W. George Wailes, a Business Trial Attorney and Director at Carr McClellan, in Burlingame, CA brings us this warning from the California Court of Appeal about what could happen to a third party that refuses to comply with a subpoena for electronically stored information.
The California Court of Appeal recently provided rare guidance regarding a third party’s obligations to produce electronically stored information (ESI) in response to a subpoena. In Vasquez v. California School of Culinary Arts, Inc. (Sallie Mae) (2014) 230 CA4th 35, the court defined subpoenaed parties’ obligations to extract existing data from computer systems and upheld an award of attorneys’ fees against the recalcitrant third party. The court concluded that it is unreasonable for a third party to withhold ESI that exists in its computer systems on the basis that outputting the ESI entails creating a “new” spreadsheet.
The Vasquez plaintiffs served a business records subpoena on Sallie Mae, Inc. requesting their student loan files. Sallie Mae responded that the burden of reviewing and copying some 800 loan files would cost $60,000. Faced with that estimate, plaintiffs served a new business records subpoena on Sallie Mae, this one requesting 44 specific data fields from the student loans produced as ESI in a “reasonably usable form, i.e., in a format that is electronically searchable and sortable.” The subpoena requested that Sallie Mae provide a cost estimate before producing the ESI.
Sallie Mae objected that the subpoena improperly required it to perform research and prepare a spreadsheet, and was therefore unreasonably burdensome. The trial court denied Sallie Mae’s motion to quash, holding that the information was relevant and should be produced. The trial court also granted the plaintiffs’ motion for attorneys’ fees.
Sallie Mae appealed only the attorneys’ fee award, arguing that it had substantial justification to file its motion to quash because the subpoena sought information not within the scope of permissible discovery under Code of Civil Procedure Section 1985.8 when it demanded that Sallie Mae to perform research and create a spreadsheet that did not already exist. The Court of Appeal affirmed the fee award.
Because California case law interpreting ESI discovery from third parties is sparse, the court turned to federal case law to analyze the issues, starting with one of the seminal ESI opinions Zubulake v. UBS Warbug LLC (S.D.N.Y. 2003) 217 F.R.D. 309, 318, which stated that a court will not automatically assume that compliance with a subpoena is unduly densome because it requests production of ESI. The Vasquez court cited additional federal authorities holding that parties can’t object to a subpoena for ESI on the ground that (1) they could produce the information in paper format; and (2) they are required to create new code to extract and format the data. The court noted that the information was already in Sallie Mae’s computers, and that Sallie Mae had never argued that it was unable to extract the requested ESI. Based on this, the court concluded that Sallie Mae had no justification for refusing to extract and produce the ESI in a readable, searchable format, especially since Plaintiffs had offered to pay for the cost of the extraction.
Vasquez is important as the first California case to analyze a third party’s obligations in response to a business records subpoena for ESI. Practioners will want to use it as a resource when issuing or responding to subpoenas for ESI.