Zapproved Case Summary IconUnited States ex rel Guardiola v. Renown Health, No. 3:12-cv-00295-LRH-VPC, 2015 WL 5056726 (D. Nev. Aug. 25, 2015).

A party had to produce e-mails from its haphazardly maintained backup system and bear the cost of doing so because any inaccessibility was due to the party’s own malfeasance and did not meet the standard of not “reasonably accessible” under the Federal Rules of Civil Procedure.

In this qui tam action, the plaintiff relator, Cecilia Guardiola, sued under the False Claims Act, alleging fraudulent Medicare claims against her former employer Renown Health, Renown Medical Center, and Renown South Medical Center (“Renown”). Guardiola sent Renown two requests for the production of documents. In response, Renown provided thousands of e-mails spanning two periods, June 2006 to March 2011 and February 2013 to June 2014. It did not produce any e-mails for the gap between these two periods, citing the difficulty of restoring them from its backup tapes.

Before the gap began in April 2011, Renown saved all of its e-mails. Beginning in April 2011, Renown implemented a six-month retention period for e-mail, where messages older than six months would be automatically stored on backup tapes. It retained all messages older than March 2011 on backup tapes.

Renown believed that the March 2011 tapes would contain the most relevant e-mails for the litigation, so it hired a third party to restore them at a cost of $35,000; review and production costs exceeded $100,000. Based on these results, Renown refused to produce e-mails stored on backup tapes from the gap period, asserting it would cost at least $248,000 to do so.

Guardiola then filed a motion to compel their production. Renown objected, claiming the production would impose an undue burden. The court analyzed whether the requested e-mails were not reasonably accessible under Federal Rule of Civil Procedure 26(b)(2)(B), which required Renown to show an undue burden or cost; if it carried this burden, Guardiola would need to establish good cause for their production.

First, the court found that the mere fact that the e-mails were on backup tapes was insufficient to demonstrate that they were not reasonably accessible, particularly because Renown had already produced a month’s worth of e-mails from backup tapes. In finding that a cost of $136,000 to restore the backup tapes was not an undue burden, the court focused on Renown’s decision to store the e-mails on backup tapes without a clear organizational scheme. The company should have given “some thought to the risk of litigation and corresponding discovery obligations” before choosing an option that “did not maintain ESI in an indexed or otherwise searchable manner.” Given Renown’s choice to store disaster recovery tapes with archival data, the court concluded that Renown “must bear some responsibility” for the cost, and the costs were an “infinitesimally small portion” of the company’s annual revenue. Further, Renown’s reliance on a third party to assist with the restoration meant “there will be a burden or a cost, but not both.” The court also disregarded Renown’s additional storage and review costs of at least $248,000, because the undue burden analysis considers only searching and restoration costs.

After finding the e-mails reasonably accessible, the court was not required to analyze whether good cause existed. However, it still applied the seven-factor balancing test and found Guardiola could establish good cause. Guardiola had narrowed the scope of her requests, and e-mails were Renown’s primary vehicle for communication. Moreover, the timing of the gap made these e-mails highly relevant to Guardiola’s claim. These factors, as well as the import of raising a claim of fraud under the False Claim Act on behalf of taxpayers and the United States, weighed in favor of their production.

Finally, cost shifting was inappropriate because the e-mails were reasonably accessible. Therefore, the court granted Guardiola’s motion to compel and ordered the parties to meet and confer to set a schedule for production.

United States ex rel Guardiola v. Renown Health, No. 3:12-cv-00295-LRH-VPC, 2015 WL 5056726 (D. Nev. Aug. 25, 2015).

https://scholar.google.com/scholar_case?case=8755059470073000170&q=guardiola+v.+renown+health&hl=en&as_sdt=3,47&as_ylo=2015

 

Takeaways

Parties must plan their data retention programs cautiously. As the court noted, “ESI is now a common part and cost of business. Businesses are best situated to weigh for themselves the costs and benefits of various technology solutions in light of their needs.” Beyond budgeting for immediate storage, organizations must also consider the costs of preserving, collecting, and reviewing data for discovery. Here, choosing a (likely budget-friendly) backup solution that omitted indexing and searching capability came back to bite the defendants.

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