The adoption of the revised Federal Rules of Civil Procedure (FRCP) and recent high-profile court cases with eye-popping damage awards were supposed to change the way corporations manage the discovery process and improve transparency during litigation. But more than a year and a half after the revised federal rules took effect, many organizations have not rushed head-long into major changes in the way they do business and manage their information assets.
The sheer amount of electronically stored information (ESI) that the average business must grapple with has exploded in recent years, overwhelming companies and the legal system alike. Trailblazing cases such as the series of rulings in Zubulake v. UBS Warburg and the $1.5 billion in damages awarded in Coleman v. Morgan Stanley have also increased the pressure on companies to improve the way they manage data that could end up in litigation.
The revised federal rules were intended to provide guidance to organizations and their law firms in managing a changing litigation environment. Major changes in the rules include a new timetable for the “Meet and Confer:” According to Rule 26(f) of the FRCP, parties must meet “as soon as practicable” and at least 14 days before the scheduling conference is held, to propose a discovery plan.
Discovery in the Real World
Yet even in such a challenging litigation environment, many companies and law firms have been reluctant to adopt far-reaching changes. There are many reasons for this–change often comes slowly to the corporate world, and it usually proceeds even more slowly in the legal industry.
And while the new regulations have done a great deal to clarify both the obligations of parties involved in litigation, as well as the intent behind those obligations, there are still questions about and room for interpretation of many aspects of the new rules. For example, the new rules dictate when a Meet and Confer must take place; the rules do not require that the two sides emerge from the Meet and Confer with tangible results.
Companies and law firms must also take into account the different makeup of courts in various jurisdictions throughout the country. The rules are still new enough that very little precedent has been set using them, so different judges often look at identical rules and interpret them in different ways. There are also differences in the levels of sophistication and technological expertise in various courts. Some courts, often those with less crowded dockets or that tend to see fewer cases that hinge on new technology, may adopt a wait-and-see attitude until other courts have issued rulings.
Even when companies have the best of intentions to prepare for litigation, there can be many stumbling blocks. Information silos between the legal department, the IT department and other key players can exist at even the smallest companies. And often, the missions and goals of legal and IT are at cross-purposes; the legal department wants to limit the amount of information that is saved, and the IT people are more concerned with retaining records that are as thorough as possible.
The process of revising records retention plans also can be daunting, in terms of manpower and cost. It is one thing to get buy-in from top management to change the way that ESI is handled and stored; it’s another matter entirely to get the project accomplished. Different departments must come together to develop the new plan, and the upgrades in software and hardware required for a state-of-the-art system can be prohibitive. And in a faltering economy, it can be tough to sell management on the need to pull people away from other projects to focus on records retention, particularly if no major lawsuits are looming on the horizon. Developing and enforcing new policies is a huge task, and even the biggest companies with the greatest resources struggle with it.
In many cases, law firms are not leading the charge to push clients when it comes to upgrading record retention programs to make them more in line with the FRCP. There so far has been little pressure from the courts or from clients themselves. When necessary, many courts seem willing to grant extensions for litigants that can’t meet the shortened timetables. Without a compelling legal reason to push clients, many law firms are reluctant to do so.
Upcoming Trends
The new federal rules were revised in December 2006, so cases under those rules are only now beginning to work their way through the court system. Attorneys at both legal departments and law firms should be aware of emerging trends that will play out in the future.
Along with court precedent for the new rules, technology also will continue to evolve, and that will create new challenges. The ascendance of Web 2.0 and other breakthroughs will doubtlessly raise issues that the FRCP and the courts haven’t even considered. The creation of virtual workstations, for example, could present questions about how information is stored and tracked.
The disconnect between the products and services that law firms and corporations need and what e-discovery vendors are providing also will continue. The lack of uniform standards has exacerbated that situation, but hopefully it will become more mitigated in the future. Those who work on the front lines of discovery are beginning to form associations and affiliations. As those groups become more formalized, they should move closer to creating uniform standards.
While much of the legal focus has been on ESI, paper will continue to remain an issue for some companies and some industries. Young companies that have mostly been in existence in the digital era won’t have to worry much. But some older companies with litigation that stretches back for decades, such as pharmaceutical or tobacco companies, will continue to grapple with the reams and reams of papers that still exist and could have potentially discoverable information.
A faltering economy could also slow the adaptation of new processes for managing ESI. There are substantial costs associated with being prepared for upcoming litigation. Companies with a finite amount of both time and money must weigh the risk of investing early in their records retention programs for lawsuits that may never come. In a struggling economy, efficiencies are very important, and the economic realities for one company may move that company in a different direction than another, similar company. Small companies in particular may struggle with accomplishing significant changes to their programs in the short term.
Because of these economic pressures, many organizations are working to do more internally, rather than hire outside vendors. Areas that companies are working on in-house can include data mapping and systems for implementing a legal hold. Organizations also are becoming smarter about what data to restore, conducting limited scans to guide decisions on moving forward rather than simply restoring everything. In response, vendors are looking to become more proactive and serve as risk consultants, rather than limiting their services to hardware and software sales.
As attorneys become more familiar with the revised Federal Rules, many of those with initial concerns are adopting a wait-and-see approach. While few organizations have rushed to make wholesale changes in direct response to the FRCP, the true effect of those rules could take years to move down through the legal system and often labyrinthine systems of large corporations. In the meantime, though, attorneys should closely monitor court rulings that relate to managing ESI under the federal rules-if and when the time comes to make significant changes to the way potentially discoverable data is managed, no one wants to be blindsided.
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