Assessing Cost-Shifting for Electronic Discovery in Federal and State Court

Sudee Mirsafian Wright[1]

Introduction

The plaintiff files an action against the defendant, her former employer, alleging gender discrimination and retaliatory firing.  During the course of discovery, the plaintiff requests the production of e-mails relating to discrimination against the plaintiff and other women employed by the defendant.  The cost of producing the e-mails is approximately $225,000.00.  The defendant requests that the court shift the cost of production to the plaintiff who has the potential to receive a multi-million dollar recovery.  How should the court rule on the defendant’s cost shifting-request?[2]

The increase in the use of electronic discovery has made this type of problem common.  This article briefly examines when cost-shifting in the context of electronic discovery is deemed appropriate in federal and state court.

Cost-Shifting in Federal Court

As a general rule, “the responding party must bear the expense of complying with discovery requests.”[3]  This rule applies equally to the discovery of paper documents and the discovery of electronically stored information.[4]  The 2006 amendments to Federal Rule of Civil Procedure 26 provide an exception to this general rule by dividing electronically stored information into two categories: accessible information, which is presumptively discoverable, and inaccessible information, which is presumptively undiscoverable.[5] 

Specifically, amended Federal Rule of Civil Procedure 26(b)(2)(B) provides that the responding party “need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost.”[6]  The burden is on the responding party to show that the electronically stored information at issue is “not reasonably accessible in light of the burdens and costs required to search for, retrieve, and produce” the information.[7] 

The requesting party may still obtain the inaccessible, electronically stored information by showing “good cause” considering the limitations of Federal Rule of Civil Procedure 26(b)(2)(C) which balances the costs and potential benefits of discovery.[8]  In determining whether “good cause” exists, the Advisory Committee Notes to amended Federal Rule of Civil Procedure 26(b) provide that the following factors may be taken into consideration: (1) the specificity of the discovery request; (2) the quantity of information available from other and more easily accessed sources; (3) the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources; (4) the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources; (5) predictions as to the importance and usefulness of the further information; (6) the importance of the issues at stake in the litigation; and (7) the parties’ resources.[9]

Even if the court finds “good cause in ordering the production of electronically stored information that is inaccessible, the court has discretion to shift all or part of the costs of production to the requesting party under Federal Rule of Civil Procedure 26(c).[10]  In determining whether cost-shifting is appropriate, federal courts often apply seven factors first articulated in Zubulake v. UBS Warburg,[11] the “leading case on cost-shifting of electronic discovery.”[12]  These seven factors are: (1) the extent to which the request is specifically tailored to discover relevant information; (2) the availability of such information from other sources; (3) the total cost of production, compared to the amount in controversy; (4) the total cost of production, compared to the resources available to each party; (5) the relative ability of each party to control costs and its incentive to do so; (6) the importance of the issues at stake in the litigation; and (7) the relative benefits to the parties of obtaining the information.[13]  The Zubulake court cautioned that these seven factors should not be treated “as a check-list, resolving the issue in favor of whichever column has the most checks.”[14]  Instead, the factors should be weighed in descending order with the most weight placed on the first two factors.[15]    The Zubulake court noted that the sixth factor, which measures the importance of the litigation to the broader public, will rarely come into play but when it does, it has the potential to predominate over the other factors.[16]  Finally, the Zubulake court noted that the seventh factor is “the least important because it is fair to presume that the response to a discovery request generally benefits the requesting party.”[17]  However, “in the unusual case where production will also provide a tangible or strategic benefit to the responding party, that fact may weigh against shifting costs.”[18]

Cost-Shifting in State Court

Unlike the Federal Rules of Civil Procedure, the Colorado Rules of Civil Procedure do not discuss the production of electronically stored information.  In fact, there is no Colorado Rule of Civil Procedure even comparable to Federal Rule of Civil Procedure 26(b)(2)(B).  One source of guidance for Colorado state courts in determining whether cost-shifting is appropriate in a particular case is the Conference of Chief Justices Guidelines for State Trial Courts Regarding Discovery of Electronically Stored Information.[19]  The Guidelines were issued in August 2006 to provide guidance to state court judges faced with disputes regarding the production of electronically stored information.[20]  

According to the Guidelines, “the shifting of the costs of discovery to the requesting party . . .  should be considered only when the electronically-stored information is not accessible information and when restoration and production of responsive electronically-stored information from a small sample of the requested electronically-stored information would not be sufficient.”[21]  The Guidelines define “accessible information” as information as “electronically-stored information that is easily retrievable in the ordinary course of business without undue burden or cost.”[22]  When cost-shifting is considered, the Guidelines provide that the seven Zubulake factors should be considered in determining whether any or all discovery costs should be borne by the requesting party.[23]         

Conclusion

Parties can avoid the potential adverse affects of cost-shifting by discussing electronic discovery at the outset of each case.  The particular issues that should be addressed include the various sources of electronic data within each party’s control that may contain relevant information, whether those sources are accessible or inaccessible when taking into consideration the burden or cost of retrieving and reviewing the stored information, whether the information stored on inaccessible sources is necessary for the case and, if so, whether the information can be retrieved from sources that are accessible.  By doing so, the parties may be able to reach an agreement without requiring court intervention, thereby making the production of electronic stored information less costly and more efficient.

 


[1] Sudee Mirsafian Wright is an attorney at Husch Blackwell LLP.  She concentrates her practice in complex business and commercial litigation, handling a variety of matters from contract disputes to business torts.

[2] This example is derived from Quinby v. WestLB AG, 245 F.R.D. 94 (S.D.N.Y. 2006).

[3] Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 358 (1978).

[4] See Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309, 317 (S.D.N.Y. 2003) (“Any principled approach to electronic evidence must respect this presumption.”); Advisory Committee’s Notes on 2006 Amendments to Fed. R. Civ. P. 34(a) (The “discovery of electronically stored information stands on equal footing with discovery of paper documents.”).

[5] See generally Fed. R. Civ. P. 26(b)(2)(B).

[6] Id.

[7] Fed. R. Civ. P. 26(b) advisory committee’s notes on 2006 Amendment.

[8] Fed. R. Civ. P. 26(b)(2)(B).

[9] Fed. R. Civ. P. 26(b) advisory committee’s notes on 2006 Amendment.

[10] Oppenheimer, 437 U.S. at 358; Fed. R. Civ. P. 26(c).

[11] 217 F.R.D. 309 (S.D.N.Y. 2003).

[12] Semsroth v. City of Wichita, 239 F.R.D. 630, 636 (D. Kan. 2006).

[13] Zubulake, 217 F.R.D. at 322.

[14] Id. at 322.

[15] Id. at 323.

[16] Id. at 321, 323.

[17] Id. at 323.

[18] Id. at 323.

[19] Approved August 20006 (hereinafter referred to as the “Guidelines”), available at http://www.ncsconline.org/WC/Publications/CS_ElDiscCCJGuidelines.pdf The Conference of Chief Justices was founded in 1949 and consists of the highest judicial officer of consists of the highest judicial officer of the fifty states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, and the territories of American Samoa, Guam and the Virgin Islands.  See http://ccj.ncsc.dni.us/about.html.

[20] Guidelines, supra note 19, at ix.

[21] Id. at 7.

[22] Id. at 1.

[23] Id. at 7.