The Ins and Outs of E-Discovery

December 08, 2009
By Theresa Lopez and Mark DeSouza

On June 29, 2009, Governor Arnold Schwarzenegger signed the California Electronic Discovery Act into law. The Act closely tracks the 2006 amendments to the Federal Rules of Civil Procedure, and, like the Federal Rules, will have a significant impact on discovery of electronically stored information. Given the sheer volume of electronically stored information in commercial and class action lawsuits these days, electronic discovery can be a minefield for litigants if not carefully navigated. But if properly and thoroughly understood, the Act can provide the tools for managing the costs and burdens of discovery.

The Act, like the Federal Rules, broadly defines electronically stored information as "information that is stored in an electronic medium." California Civil Code of Procedure Section 2016.020(e). If applied similarly to the Federal Rule, it will encompass all data stored on computers or other digital media. Despite this broad definition, though, the Act does place some limits on the discovery of electronically stored information. For example, if the electronically stored information "is from a source that is not reasonably accessible because of undue burden or expense," the producing party may avoid production on that basis, but must state which sources it will not search. California Civil Code of Procedure Section 1985.8(d). However, unlike the Federal Rules, under the Act, the producing party has the burden of demonstrating that the requested information is not reasonably accessible. Nonetheless, subject to any limitations set by the court, a requesting party may still obtain an order requiring production of some or all of the electronically stored information sought if good cause is shown-even if the producing party has established the information is not reasonably accessible.

The court may also limit production where the information is unreasonably cumulative or duplicative, it is available from less expensive or more easily accessible sources, or the likely benefit is outweighed by the burden and expense of production. These exceptions are based on the idea that the cost of discovery should be proportionate to the overall case. It is worth noting, however, that objections to discovery based on the burden and expense of production generally have not been successful under the Federal Rules unless substantiated with specific facts and evidence of the burden. The California Act will likely be similarly applied.

Another significant change found in the Act is the so-called "Safe Harbor" provision. Prior to the Act, courts had the power to impose sanctions against a party for failing to maintain relevant evidence. Now under the Act, courts may not impose sanctions against a party for electronically stored information that is lost "as a result of the routine, good faith operation of an electronic information system." California Civil Code of Procedure Section 1985.8(k)(1). A similar safe harbor clause is found in the Federal Rules, which protects parties using systems that automatically alter and overwrite electronic information. Based on the Federal Rule, the Act, if interpreted similarly, should protect against sanctions for the inadvertent loss of ephemeral data such as temporary caches, system logs, and other information that is routinely deleted for the efficient operation of a computer system. It is important to note, however, that the protection of the safe harbor provision only extends to the deletion of such data up to the point at which a legal duty to preserve is triggered. After preservation, or "legal hold," obligations are triggered, parties must take measures to suspend the automatic deletion of all relevant information and the failure to do so may subject them to sanctions for spoliation.

Because the amount of electronically stored information available is often voluminous, its discovery greatly increases the risk of inadvertently producing privileged information. In an apparent attempt to address this issue, the Act includes a clawback provision that allows a party to seek the return of any privileged electronically stored information inadvertently produced by notifying the receiving party. California Civil Code of Procedure Section 2031.285(a). Based on the text of the Act, however, the clawback provision appears only to apply to the physical return of the inadvertently produced documents, but does not address whether there has been a privilege waiver. Under the Federal Rules and the recently amended Federal Rule of Evidence 502, inadvertent disclosure is generally not a waiver of privilege as long as reasonable steps have been taken to prevent disclosure or the parties have an agreement entered by the court to such effect. Unfortunately, California does not have an analogous rule of evidence to clarify this issue. It remains to be seen how California courts will interpret this new rule, but it is important for parties to understand the limitations of the clawback provision.

Under prior California law, parties were already generally required to meet and confer regarding discovery disputes in connection with discovery motions. Despite this general requirement, though, many anticipated the Act would amend California Rule of Court 3.724 to include specific meet and confer requirements relating to electronic discovery; however, it did not. Recognizing this omission, the Judicial Council has now amended Rule 3.724 (effective Aug. 14, 2009).

Under the amended Rule 3.724, parties must engage in the meet and confer conference at least 30 days prior to the initial case management conference. Among other things, parties will now be required to discuss issues relating to preservation of electronically stored information, the form in which it will be produced, when it will be produced, the scope of discovery of electronically stored information, the method by which parties will be able to make claims of privilege or confidentiality, and - most importantly - how the costs of production will be borne or shared by the parties. Parties and their attorneys should be cognizant that this change to Rule 3.724 now means that parties must understand their information technology systems and capabilities much earlier in the case. They will need to be prepared to discuss those capabilities with the opposing side to flesh out any related discovery issues before they are in front of the judge at the case management conference. Under the new rule, parties cannot simply delay addressing issues relating to electronic discovery until they have a discovery demand in front of them or it is raised at a hearing. This rule forces parties to be proactive, not just reactive.

Electronic discovery can be expensive and burdensome. This is especially true in light of the new Act, which makes it clear that the scope of discovery includes all forms of electronically stored information. At the same time, though, the Act provide a framework for litigants and the courts to cope with the ever-increasing amount of electronically stored information. Companies that embrace the new rules and take steps to understand their information systems will be best positioned to reap the Act's benefits.

Mark DeSouza, a law student and summer associate at Crowell & Moring, contributed to this article.

Theresa C. Lopez is counsel at Crowell & Moring. Mark DeSouza is a law student and summer associate at Crowell & Moring.

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