As one court has characterized it, “a ‘certificate of admission to the bar’ is a pilot’s license which authorizes its possessor to assume full control of the important affairs of others and to guide and safeguard them when, without such assistance, they would be helpless.” In re Discipline of Laprath, 670 N.W.2d 41 (S.D. 2003). While the freedom suggested by that imagery might be a bit overstated, the assertion that the qualifications of a counsel assuming responsibility for a case are critical to the potential outcome is not.
The lawyer who agrees to be retained to provide legal advice or perform other legal services has implied that he or she will use such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake. See Furia v. Helm, 4 Cal.Rptr.3d 357 (Cal.App.1.Dist. 2003). Certainly a lawyer’s duties vary with the circumstances presented. See Estate of Albanese v. Lolio, 923 A.2d 325 (N.J.Super.A.D. 2007). See also Jones v. Law Firm of Hill and Ponton, 141 F.Supp.2d 1349 (M.D. Fla. 2001) (Under Florida law, an attorney’s reasonable duties require an attorney to have the knowledge and skill necessary to confront the circumstances of each case); In re SRC Holding Corp., 364 B.R. 1 (D.Minn. 2007) (Under Minnesota law, attorney is obligated to advise client with that degree of care and skill that is reasonable under circumstances, considering nature of undertaking); and Celentano v. Grudberg, 818 A.2d 841 (Conn. App. 2003) (An attorney, by accepting employment to give legal advice or to render other legal services, impliedly agrees to use such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake). What may constitute a reasonable degree of care should be viewed with reference to the type of service the attorney undertakes to perform. See Baker Donelson Bearman & Caldwell, P.C. v. Muirhead, 2006 WL 177593 (Miss. 2006). (An attorney generally owes the client a duty of care consistent with the level of expertise he holds himself out as possessing). It may be that the most important factor in establishing the extent of the duty of care assumed by the lawyer is foreseeability. See Worsham v. Nix, 83 P.3d 879 (Okla.Civ.App.Div.2 2003). In other words, what should the lawyer have expected to do when he or she accepted the case?
Apart from concerns about potential error and malpractice, an attorney accepting a case has a basic ethical obligation to first determine whether he or she has the requisite level of competence to handle the tasks that are expected to arise. Rule 1.1 of the ABA Model Rules of Ethics provides that “a lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” Further, it is a basic rule of professional conduct that lawyers must maintain competence by keeping abreast of changes in the law and its practice. See U.S. v. Kwan, 407 F.3d 1005 (C.A.9.Cal. 2005).
The recent changes to the Federal Rules of Civil Procedure related to electronic discovery raise competency issues that may have profound implications for the traditional practice of law. Such questions of competence arise both during the course of litigation and before litigation begins. A review of the rules illustrates the scope of the new challenges facing attorneys today.
It is not hyperbole to state that the complexities attendant to the discovery of electronically-stored information has significantly changed the face of litigation. Given the ease of storage, the volume of electronic information is exponentially greater than hard-copy documents. The computer networks of large corporations, government and non-profit organizations store information in terabytes, each of which represents the equivalent of 500 million typewritten pages of plain text, and to receive 250 to 300 million e-mail messages monthly. See Document Retention, Electronic Discovery, E-discovery Cost Allocation and Spoliation of Evidence: the Four Horsemen of the Apocalypse in Litigation Today, 80 Conn. B.J. 331, 366+ (2006) (citing comments of the Judicial Conference Committee on Rules of Practice and Procedure in approving the proposed amendments to the Federal Rules of Civil Procedure addressing electronic discovery issues).
In the days of paper files, the principle danger of spoliation was posed by the purposeful destruction of paper files and the occasional loss through negligence. Those less dynamic days have been replaced by ubiquitous electronic storage of information in computer-based systems in which ordinary operation involves both the automatic creation and the automatic deletion or overwriting of huge quantities of information. See Wendy R. Liebowitz, Digital Discovery Starts to Work, Nat’l L.J., Nov. 4, 2002, at 4 (reporting that as early as 1999, ninety-three percent of all information generated was in digital form). It has always been true that failure to address preservation issues early in the litigation increases uncertainty and raises a risk of disputes and sanctions. Federal Rules of Evidence, Advisory Committee Notes, Page 160. In the brave new world of electronic data, however, the time to intervene in order to prevent the certain destruction of potential evidence may be long before counsel is engaged. Once the case is accepted, the attorney who lacks the expertise to identify and protect potential repositories of evidence may subject his or her client to increased costs, potential sanctions and, in the most severe cases, defeat in the litigation itself.
The general rule is that the obligation to preserve evidence begins when a party knew or should have known that the material may be relevant to future litigation or is relevant to ongoing litigation. Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir. 2001). In the event that relevant evidence has been lost, and the court concludes that a party was under an obligation to preserve the evidence that it destroyed, it must then consider whether the evidence was intentionally destroyed, and the likely contents of that evidence. Weinreich v. Sandhaus, 850 F.Supp. 1169, 1181 n. 19 (S.D.N.Y. 1994). A party’s intentional destruction of relevant evidence can support an inference that the evidence would have been unfavorable to the party responsible for its destruction. See, e.g., Nation-Wide Check Corp. v. Forest Hills Distributors, 692 F.2d 214, 217-18 (1st Cir. 1982); 2 John Henry Wigmore, Evidence in Trials at Common Law § 291 (James H. Chadbourn rev. 1979). (The principle that an adverse inference may be drawn against a party responsible for the loss or destruction of evidence is often associated with the famous common-law case of Armory v. Delamirie, 1 Strange 505, 93 Eng. Rep. 664 (K.B.1722), in which a chimney sweep who found a jewel sued a jeweler for the loss of the jewel, and was entitled, based on the jeweler’s return of the ring without the stone, to an inference that the stone was “of the finest water.” See Welsh v. United States, 844 F.2d 1239, 1246 (6th Cir. 1988.))
The evidentiary rationale for adverse inferences derives from two common sense notions. First, a party’s destruction of evidence that it has reason to believe may be used against it in litigation suggests that the evidence was harmful to the party responsible for its destruction. Second, that the drawing of an adverse inference against parties who destroy evidence will deter such destruction, places the risk of an erroneous judgment on the party that wrongfully created the risk. Lastly, an adverse inference should serve the function of restoring the prejudiced party to the same position he or she would have been in absent the wrongful destruction of evidence by the opposing party. See Skeete v. McKinsey & Co., No. 91 Civ. 8093, 1993 WL 256659, at *5 (S.D.N.Y. July 7, 1993); Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 74 (S.D.N.Y. 1991).
There is some doubt whether these traditional notions should be applied to electronic systems in the same way they applied to the purposeful destruction of paper records. After all, in the realm of electronic information, the daily or even hourly destruction of such information generally is intentional, but it is driven by a systems pre-programmed data retention rules rather than malice. As a practical matter, the sheer volume of electronic data processed in most large organizations makes it unlikely that the party deleting a document “knew” any particular document existed much less reviewed its contents before destruction. The inference of evil intent attendant to the destruction of paper documents thus seems misplaced.
This concern is mirrored in the new “Safe Harbor” provided by FRCP 37(f). The rule provides that “[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.” However, it will be for the court to determine when “good faith” should have dictated that someone step in to modify the routine operation of the client’s systems and monitor that modification. Counsel should be wary of placing too much reliance in its promise of protection. In fact, the Rule will do little to shield counsel and parties who fail to act quickly and correctly to address the destructive impact of an automated document management system. The question becomes whether such destruction could or should have been prevented. In other words, was the failure to interrupt the destruction of electronic information the result of malice?
Clients and counsel are bound by the traditional requirement to preserve documents and other evidence they knew or should have known were relevant to litigation. Both client and counsel know that the majority of all documents related to the client’s operations are stored electronically and thus subject to pre-programmed destruction. Together, these create a duty to cease pre-programmed destruction until a review for documents and other material relevant to the prospective litigation has been completed. Under the circumstances, it would seem that Rule 37 merely provides a “safe harbor” when destruction takes place before litigation is contemplated or when a document’s relationship to the prospective litigation could not have been foreseen. However in those cases, there was never a duty to preserve the item in the first place.
Lest any practitioner doubt the impact of an adverse inference for failure to preserve electronic data, two cases illustrate the monsters that may emerge from under that discovery bed. In Zubulake v. UBS Warburg LLC, (VI), 382 F. Supp. 2d 536, 547 (S.D.N.Y. 2005), UBS was found to have willfully deleted e-mails that the court had determined were relevant in Zubulake IV, 220 F.R.D. 212, 216 (S.D.N.Y. 2003). The jury subsequently awarded the plaintiff $29.3 million in damages ($9.1 million in compensatory damages and $20.2 million in punitive damages). Geometrically more frightening is the result in Coleman Holdings, Inc. v. Morgan Stanley & Co., Inc., 2005 WL 679071 (Fla. Cir. Ct. 2005). In Coleman, the jury awarded Coleman Holdings $1.45 billion in damages ($604 million in compensatory damages and $850 million in punitive damages) after finding that Morgan Stanley failed to search approximately 1400 backup tapes for e-mails, then filed a false certificate with the court claiming that the search had been made. See E-Discovery: Why and How E-mail Is Changing the Way Trials Are Won and Lost, 45 Duq. L. Rev. 269, 291+ (2007). See also “Byte” Me! Protecting Your Backside in an Electronic Discovery World (Not Just for Litigators), 76-MAR J. Kan. B.A. 22, 32 (2007).
While Morgan Stanley may seem an extreme case, it illustrates the need for counsel to insure that his or her client is aware of the duty to preserve electronic information. To do that, counsel needs to know the parameters of the client’s IT system, and understand the expected burden or expense involved in producing information from that system or collection of systems. In addition, if counsel expects to be persuasive with the court on discovery issues, it is imperative that he or she works with the client’s IT representative to provide the court with a common sense explanation of the procedures and expense for complying with the opponent’s e-discovery requests.
It has been suggested by one commentator that Morgan Stanley’s problems began when both client and counsel failed to properly define the limits of the data systems. Having failed to sit down and understand the extent of potentially relevant electronic information, both the company and its attorneys became trapped in a cycle of finding additional electronic information, having to review and produce it, and then having to explain its late disclosure to an increasingly impatient court. Zubulake V: Counsel’s Obligations to Preserve and Produce Electronic Information, 84-OCT Mich. B.J. 26, 30 (2005). If true, this picture of the case highlights the challenge and the dangers for counsel and begs the question whether counsel without the expertise to anticipate and understand the scope of the client’s electronic systems and insufficient time to obtain it before discovery began should have ever taken the case.
While it may be that such cases now require counsel to be technically sophisticated, it is the potential scope of that sophistication that is particularly troubling. Some clients will have in-house counsel well versed in data preservation and active systems in place to implement and monitor such preservation at the first hint of potential litigation. For all other clients however, even conscientious counsel, who immediately engages to implement data protection, may find that relevant information has been destroyed.
Depending on the date of destruction, counsel who is already familiar with the client’s technical systems may be able to implement efforts that recover that lost information at little cost. Similarly, technically sophisticated counsel, equally knowledgeable about the client’s hardware or software systems, who understand the impact of pending changes in those systems, can take proactive steps to prevent the loss of relevant data that might result form such changes. Conversely, a lack of familiarity with a prospective client’s existing and planned systems, and their technical capabilities, may mean the difference between “normal” discovery costs and otherwise avoidable costs or sanctions that compel settlement of a case that could have been won.
It is perhaps too soon to sketch the ethical parameters of the role of outside counsel, however the courts have made it clear that the obligation to protect evidence runs first to counsel, who then has a duty to advise and explain to the client its obligations to retain pertinent documents that may be relevant to the litigation. Telecom International Am. Ltd. v. AT & T Corp., 189 F.R.D. 76, 81 (S.D.N.Y. 1999) citing Kansas-Nebraska Natural Gas Co. v. Marathon Oil Co., 109 F.R.D. 12, 18 (D.Neb. 1983). If the rules appear to offer little safe harbor, what is the standard that is now expected of counsel seeking to avoid discovery sanctions? In Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422 (S.D.N.Y. 2004), Judge Scheindlin addressed the sanctions for spoliation of electronic evidence. She began her analysis with an inquiry of whether counsel took “all necessary steps to guarantee that relevant data was preserved and produced.” The Court set out the following minimum standards:
Id. The Court noted, “Regardless of what particular arrangement counsel chooses to employ, the point is to separate relevant backup tapes from others. One of the primary reasons that electronic data is lost is ineffective communication with information technology personnel. By taking possession of, or otherwise safeguarding, all potentially relevant backup tapes, counsel eliminates the possibility that such tapes will be inadvertently recycled.”
In examining Judge Scheindlin’s list, three things seem clear. First, counsel who arrives only after litigation has begun may very well be too late to prevent spoliation. Second, counsel’s role will necessarily involve direct communication with a significant number of the client’s employees and direction of those employees in the conduct of their duties. These two issues suggest that a prospective client whose business generates repeated litigation such as an insurer or manufacturer will need to engage outside counsel who can acquaint themselves with the client’s systems and prepare the client for the demands of discovery well before litigation begins. It also suggests that counsel without that opportunity may not be competent to perform the duties required to meet the demands of electronic discovery.
Lastly, the court’s comments about the duty to take possession of certain evidence suggest that counsel has almost a parental duty to protect the client from itself. Perhaps in recognition of the implications of this new role, the court cautioned that a lawyer “cannot be obliged to monitor a client like a parent watching a child. At some point, the client must bear responsibility for a failure to preserve.” However the court follows these comments with the observation that “at the same time, counsel is more conscious of the contours of the preservation obligation; a party cannot reasonably be trusted to receive the “litigation hold” instruction once and to fully comply with it without the active supervision of counsel.” Id.
It is perhaps this aspect of the expansion of counsel’s duty that offers the most significant challenge to practitioners. While the court in Zubulake focused on back-up tapes (Id.), the list of electronic storage media that might be subject to inadvertent modification or loss over time is extensive. It includes among other things, PDAs, cell phones, voice mail boxes, portable hard drives, “memory sticks” and various temporary file systems. Before accepting a case, it would seem that a lawyer needs to be familiar with the prospective client’s personnel structure, the hardware and software systems operated by that client and the data that may be sought. Only then can counsel determine whether he or she has the expertise to craft a litigation hold instruction that encompasses the relevant assets and, more importantly, monitor compliance.
Given the uniquely vulnerable nature of electronic data, these concerns once again suggest we may be moving to a model that presumes a long-term hybrid legal/administrative relationship between clients and outside counsel. While outside counsel would manage litigation, they would be retained prior to any litigation to establish a relationship with the client’s documents managers and information technology personnel. In this role, they would advise and help monitor information management policies that minimize the danger of spoliation. When litigation was anticipated, such counsel would be in position to act quickly and effectively to protect the client’s interests. They would also know enough about the client’s systems and system changes to interact with opposing counsel and the court within the time restrictions imposed by the discovery rules. Given the complexities of electronic discovery, other outside counsel without that pre-existing relationship may simply not be competent to take the steps needed to protect the client’s interests.
Redefining Competence – The “Duty” to Know and Understand Technology
Putting aside the concerns about spoliation, the new Federal Rules contain a number of requirements that, given the nature of electronic media, raise potential uncertainties about counsel competence. Once again, the question is not whether, with sufficient time and preparation, otherwise bright and energetic counsel can ultimately learn about the client’s systems and documents. The question, as it was during the discussion of potential spoliation, is whether counsel without a prior relationship with the client and previous knowledge of the client’s document management systems can hope to learn enough in time to meet his or her discovery obligations. If the answer is no, it seems clear that prospective counsel is not competent to accept a case that may involve extensive electronic discovery.
Federal Rule of Civil Procedure 26(a)(1)(B) provides that, without awaiting a discovery request, a party must provide to other parties a copy of, or a description by category and location of all documents, electronically stored information, and tangible things that are in the possession, custody, or control of the party and that the disclosing party may use to support its claims or defenses, unless solely for impeachment. The Advisory Committee notes state “[t]he responding party must also identify by category or type the sources containing potentially responsive information that it is neither searching nor producing. The identification should, to the extent possible, provide enough detail to enable the requesting party to evaluate the burdens and costs of providing the discovery and the likelihood of finding responsive information on the identified sources. See Fed. R. Civ. Pro., Advisory Committee Notes, page 159. It is axiomatic that to make such disclosures, counsel must possess the expertise to ask the right questions of the client and make judgments about what he or she is told.
It seems too late in the day to argue that a lawyer’s duty of fundamental competence does not encompass a level of expertise related to digital technology, especially the information technology systems used by the lawyer’s client. The decision by the court to impose discovery sanctions in G.T.F.M., Inc. v. Wal-Mart Stores, Inc., 2000 U.S. Dist. LEXIS 3804 (S.D.N.Y. 2000), illustrates the extent of the challenge facing counsel as they interact with their clients. In that case, the court took counsel to task, finding counsel’s inquiries about defendant’s computer capacity were professionally deficient. Id.
In G.T.F.M., Inc., plaintiffs requested production of all documents, including computer printouts, reflecting defendant’s purchase and sale of products bearing plaintiffs’ trademarks through a Local Purchase Program from a certain date. Id. Acting on the representations of a senior executive of the client, Defendant’s counsel objected, advising that the requested production would be unduly burdensome as the client did not have the centralized computer capability to track the purchase and sale of locally purchased goods.
At a conference with the parties, the Court questioned counsel for the defendant about its inability to produce the records requested by plaintiffs. The court stated that it seemed highly unlikely that an organization the size of the defendant did not keep a centralized system of records at its headquarters. Counsel for defendant insisted that it was unable to provide the computer printouts requested by plaintiffs. Approximately a year later, plaintiffs deposed a vice president in the defendant’s management information systems department. At that deposition, the employee revealed that the defendant’s computers systems did have the capability to track the information that had been requested, but due to the delay and the normal purging operations of the system, the information originally requested by plaintiffs was no longer available.
Characterizing the previous disclosures as “misrepresentations” and counsel’s efforts as “deficient,” the court ordered the defendant to make available the individual who was most familiar with defendant’s computer records and facilities, and in particular the recording, maintaining, back-up, purging and retrieval the requested computer data, to meet with plaintiffs’ expert to explain defendant’s computer facilities and to provide reasonable assistance to plaintiffs’ expert in his/her efforts to retrieve data about the purchases at issue in the case. The defendant was also ordered to reimburse the plaintiffs for all legal and expert fees and expenses reasonably incurred in conducting the on-site inspection of defendant’s computer facilities, subject to court approval.
The court’s decision to impose sanctions for electronic discovery abuses makes it clear that counsel’s discovery responsibilities are not satisfied by reliance on the client’s internal “experts.” Instead, counsel is expected to weigh what he or she is told and ask questions when the client’s representations seem inconsistent with the capabilities of the expected technology as “known” to counsel. It may well be that the duty imposed by the court raises the bar of attorney competence fairly high, presupposing a degree of technical expertise necessary to make independent judgments about the capabilities of the client’s software and hardware, and further to weigh the client’s representations against the technology that similarly situated companies “should have.” If that is the standard of competence, the question is whether a significant percentage of attorneys and law firms are competent to accept such cases.
The ethical concern for attorney competence dictates that attorneys in modern practice educate themselves about the technology upon which modern discovery increasingly depends. Attorneys are held to that degree of care, skill, diligence and knowledge commonly possessed and exercised by a reasonable, careful and prudent attorney. See Sun Valley Potatoes, Inc. v. Rosholt, Robertson & Tucker, 981 P.2d 236 (Idaho 1999). See also Gayhart v. Goody, 2004 WY 112 (Wyo. 2004) (To establish a departure from the standard of care, the plaintiff in a legal malpractice action must show that the attorney failed to exercise the degree of care, skill, diligence and knowledge commonly possessed and exercised by a reasonable, careful and prudent lawyer in the practice of law in jurisdiction). The question is whether the transition from paper to electronic record keeping and the recognition of that transition in the Federal Rules of Civil Procedure have changed the scope of knowledge that is or should be “commonly possessed and exercised by a reasonable, careful and prudent attorney.” The answer appears to be yes.
In judging competence, what expertise is required before an attorney should accept a case where there may be complex issues regarding electronic discovery? Given the restrictions of discovery rules, and the dangers of spoliation, can attorneys with no prior knowledge of a prospective client’s complex information management systems hold themselves out as competent to meet the expected challenges of discovery? It may be that the changes to the Federal Rules, and the expected changes to individual state rules, create an environment where only large law firms with existing relationships with corporate clients are “competent” to meet the time restrictions of discovery.
The complexities of electronic discovery will likely create new structures and relationships within corporate clients that are geared to address the challenges posed by electronic discovery. However, as illustrated in G.T.F.M., Inc., 2000 U.S. Dist. LEXIS 3804 (S.D.N.Y. 2000), outside counsel cannot simply rely on the representations and technological “expertise” of the client. A law firm with litigation expertise could secure an expert to advise them on technology issues. However, if the purpose is to secure the information needed to “double check” the representations of the client, who will pay for that expert? In particularly complex cases, the prospective attorney may find that he or she lacks the expertise needed to select the appropriate expert to advise them on discovery issues. Who hires the expert to provide advice to the law firm on what expert to hire for discovery? If this is an issue of competence, are such experts now part of expected law firm overhead? Do all of these efforts have to be undertaken before deciding whether there is the requisite expertise to accept a case?
What seems clear is that the period in which an attorney could ignore technology, or assert that changing technology was merely an issue for technicians, has passed. As lawyers struggle to adapt to the new rules and the technology that drives them, only time will tell what impact these changes will have on the profession. At a minimum, lawyers who do not educate themselves about the nature of data collection systems, document management and the implications of changing hardware will find themselves at an increasing competitive disadvantage. More importantly however, the ethical issue of competence dictates that all lawyers pay attention to the demands of technology. Certain knowledge of information technology and the way it is used by clients may now be required before one can take that next case.
John V. Garaffa is a Senior Associate with Butler Weihmuller Katz Craig LLP. Prior to joining the firm, Mr. Garaffa served 21 years on active duty in the U.S. Navy’s Judge Advocate Generals Corp, four of those years as the Deputy Assistant Judge Advocate General for Information Resources/CIO. Mr. Garaffa earned his B.B.A. (cum laude) from the University of Wisconsin in 1979, his J.D. (cum laude) from the University of Minnesota in 1982 and his L.L.M. (Labor Law) (with distinction) from Georgetown University in 1991.