District Court Sustains Plaintiff’s Objection to Magistrate Judge’s Order Requiring Restoration and Production of Database Prepared in Separate Litigation

Best Buy Stores, L.P. v. Developers Diversified Realty Corp., 247 F.R.D. 567 (D. Minn. 2007)

Best Buy sued its landlords for fraud, breach of contract, breach of fiduciary duty and declaratory judgment, claiming that they overcharged insurance and maintenance costs for common areas.  On September 5, 2007, the magistrate judge ruled on a number of discovery motions filed by the parties.  (A copy of the September 5, 2007 Order is available here.)  Among other things, the magistrate judge concluded that a database prepared by Best Buy in the case of Odom v. Microsoft Corp. (the "Odom database") was reasonably accessible despite a cost of at least $124,000 to restore the data to searchable form.  The magistrate judge found that $124,000 was a reasonable cost considering the potential breach of contract damages exceeding $800,000, the potential for enhanced damages associated with Best Buy’s fraud claims, and the potential long-term economic impact of the outcome of the litigation on all parties.  Further, the magistrate judge noted that "discovery in the Odom case is complete [and] the database has … been archived by an e-discovery vendor."  Thus, the magistrate judge ordered Best Buy to restore the Odom database to permit discovery by defendants in this case.

Best Buy objected, explaining that discovery in the Odom litigation was not complete, the database had not been archived, and "the data can only be restored from original sources such as backup tapes."  Thus, Best Buy argued that the magistrate judge clearly erred in determining that the Odom database was reasonably accessible and ordering its discovery.

Defendants argued that, even if the Odom database was not reasonably accessible, Best Buy was under a duty to preserve the evidence at the time it downgraded the database and that the reasonable accessibility of the database should be determined from the time Best Buy had a duty to preserve relevant evidence.

The court observed that Federal Rule of Civil Procedure 26(b) governs the scope and limits of the discovery of electronically stored information ("ESI"):

As an initial matter, all discoverable material must be relevant and not privileged.  Fed. R. Civ. P. 26(b)(1).  The material need not be admissible as evidence but must be reasonably calculated to lead to admissible materials.  Id.  Discovery of relevant and nonprivileged ESI, however, is limited if the party from whom discovery is sought establishes that it is "not reasonably accessible because of undue burden or cost."  Fed. R. Civ. P. 26(b)(2)(B).  If the ESI is not reasonably accessible, it is only discoverable upon a showing of good cause by the requesting party, taking into consideration the limitations of Rule 26(b)(2)(C).  Id.

The court determined that the Odom database was not reasonably accessible:

Reasonable accessibility is best understood in terms of whether the ESI "is kept in an accessible or inaccessible format (a distinction that corresponds closely to the expense of production)."  Zubulake v. UBS Warburg LLC, 217 F.R.D. 309, 318 (S.D.N.Y. 2003); see also W.E. Aubuchon Co. v. Benefirst, LLC, [245 F.R.D. 38 (D. Mass. 2007)] (applying Zubulake to amended Rule 26(b)(2)).  This distinction largely depends "on the media on which [the ESI] is stored." Zubulake, 217 F.R.D. at 318.

In this case, all of the information in the Odom database not relevant to the Odom litigation was downgraded beginning on July 27, 2006, so that now the information would have to be restored from original sources.  The parties disagree as to whether the original sources from which the data would have to be restored are backup tapes.  The parties agree, however, that the information is no longer in a searchable format and that the database would have to be restored at a cost of at least $124,000 with a monthly storage cost of $27,823.  Because of the high cost to restore and maintain the database and the fact that it would have to be restored from original sources, the court determines that the Odom database is not at present reasonably accessible.  Defendants, however, argue that the accessibility of the database should be determined from a time prior to July 27, 2006, because Best Buy downgraded the database after it had a duty to preserve it for discovery in this litigation.

(Citations to the record omitted.)

The court then analyzed Best Buy’s duty to preserve evidence.  It concluded that the Odom database “would have been potentially relevant to virtually any litigation involving Best Buy because of the quantity and nature of the information it contained.”  However, it concluded that Best Buy did not have a duty to preserve it:

Absent specific discovery requests or additional facts suggesting that the database was of particular relevance to this litigation, the court determines that Best Buy did not have an obligation to maintain the Odom database at a monthly cost of over $27,000.  Moreover, by downgrading the database, Best Buy did not destroy the information it contained but rather removed it from a searchable format.  Therefore, Best Buy did not have a duty to preserve the Odom database as of July 27, 2006, and it need not restore the information to searchable format unless defendants establish good cause.

The court went on to decide whether there was good cause for discovery of the Odom database.  It observed that Rule 26(b)(2)(B) permits discovery of ESI from sources that are not reasonably accessible if "the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C)."  It noted that the advisory committee’s notes provide seven factors to inform the specific "good cause" inquiry required under Rule 26(b)(2)(B):  (1) the specificity of the discovery request; the quantity of information available from other and more easily accessed sources; (2) the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources; (4) the likelihood of finding relevant responsive information that cannot be obtained from other, more easily accessed sources; (5) predictions as to the importance and usefulness of the further information; (6) the importance of the issues at stake in the litigation; and (7) the parties’ resources.

The court found that defendants had not established the requisite good cause, and sustained Best Buy’s objection to the magistrate judge’s order:

Defendants argue that the Odom database will contain materials responsive to the discovery ordered by the magistrate judge because Best Buy has yet to search for such materials.  However, defendants do not argue that these materials are uniquely available from the Odom database or that Best Buy could not more easily obtain the materials from another source.  Indeed, the ordered discovery likely exists in hard copy format, and any relevant ESI could be gathered manually without the need for restoration of the Odom database.

The focus of defendants’ arguments, both in response to Best Buy’s objection and in their own generalized objections, is that Best Buy haphazardly conducted electronic discovery.  Specifically, defendants note concern about the lack of involvement from Best Buy’s information technology department to aid in the collection of ESI, the search practices of Best Buy’s property management department, Best Buy’s failure to preserve and search documents related to departed employees and Best Buy’s alleged failure to adequately search e-mail archives.  Defendants, however, have failed to connect any of these concerns with the specific discovery ordered by the magistrate judge.  In the absence of particularized arguments, the court cannot conclude that defendants have established the good cause required to restore the Odom database.  Accordingly, the court determines that, for the limited purpose of responding to the discovery required by the September 5, 2007, order, Best Buy need not restore the Odom database, and the magistrate judge’s conclusion to the contrary is clearly erroneous.

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