Addressing the Costs and Comity Concerns of International E-discovery

• Publication year: 2021

ADDRESSING THE COSTS AND COMITY CONCERNS OF INTERNATIONAL E-DISCOVERY

John T. Yip

Abstract: The volume of electronically stored information (ESI) is expanding rapidly. Under the Federal Rules of Civil Procedure, litigants may request electronic discovery (e-discovery) of many different forms of ESI. In 1978, the U.S. Supreme Court held that the party responding to an e-discovery request presumptively pays all e-discovery costs, including the costs of preserving, producing, and reviewing the requested ESI. Therefore, the rapidly increasing volume of ESI has substantially increased the costs of e-discovery for producing parties. In the 2003 case, Zubulake v. UBS Warburg LLC, the U.S. District Court for the Southern District of New York established a two-step test that allows a court to shift some of the e-discovery costs from the responding party to the requesting party. Since 2003, many federal district courts and some state courts have followed the two-step Zubulake test for conducting e-discovery in the United States. However, no court has yet established a test for cost-shifting in international e-discovery-conducting e-discovery on ESI located outside the United States. International e-discovery has unique costs and implicates concerns of national sovereignty. This Comment argues that courts should adopt a cost-shifting test for international e-discovery that starts with a comity analysis and then applies Zubulake's two-step cost-shifting test. Furthermore, courts applying this test should enforce cost-shifting orders through an escrow system whereby the requesting party will deposit some of the shifted costs with the court for later disbursement to the producing party.

INTRODUCTION

The amount of electronically stored information (ESI) worldwide is increasing at a rapid rate.(fn1) In 2005, the total amount of ESI worldwide (the "digital universe") was 130 exabytes.(fn2) In 2011, the digital universe expanded to over 1800 exabytes, enough data to fill 57.5 billion 32GB Apple iPads.(fn3) Consistent with this rapid growth in ESI, Law Technology News reported that the total cost of e-discovery rose from $2 billion in 2006 to $2.8 billion in 2009 and estimated that the total cost would rise ten to fifteen percent annually in 2010 and 2011.(fn4)

Electronic discovery (e-discovery) begins when one of the parties in a lawsuit requests that the other party produce certain ESI that is relevant to the requesting party's claims or defenses.(fn5) Many forms of ESI are discoverable in federal district courts.(fn6) As a general rule, the producing party pays the costs of preserving, finding, and sending the ESI to the requesting party.(fn7) Due to the high volume of available ESI, discovery requests can pose a burden for producing parties.(fn8) In one case, the cost of complying with an e-discovery request was $249,000.(fn9) In another case, the cost to restore, search, and produce data in archived electronic backup tapes was around $274,000.(fn10) Twenty-five percent of large-cap businesses(fn11) in the United States and the United Kingdom anticipate an increase in their e-discovery budgets for 2011,(fn12) notwithstanding improvements in e-discovery tools and technologies.(fn13)

Federal district courts address the high costs of e-discovery in the United States by shifting some e-discovery costs to the requesting party under the two-step test articulated in Zubulake v. UBS Warburg LLC.(fn14) The first step of the Zubulake test is to examine the ESI's "accessibility."(fn15) Although the original Zubulake case described accessibility in terms of the data storage format,(fn16) some post-Zubulake cases have framed accessibility in terms of the overall cost to the producing party.(fn17) The Federal Rules of Civil Procedure (FRCP) state that ESI is inaccessible if it creates an "undue burden or cost" for the producing party.(fn18) If the court finds the ESI accessible, then the producing party must bear the costs of e-discovery.(fn19) However, if the court finds the data inaccessible, it will continue on to the second part of the Zubulake test, which requires considering and balancing seven factors related to the cost and significance of the e-discovery request.(fn20) One of three results will occur: the court might allow e-discovery at the producing party's expense;(fn21) the court might not allow e-discovery;(fn22) or, the court might allow e-discovery with some restrictions, such as requiring that the requesting party pay some or all of the e-discovery costs.(fn23)

Few federal courts have addressed the costs of conducting e-discovery on ESI outside the United States (international e-discovery), even though international e-discovery involves additional costs.(fn24) When addressing international ESI, American courts rarely limit discovery on grounds of cost,(fn25) rarely use cost-shifting,(fn26) and often compel producing parties to hand over ESI even though doing so would violate foreign blocking statutes.(fn27) Courts that have considered the use of cost-shifting to date did not provide general criteria for determining when cost-shifting is appropriate.(fn28) Consequently, courts have not settled on the proper analysis for determining the appropriateness of cost-shifting in international e-discovery.

The FRCP govern discovery in federal district courts generally, regardless of whether the discovery request involves ESI in the United States or in a foreign country.(fn29) However, international e-discovery sometimes implicates foreign laws and international treaties, such as the Hague Convention.(fn30) Although the 2006 amendments to the FRCP specifically addressed e-discovery, they did not address issues unique to international e-discovery.(fn31)

This Comment addresses the lack of clarity regarding international e-discovery standards by proposing a test for analyzing comity concerns and cost-shifting in such cases. Part I describes the high costs of e-discovery. Part II explains the Zubulake test in general. Part III describes international e-discovery and surveys the ways in which courts have addressed the costs of international e-discovery. Part IV proposes a cost-shifting approach for international e-discovery, advocates the use of "total cost" accessibility instead of "format" accessibility, and discusses a way to enforce cost-shifting orders. Finally, Part V applies the test from Part IV to the facts of In re Automotive Refinishing Paint Antitrust Litigation(fn32) as an example of how the test would operate in litigation.(fn33)

I. THE HIGH VOLUME OF DISCOVERABLE ESI OFTEN MAKES E-DISCOVERY EXPENSIVE FOR THE PRODUCING PARTY

E-discovery tends to be expensive due to the large volume of potentially discoverable ESI.(fn34) FRCP 26(b)(1) states that a party may obtain via discovery "any nonprivileged matter that is relevant to any party's claim or defense . . . ."(fn35) The FRCP allows for broad discovery,(fn36) and electronic data is generally no less discoverable than paper documents.(fn37) Businesses store much of their data in electronic form.(fn38) Examples of discoverable ESI include "word processing documents, email messages, electronic spreadsheets, different image or sound files, and material from databases."(fn39) The high volume of discoverable ESI increases the three main e-discovery costs of preservation, production, and review.

A. Preserving ESI Can Disrupt Business and Impose Costs on the Producing Party

Parties have a duty to preserve evidence that "[they know], or reasonably should know, will likely be requested in reasonably foreseeable litigation."(fn40) In some instances, federal district courts may order a party to preserve potentially discoverable information.(fn41) One district court noted in 2006 that preservation orders are becoming "increasingly routine."(fn42) Generally, a preservation order requires a party to retain ESI made by or prepared for persons who are likely to have relevant data.(fn43) However, standards for adequate preservation vary widely.(fn44)

If the producing party fails to comply with a preservation order or to meet the party's duty of preservation, a court may impose monetary sanctions under FRCP 37.(fn45) At trial, a court may also instruct the jury to infer that a party who destroyed ESI in violation of the preservation order did so because the ESI would have been unfavorable to that party.(fn46) In at least one case, the court dismissed a party's claims entirely for failure to preserve ESI.(fn47)

To satisfy the duty of preservation and comply with preservation orders, a party might have to stop or limit using devices storing the data, such as company computers, for the course of litigation.(fn48) This could disrupt the producing party's business.(fn49) Usually, the producing party must pay for all the costs of preserving data during the course of the lawsuit, including the costs of backing up the data.(fn50) Because a preservation order might encompass numerous sources of ESI, such as computers, computer networks, and backup storage devices,(fn51) the costs of preserving the large volume of ESI may be "prohibitively expensive."(fn52) Moreover, the available sanctions for violating a preservation order could cause risk-averse producing parties to preserve more data than is necessary and spend money on servers and warehouses to hold the additional data.(fn53)

B. Producing Large Volumes of ESI Is...