Originally published June 30, 2009

Keywords: Electronic discovery, backup tapes, discovery requests, discovery costs, Federal Rules of Civil Procedure, Rule 26(b)2), cost-shifting, electronically stored information, ESI

Scenario:

A company is sued by a class of investors.  The investors issue a discovery request for a large number of data files that are only tangentially related to their claim.  The company is sure the requested materials do not indicate liability, but it fears the substantial cost of digging through mountains of backup tapes and archived storage media to demonstrate this fact.

Allocation of Discovery Costs

The US Supreme Court has long held that in federal litigation, "the responding party must bear the expense of complying with discovery requests."   Several provisions of the Federal Rules of Civil Procedure  do limit the ability to abuse this rule by issuing broad discovery requests intended to increase an adversary's litigation costs.

One such restriction is Rule 26(b)(2)(B), which frees responding parties from producing electronically stored information (ESI) from sources they "identif[y] as not reasonably accessible because of undue burden or cost."  This protection is not absolute, however, and a court may order discovery from sources not reasonably accessible "if the requesting party shows good cause."  Still, such requests may not require expenditures disproportionate to the amount in controversy.  See Fed. R. Civ. P. 26(g)(1)(B)(iii).

In close cases, courts sometimes take a "you get what you pay for" approach, compelling production only if the requesting party pays part of  the responding party's costs.  The Advisory Committee Note to the 2006 Amendment to Rule 26(b)(2) supports this approach in relation to ESI deemed not reasonably accessible.  Such "cost-shifting" has proven especially important in relation to backup tapes, which are typically expensive to restore and search, and which commonly yield few—but perhaps not zero—relevant documents not available on other media.

Prior to the 2006 Amendments, there was no universally agreed upon framework for deciding when to shift the costs of producing inaccessible ESI.  The leading tests came from McPeek v. Ashcroft, 202 F.R.D. 31 (D.D.C. 2001); Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421 (S.D.N.Y 2002); and Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003).  Each involved, at least in part, requests for ESI available only on backup tapes.

The earliest of these cases, McPeek, enunciated the principle that "[t]he more likely it is that the [ESI] contains information that is relevant to a claim or defense, the fairer it is that" the responding party pay production or search costs.  Of course, the likelihood that inaccessible storage media contain relevant information may be hard to estimate, and the court lamented that it was "impossible to know in advance what is on these backup tapes."  To inform the "marginal utility" calculation, therefore, the magistrate judge ordered that a small sample of the tapes be restored.

Rowe went a step further and addressed how to decide whether to shift costs when marginal utility estimates and other relevant parameters are known.  Surveying earlier decisions, the court listed eight factors that guided this determination.  Zubulake, in turn, refined and prioritized the Rowe factors, ultimately producing a list of seven factors to be considered.  Of these, the most important are (i) the specificity of the requests; (ii) the availability of the requested information from other, more accessible sources; and (iii) the total cost of production as compared to the amount in controversy and the resources available to each party.

While the 2006 version of Rule 26(b)(2)(C)(i)-(iii) changed the focus of cost-shifting analysis, the extensive overlap between the Zubulake factors and the Rule 26 considerations means that courts continue to consider the same kinds of factors as before.  In particular, several trends spanning the adoption of the 2006 Amendments are identifiable:

  • Courts frequently require producing parties to bear the costs of discovery where those parties have, after litigation has commenced or become reasonably foreseeable, allowed data that was readily accessible to become available only in less accessible form.
  • Consistent with Rule 26's concerns about duplicative discovery, cost-shifting may be more frequent when previously produced information is sought in a second format.
  • As in Zubulake and McPeek, courts still sometimes issue orders for small samples of ESI to gauge relevance and importance when it is possible to take such a sample, as with data stored on multiple back-up tapes.
  • Courts commonly shift the cost of paying for special masters or ESI experts.
  • Cost-shifting is more frequent when ESI is requested from a third party.

Best Practices

With courts still coming to terms with the 2006 amendments, the outcome of a request for cost-shifting can be hard to predict.  In the absence of definitive guidance, the trends described above suggest the following:

  • When potentially responsive ESI resides on both active storage media and backup tapes, preserve the more accessible version.  A requesting party that deletes accessible ESI will likely have to pay to restore the lost material from backup tapes.
  • An index of backup tapes can aid with cost-shifting requests.  With a fixed recycling schedule, a small number of tapes together with active storage are likely to contain most of the materials present on all the other tapes, and the index can improve the predictive power of a sample if partial restoration is ordered.
  • It is often helpful to present the court with specific requests and objections.  Cost-shifting inquiries are highly fact-sensitive and courts consequently possess a great deal of discretion in deciding them.  Where economic and practical details, such as the cost of ESI discovery, the amount at stake, the resources of the parties or the recovery methods to be used go unspecified, the court may make a determination adverse to the party failing to provide the requisite information.
  • When presenting to the court the anticipated cost of compliance, responding parties should include the costs of attorney review of ESI.  Because the issue of whether these costs are subject to shifting is unsettled, some courts may allow them to be shifted.
  • Parties should be attentive to the expense of ESI discovery and potential alternative methods and should confer about potential cost-shifting as part of their early ESI discussions.

Learn more about Mayer Brown's Electronic Discovery & Records Management practice.

Visit us at www.mayerbrown.com.

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2009. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.