A new change to California's Civil Discovery Act has all of the trappings of a burdensome and costly requirement for employer defendants litigating in California state court. In addition to a litany of new California employment laws discussed in prior blog posts, Governor Gavin Newsom also signed into law SB 370, which became effective on January 1, 2020. SB 370 now requires the producing party in a civil litigation to identify the specific document request number to which documents are responsive. Although this new requirement will likely increase defense costs for many employers, as we discuss below, it can also be used to help streamline document demands while providing greater opportunities to incorporate technological solutions into the discovery process.
SB 370: Discovery: Response to Inspection Demands
SB 370 amended Section 2031.280(a) of the California Code of Civil Procedure. Previously, Section 2031.280(a) provided that "[a]ny 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." SB 370 eliminated the more common option to produce documents "as they are kept in the usual course of business." Instead, documents, or categories of documents, must now be "identified with the specific request number to which the documents respond."
SB 370 applies equally to physical documents and electronically stored information ("ESI"). However, the law provides no guidelines or specific requirements for how parties must identify requests on ESI. The amended Section 2031.280(a) applies to all pending and future actions.
Purpose of SB 370
Surprisingly, the California Defense Counsel co-sponsored SB 370 with the Consumer Attorneys of California. In the groups' joint letter to the state legislature, they claimed that "[o]ften litigants will produce a mass quantity of documents without specifying the category to which said documents are responsive. This leads to difficulty determining whether responses were indeed submitted for each request." The amended Section 2031.280(a), they argued, "streamlines the process for parties receiving this information and makes litigation more efficient."
Although the procedural change will ostensibly reduce the costs and burden on the requesting party in reviewing documents, it does so at the expense of the producing party. The costs and burden born by the producing party will increase substantially unless counsel leverages sophisticated artificial intelligence ("AI") tools that can provide a preliminary review for privilege and categorize mountains of ESI to the standards required of a discerning defense attorney. The burden is especially one-sided in employment cases, where employers typically produce the lion's share of relevant documents.
Impact on Discovery Negotiations
Despite the changes to Section 2031.280(a), the parties can still jointly stipulate around the new identification requirement. However, SB 370 clearly gives employee-plaintiffs greater leverage in negotiating a joint ESI stipulation and obtaining concessions from employers to avoid full or partial compliance with the requirement. Parties who are unwilling to agree to plaintiff's counsel's demands will be forced to comply with amended Section 2031.280(a).
In the absence of an ESI stipulation, counsel must utilize the meet and confer process effectively to negotiate the narrowing of broad requests, both in number and description. The substantial burden of complying with SB 370 provides defense counsel with legitimate grounds under Section 2031.060 for a court to side with defendants. Where the requesting party's demands result in undue burden and expense, the producing party can seek a protective order directing that all or some documents or categories of documents need not be produced. Code of Civ. Proc. § 2031.060(b)(1). The court may also limit the scope of ESI discovery if the "likely burden or expense of the proposed discovery outweighs the likely benefit, taking into account the amount in controversy, the resources of the parties, the importance of the issues in the litigation, and the importance of the requested discovery in resolving the issues." Code of Civ. Proc. § 2031.060(f)(4). Defense counsel should use the new requirement to demand more reasonable and narrowly-tailored document requests to avoid the tremendous cost of reviewing mounds of irrelevant ESI.
Impact on Costs of Producing Documents
The costs and burden of identifying each request number that applies to each responsive document obviously increases with the number of document requests and the amount of potentially responsive documents. For employers, this task may be particularly costly because productions in class action and/or PAGA claim cases could potentially include hundreds of thousands of potentially responsive documents. Moreover, the California Code of Civil Procedure does not limit the number of document requests a party may propound and each party bears its own costs for conducting and responding to discovery. Thus, plaintiffs in employment cases will likely seek even more document requests, which, unless challenged, can be particularly onerous on the defendant employer. Of course, a savvy defense counsel can use these new requirements to impress upon plaintiff's counsel, and certainly courts, that requests for production of documents must not be unduly burdensome given the real, hard costs of retrieving, reviewing, and producing these records.
To mitigate some of these costs, document review software and predictive coding AI tools can help streamline some areas of this review by building the request identification process into the initial review for responsiveness and privilege. More specifically, leveraging search term identification tools to quickly identify and tag every document in a production with any corresponding request will reduce review time and costs. Additionally, predictive coding models can be developed to identify a variety of responsive document categories using key example documents that illustrate each document request category. While the advances in AI technologies will over time lead to greater efficiencies, this process not only requires a skilled team of attorneys and ESI discovery professionals, but also requires increased attorney review time, especially when responding to dozens of requests. Thus, this procedural change will often result in increased costs early in the litigation because the review process must be performed once the discovery period begins.
Impact on Costs of Discovery Disputes
The identification requirement also provides another discovery issue for parties to dispute. The lack of guidelines by SB 370 assures such disputes will occur. For example, the propounding party will likely seek compliance with their interpretation of what the new law requires, such as the inclusion of request numbers in metadata or branded on ESI image files. Disputes may also arise from objections to how broadly the producing party identifies documents as responsive to requests. Alternatively, the producing party may object that the identification requirement in some instances, such as a request for documents supporting a party's affirmative defenses or contentions, violates the attorney work product doctrine by revealing counsel's legal analysis and arguments. We anticipate that it will take several years for courts to issue guidance on these thorny issues.
This change to the California Discovery Act will certainly impact both the costs of litigation as well as how parties strategize around document productions. Employers who are hit with, or in the middle of, an employment lawsuit can minimize the impact of SB 370 by adopting five practical measures:
- Always be prepared for the potential of litigation. Invest in a comprehensive email and document management software that archives and organizes emails, often using machine learning, based on projects and keywords. At the same time, encourage managers and Human Resources professionals to save emails concerning an employee's performance into unique folders.
- As soon as the organization becomes aware of the threat of litigation be proactive in working with document custodians (e.g. the employee, his/her manager, supervisor, HR representative, etc.) to pull and store potentially relevant documents.
- Work with the opposing counsel to obtain an agreed upon protective order/ESI protocol stipulation early in the litigation.
- When meeting and conferring with opposing counsel, reference the importance of proportionality and any undue burden in responding to discovery, and where appropriate, demand that plaintiff narrow overbroad document demands.
- Outside counsel should be familiar with, and utilize, the latest and most effective discovery review software to streamline the identification process and organization of document productions around specific categories.
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