Discovery of electronically stored information (ESI) plays an increasingly important—and expensive—role in litigation.  With few opportunities to provide guidance on discovery disputes, the Texas Supreme Court recently seized the chance in In re State Farm Lloyds, Nos. 15-0903, 15-0905, 2017 Tex. LEXIS 482 (Tex. May 26, 2017).

Plaintiffs sued State Farm over handling of their hail-damage claims and sought records in native, searchable format (with metadata) instead of static images like Portable Document Format (PDF) or Tag Image File Format (TIFF).  State Farm offered to produce ESI in searchable but “static” form.  It offered evidence 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 form and stored in secure read-only format for data integrity.  State Farm’s expert testified that it would be an extraordinarily burdensome undertaking for State Farm to produce the data in native format.  The claimants’ expert refuted State Farm’s claim of burden.

The trial court ordered all ESI to be produced in its native or near-native form rather than the alternative “reasonably usable” format State Farm proposed.

State Farm sought mandamus relief from the court of appeals, arguing that considering the proportionality concerns delineated in Rule 192.4, the trial court abused its discretion in requiring native format production in lieu of the reasonably usable form State Farm offered.  The court of appeals denied mandamus relief.

The Supreme Court held that when a party asserts that unreasonable efforts are required to produce ESI in the requested form and a “reasonably usable” alternative form is readily available, the trial court must balance any burden or expense of producing in the requested form against the relative benefits of doing so, the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the requested format in resolving the issues.

Evidence that a “reasonably usable” alternative form is readily available gives rise to a need for balancing, and if these factors preponderate against production in the requested form, the trial court may order production as requested only if the requesting party shows a particularized need for data in that form and the requesting party pays the reasonable expenses of any extraordinary steps required to retrieve and produce the information.  Unless ordered otherwise, the responding party need only produce the data reasonably available in the ordinary course of business in reasonably usable form.

The proportionality inquiry requires a case by case balancing in light of the following factors.

• Likely benefit of the requested discovery.  If the benefits of the requested form are negligible, nonexistent or speculative, any enhanced efforts or expense in obtaining the requested form of production is undue and sufficient to deny the requested discovery.
• The needs of the case.  Metadata’s relevance must be obvious and linked concretely to a claim or defense.  As a general proposition, metadata may be necessary to the litigation when the who, what, where, when and why ESI was generated is an actual issue in the case.  The court should also consider availability of the information from another source that is a more convenient, less burdensome, or less expensive.
• The amount in controversy.  Because e-discovery is very expensive and quite complicated, the amount in controversy is crucial in determining whether the burden or expense is justified.
• The parties’ resources.  Another way of looking at the benefit versus the burden is that if the potential benefit cannot be realized, any associated burden would be unwarranted.
• The importance of the issues at stake in the litigation.  When the amount involved is small, vindication of vitally important personal or public values may justify otherwise unwarranted expense.
• The importance of the proposed discovery in resolving the litigation.  Discovery must have a reasonable expectation of obtaining information that will aid a dispute’s resolution.
• Any other articulable factor bearing on proportionality.  The Supreme Court emphasized that “proportionality is the polestar.”