2013 E-Discovery Year in Review: Part 2

A quiet year in the courts as the profession appears to accept that EDD is here to stay.

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Magistrate Judge James Francis IV
Magistrate Judge James Francis IV

Editor's note: This is part two of a two-part series. See also part one.

Last year was surprisingly quiet on the electronic data discovery front. No earth-shattering opinions, no imprisoned spoliators, and barely a whimper from reported decisions related to parties' chosen form of production. Perhaps the bench and bar are getting more sophisticated and technology savvy. Or perhaps the courts implicitly recognized the current state of flux, what with the proposed amendments to the Federal Rules of Civil Procedure that specifically address EDD. Or possibly, the industry is evolving from what was once considered cutting-edge and novel to what is emerging as best practices.

Cooperation

In years past, cooperation and EDD competence have been singled out by judges. This year was no exception. In U.S. Bank National Association v. PHL Variable Insurance Co., No. 12-CV-6811 (S.D.N.Y. Apr. 22, 2013), U.S. Magistrate Judge James Francis IV urged litigants to take seriously their cooperation obligation to reduce the number of disputes that could be resolved without court intervention. This is not an unexpected charge given that the U.S. District Court for the Southern District of New York implemented a pilot program two years ago to increase awareness and cooperation in EDD. In 2013, the Eastern District of Michigan followed suit with a "Meet and Confer Checklist and Model Order Related to the Discovery of Electronically Stored Information."

Proportionality

Courts have placed an increased and more immediate focus on the parties' meaningful efforts to streamline discovery and consider the cost and burdens associated with their discovery requests. See, e.g., In re Morgan Stanley Mortgage Pass-Through Certificates Litig., No. 09-CV-02137 (S.D.N.Y. Sept. 11, 2013).

In Morgan Stanley, U.S. Magistrate Judge Sarah Netburn was called upon to resolve the parties' impasse related to the number of custodians whose electronic data should be searched and the relevant time period for the search. Before ruling, Netburn walked the parties through the proportionality considerations of Federal Rule of Civil Procedure 1 (which sets the tone for all litigation directing the rules to be administered with an eye towards a "just, speedy and inexpensive" resolution of every case) and 26(b)(2)(C) (which states a court "must" limit discovery that is unreasonably duplicative, more easily obtained from another source, or is burdensome or expensive when compared to its likely benefit).

Applying these principles, Netburn reduced plaintiffs' requested 80 discovery custodians to 34, finding that the burden to the defendant in terms of both reviewing duplicative material and reviewing false search hits would not be insignificant given the scope of the issues involved and the parties' agreed-upon list of search terms that spanned 1,600 pages and contained more than 30,000 terms.

Likewise, in Connecticut General Life Insurance v. Earl Scheib, Inc., No. 11-CV-0788 (S.D. Cal. Feb. 6, 2013), U.S. Magistrate Judge William Gallo underscored that, while data accessibility is an important factor in determining whether a discovery request places an undue burden on the producing party, an equal (if not greater) consideration should be given to the cost of the discovery when compared with its benefit in litigation. Accordingly, Gallo denied plaintiff's motion to compel discovery of 219 gigabytes of data from 19 different email accounts that would have cost the defendant more than $121,000 to collect, search and produce. Gallo reasoned that "if Plaintiff believes that this information is important to its case, then Plaintiff can perform its own cost-benefit analysis and determine whether it wants to fund the discovery."

Cost Shifting

In the past few years, courts have provided much-needed guidance on EDD cost shifting and cost allocation. In 2013, courts focused not only on cost shifting between parties, but also on how to allocate ESI expenses incurred by non-parties. See, e.g., In re Subpoena of Am. Nurses Assoc., No. AW-11-2837 (D. Md. Feb. 13, 2013) (confirming order that The Fair Labor Standards Act of 1938 plaintiffs pay the $250,000-plus EDD costs related to its subpoena on a non-interested third party).

Even when the non-party and a party share an interest in the subject matter of litigation—a factor that weighs against cost shifting—one court held that the sheer volume of discovery can tip the balance in favor of shifting EDD-related expenses. In Maximum Human Performance, LLC v. Sigma-tau HealthScience, LLC, No. 12-CV-6526 (D.N.J. Aug. 27, 2013) (unpublished). Magistrate Judge Steve Mannion found that partial cost shifting was appropriate where the defendant sought the production of voluminous EDD from a third party, Vitaquest International, related to its manufacture of a dietary supplement containing defendant's product. Vitaquest conceded that it had a longstanding relationship with the plaintiff and that it had the financial resources to pay for the discovery. Nonetheless, Mannion ordered the defendant to reimburse Vitaquest for one-third of the vendor costs to harvest the ESI.

Cost Recovery

There was also a significant increase in the number of reported cases dealing with prevailing parties' recovery of EDD-related expenses. Generally, a prevailing party is entitled to recover costs, including "fees for exemplification and the cost of making copies of any materials where the copies are necessarily obtained for use in the case." See FRCP 54(d) and 28 U.S.C. § 1920(4).

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