Passing the bucks – when and why to expect cost-shifting Posted By Daniel Kaiser, Esq. on August 10, 2009
How do you feel about “going Dutch?” You may or may not have strong feelings about being asked to split a dinner tab, but my money says that you’ll have even stronger feelings about splitting a discovery “tab.” This is a brief look at when to expect cost-shifting in eDiscovery.
When?
From the outset, keep in mind that eDiscovery cost-shifting is an extraordinary remedy. Court modifications of discovery requests (including cost-shifting) are not a given. In fact, the benchmark decision of Zubulake 1 points out that in many typical discovery requests a consideration of cost-shifting would be wholly inappropriate.[1] 
In general, courts should deny burdensome requests for data in the absence of a reasonable prospect that the data will contribute significantly to discovery.[2]
The remedy is more likely to arise where a request might be burdensome upon the recipient, but that burden is coupled with a justification – a demonstration of substantial need by the requesting party.[3] While a motion to limit a discovery request or to shift a portion of discovery costs to the requesting party remains a matter of court discretion, clear guidance has been provided in several compelling sources – allowing us the benefit of a few reasonable predictions.
Typically expect cost-shifting when…
- a party is compelled to recover and produce deleted data – deleted as a result of the routine, good-faith maintenance of an electronic information system;[4]
- a party is compelled to recover and produce data from recovery / backup tapes;[5]
- a party is compelled to recover and produce residual data;[6]
- a party is compelled to recover and produce legacy data;[7]
- the aggregate volume of data requested outstrips the needs of the requesting party;[8]
- the requesting party has disproportionately greater resources than the party from whom the data is sought;[9] or
- there is a lack of reasonable likelihood that the requested evidence will lead to the discovery of admissible evidence.[10]
Don’t expect cost-shifting when…
- a party may reasonably anticipate litigation, yet failing to place a legal hold on relevant data, that party allowed relevant data to be deleted;[11]
- in spite of the fact that the production of certain data would be unduly burdensome, a party agreed to a stipulation ordering production of the data in question;[12] or
- the data requested is reasonably accessible, meaning compliance would not be unduly burdensome or costly.[13]
What?
Where do these factors come from? What does “reasonably accessible” mean? In a federal context, eDiscovery requests are at the discretion of the court. Fed. R. Civ. P. 26 notes that where the production of ESI is found to be unduly burdensome (where the ESI is not reasonably accessible) the court may “specify conditions for the discovery.”[14] So how do we recognize undue burden or cost, the lodestar for data that is not reasonably accessible? The Federal Rules of Civil Procedure, The Sedona Principles, and case law all shed light on these questions.
Reasonable Availability and Undue Burden in Context…
- Rule 26 provides a proportionality standard to be used when a court steps in to specify discovery conditions, incorporating the factors of IT feasibility, balancing its burden or expense against “its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake . . . and the importance of the discovery in resolving the issues.”[15]
- Principle 13 of The Sedona Conference Working Group on Electronic Document Retention & Production states that “if the information sought is not reasonably available . . . in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information may be shared by or shifted to the requesting party.”[16] The bald use of “reasonably available” and “ordinary course of business” may be vague on its own, but Comment 13.a. provides eight factors to determine whether cost-shifting should occur in the production of burdensome ESI:
- whether the information is reasonably accessible as a technical matter without undue burden or cost;
- the extent to which the request is specifically tailored to discover relevant information;
- the availability of such information from other sources, including testimony, requests for admission, interrogatories, and other discovery responses;
- the total cost of production, compared to the amount in controversy;
- the total cost of production, compared to the resources available to each party;
- the relative ability of each party to control costs and its incentive to do so;
- the importance of the issues at stake in the litigation, and
- the relative benefits of the parties of obtaining the information.[17]
- In Zubulake I, judge Scheindlin wrote that “whether production of documents is unduly burdensome or expensive turns primarily on whether it is kept in an accessible or inaccessible format,”[18] and went on to clarify that metric with the following seven-point test:
- The extent to which the request is specifically tailored to discover relevant information;
- The availability of such information from other sources;
- The total cost of production, compared to the amount in controversy;
- The total cost of production, compared to the resources available to each party;
- The relative ability of each party to control costs and its incentive to do so;
- The importance of the issues at stake in the litigation; and
- The relative benefits to the parties of obtaining the information.[19]
The first two factors are generally the weightiest, but factor six takes precedence if the case is one of broad, important impact.[20] This calculus is objective; a sampling of the requested data is required to allow an analysis of these factors.
What you should do…
Review these factors (and any corresponding state/local law) to see whether an eDiscovery request is likely to fall within a precedent for cost-shifting. It remains vital that in the shadow of anticipated litigation, you maintain viable records of your relevant data.[21] Be prepared, and take the mystery out of “going Dutch.”
[1] Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (drawing a distinction between accessible email files on optical discs and less accessible email files on backup tapes).
[2] The Sedona Conference Working Group on Electronic Document Retention & Production (WG1), The Sedona Principles: Second Edition, Best Practices Recommendations & Principles for Addressing Electronic Document Production, Comment 13.b. (June 2007).
[3] Id.
[4] Id. at Comment 13.a.
[5] Id.
[6] Id.
[7] Id.
[8] Id. See Fed. R. Civ. P. 26(b)(2)(C)(iii).
[9] Id. See Fed. R. Civ. P. 26(b)(2)(C)(iii).
[10] See Fed. R. Civ. P. 26(b)(2)(C), Fed. R. Civ. P. 26(c), see also Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003).
[11] See http://www.thesedonaconference.org/content/miscFiles/Legal_holds.pdf. See also Procter & Gamble Co. v. Haugen, 2003 WL 22080734, No. 1:95CV94 DAK (D. Utah August 19, 2003).
[12] In re Fannie Mae Securities Litigation, 552 F.3d 814 (2009).
[13] Fed. R. Civ. P. 26(b)(2)(B).
[14] Fed. R. Civ. P. 26 (b)(2)(B).
[15] Fed. R. Civ. P. 26 (b)(2)(C).
[16] The Sedona Conference Working Group on Electronic Document Retention & Production (WG1), The Sedona Principles: Second Edition, Best Practices Recommendations & Principles for Addressing Electronic Document Production, at 67 (June 2007).
[17] Id. at Comment 13.a.
[18] Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003).
[19] Id. at 322.
[20] Id.
[21] See FN 9 supra, and accompanying text.
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