February 2016 | Earn one hour of MCLE Credit in Legal Ethics
Ethics in the ether: Competently representing your client with regard to ESI
The ubiquity of electronically stored information (“ESI”) and its ever-expanding role in litigation, when combined with the statutory and ethical duties owed to clients and courts, require greater sophistication on the part of attorneys. A failure to keep abreast of evolving technology and to educate oneself on a client’s use, preservation and storage of ESI may result in both disciplinary proceedings and malpractice claims against an unprepared lawyer.
All California lawyers owe a duty of competence to their clients, not just as a matter of tort law but also under the state’s ethics rules, meaning an attorney may be subject to discipline if he or she fails to act competently.
Rule 3-110 of the California Rules of Professional Conduct provides:
(A) A member shall not intentionally, recklessly, or repeatedly fail to perform legal services with competence.
(B) For purposes of this rule, “competence” in any legal service shall mean to apply the 1) diligence, 2) learning and skill, and 3) mental, emotional, and physical ability reasonably necessary for the performance of such service.
(C) If a member does not have sufficient learning and skill when the legal service is undertaken, the member may nonetheless perform such services competently by 1) associating with or, where appropriate, professionally consulting another lawyer reasonably believed to be competent, or 2) by acquiring sufficient learning and skill before performance is required.The increasing importance of ESI in our daily lives and, in particular, in the context of litigation, has expanded the duty of competence. Not only must attorneys understand or educate themselves on substantive areas of the law, or associate with other practitioners reasonably believed to be competent in ESI, lawyers must also know and understand a client’s technology and how to preserve, collect, review and produce a client’s data while maintaining applicable privileges, trade secrets and confidentiality. Of course, lawyers can always decline a representation.
When e-discovery is anticipated in an engagement, lawyers must first fairly evaluate their competence in the field and disclose it to the client in accordance with the requirements of Rule 3-500, the rule requiring an attorney to keep his or her “client reasonably informed about significant developments relating to the employment or representation.” (See San Diego County Bar Association Formal Opn. No. 2012-1, *4. See also Cal. State Bar Formal Opn. No. 2015-193 at 7.) Appropriate handling of ESI may require consultation with non-lawyer technical professionals reasonably believed to be competent in their field. (Cal. State Bar Formal Opn. No. 2010-179.) However, it is insufficient for a lawyer to merely retain self-proclaimed “experts” in e-discovery who then act unsupervised.
This is because an attorney’s duty of competence extends to supervising the work of subordinate attorneys and non-attorney agents and employees. (Discussion, Rule 3-110). This may include a duty to vet and oversee the work of both the client and outside consultants or contractors. (See California State Bar Formal Opn. No. 2004-165 [duty to supervise outside contract lawyers] and San Diego County Bar Association Formal Opn. No. 2012-1 [duty to supervise clients relating to ESI, citing Cardenas v. Dorel Juvenile Group, Inc. (D. Kan. 2006) 2006 WL 1537394].)
Although a non-lawyer professional may have more experience with the technical aspects of collecting ESI, counsel owes additional duties to the client relating to the e-discovery needs in a particular case. These duties, which originate both within and outside the duty of competence, include understanding a client’s ESI systems and storage procedures, implementing necessary steps to preserve and prevent the destruction of data and attendant spoliation claims, advising clients on the collection and preservation of ESI, meeting and conferring with opposing counsel concerning e-discovery, complying with any court orders related to the e-discovery, developing and performing or supervising searches, reviewing and analyzing the data, maintaining privileges, trade secrets and the confidentiality of clients’ records and producing nonprivileged ESI in a recognized and appropriate manner. (See HM Elecs., Inc. v. R.F. Techs., Inc. (S.D. Cal. Aug. 7, 2015) 2015 U.S. Dist. LEXIS 104100, *58, citing Cal. State Bar Formal Opn. No. 2015-193 at 3-4.) Thus, a lawyer may not satisfy the duty of competence with regard to ESI simply by hiring an outside professional with experience in the field and allowing the outsider to perform without guidance.
Instead, an attorney must supervise all work performed on behalf of the client, whether by experts, consultants, subordinate attorneys, the client or its representatives. Consistent with an attorney’s duty to communicate with a client under Rule 3-500, counsel must regularly engage with the client and any outside vendors or experts who work with ESI to educate them on the legal and factual matters affecting the e-discovery process, to adequately instruct and guide the client and consultants on necessary steps and to routinely conduct “quality control” checks to ensure the process is advancing as intended and expected. Counsel should also obtain an estimate of the expected cost to the client for the handling of ESI and apprise the client of additional foreseeable costs once known.
At the outset of any engagement in which it is reasonably foreseeable litigation may result, counsel must assess both the need for e-discovery and any known issues that may affect it, which include, but are not limited to the loss, destruction or modification of ESI, whether due to routine, inadvertent or intentional acts of the client, its agents or third parties. Important examples include the regular deletion or overwriting of data.
Preserving relevant ESI is critical, as a failure to do so may result in a spoliation claim that results in monetary, evidentiary or even terminating sanctions. Once an attorney determines ESI may be at issue, he or she has “a duty to effectively communicate a written ‘litigation hold’ that is tailored to the client and the particular lawsuit, so the client will understand exactly what actions to take or forebear, and so that the client will actually take the steps necessary to preserve evidence. [Citation]” (HM Elecs., Inc., supra, 2015 U.S. Dist. LEXIS 104100, *56, citing Philips Electronics North America Corp. v. BC Technical (D. Utah 2011) 773 F.Supp.2d 1149, 1195, 1204-1206 [litigation hold must be directed to appropriate employees, must be conveyed in a manner that ensures recipients read and follow it, must tell them what the case is about, and must identify categories of documents to be preserved].)
A failure to implement and supervise a litigation hold procedure constitutes “gross negligence.” (Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC (S.D.N.Y. 2010) 685 F. Supp. 2d 456, 464-465 [“Possibly after October, 2003, when Zubulake IV was issued, and definitely after July 2004, when the final relevant Zubulake [V] opinion was issued, the failure to issue a written litigation hold constitutes gross negligence because that failure is likely to result in the destruction of relevant information.”]) Note that an attorneys’ mere negligence, although potentially grounds for a malpractice suit, may not constitute a cause for discipline. (See In the Matter of Torres (Review Dept. 2000) 4 Cal. State Bar Ct. Rptr. 138, 2000 Calif. Op. LEXIS 2, *29 [“We have repeatedly held that negligent legal representation, even that amounting to legal malpractice, does not establish a rule 3-110(A) violation.”] However, “gross negligence” is another matter.
A disciplinary violation under Rule 3-110(A) requires an attorney to “intentionally, recklessly, or repeatedly fail to perform legal services with competence.” Citing Prosser & Keaton on Torts, the court in Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, supra, equated “gross negligence” to wanton, willful or reckless behavior, suggesting a failure to issue and implement an adequate litigation hold procedure would be an ethical violation under Rule 3-110.
An effective litigation hold requires counsel to understand a client’s organizational and data storage structure. (Qualcomm, Inc. v. Broadcom Corp. (S.D. Cal. Apr. 2, 2010) 2010 U.S. Dist. LEXIS 33889, 2010 WL 1336937, at *2-*3). Counsel further owes a continuing duty to monitor the client’s implementation of and compliance with the litigation hold, as well as determine whether changed circumstances require modification of the litigation hold’s scope. (Zubulake v. Warburg, LLC (S.D.N.Y. 2004) 229 F.R.D. 422, 423.) Hence, simply putting a litigation hold in place is not enough and will not protect the client or the lawyer.
A lawyer must identify the available sources of ESI held or hosted by the client or third parties, which may include not only company-controlled servers, desktops, laptops, tablets, smartphones and removable media (DVDs, CDs, USB drives, etc.), but also employee-controlled devices (e.g., “BYOD” and “COPE”) and third-party archival or cloud storage. Counsel must inquire about and identify all relevant devices presently in use, but also the disposition of equipment and media used during the period relevant to the potential or pending action, then implement appropriate safeguards to ensure both data and devices are preserved.
Although a client’s information technology (“IT”) personnel may be an important resource when identifying custodians and sources of information, an attorney may not presumptively rely solely upon any assumed “expertise” or knowledge of a client representative. Trust, but verify, is the rule attorneys need to follow, meaning they must confirm an effective litigation hold is in place throughout the discovery process.
The handling of ESI also implicates the duty of confidentiality. California lawyers must “maintain inviolate, and at every peril to himself or herself, secrets of his or her client.” (Bus. & Prof. Code section 6068(e)(1). See also Rule 3-100.) The client controls the confidentiality of information, and absent the client’s informed consent or “as authorized or required by the State Bar Act, these rules or other law,” an attorney may not reveal the client’s confidential information. (See Rule 3-100 and Discussion .)
Effective management of a client’s data in a litigation context requires counsel to remain ever vigilant. A lawyer must identify effective safeguards and implement adequate oversight to prevent the unintended disclosure of a client’s confidential information, including information unrelated to the litigation, but which may encompass proprietary or trade secret information, as well as metadata that may reflect proprietary or confidential information, attorney-client communications and/or work product. When using third parties to assist with the preservation, collection, retrieval, storage and production of a client’s ESI, counsel must take sufficient steps to ensure vendors employ adequate security to protect the confidentiality and integrity of data.
Knowing and understanding the client’s technology will assist in preventing inadvertent disclosure. But counsel should also negotiate and implement a written “claw back” agreement in accordance with Code of Civil Procedure section 2031.285 or a written stipulated protective order under Rule 502(d) of the Federal Rules of Evidence if the action is pending in federal court. (San Diego County Bar Association Formal Opn. No. 2012-1, *4.) A writing is necessary, as oral claw backs will generally not protect privileges. Id. A Rule 502 protective order permits a federal court to conclude a privilege or other protection has not been waived so long as the disclosure does not constitute a waiver in another federal or state proceeding. (Fed. R. Evid. 502(d).) California’s statute provides less assistance than the federal equivalent to an attorney confronted with an issue of inadvertent production as it only outlines the procedure for litigating a dispute. (See Code of Civ. Proc., § 2031.285; see also, Cal. State Bar Formal Opn. No. 2015-193 at 7, n. 11.). Indeed, decisional authority in general under California’s Electronic Discovery Act is relatively rare, and practitioners must turn to the federal courts for much of the development of e-discovery law.
Finally, an attorney’s duty of candor to a tribunal under Rule 5-200 is implicated in the handling of ESI. State and federal courts require counsel to “meet and confer” regarding e-discovery issues, and to fairly and accurately represent to the court what is reasonably necessary with regard to e-discovery. (See San Diego County Bar Association Formal Opn. No. 2012-1, *5.)
The duties of competence, confidentiality, communication and candor to a tribunal all attend an attorney’s handling of e-discovery. The ethical practitioner must remain mindful of each whenever working with a client’s data.
Eric Deitz is a partner in the San Diego and Los Angeles offices of Gordon & Rees. His practice involves professional liability defense, commercial and employment litigation. He serves on the State Bar of California’s Committee on Professional Responsibility and Conduct and as the vice-chair of the San Diego County Bar Association’s Legal Ethics Committee. The opinions expressed herein are his alone.