge that electronically stored information is discoverable. The expansive phrase is meant to include any type of information that can be stored electronically. It is intended to be broad enough to cover all current types of computer-based information, yet flexible enough to encompass future changes and technological developments.

2.Early attention to electronic discovery issues
The amended rules require the parties to address ESI early in the discovery process. Rule 26(f) expands the list of issues that must be discussed as a part of the early meet and confer process by the parties. Rule 16(b)(5) adds discovery of electronically stored information as an item that may appropriately be included in the court’s scheduling order.

To participate meaningfully in early discussions regarding ESI, agents and their attorneys must first have a basic understanding of the agent’s computer systems. There are many issues to consider, including:

For personal computers, what operating systems are used? What e-mail client? Productivity software? Browsers? Instant messaging? What e-mail servers are used (e.g. Exchange)? Is there a janitorial system for e-mail or a “sweep and keep” policy?

How are servers organized? How are file shares on the servers structured?

Are internal Web sites used? Collaboration tools? Extranet? Is it Internet protocol-enabled? Unified messaging? What type of portable devices are used?

Can employees save files, e-mails or other data to their desktop or laptop hard drives? What are the backup and disaster recovery policies? How often are servers backed up? Is there a policy in place for recycling the disaster recovery media?

If that seems like a lot to discuss, it is. But the new rules require a high level of understanding of information technology systems.

3.Information from sources not reasonably accessible
Some electronically stored information is not reasonably accessible. Under the amended Rule 26(b)(2), a responding party does not need to produce electronically stored information from sources that it identifies as not reasonably accessible because of undue burden or cost. In that case, the responding party must identify the potentially responsive information that it is neither searching nor producing. If the requesting party moves to compel discovery of this information, the responding party would be required to show why the information is not reasonably accessible. Once that showing is made, a court may order discovery only for good cause.

4.”Safe harbor”
Rule 37(f) states that, absent exceptional circumstances, a court may not impose sanctions on a party for failing to provide ESI lost as a result of the routine, good-faith operation of an electronic information system. Good faith in the routine operation of an information system may involve modifying or suspending certain features of that routine operation to prevent the loss of information, if that information is subject to a preservation obligation. A party certainly cannot use the routine operation of a system to destroy ESI that it should preserve. The agent must understand what ESI its system will automatically delete and modify by routine operation, in order to comply.

5.Format of production
Rule 34(b) addresses the format of production of electronically stored information, and would permit the requesting party to designate the form or forms in which it wants electronically stored information produced. The rule does not require the requesting party to choose a form of production. It provides that if a request does not specify a form of production, or if the responding party objects to the requested form(s), the responding party must notify the requesting party of the form in which they intend to produce the electronically stored material — with the option of producing either in a form in which the information is ordinarily maintained (usually in its native or application electronic format), or in a reasonably usable form (generally meaning being searchable electronically).

6.Asserting claim of privilege or work product protection
Rule 26(b)(5) created a procedure through which a party who has inadvertently produced trial preparation material or privileged information may nonetheless assert a protective claim as to that material. The pending rule provides that once the party seeking to establish the privilege or work product claim notifies the receiving parties of the claim and the grounds for it, the receiving parties must return, sequester or destroy the specified information.

Knowing is half the battle
The amended Federal Rules of Civil Procedure are a call to become better informed about your IT capabilities. Given the sheer volume of electronic documentation, it is essential for agents and their attorneys to understand how their computer systems operate to properly handle ESI under the amended Federal Rules of Civil Procedure.

Todd Nunn is a partner in the business litigation practice in the Seattle office of Preston Gates & Ellis LLP. Phone: 206-623-7580. E-mail: toddn@prestongates.com.

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