W.E. Aubuchon Co. v. Benefirst, LLC
68 Fed. R. Serv. 3d 361, 245 F.R.D. 38, 2007 U.S. Dist. LEXIS 44574 (2007)
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Rule of Law:
Under Federal Rule of Civil Procedure 26(b)(2)(B), a court may compel the production of electronically stored information that is not reasonably accessible due to undue burden or cost if the requesting party demonstrates good cause, considering a multi-factor balancing test.
Facts:
- W.E. Aubuchon Co., Inc. ('Aubuchon') sponsored employee medical benefit plans and contracted with BeneFirst, LLC ('BeneFirst') to act as the third-party administrator.
- BeneFirst's contractual duties included processing claims, which involved investigating and determining eligibility for payments, co-pays, and coinsurance.
- BeneFirst received paper claim forms from medical providers, which it processed for payment.
- After 60 days, BeneFirst scanned the claim forms into electronic images and destroyed the paper originals.
- The electronic images were stored on a server organized by year, claims examiner, month, and processing date, but lacked an indexing system that would allow for retrieval by claimant name or employer.
- This storage system made the wholesale retrieval of a client's claims files extremely time-consuming and costly.
- Aubuchon alleged that BeneFirst mismanaged the claims, breaching its duties, and sought the electronic claim files to prove its case.
- BeneFirst is no longer in operation and would have to hire temporary personnel to conduct the retrieval.
Procedural Posture:
- W.E. Aubuchon Co., Inc. and Aubuchon Distribution, Inc. (Plaintiffs) filed a lawsuit against BeneFirst, LLC (Defendant) in the United States District Court.
- During discovery, Plaintiffs filed a motion to compel BeneFirst to produce medical claims files and bills.
- The court granted the Plaintiffs' motion to compel.
- BeneFirst then filed a Motion for Reconsideration of the court's discovery order, arguing the electronic data was not reasonably accessible.
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Issue:
Does a party have to produce electronically stored information that it claims is not reasonably accessible due to undue burden or cost, if the requesting party can demonstrate good cause for its production under Federal Rule of Civil Procedure 26(b)(2)(B)?
Opinions:
Majority - Hillman, United States Magistrate Judge.
Yes. A party must produce electronically stored information that is not reasonably accessible due to undue burden or cost if the requesting party shows good cause. The court applied the two-step analysis under the newly amended Federal Rule of Civil Procedure 26(b)(2)(B). First, the court found that BeneFirst met its burden to show the data was not 'reasonably accessible' because its convoluted and unindexed electronic storage system created an undue burden and cost for retrieval. Second, the court evaluated whether the Plaintiffs showed 'good cause' to compel production anyway, using a seven-factor test derived from the rule's advisory committee notes and the Zubulake case. The court found the factors weighed heavily in favor of the Plaintiffs because the requested data was the central evidence needed to prove their case, it was not available from any other source, and the Plaintiffs had significantly narrowed their request to reduce the burden. The court also noted that the service agreement specified the records were the Plaintiffs' property. Therefore, despite the cost, BeneFirst was ordered to produce the requested 3,000 claims at its own expense.
Analysis:
This case serves as a key application of the 2006 amendments to FRCP 26(b)(2)(B), codifying the two-tiered approach to discovering inaccessible electronically stored information (ESI). It establishes that a party cannot shield relevant evidence from discovery simply by maintaining a poorly designed or archaic data storage system. The decision emphasizes that the 'good cause' exception is a powerful tool for requesting parties when the ESI is central to the litigation and unavailable elsewhere. This precedent places a practical burden on companies to consider litigation preparedness when designing their data management systems, as the cost of an inefficient system may ultimately be borne by them during discovery.
