E-discovery is one of the most controversial tasks in civil litigation today. As the amount of electronically stored information has skyrocketed, smart plaintiffs are seeking to require corporate defendants to preserve, search and produce every bit of data that is reasonably calculated to lead to the discovery of admissible evidence. And if corporate defendants fail to do so, plaintiffs stand ready to prosecute sanction motions that can reach hundreds of thousands of dollars.
The growth of ESI, together with plaintiffs’ growing sophistication in aggressively seeking e-discovery and courts’ willingness to sanction non-complying defendants, has put pressure on corporate defendants to preserve and produce electronic data. Estimates suggest that discovery costs now entail up to 50 percent of total litigation costs.
Corporate defendants should be on the lookout for ways to reduce the risks and burdens of e-discovery obligations and lower e-discovery costs. To address the issues, corporations have focused on reducing the amount of electronic data generated, using specialized e-discovery software, and hiring specialized e-discovery vendors—even introducing new legislation to address the issue. These have all proved inadequate.
One of the more recent, and perhaps overlooked, tactics to reduce e-discovery risk is to use contract provisions to address e-discovery issues and establish discovery protocols before litigation ensues. Part I of this article will outline some of the issues facing a corporate defendant considering including such provisions in their contracts. Part II will discuss the enforceability of e-discovery contract provisions.
BENEFITS OF CONTRACTUAL PROVISIONS
Proponents of e-discovery clauses argue that they have the potential to reduce the burdens of e-discovery for not only commercial litigants but also courts. Such clauses could benefit corporate defendants by reducing preservation and production costs. Moreover, contracts will, at least in theory, establish a more predictable discovery framework that reduces the risk that a corporate defendant will take a misstep and face sanctions. Courts will benefit from the greater predictability afforded by contractual provisions, which may result in fewer discovery disputes between the parties. Thus, courts will be able to devote less time managing discovery matters, which currently take up a large portion of their docket.
Whether the efficiencies imagined by the proponents of contract provisions will ultimately be realized still remains to be seen. While it is certainly true that well-drafted contractual language may afford more predictable e-discovery than the current Federal Rules of Civil Procedure, it is not necessarily the case. As we all know, it is difficult, if not impossible, to draft a litigation-proof contract clause. Corporate defendants relying on these provisions may find themselves fighting just as many—if not more—battles in court but just under a different set of rules. Moreover, despite the parties’ best intentions, if courts ultimately refuse to enforce these provisions (an issue addressed below), corporate defendants risk finding themselves in a much worse position than if they had followed the established law.
CONTRACT PROVISIONS FOR E-DISCOVERY
There are several issues that a corporate defendant should consider addressing in e-discovery contractual provisions. They include:
1. Specify when a party’s duty to preserve evidence begins.
Under the Federal Rules of Civil Procedure and case law interpreting the rules, a litigant’s duty to preserve evidence begins when it reasonably anticipates litigation. This somewhat murky standard has generated confusion and a great deal of litigation. Thus, a corporate defendant may consider including a provision that specifies more precisely when a duty to preserve evidence begins. For example, the parties could agree that there is no obligation to preserve evidence unless and until the other party makes a written request to preserve specified evidence. Or the contract could go further and require the opposing party to specify precisely which types of evidence, such as email, that a party must preserve.
2. Specify the types and sources of data to be preserved and searched.
Under the current rules, corporate defendants may be required to search many different types of ESI, including e-mails, Word documents, PDF files, spreadsheets, PowerPoint presentations, audio and video files, text messages and Internet and social media postings. This information can be found in numerous places including current active systems, archival storage and on individual user’s laptops, smartphones or tablets.
There are three different ways that parties can contract to limit the type and sources of data to be preserved. First, the parties can agree to limit the number of custodians. Second, the parties can agree to limit the type of ESI to be searched and produced. For example, the parties can agree not to produce e-mails prior to a certain date or not produce text messages at all. Finally, the agreement can limit the sources to search. For example, the parties can agree not to search for information on data warehousing or archival storage systems as these sources are likely to replicate data found on active systems.
3. Include fee and cost-shifting provisions.
Under the federal rules each party is generally required to pay for their own costs of production. To limit those costs, a corporate defendant should consider a provision to shift the costs of searching or producing e-discovery to the opposing party. Alternatively, fees could be shifted to the other party to deter excessive discovery requests or litigation. For example, the parties could agree to shift fees if one party challenges the enforceability of the e-discovery provisions in the contract or seeks to compel greater preservation, collection or production beyond what was specified in the contract.
4. Limit the availability of discovery sanctions.
The fear of discovery sanctions, whether monetary and/or evidentiary, is what drives much of burden and cost of e-discovery. Parties should consider including language that would preclude sanction motions so long as a party relied in good faith on contractual provisions. Other suggestions would include limiting sanctions to situations in which one party knowingly and intentionally violated its discovery obligations or acted with bad faith.