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Illinois Adopts e-Discovery Rule - Part II

II. 2014 AMENDMENTS TO THE ILLINOIS SUPREME COURT RULES AND IMPORTANT COMMITTEE NOTES

Effective July 1, 2014, for the first time the Illinois Supreme Court made significant changes to the Rules regarding discovery and the inclusion of ESI. ESI can take many forms – from emails, Microsoft Documents and Excel spreadsheets to metadata and all other digital files. Essentially, ESI is an “all encompassing” form of discovery and has been a part of a significant upward trend in civil litigation.

In terms of electronic discovery, the Illinois Supreme Court made two substantial changes to Rule 201. The first amendment to Rule 201 can be found under the Scope of Discovery section (b)(4) in which the Illinois Supreme Court included the definition of electronically-stored information. Rule 201(b)(4) states, “ESI shall include any writings, drawings, graphs, photographs, sound recordings, images, and other data or data compilation in any medium from which electronically stored information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.”[7] Rule 201(b)(4) covers a broad spectrum of information and includes any data compilation the ESI has been stored in.

However, like the Federal Rules, there is a significant limiting factor. Under Illinois Supreme Court Rule 201(c)(3), the court can determine “whether the likely burden or expense of the proposed discovery, including electronically stored information, outweighs the likely benefit, taking into account the amount in controversy, the resources of the parties, the importance of the issues in the litigation, and the importance of the requested discovery in resolving the issues.”[8] This Amendment, which is intended to prevent abuse and unnecessary costs, gives the court discretion when granting requests to produce ESI discovery. Although practitioners have the ability to request relevant ESI, the court has the ultimate voice in determining whether the ESI request is proportional. However, the Committee Comments dated May 29, 2014 state that “this list is not static, since technological changes eventually might reduce the cost of producing some of these types of ESI.” [9] Thus, it appears the Court has acknowledged that since technology is constantly evolving, whether a proposed discovery request is in fact burdensome will be determined on a case-by-case basis.

Additionally, Rule 214 now provides practitioners with the opportunity to request the particular form in which electronically-stored information is to be produced during civil litigation. Rule 214(b) states that “with regard to electronically stored information as defined in Rule 201(b)(4), if a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms.”[10] This Illinois rule is modeled after FRCP 34(b) and its significance is that the Rule now allows practitioners to request documents to be produced in their native form with its metadata attached.

Lastly, although the Federal Rules have included a “clawback” provision in the federal rules since 2006, it was not until July 1, 2014 that the Illinois Supreme Court amended the rules to include a “clawback” provision in Illinois. Referring to Rule 201(p), the Illinois Committee commented on May 29, 2014 that this provision “is referred to as the ‘clawback’ provision and comports with the new Code of Ethics requirement that if an attorney received privileged documents, he or she must notify the other side.”[11] Thus, if privileged ESI is given to opposing counsel, the receiving party now has a duty to report this to the sender. However, in First Tech. Capital, Inc. v. JPMorgan Chase, the court found that privilege was waived when counsel failed to take reasonable steps to prevent the inadvertent disclosure of privileged materials. [12] The court thus imposed a sanction and allowed all “privileged” information to be used throughout the litigation process. This case reiterates the fact that overlooking production (on part of the practitioner) can lead to destructive penalties against his or her client. Thus, diligence is a key attribute to avoid unfavorable litigation results.

Overall, the amended Illinois Supreme Court Rules demonstrate that Courts across the country are catching up with the technology trends and adopting the FRCP. These Amendments not only give Courts more discretion in deciding when e-discovery requests are becoming excessive, but also provides practitioners with the option of what format ESI should be produced, which are major advances for e-discovery in Illinois.

III. FEDERAL RULES AND DECISIONS THAT WILL SERVE AS AUTHORITY AS TO HOW ILLINOIS RULES SHOULD BE IMPLEMENTED

The amendments to the FRCP in 2006 were not created in a vacuum but were based on some significant case law that shaped the course of e-discovery. The series of orders in the case of Zubulake v. UBS Warburg were decided before the Federal Rules were amended to include electronic discovery. [13] The Zubulake cases provide monumental decisions regarding FRCP 26 through 37, which governs discovery in all civil actions.

Since Illinois does not have any authoritative cases regarding e-discovery, the federal rules and its decisions should serve as persuasive authority for Illinois courts in applying the new Rules. Thus, it is crucial for Illinois practitioners to be familiar with the case law that laid the foundation for e-discovery, including cost-shifting, proportionality, spoliation sanctions, and authentication.

A. Cost-shifting

In the Zubulake case, a female employee brought an action against her former employer for gender discrimination and retaliatory firing. During the discovery phase of Zubulake I, the Plaintiff requested the emails of five individuals employed by the Defendant, UBS Warburg, LLC. The Defendant produced 100 pages of emails. However, Zubulake produced 450 pages of emails. After being questioned about its lack of production, the Defendant Corporation argued that the additional emails were on backup tapes and would cost nearly $300,000.00 to produce. Consequently, the issue became, (1) to what extent is inaccessible electronic data discoverable, and (2) who should pay for its production?

FRCP 34 states that a party is entitled to discovery of requested documents as long as the documents are relevant to the claim. The Court found that Zubulake’s discovery request was relevant and therefore, discoverable. In fact the Court stated, “Zubulake herself has produced over 450 pages of relevant emails, including e-mails that would have been responsive to her discovery requests but were never produced by UBS. These facts strongly suggest that there are e-mails that Zubulake has not received that reside on UBS’s backup media.”[14] Even though the Court found that Zubulake was entitled to the inaccessible data on UBS’s backup file, the issue remained as to whether Zubulake and UBS had to split the cost for the production of the evidence.

The court ruled that there is a presumption that the responding party must bear the expense of complying with discovery requests. [15] In fact, the trial judge urged in Zubulake I that “courts must remember that cost-shifting may effectively end discovery, especially when private parties are engaged in litigation with large corporations. As large companies move to entirely paper-free environments, the frequent use of cost-shifting will have the effect of crippling discovery in discrimination and retaliation cases. This will both undermine the ‘strong public policy favoring resolving disputes on their merits,’ and may ultimately deter the filing of potentially meritorious claims.”[16] Essentially, cost-shifting will only be considered when e-discovery imposes an undue burden on the responding party. The burden is undue when it “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.” [17]

In the world of e-discovery, the production of documents is unduly burdensome if it is kept in an inaccessible format. While information is ‘accessible’ if it is available in a readily usable format, information is ‘inaccessible’ if it is found on process servers that require defragmenting data and reconstructing erased data. In Zubulake I, USB kept ninety-four files on it backup file, which is an inaccessible format. [18] If USB were required to produce these files, it would be extremely costly and thus, the Court stated it was appropriate to consider cost-shifting.[19] Additionally, the cost-shifting analysis is found within the proportionality analysis of FRCP 26.

B. Proportionality

One of the major rules regarding electronic discovery is the “proportionality test” indicated in FRCP 26(b)(2)(c). This rule provides that discovery will be limited by three circumstances, if one shall arise: (1) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive; (2) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or (3) the burden or expense of the proposed discovery outweighs its likely benefit considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.[20] Although FRCP 26(b)(2)(c) is applied on a case-by-case basis, critics have noted that Courts have not applied this rule with the vivacity that it deserves. However, “as the Bench and the Bar confront issues of the volume and complexity of electronic discovery, the Rule will be featured more often in arguments and rulings.”[21]

In Zubulake II the court looked at this multi-factor test – adopted in FRCP 26. The Court instructed that whenever a multi-factor test is applied, you cannot simply add up the factors. On the other hand, the test is to serve only as guidance since it “cannot be mechanically applied at the risk of losing sight of its purpose.”[22] After weighing the factors of the “proportionality test” the Zubulake II court ordered UBS to produce all of the files found on its backup tape at its own expense.

More recently, the issue of proportionality has been litigated in Cochran v. Caldera Medical, reiterating that the proportionality analysis found under FRCP 26(b)(2)(c) is often determined on a case-by-case basis.[23] In Cochran v. Caldera Medical, the Plaintiff filed a products liability claim resulting from internal organ failure she experienced after using implantable surgical meshes sold by the Defendant. After delivering requests to produce documents to the Defendant, the Defendant urged the court to issue a protective order to forbid the production of such documents since all the requested documents consisted of ESI and would be extremely costly to the Defendant. If the court chose not to enter the protective order in favor of the Defendant, the Defendant asked the court to order the Plaintiff and Defendant to split the cost of producing the ESI. The court acknowledged Defendant’s claim under FRCP 26(b)(2)(c) that it had limited resources and the costs in producing the ESI would be quite excessive. However, the court weighed the Defendant’s burden with the seriousness of the Plaintiff’s claim and injuries. Despite the Defendant’s limited resources, the court considered the fact that the Defendant had 1,700 pending lawsuits, and thus, “given the volume of the litigation against it, defendant inevitably would need to gather the information sought by plaintiffs.” [24] Ultimately, the court held under FRCP 26(b)(2)(c) that Plaintiff’s request was not unduly burdensome and after the litigants had another court-ordered meet and confer, the parties would be able to reduce the ESI sought and decrease costs.

C. Sanctions

Spoliation of evidence is the most reoccurring problem behind issuing sanctions against practitioners and significantly impacting the outcome of litigation. Spoliation is defined as the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.[25] Additionally, FRCP 37(a) specifically states that if a party fails to make a disclosure required by FRCP 26(a), any other party may move to compel disclosure and for appropriate sanctions. [26]

The sanction imposed on the litigant depends on a variety of factors. While these factors are not set in stone, they are factors that are often balanced by the court. These factors include the culpability of the spoliation party, the prejudice to the non-offending, the degree of interference with the judicial process, whether lesser sanctions will remedy the harm and deter

future spoliation, the practical relevance or importance of the evidence, whether sanctions will unfairly punish a party for attorney misconduct, and more. [27]

Although there are a variety of sanctions available, there are typically two sanctions that are passed down by courts. One sanction commonly enforced by the courts is the negligence instruction. Essentially, the courts give the jury an instruction that requires the wronged party to prove that the spoliator acted with the willful intent to destroy or destruct evidence. The other, more severe sanction enforced by the courts is the adverse inference instruction. This sanction is far more devastating to a practitioner because this sanction instructs the jury to assume that the destroyed evidence, or lost ESI, would be unfavorable to the spoliator if it had been produced. The adverse inference instruction was first introduced in Zubulake v. UBS Warburg, LLC. V, a monumental case that was a wake-up-call for business corporations and legal firms to preserve all ESI, including emails. The court held that the Defendant UBS failed to preserve electronically-stored information, which resulted in severe sanctions for failing to produce relevant evidence. The court stated, “in practice, adverse inference often ends litigation – it is too difficult a hurdle for the spoliator to overcome. The in terrorem effect of an adverse inference is obvious. When a jury is instructed that it may infer that the party who destroyed potentially relevant evidence did so out of a realization that the evidence was unfavorable, the party suffering this instruction will be hard-pressed to prevail on the merits. Accordingly, the adverse inference instruction is an extreme sanction and should not be given lightly.” [28]

The state of mind required for both instructions is quite different. For example, in order for an aggrieved party to receive an adverse inference instruction against a spoliator, the spoliator’s conduct must be intentional and willful. On the other hand, for the aggrieved party to receive a negligence instruction against a spoliator, the aggrieved party must show that the spoliator was negligent in destroying the evidence and that the evidence was relevant.[29]

In Illinois, Supreme Court Rule 219(c) discusses sanctions and penalties that are available against practitioners for failing to comply with any court order or Illinois Supreme Court rule. The Illinois rule does not indicate whether it strictly follows the negligence instruction or the adverse inference instruction sanction. In fact, the rule states that “the court, upon motion or upon its own initiative, may impose upon the offending party or his or her attorney, or both, an appropriate sanction.”[30] Since electronic discovery and ESI is at the forefront of most discovery requests and orders today, Illinois added a Committee Comment to the Illinois Supreme Court Rule revising the rule as of May 29, 2014. The revision states: “The Committee believes that the rule is sufficient to cover sanction issues as they relate to electronic discovery. The rulings in Shimanovsky v. GMC, 181 Ill.2d 112 (1998) and Adams v. Bath and Body Works, 358 Ill.App.3d 387 (1st Dist. 2005) contain detailed discussion of sanctions for discovery violation for the loss or destruction of relevant evidence and for the separate and distinct claim for the tort of negligent spoliation of evidence.”[31]