California's Electronic Discovery Act: Changing The Rules For Competency In The 21st Century

California’s Electronic Discovery Act (the “Act”) obligates counsel to consider any issues relating to the discovery of electronically stored information” at the mandatory initial meet and confer. By passing the Act, the California Legislature recognized that the digital revolution has changed the way businesses, clients, consumers, and professionals manage, access, and save documents and information. The office of today bears little resemblance to the typewriters, dictaphones, and adding machines commonly seen throughout the workplace in the 1960’s and depicted on AMC’s television series Mad Men. These antiquated machines have been replaced by inexpensive personal computers that complete the tasks and manage the information of multiple machines in a fraction of the time. The use and storage of digital information poses new responsibilities and challenges for attorneys in protecting and promoting their clients’ interests.

Electronically stored information (“ESI”) creates new duties and responsibilities for attorneys. California’s Rules of Professional Conduct require every attorney to apply the diligence, learning and skill reasonably necessary for the performance of their services. The pervasive use and reliance on electronic data demands that attorneys be computer literate to fulfill this duty and understand the role electronic data and documents play in litigation. In addition, the California Supreme Court has made it clear that lawyers must instruct their clients to preserve and maintain any potentially relevant evidence. In the modern era, a large amount of relevant evidence comes in the form of ESI. ESI can be a separate and distinct category of information from what is contained in an electronic document’s paper counterpart. For example, many electronic documents contain “metadata,” which is commonly defined as “data about data.” More specifically, metadata is “information describing the history, tracking, or management of an electronic document.” As an illustration, if an attorney produces an electronic document, but erases the metadata, it is like copying only the front of a paper document that has print on both sides. A failure to understand metadata risks the loss of valuable information.

 

Because of ESI, attorneys face new challenges in conducting and managing discovery for their clients.   Litigators must consider the discovery of ESI to anticipate the time necessary to complete discovery and establish a plan for obtaining all relevant information. A few of the issues or questions that must be considered in discovering relevant ESI include: the number of computers, number of users, programs used (including proprietary software), policies on storing ESI, remote data storage, the names of network administrators, and file formats to request (i.e., doc, docx, xls, pdf, tif, etc.). Also, prudence may require the attendance of an information technology (“IT”) expert at the meet and confer. Employing the help of IT experts will assist those who are less computer-savvy in locating and securing relevant ESI. Depending on the amount of ESI, it may be helpful to depose a member of the opposing party’s IT staff as a person most knowledgeable. 

 

Well-orchestrated electronic discovery has many benefits in litigation. As discussed above, electronic documents can provide valuable details (metadata) about a particular electronic document like who, when, and where that document was created. Moreover, reviewing electronic documents can increase efficiency because the information can be searched for key terms, phrases, and issues. But if a production request doesn’t specify whether the document should be produced in electronic or paper form, the producing party can choose. Federal courts have held that acceptance of documents in paper form satisfies the production obligation and the accepting party has waived any objection to the form of the document produced. Therefore, the electronic version and any metadata contained within the document will be lost.

 

The California Legislature has recognized the important and ubiquitous nature of ESI in modern litigation. The effective litigator will also observe its importance and develop a strategy for preserving and discovering ESI.

No If's, And's Or Butts: Self-Extinguishing Cigarettes

The flammability of approved cigarettes is of great importance to insurers as significant property damage occurs each year from carelessly discarded smoking materials.  According to NFPA's 2008 article U.S Smoking-Material Fire Problem, in 2006 over $606 million dollars of property damage occurred due to smoking materials.   In order to try and reduce the number of fires related to cigarettes, most states require that cigarettes meet the testing procedures outlined in the American Society for Testing and Materials (ASTM) International's E2187, Standard Test Method for Measuring the Ignition Strength of Cigarettes.  Cigarettes that comply with this testing standard are supposedly safer --- less likely to cause a fire than cigarettes that do not comply with this standard.  The hope was that ASTM E2187 compliant cigarettes would self-extinguish thereby reducing the number of smoking material related fires.

Unfortunately, recent ignition tests by Fire Findings shows little to no difference between ASTM E2187 approved cigarettes and traditional, non-ASTM E2187 cigarettes.  See, Fire Findings, Vol.18, No.1 (Winter 2010).  Fire Findings tested the propensity for ASTM E2187 cigarettes to ignite trash, dry potting soil and peat moss, and gasoline.  The results of these tests were similar to the results of their previous tests of traditional cigarettes.  Fire Findings concluded that both types of cigarettes, ASTM E2187 approved and non-approved, can ignite similar materials in real world situations.   The next time your get a fire loss involving a cigarette, don't be so quick to discard it simply because the cigarette met the ASTM E2187 standard. 

Colorado's Subrogation "Made Whole Rule" Under Discussion

Colorado's legislature is considering passing a bill that would limit subrogation in personal injury casesHouse Bill 10-1186 is aimed at situations where the insured would not be made whole if the insurer was allowed to recover its payments through subrogation.  In other words, if there is a limited pool of money to go around, the insured needs to be fully compensated before the insurer can recover its payments.  See full size imageIf the bill is passed into law, an insurer would be prohibited from bringing a direct subrogation action against a third party if the insured was not fully compensated for his or her damages by the policy.  

As drafted, the proposed bill seems only to apply to personal injury and health care cases and does not include property damage cases.  Specifically, the bill defines an injured party in pertinent part as "a person who has sustained bodily injury as the result of the act or omission of a third party."  If passed, the bill would prohibit an insurer from recovering payments, either directly or from the insured, if the insured has not been fully compensated for his personal injuries. 

The bill was introduced in January 2010 and is currently with the Judiciary Committee.  Cozen O'Connor attorneys, along with lobbyists for other interested parties, recently met with the sponsors of the bill seeking modifications to the proposed language specifying that the bill only deals with health care matters.  The bill's future can be monitored at this blog or the Colorado legislature's website.

MOVING UNINTENDED ACCELERATION CLAIMS FORWARD: SUBROGATION POTENTIAL FOR TOYOTA'S 8.1 MILLION RECALLED VEHICLES

Toyota’s unprecedented recall of some 8.1 million vehicles will impact consumers, businesses, and their insurance carriers all over the country.  Since 1999, an estimated 2,000 complaints of sudden unintended acceleration in Toyota and Lexus vehicles have been reported to the National Highway Traffic Safety Administration ["NHTSA"].  On February 9, 2010, Toyota issued a global recall of its 2010 Prius hybrid after over 100 complaints of “delayed brake performance” were filed with the NHTSA.   [See, timeline of recalls.]

Damages to persons and property as a result of these apparent defects will result in numerous insurance claims scattered throughout the fifty states.  The breadth of this recall presents significant subrogation and recovery potential.  But the potential complexity and fragmentation of claims raises obstacles to efficiently and effectively prosecuting many separate cases. 

Mutual cooperation agreements allow carriers to maximize recovery while minimizing and sharing expenses.  Cooperation allows for the appointment of review masters and experts to determine liability and damages related to prior, existing, and future claims.  These claims may include payments to insureds for property damage, personal injury, worker’s compensation benefits, business interruption, and loss of goodwill.

It is anticipated that the insurance industry will act quickly and expediently to review past and existing claims related to matters that involve Toyota vehicles.  Given the expanse of the recall effort by the automaker and the efforts directed by Toyota to rectify manufacturing and design defects, it is possible that the automaker will also seek a forum for cost effective and expedient resolution of claims related to the defective vehicles. 

The availability of multi-district litigation modules and mutual cooperation agreements combined with the efforts of the automaker will effectively endow both the insurance industry and the automaker with a viable alternative to multiple forum litigation.

OREGON COURT FINDS THAT A PHD IS NO DEFENSE FOR NEGLIGENT HOME DESIGN

The Oregon Court of Appeals once again affirmed the viability of negligent construction claims while delivering another blow to the Economic Loss Doctrine.  In Cowan v. Nordyke, 232 Or.App. 384 (2009), plaintiff purchased a home from a Professional Home Designer (PHD).*  Of course, the home was not without problems, including water intrusion.  Plaintiff filed suit against the PHD claiming negligent design of the home and that the PHD's conduct fell below the standard of care for a reasonably prudent professional home designer.  The PHD’s motion for summary judgment was granted as Oregon does not recognize a tort for "professional negligence" by a PHD.  After attempts to amend the complaint to allege general negligence proved unsuccessful, plaintiff filed an appeal. 
While the Oregon Court of Appeals affirmed that Oregon does not recognize "professional negligence" by a PHD, it reversed on the issue of allowing a claim against a PHD for general negligence. In reaching its decision, the Court explained that Oregon deviates from traditional negligence concepts of "duty, breach and causation."  In Oregon, liability rests on whether the defendant's conduct unreasonably created a foreseeable risk of harm to the plaintiff.  Foreseeability applies unless the parties invoke a "status, relationship, or particular standard of conduct that limits the defendant's duty."  Here, the PHD argued that the foreseeability standard did not apply because its duty to plaintiff was defined and limited by its status as an unlicensed contractor and an "owner builder," rather than a "builder-vendor."  The PHD further contended that there were adequate contractual protections for plaintiff and that it need only disclose that it built the house and to disclose known defects.  The court was not swayed and correctly held that that being an unlicensed contractor did not provide a shield to limit liability.  The Court reasoned that a jury can determine whether damages sustained by a plaintiff are reasonably foreseeable.  With regard to contractual protections and the disclosure of defects, the Court agreed that the required disclosure might provide sufficient protection for known defects.  However, the Court recognized that not all latent defects "come to light" while the builder occupies the home.  Therefore contractual disclosure is not an adequate substitute for holding a builder liable under the general negligence standard.

Oregon continues to recognize negligent construction claims grounded in general negligence.  As Oregon continues to recognize negligence in this context, it further erodes the Economic Loss Doctrine.  See also Bunnell v. Dalton Construction, Inc. (2006 (water damage to interior not economic loss) and Harris v. Suniga (2006) (damage to physical structures is not economic loss).
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* A Professional Building Designer specializes in designing light-frame buildings such as single family homes and agricultural buildings.  Unlike architects, Professional Building Designers are not legally required to pass exams or receive special licenses.