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The E-Usual Course of Business: ESI Application to Rule 34 Requirements

By Amanda E. Gordon – June 16, 2016

As the world has evolved, more and more of the legal industry has become automated. No longer is document collection accomplished by loading filing cabinets onto trucks but by forensically imaging hard drives and backup tapes. Gone are the days of staples or paper clips. These metal tools have been replaced with documents that reflect the parent-child relationships commonly used to logically differentiate electronic documents. In this “paperless” world, most documents are exclusively stored in electronic format rather than in printed form.

The electronic world has grown and with it the ever-present issue of legal discovery costs and how best to balance the burden and expense of producing electronically stored information (ESI). Currently, Rule 34 of the Federal Rules of Civil Procedure allows parties to produce documents in one of two ways: (1) by organizing and labeling them to correspond to the categories in the request or (2) by keeping them as they are in the usual course of business. Producing parties often prefer to provide documents as they are kept in the usual course of business because it is less burdensome and costly. Requesting parties may also want the documents as they are maintained on a day-to-day basis for strategic reasons. But what exactly does the “usual course of business” mean in today’s electronic world?

The Evolution of “Kept in the Usual Course of Business”
Traditionally, a party can satisfy the requirements of Rule 34 by either allowing the requesting party to inspect the records where the documents are maintained or producing copies of the records that have been organized, indexed, and labeled in the same manner as the producing party maintains them. Unlike paper documents, however, ESI is not physically stored in file folders, boxes, or cabinets but placed on hard drives or in a storage device and organized and presented to users as needed for specific purposes by computer applications.

There is also a wide variety of ESI, ranging from familiar and easily accessed email and word processing files to less familiar or accessible cloud storage, backup media, or fragmented data on hard drives. Parties can also uniquely produce ESI in a number of forms—portable document format (PDF) or tagged image file format (TIFF) digital image, or in the form it was created and maintained electronically (typically referred to as “native”), to name a few. To further complicate matters, most ESI, unlike paper, is also associated with or contains “metadata” information about the document or file itself that is recorded by the computer to assist in storing or retrieving the document or file.

The Federal Rules

Federal Rule of Civil Procedure 34, added in 1980, was designed to address the concern that parties could deliberately mix critical documents with other documents to make review more difficult. For that reason, the rule forbids parties from burying or hiding an important file among several unimportant documents. A party choosing to produce documents as they are maintained in the usual course of business bears the burden of establishing that the documents were so kept.

Rule 34(b)(2)(E) specifies how documents and ESI may be produced:

(E) Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information:

(i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request;

(ii) 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; and

(iii) A party need not produce the same electronically stored information in more than one form.

Some district courts have held that ESI is governed by (E)(ii) only and that (E)(i) does not apply to ESI, while other courts have applied both subsections to ESI. Practitioners are advised to carefully research their district for cases indicating their court’s preference. See Amanda E. Gordon, “Tips for Organizing ESI per the Document Request,” Business Torts & Unfair Competition, Winter 2016.

ESI Application to the “Usual Course of Business”
When producing electronic files, the manner of production determines whether the files are properly produced as they are kept in the usual course of business. Because businesses have an incentive to keep their documents to allow ready access, producing documents as kept in the ordinary course of business should permit a systemized retrieval of relevant documents. This requires a party to organize its ESI production in such a way as to enable the requesting party to substantially replicate the system that the producing party uses.

Computer forensics. The most exact replica of ESI as it is maintained in the usual course of business, short of producing the actual devices on which the files are stored, uses computer forensics to produce a copy of the devices on which the files are stored. This, however, is not often required nor necessary in most civil litigation. Forensic collection, the most sophisticated method of ESI collection, involves the employment of experts, which is costly and implicates issues of relevance, burden, privacy, and privilege. There are, of course, instances in which forensic collection and examination may be warranted. For example, if it is important to show ESI usage activity and patterns, forensic collection may be useful. However, baring these special circumstances, the far more common option is for a party to simply produce electronic files.

Electronic file production. If a party chooses to produce files but not the devices or forensic copies of the devices on which the files are stored, courts have found that the manner of production should preserve the functional utility of the electronic information produced. Courts have recognized that Rule 34 does not explain what it means to produce ESI as it is kept in the usual course of business, and very little case law guides this determination. An examination of the decisions that have addressed this issue, however, shows that Rule 34 is generally held to require (1) preserving the format of the ESI and (2) providing sufficient information about the context in which it is kept and used. Teledyne Instruments, Inc. v. Cairns, 2013 U.S. Dist. LEXIS 153497, at *31 (M.D. Fla. 2013).

ESI format. The format for disclosure of ESI as it is kept in the usual course of business depends on the type of electronic data. Production “as kept in the ordinary course of business” typically requires turning over electronic documents in the format in which they are kept on the user’s hard drive or other storage device. Some courts interpret Rule 34 to mean that a party producing electronic documents as they are kept in the usual course of business must provide them in native format.

Metadata have been found to be relevant when producing in the usual course of business. A file converted to another format solely for production, or for which the metadata have been scrubbed or altered, has not generally been found to be produced as kept in the ordinary course of business. For example, in Bray & Gillespie Management, LLC v. Lexington Insurance Co., 259 F.R.D. 568, 585 (M.D. Fla. 2009), quashed in part on other grounds, 2009 U.S. Dist. LEXIS 123236 (Nov. 16, 2009), the defendant requested that the plaintiff produce data in native format, and the plaintiff did not comply. While the plaintiff converted its native files to TIFF and stored the files’ metadata separately, the plaintiff gave the defendant only the TIFFs and held back the metadata. In withholding the metadata, the court found that the plaintiff had not produced documents in the usual course of business as claimed, and the court imposed sanctions while still requiring the plaintiff to produce the metadata.

In requiring metadata, courts have specifically voiced concern that conversion from native format may eliminate or degrade searching and other information processing features. These features, such as copy, paste, search, or sort, may allow a receiving party to identify relevant information in a document much more quickly, greatly enhancing the value of a document. Allowing a party to defeat information processing features undermines the purpose of producing information as it is kept in the usual course of business. For example, stripping embedded formulas or data from files such as Excel spreadsheets can substantially impair the functionality of the file and the accuracy of the production as a fair representation of the file as kept and used in the ordinary course of business.

When producing under Rule 34, it is important that all parties have a clear understanding of applicable terms. “Native format,” for instance, is often used without a common understanding of what it means in the context of the particular case. Not all ESI may be conducive to production in native format, and some other form of production may be necessary. In the same way, metadata often have no material evidentiary value—frequently, it does not matter what edits were made before the document was finalized or when it was printed. At least one court has found that electronic records were produced in the usual course of business where the records lacked metadata, but the requesting party did not specifically request metadata. Autotech Techs. Ltd. P’ship v. Automationdirect.com, Inc., 248 F.R.D. 556, 559 (N.D. Ill. 2008). Parties are encouraged to use the Rule 26(f) conference to resolve what documents need to be produced and in what format, even in defining “the usual course of business.” Because discovery, especially in federal courts, is often a self-managed process, cooperation is necessary for meaningful and efficient discovery.

ESI organization. In addition to producing in a specified format, the producing party must also provide information about where the documents are kept and how they are organized. Generally, courts have found that this means that ESI should be produced, organized, and labeled, and, if appropriate, indexed, just as the ESI is maintained by the producing party. For documents stored on a computer or external storage device, this means providing system metadata indicating at least the file name and path for produced files. The files and system metadata must also be organized in a manner that permits systemized retrieval of files. In other words, the requesting party must be able to search for and readily access files with particular characteristics. For example, a party must be able to search for all PowerPoint files in a particular folder.

The case of Valeo Electrical Systems v. Cleveland Die & Manufacturing Co., 2009 U.S. Dist. LEXIS 51421, at *6–8 (E.D. Mich. 2009), illustrates this point well. The plaintiffs produced over 270,000 pages of documents in PDF files, per party agreement, with two searchable indices describing the origin of all produced ESI. The defendant, expressing concern that metadata were omitted, moved to compel the plaintiff to organize and label the documents according to the production request. The court, although likening the indices to a “magic decoder ring” that would provide no more help than the Rosetta Stone, held that the plaintiff had demonstrated that the documents were kept in the usual course of business and was under no obligation to otherwise organize and label the documents. In so holding, the court noted that there was no indication that any document or file names had been modified and all ESI documents were searchable in Adobe or other commercial available litigation search programs.

For emails, the relevant context is somewhat different. A user typically does not view emails in a file browser but in an email client. While the relevant organizational information for files viewed in a file browser is the file name and path, the relevant information in an email client is the date the email is transmitted, the sender and recipients, and the subject line. As a rule, emails are produced in the usual course of business when arranged by custodian, in chronological order, and with any attachments, or when arranged in the same order as found on the hard drive of each document’s custodian, with attachments directly following the corresponding email.

For email collection, practitioners should work with the client immediately to identify and preserve any ESI and keep careful records showing where and from whom ESI has been obtained. Practitioners too often allow clients to address these concerns without proper direction.  The better course is to take an active role in ESI collection.

The “usual course of business” requirement, once relevant to file cabinets and paper clips, is now infused with concepts that range from forensics and metadata to applications and databases. Discovery requests have become voluminous and the costs of compliance enormous. Although rules regarding electronic discovery are still in their relative infancy, courts have generally turned to the historical reasons underlying Rule 34 to prevent discovery abuses stemming from document production in volume or disarray. Careful planning and cooperation are the best tools to meet your burden when producing ESI in the usual course of business.

Keywords: litigation, business torts, ESI, electronically stored information, e-discovery, usual course of business

Amanda E. Gordon is an associate in the Hartford, Connecticut, office of Robinson+Cole LLP.

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