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EED Case Law Update: California Court Relies on Civil Code to Shift Tape Restoration Costs
By Dean Gonsowski, Esq. - Director, Litigation Strategy Services
Fios, Inc. | Electronic Discovery Simplified®
January 2004

In Toshiba America Electronics Components, Inc. v. Superior Court (Lexar Media, Inc.), 2004 Westlaw 2757873 (Cal. App. 4th, decided December 3), a California Appellate Court held that costs for backup tape restoration was properly shifted to the propounding party pursuant to California Code of Civil Procedure, section 2031, subdivision (g)(1). Rejecting the Federal approach epitomized by Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D. N.Y. 2003), the Court addressed whether "the responding party should pay the cost . for recovering usable information from the responding party's computer backup tapes."

In the underlying matter, Plaintiff, Lexar Media, Inc. (Lexar) sued Toshiba America Electronic Components, Inc. (TAEC) and TAEC's parent company Toshiba, Inc. for "misappropriation of trade secrets, breach of fiduciary duty, and unfair competition." As part of its discovery, Lexar sought information from TAEC, who had more than 800 backup tapes for the relevant time frame. Given the complexity of the potential tape restoration project, TAEC hired a consultant who determined that the complete processing of all the tapes (i.e., 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. A smaller sample (130 tapes surrounding 15 key dates) would cost at least $211,250. Not surprisingly, TAEC was disinclined to shoulder this burden alone and refused to restore the files as requested. Lexar subsequently filed a motion to compel production, which was summarily granted by the trial court.

In response, TAEC petitioned for a writ of mandate and sought protection from the trial court's order, relying principally upon California Code of Civil Procedure, section 2031, subdivision (g)(1) (hereafter §2031(g)(1)) which 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." (Italics added by court.)

The Appellate Court quickly concluded that the writ was appropriate and that TAEC's backup tapes were "data compilations" within the meaning of §2031 (g)(1). This left a singular dispute: "whether the phrase 'at the reasonable expense of the demanding party' is a mandatory cost-shifting provision or whether it merely permits the trial court to shift the cost to the demanding party when the responding party objects."

As the court began its statutory analysis, it addressed Lexar's contention that "the cost-shifting specified by §2031 (g)(1) may only be had upon a showing by the responding party that it will suffer undue burden or expense." Rejecting this argument, the Court found that that "[t]his contention ignores the plain language of the statute." The Court also concluded that Federal Rule of Civil Procedure 34 and the Zubulake line of cases were similarly inapposite given the legislature's clear intent.

"By enacting the cost-shifting clause of section 2031 (g)(1) our Legislature has identified the expense of translating data compilations into usable form as one that, in the public's interest, should be placed upon the demanding party. That is, section 2031 (g)(1) is a legislatively determined exception to the general rule that the responding party should bear the cost of responding to discovery."

Having concluded that §2031 (g)(1) shifted the expense of translating a data compilation into usable form to the demanding party, the Court was careful to point out that "our conclusion 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."

There was another interesting argument that may have carried the day for Lexar, but it was not evaluated by the Court since it was neither raised in the briefs nor examined factually by the trial court. The argument advanced by Lexar was that "since its document demand sought only email communications and not the backup tapes themselves, no data compilation was 'included in the demand' so that section 2031 (g)(1) does not apply at all." Similarly, Lexar also argued that "the expense of converting the tapes was not truly necessary but was to be incurred only because TAEC refused to turn all the tapes over to Lexar in their original form." Nevertheless, these potentially meritorious contentions were procedurally sidestepped by the Court.

Clearly, both of Lexar's belated arguments were an attempt to move the tape restoration issue outside the scope of the now mandatory cost shifting provisions of §2031 (g)(1). Certainly, as additional California cases address this issue, savvy propounding parties will undoubtedly go out of their way to craft the argument as one where they are seeking "responsive email from back up tapes" -- specifically claiming that they are not interested in "data compilations" per se. There are undoubtedly times when parties to discovery process may in fact want complete databases to be reconstructed from backup tapes, but when the request is truly more narrow (i.e., just for the email) will this reliance upon section 2031 (g)(1) still carry the day?

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Dean Gonsowski

Fios, Inc. | Electronic Discovery Simplified®

As a former practicing attorney and general counsel, Dean Gonsowski is in a unique position to discuss the impact that digital evidence has on the discovery process. He has managed a number of high-profile client engagements involving a range of complex litigation support issues including data de-duplication, forensic analysis, chain-of-custody and privilege issues. Dean is also a frequent guest speaker at legal technology events and law firms in the U.S. His work has been published in numerous legal publications, including Digital Discovery and e-Evidence and Colorado Trial Lawyer.
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