The Costs of Cost Shifting

• Date: 01 April 2022
• Author: Brian A. Zemil

Published in Litigation News Volume 47, Number 3, Spring 2022. © 2022 b y the American Bar Ass ociation. Reproduc ed with permission. A ll rights reserv ed. This information or an y portion there of may not be copied or dis seminated in any

form or by any means or sto red in an electronic da tabase or retrieval sy stem without the ex press writt en consent of the Amer ican Bar Associatio n.

he 2015 amendments to the Federal Rules of

Civil Procedure marked a turning point in the

evolution of electronic discovery. The amendments

propelled litigants into an era of proportional discov-

ery and, through Rule 26(c)(1)(B), authorized courts

to shift discovery costs to a requesting party making overly

burdensome demands. While the advisory note cautions that

the change “does not imply that cost shifting should become

common practice,” responding parties are increasingly mov-

ing for courts to shift costs to protect them from the undue

burden or expense of conducting discovery.

These disputes highlight the limits on a party’s duty to

cooperate and the need for upfront negotiation of compre-

hensive discovery protocols regarding electronically stored

information (ESI), including how available technologies, such

as technology-assisted review (TAR), should be considered

and used. Cost shifting should be considered a last resort to

protect a party from the expense of excessive and marginal

discovery demands.

Rule 26(f) requires the parties to cooperate in formulat-

ing ESI protocol. Sedona Conference Principle 6 recognizes

that the “responding parties are best suited to evaluate the

procedures, methodologies, and technologies appropriate for

preserving and producing their own [ESI].” These two com-

peting guidelines reect the crossroads between autonomy

and cooperation in selecting discovery protocols.

Competent counsel is fundamental to a client’s ability to

exercise independence during negotiation. An attorney must

understand a client’s information systems and electronic

documents while also keeping “abreast of changes in the law

and its practice, including the benets and risks associated

with relevant technology.” ABA Model Rule 1.1, cmt. 8. This

knowledge enables counsel to negotiate a protocol identifying

what technologies the parties will use to conduct ESI discov-

ery, such as TAR. Cooperation does not, however, require

capitulation, and when a requesting party insists the respond-

ing party utilize a specic technology disproportionate to the

case, Rule 26(c)(1)(B) authorizes a court to issue an order

protecting a responding party from undue burden by allocat-

ing “expenses for the disclosure or discovery.”

The decision in Lawson v. Spirit AeroSystems provides

instructive guidance on which Rule 26(b)(1) proportional-

ity factors may inuence a court to grant or deny a motion

to shift costs when a requesting party presses the responding

party to utilize TAR. Lawson, the former Spirit CEO, sued

his prior employer for nonpayment of funds pursuant to his

retirement agreement. Spirit claimed Lawson was not entitled

to the retirement funds because he violated a noncompete

agreement by consulting with a “competitive business.” After

the parties had difculty “meeting and conferring produc-

tively,” the court entered an ESI protocol using traditional

e-discovery methods involving keyword searches and custo-

dian interviews.

The process yielded a large data set, but a low responsive-

ness rate. Lawson then pressed Spirit to utilize the TAR pro-

cess on the same data. Spirit argued that the new request was

burdensome because it would cost $600,000 without a like-

lihood of improved responsiveness rates. The court “raised

the possibility” of ordering a TAR on the condition that the

requesting party bear the cost of the review. Spirit conducted

the TAR and moved to shift the costs for the TAR process.

The court examined Rule 26(b)(1)’s proportionality fac-

tors “to determine whether the discovery request imposes

an undue burden or expense such that allocating expenses

under Rule 26(c)(1)(B) is warranted.” When the court exam-

ined whether the discovery sought information “at the very

heart of the litigation,” the court found the TAR process

that Lawson demanded, based on three earlier sampling

efforts, added minimal value. The court found that Lawson

stubbornly pursued continued discovery despite knowing

that the TAR process would likely produce “marginal (if

any) relevan[t] documents” while Spirit already spent “hun-

dreds of thousands of dollars” on the same data set using

non-TAR technologies. Ultimately, the court found that the

TAR-related costs were disproportionate to the needs of the

case. In a subsequent decision, the court awarded Spirit over

$750,000 to satisfy the TAR-related costs and attorney fees

to protect the company from incurring the undue burden

and expense.

The Lawson decision highlights how critical it is for liti-

gants to develop a comprehensive ESI protocol earlier in

a case to avoid costly downstream disputes over litigation

about litigation. Counsel must work closely with clients to

independently evaluate the efcacy of TAR and other tech-

nologies to advance the ability to conduct discovery with a

meaningful degree of autonomy. When litigants reject using

a certain technology, like TAR, the parties should disclose

in the protocol what collection process they considered and

explain why they determined what was and what was not

appropriate. A well-negotiated protocol will protect against

a requesting party’s unilateral attempts to insist on a previ-

ously rejected technology mid-discovery that may yield mar-

ginal results. It may also reveal when a cost-shifting request is

appropriate to shield a responding party from undue burden

and expense.

RESOURCE

Lawson v. Spirit AeroSystems, No. 18 -1100-EFM-AD M, 2020 U.S.

Dist. LEXI S 106817 (D. Kan. J une 18, 2020), af ’d, No. 18-1100-

EFM, 2020 U. S. Dist. LEXIS 2 21260 (D. Kan. June 24 , 2020).

The Costs of Cost Shifting

By Brian A. Zemil , Litigation News As sociate Editor

20 | LITIGATION SECTI ON

CIVIL PROCEDURE UPDATE