Metadata is “the new black,” but it’s often a useless accessory (Part 2)

Chris Hanslik, Robert Arthur

August 15, 2017

Electronically Stored Information (ESI) can make or break your case. ESI often gives the most accurate recitation of what occurred in a dispute, and ESI is locked in time when the send or save button is clicked.

ESI is often one party’s biggest strength—and the other party’s biggest weakness—in employment litigation. For example, we recently represented a services company in the oil and gas industry in litigation against a former employee. A forensic examination of the former employee’s computer showed he actively competed with his former employer during his employment, and the time stamps on his computer files (including the created, last modified, and deleted dates) were the nail in the coffin in the Court’s decision to award broad injunctive relief. On the flip side of the coin, the complete lack of evidence on the computer of a client sued for misappropriation of trade secrets was enough to convince a Harris County district court judge to completely deny a request for a temporary injunction.

However, the cost of preserving and producing that ESI is a significant concern for litigants, especially in high-volume productions. Attorneys are well-aware of the cost of electronic discovery, and often serve far-reaching requests for production of documents that include ESI to impose a cost burden on the other side and leverage settlement. Still, Texas Rule of Civil Procedure 196.4 gives litigants the right to “specifically request production of electronic or magnetic data and specify the form in which the requesting party wants it produced.” It also gives the responding party the right to object to the form of production requested.

Rule 196.4 is limited by Rule 192.4, which allows courts to limit the scope of discovery when the burden or expense of responding to a discovery request outweighs its likely benefit. The rule was originally designed to prevent unwarranted delay and expense, but Rule 192.4 objections have long been an overused, but underutilized, discovery objection.

In re State Farm Lloyds was an impactful decision by the Texas Supreme Court both in the definition of the discovery standard and production of ESI. In In re State Farm Lloyds, State Farm objected to the requesting party’s demand for production of documents in native form, arguing doing so would be burdensome and the documents were more reasonably available in PDF form.

The trial court overruled State Farm’s objection and ordered it to produce documents in native form. The court of appeals agreed, noting Rule 196.4 “does not offer State Farm the unilateral option to produce ESI in a ‘reasonably usable format,’” and a party is “required to produce the information in the form requested unless the party serves timely objections or assertions of privilege.”

The Texas Supreme Court clarified that neither the requesting nor the responding party have the unilateral right to specify the form of electronic discovery. Instead, courts must apply the proportionality factors for determining whether the producing party must produce documents in the form requested or a reasonably usable alternative form is appropriate:

[W]hen a party asserts that unreasonable efforts are required to produce documents 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.

 . . .

[I]f 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 pay[s] the reasonable expenses of any extraordinary steps required to retrieve and produce the information.”

The Court observed “‘a weak presumption against the production of metadata has taken hold,’ which may be due to ‘metadata’s status as ‘the new black,’ with parties increasingly seeking its production in every case, regardless of size or complexity.” This follows the presumption against production of metadata applied by many federal courts, recognizing metadata is of little evidentiary value in litigation, and only serves to needlessly and unnecessarily drive up litigation costs.

If applied correctly by the trial courts, In re State Farm Lloyds is a significant and positive development in business litigation. It should limit the costs of discovery in cases where metadata is not critical to the outcome (i.e., your run-of-the-mill breach of contract case). However, in cases where metadata is important, like in many employment litigation cases, the Texas Supreme Court left a reasonable avenue for litigants to obtain evidence documents in native form.