California's New Electronic Discovery Act

In July, Governor Arnold Schwarzenegger signed into law a new series of statutes pertaining to discovery. The new statutes are effective immediately. They address for the first time the reality that most businesses primarily communicate by e-mail and store documents electronically, and they impose new procedures for conducting discovery of electronic communications and records during litigation. The new law potentially could have a profound impact on litigants and third-party witnesses.

The following is a brief summary of the new eDiscovery law.

A. Broad Highlights of New eDiscovery Law.

The new eDiscovery law sets standards for the production and preservation of Electronically Stored Information ("ESI"). The law is comprised of two new statutes in the California Code of Civil Procedure ("C.C.P.") and 19 amendments to pre-existing statutes in the C.C.P.²  Those statutes govern both party and third-party witness discovery and largely track current federal regulations³ in this important area of modern civil litigation. In a nutshell, the new law:

     • Renders automatically discoverable all ESI that is relevant to the case.
     • Permits a party requesting ESI to specify its desired form of production. 
     • Sets a process for locating, re-creating and producing ESI that has been deleted or that is otherwise not "reasonably accessible." 
     • Defines the circumstances under which a Court can impose sanctions against a responding party or third-party witness (and/or their attorneys) for failing to produce or for altering ESI.
     • Establishes "clawback" procedures to protect parties or third-party witnesses who accidentally produce electronic records containing attorney-client privileged communications or attorney work-product.
We explore these specific changes below.

B. The New Production Requirements.

In the past, litigants typically could only obtain the electronic communications and records of parties and third-party witnesses if their lawyers specifically asked for ESI during discovery. Even then, some parties and third-party witnesses made only the most cursory effort to identify, collect and produce ESI, citing as a reason the high cost and undue burdens of more extensive production efforts. Under the new eDiscovery law, all discoverable ESI must be produced whether or not a lawyer has specifically asked for it in a party inspection demand or a third-party subpoena.

Litigants serving discovery also now have the option to select the form in which ESI must be produced (e.g., "native files," TIFF format, Adobe Acrobat). If a litigant does not specify a form in its inspection demands or subpoena, the responding party or third-party witness is required to produce the ESI in its "native files" (as the records are ordinarily maintained) or in another form that is reasonably usable.

This recent change is important because it places the burden on litigants and their counsel to (1) be well-versed in electronic storage systems, (2) understand which discovery strategies likely will yield the most responsive and efficient production, and (3) conduct the ESI discovery process in the most cost-effective manner possible. Our firm, for example, has an advanced Electronic Information Management system that allows our lawyers, through the use of certain software, to review, analyze and use considerable volumes of documents in various formats. The new law will allow us to select the form of ESI that is most compatible with our system and that is the most efficient for us to review, analyze and use in litigation.

C. Production of Hard-to-Access ESI.

One of the thorniest discovery issues pertains to ESI that has been deleted, but is forensically-recoverable, or that has been otherwise stored in systems that are difficult to access. Because the cost of recovering such "Not Reasonably Accessible ESI" ("NRA-ESI") is considerable, the Courts frequently have found themselves adjudicating contested battles over whether the requesting party or responding party must bear that expense. The new law specifically establishes rules for the production of NRA-ESI and allocating retrieval costs among the parties. It imposes a burden on responding parties or third-party witnesses to establish that (1) a particular discovery request seeks NRA-ESI and (2) compliance with the request would subject them to "undue burden or expense." Under the statute, this burden can be met simply by asserting a written objection. Once the burden is met, the party serving the discovery is required to establish to the Court that "good cause" exists to obtain NRA-ESI. Even so, the Court can set conditions on the discovery or it can reasonably allocate among the parties the costs to locate, re-create and produce NRI- ESI. For example, under the new law, the requesting party is required to pay for the cost of "translating" data compilations (even "accessible" ones) into a form that is usable for litigation.

D. Sanctions for Failing to Comply.

California Courts have always had the power to sanction parties or third-party witnesses and/or their counsel for failing to comply with appropriate discovery requests and for withholding otherwise responsive documents. Sanctions are a real concern for many parties and witnesses: Due to the volume of most stored electronic records, it is inevitable that a responding party or third-party witness will accidentally omit some responsive ESI from its production. However, the new law creates a "safe harbor" that limits the imposition of sanctions against parties and third-party witnesses and/or their counsel for failing to produce ESI where it was lost or altered due to the routine, good faith operation of an electronic information system.

The protections of this new "safe harbor" are available only where ESI is deleted or otherwise destroyed as part of an ESI retention/destruction policy that (1) was not instituted in response to a lawsuit or dispute; (2) has been consistently enforced; and (3) contained a valid "litigation hold" (i.e., destruction suspension) provision with which the party or third-party witness complied. In other words, for a company to avail itself of the "safe harbor" sanctions exception, the company must have two pre-existing policies (preferably articulated in writing for its own protection): One dealing with the timing and circumstances under which it deletes electronic documents in the ordinary course of its operations and a second requiring it, on the commencement of a dispute, to immediately preserve all electronic documents relevant to that dispute. A company might be precluded from availing itself of the "safe harbor" protections if it failed to have, or comply with, either policy.

E. Privilege Waiver Protection.

Occasionally, a responding party or third-party witness will accidentally produce a privileged document among its electronic records. In the past, parties or third-party witnesses who accidentally produced privileged documents (like an attorney-client communication) were compelled to take a number of steps to try to protect any such privilege from being waived by their inadvertent production. Those steps are not always successful in preserving privilege from waiver. The new law recognizes that, with volume of electronic records, privileged documents likely will be accidentally produced. It therefore presumes that, if privileged ESI has been accidentally produced, no waiver has occurred. This change in the law imposes a burden on the requesting party to file a motion with the Court to have the asserted privilege declared "waived" in accordance with traditional waiver principles.

F. Proposed Meet-and-Confer Obligation.

Two amendments to the California Rules of Court, C.R.C. 3.724 and 3.728, have been proposed by the California Judicial Council and are likely to be adopted in the coming months. If they are adopted, litigants will be required to confer about, and, if possible, jointly prepare a plan for, electronic discovery at the inception of every lawsuit. That plan must addresses a wide range of issues, including those pertaining to scope, cost, privilege, preservation, timing, and format of production. This proposed change is supposed to make eDiscovery more cost-effective and efficient.

G. Conclusion.

The proposed new Rules of Court and the new C.C.P. statutes are aimed at bringing California in line with other jurisdictions that already regulate eDiscovery. The new eDiscovery law requires parties and third-party witnesses to now (1) understand the ins and outs of their electronic document management systems and destruction policies and (2) comply with the new statutory constructs for identifying, formatting and producing ESI during litigation. This new accountability has created several risk management challenges, leading some businesses to prudently develop and implement ESI management and litigation strategies in advance of lawsuits or subpoenas.

If you have any questions regarding the new eDiscovery law or the steps that you should take to ensure compliance with the new eDiscovery law, please feel free to call us.⁴

1 This summary was prepared by Michael F. Donner of Stein & Lubin. All rights reserved.
2 The new and amended C.C.P. statutes are Sections 1985.8, 2016.010-2031.060, 2031.280 and 2031.300-2031.320.
3 The federal regulations are set forth in Rules 26, 34 and 45 of the Federal Rules of Civil Procedure. The federal eDiscovery law differs from the new California eDiscovery law in the following respects (among others): (1) federal law imposes greater preconditions than does state law when shifting discovery costs from the responding party to the propounding party (see Section C, below); (2) no automatic "safe harbor" protections exist under federal law with respect to the imposition of sanctions for failing to comply with appropriate discovery requests (see Section D, below); (3) the responding party, not the propounding party, has the burden under federal law to show that its production of ESI in a requested format would be unduly burdensome (see Section C, below); and (4) no automatic "clawback" procedures exist under federal law to protect privileged documents that have been accidentally produced (see Section E, below).
4 This posting is intended to summarize recent developments in the law for informational purposes only. It is not intended, and does not constitute, legal advice. We make no warranties of its completeness or accuracy. Because questions regarding the application and interpretation of these and other laws require qualified legal analysis, we ask that you direct any such questions to us following an appropriate, formal retention.

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