In re State Farm Lloyds: eDiscovery Guidance from the Texas Supreme Court
Unlike the discovery process in many parts of the world, discovery in the United States is designed to be “self-executing” by the parties to litigation – ideally with little (if any) guidance or oversight by judges or magistrates. And in most cases, it is – given the volume of litigation in both the state and federal courts, the number of discovery and eDiscovery issues and disputes that make their way to the bench – let alone into a reported decision – is small.
And so it’s surprising – though welcome – that the Supreme Court of Texas recently issued a 29-page opinion concerning the form in which electronically stored information (or “ESI”) may be requested and produced. In re State Farm Lloyds, __ S.W.3d __, 2017 WL 2323099 (Tex. Sup. Ct. May 26, 2017).  The Court itself recognized the unique position it was in: “[w]ith few occasions to enter the fray, we have an opportunity in these consolidated mandamus proceedings to provide further clarity regarding ESI discovery.” Id. at 1.
The technical ESI issues before the Court arose out of an all too common occurrence in Texas, namely home and roof damage from hail and wind storms. In the lower trial courts, plaintiffs challenged State Farm’s denial of insurance claims related to such damage. As discovery began, the parties attempted – unsuccessfully – to negotiate various eDiscovery protocols, with form of production being a particular sticking point.
"Given the volume of litigation in both the state and federal courts, the number of discovery and eDiscovery issues and disputes that make their way to the bench... is small."
The plaintiff homeowners sought production of claim and other documentation in native format for a host of reasons, including that the utility of many documents (such as Excel spreadsheets) is greatly reduced in static form, and that potentially probative metadata could be lost by static productions. State Farm countered that – in the ordinary course of its business – its documents were converted from native into a static form and subsequently stored within its document management system. Attempting to match such static documents (in PDF, TIFF, or JPG form) with “upstream” native ones would be costly and burdensome, State Farm argued. And moreover, according to State Farm, such a matching and native production is not legally required, as production of potentially relevant documents in searchable static form from its document management system would be “reasonably usable” by the homeowners.
The homeowners eventually succeeded in moving the trial court to order native production of documents. State Farm mounted an unsuccessful appeal, following which it sought relief before the Texas Supreme Court. Because “neither the trial court nor the parties had the benefit of the guidance we seek to provide today,” the Supreme Court denied “the petitions for writ of mandamus without prejudice, affording the relator [State Farm] an opportunity to reurge its discovery objections to the trial court in light of this opinion.” Id. at 4.
The Supreme Court had two, overarching goals in writing its opinion: to “(1) clarify that neither the requesting nor the producing party has a unilateral right to specify the format of discovery under [Texas Rule of Civil Procedure] 196.4 and (2) provide guidance regarding the application of Rule 192.4’s proportionality factors in the electronic-discovery context.” Id. at 10. The Court stated that “[w]hen 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.” Id. at 16.
The Court went on to say that “[t]he proportionality inquiry requires case-by-case balancing in light of the following factors.” Id. The factors identified by the Court include:
1. Likely benefit of the requested discovery;
2. Needs of the case;
3. Amount of controversy;
4. Parties' resources;
5. Importance of the issues at stake in the litigation;
6. Importance of the proposed discovery in resolving the litigation; and
7. Any other articulable factor bearing on proportionality.
Id. at 16-23.
In conclusion, the Court stated that “[t]oday, 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.’” Id. at 29. Welcome guidance and admonition from Texas’ highest court.
 Citations throughout are to the PDF version of the opinion publicly available at http://law.justia.com.