Preparing a construction case for arbitration or litigation creates the challenge of distilling the "best" evidence from a universe of documents that frequently exceeds hundreds of thousands of pages. Preserving, gathering, and reviewing all relevant project documents is often daunting. Project records may be maintained by a number of project personnel at various locations, including at the project site, at the home office, on personal electronic devices, at off-site retention facilities in an entirely different part of the world, or all of the above. Today, virtually all construction documentation is maintained in electronic format – often within a dedicated Electronic Document Management System (EDM).
Computer-based project administration of vast amounts of electronic data, known as "Electronically Stored Information" (ESI) has not gone unnoticed by lawyers, the courts, or arbitration tribunals. All recognize that electronic evidence from a construction project may never be printed or exist in hard copy. Rather, project records may only, in fact, be maintained on an individual's desk-top hard drive, laptop computer, a company network, cloud-based applications, and other forms of backup systems for electronic media. Very often contractors, owners, architects, engineers and subcontractors will use dedicated servers or cloud-based electronic EDM storage systems to maintain, review, disseminate and comment on project-related documents, including submittals, construction drawings, and correspondence.
As a result, virtually every US jurisdiction and numerous national and international arbitration tribunals now require parties to a construction dispute to preserve and produce relevant "electronic" documents for production to opposing parties. Because electronic documents are created, modified and distributed at a greater rate than paper documents, electronic discovery only compounds the issue of how best to review and analyze thousands of additional pages of potentially important documents. This note discusses the law of electronic discovery and some guidelines to assist parties in understanding the process of managing ESI in construction disputes.
ELECTRONIC DISCOVERY LAW
US federal and state courts (as well as arbitration tribunals) recognize that ESI, if relevant, is generally discoverable and that electronically-stored information is discoverable under the same rules that pertain to tangible written materials.1 Courts are almost universally in agreement that "computerized data is discoverable, if relevant."2 According to one court, "a discovery request aimed at the production of records retained in some electronic form is no different in principle, from a request for documents contained in any office file cabinet."3
Federal Rules of Civil Procedure 26 to 37 govern discovery procedures in federal civil actions. Many state rules follow the Federal Rules. The basis for the discovery of electronic "documents" in federal court arises from Rule 34 (Producing Documents, Electronically Stored Information, and Tangible Things, or Entering Onto Land, for Inspection and Other Purposes). Rule 34 was amended in 2006 "to confirm that discovery of electronically stored information stands on equal footing with discovery of paper documents" and to clarify "that Rule 34 applies to information that is fixed in a tangible form and to information that is stored in a medium from which it can be retrieved and examined."4
In 2015, the Federal Rules of Civil Procedure were amended in several ways that clarified the obligation to preserve, manage and produce ESI. For example, FRCP Rules 16 and 26 specifically require within the first few months after a case has been filed and served that the parties meet and confer regarding ESI production, ESI preservation, and the scope of ESI production. Under these rules, parties are required not only to address any anticipated issues with regard to ESI, but also essentially require the parties to identify all ESI locations and sources.
The 2015 Amendments also expressly addressed cost-shifting in all document discovery, not just ESI. Specifically, sub-section 26(c)(1)(B) was added to state that, when entering a protective order, a court may specify terms "including time and place or the allocation of expenses, for the disclosure or discovery…" The Advisory Committee Notes to the 2015 Amendments, however, explain that the amendment to Rule 26 was designed only to recognize courts' authority to order cost-shifting, not to normalize it.
Consistent with state and federal courts, many national and international arbitration tribunals now recognize the need for identifying and exchanging relevant documents and information that are maintained in electronic format. In fact, many dispute resolution tribunals, including the International Chamber of Commerce ("ICC") and International Centre for Dispute Resolution ("ICDR") have now established arbitration rules and advisory opinions regarding E-Discovery that specifically address the parameters and protocols for the production of electronic documents, including potential limits on E-Discovery, protocols for collection and production of ESI, identification of document custodians, and proportionality considerations.5
PREVENTING AND AVOIDING PITFALLS
Electronic discovery is now an essential consideration for all potential litigants. The most recent court pronouncements and rules indicate that a party's preservation and production obligations are increasingly complex, likely creating a greater chance for sanctions in the face of non-compliance.
- Preservation and Production Strategy
Construction practitioners must develop a deep understanding of the types of electronic media in use for any particular project – including the specific software applications and platforms used, as well as the potential sources of ESI that may be subject to disclosure – and develop a protocol for preservation of all relevant electronic data. Electronic management tools are commonly used on construction projects, many of which a practitioner would not necessarily consider when evaluating the extent of his or her client's ESI, but all of which are potentially subject to discovery. These include:
- Electronic Schedules
- CAD and Similar Electronic Files
- Architecture and Engineering Software
- Estimating and Job Cost Control Programs
- Project Management Programs
Construction practitioners should also consider the time when the obligation to preserve documents arises. Does the duty arise at the time of the first change order or first differing site condition? Every case is different, and the duty may arise at a much later point in time. At a minimum, the duty to preserve evidence begins with service of the complaint and before receipt of a document production request.6 In all cases, the construction practitioner should focus on document preservation issues and make sure his or her client understands the seriousness of the preservation obligation.
With the potential for broad discovery of electronic evidence at any given time, construction practitioners should advise their clients, if not in place already, to immediately implement document retention policies that address both electronic and paper data. Organizations should develop a solid understanding of how their data is stored, where it is stored, and how long it is stored before deleted.
- Preservation and Production Strategy – E-mail
E-mail merits special mention because it is often the most damaging electronic evidence in any given case. Email messages that with a stroke can be sent to numerous recipients, are often viewed as important evidence of fact. For this reasons, parties should be advised to create e-mail usage and retention policies. Counsel may want to consider the following list of suggestions in dealing with e-mail:
- Restrict the use of e-mail for work purposes only.
- Restrict the type of communications that can be sent by e-mail; ask questions such as, "if you wouldn't want this message published in a newspaper, don't send it in an e-mail."
- Set up e-mail retention policies that retain only the absolute minimum amount of electronic evidence for the absolute minimum amount of time.
- Instruct employees not to use humor (or worse) in e-mail messages.
Parties should also be aware of the risks involved in sending e-mail to their counsel or e-mail to which they attach attorney work product but may be inadvertently produced to opposing parties. Any communications with legal counsel or communications attaching attorney work product should be highly restricted and clearly labeled as such.
- Other Strategies
A few additional issues construction practitioners may consider in preparing for electronic discovery include doing the following:
- Establish protocols for electronic document review for privileged or protected material in order to avoid unintentional waivers.
- Remind opposing party early of the obligation to preserve electronic evidence and remind your client of the duty to do the same, including suspending any document destruction protocols that may be in place.
- Seek information through discovery regarding the state of opposing party's electronic evidence.
- Consider alternatives to all-out electronic discovery – work with opposing party to determine of you really need all of the requested information. Can the parties focus on determining where certain evidence may actually be located, therefore limiting costs?
There is a daunting universe of documents generated in most construction projects, and the reality of electronic data production emphasizes the importance of early preparation. Parties to a construction dispute should implement policies and procedures for use of company computer systems and electronic document retention. They should also implement systems for tracking all electronic files. Protocols should also be established for electronic document review for privileged or protected material in order to avoid unintentional waivers. Virtually every significant construction project today is run electronically, making E-Discovery a crucial part of any construction dispute.
- Rowe Entertainment, Inc. v. The William Morris Agency, 2002 WL 975713 (S.D.N.Y., May 9, 2002).
- Anti-Monopoly, Inc. v. Hasbro Inc., 1995 WL 649934, at *2 (S.D.N.Y. Nov. 3, 1995).
- Linnen v. A.H. Robbins Co., 1999 WL 462015, *6 (Mass. Super. June 16, 1999).
- FRCP Rule 34, Adv. Comm. Notes., 2006 Amendment (emphasis added).
- See, e.g., the July 2016 ICC Report on Managing E-Document Production; the June 2014 ICDR, International Dispute Resolution Procedures, Article 21, ¶ 6; the July 1, 2015 American Arbitration Association ("AAA") Construction Industry Arbitration Rules and Mediation Procedures, Rule R-24(b)(iv); the July 1, 2014 JAMS Comprehensive Arbitration Rules & Procedures, Rules 16.2 and 17.
- Mathias v. Jacobs, 197 F.R.D. 29, 39 (S.D.N.Y. 2000).