Electronic Discovery: Producing Electronic Documents in Litigation and Arbitration
by John S. Mrowiec

Most of our readers are generally familiar with the discovery process in the litigation of construction disputes. Much of the time and expense in any lawsuit is spent in "discovery": exchanging project documents, answering interrogatories and testifying at deposition.

One of the claimed benefits of the arbitration process is that discovery is more limited than in litigation. Indeed, in some arbitrations there is no discovery at all. Yet, in most construction arbitrations, an exchange of some project records and, possibly, reports of retained experts are permitted discovery.

Whether in litigation or in arbitration - and even in mediation - the parties will be required to produce some or all of the project records. The "document request" and subpoena for documents are the discovery devices used.

New challenges and expense in discovery arise from the biggest change in the business world in the last five to 10 years: electronic storage of documents and the use of electronic mail.

Under most court rules and the given definition of "document" in document requests, the word "document" includes information in electronic format. For example, Federal Rule of Civil Procedure 34 defines "document" as including "data compilations from which information can be obtained."

Many businesses are moving ever nearer to a "paperless" world where all written communications are by electronic mail with attached ".pdf" or ".tif" files. Cost and scheduling information is gathered from huge databases into selected reports, many read "on the screen" but never printed into hard copy.

Absent creation by a computer, the destruction of a paper record and all of its photocopies is destruction of the record. Many people believe that electronic information is like hard-copy information. They think that unwanted electronic mails can always be "deleted," drafts of documents can always be "overwritten," and reports not printed "vanish." They are usually mistaken.

A recent case discusses the obligation of the party responding to discovery to locate "deleted" electronic documents and how the search will be funded, Zubulake v. UBS Warburg, LLC, 2003 U.S. Dist. LEXIS 7939 (S.D.N.Y., May 13, 2003). While the case does not involve a construction dispute, its analysis of electronic document discovery is likely to be cited in many cases, including construction disputes.

The explosion in the use of personal computers has caused the universe of discoverable "documents" to expand greatly. Indeed, one estimate is that as long ago as 1999, 93 percent of the information generated by business was in digital form (W. Liebowitz, Digital Discovery Starts to Work, Nat'l L.J., Nov. 4, 2002 at 4).

From an economic perspective, it has been said that "electronic data is so voluminous because unlike paper documents, 'the costs of storage are virtually nil. Information is retained not because it is expected to be used, but because there is no compelling reason to discard it'" (Zubulake, 2003 U.S. Dist. LEXIS 7939 at 3 quoting Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 429 (S.D.N.Y. 2002)).
But even when individuals at the company do not wish to retain data, but rather to "delete" it, the Zubulake decision explains:

"'Deleting' a file does not actually erase that data from the computer's storage devices. Rather, it simply finds the data's entry in the disk directory and changes it to a 'not used' status - thus permitting the computer to write over the 'deleted' data. Until the computer writes over the 'deleted' data, however, it may be recovered by searching the disk itself, rather than the disk's directory. Accordingly, many files are recoverable long after they have been deleted - even if neither the computer user nor the computer itself is aware of their existence. Such data is referred to as 'residual data.' Deleted data may also exist because it was backed up before it was deleted" (Zubulake, 2003 U.S. Dist. LEXIS 7939 at 10 quoting S. Scheindlin & J. Rabkin, Electronic Discovery in Federal Civil Litigation: Is Rule 34 Up to the Task?, 41 B.C.L.Rev. 327, 337 (2000)).

In a particular litigation, if one wants to attempt to locate every electronic mail sent or received, one might need to search the hard drives of personal computers, network hard drives, tape back-up systems and optical disk storage. Retrieving electronic mails from back-up tapes sometimes can be difficult depending on how diligently the responding party tries and how skilled its electronic evidence consultant is.

A lack of diligence, though, might result in the sanction of an adverse inference instruction. That is, the fact finder is advised that the missing documents would have been damaging to the responding party (see Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002) (remanding to trial court for determination on whether plaintiff's belated failure to produce e-mails and back-up tapes should have warranted adverse jury instruction which, if given, might have prevented $96 million jury verdict in plaintiff's favor).

Zubulake involved a suit by a former employee alleging gender discrimination and illegal retaliation. The employer communicated frequently through electronic mail.
When the employee requested the production of all electronic mails, the employer produced approximately 100 pages from active computer files. The employee herself had 450 pages of electronic mail. The employer claimed the 100 pages were all that it could locate.

The Zubulake court made a distinction between "accessible" and "inaccessible" electronic data, depending on the media the data is stored in. "Accessible" electronic data is typically that data retained in a machine readable format such as active, on-line data including hard drives, near-line data on optical disks or some offline storage or archived data. "Inaccessible" data is usually that data not retained in a machine readable format such as some offline storage or archived data (depending on the effectiveness of the storage mechanism), compressed back-up tapes and erased, fragmented or damaged data, such as partially overwritten data.

The Zubulake court had no difficulty in ordering the employer to produce all electronic mail from accessible sources at the employer's cost. The more difficult question addressed by the Zubulake court then was: "To what extent is inaccessible electronic data discoverable, and who should pay for its production?"

In the usual paper situation, the responding party searches for responsive documents at its own cost. But with "inaccessible" electronic data, it might be unfair in a particular case for the responding party to incur the great expense of retrieving, decompressing, reconstructing and reviewing for privilege the "inaccessible" data. That would be especially true when one does not know whether anything relevant, or even if relevant, material or valuable, will be uncovered.

It might be equally unfair to shift the cost for the search to the requesting party in a circumstance where much of the relevant, material data is stored in an "inaccessible" format, especially where the requesting party has little resources.

The Zubulake court set forth a test to weigh the competing interests in broad discovery with the fairness to the responding party of bearing the cost of searching, retrieving and reviewing "inaccessible" data. The outcome of the test depends upon the facts of each case.

Applying the test to the Zubulake employer's electronic data storage system, the court ordered the employer to produce at its own cost all responsive electronic mails on its optical disks and active servers.

In addition, the employer was ordered to produce an inventory of back-up tapes to the employee from which she could select any five to be searched by the employer. The employer was then to submit an affidavit detailing the results of the five tape search and the time and money spent. The court would then review the results of the search and the affidavit and decide who should pay the cost of the back-up tape search (Zubulake, 2003 U.S. Dist. LEXIS 7939 at 50-51.)

Participants in the construction process must understand that:

1. Electronic data is discoverable.
2. "Deleted" electronic data, such as drafts and electronic mails, most likely continue to reside somewhere.
3. The party responding to a document request or subpoena might have to bear the cost of searching and retrieving all "accessible" data which will include the data on hard drives, servers, optical disks and, depending on the system, some back-up tapes.
4. The party responding to discovery might have to search and retrieve some or all "inaccessible" data such as on back-up tapes and fragmented or overwritten data especially if the requesting party will bear the cost.
5. The party requesting documents might (but might not) have to bear the cost of retrieving and searching that "inaccessible" data.

John S. Mrowiec is a partner with Chicago-based Conway & Mrowiec, a construction and public contracts law and litigation practice. He may be reached at (312) 658-1100. For information, go to the firm's Web site at www.cmcontractors.com.