Discovery: the dreaded D-word. The process is time-consuming, delays the resolution of litigation, and is often quite expensive. There are also frequent challenges (and costs) related to identifying, collecting, reviewing, and producing electronically stored information, or ESI. And, of course, there can be thorny issues regarding what documents and communications may be withheld or redacted as privileged.

This article offers strategies designed to minimize the cost of compliance with a new California statute requiring initial disclosures, and refresh in-house counsel on key aspects of the attorney-client privilege and work product doctrine.

California State Court – Initial Disclosures

Prior to 2024, litigants in California state court could stipulate to the mutual exchange of initial disclosures, but such exchange was not mandatory. As of last year, however, pursuant to Code of Civil Procedure section 2016.090, in any California state court lawsuit filed on or after January 1, 2024, all parties must, upon the demand of any party and within 60 days of such demand, provide (1) the names and contact information for potential witnesses with knowledge relevant to the subject matter of the lawsuit, (2) copies of or a description by category of documents relevant to the subject matter of the lawsuit, and (3) copies of any applicable insurance policies or contractual indemnification provisions. The scope of these disclosures is notably broader than the parallel initial disclosure procedure in federal court, set forth in FRCP 26, which only requires disclosure of witnesses and documents the party intends to rely on for its claims and defenses.

Initial Disclosures – Potential Issues

There are several potential pitfalls regarding these mandatory initial disclosures. The first is its incredible breadth and scope. Early on in a case, it is difficult, if not impossible, to ascertain all witnesses and documents that may be relevant to the subject matter of the action. In addition, it is unclear when exactly the initial disclosure obligation is triggered – although the statute states that a party must serve initial disclosures within 60 days of a demand by another party, it also states that the court may enforce the initial disclosure statute on its own, meaning it is unclear whether a party must disclose anything at all in the absence of a demand or court order. Third, the requirement of disclosure of indemnification provisions is potentially problematic if such provisions are contained in confidential or commercially sensitive agreements.

Initial Disclosures – Strategies for Complying

The following strategies can help clients comply with CCP § 2016.090, without risking limiting the evidence they can put on at trial and without breaking the bank:

• Stipulate around the default rule. Subsection (a) of 2016.090 allows all parties to an action to modify the general rules set forth therein. Agreeing with opposing counsel to limit or narrow (or do away with) the otherwise-mandatory initial disclosures can avoid uncertainty and increased costs of compliance.
• When it comes to documents that may be relevant to the subject matter of the litigation, make use of the alternative to production of the documents themselves, which may be voluminous – a description by category (e.g., “Profit and Loss Statements from 2019-2024”). Make sure that the description is sufficiently detailed to describe the category of documents so that an opposing party or judge knows what you mean.
• If a contract contains an applicable indemnification provision, but you are concerned about disclosure of other sensitive provisions of the contract, such as purchase price, you can redact such information. CCP § 2016.090 only requires that the material provisions, i.e., who is on the hook for indemnification and in what amount, be provided.

Attorney Client Privilege/Work Product

Another critical aspect of discovery obligations is knowing what documents and communications are likely to be protected from disclosure by the attorney-client privilege and work product doctrine. A recent California Court of Appeal decision serves as a reminder that there can be substantial “gray area,” and in-house counsel should not assume that certain communications are privileged.

In Southern California Edison Company v. Superior Court, 102 Cal.App.5th 573 (2024), insurance carriers brought suit against a utility company regarding a wildfire. The utility company withheld approximately 108 documents, including emails to and from claims department employees on which no attorneys were copied, and other emails to and from employees in non-legal departments. The insurance carriers moved to compel, claiming such documents were not privileged.

The trial court granted the motion to compel. The court found that “none of the documents was sent to or from SCE Counsel” and that none of the documents involved opinions or impressions of any attorney. The trial court further found that the documents “were related to legal compliance, which it characterized as a business purpose” and which was the main purpose, rather than anticipated litigation.

Southern California Edison (SCE) filed a writ petition. The Court of Appeal reversed, holding that there was “substantial evidence” that the documents were prepared “as part of an attorney led internal investigation.” SCE’s in-house counsel had “directed Claims employees to obtain information from employees” in other departments, which thus made the communications at issue a form of witness statement, entitled to qualified attorney work product protection.

Although the insurers claimed that compliance was not a legal function, the Court disagreed – “[c]ounsel’s involvement here to ensure corporate compliance with legal reporting requirements was a legal role, not a non-legal one….”

Southern California Edison was a close call. In-house counsel should make sure that emails, notes, and other documents clearly indicate if they are intended to be privileged communications or attorney work product.

In-House Counsel Wearing Many Hats – Keep Them Separate

Another privilege issue that can arise for in-house counsel is what protections apply to their communications when they wear multiple hats within the company, for example, providing both business advice and legal advice. California courts will not find all communications to or from legal counsel are privileged just because a lawyer is involved. As one court noted, “merging of business and legal activities jeopardizes the assertion of the attorney-client privilege, since the attorney and the client have in effect become indistinguishable.” Corporate counsel who provide both legal and non-legal advice should be mindful of the distinction and keep such communications separate. Where legal advice is being sought or given, the email or memorandum should clearly indicate as much.

It’s also important to note that the mere presence of an in-house counsel on an email thread does not establish the attorney-client privilege. California law holds that “routine, non-privileged communications between corporate officers or employees transacting the general business of the company do not attain privileged status solely because in-house or outside counsel is ‘copied in’ on correspondence or memoranda.”

Conclusion

It’s clear that the rules and procedures for discovery and privilege in California courts are anything but clear. The guidance and insight of experienced outside counsel can be of great assistance, helping in-house counsel avoid problems that could create future headaches in litigation.