Commission on Law & Technology
|Topic||Preservation in Small Litigations and for Parties with Limited Resources|
|Date of Publication||August 27, 2015|
|Applicable DLRPC (Rules)||1.1|
|Summary||This Leading Practice addresses how an attorney can advise a client in a small stakes litigation or a client with limited resources on how to comply with the client's obligations to preserve potentially relevant electronically stored information. This Leading Practice is intended to provide a general overview and approach to preservation. It should be read in light of other Leading Practices that address particular technology applications or issues.|
Disclaimer: The purpose of this leading practice is to provide the Delaware Bench & Bar with an understanding of an appropriate manner in which this technology may be used. There may be more appropriate uses; and the leading practice discussed might not be appropriate for a specific purpose. It is up to the individual to use well-reasoned judgment in making that decision. The Commission is not responsible for the consequences of the decision-making process.
Preservation in Small Litigations and for Parties with Limited Resources
A party in litigation or who has reason to anticipate litigation has an affirmative duty to preserve evidence that might be relevant to the issues in the lawsuit. Whether a person has reason to anticipate litigation depends on whether the "facts and circumstances... lead to a conclusion that litigation is imminent or should otherwise be expected." A court may sanction a party who breaches this duty by destroying relevant evidence or by failing to prevent the destruction of such evidence. 1
The foregoing standard sets forth a party's obligation to preserve potentially relevant documents and, as the Court of Chancery ruled in Beard Research, that obligation extends to electronically stored information ("ESI"). Notably, the preservation standard is not limited to large scale commercial litigation. There is no exemption for smaller litigations or smaller parties, even though litigation budgets in such cases may pale in comparison to larger commercial cases where the assistance of skilled e-discovery vendors and IT personnel stand at the ready. Thus, for attorneys faced preserving ESI in smaller cases or on behalf of smaller clients, this leading practice is intended to provide guidance as to (1) the scope of that obligation through a discussion of proportionality, (2) some practical tips for preserving ESI, and (3) measures parties can use to protect themselves through the applicable Rules of Evidence.
The proportionality principle, contained in Rule 26(b)(1)(iii) of the Rules of the Court of Chancery and of the Superior Court, gives courts discretion to limit any discovery, including ESI, where it is "unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties' resources, and the importance of the issues at stake in the litigation." While these rules are geared toward proportionality in the collection and production of information, the proportionality principle embodied in these rules may assist a party in determining what would be a reasonable scope for preservation in its particular case. Because the proportionality principle relies on the courts' discretion, a party could not safely rely on proportionality in a pre-litigation context to limit its preservation obligation. Rather, when the preservation obligation arises in the context of litigation, a party may have an opportunity to seek agreement with the other party regarding the scope of preservation obligations and, in the absence of agreement, seek relief from the court.
For example, a party may consider how the factors implicating undue burden - the needs of the case, the amount in controversy, the parties' resources, and the importance of the issues at stake - impact the importance of information that may be subject to preservation. Do "the needs of the case" direct that a particular class of documents may be material and therefore must be preserved, or may a party persuade the opposing party or the court that the information will be of minimal, if any, importance and opt for a less stringent preservation model for that category of information? Making these kinds of assessments allow the parties or the court to weigh the potential relevance of the information against the burden and cost of preserving it. For any of these decisions to be made, however, counsel must understand early in a case what types of ESI are relevant to the issues, based on the substance of the claims and the nature of a client's ESI.
Guidance from the Court of Chancery and the Complex Commercial Division of the Superior Court ("CCLD") indicates that, for proportionality to be accomplished in good faith, parties should try to reach agreements early in the case on e-discovery protocols. For example, the CCLD's e-discovery plan guidelines direct parties to meet and confer regarding "whether allocation among the parties of the expense of preservation and production is appropriate." 2 The Court of Chancery's guidelines similarly point out that "[p]arties are not required to preserve every shred of information. Act reasonably. If possible, seek agreement with the opposing parties at the beginning of the litigation about steps to take to preserve potentially relevant information[.]" 3
While smaller cases do not necessarily mean there is less at stake for the parties or less electronic data to cull through for discovery, the size of the case does usually determine the size of the litigation budget. A smaller litigation budget will restrict the options an attorney will face in meeting its discovery obligations. For example, a dispute over $100,000 or less typically does not justify the expenses associated with high price e- discovery vendors if you are even able to find one who is willing to take on such a matter.
The principle of proportionality calls for an early assessment of things such as the needs of the case, the amount in controversy, limitations on the parties' resources, and the importance of the issues at stake in the litigation. There is no bright line rule for determining what steps are required to ensure full compliance with court, client and professional obligations. Instead, an attorney must have knowledge of the options and their ramifications so that he or she can make an informed decision as to what options to recommend to the client. Notwithstanding the proportionality principle, even parties to a smaller litigation should weigh the strategic benefits of preserving broadly. A party that adopts a broad preservation plan may persuade an adversary or court that it should not produce all potentially relevant information at the outset because, if the information does become important later, it has been preserved properly.
As an initial matter, if counsel has access to an IT person - either in his or her law office or through the client - counsel should involve the IT person at the outset. Having a person skilled in technology and perhaps with an understanding of the client's ESI will prove invaluable. However, smaller litigations and litigants with limited resources often do not have the luxury of an IT person. This Leading Practice is intended to help advise counsel in either circumstance.
The primary objectives of a preservation effort are to identify what is potentially relevant information, to identify where that information may be stored, and to implement procedures to preserve such information. To help counsel in this task, the Sedona Conference's "Jumpstart Outline" 4 is a good starting point.
First, counsel should identify whether the client has or is subject to a document retention or records management policy. Such a policy will define how ESI is to be saved and stored in the regular course of business. If a policy exists, counsel should inquire as to whether it is followed. Through this inquiry, counsel will be able to determine what may be preserved - and what may already be inaccessible.
Second, attorneys should identify the key custodians of potentially relevant information. Think broadly. Named parties are the obvious starting point, but are there other persons or entities that are under the control of the named party who may also have potentially relevant documents? For example, in large cases, a company may have subsidiaries and large organizational charts creating a large universe of potential custodians. But in smaller cases, it is not uncommon for parties to rely upon third parties. Companies with limited resources may outsource many services to third parties, and individuals may have exchanged relevant information with personal advisers, such as accountants. Such agents - who arguably are under the control of the party - may have potentially relevant ESI.
After identifying custodians, counsel should: (1) inquire as to the potential ESI that such custodians may possess, (2) inquire as to what devices the custodians use ( e.g., personal computers, work computers, tablets, smart phones), (3) ask how the custodians store the ESI they create ( e.g., on the hard drives or "desktops" of their personal or work computers, on removable storage like USB drives, on clouds such as DropBox or Google Drive, or simply by not deleting email sent or received), then (4) discern how else the custodians interact electronically. While a party may not affirmatively "save" communications online, social media sites will often store what a party has created and such ESI is potentially discoverable. Broadly identifying potential custodians, learning what ESI they may possess in the initial stages of discovery, and informing such custodians of their preservation obligations through a litigation hold notice are prudent first steps in client and counsel fulfilling their preservation obligation.
Third, in addition to custodial sources, counsel should identify non-custodial sources of potentially relevant ESI. Just like parties may store paper in centralized file cabinets, likewise parties often store ESI in shared repositories, particularly in office environments. Documents like Word and Excel files often will be stored on networks. Email - even though it appears on a desktop in a mailbox such as Outlook - is often saved on an email server.
Clients often lack a complete understanding as to how their ESI is stored. But through persistent questioning, counsel can gain an understanding of where and how ESI is stored - because it is stored "somewhere." Such an understanding is critical in both preserving and later collecting discoverable information.
Counsel should avoid two potentially significant pitfalls. The first is disregarding the importance of preservation. No matter how small the case may be, the principle of proportionality does not diminish or override the obligation to preserve. 5 The second is becoming dismayed by the technical complexities surrounding ESI. Rule 1.1 does not require counsel to have technical proficiency, but to align with someone who does. 6 Fortunately, there are various third parties available to assist, as well as free information on the internet.
Cost-Effective Steps to Preserving ESI
While experienced IT personnel or an e-discovery vendor can be of great assistance in preserving ESI, a variety of resources are available for cases that do not warrant or litigants who cannot afford such expenses. Resources such as the American Bar Association 7 can be of great assistance to attorneys in need of alternatives to the more expensive means of preserving ESI. The following is not an endorsement of any particular product, but rather exemplary of the variety of resources available to parties in need of preserving ESI stored in hard drives or personal email, 8 as well as on other platforms.
Once counsel determines that potentially relevant "loose files" exist, such as Word or Excel files, counsel can preserve that ESI through use of an external hard drive. Readily available from most electronics stores, an external hard drive can be purchased for under $100 that should be able to capture the amount of data at issue in smaller litigations ( i.e., less than 1-2 terabytes). Once this has been collected, there are inexpensive processing tools available that will allow counsel to review and analyze the ESI. For example, one of the leading e-discovery engines, Nuix, has an e-discovery tool called Prooffinder 9 designed for smaller budgets. With many of the same features as its commercial offering, Nuix's Prooffinder allows attorneys working on a smaller budget to analyze up to 15GB of ESI for a license fee of $100 per year.
Likewise, email can be preserved with little need to resort to expensive solutions. An important first step to preserving email is to turn off any auto-delete feature that may be operating silently in the background. If a party is using Microsoft Outlook it is very likely that the party is using Microsoft Exchange. (While often confused, Outlook is the software that displays email, whereas Exchange is the mailman, a.k.a. the server, that delivers emails. Because both are Microsoft products, it is common to find Outlook paired with Exchange.) There are resources available online explaining how to use the litigation hold feature on Exchange to affirmatively preserve relevant email during the pendency of a litigation hold. 10
Even if a party is using popular free email providers such as Gmail, Yahoo, AOL, or Hotmail, there are steps that counsel can take to preserve relevant email. For example, parties using Gmail can follow the steps at the site below to preserve and collect email. 11
Social media such as Facebook or Twitter accounts may sometimes be preserved by an archiving procedure made available by the social media provider. Otherwise, preservation of a social media page may require a variety of complicated tools that work with a particular social media site's format. It may not be sufficient simply to use the "print" function, because that will not capture links, video and other files that may be embedded in the page. Some internet browsers, such as Chrome or Firefox, have a feature allowing a user to save a website as a PDF file in a way that at least captures its appearance if not all embedded files. Other categories of ESI that counsel may need to preserve are beyond the scope of this Leading Practice, but include personal devices such as cell phones and audio recordings such as voice mail.
Inadvertent Disclosure of Privileged Information
While the changes to the Federal Rules of Civil Procedure in 2006 were meant to address the volume and complexity of ESI in litigation, the problem of the ever-expanding volume of ESI and the ability to identify and exclude from production privileged information still exists today. Federal Rule of Evidence ("FRE") 502, which was enacted in 2008, was intended to address the problems associated with waiver and the high cost associated with privilege review and the creation of privilege logs. Even with significant advances in technology, the bottom line is that it is still very difficult to prevent the inadvertent production of privileged information in the production of ESI.
FRE 502 applies to disclosures made initially in federal proceedings and subsequently in either federal or states proceedings. However, FRE 502 is a federal rule, so there is a need for the state law analog to FRE 502. States have been slow to adopt such provisions. To date, only a small number of states have adopted a state analog. On June 19, 2014, the Delaware Supreme Court adopted a revision to Delaware Uniform Rule of Evidence ("DRE") 510 (effective July 1, 2014), which is modeled after FRE 502. 12 The Supreme Court noted in its press release that DRE 510 was revised "to incorporate concepts found in Federal Rule of Evidence 502, which provides some protection against the admission or use of inadvertently disclosed privileged or protected communications."
While DRE 510 generally tracks the language of FRE 502, there are some notable exceptions. DRE 510 is not limited to attorney-client privilege and work product immunity, but is broader. DRE 510 applies to any privilege conferred by the DRE - physician/patient, husband/wife, priest/penitent, etc. or work product protection. Another unique feature is DRE 510(e), which notes that "a disclosure to a law enforcement agency pursuant to a confidentiality agreement does not operate as waiver of an existing privilege." DRE 510(e) (emphasis added). DRE 510(e) was intended to codify the holding in a 2002 Delaware Court of Chancery decision, Saito v. McKesson HBOC, Inc., which involved the question of whether the defendant waived its work product protection as to documents at issue by sharing them with the SEC in an investigation. Thus, the DRE 510(e) non-waiver language does not include work product immunity.
The Delaware version of FRE 502(d) order is DRE 510(f) (Controlling Effect of a Court Order.) Unlike its Federal counterpart, 510(f) starts with the phrase "Notwithstanding anything in these rules to the contrary..." The commentary to the rule notes that this language was included "in part so that a court may allow the parties in a matter to agree to quick-peek arrangement without pre-production review. Otherwise, the parties to such an agreement may be deemed to have waived a privilege pursuant to subsection 510(a)."
TEXT OF NEW RULE WHICH BECAME EFFECTIVE JULY 1, 2014
Rule 510. Waiver of Privilege or Work Product; Limitations on Waiver.
The following provisions apply, in the circumstances set out, to disclosure of information or communications that are privileged under these rules or that are subject to work-product protection.
(a) Waiver by Intentional Disclosure. A person waives a privilege conferred by these rules or work-product protection if such person or such person's predecessor while holder of the privilege or while entitled to work- product protection intentionally discloses or consents to disclosure of any significant part of the privileged or protected communication or information. This rule does not apply if the disclosure itself is privileged or protected.
(b) Disclosure; Scope of a Waiver. When the disclosure waives a privilege conferred by these rules or work-product protection, the waiver extends to an undisclosed communication or information only if:
(1) the waiver is intentional;
(2) the disclosed and undisclosed communications or information concern the same subject matter; and
(3) they ought in fairness to be considered together. (3) they ought in fairness to be considered together.
(c) Inadvertent Disclosure. A disclosure does not operate as a waiver if:
(1) the disclosure is inadvertent;
(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and
(3) the holder promptly took reasonable steps to rectify the error, including following any applicable court procedures to notify the opposing party or to retrieve or request destruction of the information disclosed.
(d) Disclosure Made in a Non-Delaware Proceeding.
Notwithstanding anything in these rules to the contrary, a disclosure made in a non-Delaware proceeding does not operate as a waiver if the disclosure is not a waiver under the law of the jurisdiction where the disclosure occurred.
(e) Disclosure to a Law Enforcement Agency. Notwithstanding anything in these rules to the contrary, a disclosure made to a law enforcement agency pursuant to a confidentiality agreement does not operate as a waiver of an existing privilege.
(f) Controlling Effect of a Court Order. Notwithstanding anything in these rules to the contrary, a court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court - in which event the disclosure is also not a waiver in any other proceeding.
(g) Controlling Effect of a Party Agreement. An agreement on the effect of disclosure in a proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.
(h) Definition. In this rule:
(1) "work-product protection" means the protection that applicable law provides for documents and tangible things (or their intangible equivalents) prepared in anticipation of litigation or for trial.
Commentary to DRE 510
The revisions to D.R.E. 510 are based on F.R.E. 502, which rule has been the subject of almost 200 law review articles. At least 30 articles are comprehensive discussions of the rule and post-enactment judicial use of the rule. This proliferation of learned journal commentary on inadvertent disclosure of privileged communications parallels the exponential increase in e-discovery requests and responses in major cases. F.R.E. 502 takes a "middle ground" position on inadvertent disclosure, requiring an inquiry into the means taken by counsel to identify and protect privileged communications, unless the parties agree on a different protocol for dealing with inadvertent disclosure. The revised D.R.E. 510 contains similar protection against the admission or use of inadvertently disclosed privileged or protected communications to ensure the integrity of the litigation process in Delaware.
D.R.E. 510 conforms to the federal rule in terms of handling inadvertent disclosure. A leading case interpreting F.R.E. 502 is Rhoads Industries, Inc. v. Building Materials Corp., 254 F.R.D. 216 (E.D. Pa. 2008). At least one Delaware decision deals with claims of waiver of attorney-client privilege through inadvertent disclosure and contains the following discussion:
An inadvertent disclosure of privileged communications will not necessarily operate to waive the attorney-client privilege. In order to determine whether the inadvertently disclosed documents have lost their privileged status, the Court must consider the following factors: (1) the reasonableness of the precautions taken to prevent inadvertent disclosure; (2) the time taken to rectify the error; (3) the scope of discovery and extent of disclosure; and (4) the overall fairness, judged against the care or negligence with which the privilege is guarded.
In re Kent County Adequate Public Facilities Ordinances Litigation, 2008 Del. Ch. LEXIS 48, at *24 (Apr. 19, 2008) (Noble, V.C.) (citations omitted). The factors set forth in these decisions are not explicitly codified in D.R.E. 510, as they constitute non-determinative guidelines that may vary from case to case.
As in F.R.E. 502, new D.R.E. 510 also clarifies that when a voluntary disclosure constitutes a waiver of attorney-client privilege as to a communication or information, the scope of the waiver is generally limited to the privileged communication or information disclosed. The rule does not disturb existing Delaware law regarding the scope of waiver of work product protection by voluntary disclosure. See Rollins Properties, Inc. v. CRS Sirrine, Inc., 1989 WL 158471 (Del. Super. Dec. 13, 1989).
The rule governs only certain waivers by disclosure and is not intended to alter existing law with respect to waiver of privilege or work product protection by other means. See, e.g., Baxter Int'l, Inc. v. Rhone- Poulenc Rorer, Inc., 2004 WL 2158051 (Del. Ch. Sept. 17, 2004) (discussing "at issue" exception to attorney-client privilege as form of waiver "where the issue was lack of good faith" (citation omitted)).
Subsection 510(e) codifies the ruling by Chancellor Chandler in Saito v. McKesson HBOC, Inc., C.A. 18553, 2002 WL 31657622 (Del. Ch. Nov. 13, 2002). Saito involved the question of whether the defendant waived its work-product protection as to the documents at issue by sharing them with the SEC in an investigation.
Subsection 510(f) contains the introductory clause, "[n]otwithstanding anything in these rules to the contrary," in part so that a court may allow the parties in a matter to agree to quick-peek arrangements without preproduction privilege review. Otherwise, the parties to such an arrangement may be deemed to have waived a privilege pursuant to subsection 510(a).
4. The Sedona Conference "Jumpstart Outline": Questions to Ask Your Client & Your Adversary to Prepare for Preservation, Rule 26 Obligations, Court Conferences & Requests for Production, available at thesedonaconference.org.
5. See Court of Chancery Guidelines at 15 ("The Court is aware that in order for litigation to produce justice, the costs of the litigation must be proportionate to what is at stake. That awareness applies with special force to the subject of electronic discovery... [B]ecause the Court has eschewed a mandatory approach, it is essential and not optional that the parties discuss this subject directly and try to reach a case-specific accord based on a candid appraisal of the information base each side has, the costs of employing various electronic discovery techniques, and the stakes at issue in the case... [I]t is unlikely that the subject of electronic discovery can be avoided in any class of cases altogether.").
6. See D.L.R.P. 1.1 cmt. 2 ("A lawyer need not necessarily have special training or prior experience to handle legal problems of a type with which the lawyer is unfamiliar... A lawyer can provide adequate representation in a wholly novel field through necessary study. Competent representation can also be provided through the association of a lawyer of established competence in the field in question.")..
7. See, e.g., Managing e-Discovery in Small to Medium Cases: Software Solutions, available at www.americanbar.org.
8. The following discussion is limited to the preservation ESI stored on hard drives and in email. To the extent there is network data, counsel should contact the network administrator. Likewise, if a party must preserve email that is stored on a work email server, counsel should contact the administrator and work with that person to preserve relevant email.