How To Protect Your Electronic Information System From Being Destroyed

Transcription

1 LINKS DATABASES SEARCH FIRMS MEMBER PROFILES FORUM VENDORS CALENDAR SEARCH My Dashboard My Messages (1) Firm Menu My Articles My Expert Witnesses My Links My Mediators / Arbiters My News / Updates My Verdicts My Briefs My ADR Documents My Other Documents Subscriptions My Profile Logout CALIFORNIAS NEW ELECTRONIC DISCOVERY ACT ASSEMBLY BILL NO. 5 Authored by: Pauline Self Esq. Gordon & Rees LLP on July 30, 2009 CALIFORNIA'S NEW ELECTRONIC DISCOVERY ACT (Assembly Bill No. 5) By Pauline Self, Esq. Gordon & Rees LLP Add this article as favorite Add new article Subscribe to this document The California Electronic Discovery Act s provisions largely track the electronic-discovery amendments to the Federal Rules of Civil Procedure, which took effect in The Act establishes procedures for the discovery of electronically stored information ( ESI ), as well as the objection to the information, and serves to extend the Civil Discovery Act which requires the production of hard-copy documents as they are kept in the usual course of business to the production of electronically stored information. The Act defines ESI as information that is stored in an electronic medium and defines electronic broadly as relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. (Cal. Code Civ. Proc (d) and (e).) Furthermore, the Act defines the manner in which parties may seek protective orders regarding demands for production, inspection, copying, testing or sampling of electronically stored information, on grounds that the information is not reasonably accessible because of undue burden or expense. Other features of the Act include that: electronically stored information should be provided in the form ordinarily maintained or in a reasonably usable form; a party may object to the production of electronically stored information on burden or inaccessibility grounds, but that party bears the burden of proving that objection, and a court still may require production upon a showing of good cause by the demanding party; and the Act is applicable to third parties pursuant to subpoenas, although one can expect potentially less e-discovery burdens being placed on third parties as opposed to parties in a case. Of significance, the Act (1) provides a safe harbor provision that provides that a court shall not impose sanctions on a party or an attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered or overwritten as a result of the routine, good-faith operation of an electronic information system; (2) the Act does not require the parties to meet and confer regarding discovery of ESI prior to a pre-trial conference; (3) the Act includes Federal Rule 45 s protections for non-parties in the context of responding to subpoenas; and (4) the Act contains an urgency clause which make the Act s provisions effective immediately. Thus, litigants in California courts are expected to be knowledgeable on the provisions and compliant. 1 Furthermore, it is advantageous for clients to develop an ESI discovery strategy early on and be prepared to deal

2 with these types of discovery issues in the future, should they arise. It is recommended that our clients have a litigation hold policy as well as a documented, global retention policy in place that specifies how long information is kept, what type of information is retained and for how long, and what type of information is destroyed and when information is destroyed. In addition, procedures should be in place to ensure any document retention and litigation hold policies are enforced. A good document retention and litigation hold policy can be defense against catastrophic litigation consequences that result from a claim that the client has destroyed evidence. SIGNIFICANT PROVISIONS OF THE ACT Form of production Similar to the Federal Rules, the Act provides procedures by which parties are to specify the form of production. A party must specifically request the production of ESI and in requesting the material, may specify the format in which the material is to be produced. Cal. Code Civ. Proc (a)(2). If the requesting party fails to specify a format for production, the responding party may choose a format on its own, provided the format is either as the material is ordinarily kept or in another reasonably accessible format. Cal. Code Civ. Proc (d)(1). Once the responding party produces the material in the form specified by the requesting party or the form chosen by the responding party if no request was made, the responding party need not produce the material again in any other format. Cal. Code Civ. Proc (d)(2). Note, these requirements mean that counsel should be aware of the different forms in which the information can be produced and the benefits and potential detriments to the client. Extent of production As with any other objection in discovery, if a responding party objects to electronic production based on lack of reasonable accessibility, the asking party can move to compel further responses and production. Cal. Code Civ. Proc et seq. However, the Act places the burden on the responding party to seek a protective order and demonstrate that the requested ESI is from a source that is not reasonably accessible because of undue burden or expense. (Cal. Code Civ. Proc (d).) [emphasis added.] 2 The responding party also bears this burden if it chooses to seek a protective order based on inaccessibility of the material, rather than simply making objections. Cal. Code Civ. Proc (d). 3 Limits on Production. The court may impose limits on the discovery of ESI if one of a number of conditions exists, such as the information is able to be produced from a less-burdensome source, the discovery sought is unreasonably cumulative or duplicative, or the likely burden or expense of producing the ESI outweighs the likely benefit. 4 Inspection/production demands and inaccessible data The Act does not change how a party responds to inspection demands, but rather adds ESI to the categories of materials addressed in Cal. Code Civ. Proc et seq. A party responding to a demand to inspect ESI must respond separately in writing to each response, providing a statement of compliance or inability to comply or an objection. Cal. Code Civ. Proc (a). However, the act contains specific provisions for objections to the production of ESI based on lack of reasonable access to such material. Under Cal. Code Civ. Proc (d), a party does not have to produce ESI that is from a source that is not reasonably accessible because of undue burden or expense. The responding party must state in its written response to the discovery request which sources it will not search because they are not reasonably accessible. Cal. Code Civ. Proc (d). The responding party must object specifically, identifying the types or categories of sources it will not search and produce from, based on inaccessibility and this will preserves the objection. Cal. Code Civ. Proc (d). 5 Thus, it is imperative for counsel to have an understanding of the client s systems and their accessibility before serving written responses to document requests. Cost shifting The Act also allows the court to order production of ESI for "good cause" even if the responding party establishes that the ESI is not reasonably accessible. In such circumstances, however, the court may set conditions for the production from sources that are not reasonably accessible, including shifting the costs of production to the

3 the production from sources that are not reasonably accessible, including shifting the costs of production to the requesting party. 6 Meet-and-confer requirements Unlike the federal Rule 26 that set forth specific requirements to meet and confer on ESI issues in connection with the pre-trial conferences, California s Rule of Court was not amended in the act to require such discussions, despite the fact that the Judicial Council had recommended in 2008 that such a provision be included. Therefore, there is no requirement to meet and confer on ESI issues before a pre-trial conference. That said, it is expected that many state court judges will expect such pre-trial discussions and best practices support such discussions in any event. 7 Sanctions and " safe harbors" In California, Cal. Code Civ. Proc (i)(1) and (d)(1) provide a safe harbor provision, providing that absent exceptional circumstances, a court shall not impose sanctions on a party or any attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered, or overwritten as the result of a routine, good faith operation of an electronic information system. 8 Note, the provision does not alter a party s obligation to preserve ESI when it is on notice of litigation. 9 Thus, the Act essentially indicates that if a party or an attorney who has implemented a routine, good faith operation of an electronic system, fails to produce electronically stored information that has been lost, damaged altered or overwritten, that party or attorney shall not be sanctioned. 10 Privileged information. A party that inadvertently produces ESI that is subject to a claim of privilege or attorney work product protection may seek the return of the ESI by notifying the receiving party. Cal. Code Civ. Proc Upon such notice, the receiving party must return the information or present it to the court under seal for a privilege determination and may not use the information until the ESI the claim of privilege is resolved. The receiving party may file a motion within 30 days of the notice to contest the producing party s claim of privilege over the ESI. 11 Non-party subpoenas for ESI The Act s same procedures for production of electronically stored information apply to third parties who are compelled to produce information in response to valid subpoenas. (Cal. Code Civ. Proc et seq.) Courts Are Required to Limit ESI Discovery Under Certain Circumstances The Act provides that the court must limit the frequency and extent of ESI discovery of (1) it is possible to obtain the information from a more convenient, less burdensome or expensive source; (2) the discovery sought is unreasonably cumulative or duplicative; (3) the party seeking the discovery has had ample opportunity to previously obtain the information sought; or (4) the likely burden or expense outweighs the likely benefit, taking into account the amount in controversy, the resources of the parties, the importance of the issues, and the importance of the requested information in resolving the issues. Code Civ. Proc (f) (as amended). 12 IMPORTANT RECOMMENDATIONS FOR CLIENTS AND COUNSEL REGARDING IMPLEMENTATION OF A LITIGATION HOLD POLICY The importance of a document retention/destruction policy is emphasized by the safe harbor provisions of the new rules. 13 Under the new rules, a responding party must demonstrate that it was routinely adhering in good faith to an operation of an electronic information system, when the ESI was destroyed and/or cannot be produced. Thus, in an abundance of caution, it is advised that as soon as a client is sued, lawyers have an obligation to put in place a litigation hold to preserve electronic information that may be subject to discovery. For instance, if the client does not have the electronic information requested by plaintiffs, the client and counsel should have a sound document retention policy in place so that they can point the court to it and avoid sanctions. Accordingly, the following four recommendations, in pertinent part, 14 were made by featured expert Joel Bennett, Esq., regarding steps counsel and clients should take in order to comply with the FRCP electronic discovery rules and litigation holds. However these recommendations are helpful and can also be

4 discovery rules and litigation holds. However these recommendations are helpful and can also be implemented when dealing with the California Electronic Discovery Act. 1. Develop a litigation hold Policy Corporations and their counsel should develop a litigation hold policy which, when implemented, suspends routine corporate document destruction and retention procedures. Counsel must stop client deletion practices and automatic systems that destroy digital evidence. Unlike paper documents, where doing nothing ensures that information will be preserved, doing nothing with digital evidence can lead to data being lost either intentionally or inadvertently, by deletion, overwriting, or recycling. Computer malfunctions or human errors can also lead to the inadvertent loss of important electronic data. Given the lawyer s paramount role in preserving evidence, asking the client for detailed systems information such as the following is essential and now required by the new rules: - What relevant electronic evidence is in danger of being lost by deletion, overwriting, or recycling? - Are the firm s backup tapes recycled; and, if so, how often? - Are massive amounts of old information routinely purged from the system to create space for new files on the system? - Are s and other electronically stored information automatically deleted after they reside on the system or individual computers, including ISP accounts, for a set period of time (e.g., 30 days)? - Are s stored on a central server or individual desktop or laptop computers? - Are computers ever wiped clean and reformatted, such as when an employee leaves the company? - Are any IT infrastructure changes, modifications, or upgrades planned for the near future; if so, how will archival data be migrated to the new system? The next step is for counsel to ensure that such practices are immediately suspended and to document the steps the client takes in doing so. 15 Steps counsel should take to ensure a defensible litigation hold process Regularly audit client document retention policies to determine if ESI is being either deleted or archived as the policy dictates; Create a protocol to preserve electronic information to be implemented when litigation arises; train relevant personnel including information technology personnel to be witnesses; conduct suspension fire drills, have a litigation hold response team in place, which includes in-house and outside counsel; implement a comprehensive litigation-hold program which tells corporate employees when records should be preserved; become familiar with all client s back-up data systems; and ensure that the litigation hold policy fully covers all ESI including back-up tapes. The following outlines a suggested step-by-step litigation hold checklist: - Meet with the client and become familiar with the client s document retention system and documentary terminology; - Identify key players and confirm their policies on retention; - Meet with IT personnel who can facilitate a litigation hold and assist with document production; - Issue a thorough litigation hold to all employees who may have relevant information; - Communicate with the client to monitor preservation efforts and periodically reissue litigation holds; - Take possession of data or ensure that data is segregated in a safe location; and, - Document all the steps taken to preserve discoverable information. Counsel Should Act Fast Once a corporation is either sued or anticipates that a claim may be made, a duty to preserve ESI immediately attaches and the corporation must issue a litigation hold memo to prevent destruction of potential evidence. In house and general counsel thus needs to act immediately to implement pre-litigation protocols so that there is a procedure in place implementing a preservation hold policy immediately when the need arises. Counsel needs to anticipate litigation being filed and/or a claim arising against all corporate clients. 16 The specific standard on the duty to preserve electronic information is extensively discussed in a series of decisions authored by Judge Shira A. Scheindlin from the U.S. District Court for the Southern District of New York in the matter entitled Zubulake v. UBS Warburg LLC, Civil Action No In Zubulake IV, Judge

5 York in the matter entitled Zubulake v. UBS Warburg LLC, Civil Action No In Zubulake IV, Judge Scheindlin found the preservation obligation arises [o]nce a party reasonably anticipates litigation. Zubulake IV, 220 f.r.d. AT 218. Judge Scheindlin added that once litigation is reasonably anticipated, a party must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents. Other courts have made clear, however, that the standard for instituting a litigation hold does not necessarily arise when a party is notified that a formal complaint is filed; instead the litigation hold obligation arises well before the actual filing and service of the Complaint. Several courts have held that once a demand letter is sent, the parties should reasonably anticipate litigation and should therefore cease routine destruction of electronic information. 17 The risks of not being prepared Under the FRCP and The Act, the risks of not being prepared now are potential sanctions against the client and potentially, the attorney, because of a failure to anticipate and have in place document preservation procedures and litigation hold policies both pre-litigation and after a claim arises. The importance of a document retention/destruction policy in order to avoid sanctions, is further emphasized by the safe harbor provisions of the new rules. 18 Under the Act, in order to avoid sanctions for failure to produce ESI information, a responding party must demonstrate that they had in place a routine, good faith operation of an electronic information system. Thus, in an effort to avoid sanctions, it is imperative to implement a document retention/destruction policy and document each step along the way. 19 RELEVANT CASE LAW DEMONSTRATING THE RISKS OF NOT HAVING DOCUMENT PRESERVATION POLICIES IN PLACE More recently, there has been numerous cases that demonstrate the perils of electronic discovery gone wrong and identify the risks of failing to have in place document preservation procedures and litigation hold policies: 20 Leon v. IDX Systems Corp., 464 F.3d 951 (9th Cir. 2006) (Plaintiff ran hard drive wiping program on business laptop erasing 2,200 files; dismissal of suit as sanction entered). E*Trade Securities LLC v. Deutsche Bank AG, 230 F.R.D. 582 (D. Minn. 2005). (Adverse inference instruction granted for erasure of hard drives and failure to preserve backup tapes used as archive). 3M Innovative Properties Co. v. Tomar Electronics, 2006 WL (D. Minn. 2006). (Adverse inference instruction and deeming certain facts established granted as sanction for failure to establish litigation hold, resulting in loss of s). Z4 Technologies, Inc. v. Microsoft Corp., 2006 WL (E.D. Tex. 2006). (Failure to produce key and failing to disclose the existence of a database; enhanced damages (of $25 million plus almost $2 million in attorneys fees) in patent infringement action granted). Zubulake v. UBS Warburg LLCI, 229 F.R.D. 422 (S.D.N.Y. 2004). (Deletions of s in violation of litigation hold and own records retention policy; adverse inference instruction granted; UBS was sanctioned for destroying relevant s during the litigation and there was a 29.3 million verdict for the plaintiff). Optowave Co. Ltd. v. Nikitin, 2006 WL (M.D. Fla. 2006). (Adverse inference instruction recommended for reformatting of hard drives, erasing files and s after notice of litigation received; defendant was computer expert). Ridge Chrysler Jeep, LLC v. Daimler Chrysler Services North America LLC, 2006 WL (N.D. III. 2006). (Dismissal sanction based on willful withholding and destruction of electronic records). Consolidated Aluminum Corp. v. ALCOLA, Inc., 2006 WL (M.D. La. 2006). (Failure to suspend automated deletion program for litigation hold; negligent failure to preserve; adverse inference instruction denied). Toshiba American Electronic Components Inc. v. Superior Court (Lexar Media) (Cost shifting case where California Court of Appeal ruled that the party seeking the production of data from computer backup tapes must bear the reasonable costs of retrieval and production. In that case, the costs amounted to nearly $2 million.)

6 Coleman v. Morgan Stanley, 2005 W.L (2005) (1.45 Billion Dollar Verdict following adverse inference jury instruction after the Court found that a certification regarding Morgan Stanley s backup tapes was false when made). In ACORN v. County of Nassau (2009) WL (E.D.N.Y. Mar. 9, 2009),plaintiffs moved for an adverse inference instruction alleging that defendants failed to timely implement a litigation hold which resulted in destruction of potentially relevant documents. The court found that while defendant s failure to implement a litigation hold did not warrant an adverse inference instruction, it did amount to gross negligence. The court awarded plaintiffs their costs and attorneys fees. Addressing the duty to preserve, the court indicated that once the duty arises (when the Complaint is filed) a litigant is expected, at the very least, to suspend its routine document and retention/destruction and to put in place a litigation hold and to take affirmative action to prevent its systems from destroying the information. CONCLUSION Although cases against clients may deal with issues or products from a time period prior to the age of electronic information, many clients may have converted some of these older documents to electronic format, in which case they would become subject to the new rules. Given the very recent implementation of the Act, the effects of these new rules are not immediately evident in the context of California-specific litigation. However, what is clear is that the Act will likely effect the way parties conduct discovery in California. First, Clients should expect to see discovery demands from plaintiffs that request ESI in particular formats. Next, clients should further expect to see an increase in the costs of responding to discovery, mainly in due to the fact that the new rules require the producing party to adhere to the requested format and bear the costs of production. Parties should keep in mind that California courts (like federal courts) still retain discretion to order discovery over a showing of undue burden and cost by the responding party. 21 Under the Act, the court has to discretion to limit the frequency or scope of discovery if it determines it is possible to obtain the information from another, more-convenient or less-expensive source; the discovery is cumulative or duplicative; the requesting party has already had ample opportunity to discover the information sought; or the burden and expense of the discovery simply outweighs the benefits, based on the specific circumstances. Cal. Code Civ. Proc (f). 22 In summary, clients and counsel should be aware of these new provisions, be prepared to deal with these types of discovery issues down the road and immediately work together to implement an ESI discovery strategy which may help to protect both counsel and the client from sanctions in the future. 1 Interestingly, following a verdict in plaintiffs favor, a Washington court reduced plaintiffs amount of attorneys fees claimed for time spent on discovery, based upon finding that the plaintiff attorney s inhibited ability to participate meaningfully in electronic discovery was indicative of novice skills in this area and not experienced counsel. (Chen v. Doughtery (2009) WL (W.D. Wash. July 7, 2009.) 2 The Federal Rules, by contrast, put the responsibility on the requesting party to move to compel if the responding party claims that ESI is not reasonably accessible because of undue burden or cost (see FRCP 26(b)(2)(B)). 3 Erin Marie Adrian & Redgrave & Jonathan M. Redgrave, New E-Rules for Discovery; Nixon Peabody, July 8, 2009; (last accessed July 14, 2009.) 4 Allan Johnson & Amy Longo, Summary of Proposed California Electronic Discovery Act, O Melveny & Meyers; (last accessed July 15, 2009.) 5 Adrian, E. & Redgrave, J., supra, note 3. 6 Typically, the party producing ESI must bear the costs of production. However under CCP Sections and , if a party objects and demonstrates that data is not reasonably accessible because of undue expense, a court may order production for good cause and shift the costs to the demanding party. 7 Adrian, E. & Redgrave, J., supra, note 3.

7 8 Cal. Code Civ. Proc (i)(1). 9 Cal. Code Civ. Proc (i)(2). 10 Safe harbor provisions should enable a party to fend off a spoliation charge by demonstrating that it only deleted or did not preserve potentially discoverable ESI pursuant to an ongoing retention/destruction policy that (1) was not instituted in response to a litigation or other dispute; (2) was consistently applied and enforced; and (3) contained a valid "litigation hold" (destruction-suspension) provision, under which a hold notice was issued and reissued in a timely and effective manner. (Robert Brownstone & Michael Sands, United States: California ediscovery Legislation Signed Into Law, Effective Immediately., Fenwick & West (July 13, 2009), (last accessed July 15, 2009.). 11 Johnson, A.& Longo, A, supra, note Gareth Evans, New California legislation tracks federal rules on e-discovery with a few new exceptions, The Recorder, July 15, 2009; at 4-5. Cal. Code Civ. Proc (i)(1) (2). 14 Discovery Resources; In the Spotlight: Joel Bennett, Esq., Interview Focus: The Implications of the Federal Rules of Civil Procedure; August 1, 2007; (last accessed July 14, 2009.) 15 Discovery Resources; supra, note Discovery Resources; supra, note Id. 18 Cal. Code Civ. Proc (i)(1) (2). 19 Discovery Resources; supra, note 14. COMMENTS MESSAGE: Design Source Preview Use Shift+Enter for a <BR> tag Submit Comment Home About the Forum About Us FAQs Privacy Statement Code of Conduct Contact Us Policies Advertising Web Design Web Hosting Internet M arketing by M edia M arketers

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