eDiscovery Daily Blog

• June 1, 2017

In the case In Re State Farm Lloyds, Relator, Nos. 15-0903, 15-0905 (Tex. Sup. Ct. May 26, 2017), the Texas Supreme Court, in an opinion delivered by Justice Eva M. Guzman, denied the petitions for writ of mandamus without prejudice, “affording the relator an opportunity to reurge its discovery objections” (regarding the requesting party’s request for a native file production) to the trial court in light of its opinion.

Case Background

In this case which involved a homeowner’s insurance claim after hail storm damage, the parties met repeatedly and unsuccessfully to attempt to negotiate a protocol for the production of ESI, with format of production being among the primary issues as the requesting party (the homeowners) requested native file production from the producing party (State Farm) in this case.  The trial court held an evidentiary hearing on the discovery issues, after which it granted the motion to compel native production of the ESI.  The court of appeals denied mandamus relief (we covered that ruling here), which led to State Farm’s appeal to the Texas Supreme Court.

Court Opinion

In the opinion delivered by Justice Guzman, the Court noted that “Under our discovery rules, neither party may dictate the form of electronic discovery. The requesting party must specify the desired form of production, but all discovery is subject to the proportionality overlay embedded in our discovery rules and inherent in the reasonableness standard to which our electronic-discovery rule is tethered.”

State Farm’s position was that it processes more than 35,000 new claims each day and, in the ordinary course of business, information related to those claims is routinely converted into static format and uploaded to its Enterprise Claims System (ECS), “the system of record” for claims handling at State Farm.  Its expert contended that ESI in “static format is easier to Bates number for discovery; allows efficient management of documents as exhibits at depositions, hearings, and trials; enables redaction, which is not possible with most native forms of ESI; and avoids intentional or unintentional alteration of the information, which may be difficult to detect or propagate further disputes about data integrity”.  The expert claimed that production in native form “would require State Farm to engineer a new process that includes determining upstream sources of the data, validating the upstream sources, determining whether native files of the information still exist, and developing an extraction method for the native versions.”  The expert did not quantify the time or expense involved, but claimed that “[t]hese additional steps would be an extraordinary and burdensome undertaking for State Farm” and are unnecessary because State Farm’s proffered production form is “reasonably usable.”

In asserting that searchable static format is not a “reasonably usable form,” the homeowners supported their proposed electronic discovery protocol with expert testimony that static images have less utility compared to native format, which would allow them to see formulas in Excel spreadsheets, search and sort the information by data fields, analyze the relationship of data, and see information in color that may not translate as accurately to stored or printed static images. Referring to static-form production as “the electronic equivalent of a print out,” the homeowner’s expert explained that useful metadata would not be viewable in static form, including tracked changes and commenting in Word documents; animations, other dynamic information, and speaker notes in static printouts of PowerPoint documents; and threading information in emails that would allow construction of a reasonable timeline related to State Farm’s processing of the homeowners’ claims.  Summarizing the homeowners’ position, the expert explained, “[W]e’re not imposing any additional duties, we’re only asking that they not be allowed to dumb down, to downgrade the data for production.”

The Court’s opinion noted that “Whether production of metadata-accessible forms is required on demand engages the interplay between the discovery limits in Rule 192.4 and production of electronic discovery under Rule 196.4” and also stated that “When a reasonably usable form is readily available in the ordinary course of business, the trial court must assess whether any enhanced burden or expense associated with a requested form is justified when weighed against the proportional needs of the case.” 

The Court also discussed the following seven factors when considering proportionality of the request: 1. Likely benefit of the requested discovery, 2. The needs of the case, 3. The amount in controversy, 4. The parties’ resources, 5. Importance of the issues at stake in the litigation, 6. The importance of the proposed discovery in resolving the litigation and 7. Any other articulable factor bearing on proportionality.  The Court also considered parity with Rule 34 of the Federal Rules of Civil Procedure and noted that “Rule 34’s plain language does not permit either party to unilaterally dictate the form of production for ESI.”

The Court concluded by stating:

“Today, we elucidate the guiding principles informing the exercise of discretion over electronic-discovery disputes, emphasizing that proportionality is the polestar. In doing so, we further a guiding tenet of the Texas Rules of Civil Procedure: that litigants achieve a ‘just, fair, equitable and impartial adjudication . . . with as great expedition and dispatch and at the least expense . . . as may be practicable.’ Because the trial court and the parties lacked the benefit of our views on the matter, neither granting nor denying mandamus relief on the merits is appropriate. Accordingly, we deny the request for mandamus relief without prejudice to allow the relator to seek reconsideration by the trial court in light of this opinion.”

So, what do you think?  Do you agree with State Farm’s arguments that producing native format ESI would be “extraordinary and burdensome” and that its proposed production form is “reasonably usable.”?  Please share any comments you might have or if you’d like to know more about a particular topic.

One footnote (literally): This opinion actually cited one of our blog posts in the footnotes, when discussing the relevance of metadata to the request – this post regarding how metadata played a key role in a $10.8 million whistleblower lawsuit verdict.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine. eDiscovery Daily is made available by CloudNine solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Daily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.