Lexar, citing Zubulake’s cost-shifting standard, argued that cost-shifting was not warranted. Toshiba, of course, argued the opposite. But neither cited any California case law or statutes. The dispute eventually reached the court of appeal. At this point, Toshiba cited California Code of Civil Procedure Section 2031(g)(1)16 which provides in part:
“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.”
The court of appeal held that Toshiba’s backup tapes were “data compilations” within the meaning of Section 2031(g)(1). Essentially rejecting the Federal approach propounded by Zubulake, the court of appeal determined that cost-shifting under the circumstances was automatic and no cost-shifting analysis was required. The Court held that Section 2031(g) explicitly required the demanding party to bear the expense of restoring and extracting data compilations. Further, the requirement under Federal Rule of Civil Procedure 34 that the responding party show undue burden or expense before cost-shifting may be considered was inapposite given the legislature’s clear intent. Therefore, the demanding party had to bear the expenses of translation, regardless of the burden (or lack of burden) on the responding party so long as the expenses were reasonable.
c. After Zubulake and Toshiba
Zubulake and Toshiba approached the issue of cost-shifting of inaccessible backup data in differing ways. Under the Federal approach, cost-shifting may be appropriate depending on the circumstances and based on a multitude of factors. As shown in Zubulake, cost-shifting may prove difficult in most cases. The proposed amendments to the Rules do not appear to alter this approach, other than by potentially eliminating the exception articulated in Zubulake relating to back-up tapes. Under the California approach, the relevant statute may automatically shift the expense of production to the requesting party where a “data compilations” are requested. Responding parties should bear this in mind and attempt to shift costs wherever possible. Cost- shifting may effectively end litigation in certain cases or prevent the opposing party from obtaining electronic data.
IV. Strategies and Recommendations On How a Company Can Manage Costs In Light Of These Recent Developments in Case Law and Statutes.
The proposed amendments to the Rules and the case law cited above are specific examples of the approaches lawmakers and judges have taken towards the enormous costs that electronic discovery can levy on parties to lawsuits. At least one court has expressed the concern that the heavy expense of electronic discovery can cripple a party or prevent the party from pursuing a claim.17 The fact remains: the party that can more effectively manage its costs has the advantage in litigation. That party will be able to quickly gather data, review it and produce it and for less cost. On the other hand, a party that cannot manage its costs may be forced to settle or alter its strategy in disadvantageous ways. Companies and their counsel must take a proactive approach to cutting costs where possible. This imperative applies not just in litigation. Routine business needs require the same discipline. In the remainder of this article, we will provide some of our suggestions on how companies can control and cut costs in light of the recent