United States: Shifting E-Discovery Costs To The Plaintiff In A Potential Class Action: A Pennsylvania Federal Court Tells Plaintiffs' Counsel To "Make the Investment In Discovery"

In what could be a significant opinion for federal class action defendants seeking to limit their e-discovery costs, a court in the Eastern District of Pennsylvania recently held in Boeynaems v. LA Fitness International, LLC, No. 10-2326, No. 11-2644 (E.D. Pa. Aug. 16, 2012), that plaintiffs who were seeking broad discovery regarding class certification issues – including extensive ESI requests -- should share in the costs of the defendant's discovery production.    

Recognizing that the potential for a class action suit "dramatically increases the economic pressure on the defendant" and that the economic burden of discovery production regarding certification often falls primarily on the defendant, Judge Michael Baylson wrote, "[D]iscovery burdens should not force either party to succumb to a settlement that is based on the cost of litigation rather than the merits of the case."  Where there is a substantial discovery dispute prior to class certification, Judge Baylson held, "economic motivation and fairness are relevant factors in determining cost-shifting of disputed discovery burdens." 

In Boeynaems, the five individual plaintiffs had asserted deception and breach of contract actions relating to their attempts to cancel their gym memberships with the defendant.  In the process of seeking class certification for what they anticipated would be a very large class, the plaintiffs sought extensive discovery from defendants.  After the defendant had already provided some discovery  to the plaintiffs, substantial disputes arose between the parties about the scope of remaining discovery to be provided by the defendant.  Among other things, the plaintiffs sought "millions of items" of ESI (electronically stored information).  The cost of production of that ESI, the court noted, was "a significant factor in the defense of the litigation."

In determining how to allocate discovery costs between the parties, the court focused on the specific circumstances of the case.  Discovery in the case was called "asymmetrical," in that discovery production and its attendant expenses were rather small for the plaintiffs, and potentially huge for the defendant.   The court noted while class determination requires a "searching inquiry" and "very detailed analysis," the plaintiffs had already amassed a very large set of documents that were potentially probative of the class action issue.  With that in mind, the court held that the plaintiffs should bear the economic responsibility of any future discovery efforts in regard to class determination:

The Court is persuaded, it appearing that Defendant has borne all of the costs of complying with Plaintiffs' discovery to date, that the costs burden must now shift to Plaintiffs, if Plaintiffs believe that they need additional discovery.  In other words, given the large amount of information Defendant has already provided, Plaintiffs need to assess the value of additional discovery for their class action motion.  If Plaintiffs conclude that additional discovery is not only relevant, but important to proving that a class should be certified, then Plaintiffs should pay for that additional discovery from this date forward, at least until the class action determination is made.

Remarkably, in arriving at its decision, the court took into consideration the economic resources of the plaintiffs' counsel.  The court observed that the plaintiffs' counsel was a "very successful and well regarded" firm, and reasoned that if that firm "believes that this case is meritorious, it has the financial ability to make the investment in discovery[.]"  The court further noted that while the discovery costs were likely not recoverable from the defendant in the event of  plaintiff victory,¹ the court would likely allow the firm's "out-of-pocket costs to be deductible from any award to a class, assuming a class was certified."

Although federal rules have allowed the courts to shift discovery costs for years, Boeynaems appears to be the first instance in which a federal court has  addressed the shifting of discovery costs in a pre-class determination setting.  Judge Baylson's analysis in Boeynaems should present a useful resource to a defendant who is facing the prospect of class action litigation and seeking to limit the potential for extensive e-discovery costs.

Footnote

1 For this proposition, the court cited to the recent, major e-discovery case Race Tires America v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012).  You can find our analysis of the Race Tires opinion here.

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