I represent a commercial builder who spent $400,000 on the e-discovery process a few years ago - in a case where my client sought $6,000,000 in damages. The case settled. While the terms of the settlement are confidential, I suspect many lawyers reading this article could make some educated guesses regarding the amount of money my client obtained through the settlement. This begs the question – was the $400,000 e-discovery expense “proportional to the needs of the case”? If not, what could have been done differently?
The purpose of this article is not to discourage lawyers and their clients from using the e-discovery process. The e-discovery process can be useful and, in many instances, is warranted. However, in an era where legal fees associated with the resolution of disputes continue to rise, and the usage of email is at a historic high, the parties to a dispute should hit the pause button before they open an “e-discovery Pandora’s box.” Before plowing forward with e-discovery, litigants should exercise caution to determine whether an e-discovery protocol is warranted and, if so, to establish a reasonable protocol to (hopefully) ensure the associated expense is proportional to the needs of the case. This article provides guidance to ensure litigants make appropriate decisions regarding both (a) the decision to utilize e-discovery and (b) the scope/parameters of e-discovery.
As most of you are aware, Rule 26 of the Federal Rules of Civil Procedure governs the scope of discovery. Rule 26 was amended in late 2015 to address the costs and delays associated with litigation and, in particular, the costs associated with discovery. The scope of discovery must be “proportional to the needs of a case.” Relevancy is not enough. See, e.g., Lauris v. Novartis AG, 2016 WL 7178602 (E.D. Cal. December 8, 2016) (noting that a litigant does not have to examine every document in its voluminous files to comply with discovery obligations, but must utilize a “reasonably comprehensive search strategy”). Courts consider six (6) factors when evaluating whether requested discovery is proportional to the needs of a case: (1) “the importance of the issues at stake,” (2) “the amount in controversy,” (3) “the parties' relative access to relevant information,” (4) “the parties' resources,” (5) “the importance of the discovery in resolving the issues,” and (6) “whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1).
While it is probably too soon to determine courts’ overall interpretation and application of the amended Rule 26, there are signs the amended Rule is encouraging courts to conduct a more involved analysis regarding the scope of discovery to keep the associated costs reasonable in light of the above factors. In Lauris, for example, the Eastern District of California recently denied a plaintiff’s request to expand a list of email custodians after the defendants had already agreed to search the files of nine key custodians, finding that the additional burden or expense associated with the searching of additional custodians’ files outweighed the potential benefit. Id. at *4-5. However, the amended Rule has also been interpreted to put the onus on the party challenging discovery on the basis of proportionality to prove the discovery is not proportional to the needs of the case, as if the defendant was arguing the discovery request is overly burdensome. See, e.g., FDIC v. Ark-La-Tex Financial Services, LLC, 2016 WL 3460236 (N.D. Ohio June 24, 2016) at *3. One thing that can be gleaned from recent court decisions is the reality that parties arguing for or against discovery must be prepared to argue the burden/costs and importance of the discovery being sought with actual data to back up their position. A mere assertion of “relevance” or “undue cost” will probably not suffice.
The amendments to Rule 26, and the heightened emphasis on “proportionality,” has great significance in the world of e-discovery. On the highway of litigation, the parties’ decisions regarding e-discovery implicate crucial left and right turns. If the parties veer too far to the left, they may be bogged down in a black hole of e-discovery. If they veer too far to the right, either disregarding e-discovery altogether or creating an overly narrow e-discovery protocol, some important documents and information could slip through the cracks.
Keeping Rule 26 in mind, here are three tips to follow when you are evaluating the possible use of an e-discovery protocol and/or defining the scope of e-discovery to be conducted:
(1) Prepare a Budget and Conduct a Front-Loaded E-Discovery Investigation Before Making any Decisions.
In terms of financial impact, the decision to conduct e-discovery is a costly one. In most cases, the decision typically implicates, on the lean end, tens of thousands of dollars; frequently, the costs reach the low to mid 6-figure range when legal fees and e-discovery vendor costs are combined. Related decisions, such as those regarding the number of email custodians at issue, the date range for email searches, or the litany of search terms to be utilized, can keep the costs down or, on the other hand, cause them to spiral out of control.
Making a budget at the onset of a dispute (of even before the dispute is initiated), including a breakdown of anticipated discovery-related costs, can guide your thinking as you evaluate whether the dispute warrants e-discovery and, if so, how you can keep the associated costs proportional to the needs of the case. Of course, parties may have diverse ideas in terms of budgets/expenses, and the answer to this question may vary dramatically from one case to another, and from one client to the next.
When preparing your budget, conduct a “front-loaded e-discovery investigation” to gain a preliminary understanding regarding the anticipated scope of e-discovery. First, identify the likely email custodians implicated (both your client’s custodians and those of the adversary). Is it 10 people? Is it 40+ people? The answer to this question can have a significant impact on the amount of data at issue, which tends to be strongly correlated to the overall costs of e-discovery. Construction projects can drag on for a few years or longer, especially large-scale commercial projects. As a result, the construction professionals working on those projects can amass (1) countless internal and external emails (2) involving dozens of “custodians,” i.e. the senders and recipients of the emails.
Second, and on a related note, acquire a general sense for the volume of emails/data at issue. If your client is sophisticated, their IT department may be able to add great value, in terms of quantifying the amount of data. If a party has terabytes of data, the e-discovery costs are probably going to be high.
None of the above should be construed to suggest litigants should avoid e-discovery merely because it appears the process will be costly. However, if you are working on a dispute in which your total legal budget is under $250,000, for example, you are going to have a hard time utilizing an in-depth e-discovery protocol while keeping the costs “proportional to the needs of the case.” In a case of that size, e-discovery should be used with caution and, if used, should be narrowly tailored to a small number of custodians and a relatively limited number of search terms. While there are an increasing number of software solutions available for streamlined e-discovery in smaller disputes, it still remains an expensive process. This leads us to our second tip.
(2) Stick to Your Guns and, if You Decide to Conduct E-discovery, Establish a Reasonable Framework with the Opposing Party.
The decision to conduct e-discovery and the related negotiations/discussions between the parties regarding the scope of e-discovery is one of the most important issues the parties will negotiate in the life of a case.
If the parties have agreed conceptually to an e-discovery protocol, the secondary questions that must be answered will have a significant impact on the overall costs incurred. Lawyers should conduct due diligence with their clients to, in particular, identify the important custodians whose emails should really be searched/gathered, establish a reasonable date range to be utilized for email searches, and formulate a reasonable, narrowly tailored list of search terms. The importance of this exercise cannot be emphasized enough. Keep in mind, you can always conduct a narrow e-discovery search and, if warranted, ask the opposing party (or judge or arbitrator) to broaden the scope.
Similarly, if the parties agree to an e-discovery protocol, they should reach an understanding regarding whether the emails flagged will be reviewed for responsiveness or simply reviewed to determine whether any privileges apply. Your desired approach may vary from case to case. In one prior lawsuit, I had an opposing party dump 750,000+ pages of emails on my client, but only perhaps 3,000 of those pages were even remotely relevant to the lawsuit. Most of the documents were not even responsive to my client’s discovery requests. However, they all had to be reviewed. If your client has nothing to hide, and has hundreds of thousands of emails which were flagged through the e-discovery process, they might prefer to do a “document dump” on the other side. If your client has very little e-discovery to produce, while the other side likely has more, you might want to push the other side to review the emails for responsiveness. In short, there are various reasons your client may (or may not) want to streamline the e-discovery process. Make sure you are thinking ahead.
If your opposing counsel wants to establish an e-discovery protocol against your client’s objection (or wants a protocol which is broader than you deem warranted), don’t roll over on the issue. Perhaps your client has fewer resources than the opposing party and needs to “litigate on the skinny.” Perhaps your client has a million emails that could be flagged using an e-discovery protocol, and knows 99% of them are irrelevant and doesn’t want to pay enormous legal fees to have the documents gathered and reviewed. Perhaps your client has reason to believe the other side has significantly less e-discovery to produce, and doesn’t want the costs incurred to be grossly disproportional. There are countless reasons one party might be opposed to e-discovery and/or opposed to a broad e-discovery protocol. If you’re in that boat, make the opposing party go to the judge or arbitrator and plead her case. Don’t let a deeper-pocket party bully your client.
At the same time, if your client wants to establish an e-discovery protocol but your adversary resists, or if your adversary won’t agree to a broader e-discovery protocol, don’t be afraid to take the issue to the judge or arbitrator and let them decide. At a minimum, the court or arbitrator may order the parties to conduct limited e-discovery which, if productive, could open the door for you to ask the judge or arbitrator to broaden the e-discovery protocol.
(3) If You Decide to Conduct E-discovery, set Your OCD Aside.
Perfection cannot be the e-discovery standard. That was a hard reality for me to accept. Whether human error, or shortcomings due to the usage of predictive coding or “TAR” (technology-assisted review, aka computer-assisted review), 100% accuracy and completeness is not a fair expectation. Rather, litigants must do the best they can, with the protocol established, while honoring their ethical obligations, to proceed through the e-discovery process in a manner which keeps the associated costs proportional to the needs of the case.
A few years ago, I was skeptical regarding TAR and predictive coding. I used to question the accuracy of such practices. However, TAR and predictive coding can be viable options to manage e-discovery costs in disputes which involve voluminous documents.
A large number of articles have been written about TAR and predictive coding. In short, TAR and predictive coding are processes through which computer software is utilized to classify documents based on input from human reviewers to expedite the organization and prioritization of the documents. TAR and predictive coding (which is essentially one type of TAR) may dramatically reduce the time and cost of reviewing electronically stored information (“ESI”), by reducing the amount of human review.
Whether you are utilizing TAR or predictive coding, or simply reviewing a mountain of emails, set your OCD aside. Rest assured that, while the process you are using might not uncover every single email responsive to a discovery request, the odds of a “smoking gun” remaining uncovered are slim. Like many things, e-discovery must be conducted on a cost-benefit analysis. Lawyers owe it to their clients to manage the costs of litigation, and e-discovery is one area where lawyers fail all too frequently.