Guidance on Reining in E-Discovery: Think Proportionality

Volume 37 Number 5

By

Sharon D. Nelson (snelson@senseient.com) and John W. Simek (jsimek@senseient.com) are President and Vice President, respectively, of Sensei Enterprises, Inc., a computer forensics and legal technology firm based in Fairfax, VA. They are coauthors of The 2011 Solo and Small Firm Legal Technology Guide (ABA, 2011).

E-discovery is increasingly important in handling cases of all kinds. But with the volume of information that’s housed in electronic form these days, things can spin out of control. Not sure if you, or your opponent, is going overboard with the e-discovery requests? Here are some things you’ll want to know.

The concept of “proportionality,” whereby discovery monies may be deemed disproportionate to the amount in dispute in a case, has been in the legal system for some time. It’s just that it hasn’t been exercised enough. However, owing to the work of The Sedona Conference and a new awareness on the part of courts, proportionality has been highlighted a great deal in the past couple of years. But before we get too far into where things stand today, first it’s a good idea to review some of proportionality’s history within the Federal Rules of Civil Procedure.

Factors Covered in the FRCP
The Federal Rules of Civil Procedure have, of course, been amended several times. But in 1983, Rule 26(b) was amended, granting courts the power to limit discovery where it was redundant or duplicative. This was really the official beginning of proportionality in the States, with the FRCP Advisory Committee noting that the amendment was designed to “guard against redundant or disproportionate [emphasis added] discovery by giving the court authority to reduce the amount of discovery that may be directed to matters that are otherwise proper subjects of inquiry.”

The committee listed these factors to consider in determining whether discovery is proportional: the nature and complexity of the lawsuit; the importance of the issues at stake; the parties’ resources; the significance of the substantive issues; and public policy concerns.

Next, in 1993, a new paragraph—Rule 26(b)(2)—was added to address the explosion of electronic information and the consequent rising costs. This paragraph provided the courts with broader discretion to impose additional restrictions on the scope and extent of discovery. And in 2006, the same paragraph was amended once again to limit the discovery of electronically stored information (ESI) deemed not reasonably accessible by reason of the costs and burdens associated with retrieving it.

Yet with all of this, the word “proportionality” was nonetheless rarely used even when its principles were applied. And even though there are various aspects of the rules that imply that proportionality is indeed the goal.

Rule 26(b)(2)(C), for example, mandates that courts impose limitations where “the discovery sought ... can be obtained from some other source that is more convenient, less burdensome, or less expensive.” Plus, it further mandates that courts limit discovery where “the party seeking discovery has had ample opportunity to obtain the information by discovery in the action.” Here, the court can act to deny untimely discovery requests and objections, shortening the length of discovery and reducing costs.

There is also the burden vs. benefit rule under Rule 26(b)(2)(C). This requires the courts to consider whether “the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.” Thus expensive discovery might be allowed in a case where the money value is low because of important societal issues, for example. Also, the expense to a Fortune 500 company will be viewed differently than the expense to a mom-and-pop hardware store.

Sedona’s Six Principles
Now, on to the next turn of events that has brought an increased focus on these issues: the publication of The Sedona Conference Commentary on Proportionality in Electronic Discovery in August 2010. The full document is available at www.thesedonaconference.org. Let’s look at what its six principles entail.

  1. The burdens and costs of preservation of potentially relevant information should be weighed against the potential value and uniqueness of the information when determining the appropriate scope of preservation. Courts often invoke their inherent authority to sanction parties for pre-litigation failure to preserve. This kind of “Monday morning quarterbacking” can be fraught with peril, but in each case, the court must consider what the party knew at the time of the impending litigation and then determine whether the preservation efforts were reasonable and made in good faith.

    At the same time, some courts have commented that a proportionality standard in preservation may be rather amorphous and may not provide much comfort to a party in litigation trying to decide what to preserve. As an example, if a party is shown to have intentionally destroyed ESI, a court will likely take very little notice of proportionality.
  2. Discovery should generally be obtained from the most convenient, least burdensome, and least expensive sources. This principle, which helps limit costs and promote efficiency, will vary with circumstances. If, for example, a requested email is easily collected from custodians, why go to the bother of restoring the backup tapes? However, hard copies of e-mails are not searchable, so it is reasonable to request their electronic versions. In many cases, the court may want a phased approach taken too, exploring the “low-hanging fruit” first and then determining whether more discovery should be done.
  3. Undue burden, expense, or delay resulting from a party’s action or inaction should be weighed against the party. In most cases, the court will have imposed discovery deadlines and failure to meet them should have consequences. Thus, if one party has caused delay, its lamentations that it needs further discovery might well fall on deaf ears. Parties who seek to ratchet up expenses without good cause should likewise be taken to the judicial woodshed. And if a delay in preservation resulted in the destruction of ESI, that absolutely should be weighed against the party.
  4. Extrinsic information and sampling may assist in the analysis of whether requested discovery is sufficiently important to warrant the potential burden or expense of its production. Extrinsic information may be very important in evaluating whether evidence should be produced despite burden and cost. And sampling often proves that a source of ESI is not at all useful—or that it’s quite invaluable. The 2009 case Kipperman v. Onex Corporation offers a good illustration. There, the court ordered the sampling of two backup tapes. After reviewing them, additional discovery was ordered with the judge commenting wryly, “I don’t … declare these to be smoking guns but they certainly are hot and they certainly do smell like they have been discharged lately.”
  5. Nonmonetary factors should be considered when evaluating the burdens and benefits of discovery. The substantive factors might involve philosophical, societal or institutional issues that are important to address within the judicial system. This was particularly true in the 2007 case Disability Rights Council of Greater Washington v. Washington Transit Authority, in which the court denied the defendant’s request to limit discovery, in part because this was an important social issue under the Americans with Disabilities Act.
  6. Technologies to reduce cost and burden should be considered in the proportionality analysis. Right now, it is never required that the “best” technology be used, but certainly lawyers on both sides should confer to make sure that the “best possible” tools, which do not present undue costs, are used in the case. So the more lawyers know about e-discovery, the more they can reduce costs.

What the Courts Are Saying
It isn’t feasible to cover all of the relevant cases here, but let’s pick a few.

One landmark is the 2008 case Mancia et al v. Mayflower Services Corporation, which considered proportionality in the context of motions to compel and motions for protective orders, tying together Rules 26(b) and (g). Among the famous quotes from the redoubtable Judge Grimm in this case:

It cannot seriously be disputed that compliance with the “spirit and purposes” of these discovery rules requires cooperation by counsel to identify and fulfill legitimate discovery needs, yet avoid seeking discovery the cost and burden of which is disproportionally large to what is at stake in the litigation. Counsel cannot “behave responsively” during discovery unless they do both, which requires cooperation rather than contrariety, communication rather than confrontation.

In the meantime, however, the present dispute evidences the need for clearer guidance how to comply with the requirements of Rules 26(b)(2)(C) and 26(g) in order to ensure that the Plaintiffs obtain appropriate discovery to support their claims, and the Defendants are not unduly burdened by discovery demands that are disproportionate to the issues in this case.

While admittedly a rough estimate, this range [of damages] is useful for determining what the “amount in controversy” is in the case, and what is “at stake” for purposes of Rule 26(b)(2)(C)’s proportionality analysis. The goal is to attempt to quantify a workable “discovery budget” that is proportional to what is at issue in the case.

Other courts are increasingly applying proportionality where the responding parties demonstrate that collecting, searching and producing requested ESI would be unduly burdensome. For example, in the 2010 case United Century Bank v. Kanan Fashions, the court limited the scope of discovery by five years because earlier documents would be expensive to retrieve and of little relevance.

Similarly, in 2010’s Willnerd v. Sybase, Inc., the court reduced the responding party’s search from 30 custodians to the ones linked most directly to the claim at issue. And it was cited again in 2010’s Escue v. Sequent, Inc., where the court refused to order the costly restoration of 45 backup tapes where relevant information had already been produced through “live” ESI.

In addition, a number of courts have favored sampling techniques to see if relevant evidence really exists before ordering full-scale production. This was the result in the 2010 case Barrera v. Boughton, where the court ordered phased discovery beginning with 3 of 40 requested custodians to test costs and the possible yield of a larger search. Phased discovery was also favored in the 2010 case Tamburo v. Dowrkin, where the court ordered going after the low-hanging and least-expensive fruit to determine whether “further potentially more burdensome and expensive discovery is necessary or warranted.”

And for a final example, we offer the notable 2010 case John B. v. Goetz, in which a group of children brought a class-action suit against the state of alleging deprivation of care in violation of federal law. They sought production of ESI that the defendants claimed would cost $10 million to produce. The court applied the proportionality test and found that multiple factors favored ordering the production, including that the defendants had almost all of the critical documents needed by the plaintiffs to prove their claims; that the class consisted of poor children, whereas the defendants had access to federal funds and the state attorney general’s staff; and the case presented “issues of the utmost importance,” noting “if a case has the potential for broad public impact, then public policy weighs heavily in favor of permitting extensive discovery (quoting Zubulake).”

At least the courts are now talking proportionality on a regular basis as well as observing that it is genuinely grounded in the FRCP. So as guiding principles like those cited here continue to emerge, ultimately, maybe we’ll get a handle on all this over the next few years.

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