|May 23, 2012|
Previously published on May 22, 2012
“We must become much more efficient and more clever in theways we find new sources of data, mine information from the new and old, generate information, make it available for analysis, convert it to knowledge, and create actionable options”1
While many clients have ignored it until now, electronic discovery is quickly becoming the elephant in the room in even the simplest of cases. Why? Because electronic discovery provides a mechanism to find information missing from traditional document discovery, and to obtain documents and data from sources not available in traditional written form. Electronic discovery permits a sophisticated user to obtain information from searching and analyzing information from sources previously hidden, and to locate and dig through new mines of information, all the while trying to avoid the mine fields that lie in wait.
Electronic discovery is no longer the domain of the “big firms” or “big clients”, with vaults of money and unlimited expense accounts. To the contrary, ignoring electronic discovery is no longer an option for any firm, large or small. Lawyers and clients who turn a blind eye to electronic discovery are ignoring the reality that quite often the documents considered to be “originals” are simply electronically generated documents or data, with metadata (data about data) hidden from view. Simply put, what is considered an “original” or “hard copy” is simply an incomplete imitation of the original document prepared from an electronic medium. This memorandum should be read for what it is. It is intended to be a simple overview of a far more complicated topic. This memorandum is not meant to be all inclusive either as to content or authority. Quite to the contrary. Entire books and multiple day seminars are devoted to the issues involving electronic discovery. This memorandum is simply an introduction to an introduction to an introduction, which hopefully will introduce the uninitiated to a brave new world.2
WHAT IS ELECTRONIC DISCOVERY?
In California, “electronic” (also known as “ESI” - Electronically Stored Information) and “electronic discovery” (also known as E-Discovery) is defined as information stored by an electronic medium relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. California Code of Civil Procedure sections 2016.020(d) and (e). Specifically, E-Discovery is the process of obtaining and utilizing data created or stored in any form of electronic medium. To make it simpler, E-Discovery is the method of obtaining through the litigation process electronic data generated by a business entity or an individual which is kept or stored on some sort of a hard drive or a back-up tape (although there are other possibilities as well).
WHAT IS ESI AND WHERE IS IT FOUND?
Estimates abound of the number of e-mails ranging from 75 billion to 100 billion per day. There are over a billion e-mail accounts world wide. Companies have sophisticated document protection and retention policies such that more documents are kept in electronic form than in hard copy form, and with modern technology, it is more easily accessed and searched than ever before. Electronic documents that are never printed in hard copy form can be the most useful area of discovery. The most obvious of these are e-mails, searching hard drives for deleted documents, and obtaining prior drafts of documents and all modifications thereto, including track changes. Information about when documents are created and edited, who created and edited them, as well as who received them can often be found quickly and easily through E-Discovery. Electronic discovery can include obtaining records related to the electronic access to buildings and parking lots. It can include a person’s internet surfing. A person’s GPS tracking can be discovered. Even the use of grocery store discount cards, automated toll booth payments, trips to the gym, and virtually anything else that is automated can be tracked. This list just scratches the surface.
Electronic discovery can be obtained from a variety of different technologies. This includes memory cards, smart phones, video and audio recordings, documents that have been word processed, instant messages, text messages, e-mails, retrievable voice mail, computers and laptops, disk drives, hard drives, CDs, and DVDs. The recovery can be of “active” data (information prepared with the intent and understanding that it is easily retrievable and usable, such as e-mails, spread sheets and word processing documents.) But often the more interesting discovery is for metadata, which is “data about data”. Metadata is information embedded within an electronic file about that file. Such information includes the name of the creator, the date of creation, who received it, who changed it, how it was changed. This information usually does not appear on the screen as a person is typing. It is generally automatically stored without the knowledge of the user.
HOW IS ELECTRONIC DISCOVERY OBTAINED IN CALIFORNIA?
California has adopted the Electronic Discovery Act. Thus, California has joined a majority of other states in enacting specific legislation to address the issues involving electronic discovery in litigation. While most states follow closely the 2006 amendments to the Federal Rules of Civil Procedure, there are differences from state to state. Some of the differences are procedural (such as meet-and-confer requirements which exist in some states), but many of these differences are substantive (such as what is discoverable and cost shifting issues). In California, E-Discovery is traditionally addressed in an inspection demand pursuant to California Code of Civil Procedure section 2031.010, et seq. Specifically, a party can obtain discovery by inspecting, copying, testing or sampling documents, tangible things and electronically stored information. California Code of Civil Procedure section 2031.010 (a). A party may demand that any other party permit the party making the demand, or someone on their behalf, to inspect, copy, test or sample electronically stored information in the possession, custody or control of the party to whom the demand is made. California Code of Civil Procedure section 2031.101 (e).
A party requesting electronic discovery may specify the format in which the material is to be produced. California Code of Civil Procedure section 2031.030(a)(2). If a party responding to a demand for production of electronically stored information objects to a specified form of production, or if no form is specified, the responding party shall state the form in which it intends to produce each type of information. California Code of Civil Procedure section 2031.280 (c). 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 in the regular course of business or in another reasonably accessible format. California Code of Civil Procedure section 2031.280(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 method of production is demanded, the responding party need not produce the material again in any other format. California Code of Civil Procedure section 2031.280(d)(2).
The act contains specific provisions for objections to the production of ESI based on lack of reasonable access to such material. The responding party must object specifically, identifying the types or categories of sources it will not search and produce from. Doing so preserves the objection. California Code of Civil Procedure section 2031.210(d). 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. California Code of Civil Procedure section 2031.310 et seq. The burden is on the responding party to demonstrate that search and production of the ESI would be unduly burdensome or costly. The responding party also bears this burden if it chooses to seek a protective order based on inaccessibility of the material, rather the simply making objections, which also permitted. California law does provide two safe harbor provisions. Absent exceptional circumstances, the court will not impose sanctions on a party or its counsel when information is damaged, altered, or overwritten, as well as data “lost” as the result of the “routine, good faith operation of an electronic information system”. California Code of Civil Procedure sections 2031.060(i) (1) and 2031.300(d) (1).
If a party inadvertently or otherwise produces ESI to which a claim of privilege is made, the responding lawyer is to advise the propounding attorney of the issue. The lawyer or party who received the information must immediately sequester the information and either return the information and all copies to the responding party, or present the information to the court under seal for court determination. Prior to a court ruling, the propounding party cannot use the information, and cannot disclose it. If the receiving party already disseminated the information, the party or attorney must take reasonable steps to retrieve it. A request for court ruling on the issue of privilege is to be made within thirty (30) days, and the information must be kept confidential until the court’s ruling. California Code of Civil Procedure section 2031.285 (a) - (d). This is referred to as a “claw back” statute.
California courts (like their federal counterparts) retain substantial discretion over discovery. For example, if good cause exists, a court may order discovery of inaccessible information subject to certain restrictions, such as cost-shifting among the parties. California Code of Civil Procedure section 2031.060(e). The court can also limit the frequency or scope of discovery if it determines that it is possible to obtain information from another, more-convenient or less-expensive source, or the discovery is cumulative or duplicative, or 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. California Code of Civil Procedure section 2031.060(f).
Issue One: Cost Shifting.
Gone are the days when a client’s biggest concern in response to a Request for Documents was who was going to pay for the photocopies. This issue has all but disappeared as lawyers learned that hard copies of documents are not as desirable as the electronic data behind those same documents.
Demanding voluminous E-Discovery, especially with a shot gun rather than a rifle, may backfire. Judges are aware of random fishing expeditions under the guise of E-Discovery, and judges have the power to shift the costs associated with E-Discovery to the propounding party. To illustrate the issue, in a case where historical e-mails of key personnel are desired, but the hard drives have been erased, a party wants to e-discover the back-up tapes which are used by the company to store data. Unfortunately, the backup tapes were not designed for the easy retrieval of information. The cost of retrieving e-mail of a few key players under such a circumstance could exceed a million dollars. Who should pay for the retrieval?
California law recognizes the authority and discretion of the trial court in shifting costs based on protective order sections but also provides a unique cost shifting provision of electronic information as set fourth in California Code of Civil Procedure section 2031.280(e.) Under this section the propounding party must pay for the costs associated with translating data into a usable form. When this section applies, cost shifting is automatic. However, it must first be determined if the section applies. Then, it must be determined what constitute “reasonable expenses” since only reasonable expenses are shifted.
Responding parties can object to E-Discovery on the same grounds as any other form of discovery. California Code of Civil Procedure Section 2019.030 states:
“The court shall restrict the frequency or extent of use of these discovery methods if it determines either of the following:
(1) The discovery sought... is obtainable from some other source that is more convenient, less burdensome, or less expensive.
(2) The selected method of discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, and the importance of the issue at stake in the litigation.”
Pursuant to California Code of Civil Procedure section 2017.020(a), a court can grant a protective order based on a cost/benefit analysis to limit discovery. California Code of Civil Procedure section 2031.060(b) states the following: “....The court, for good cause shown, may make any order that justice requires to protect any party or other natural person or organization from unwarranted annoyance, embarrassment, or oppression, or undue burden and expense. This protective order may include, but is not limited to, ...:
(1) That all or some... need not be produced or made available at all....
(4) That the inspection be made only on specified terms and conditions. California Code of Civil Procedure section 2031.060(c) states that the court may order that the party to whom the demand was directed provide or permit the discovery... on terms and conditions that are just.”
There are now several cases nationwide on the subject applying multi-factor evaluations to determine whether and what costs should be shifted to the requesting party. The court in Toshiba America Electronics Components, Inc. v. Superior Court (Lexar Media, Inc.) (2004) 124 Cal.App.4th 726 addressed this issue in connection with the application of California Code of Civil Procedure section 2031.280, but left many unanswered questions in regard to when cost shifting occurs, and how reasonable expenses are defined.
In Toshiba America, Lexar Media, Inc. filed a California state court action against Toshiba America and its parent company alleging misappropriation of trade secrets, breach of fiduciary duty, and unfair competition. Toshiba had over 800 backup tapes within the relevant time period of a Lexar document production request. After producing over 20,000 pages of what it termed “readily accessible” documents, Toshiba balked at producing documents or e-mail that could be derived from the backup tapes if the tapes were translated into usable form. An electronic discovery specialist hired by Toshiba estimated that a complete search of the tapes following necessary manipulation and analysis would cost between $1.5 and $1.9 million. Lexar filed a motion with the trial court to compel production of the requested documents. The motion was granted without explanation by the trial court, and Toshiba was ordered to produce all non-privileged e-mail from backup tapes within 60 days of the order. After staying the discovery order, the appellate court ordered the trial court to vacate its discovery order and to conduct further proceedings.
The court in Toshiba acknowledged that the party responding to a discovery request normally is required to absorb the cost of providing the response. However, the Toshiba court noted Section 2031.280 of the California Code of Civil Procedure, which has a provision in subsection (g)(1) which states that “[i]f necessary, the responding party shall, through detection devices translate any data compilations included in the demand into reasonably usable form” but at the demanding party’s expense.
The court noted that the “astronomical costs to the responding party” of unlimited demands “inflates the settlement value of even meritless cases.” The court assumed the legitimacy of Lexar’s argument that imposing costs of recovering data from backup tapes on requesting parties could discourage parties with limited resources from making meritorious claims and could induce businesses to “bury” data in inaccessible formats. However, the court indicated that the “reasonableness and necessity” qualifiers in C.C.P. section 2031 provide sufficient safeguards.
The court concluded that the trial court had discretion to determine applicability of Section 2031.280(e) and to determine the reasonable expense Lexar would have to pay for the data compilation translation that Lexar sought. Citing Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 323-324 (S.D.N.Y. 2003), the court recommended to the trial court that it should develop information on potential expenses for Lexar by encouraging “the parties to meet and confer about translating a sample of the tapes.” If Lexar then believed that it would suffer from undue burden and expense, Lexar could seek issuance of a protective order by the trial court in the exercise of its discretion to manage further the discovery dispute.
As a practice pointer, it is wise for parties to meet and confer before propounding EDiscovery in anticipation of these issues. It will save time and money, and impress the judge.
Issue 2: Reasonable Search.
In responding to ESI discovery requests, there will be questions as to how much “reasonable diligence” is required in responding to an inspection demand. Just how much investigation is necessary for a party to find and identify “each and every document that refers or relates to...” a specific subject matter? Given the volume of e-records, a literal search and review by a human is, without being too dramatic, impossible in many cases. Because computers are more accurate and cheaper than humans in examination of documents, lawyers, clients and their consultants are relying on key word searches and such, but there is no guarantee that searches based on key words will have a high degree of accuracy.
What is considered reasonable will be a case by case evaluation, and the subject of objections, motions for protective orders and motions to compel. This is another area best addressed in a meet and confer in advance of propounding E-Discovery.
Issue 3: Privilege.
The huge volume of e-records gives rise to issues regarding review for privilege and waiver by inadvertent production. The major reason for the high expense of some E-Discovery is the high expense of attorney’s fees attributable to review of huge volumes of documents for relevance and privilege.
While California has enacted California Code of Civil Procedure sections 2031.285 (a) - (d), which is California’s claw back statute, once privileged documents have been produced to the other side, responding parties face an uphill battle to get them back. It is recommended that during the E-Discovery meet and confer that the issue of inadvertent disclosure and claw backs are discussed, and appropriate remedies.
Issue 4: Form and Format.
How documents are produced affects the value and use of the information and the cost of discovery. Requesters typically demand native format with all metadata. Parties seeking production want the ability to search through documents electronically and to analyze and manipulate data and documents efficiently. On the other hand, those parties producing documents know that production in hard copy and some electronic formats can render the discovery useless or very expensive. California Code of Civil Procedure section 2031.280(a) and F.R.C.P. Rule 34 allow, as an alternative to producing documents by categories requested, production of documents “as they are kept in the usual course of business” which today is, arguably, native electronic format. Otherwise, they can be produced in a manner which corresponds with the categories requested. Other possible formats include indexed, searchable, PDF and TIFF (tagged image file format), optical character recognition, controlled-access website, just to name a few.
Therefore, when making an E-Discovery request, care must be taken in specifying the form of the response, and those who receive E-Discovery must be vigilant to object to producing E-Discovery in less desirable formats. This is another topic for the E-Discovery meet and confer.
Issue 5: Meet and Confer.
To further this issue, in addition to the above, the following are other issues that could be addressed in an E-Discovery meet and confer: Preservation duty, scope and costs; Scope of search and production (metadata, back-ups, hard drives, lap tops, digital storage, IP addresses); Possibility of a shared data depository; Simultaneous or phased production; Form of production (hard copy, native form, TIFF, PDF); Cost allocation; Privilege ID or log; Claw backs and quick peaks; Inadvertent production; Modified judicial assistance; Discovery referee (scope, cost authority, judicial review); Admissibility of e-data; Access to adversary’s computers and data bases; Neutral experts; Discovery/admissibility of preservation efforts.
As indicated above, many of the conflict areas involved in E-Discovery are best addressed before the discovery is propounded. It must also be kept in mind that one who propounds excessive E-Discovery should expect the same in return.
SPOLIATION OF EVIDENCE
Loosely described as the destruction of potential evidence, spoliation has been an issue since the beginning of modern jurisprudence. See The FORTUNA---Krause, et al. Claimants, 15 U.S. 161, 4 L.Ed. 209, 2 Wheat. 161(1817). Spoliation of evidence, like the fabrication of evidence, goes to the soul of the American judicial system. As such, courts often rely on inherent powers to control and remedy spoliation rather than rely on the statutory discovery sanctions. In California, spoliation of evidence was eliminated as an independent tort, but it can be used as a remedy in the underlying litigation. Cedars-Sinai Medical Center v. Superior Court (Bowyer) (1998) 18 Cal.4th 1.
With regard to electronic data discovery, spoliation issues are front and center, and of paramount importance. Simply the normal operation of a computer destroys or changes information. Information contained in databases is continually updated, and old information is destroyed, either intentionally or otherwise. Important evidence can be lost if not preserved. A party’s obligation to preserve evidence arises when a party knows, or should have known, that evidence may be relevant to future (or current) litigation. If litigation is on the horizon, a party has an immediate duty to affirmatively act, even without the receipt of a demand mto preserve or the filing of an actual lawsuit. The party must cease all activity likely to destroy or alter evidence, and take steps to preserve such evidence.
This raises several issues:
1. What is the extent of the duty to preserve evidence?
2. When does the duty arise?
3. What must be preserved?
4. How should the information be preserved?
5. What is the duration of the preservation?
6. What is the remedy for spoliation? And,
7. What is the duty of counsel in regard to these issues.
The failure to preserve and produce electronic data results in claims of spoliation and demands for sanctions. Courts throughout the country have become less sympathetic - and tolerant - of parties who fail to preserve, search for, and produce electronic evidence in litigation. Courts are awarding spoliation and discovery sanctions against those who fail to preserve and produce electronic records, which have resulted in evidentiary sanctions, monetary sanctions and adverse inference instructions. Coleman (Parent) Holdings Inc. v. Morgan Stanley, Inc. 2005 WL 674885(Fla.Cir.Ct.) United States v. Philip Morris USA, Inc., 327 F. Supp. 2d 21 (D.D.C.2004).
In the case of Zubulake v. UBS Warburg LLC, 2004 WL 1620866 (S.D.N.Y.), the Court noted the duty of counsel with regard to electronic data:
“Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a “litigation hold” to ensure the preservation of relevant documents. ....Counsel must oversee compliance with the litigation hold, monitoring the party’s effort to retain and produce the relevant documents....” Once a “litigation hold” is in place, a party must make certain that all sources of potentially relevant information are indentified and placed “on hold” . Courts have acknowledged that to do this, counsel must become fully familiar with their client’s document retention policies, as well as the client’s data retention architecture. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual implementation of the company’s electronic document storage, backup, destruction and retrieval policies.
In the Zubulake case, an adverse inference instruction was given to the jury and it awarded $29.3 million to the plaintiff. Similarly, in the Coleman case, the jury awarded $1.45 billion to the plaintiff.
Most E-Discovery issues require a balancing of interests and consideration of multiple factors and consequences. For example, the need to move quickly to preserve evidence before it is destroyed or altered in the normal course of business must be weighed against the danger that an overbroad protective order, literally followed, would shut down the operations of an ongoing business. Courts will look at the cost of preservation in determining the extent of the duty to preserve, but it should be expected that courts will err on the side of preservation.
In addition to the duty of preservation which exists as a matter of course, parties can also force the issue through the serving of a preservation letter. This is a letter sent to the other side which has as its intent to “remind” the opponent of their duty to preserve evidence, and ensure that evidence does not disappear. But in addition, a preservation letter can be the foundation for a claim of spoliation. The service of a preservation letter can later be used offensively to establish bad faith and conscious disregard for the duty to preserve evidence. A preservation letter can be used to establish awareness of the duty to preserve, and the breach of that duty. A well-written preservation letter is not simply a professional courtesy. It puts the other party in the position of having to acknowledge the duty to preserve, and to affirmatively act to ensure that evidence is not destroyed.
Although ESI has been discoverable for many years, E-Discovery has become essential due to the manner and form in which ESI permeates our lives and memorializes our activities. ESI can be saved in huge amounts, and the ability to search and analyze such data electronically advances more everyday. The challenge is to use technology to achieve cost effective discovery and improve the quality of the litigation process.
On the other hand, it is not suggested that all business owners run off and become experts in computer programming and forensics. But today’s business owners must have baseline knowledge in what electronic discovery is, and consider the duties and obligations associated with electronic discovery in each and every case.
Attacking E-Discovery requires the application of traditional discovery devices to new systems, but the challenge is not to do so in a rote manner. Discovery principals and avenues need to be reconsidered based on the differences between e-data and hard copies. It must be understood that most records in today’s business environment are created electronically and are seldom printed in hard copy form. Also, hard copies are incomplete in that they do not contain metadata, hidden comments, prior versions and changes. A hard copy of a document will not reveal that it was modified numerous times, or even that it was back-dated or otherwise produced at a time different than purported. But a computer forensics examination could reveal those facts.
E-data involves large volumes of information. While e-data can be deleted, it can often be recovered, and if not, evidence of the deletion is available. E-Discovery involves new records and information such as e-mail, database, metadata (data about the data such as who created or changed it and when), hidden comments, and computer logs. It involves records created by computers without the knowledge of the user, and which do not appear on the hard copy. It involves new sources of information such as backup recovery and storage devices, hard drives and servers, PDAs, cell phones, laptops and voicemail. It involves great masses of information which is easily duplicated and easily and inexpensively stored. The discovery of electronic information may involve several non-legal professionals such as computer forensics experts, record management experts, and litigation technology support services. This is about using new technology to find new information, in new and varied forms, in new and unexpected places, from previously un-mined sources, and using it in completely new ways.
Because of rapidly evolving technology and the law surrounding it, lawyers and their clients must accept continuing education on the relevant technology and how it changes and effects traditional discovery concepts. Issues will change and emerge as education grows. Those who do not keep up will be left behind and at a substantial disadvantage.
1 Admiral John Poindexter, Director, Information Awareness office. 8/12/02 prepared remarks, DARPA Tech 2002 Conference, Anaheim, California
2 This document is not intended to provide legal advice, and should not be relied upon as such. It is provided for general information only.