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THE SEDONA CONFERENCE

WORKING GROUP SERIES

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THE SEDONA PRINCIPLES:

Best Practices Recommendations & Principles for Addressing Electronic Document Production
A Project of the October 2002 Sedona Conference Working Group on Best Practices for Electronic Document Retention & Production

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THE SEDONA PRINCIPLES
Editor-in-Chief: Jonathan M. Redgrave, Esq. Senior Editor: Ashish Prasad, Esq. Editors: Jason Fliegel, Esq. Ted S. Hiser, Esq.

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Copyright © 2003, The Sedona Conference Visit www.thesedonaconference.org

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Foreword
Welcome to the first publication in The Sedona ConferenceSM Working Group Series (the "WGS"). The WGSSM is designed to bring together some of the nation's finest lawyers, consultants, academics and jurists to address current problems in the areas of antitrust law, complex litigation and intellectual property rights that are either ripe for solution or in need of a "boost" to advance law and policy. (See Appendix C for further information about The Sedona ConferenceSM in general, and the WGSSM in particular). The WGSSM output is published and widely distributed for review, critique and comment. Following a period of peer review, we will revise and republish the original piece, taking into consideration what has been learned during the comment period. The Sedona ConferenceSM hopes and anticipates that the output of its working groups will evolve into authoritative statements of law and policy, both as they are and as they ought to be. Electronic document production is an ideal first topic for the WGSSM. The problems posed vex corporations, litigants, and the courts alike, yet there exist few guides sufficient to meet the complexity of issues that even the most simple document request can raise. The Steering Committee and participants of the Working Group on Electronic Document Production are to be congratulated for their efforts developing these guidelines and their continued dedication to the project since the first meeting in October of 2002. I especially want to acknowledge the contributions of Jonathan Redgrave in organizing and leading the Working Group. Special thanks also to Electronic Evidence Discovery, Inc. for sponsoring the effort. Finally, the peer review period is an important part of the balanced development of these principles and commentary; please submit your comments in writing to Jonathan ([email protected]) and me ([email protected]) on or before June 1, 2003. Thank you in advance for any thoughts you may take the time to forward to us as this dynamic document takes shape. Richard G. Braman Executive Director The Sedona ConferenceSM

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Table of Contents
Foreword Introduction .................................................................i .................................................................1 The Need For Reasonable Standards To Address Electronic Data and Documents In Discovery . . . . . . 3 1. Electronic Documents Are Different Than Paper Documents a. Quantitative Differences b. Qualitative Differences 2. Standards For Dealing With Electronic Data And Documents Are Necessary And Appropriate The Sedona Principles for Electronic Document Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Principles and Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1. Electronic data and documents are potentially discoverable under Fed. R. Civ. P. 34 or its state law equivalents, and organizations must therefore properly preserve electronic data and documents that can reasonably be anticipated to be relevant to litigation. . . . . . . . . . . . . 11 Comment 1.a. The Importance of Proper Document Preservation Policies . . . . . . . . . . . . . . . 11 Comment 1.b. Preservation in the Context of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2. When balancing the cost, burden, and need for electronic data and documents, courts and parties should apply the balancing standard embodied in Fed. R. Civ. P. 26(b)(2) and its state law equivalents, which requires considering the technological feasibility and realistic costs of preserving, retrieving, producing and reviewing electronic data, as well as the nature of the litigation and the amount in controversy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Comment 2.a. Discovery of Electronic Documents Under the Federal Rules. . . . . . . . . . . . . . 13 Comment 2.b. Scope of Reasonable Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Comment 2.c. Balancing Need and Cost of Electronic Discovery . . . . . . . . . . . . . . . . . . . . . . 14 Comment 2.d. Need to Coordinate Internal Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Comment 2.e. Communications with Court Regarding Electronic Data Collection . . . . . . . . 15 3. Parties should confer early in discovery regarding the preservation and production of electronic data and documents and seek when these matters are at issue in the litigation, if possible, to reach agreement concerning the scope of each party's rights and responsibilities.. . . . . . 16 Comment 3.a. Parties Should Include Electronic Discovery Issues In Their Rule 26 Disclosures and Conferences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4. Discovery requests should make as clear as possible what electronic documents and data are being asked for, while responses and objections to discovery should disclose the scope and limits of what is being produced.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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Comment 4.a. Requests for Production Should Clearly Specify What Documents are Being Requested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Comment 4.b. Rule 34 Responses and Objections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Comment 4.c. Disclosure of Collection Parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5. The obligation to preserve electronic data and documents requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation. However, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Comment 5.a. Scope of Preservation Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Comment 5.b. Organizations Must Prepare for Electronic Discovery to Reduce Cost and Risk 19 Comment 5.c. Corporate Response Regarding Litigation Preservation . . . . . . . . . . . . . . . . . . 20 Comment 5.d. Notice to Affected Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Comment 5.e. Preservation Obligation Not Ordinarily Heroic. . . . . . . . . . . . . . . . . . . . . . . . 21 Comment 5.f. Preservation Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Comment 5.g. All Data Does Not Need to be "Frozen" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Comment 5.h. Disaster Recovery Backup Tapes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Comment 5.i. Potential Preservation of Shared Data.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 6. Responding parties are best situated to evaluate the procedures, methodologies and technologies appropriate for preserving and producing their own electronic data and documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Comment 6.a. The Producing Party Should Determine the Best and Most Reasonable Way to Locate and Produce Relevant Documents in Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Comment 6.b. Scope of Electronic Data Collection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Comment 6.c. Rule 34 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Comment 6.d. Use and Role of Consultants and Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Comment 6.e. Documentation and Validation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 7. When the responding party has shown that it has acted reasonably to preserve and produce relevant electronic data and documents, the burden should be on the requesting party to show that additional efforts are warranted under the circumstances of the case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Comment 7.a. Rule 37 Sets Forth Guidelines for Resolving Discovery Disputes . . . . . . . . . . . 28 Comment 7.b. Discovery Against Third Parties Under Rule 45 . . . . . . . . . . . . . . . . . . . . . . . 28 8. The primary source of electronic data and documents for production should be active data and information purposely stored in a manner that anticipates future business use and permits efficient searching and retrieval, and resort to disaster recovery backup tapes and other sources of data and documents requires the requesting party to demonstrate need and relevance that outweigh the cost, burden, and disruption of retrieving and processing the data from such sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Comment 8.a. Scope of Search for Active and Purposely Stored Data . . . . . . . . . . . . . . . . . . . 29 Comment 8.b. Forensic Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Comment 8.c. Outsourcing Vendors and Third Party Custodians of Data . . . . . . . . . . . . . . . 29

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9. Absent a showing of special need and relevance, a responding party should not be required to preserve, review or produce deleted, shadowed, fragmented or residual data or documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Comment 9.a. The Scope of Document Discovery under the Federal Rules . . . . . . . . . . . . . . 30 Comment 9.b. Deleted Data and Residual Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 10. A responding party should follow reasonable procedures to protect privileges and objections to production of electronic data and documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Comment 10.a. Potential Waiver of Confidentiality and Privilege. . . . . . . . . . . . . . . . . . . . . . 33 Comment 10.b. Protection of Confidentiality and Privilege Regarding Rule 34 Inspections . . . 33 11. A responding party may properly access and identify potentially responsive electronic data and documents by using reasonable selection criteria, such as search terms or samples. . . . . . . . 34 Comment 11.a. Key Word Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Comment 11.b. Consistency of Manual and Automated Collection Procedures . . . . . . . . . . . 35 12. Absent a specific objection, agreement of the parties or order of the court, electronic documents normally include the information intentionally entered and saved by a computer user.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Comment 12.a. Metadata. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Comment 12.b. Formats Used for Collecting Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Comment 12.c. Production of Electronic Data and Documents in a Given Litigation Should Only be Required in One Format. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 13. Absent a specific objection, agreement of the parties or order of the court, the reasonable costs of retrieving and reviewing electronic information should be borne by the responding party, unless the information sought is not reasonably available to the responding party in the ordinary course of business. If the data or formatting of the information sought is not reasonably available to the responding party in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information should be shifted to the requesting party.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Comment 13.a. Cost-Shifting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 14. Sanctions, including spoliation findings, should only be considered by the court if, upon a showing of a clear duty to preserve, it is found that there was an intentional or reckless failure to preserve and produce relevant electronic data, and a showing of a reasonable probability that the loss of the evidence materially prejudiced the adverse party.. . . . . . . . . . . . . . . 39 Comment 14.a. Knowing, Willful, and Reckless Violations of Preservation Obligations . . . . . 39 Comment 14.b. Prejudice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Appendix A: Appendix B: Appendix C: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 List Of Working Group Participants and Observers . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Background on The Sedona ConferenceSM and its Working Group Series . . . . . . . . . . 46
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Introduction
In Spring 2002, many of us who would later form the Sedona Conference Working Group on Electronic Document Production began to discuss ways to develop "best practices" for lawyers to follow in addressing electronic document production. An industry of electronic discovery consultants and continuing legal education courses had developed, which suggested to some that all data ever generated electronically would be saved and made available for litigation. Courts handled ripe disputes, but with few decisions reported and a smaller number containing applicable guidance outside the context of the instant facts, organizations were uncertain as to their legal obligations. The collapse of Enron and Arthur Andersen, and the legislative response to these events, including the Sarbanes-Oxley Act of 2002, confirmed the importance of handling electronic document production in a defensible manner. It seemed doubtful to us that the normal development of case law would yield, in a timely manner, best practices for organizations to follow in the production of electronic documents. In October 2002, The Sedona Conference Working Group on Electronic Document Production, a group of attorneys and consultants experienced in electronic discovery matters, met to address the production of electronic data and documents in discovery. The group was concerned about the adequacy of rules and concepts that were developed largely for paper discovery to handle issues of electronic discovery. After vigorous debate, key principles emerged for addressing electronic data and document production. This document contains those principles, and the reasons supporting them. In thinking about electronic document production, one might begin by looking at the Federal Rules of Civil Procedure. Under Rule 34 and many of its state counterparts, all "data compilations" are documents and therefore might be handled with procedures and methodologies created for paper documents. However, it is important to recognize the significant differences between paper and electronic information in terms of structure, content and volume. Simply put, the way in which information is created, stored and managed in digital environments is inherently and fundamentally different from the way in which that is done in the paper world. For example, the simple act of typing a letter on a computer involves multiple (and ever changing) hidden steps, databases, tags, codes, loops, and algorithms that simply have no paper analogue. The interpretation and application of the discovery rules, to date, has not accommodated these differences consistently and predictably so that litigants can efficiently and cost effectively meet discovery obligations without risk of unforeseeable sanctions. The Sedona Conference Working Group on Electronic Document Production was conceived as an effort to develop reasonable principles to guide organizational practices and legal doctrine. The participants were chosen based on their knowledge and practical experience with electronic discovery issues. The group welcomes the comments of bench and bar alike on the principles, which we hope will guide lawyers and judges who are confronted with electronic document production issues in the coming years. In drafting the principles and commentary, we tried to keep in mind the "rule of reasonableness." That rule, embodied in Rules 1 (courts should secure the just, speedy and inexpensive determination of all matters) and 26(b)(2) (proportionality test of burden, cost and need) of the Federal Rules of Civil Procedure, and in many of their state counterparts, stands for the basic proposition that courts and litigants must permit that discovery that is reasonable and appropriate to the dispute at hand.

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We believe that this "rule of reasonableness" analysis is a useful guide in discussions of electronic document production, including, for example, the question of whether computer forensics should be used to unearth "hidden" data. This paper has three major sections. The first outlines why courts and litigants need reasonable standards to address electronic data and document production. Some have suggested that our current laws and rules are sufficient to meet the needs of electronic issues; this section outlines why those laws and rules are not sufficient. The second section sets forth basic principles of electronic document production. These principles embody the consensus views of the Working Group participants, and represent a reasonable and balanced approach to the treatment of electronic data. The third section contains commentary on those principles, and aims to expand the basic formulations set forth in the principles into a more comprehensive analysis. Our earnest hope is that the efforts of the Working Group will stimulate productive discussion and promote the formulation of legal doctrine consistent with principles of fairness, equity and efficiency.

Thomas Y. Allman Gary L. Hayden John H. Jessen Timothy L. Moorehead Jonathan M. Redgrave1 March 15, 2003

Production and does not necessarily reflect or represent the views of The Sedona ConferenceSM, any one participant (or observer) or law firm/company employing a participant or any of their clients. A list of all participants (as well as observers to the process) is set forth in Appendix B.

1 Readers should note that this effort represents the collective view of The Sedona Conference Working Group on Electronic Document

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The Need For Reasonable Standards To Address Electronic Data And Documents In Discovery
Before turning to the principles that the Working Group developed to address electronic document production, it is first necessary to discuss whether such standards are necessary in the first place. In short: Do courts, parties and counsel need any specific guidance in the area? The Working Group concluded that the answer to this question is "yes." This section sets forth the rationale behind that answer.

1. Electronic Documents Are Different Than Paper Documents
Since 1970, the definition of a "document" in Rule 34 of the Federal Rules of Civil Procedure has included a reference to electronic data.2 The role of electronic evidence in discovery is well recognized, as reflected in an oft-quoted passage from Wright & Miller: [I]t has become evident that computers are central to modern life and consequently also to much civil litigation. As one district court put it in 1985, `[c]omputers have become so commonplace that most court battles now involve discovery of some computer-stored information.'3 However, this principle ­ that storing information in an electronic format does not exclude it from the realm of potential discovery -- does not provide specific guidance on where courts and litigants should draw the lines in applying the proportionality test of Rule 26 to electronic discovery requests and disputes. In order to draw those lines, one needs to understand the differences between electronic documents and paper documents. The distinctive characteristics of electronic documents can be divided into quantitative and qualitative differences between electronic and paper documents.

A. Quantitative Differences
There are several quantitative differences between electronic and paper documents. First, electronic documents are created at much greater rates than paper documents. As a result, the amount of information available for potential discovery has exponentially increased with the introduction of electronic data. For example, the use of e-mail has risen dramatically in recent years. In 1998, the U.S. Postal Service processed approximately 1.98 billion pieces of mail. During that year, there were approximately 47 million e-mail users in the United States who sent an estimated 500 million e-mail messages per day, for a total of approximately 182.5 billion e-mail messages -- more than 90 times as many messages as the U.S. Postal Service handled the same year. In 2003, it is projected that there will be 105 million e-mail users in the United States, who will send over 1.5 billion e-mail messages a day, or

2 The Advisory Committee Notes for the 1970 amendments to the Federal Rules of Civil Procedure reflect the inclusive nature of the

term "document": The inclusive description of "documents" is revised to accord with changing technology. It makes clear that Rule 34 applies to electronic data compilations from which information can be obtained only with the use of detection devices, and that when the data can, as a practical matter, be made usable by the discovering party only through respondent's devices, respondent may be required to use his devices to translate the data into usable form. In many instances, this means that respondent will have to supply a print-out of computer data. The burden thus placed on respondent will vary from case to case, and the courts have ample power under Rule 26(c) to protect respondent against undue burden or expense, either by restricting discovery or requiring that the discovering party pay costs. Similarly, if the discovering party needs to check the electronic source itself, the court may protect respondent with respect to preservation of his records, confidentiality of nondiscoverable matters, and costs. [emphasis supplied].
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8A Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus, Federal Practice & Procedure, § 2218 at 449 (2d ed. 1994) (quoting Bills v. Kennecott Corp., 108 F.R.D. 459, 462 (D. Utah 1985)) (emphasis added). Similarly, the Manual for Complex Litigation (Third) recognizes that the benefits and problems associated with computerized data are substantial in the discovery process. Manual for Complex Litigation (Third), § 21.446 (1995).
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approximately 547.5 billion e-mail messages per year -- nearly as many messages in a day as the U.S. Postal Service handles in a year. The dramatic increase in e-mail usage and electronic file generation poses special problems for large corporations. A single large corporation can generate and receive millions of e-mails and electronic files each day. At least 93 percent of information created today is first generated in digital format,4 70 percent of corporate records may be stored in electronic format,5 and 30 percent of electronic information is never printed to paper.6 Not surprisingly, the proliferation of the use of electronic data in corporations has resulted in vast accumulations. While a few thousand paper documents are enough to fill a file cabinet, a single computer tape or disk drive the size of a small book can hold the equivalent of millions of printed pages. Organizations often accumulate thousands of such tapes as data is stored, transmitted, copied, replicated, backed up, and archived. Second, the frequent obsolescence of numerous computer systems due to changing technology creates unique issues for recovering electronic documents that are not present in paper documents. It is not unusual for an organization to undergo several migrations of data to different platforms within a few years. Moreover, because of the turnover in computer systems, neither the personnel familiar with the archival systems nor the technological infrastructure necessary to restore the out-of-date systems may be available when it comes time to access this "legacy" data. In a perfect world, electronic records that continue to be needed for business purposes or litigation are converted for use in successor systems and all other data is discarded. In reality, though, such migrations are rarely flawless. Third, electronic documents are more easily replicated than paper documents. While paper documents can be copied, electronic information is subject to rapid and large scale user-created and automated replication without degradation of the data. E-mail provides a good example. E-mail users frequently send the same e-mail communication to many recipients. These recipients, in turn, often forward the message, and so on. At the same time, e-mail software and the systems that are used to transmit the messages automatically create multiple copies as the messages are sent and resent. Similarly, other business applications are designed to periodically and automatically make copies of data. Examples of this include web pages that are automatically saved as "cache" files and file data that is routinely backed up to protect against inadvertent deletion or system failure.7 Fourth, electronic documents are more difficult to dispose of than paper documents. A shredded paper document is, for all intents and purposes, irretrievable. Likewise, a paper document that has been discarded and taken off the premises is generally considered to be beyond recovery. When a computer user deletes an electronic file, the computer simply removes a pointer to the body of the electronic data in a directory -- it does not delete the body of the document itself. Only when the computer requires the space that the particular file occupies will the content be partially or completely overwritten. As a result, computer systems may retain documents long after their users believe those documents are gone.

Kenneth J. Withers, The Real Cost of Virtual Discovery, Federal Discovery News (Feb. 2001) . Lori Enos, Digital Data Changing Legal Landscape, E-Commerce Times, May 16, 2000. 6 Richard L. Marcus, Confronting the Future: Coping with Discovery of Electronic Materials, 64 Sum Law & Contemp. Probs. 253, 280-81 (2001). 7 Neither the users who created the data nor information technology personnel are necessarily aware of the existence and locations of the replicant copies. For instance, a word processing file may reside concurrently on an individual's hard drive, in a network-shared folder, as an attachment to an e-mail, on a backup tape, in an Internet cache, and on portable media such as a CD or floppy disk. Furthermore, the location of particular electronic files is determined not by their substantive content, but by the software with which they were created, making organized retention and review of those documents difficult.
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This fact compounds the rate at which electronic data and documents accumulate and creates an entire subset of electronic data that exist unknown to the individuals with ostensible custody over them. Indeed, in recognition of the lack of effectiveness of simply deleting electronic documents, software is sold that purports to actually erase or wipe the data by overwriting the data numerous times.

B. Qualitative Differences
There are also several qualitative differences between electronic and paper documents. First, computer information, unlike paper, has dynamic content that is designed to change over time even without human intervention. Examples include the following: workflow systems that automatically update files and transfer data from one location to another; tape backup applications that move data from one cartridge to another to function properly; web pages that are constantly being updated with information fed from other applications; and e-mail systems that reorganize and remove data automatically. As a result, unlike paper documents, many electronic documents and collections are never fixed in a final form. Second, electronic data, unlike paper, may be incomprehensible when separated from their environments. For example, as a structured set of data, the information in a database is generally incomprehensible when removed from the structure in which it was created. If the raw data (without the underlying structure) in a database is produced, it will appear as merely a long list of undefined numbers. In order to make sense of the data, a viewer needs the context that includes labels, columns, report formats and other information.8 Often this can take the form of existing or customized "reports" that can be generated, obviating any need to access or produce the underlying database. Third, electronic documents are more changeable than paper documents. Documents in electronic form can be modified in numerous ways that are sometimes difficult to detect without computer forensic techniques. Moreover, the act of merely accessing or moving electronic data can change it. For example, booting up a computer can alter data contained on it. Simply moving a word processing file from one location to another can change creation or modification dates. In addition, drafts of documents may be retained without the user's knowledge or consent. Fourth, electronic documents, unlike paper, contain metadata, information used by the computer to manage and often classify the document that is not visible to the user. The ability to process and manipulate electronic data is facilitated by formatting codes and other information that are part of the document or file yet are not visible to the user. There are many examples of metadata.9

8 9

In addition, passwords, encryption and other security features can limit the ability of users to access electronic documents. Such information includes file designation, create and edit dates, authorship, comments, and edit history. Indeed, electronic files contain hundreds or even thousands of pieces of such information distinct from the user created content of a file. E-mail has its own metadata elements that include, among about 800 or more properties, such information as dates that mail was sent, received, replied to or forwarded, blind carbon copy ("bcc") information, and sender address book information. Typical word processing documents have hidden codes that determine whether to indent a paragraph, change a font, and set line spacing. The ability to recall inadvertently deleted information is another familiar function as is tracking of creation and modification dates. Similarly, electronically created spreadsheets may contain calculations that are not visible in a printed version or completely hidden columns that can only be viewed by accessing the spreadsheet in its native application. Internet documents contain hidden data that allows for the transmission of information between an Internet user's computer and the server on which the internet document is located. So-called "meta-tags" allow search engines to locate websites responsive to specified search criteria. "Cookies" are embedded codes that can be placed on a computer (without user knowledge) that can, among other things, track usage and transmit information back to the originator of the cookie.

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Fifth, it is more difficult to determine the provenance of electronic documents than paper documents. It is generally a routine matter to determine the authorship, or at least the custodianship, of a written document. Factors such as handwriting, signatures, and the location of the document facilitate such determinations. The manner in which electronic data is created, stored and transmitted makes determination of authorship a greater challenge. Electronic files are often stored in shared network folders that may have departmental or functional designations rather than author information. In addition, there is greater use of collaborative software that allows for group creation of electronic data, rendering the determination of authorship far more difficult. The ease of transmitting electronic data and the routine modification and multi-user editing process that often takes place further complicate the issue. Finally, while electronic documents may be stored on an individual's hard drive, it is likely that such documents may be found on high-capacity, undifferentiated backup tapes, or on network servers -- not under the custodianship of an individual who may have "created" the document. In real terms, these differences mean that rules principally designed to govern paper documents do not always provide meaningful guidance for disputes involving the discovery of electronic documents. For example, a preservation order to save "all records pertaining to the manufacture of X" could, if all documents were paper documents, be applied logically by a party, which could instruct employees to collect and preserve those reports. In the electronic age, such a command could present intractable problems. Because electronic information is both dynamic (i.e., constantly changing) and ubiquitous, short of suspending operations, all electronic data, wherever located and in whatever form, will have to be copied so that reports can be generated as needed in the future. That process could be extraordinarily complex and expensive, depending upon the size of the data involved, since it is typically impossible to suspend destruction of only the information covered by the preservation order.10

2. Standards For Dealing With Electronic Data And Documents Are Necessary And Appropriate
There are standards that govern the scope of discovery regardless of the resources available, the matters at issue, or whether a party is a defendant or plaintiff. For example, under the Federal Rules of Civil Procedure, depositions presumptively are limited to one day of seven hours. See Fed. R. Civ. P. 30(d)(2). Interrogatories presumptively are limited to 25 in number. See Fed. R. Civ. P. 33(a). All discovery is subject to the limitations of Rule 26. See Fed. R. Civ. P. 26(a)(1)(B) (disclosure of documents and things limited to those "in the possession, custody or control of the party and that the disclosing party may use to support its claims or defenses..."); Fed. R. Civ. P. 26(b)(1) (party may obtain discovery "regarding any matter, not privileged, that is relevant to the claim or defense of any party ..."). Rule 26(b)(2)(i) further provides that discovery may be limited if "the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive." Rule 26(b)(2)(iii) provides a standard for limiting discovery, i.e., if "the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the dispute." Local court rules likewise contain many rules or standards imposing limitations on all forms of discovery. These existing rules, however, do not account for the dramatic and substantial differences between electronic and paper documents outlined above. For example, an inartfully worded preservation order applied to electronic

10 Indeed, at an extreme such data might be interpreted to include machine or product line data that is collected for milliseconds, and attempting to retain all such data would effectively shut down manufacturing operations as retaining all data would quickly outstrip the storage capacity.

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records could cause a litigant to incur costs that are multiples of the value of the case before discovery even begins. Simply put, as a result of the qualitative and quantitative differences between electronic and paper documents, the current rules do not effectively address a myriad of issues unique to electronic documents. Some have argued that there is no need for electronic document production standards because the Federal Rules of Civil Procedure provide an adequate framework to address issues that arise. The Working Group rejected this argument for several reasons. First, we have first-hand experience of unreasonable and unfair burdens in producing electronic documents in litigation. These unfair burdens have included, among other things, spending millions of dollars to process and review large volumes of electronic documents that had little likelihood of being relevant to the case; and preserving at great cost thousands of backup tapes that were subsequently not sought by the opposing party later in discovery. Second, we believe that the unfair burdens would be minimized if standards were provided to parties and courts for addressing electronic document production. In the absence of standards, parties are left to guess as to what their obligations are, with the threat of discovery violations for incorrect guesses. Indeed, a number of courts facing electronic discovery issues have noted the lack of principled guidance in the area. For example, the court in McPeek v. Ashcroft observed, in the context of evaluating the discovery of e-mail backup tapes: [t]here is certainly no controlling authority for the proposition that restoring all backup tapes is necessary in every case. The Federal Rules of Civil Procedure do not require such a search, and the handful of cases are idiosyncratic and provide little guidance. The one judicial rationale that has emerged is that producing backup tapes is a cost of doing business in the computer age. In re Brand Name Prescription Drugs, 1995 WL 360526 at *3 (N.D. Ill., June 15, 1995). But, that assumes an alternative. It is impossible to walk ten feet into the office of a private business or government agency without seeing a network computer, which is on a server, which, in turn, is being backed up on tape (or some other media) on a daily, weekly or monthly basis. What alternative is there? Quill pens? McPeek v. Ashcroft, 202 F.R.D. 31, 33 (D.D.C. 2001) (footnote omitted). The general lack of standards has been noted by other judges as well. See, e.g., Shira A. Scheindlin & Jeffrey Rabkin, Electronic Discovery in Federal Civil Litigation: Is Fed. R. Civ. P. 34 Up to the Task?, 41 B.C. L. Rev. 327, 361 (2000) ("[W]hile courts have managed to resolve motions that raise Fed. R. Civ. P. 34 questions in the context of electronic discovery, they have generally approached these questions in a highly fact-specific manner, producing few general principles to aid in the resolution of similar disputes.").11 We believe that electronic document production standards arising out of our practical experiences would bring needed predictability to litigants and guidance to courts. The principles set forth herein are concrete enough to provide actual direction, but flexible enough to allow courts within their sound discretion to fashion solutions for the inevitable exceptions. For example, while documents and data in a computer or electronic device may be discoverable under Fed. R. Civ. P. 34 or its state law equivalents, we argue that discovery of all such documents and data is simply not feasible. Because the volume of

There are many examples of conflicting guidance in the case law. Compare, e.g., McPeek v. Ashcroft, 202 F.R.D. at 33 (restoring all backup tapes not necessary in every case) with Linnen v. A.H. Robins Co., 1999 Mass. Super. LEXIS 240 (Mass. Super Ct. June 15, 1999) (obligation imposed to cease recycling of backup tapes); compare, e.g., In re Brand Name Prescription Drugs Antitrust Litig., (1995 WL 360526 at *3) (holding that producing party must bear costs, as would be the case with paper documents, because the producing party chose to store the data electronically) with Rowe Entm't, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421 (S.D.N.Y. Jan. 16, 2002) (adopting multiple factor test to address cost allocation of electronic discovery burden).

11

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such information captured in computer systems today is already enormous, and increasing exponentially, the discovery of electronic data and documents must be firmly grounded in the principles of promoting the just, speedy, and inexpensive resolution of civil disputes and making the burden of discovery proportional to the anticipated benefit, consistent with Fed. R. Civ. P. 1 and 26 and their state law analogues. To serve this end, dialogue and reasonableness are essential. Parties are well served by an early discussion about the issues in dispute, the types of information sought, the likely databases where such information may be stored, and the realistic costs of preserving, retrieving, producing, and reviewing such data. Electronic discovery is a tool to help resolve a dispute and should not be viewed as a strategic weapon to coerce unjust, delayed, or expensive results. The need for good faith of the parties also extends to the efforts taken to reasonably retain relevant electronic data, the form of the production, and the allocation of the costs of the preservation and production. Each of these aspects of discovery should be considered in light of the nature of the litigation and amount in controversy, as well as the cost, burden and disruption to parties' operations.12

12

As a practical matter, such disputes are most likely to arise and require court intervention when the burdens of preservation and production are disproportionate among the litigants such as, for example, in products liability lawsuits brought by individuals with few, if any, electronic records, against large corporations with vast worldwide networks of electronic data.

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The Sedona Principles for Electronic Document Production
1. Electronic data and documents are potentially discoverable under Fed. R. Civ. P. 34 or its state law equivalents, and organizations must therefore properly preserve electronic data and documents that can reasonably be anticipated to be relevant to litigation. 2. When balancing the cost, burden, and need for electronic data and documents, courts and parties should apply the balancing standard embodied in Fed. R. Civ. P. 26(b)(2) and its state law equivalents, which require considering the technological feasibility and realistic costs of preserving, retrieving, producing and reviewing electronic data, as well as the nature of the litigation and the amount in controversy. 3. Parties should confer early in discovery regarding the preservation and production of electronic data and documents when these matters are at issue in the litigation, and seek, if possible, to reach agreement concerning the scope of each party's rights and responsibilities. 4. Discovery requests should make as clear as possible what electronic documents and data are being asked for, while responses and objections to discovery should disclose the scope and limits of what is being produced. 5. The obligation to preserve electronic data and documents requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation. However, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant data. 6. Responding parties are best situated to evaluate the procedures, methodologies and technologies appropriate for preserving and producing their own electronic data and documents. 7. When the responding party has shown that it has acted reasonably to preserve and produce relevant electronic data and documents, the burden should be on the requesting party to show that additional efforts are warranted under the circumstances of the case. 8. The primary source of electronic data and documents for production should be active data and information purposely stored in a manner that anticipates future business use and permits efficient searching and retrieval, and resort to disaster recovery backup tapes and other sources of data and documents requires the requesting party to demonstrate need and relevance that outweigh the cost, burden, and disruption of retrieving and processing the data from such sources. 9. Absent a showing of special need and relevance, a responding party should not be required to preserve, review or produce deleted, shadowed, fragmented or residual data or documents. 10. A responding party should follow reasonable procedures to protect privileges and objections to production of electronic data and documents. 11. A responding party may properly access and identify potentially responsive electronic data and documents by using reasonable selection criteria, such as search terms or samples.

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12. Absent specific objection, agreement of the parties or order of the court, electronic documents normally include the information intentionally entered and saved by a computer user. 13. Absent a specific objection, agreement of the parties or order of the court, the reasonable costs of retrieving and reviewing electronic information for production should be borne by the responding party, unless the information sought is not reasonably available to the responding party in the ordinary course of business. If the data or formatting of the information sought is not reasonably available to the responding party in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information should be shifted to the requesting party. 14. Sanctions, including spoliation findings, should only be considered by the court if, upon a showing of a clear duty to preserve, it is found that there was an intentional or reckless failure to preserve and produce relevant electronic data, and a showing of a reasonable probability that the loss of the evidence materially prejudiced the adverse party.

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Principles and Comments
1. Electronic data and documents are potentially discoverable under Fed. R. Civ. P. 34 or its state law equivalents, and organizations must therefore properly preserve electronic data and documents that can reasonably be anticipated to be relevant to litigation.

Comment 1.a. The Importance of Proper Document Preservation Policies
Organizations should adopt policies that provide rational and defensible guidelines on the treatment of electronic documents. These guidelines should be set with reference to the business, regulatory, and tax needs of the organization, including the need to conserve electronic storage space on e-mail servers. Thus, a company that determines it only needs to retain e-mail with business record significance could set these guidelines forth in its document retention policy. Employees would then be charged with responsibility for implementing the policy and neither destroying documents prematurely nor retaining documents beyond their useful life. Any such system should include provisions for "litigation holds" to preserve documents related to ongoing or anticipated discovery. The existence and reasonable effectiveness of such a program should be a significant consideration in any spoliation analysis.13 The advantages of a document retention policy are particularly pronounced with respect to backup tapes and hard drives. An effective document retention policy, combined with a preservation approach triggered by the reasonable anticipation of litigation, would establish the principal source of discovery material, thus reducing the need to routinely access backup tapes or hard drives. Under such a policy, backup tapes and hard drives would not be governed by an inaccurate characterization of them as retention systems, but rather by a proper understanding of their role in providing for system reconstruction in the event of loss of functionality.14 An appropriate electronic document preservation program would involve most or all of the following: · Establishment of a thorough but practical records management program and training of individuals to manage and retain business records created or received in the ordinary course of business; · Helping business units establish practices and customs, tailored to the needs of their businesses, to identify the business records they need to retain; · Implementing a system of presumptive limits (based on time or quantity) on the retention of e-mails that are not business records and develop communications policies that promote the appropriate use of the e-mail and other company-owned systems; · Structuring the recycle time applicable to backup tapes based on business needs; · Developing and implementing appropriate procedures to identify and notify relevant individuals and business units of the need to preserve electronic and other records for pending litigation; and · Establishing and maintaining awareness of the importance of the preservation of potential evidence in the case of threatened litigation, and training lawyers and business people on when and how to carry out their responsibilities.
13 Absent assigning one "records guardian" to oversee each employee, no organization can ensure 100% percent compliance with its records management program. 14 Unlike archival systems, which contemplate restoring data, in part or whole, to an existing, active system to be used along with other active data, backup systems are designed to completely restore active systems that have been lost or corrupted as the result of some disaster. Therefore, while data stored in offline archives may often be restored to the active system and searched, searching backup files often requires either taking active data off the system or `cloning' the system. Both alternatives involve significant disruptions and expense.

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Implementing policies with features such as those described above can provide a solid basis to plan for the treatment of electronic documents during discovery. By following an objective, preexisting policy, an organization can formulate its responses to electronic discovery not by expediency, but by reasoned consideration.15 Under such an approach, a responding party may be able to limit its discovery responses to producing only those materials that are reasonably available to it in the ordinary course of business.

Comment 1.b. Preservation in the Context of Litigation
Most organizations are subject to statutory and regulatory regimes that require the preservation of particular documents for specified periods of time. For example, the Sarbanes-Oxley Act of 2002, 116 Stat. 745 (2002), contains a number of document preservation requirements applicable to many publicly traded companies. Beyond these obligations, however, all organizations must remain cognizant of preservation obligations related to litigation. Discerning when the obligation attaches (and the scope of the obligation) involves a highly fact-specific inquiry. Failure to properly preserve documents can lead to serious consequences in litigation. See Metro. Opera Ass'n. v. Local 100, Hotel Emples. & Rest. Emples. Int'l Union, 212 F.R.D. 178 (S.D.N.Y. 2003) (holding that defendant and its counsel acted willfully and in bad faith in failing to comply with discovery by systematically failing to preserve and produce documents, including disposing of several computers after receiving notice that plaintiff intended to forensically examine those computers, and entering a finding of liability against defendant and awarding attorneys' fees based on discovery abuses). Illustration i. Acme Pharmaceutical Co. ("Acme") manufactures an antacid that is marketed under the name Doxin. On April 1, it receives a letter from Consumers' Laboratory, a consumer rights group, which states that Consumers' Laboratory intends to bring a suit alleging that patients who use Doxin have an increased risk of stroke or heart attack. Upon receipt of the letter, Acme can reasonably anticipate litigation and begins preserving all documents related to Doxin. Illustration ii. Big City Automotive Parts ("Big City") manufactures radiators. It has never received any complaints regarding the quality of its radiators, and it has conducted surveys of mechanics indicating that Big City radiators perform as well or better than competitors' radiators. On September 15, Big City is served with a complaint in a class-action lawsuit on behalf of all persons who purchased cars with Big City radiators between 1990 and 2001. The complaint alleges the radiators are defective. Because Big City could not have reasonably anticipated the suit prior to receiving the complaint, its preservation obligation is not triggered until service of the complaint.

15

Thus, for example, in Lewy v. Remington, 836 F.2d 1104, 1112 (8th Cir. 1988), the United States Court of Appeals for the Eighth Circuit held that, before giving a jury instruction regarding failure to produce evidence, a court should consider whether the party alleged to have destroyed evidence had a records retention policy that was reasonable considering the facts and circumstances surrounding the relevant documents, whether lawsuits concerning the complaint or related complaints had been filed, the frequency of such complaints, the magnitude of the complaints, and whether the retention policy had been implemented in bad faith.

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2. When balancing the cost, burden, and need for electronic data and documents, courts and parties should apply the balancing standard embodied in Fed. R. Civ. P. 26(b)(2) and its state law equivalents, which requires considering the technological feasibility and realistic costs of preserving, retrieving, producing and reviewing electronic data, as well as the nature of the litigation and the amount in controversy.

Comment 2.a. Discovery of Electronic Documents Under the Federal Rules
Federal Rule of Civil Procedure 34 permits the service by one party upon another of a request for documents in any format: Any party may serve on any other party a request (1) to produce and permit the party making the request, or someone acting on the requestor's behalf, to inspect and copy, any designated documents (including writings, drawings, graphs, charts, photographs, phone records, and other data compilations from which information can be obtained, translated, if necessary, by the respondent through detection devices into reasonably usable form), or to inspect and copy, test, or sample any tangible things which constitute or contain matters within the scope of Rule 26(b) and which are in the possession, custody or control of the party upon whom the request is served[.] The Notes to the 1970 Amendment to Rule 34 explain that electronic documents may be requested: The inclusive description of "documents" is revised to accord with changing technology. It makes clear that Rule 34 applies to electronics [sic] data compilations from which information can be obtained only with the use of detection devices, and that when the data can as a practical matter be made usable by the discovering party only through respondent's devices, respondent may be required to use his devices to translate the data into usable form. In many instances, this means that respondent will have to supply a print-out of computer data. The burden thus placed on respondent will vary from case to case, and the courts have ample power under Rule 26(c) to protect respondent against undue burden or expense, either by restricting discovery or requiring that the discovering party pay costs. Similarly, if the discovering party needs to check the electronic source itself, the court may protect respondent with respect to preservation of his records, confidentiality of non-discoverable matters, and costs. See also Anti-Monopoly, Inc. v. Hasbro, Inc., 94 CIV 2120, 1995 WL 649934, at *2 (S.D.N.Y. Nov. 3, 1995) ("It is black letter law that computerized data is discoverable if relevant"); Bills v. Connect Corp., 108 F.R.D. 459 (C.D. Utah 1985) (information stored in computers should be freely discoverable as information not stored in computers). Cf. Simon Property Group L.P. v. my Simon, 194 F.R.D. 639, 640 (S.D. Ind. 2000) ("[C]omputer records ... are documents discoverable under Fed. R. Civ. P. 34."). Discovery of electronic documents, however, is not without limits. The Notes to the 1970 Amendment to Rule 34 also point out that the courts have power under Rules 26(b)(2) and 26(c) to limit discovery:16 The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.
16 Although the 1970 Committee Notes only mention Rule 26(c), courts frequently place more reliance on Rule 26(b)(2) in limiting discovery.

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Upon motion by a party or by the person from whom discovery is sought, accompanied by a certification that the moving party has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action, and for good cause shown, the court in which the action is pending or alternatively, on matters relating to a deposition, the court in the district where the deposition is to be taken may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense[.] This broad power enables a court to limit discovery of electronic documents or condition their production on cost shifting in those cases where the court concludes that the burden of the discovery outweighs its ultimate benefit.

Comment 2.b. Scope of Reasonable Inquiries
The traditional approach to preserving and producing paper documents has been to locate and inform appropriate individuals of the specific need to preserve reasonably available information that may be relevant to the dispute at issue. This is followed by reasonable steps to facilitate gathering and producing documents, after review for privilege, trade secrets, or other appropriate bases for non-production. A similar approach is also proper for persons who may have relevant information in electronic format. The Federal Rules of Civil Procedure did not intend to place a new, different, and greater discovery obligation upon litigants with relevant electronic information merely because of the increased volume of potential materials involved.

Comment 2.c. Balancing Need and Cost of Electronic Discovery
The standard of Rule 26(b), requiring a balancing of the need for discovery with the burdens imposed, is particularly applicable to discovery of electronic documents and data. Among the factors that must be addressed in electronic discovery are: (a) large volumes of data, (b) data being stored in multiple repositories, (c) complex internal structures of collections of data and the relationships of one document to another, (d) data in different formats and coding schemes that must be converted into text to be understood, and (e) frequent changes in information technology. In this context, the need to accurately balance Rule 26(b) factors becomes particularly acute. Electronic discovery burdens must be proportional to the amount in controversy and nature of the case, or transaction costs due to electronic discovery will overwhelm the ability to resolve disputes fairly in litigation. See, e.g., Alexander v. Federal Bureau of Investigation, 188 F.R.D. 111, 117 (D.D.C. 1998) (limiting discovery to "targeted and appropriately worded searches of backed-up and archived e-mail and deleted hard-drives for a limited number of individuals."); Zonaras v. General Motors Corp., No. C-3-94-161, 1996 WL 1671236, at *4 (S.D. Ohio Oct. 17, 1996) (relying on proportionality test of Federal Rules of Civil Procedure to determine that benefits of discovery outweigh expense). It is important to recognize that costs cannot be calculated solely in terms of the expense of computer technicians to retrieve the data, but must also factor in other litigation costs. For instance, the court in In re General Instrument Corporate Securities Litigation noted that, while retrieval of the requested documents from backup tapes was not unduly expensive, the implications of a production order requiring that act were broader: [T]he technical matter of retrieving the documents from the back-up tapes would be just the start of the process. Defense counsel would then have to read each e-mail, assess whether the e-mail was responsive, and then determine whether the e-mail contained privileged information. Given that the volume of e-mail at issue here is potentially very large, the court finds that the burden of reviewing the requested documents would be heavy.

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In re Gen. Instr. Corp. Sec. Litig., No. 96 C 1129, 1999 WL 1072507 at *6 (N.D. Ill. Nov. 18, 1999). In addition, the non-monetary costs (such as the invasion of privacy of business data, and the risks to business and legal confidences and privileges) and secondary economic costs (including th