United States: Electronic Discovery Costs And Requests For Cost-Shifting

A supplier who has had to respond to discovery requests that seek electronically stored information ("ESI") knows there is a general presumption that the responding party bears the expense of complying with the discovery requests. Although this presumption may be overcome and allow cost-shifting when discovery requests impose an undue burden on the responding party, a recently issued opinion from the Federal District of New Jersey, in which the Court denied a cost-shifting request, emphasizes that courts require companies to bear a heavy burden before any costs will be shifted to the other side.

In the case of Juster Acquisition Co., LLC v. N. Hudson Sewerage Auth., the District Court's opinion made it clear that cost-shifting is unlikely, even when discovery requests seek duplicative information already produced in hard copy. No. 12-3427, 2013 U.S. Dist. LEXIS 18372, at *14 (D.N.J. Feb. 11, 2013). The Court reasoned that because litigants with significant resources absorb the cost of ESI discovery, projected discovery costs in the range of $6,000 to $16,000 are "not so substantial" as to warrant cost-shifting. Id. at *15.

In its assessment of Defendant's cost-shifting requests the Court applied the test set forth in Zubulake v. Warburg LLC, 216 F.R.D. 280 (S.D.N.Y. 2003) to determine if Defendant was entitled to discovery costs. Under Zubulake, a court will determine whether discovery costs should be shifted based on a seven-factor test, which is weighted more or less in the following order:

(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; (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. Juster, 2013 U.S. Dist. LEXIS at *14 (citing Zubulake, 216 F.R.D at 284).

The Court proceeded to apply the seven factors and found that cost-shifting was not warranted.

First, the Court found that Plaintiff's ESI requests, despite employing broad search terms, were sufficiently tailored because they were restricted to the time period of 2011 to 2012. Id. at *13. Thus, this factor weighed in favor of Plaintiff.

Second, the Court stated that it was "irrelevant" that Defendant had already turned over 8,000 pages of documents because "production of information in 'hard copy' does not preclude a party from receiving that same information in computerized/electronic form." Id. at *14. Furthermore, neither Plaintiff nor Defendant actually knew what the requested searches would turn up until Defendant actually performed the search. Id. at *13.

Factors three through five concerned the financial dimensions of the discovery request. The Court's discussion of these factors proved the most interesting in terms of addressing cost-shifting requests in the context of commercial litigation. Defendant argued that it would cost $6,000 to $16,000 to process the word searches and eliminate duplicates; Plaintiff asserted that this was a $41 million dollar case and that the discovery costs were "negligible" in comparison to Defendant's resources. Id. at *15. The Court determined that factors three through five weighed in favor of Plaintiff. Id. Because the amount of damages at stake in the litigation was great and because of Defendant's ability to absorb the cost of the requested ESI discovery, discovery costs were not so substantial as to warrant cost-shifting. Id. The Court stated that factors six and seven were less critical to the cost-shifting analysis in this case and concluded that the Zubulake factors weighed in favor of Plaintiff. Id. at *17.

There is a key point to take away from this opinion. First, when litigation involves Tier 1 suppliers or OEMs with significant resources, do not expect a court to grant a request to shift fees associated with responding to ESI requests. If a party can afford to pay, expect that the court will oblige it to do so. The Juster opinion suggests that if the amount of damages at stake in a case is great, a $6,000 to $16,000 cost for an ESI search is more or less a drop in the bucket.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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