© 2018 The Texas Lawbook.
By Robert Velevis and Mason Parham of Sidley Austin
(April 23) – Litigators today know that digital media goes much deeper than the eye can see. It can be “deleted” but not quite deleted – remaining hidden in the recesses of a hard drive, a thumb drive or the cloud – archived, auto-saved, recovered and restored.
With all the complexities digitalization has brought, it is no surprise that courts require parties engaged in e-discovery to demonstrate some baseline level of technical competence. After all, it would be tremendously unfair if a party could avoid producing critical documents simply because it didn’t have the technical know-how to conduct an effective search through its digital records.
But how computer savvy does a party have to be? At what point can an opponent cry foul and request direct access to electronic devices for forensic examination? These are questions the Texas Supreme Court began to address in its recent per curiam decision in In re Marion Shipman.
Although the Court stopped short of providing a standard for when technical ineptitude rises to the level of a discovery default, the opinion provides a reminder that parties should not overlook the importance of process during e-discovery – and the importance of understanding if your opponent’s process is not going to cut it.
The case involved a dispute between Marion Shipman and Jamie Shelton, former business partners in various real estate ventures and auto dealerships. In 2011, a bank sued both Shipman and Shelton to recover the amount of a loan it had made to an auto dealership they were involved with.
Shipman independently settled with the bank in 2012, but the bank’s case against Shelton moved forward. In 2014, two years after Shipman’s settlement, Shelton filed a third-party complaint against Shipman alleging fraud, breach of contract and breach of fiduciary duty.
In connection with the third-party action, Shelton sought discovery of a variety of records regarding their past business dealings. Although Shipman produced some documents in response to these requests, Shelton felt that the productions were inadequate and moved to compel. The court granted the motion and ordered Shipman to produce additional documents.
However, in his deposition later that month, Shipman testified that he had produced all responsive documents in his possession and that he could not retrieve some of the documents requested because they had been stored on a computer that crashed in 2012 – two years before Shelton sued him – and which he had subsequently replaced.
When Shelton’s counsel asked Shipman what steps he had taken to search for documents on his current computer, he responded: “Well, I’ve looked at my computer to see, and I don’t have them on there.” At other times, Shipman sounded less certain, indicating that he did not know whether he had certain responsive documents and would have to “look and see” if he had recovered documents from his old computer.
A few days after his deposition, Shipman reported that his son had helped him discover additional files in a “backup folder” on his computer. Shipman claimed in an affidavit that these files were from his computer that crashed in 2012 and that they had been in a folder he was not previously aware of.
Following this production, Shelton filed a second motion to compel, which requested that the trial court issue an order requiring Shipman to turn over his computer for forensic examination. Shelton argued that Shipman’s deposition testimony and his post-deposition production showed that he lacked the technical expertise necessary to conduct a diligent search for responsive documents on his computer.
The trial court granted the motion and ordered Shipman to produce not only his computer, but also “all internal hard drives and external media (including, without limitation, thumb drives, hard drives, CDs, DVDs, zip drives and any other storage medium) in Shipman’s possession custody or control and used by Shipman or his agents” during the relevant time period.
Shipman sought mandamus relief from the Austin Court of Appeals and, after it was denied, the Supreme Court of Texas, arguing that the trial court’s order was overly invasive and overly broad. The Court agreed and ordered the trial court to vacate its order.
The Court’s analysis focused heavily on its 2009 decision in In re Weekley Homes, L.P., which analyzed and applied “some basic principles regarding direct access to a party’s electronic storage device.”
These principles include that before direct access will be allowed, a requesting party must first establish that a responding party has defaulted on its obligation to search its records, that the party’s production has been inadequate, and that a search could recover relevant materials. Further, the Weekley Court noted that courts have been reluctant to rely on “mere skepticism or bare allegations that the responding party has failed to comply with its discovery duties.”
Applying these principles, the Court concluded that Shipman’s belated production of the “backup” folder and his “equivocation about the existence of discrete documents at his deposition” provided some evidence bearing on his ability to operate a computer and retrieve responsive documents, but it was insufficient to support an order allowing direct access to his digital media.
Rather, the Court held that these facts only gave rise to “mere skepticism” that responsive documents would be found on Shipman’s computer. Moreover, Shipman’s production of other documents from his computer, including the backup folder, provided countervailing evidence that Shipman was competent at some level to use a computer.
Critically, however, the Court left open the possibility that a showing of technical ineptitude could provide grounds for establishing a discovery obligation default under Weekley. But “the burden imposed by Weekley is high,” and Shelton’s counsel failed to provide any evidence regarding what Shipman’s technical capabilities actually were.
For example, the Court noted that “Shipman was neither pressed at his deposition nor examined at the motion-to-compel hearing concerning his computer skills or the specific steps he took to search his computer.” Instead, “counsel merely recounted Shipman’s equivocal deposition answers, explained the belated production from the backup folder, and then stated: ‘Our question is: What else is there?’”
Given the breadth and intrusiveness of the order, this was not sufficient to establish a discovery default under Weekley – even if Shelton “may ultimately be entitled to some relief.”
In sum, Shipman does not adopt a bright line rule for when technical ineptitude will rise to the level of a discovery default, and therefore leaves it to the trial courts and courts of appeal to flesh out what the baseline level of technical competence actually is.
Until we know, the takeaway from Shipman is to be sure to build a record regarding your opponent’s process because courts in Texas demand specific evidence when it comes to allowing direct access to an opposing party’s digital media. Parties should never overlook the importance of process during e-discovery even in complex commercial cases between sophisticated parties.
The process used to search through digital media needs to be well documented and defensible. And to avoid any unwanted attention, counsel should be sure to address the process several times in a case, including when meeting with a potential witness in advance of a deposition.
Robert Velevis is a partner in the commercial litigation and disputes practice at Sidley Austin LLP. Mason Parham is an associate in the commercial litigation and disputes practice at Sidley Austin LLP. The authors are based in the firm’s Dallas office.
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