The Supreme Court of Texas has issued a significant decision related to the discovery of electronically stored information (“ESI”). In a consolidated case titled In re State Farm Lloyds, No. 15-0905 (Texas, May 26, 2017), a group of residential homeowners sued their insurer, State Farm Lloyds, over the company’s purported underpayment of their damage claims following a hail storm. As part of discovery, a trial court ordered the insurer to produce any ESI in native or near-native format as requested by the insured homeowners. At the time, State Farm Lloyds’ request that the company be allowed to produce its discoverable ESI in a reasonably usable static format that was more “convenient and accessible given its routine business practices” was denied.
In response to the trial court’s discovery order, State Farm Lloyds sought mandamus relief from the Thirteenth Court of Appeals in Corpus Christi. According to the insurer, “Texas Rule of Civil Procedure 196.4 allows for production of ESI in reasonably usable forms and, considering the proportionality concerns delineated in discovery Rule 192.4, the trial court abused its discretion in requiring native production in lieu of the reasonably usable form State Farm offered.” The appellate court denied the company’s request for relief and State Farm Lloyds sought review by the Texas Supreme Court.
In a lengthy decision delivered by Justice Guzman, the Supreme Court of Texas ultimately clarified “that neither the requesting nor the producing party has a unilateral right to specify the format of discovery under Rule 196.4.” In addition, the court’s decision provided “guidance regarding the application of Rule 192.4’s proportionality factors in the electronic-discovery context.”
With regard to Rule 192.4, the Texas court stated a 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” where “a reasonably usable form is readily available in the ordinary course of business.” In order to assess proportionality, the Supreme Court of Texas said a trial court must examine the following factors:
- Likely benefit of the requested discovery;
- The needs of the case;
- The amount in controversy;
- The parties’ resources;
- Importance of the issues at stake in the litigation;
- The importance of the proposed discovery in resolving the litigation; and
- Any other articulable factor bearing on proportionality.
The court added that its “application of proportionality principles in this context aligns electronic-discovery practice under the Texas Rules of Civil Procedure with electronic-discovery practice under the Federal Rules of Civil Procedure.”
Ultimately, the Supreme Court of Texas concluded:
Today, 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.” Because the trial court and the parties lacked the benefit of our views on the matter, neither granting nor denying mandamus relief on the merits is appropriate. Accordingly, we deny the request for mandamus relief without prejudice to allow the relator to seek reconsideration by the trial court in light of this opinion.