New e-discovery rules have been proposed in California that are unfair because they do not adequately protect litigants from requests for inaccessible data. The proposal reverses the balance of Federal Rule 26(b)(2)(B), and thereby opens the door for unreasonable, expensive e-discovery.
California law governing discovery is a patchwork of court rules and statutes. The proposal for new laws to govern electronic discovery amends both the rules and statutes. The statutory side of the proposal, §2031.060(a) & (b), contains the imbalanced provisions governing inaccessible ESI. These proposed revisions should be terminated, rather than become law. The proposal is now in its final stages, so if you want to be heard on this issue, you need to act fast. January 25, 2008, is the deadline to submit public comments on this proposal.
Generally State e-Discovery Rules are a Good Thing
I strongly favor enactment of state e-discovery rules. Attorneys and state court judges need the guidance and clarity they can bring. So too do litigants embroiled in state court justice systems. They need to know their e-discovery rights and obligations, and need some modicum of predictability and uniformity in ruling. Plaintiffs need to know they can sue in state court and obtain relevant evidence in defendants’ computers, which is, after all, where most evidence resides today. Conversely, defendants need to know they will be protected from overly burdensome and unrealistic computer requests. Fair rules balance these competing interests, and provide necessary predictability and consistency of adjudication. Fair e-discovery procedure rules thereby significantly further justice in a state court system.
Unfair state e-discovery rules may still provide some certainty and consistency, at least within the state court system, but they do not further justice. Instead, they promote the settlement or adjudication of disputes for reasons other than the merits. Like most attorneys, I would rather have no e-discovery rules at all, than unfair rules that favor one side over the other. Also, since we have a dual federal and state system, state rules that are markedly different from federal may produce inconsistent results for the same party, depending upon which court and set of rules they are under. Unfair rules in state court will also promote a flight to the federal court system, or to private arbitration.
Unfortunately, as I explain in detail below, California is on the brink of enacting of what appears to me, and many others, to be blatantly unfair e-discovery rules. In fact, I know of no other rules anywhere in the country that are potentially as oppressive to business and large organizations as the new rules proposed for California. This is a fast moving train, but it may not be too late to stop. As mentioned, the comment period closes on January 25, 2008, but after that, the California legislature must still approve and enact the enabling statutes. So, even if e-discovery lawyers fail, Governor Schwarzenegger still has plenty of time to play the Terminator role once again, and kill the bill as bad for California business.
Battle Between Two Types of Lawyers
The federal e-discovery rules were years in the making, and everyone had plenty of time to comment on their structure and wording. The federal rules are not perfect, but they represent a thoughtful and fair balance between the diverging interests of the plaintiffs and defense bars, between the requesters and producers of ESI. At the end of the day, both plaintiff and defense lawyers were unhappy with the new federal rules. Each side had some legitimate complaints about the new rules, but both were generally satisfied that they were overall fair and balanced.
Most states in the country are now considering their own e-discovery rules. A few already have done so. As a result, many states are now embroiled in a similar battles between the divergent interests of the plaintiff and defense bars, between the small litigants with few computers and little ESI, and businesses with thousands of computers and terabytes of ESI. If either side in this perennial battle gains the upper hand, the result is unfair rules. For instance, rules that protect ESI producing parties too much, generally businesses and large organizations, encourage more Qualcomm type cases, and so subvert justice. But rules that impose too much burden upon large organizations, and benefit the ESI requesting parties, typically plaintiffs with few computers, can be just as bad. They cause defense settlements driven by the costs and exposure of e-discovery, instead of the merits, if any, of the plaintiffs’ case. Unfair state rules also drive litigants away from state courts and into the federal system, or private adjudication. This so-called “flight to quality” is already occurring for a variety of reasons, including the lack of any state rules on e-discovery. Unfair rules will only accelerate this trend.
The battle between the competing interests of the plaintiff and defense bars has been raging in California too, but here the plaintiffs’ bar is about to score a major victory. The California Judicial Council is poised to ask the state legislature to enact what appears to be the most one-sided rules yet on e-discovery. These rules discard the two-tiered protection provided by Federal Rule 26(b)(2)(B). If enacted, the new law will force thousands of business and other large organizations to apply for a protective order in almost every case. In private, the plaintiffs bar has got to be all smiles and high fives. In public, they will, of course, hide their glee, especially from state court judges, and complain about something in the proposal. But there is no denying that the California proposal represents a substantial departure from the federal rules.
Who is Behind the Proposed California Law?
I will go into detail about the deficiencies of the proposed law, but first it is instructive to try to understand how this proposal came about. By my introduction you might suspect these rules are being proposed by one of the many academies of trial lawyers. Those are exclusive clubs of plaintiffs’ lawyers, where you can only join if you swear you do no defense work. But that is not the case. No, these rules have been written and proposed by an esteemed California judicial institution known as the California Judicial Council. It describes itself as “the policy-making body of the California courts” and is led by the Chief Justice of the California Supreme Court. It has 21 members: 2 justices from the Supreme Court, 3 judges from Courts of Appeal, 10 trial court judges, 2 legislators, and 4 practicing lawyers. Two of the four practicing lawyers on the Council are criminal lawyers, one of whom is a past President of the California Bar. Another of the lawyers is an assistant city attorney for Oakland. The fourth lawyer happens to be one of the most prominent plaintiff’s lawyers in the country, a past president of International Academy of Trial Lawyers.
These are very well respected people with excellent reputations. I mean them no offense and hope that they will forgive my strong opposition to this particular rules proposal. They are all experienced lawyers and judges, but as far as I can see, none have any particular expertise in e-discovery. This means they are getting their advice from other unnamed e-discovery experts, where, I fear, the concerns of business and the defense bar have not been adequately represented. This is the only explanation I have for how and why the California Judicial Council is now, unwittingly I suspect, supporting and recommending the enactment of e-discovery rules so divergent from the federal norm.
A Defense of the Judiciary
I know many will wonder why the judiciary, who make up most of the Judicial Council, would support rules that, to e-discovery insiders at least, obviously seem to favor one segment of the bar over another. A short digression in defense of the judiciary is in order, for I often hear unfounded attacks upon judges, and would like to set the record straight. As a litigation attorney for 28 years, I have appeared before hundreds of judges, and I count several of them as friends. In my experience, it is rare to find a judge that is biased towards either the plaintiff or defense bar, although it does sometimes happen. An attorney may have had an orientation when they were in private practice, but they almost always rise above such a bias once they become a judge. The role of a judge is far different than that of a private attorney advocating for a particular client, or type of client.
I do not think for a moment that the judges behind the California Judicial Counsel have consciously taken a sudden turn to favor one side of the bar over another. The Judicial Counsel members include some of the most distinguished jurists in the state. I am sure they think this is a fair and balanced proposal, otherwise they would not support it. But the truth is, sitting state court judges, especially senior judges and appellate judges such as those on the Judicial Counsel, are not in the best position to formulate e-discovery rules. They are relatively naive about e-discovery issues and lack practical experience. Unlike almost every other area of the law where judges are called upon to suggest changes to civil rules of procedure, few state court judges have any significant experience as private civil litigators in this new and fast-changing field of law.
In fact, when most of the judges on the bench today were in private practice, including those running the California Judicial Council, there was no such thing as e-discovery. Their only experience with this very complex subject, if any, has come from hearing cases on the bench. For that reason, most do not have a very good picture of what is going on behind the scenes in e-discovery, outside of their courtrooms. Of course, there are some notable exceptions to this rule. For instance, a few federal magistrates by now have extensive experience with e-discovery issues, and are very knowledgeable in this area, despite a lack of prior private practice experience. But most state court judges do not see these issues very often.
The experience problem is compounded for appellate court judges. They are usually more senior and not as involved with technology. Further, appellate courts rarely hear discovery appeals, much less grapple firsthand with e-discovery issues. All too often, their knowledge of e-discovery disputes comes solely from reading about the exceptional disaster case like Qualcomm. These cases tend to create a false impression of everyday e-discovery practice, and little sympathy for the dilemma most large companies face in this area.
Even the trial judges who actually do see and hear e-discovery disputes firsthand see only a small segment of e-discovery practice. The jurists’ view is primarily based on the few cases where e-discovery issues are taken to them for resolution. But the reality is, most e-discovery related activity is behind the scenes, and completely out of sight of the presiding judge. For instance, in federal court, 98% of all cases settle. State courts may try more cases, but still the vast majority of lawsuits, especially commercial cases, settle and are not tried. The judges rarely know the true cause of the settlement of any case, much less the parties’ confidential settlement communications.
This means that most judges are completely unaware of the fact, well known to most e-discovery practitioners, that many cases today settle and/or settle for too much, because of e-discovery concerns. The merits of a case can easily become secondary to the potential exposure and risks of e-discovery expenses. Although some large organizations today are prepared to efficiently respond to e-discovery, many are not and are an easy target for the plaintiffs’ bar that, by and large, is far more aware of this exposure than the judiciary. In short, most judges, especially state court judges and appeals court judges, are not aware of the tremendous leverage and bargaining power that uncontrolled e-discovery, or even the threat of such e-discovery, provides to a plaintiff suing a “Goliath” defendant with tons of computers.
What is Wrong with the Proposed Law?
In the federal system, and most states, all rules of procedure are promulgated by the supreme courts, and in the federal system, subject only to legislative veto. But, as mentioned, they do things differently in California. The proposed new e-discovery rules are actually made up of both statutes and traditional court rules adopted by the Supreme Court of California. Only two amendments to actual rules of court are included in the California proposal. The bulk of the amendments are contained in statutory proposals. The two rules are Rule 3.724 (Duty to Meet and Confer), and Rule 3.728 (Case Management Order). They mirror the federal rules and are fine as written. These two rule revisions will not, however, be promulgated by the California Supreme Court unless the statutes proposed by the Judicial Council are also adopted by the legislature as written. That should not happen. Here’s why:
One of the biggest e-discovery problems all large organizations face is the huge cost to search, locate and produce so called “inaccessible” information. In fact, all information is accessible; the questions is, at what cost? In e-discovery language, “inaccessible” ESI means ESI that is “not reasonably accessible.” It is information that can only be retrieved and produced at disproportionate cost and labor. That typically includes such things as backup tapes, legacy computer systems, slack space on hard drives, and damaged CDs. Many more examples could be provided.
The proposed state laws are unfair primarily because, unlike the federal rules, they fail to provide meaningful protection against discovery of inaccessible ESI. Instead, they open the door to widespread misuse of requests for this type of information.
This key protection provided in the federal rules is found in Rule 26(b)(2)(B):
(B) 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. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery.
This rule sets up a two-tiered system wherein not-reasonably-accessible ESI comprises the second tier of discovery. You are protected from the expense and burden of searching and producing such information, which can in fact often cost millions of dollars, unless you are faced with a motion to compel. Even then, if a motion to compel is made, and you must then respond, you need only provide proof of burden at that time. If you prove undue burden and cost, the discovery should be prohibited, unless good cause is shown pursuant to the terms of 26(B)(2)(C), which provides for three types of considerations:
(i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.
The FRCP Comentary provides additional important guidance as to seven factors a court should consider in making this “good cause” analysis:
Appropriate considerations may include: (1) the specificity of the discovery request; (2) the quantity of information available from other and more easily accessed sources; (3) the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources; (4) the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources; (5) predictions as to the importance and usefulness of the further information; (6) the importance of the issues at stake in the litigation; and (7) the parties’ resources.
The two tiered system in 26(b)(2)(B) is, in my opinion, and that of many others, the key provision to making the federal rules balanced. Litigants with large computer systems depend upon the carefully worded provisions of this rule for protection from overly burdensome requests. Without this rule, they are vulnerable to ESI requests that exploit the complexity of their systems, and force settlement to avoid exorbitant costs.
The e-discovery statutes proposed in California gut this protection entirely, and for that reason alone they are unfair and imbalanced. As Geoff Howard, an e-discovery attorney in San Francisco, puts it in his recent article on the proposed rules: “The California proposal reverses the federal court balance.” I agree completely.
Specifically, the new language proposed for California statute §2031.060(a)&(b) requires the production of all ESI requested unless a motion for protective order is filed and granted. This reverses the order and burden in the federal rules, where the requesting party had to file a motion to compel. You can bet that if these procedural statutes pass there will be a flood of motion practice in California state courts, starting with motions for protective orders in every case to try to prevent the otherwise mandatory search and production of inaccessible ESI. The motions for protection will try to establish undue burden and expense.
Here is the exact language of proposed §2031.060(b) which spells out the respondents (typically large defendants’) new obligations:
(a) When an inspection, copying, testing, or sampling of documents, tangible things, or places, or electronically stored information has been demanded, the party to whom the demand has been directed, and any other party or affected person or organization, may promptly move for a protective order. This motion shall be accompanied by a meet and confer declaration under Section 2016.040.
(b) The party or affected person or organization seeking a protective order regarding the production, inspection, copying, testing, or sampling of electronically stored information on the basis that such information is not reasonably accessible because of undue burden or expense bears the burden of so demonstrating.
Under the proposed California law, the burden of proof does not stop there. If you persuade the state court judge that the ESI requested is “not reasonably accessible because of undue burden or expense,” you will have to produce it anyway “if the requesting party shows good cause.” §2031.060(d). Here is the full language of subsection (d):
If the party or affected person or organization from whom discovery of electronically stored information is sought establishes that the information is from a source that is not reasonably accessible because of undue burden or expense, the court may nonetheless order discovery if the requesting party shows good cause.
That sounds sort of like the federal rules which require production anyway upon a showing of good cause, except for the important, nay critical, difference, that the “good cause” in subsection (d) of the California statute is nowhere defined. There is no reference to the three types of considerations found in 26(b)(2)(C), nor the seven factors found in the federal commentary. Although the proposed statutes do have a provision similar to 26(b)(2)(C), namely §2031.060(f), the good cause provision in subsection (d) is not specifically tied to the considerations in subsection (f), like the federal rules are. Instead, the Judicial Council commentary expressly states that they considered adding a specific balancing test to the good cause analysis, but rejected it. Sensing perhaps the controversiality of this decision, the Judicial Council specifically asks for opinions on that. Tell them it is a big mistake and you do not agree. Here is another link to their questionnaire so that you can easily do that.
As the state commentary shows, the Judicial Council ended up using e-discovery language favoring production that was developed by the National Conference of Commissioners on Uniform State Laws, whose model rules I have previously written about. But the California Judicial Council stripped the other language in the Uniform Laws that tempered this obligation. They eliminated the balancing test the Uniform Commissioners developed to restrain “good cause” and thereby provide a fair approach. This kind of pick-and-choose approach to the Uniform Commissioners’ model rules of e-discovery, which were in turn modeled on the new FRCP rules, results in a California version of 26(b)(2)(B) that is dangerously stripped of any specific considerations of good cause. It creates the illusion of a protective provision for defendants which in reality is no protection at all. Very clever, I must say, and this difference has slipped by many. Perhaps I am over-reacting, but it seems like proposed Section 2031.060 California Statutes is devoid of all power to protect businesses and other large organizations in California from unfair and exploitative discovery of inaccessible ESI.
This belief is buttressed by what I am told by several California lawyers about existing law in their state concerning “good cause” for discovery. Existing case law provides no clear guidance on good cause. As a result, the vague good cause requirment typically favors the requesting party, especially the small David in any case against a Goliath, meritorious or not. The plaintiffs’ bar does not want a clearly defined good cause for plaintiffs to have to meet to force production of inaccessible ESI, they do not want the Uniform Commissioners balancing test, nor the seven factors of the federal committee commentary. They do not even want the three general considerations of subsection 26(b)(2)(C).
If this push for new imbalanced e-discovery laws is not stopped by strong complaints to the Judicial Council before January 25, 2008, or later by Governor Schwarzenegger and his friends in the legislature, the impact of the new state law e-discovery rules in California could be substantial. Geoff Howard’s article has some good observations on what will likely happen:
Bringing a motion for a protective order in every California state court case (when the party need not follow the same process in federal court) could create a substantial burden on parties with inaccessible sources of electronically stored information. That procedure also has the potential to create significant uncertainty if a party loses a motion for a protective order in a state case, leading to the discovery of the inaccessible data. The resulting discovery of that information could impact the protected nature of that data under the federal rules. Given the substantial consideration over a period of several years that led to the federal rule, most states with separate electronic discovery rules have chosen to follow the federal rules more closely.
A Few Other Problems with the California Law
There are a couple of other things wrong with the proposed California law. First of all, they try to define “electronically stored evidence” by tracking most of the language used by the Uniform Commissioners. I have previously critiqued the Commissioners’ language. The California version is at least an improvement over the Commissioners’, as California eliminated the qualification that ESI be “retrievable in perceivable form.” The California Judicial Council correctly recognized that this “perception” requirement was confusing at best, and would only lead to unnecessary litigation. Such litigation would typically not be favorable to plaintiffs, and so it is no surprise this qualification was eliminated. But the definition they are left with is, in my opinion, still confusing, and I think at least somewhat nonsensical and contra to the normally accepted usage in e-discovery of the phrase “stored in a medium.” Although the defense bar may not like this suggestion, I think the proposed definitions should be rejected entirely, and California should follow the federal approach of no definition at all.
Here is the proposed California definition statute:
§ 2016.020. As used in this title:
(d) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
(e) “Electronically stored information” means information that is stored in an electronic medium.
The use of the word “medium” and supposed exhaustive definition of “electronic” bothers me. For instance, why is “wireless” on this list, and why speak in terms of “technology capabilities”? As to “medium,” why say stored in an electronic medium? Electronic information is stored in physical mediums, not energetical ones. In the digital world of computers, this means information is stored as either a 0 or 1; an electrical switch is either on or off. Thus, for instance, a CD a/k/a optical disk, is said to be the medium on which digital information is stored. It is stored by tiny indentations or pits on the aluminum coating on the surface of a plastic CD. The surface of the CD is read by reflection of laser light. The difference in the laser’s reflection off a pit surface, as opposed to a non-pitted “land” surface, is read as a 1 or 0. There are many other ingenious methods for this kind of zero-or-one-storage of binary information using various types of physical mediums, such as hard drives that use magnets instead of lasers. It is all essentially derived from Edison’s orginal idea of storing sound energy on phonographic records. As far as I know, no one can yet reliably store information on energy itself without some kind of underlying physical medium, although I suppose it is theoretically possible with energy interference patterns or something like that.
Bottom line, all ESI is stored in or on some kind of material thing that is called the medium on which ESI is stored. That is why I do not like California’s phrase “stored in an electronic medium,” and think it may lead to needless litigation. The comments by the federal rules committee have it right. The federal comments correctly say that ESI covers information “stored in any medium” as long as “it can be retrieved and examined.” The more technically enlightened federal approach and their comments should be adopted by California.
As I have previously explained, I think the federal committee got it right in not defining ESI. The new technologies of tomorrow are likely to doom any attempts we make today at clarity by definition. In my view, the only revision which may be needed to the federal approach is to clarify that ESI is not intended to include ephemeral data, such as RAM memory. See my blog on the bizarre Columbia Pictures case in California that precipitates this opinion.
There is another change in discovery rules that is unique to California. The current statute allows only for the “inspection” of documents in response to either a request for production of a party, or subpoena of a non-party. The California rules say “inspecting documents, tangible things, and land or other property.” Most state rules, and the federal rules, have for a long time said “inspecting, copying, testing, or sampling . . .” The new rules not only add ESI, but also add “copying, testing and sampling.” Here is the proposed statute:
(a) Any party may obtain discovery within the scope delimited by Chapters 2 (commencing with Section 2017.010) and 3 (commencing with Section 2017.710), and subject to the restrictions set forth in Chapter 5 (commencing with Section 2019.010), by inspecting, copying, testing, or sampling documents, tangible things, and land or other property, and electronically stored information that are in the possession, custody, or control of any other party to the action.
I do not understand the significance, if any, of this addition of “copying, testing or sampling.” I am told that case law has anyway already interpreted “inspection” to also allow for “copying, testing and sampling” of documents and things. Still, some California lawyers worry that the addition of the terms “copying, testing or sampling” as to ESI creates more uncharted territory, and will inevitably lead to more litigation. Could this revision as applied to ESI be used to justify forensic imaging of hard drives for instance, which is a form of copying and inspection, one that is very expensive? I do not think that was the intent of broadening the definition, but the state comments provide no explanation whatsoever for this change. They should.
What Can You Do About it?
The full text of the proposed rules, and an invitation to comment can be downloaded here. If you do business in California, or have clients that do, you should consider providing a comment. Here is a link to the official comment form. Better hurry, the comments are due January 25, 2008. This proposal was not widely publicized, and most attorneys, myself included, just found out about it last week. If the goal is buy-in of a proposal by the full bar, why keep a proposal like this under the radar and give so little time for comments? Anyway, now you know, and the rest is up to you, the good people of the state of California, and, of course, The Terminator.
POSTSCRIPT: On September 30, 2008, Governor Arnold Schwarzenegger vetoed the bill that was eventually passed by the California Legislature to implement the rule changes. The proposed law had been revised and approved somewhat from the version discussed here. Still, the California rules were, in my view, slanted towards small parties making requests for productions of ESI from large parties. Thank you Arnold! But no doubt, this law will be back.