E-discovery - Can the Producing Party Expect Cost-shifting?

• Jurisdiction: United States,Federal
• Publication year: 2005
• Citation: Vol. 2 No. 1

Shidler Journal of Law, Commerce & Technology

Volume 2, Issue 1, Summer 2005

Litigation

Cite as: Mafé Rajul, E-Discovery - Can the Producing Party Expect Cost-Shifting?: The New Trend and What Can Be Done to Reduce Production Costs, 2 Shidler J. L. Com. & Tech. 3 (Aug. 12, 2005), at [http://www.lctjournal.washington.edu/Vol2/a003Rajul.html]

E-Discovery - Can the Producing Party Expect Cost-Shifting?: The New Trend and What Can Be Done to Reduce Production Costs

By Mafé Rajul(fn1)

(c) 2005 Mafé Rajul

Abstract

Now that computers and the Internet have radically changed the way businesses create and transmit information, questions about discovery rules in litigation continue to arise, such as which party should pay for producing electronic discovery. The courts are now considering cost shifting when the cost of production is unduly burdensome on the producing party by applying a seven-factor test. However, cost shifting is not always considered or granted, which is why it is important to have electronic documents relevant to anticipated litigation accessible in order to minimize the cost of producing electronic discovery.

This Article will examine how courts are determining who should pay for electronic document production and suggest how lawyers should advice their clients in order to reduce the cost and burden of producing e-discovery.

Table of Contents

IntroductionAccessibility of Stored RecordsDocument Retention Policies and LitigationCourt's Approach to Cost-Shifting (Zubulake I)Advisory Committee on Civil Rules Proposed Amendment to Federal Rules on Electronic DiscoveryConclusionPractice Pointers

Introduction

[1] The consequence of not having relevant electronic discovery accessible when litigation arises can mean $16.5 million dollars, which was Medtronic's estimated cost of production in its trade secrets litigation.(fn2) Because rules are changing as a result of the increasing amount of electronic discovery (e-discovery), a current question facing the courts today is which party should bear the cost of production.

[2] When the cost of production of e-discovery is unduly burdensome, parties producing discovery are asking the court to shift the costs to the requesting party. In deciding whether cost-shifting is appropriate, the Southern District of New York in the case of Zubulake v. UBS developed a test (which other courts are using as guidance) where the court decides how important the sought-after evidence is in comparison to the cost of production. The court takes into consideration factors such as the needs of the case, the resources of the parties, the amount of controversy, the issues at stake, and the importance of the proposed discovery in resolving the issue.(fn3) This new test is gradually, and generally, replacing a prior test under which the courts were more likely to shift the cost to the producing party upon request.

[3] The Advisory Committee on Civil Rules proposed an amendment to Rule 26 of Civil Procedure where a party does not need to provide electronically stored information that is not reasonably accessible. Whether or not the amendment is implemented businesses need to anticipate high costs of production and take proactive steps to minimize such expense.

Accessibility of Stored Records

[4] Courts and businesses agree that discovery requests become costly when data is stored in inaccessible formats requiring an enormous amount of time to locate volumes of electronic information. One of the most challenging issues involved in electronic discovery is finding the "physical" location of the information.(fn4) Network servers can connect and store data from many employees' computers in different offices, cities, and even different countries throughout a multinational organization. Relevant information may be stored in employees' desktops, laptop computers, and removable data storage devices.(fn5) Furthermore, people fail to recognize that most documents are created on computers and more significantly, that many of these documents are never printed to paper.(fn6) As a result, many documents are not as accessible now as they used to be when records were kept in printed form.

[5] The importance of quick accessibility to these computer-generated documents varies for each business. In general, from a business perspective, the priority of having records easily accessible from the computer starts relatively high and then decreases with the age of the record.(fn7) From a regulatory perspective, however, depending of the type of records, business, and jurisdiction the expectation of when documents should be readily available varies. For instance in some cases the expectation is for the first two to three years of the required retention period, which is the period when the potential...