Friday, August 28, 2009

On June 29, 2009, Governor Schwarzenegger signed into law "The Electronic Discovery Act" (California Assembly Bill AB 5). The law took immediate effect as an urgent measure, "in order to eliminate uncertainty and confusion regarding the discovery of electronically stored information" (ESI). Approximately half of the states now have separate statutes that specifically address electronic discovery.

California's new ESI rules closely follow the Federal Rules of Civil Procedure. The federal rules for electronic discovery have been in effect since December 2006. Both California and federal Rules of Civil Procedure:

1. Define "electronically stored information" in a broad way (CCP §2016.020(e)

2. Require the parties to meet and confer regarding electronic discovery (CCP §2016.040).

3. Allows the requesting party to specify a form of production to which the requesting party can object, negotiate, or agree (CCP §2031.280(c)

4. Permit the requesting party to inspect, copy, test, or sample ESI (CCP §2031.010(e)

5. Add a new "safe harbor" provision, similar to FRCP 37(e), which protects parties who lose materials due to "routine, good-faith operation" of their electronic systems before notice of the litigation (CCP §2031.320(d)(1))

6. Address inadvertent production of privileged ESI, setting forth mechanisms to address how inadvertent disclosures are to be treated. (CCP §2031.085).

California Alters the Federal Standard for "Inaccessible" Data

The most important difference between the California and federal rules involves the production of data that is not reasonably accessible. FRCP 26(b)(2)(B) provides:

"A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost."

This same rule places the burden on the requesting party to demonstrate "good cause" before a claimed inaccessible data source must be searched. Accordingly, under the federal rules, a requesting party is encouraged to review and evaluate data from claimed accessible sources before demanding ESI from claimed inaccessible sources. Meanwhile, the responding party is relieved of producing such claimed inaccessible data.

In contrast, the California rules start with the presumption that that all ESI is accessible. See CCP §2031.060(c), and CCP §2031.310. Similar to California discovery requirements generally, the new California law on ESI provides that a responding party can object to an ESI discovery request on the basis that the data is inaccessible, and therefore requires undue burden or expense. If an objection is filed, the requesting party can file a motion to compel. However, the burden to prove inaccessibility remains with the responding party. See CCP §2031.310(d).

Producing parties often complain about the burden and cost of producing electronic information. In reality, the cost of any electronic production is a small fraction of what a corresponding amount of paper would cost. Responding parties will no doubt continue to suggest that all of the following data is not "reasonably accessible":

1. Backup tapes - Although back-up tapes are useful for disaster recovery, they are more commonly used to find a prior version of data because the most recent version has become corrupted, or contains a change that the user no longer desires. No data processing person worthy of collecting a paycheck would tell his employer that the backup data was not reasonably accessible. When backup data is needed for reasons outside of litigation stonewalling, the information will generally be obtained, recovered and used in less than 24 hours. How inaccessible is that?

2. Archival data - Archival data and backup data are terms that are often loosely used interchangeably. They are actually quite different. The difference is important if one successfully argues that backup data is not "reasonably accessible". Backup data are large files, often compressed onto tape, but more frequently often stored on large disks that have become relatively inexpensive. If housed on tape, backup email and databases usually must be recovered in total before being used. Once backup tapes are recovered, individual files can be located and used. In contrast, archival files are specifically identified as being significant, sometimes because of government requirements or for historical preservation. Archival files are usually organized and maintained in their native format. Although archival files are not actively used, in most cases they can be easily and quickly retrieved.

3. Legacy data - Legacy data refers to files that are used with a prior software or hardware combination. Legacy data is more difficult to recover. Legacy data could be likened to paper documents that have been placed in long-term, off-site storage. If such paper records are clearly relevant, a party cannot avoid production by asserting that the records are stored in an inconvenient location. Nevertheless, producing parties will often claim that the analogous legacy electronic data is not accessible.

4. Computer forensics- Data that has been deleted but simply not overwritten on the magnetic media requires special software and related training to recover. This information is not reasonably accessible, and should not be the subject of routine discovery that is paid by the producing party. Although computer forensics is not nearly as expensive as complaining parties wish to assert, the reality is that computer forensic work is (i) almost always paid for by the party seeking its use, and (ii) can be done with little disruption to the producing party.

Businesses obtain tremendous efficiencies by storing and retrieving data using technology advances. The savings are enormous. The most inaccessible electronic data is still far less expensive to retrieve than any paper sitting in dusty boxes in a warehouse.

California Maintains More Stringent Cost-Shifting

California's Electronic Discovery Act preserves mandatory cost-shifting for producing ESI from back-up media as provided for Toshiba v. Superior Court of Santa Clara County. Putting aside the above discussion, back-up tapes are the primary ESI source that courts have treated as "not reasonably accessible". In Toshiba, the appellate court held that the cost-shifting provisions of (now former) CCP §2031(g)(1) were mandatory. Thus, the demanding party had to pay the costs for recovering usable information from the responding party's computer backup tapes. The parties did not dispute that the defendant's backup tapes were "data compilations" within the meaning of §2031(g)(1). The Appellate Court instructed:

"Section 2031(g)(1) expressly provides that, 'If necessary, the responding party at the reasonable expense of the demanding party shall, … translate any data compilations . . . into reasonably useable form.' The clause is unequivocal. We need not engage in protracted statutory analysis because its plain language clearly states that if translation is necessary, the responding party must do it at the demanding party's reasonable expense. [Plaintiff] contends that the cost shifting specified by section 2031(g)(1) may only be had upon a showing by the responding party that it will suffer undue burden or expense. This contention ignores the plain language of the statute. It is also based almost entirely upon federal law, which does not include a provision similar to the cost-shifting clause of section 2031(g)(1).

… Given the patent difference between the state and federal schemes, [Plaintiff's] reliance on federal decisions is misplaced…. [Plaintiff] also argues that interpreting section 2031(g)(1) as an exception to the general rule would conflict with settled federal law. We agree that the cost-shifting provision of section 2031(g)(1) conflicts with the federal rule, but it appears to us that the Legislature intended it to be that way."

California's Electronic Discovery Act in §2031.280(e) - which is a re-lettering of old CCP §2031(g)(1) - retains the Toshiba decision as follows:

"If necessary, the responding party at the reasonable expense of the demanding party shall, through detection devices, translate any data compilations included in the demand into reasonably usable form."

Stop Inefficiencies from "Electronic Paper"

For those lawyers that wish to obtain true ESI, both the federal and California rules can end the practice of receiving inefficient "electronic paper", i.e., images stored as PDFs or TIFFs. Only because the practice is tolerated by requesting parties, producing parties often provide such electronic paper and claim that their production obligations are over. In contrast, the California rules now include:

CCP §2031.280(a) - Any documents produced in response to a demand for inspection, copying, testing, or sampling shall either be produced as they are kept in the usual course of business, or be organized and labeled to correspond with the categories in the demand. (emphasis added)

CCP §2031.280(d)(1) - If a demand for production does not specify a form or forms for producing a type of electronically stored information, the responding party shall produce the information in the form or forms in which it is ordinarily maintained or in a form that is reasonably usable. (emphasis added)

Converting important information that comes from operating databases, emails, and accounting systems to TIFFs or PDFs, rather than producing the data in its native form, alters and destroys valuable evidence. No business stores its emails, data bases and other operating systems in the ordinary course of business as TIFFs or PDFs. Accordingly, unless accepted by the requesting party, such productions are no longer acceptable under California law. If accepted by the requesting party, actually using the data contained on images requires re-input of the information, which is not necessary if the data is produced in an executable form. Similarly, all meta data (See Metadata Primer for Lawyers for more information.) is lost when TIFFs or PDFs are created.

The following resources provide additional related information:

1. See How To Get The Discovery You Need for advice regarding what to do at the early stages of your discovery.

2. See Best Practices in Electronic Discovery for advice regarding both how to prepare for your own production, and obtaining discovery from your opponent.

3. See Special Masters and Court-Appointed Experts for advice for dealing with confidentiality and relevancy objections

Fulcrum Inquiry provides electronic discovery and computer forensics and records reconstruction services in litigation.