In its May 26, 2017, opinion in the case of In Re State Farm Lloyds, Case Nos. 15-0903 and 15-0905, the Supreme Court of Texas provided litigants and courts guidance for addressing and resolving disputes over the format for producing electronically stored information (“ESI”). In sum, if the responding party appropriately objects to the ESI format specified by the requesting party, and suggests an alternative, reasonable format for production, neither the requesting nor the responding party has the right to unilaterally declare the format for ESI production. Instead, the Court directs that parties should negotiate or, if necessary, litigate the question of what format is reasonable and proportional for the particular case and the particular ESI at issue.
The parties in State Farm Lloyds disputed whether State Farm was required to produce ESI in its native format—with metadata intact—as plaintiffs requested, or in a static format such as PDF or TIFF files, as State Farm proposed. The underlying litigation concerns homeowners’ allegations that State Farm underpaid hail damage claims. The homeowners sought discovery of ESI in its native form, arguing that this enhanced the visibility, utility, and searchability of the data. State Farm countered that it would produce ESI in searchable but static form, citing the burden and cost required to determine all sources of the native data and to develop a plan to extract and produce that data. The trial court ordered production as requested by the homeowners, and the intermediate court of appeals denied State Farm mandamus relief.
The Supreme Court denied mandamus relief, but without prejudice in order to allow the trial court to reconsider its decision in light of the Court’s opinion and guidance. The Court directs that the determination of a dispute over the format for production of ESI centers on whether production in the requested or proposed format is reasonable given the circumstances and needs of the case. Determining whether production of ESI in a certain form is reasonable and proportional requires a case-by-case balancing of several factors aimed at justifiably limiting the scope of discovery, while still advancing the goal of a fair, equitable, and impartial determination of the ultimate dispute.
The Supreme Court writes that the following factors should be weighed when considering the format for ESI production:
- The likely benefit of the requested discovery: The balance of this factor tips to the party requesting discovery when it can identify a particularized need for a certain ESI format, such as a need for metadata. This factor also involves the question of whether the ESI format could have utility beyond the specific litigation at issue.
- The needs of the case: For example, when issues such as the identity of the creator of ESI, or the time or date of its creation, are central to the litigation, courts should credit this factor as supporting production of ESI with metadata. Similarly, metadata might be crucial to the disposition of the case when other evidence suggests that the integrity or genuineness of ESI has been compromised.
- The amount in controversy: Courts should consider whether the damages sought in the lawsuit justify the expense of the respective production formats proposed by the parties.
- The parties’ resources: The Supreme Court notes that this factor can cut both ways. While the trial court should consider the expense to be borne by the responding party in the event the court orders a specific discovery protocol, the court also should consider whether the requesting party possesses the resources to use the ESI in the format it requests. In practice, the Supreme Court intends this factor to serve to prevent the use of the discovery process as a tool of attrition or coercion.
- Importance of the issues at stake in the litigation: This factor might turn on the precedential value of the case for either side, the policy ramifications of the case, or the vindication of personal or public values.
- The importance of the proposed discovery in resolving the litigation: The Court reiterates that discovery cannot result in a “fishing expedition.” Instead, a trial court should determine whether the requested or proposed ESI formats bear relevance to a central issue in the case.
- Any other factor bearing on proportionality: Finally, the Supreme Court notes that trial courts should have flexibility to consider any other relevant factor, particularly given the constantly evolving nature of technology.
In the end, assuming an appropriate objection has been made, and if the parties cannot agree on a protocol, the Supreme Court identifies three potential outcomes for resolving a dispute over the format for production of ESI. If the burden or cost of production in the requested format is not proportional to the value of the discovery, a court may order ESI to be produced in the format proposed by the responding party. On the other end of the spectrum, if the requesting party establishes a particularized need for a certain ESI format, such as a certain type of metadata, then the court may order production in the format specified by the requesting party, subject to the court’s discretion to shift some or all of the costs of production to the requesting party. Alternatively, the trial court is not bound by either party’s proposed discovery protocol and possesses the discretion to order production of ESI in any form that is proportionally appropriate under the circumstances of the case.
Under State Farm Lloyds, the Supreme Court of Texas has provided litigants the framework for evaluating, negotiating, and litigating disputes over the format for producing ESI. By focusing on arguments relating to the particularized need for a certain ESI format, or to the relative expense and burden of producing ESI in the requested and proposed formats, litigants will enhance their ability to manage the discovery process.