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Demanding Party to Pay for Recovery from Backup Tapes in “Proper Case”

Posted in CASE SUMMARIES

Toshiba American Elec. Components, Inc. v. Superior Court, 2004 WL 2757873 (Cal.App. Dec. 3, 2004)

In this discovery dispute, the parties disagreed about whether the demanding party or the responding party should pay the cost (estimated to be as much as $1.9 million) for recovering email from computer backup tapes. The court concluded that in a proper case, California Code of Civil Procedure, Section 2031 (g)(1) requires the demanding party to pay that expense. Declining to resolve the immediate dispute, the court ruled that the determination of a “proper case” is a factual matter best left to the discretion of the trial court.

Background facts: The plaintiff sued Toshiba for misappropriation of trade secrets and related torts, and sought production of 60 categories of documents using a broad definition of “document.” After Toshiba produced more than 20,000 pages of documents, which it described as all of the “readily available” responsive documents, a dispute arose about who should pay for recovery of additional responsive material (email) stored on Toshiba’s computer backup tapes.

Toshiba had more than 800 backup tapes for the pertinent time period, and hired an electronic discovery specialist to examine the tapes. According to this specialist, the data contained on the tapes had to be manipulated in various ways in order to search the tapes to find out what was contained in them. Complete processing of all the tapes, which would include analyzing the data contained on the tapes, identifying and restoring the files, searching the restored files for responsive items, and producing the specified data, would cost between $1.5 and $1.9 million. Processing a selection of 130 tapes surrounding 15 key dates would cost at least $211,250.

Toshiba gave this information to the plaintiff and asked plaintiff to shoulder some or all of the cost depending upon how many tapes plaintiff wanted processed. The plaintiff refused and filed a motion to compel. Anticipating Toshiba’s cost argument, plaintiff argued that cost- shifting would be unfair: Toshiba had admitted that the tapes were “not in the best condition for discovery.” Some of the software that Toshiba was using when the tapes were made had become obsolete, requiring the development of specialized conversion tools to access the information. Some of the tapes had deteriorated from age. Still others were incorrectly labeled.

The parties cited to federal cases in making their respective arguments (including Zubulake), but neither cited to the California rule. The trial court granted plaintiff’s motion without comment or explanation. The court did not order plaintiff to bear any of the cost, nor did it limit the production request to a representative sampling as plaintiff had suggested as an alternative. The court simply ordered Toshiba to produce all non-privileged emails from its backup tapes within 60 days.

Toshiba petitioned for a writ of mandate and sought a stay of the trial court’s order. In its petition, Toshiba relied on federal cases and also cited Rule 2031(g)(1) and argued that it was an automatic cost-shifting provision that should apply. The relevant portion of the rule provides: “Any documents demanded shall either be produced as they are kept in the usual course of business, or be organized and labeled to correspond with the categories in the demand. If necessary, the responding party at the reasonable expense of the demanding party shall, through detection devices, translate any data compilations included in the demand into reasonably usable form.” (Emphasis added.)

The appellate court first acknowledged that it rarely reviews discovery order by way of an extraordinary writ, but found that this case was compelling:

In the present case, California courts have not ruled upon the question of which party should pay when it is necessary to translate electronic data compilations in order to obtain usable information responsive to a discovery request. The question is one that is bound to arise with increasing frequency. Given that the cost of translating such material can be exorbitant, the question of who should bear the cost raises practical concerns as well as complicated policy issues. We believe these issues are sufficiently novel and important to justify review by extraordinary writ.

The court concluded that Section 2031(g)(1) shifts to the requesting party the expense of translating a data compilation into usable form, and that the trial court’s order was an abuse of discretion because the trial court was never asked to decide whether and to what extent that subdivision applies to the production in dispute. The court also pointed out that its ruling does not mean that the demanding party must always pay all the costs associated with retrieving usable data from backup tapes. “Section 2031(g)(1) is clear that the demanding party is expected to pay only its reasonable expense for a necessary translation. Reasonableness and necessity are purely factual issues (undoubtedly there are others), which, when disputed, are properly submitted to the discretion of the trial court.”

In closing, the court observed that the trial court cannot exercise its discretion in a “factual vacuum.” It stated: “Since it may be impossible to determine in advance whether or to what extent the backup tapes will yield relevant material, the court should encourage the parties to meet and confer about translating a sample of the tapes (see Zubulake, supra, 217 F.R.D. at pp. 323-324) (Westlaw subscription required) and to otherwise develop information in order to inform the analysis of the extent to which [plaintiff] should bear the expenses [Toshiba] has claimed.”