Ways to Pass the Check: Cost-shifting during the electronic discovery process

In Litigation by Coolidge Wall

There is an old saying that there is no such thing as a free lunch. But in the e-discovery arena, there are times when counsel can “pass the check” for e-discovery to the opposing party.

Many courts treat e-discovery the same way they treat paper discovery, and presume that parties must pay their own costs. See Dahl v. Bain Capital Partners, L.L.C., 655 F. Supp. 2d 146, 148 (D. Mass. 2009)(internal citations omitted). In fact, the Southern District of New York in the landmark Zubulake case found that cost-shifting should be considered only when electronic discovery imposes an “undue burden or expense” on the responding party. Zubulake v. UBS Warburg L.L.C., 217 F.R.D. 309, 318 (S.D.N.Y. 2003).

So, what exactly constitutes the “undue burden or expense” requirement to shift costs to the other party? One court held in 2010 that for data kept in an accessible format, the usual rules of discovery apply and the responding party should pay the costs of production. Barrera v. Boughton, Case No. 3:07cv1436 (RNC), 2010 U.S. Dist. LEXIS 103491, at *3 (D. Conn. Sept. 30, 2010). But if the responding party can show that the requested information is not reasonably accessible, it either may not be obligated to produce the information at all, or the court may shift some portion of the costs to the requesting party. Id.

The Federal Circuit Model Order takes a different approach. It states that costs “will be shifted for disproportionate ESI production requests” pursuant to Federal Rule of Civil Procedure 26. Fed. Cir. Model Order at 2, ¶ 3. By stating that costs “will be shifted,” the Model Order implies that the district courts will have little, if any, discretion in determining whether to shift costs of the production requests that are disproportionate. By only explicitly allowing cost shifting in the event of disproportionate e-discovery production requests, the probable result is that textualists in the Federal Circuit will not shift costs for other issues that might arise between the parties.

The Model Order goes on to require that when tasked with determining whether e-discovery production requests are “disproportionate” the court must consider a party’s “nonresponsive or dilatory discovery tactics.” Fed. Cir. Model Order at 2, ¶ 3. The Model Order further states that a party’s “meaningful compliance with this Order and efforts to promote efficiency and reduce costs will be considered in cost-shifting determinations.”

To shift e-discovery costs under a system like the Model Order, an attorney must show the judge what s/he has done in an effort to make the e-discovery process cost less and yield better results. The Model Order requires only “meaningful” rather than absolute, perfect, or unwavering compliance. How judges will interpret what is “meaningful” will probably vary, but it provides an argument if complete compliance was not possible due to the other party’s “nonresponsive or dilatory discovery tactics.”

One way to deal with these issues is to agree with opposing counsel at the beginning of the case to “go Dutch.” One court warned that when the parties do not discuss the e-discovery early on, both parties are likely to bear some financial burden for the discovery, particularly if there is a dispute. See DeGeer v. Gillis, 755 F. Supp. 2d 909, 929-930 (E.D. Il. 2010).

This is not just an issue for cases involving millions of dollars in e-discovery expenses. InCouch v. Wan, Case N. CV F 08-1621, 2011 U.S. Dist. LEXIS 79043, *10-12 (E.D. Cal. July 20, 2011), the district court ordered that plaintiffs, defendants, and a non-party government agency share the costs of e-discovery, which totaled $54,000.

With e-discovery impacting more and more cases, it is worth exploring whether there are arguments for cost-shifting. With e-discovery, there is no such thing as a free lunch for those who do not know when and how they can get one…