District Court Denies Protective Order in Putative Class Action: Production of Relevant ESI May Be Time Consuming and Expensive, But Not Unduly Burdensome

The District Court for the Eastern District of California recently denied a defendant’s motion for a protective order in a putative class action, finding that the information requested by plaintiff was relevant and subject to pre-certification discovery, and that defendant did not show that the electronically stored information (ESI) was inaccessible due to undue burden or cost, pursuant to Rule 26(b)(2)(C). Additionally, the court determined that even if defendant could show that the ESI was “inaccessible,” plaintiff demonstrated “good cause” to order production of the ESI notwithstanding the potential burden and cost.

In Sung Gon Kang v. Credit Bureau Connection Inc., plaintiff, a consumer, filed a putative class action alleging that defendant provided businesses with inaccurate consumer credit information, including that plaintiff and the proposed class of consumers were included on the United States Treasury Department’s Office of Foreign Assets Control (OFAC) list. A consumer is ineligible for credit in the United States if he or she is included on the list. Plaintiff sought to “represent classes consisting of individuals ‘about whom Defendant … sold a consumer report to a third party’ that included an OFAC Hit.”

The discovery dispute centered on defendant’s objections to plaintiff’s first set of written discovery requests. Specifically, defendant objected to requests seeking the identities of individuals who had an OFAC Hit – i.e., consumers who were included on the OFAC list – and any documents in defendant’s possession regarding those individuals. Defendant argued that plaintiff’s requests were “unduly burdensome” and sought information “which is privileged against discovery on the basis of individual privacy rights[.]” Defendant submitted declarations from its Chief Technology Officer (CTO) and Chief Operating Officer (COO), in which both officers asserted that the requested information could be produced, but it would be “burdensome and oppressive,” costing several million dollars. The COO stated that the information was stored in “an encrypted database, which has ‘no searchable capability’” and, consequently, to identify and locate relevant ESI, defendant would have to write two programs and then “manually review every single transaction” to decrypt and filter the information.

The court rejected defendant’s arguments, concluding that defendant did not meet “its burden of making ‘particular and specific demonstration[s] of fact’ that ‘provide sufficient detail’ as to an alleged undue burden or cost involved in producing the ESI at issue.” The court explained that defendant’s “conclusory” and “unsupported statements” that the decryption and filtering processes would take four to seven weeks and cost between $28,000 and $49,000 were “insufficient to meet Defendant’s burden.” Moreover, the court observed that even if defendant’s statements about the decryption and filtering processes were “supportable, the processes described are common in litigation and are not unduly burdensome or costly under the circumstances.” The court further noted that the fact that defendant’s database was not “searchable” did not make it “inaccessible,” especially when defendant still used the database and it could be decrypted. Notably, defendant could not provide consistent estimates of how many files would need to be reviewed after the filtering process or how long it would take to review each file. Thus, the court concluded, “even if some portion of Defendant’s representations about the processes described is supportable, the fact that there are numerous files, or Defendant has stored them in an unorganized fashion, does not excuse their production.” And the court added that “the fact that the obligatory production of relevant information and documents will be time consuming and expensive is similarly not a sufficient reason to refuse production.”

Furthermore, the court found that even if defendant met its burden of showing that the ESI was inaccessible, plaintiff demonstrated “good cause,” pursuant to Rule 26(b)(2)(B), to order the production, despite the possible burden and cost. The court explained, “Plaintiff’s discovery requests are specific, the information appears to be in the sole possession of Defendant and not available from any other source, it is highly likely that relevant, responsive information will be found in Defendant’s database, and the information will be useful – and in fact is essential – to Plaintiff’s class certification motion.” Accordingly, plaintiff was entitled to production of the ESI with defendant bearing the full cost of production.

Lastly, the court determined that a confidentiality protective order was sufficient to address defendant’s concerns regarding privacy rights. The court found that the information sought – contact information for individuals who had an OFAC Hit and documents regarding those individuals – was “highly relevant” to plaintiff’s claims, and the need for the information “significantly outweigh[ed] any privacy rights in the information.”

The Kang decision emphasizes the importance of providing sufficient detail regarding the time, money, and procedures that will be required to produce relevant ESI when urging a court to find that the production of ESI is unduly burdensome or costly. Unsupported conclusory statements about the cost and burden of producing ESI should be considered useless, and a party will not be relieved of its duty to produce relevant and necessary ESI simply because it will be time consuming and expensive. Thus, from a litigation perspective, organized and searchable business records will be less cumbersome and more manageable for discovery (i.e., less costly). Of course, such methods must be weighed against the business’s operational needs, with the understanding that such practices will not excuse a party from producing the information or make ESI inaccessible. As the Kang decision makes clear, decryption and filtering processes are common in litigation and, depending on the circumstances of the case, the need for these processes will not be sufficient to demonstrate that production of the requested information is unduly burdensome or costly.