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November 03, 2015 Articles

A Challenge to Corporate Counsel to Regain Control of the Discovery Process

Stop fueling discovery disputes and focus on managing discovery and strategically pursuing fee-shifting

by Zachary G. Newman

The discovery phase of litigation dominates too many lawsuits, resulting in significant and unpredictable costs and little progress. As economic and business pressures intensify, the costs associated with and resources dedicated to discovery continue to attract scrutiny from clients and the courts. Corporate clients, which can spend more than 50 percent of their total litigation budget on discovery, are anxiously insisting upon new approaches and innovative solutions. As discussed below, the most effective solution may simply be for corporate litigators to reassess the way in which they traditionally manage and approach discovery.

Is Discovery Drowning the Litigation Process?
Discovery is becoming so difficult to manage efficiently that effective corporate litigators should stop and consider whether they actually are contributing to the problem. The costs associated with petty and unfruitful discovery disputes are complicated by the ever-growing availability of and disputes over electronically stored information (ESI). "ESI is now a common part and cost of business." United States ex rel. Guardiola v. Renown Health, No. 3:12-cv-00295-LRH-VPC, 2015 WL 5056726, at *5 (D. Nev. Aug. 25, 2015). Furthermore, while "parties to litigation would be much better off if they did not have to disclose certain evidence under their control . . . this is not the state of affairs intended by our adversarial system, nor is it amenable to [the] rules of discovery." Huggins v. Fed. Express Corp., 250 F.R.D. 404, 405 (E.D. Mo. 2008) (negative history omitted).

In a recent interview, United States Magistrate Judge John M. Facciola of the District of Columbia noted:

The costs of discovery may, in the long run, drive an entire economic class out of the federal court for lack of means to engage. It's all well and good when monumental companies go after each other with their extraordinary resources, but if we get use[d] to those big bills as being typical of what can be expected in cases involving electronic discovery, obviously those costs will overwhelm smaller cases involving smaller entities.

At the end of the day, discovery's impact on costs and the efficient resolution of business disputes is primarily caused, and can only be remedied, by the manner in which corporate litigators approach, manage, and resolve discovery disputes. Regrettably, corporate litigators are either unwittingly or unthinkingly contributing to the discovery crisis. Too often, the disputes that abound over discovery are, at their core, predominantly lawyer-driven.

Are Corporate Counsel Manufacturing Needless Discovery Disputes?
Because "[b]road discovery is an important tool for the litigant," WWP, Inc. v. Wounded Warriors Family Support, Inc., 628 F.3d 1032, 1039 (8th Cir. 2011), litigators typically pose broad-based discovery requests to parties as well as nonparties. The traditional teachings of litigation seem to compel litigators to seek generalized discovery about every conceivable matter that concerns or relates to the subject matter of the litigation. See Fed. R. Civ. P. 26 ("Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense . . . ."). This approach then causes the responding party to assert general, generic objections without any thought as to whether the objections could be sustained if challenged, which only further fuels the debate over discovery compliance. Therein lies the deep-rooted flaw in the discovery process as the controversy devolves into a schoolyard pushing match over gigabytes of ESI that likely will not have any significant relevance on a dispositive motion or trial.

The discovery process relies upon the good faith and professional obligations of counsel to reasonably and diligently search for and produce responsive documents. . . . However, while parties must impose a reasonable construction on discovery requests and conduct a reasonable search when responding to the requests, the Federal Rules do not demand perfection.

Reinsdorf v. Skechers U.S.A., Inc., 296 F.R.D. 604, 615 (C.D. Cal. 2013); see also PaineWebber Grp., Inc. v. Zinsmeyer Trusts P'ship, 187 F.3d 988, 993 (8th Cir. 1999).

Court decisions continue to validate the concern that corporate litigators are spending too much time and dedicating too many resources toward imprudent disputes that do not serve either the plaintiff or the defendant. Corporate clients and their outside counsel should be aiming to streamline discovery disputes as opposed to taking positions that may spark or prolong them.

For example, although the "prohibition against general [or blanket] objections to discovery requests has been long established," Hall v. State, No. 12-657-BAJ-RLB, 2014 WL 2560579, at *1 (M.D. La. June 6, 2014), parties continue, boldly and blindly, to assert undue burden as a bar to discovery. While Rule 33(b)(4) requires that "grounds for objecting to an interrogatory must be stated with specificity," most discovery objections contain generalized and unspecified responses that only contribute to the discovery malaise. "General objections . . . are meaningless and constitute a waste of time for opposing counsel and the court. In the face of such objections, it is impossible to know whether information has been withheld and, if so, why." Weems v. Hodnett, No. 10-cv-1452, 2011 WL 3100554, at *1 (W.D. La. July 25, 2011). Courts express their distaste for such objections, recognizing that "[s]uch objections are considered mere 'hypothetical or contingent possibilities.'" Sonnino v. Univ. of Kan. Hosp. Auth., 221 F.R.D. 661, 666–67 (D. Kan. 2004); see also Anderson v. Caldwell Cnty. Sheriff's Office, No. 1:09cv423, 2011 WL 2414140, at *3 (W.D.N.C. June 10, 2011) ("[T]here is no provision in the Federal Rules that allows a party to assert objections simply to preserve them. Instead, the Federal Rules require that objections be specific.").

United States Magistrate Judge David L. Horan, of the Northern District of Texas, even cautioned that "[c]ounsel should cease and desist from raising these free-standing and purportedly universally applicable 'general objections' in responding to discovery requests. Deploying these general objections in this manner is . . . inconsistent with the Federal Rules and is not warranted by existing law." Heller v. City of Dallas, 303 F.R.D. 466, 484 (N.D. Tex. 2014); see also Tyler v. City of San Diego, No. 14-cv-01179-GPC-JLB, 2015 WL 1955049, at *2 (S.D. Cal. Apr. 29, 2015) (relying on other discovery standards when discussing the opposing party's step-one demonstration); Cartel Asset Mgmt. v. Ocwen Fin. Corp., No. 01-cv-01644-REB-CBS, 2010 WL 502721, at *10 (D. Colo. Feb. 8, 2010) ("Objections to discovery must be made with specificity, and the responding party has the obligation to explain and support its objections.").

The problem is by no means limited to the responding party. Requesting parties too often pose document requests that are palpably improper and proceed to press them without any concern of court sanctions or financial penalties. See, e.g., Nova Biomedical Corp. v. i-STAT Corp., 182 F.R.D. 419, 423 (S.D.N.Y. 1998) (quashing second set of subpoenas to third party that sought substantially the same information as first set); Concord Boat Corp. v. Brunswick Corp., 169 F.R.D. 44, 51–52 (S.D.N.Y. 1996) (finding subpoena to the defendant's investment banker "overbroad on its face" as it contained 22 broad requests such as "[a]ll documents submitted or given to you by [defendant]," whereas the litigation pertained to only one of many segments of the defendant's business).

While counsel may claim that the discovery sought is absolutely necessary, or in opposition that the discovery sought is palpably improper, too often counsel fail to consider how the discovery dispute will be viewed through the court's eyes and in consideration of the court's daily docket, the proliferation of discovery disputes, and the pressures of having to manage ever-increasing caseloads.

Thus, while many corporate clients equate burden with costs, courts do not typically share that view. Courts are not necessarily convinced that the extra costs of having to comply with the discovery demands warrant discovery protections, especially since counsel have terribly overused and have desensitized the courts based on unconvincing and unsubstantiated applications. See, e.g., Dillard Dep't Stores, Inc. v. Hall, 909 S.W.2d 491, 491–92 (Tex. 1995) (per curiam) (finding discovery of incident reports in all 227 of the defendant's department stores to be overbroad as the plaintiff was injured in only one).

These discovery disputes will continue to intensify unless counsel and their corporate clients realize that they can, and in many instances should, approach discovery and discovery disputes in a much more progressive and substantial way.

Strategic Objections, Triaging, and More Tactical Fee-Shifting Arguments
If the courts are turning a deaf ear to the plethora of discovery objections and disputes advanced by corporate clients, one must question how corporate counsel can meaningfully impact the course and growing expense of discovery. Jonathan M. Proman, Esq., a solo practitioner, believes the judiciary may need to consider adopting discovery rules that "specifically target overbroad discovery objections by, among other things, (i) assuring objecting parties that they don't risk waiver by asserting only narrowly tailored objections; (ii) rewarding those who don't go overbroad; and (iii) penalizing those who contribute to the problem."

Some courts already are taking such steps. For instance, New York Supreme Court Commercial Division Justice Charles E. Ramos offers a series of progressive opt-in provisions to assist parties in streamlining discovery and specifically addressing concerns and disputes over proportionality. One of the provisions specifically addresses fee-shifting and provides that "[u]nless the Court finds that the discovery dispute was (a) reasonable and (b) not susceptible of voluntary resolution between counsel, the Court shall determine and award attorneys' fees incurred by the party who prevailed in any discovery dispute to be paid by the opposing party." The optional rule continues:

In making the determination whether a dispute was susceptible of voluntary agreement by counsel, the Court shall consider whether any counsel engaged in lack of civility or professional Courtesy. The parties agree that the Court shall award damages in the amount of increased costs of litigation as well as reasonable costs and attorneys' fees to any party who prevails in a hearing before the Court.

Of course, these types of provisions require the mutual consent of the parties. Corporate clients, however, could proactively begin incorporating similar provisions into commercial agreements and corporate documentation to supplement prevailing party fee-shifting provisions that are becoming increasingly common in these documents.

"Courts would do themselves and litigants a service by imposing some type of sanction in (almost) every discovery dispute that comes before them," suggests Daniel P. Elms, a Dallas commercial litigator with Bell Nunnally & Martin LLP. "The sanction need not be excessive or punitive—perhaps just the costs incurred by the prevailing side in preparing and arguing the motion to compel," he recommends. "But a court's reluctance to award even modest sanctions encourages a 'we'll respond when the court orders us to' attitude. A genuine risk of sanctions—irrespective of the amount—will push parties towards real participation in the discovery process in the first instance."

As demonstrated by the upcoming 2015 amendments to the Federal Rules of Civil Procedure, there is "[a] movement afoot to revise the longstanding presumption that in civil litigation, the producing party bears the cost of production in response to discovery requests." A. Benjamin Spencer, "Rationalizing Cost Allocation in Civil Discovery," 34 Rev. Litig. (forthcoming 2015) (manuscript at 2). In fact, Zubulake v. UBS Warburg LLC and its progeny have provided a solid framework for permitting cost-shifting with respect to discovery of ESI where inaccessibility, usefulness, proportionality, and undue burden are factors. See, e.g., Tierno v. Rite Aid Corp., No. C-05-02520-TEH, 2008 WL 3287035, at *4 (N.D. Cal. July 31, 2008) (characterizing the Zubulake factors as a "gold standard" in ESI discovery disputes). Corporate counsel need to be vigilant and proactive as dilatory discovery conduct can be sufficient to warrant shifting legal fees incurred as a result of the delay. Vladeck, Waldman, Elias & Engelhard, P.C. v. Paramount Leasehold, L.P., 2015 N.Y. Slip Op. 50298(U) (Sup. Ct. Mar. 4, 2015) (awarding sanctions where the defendant's counsel failed to direct client to implement litigation hold, failed to produce documents until litigation was underway, and improperly withheld documents on claims of privilege).

U.S. District Judge Michael Baylson, addressing the issue of cost-shifting in the context of "asymmetrical discovery," noted that while "[b]oth sides legitimately want to limit their own costs of pretrial discovery," legal fees should be shifted where there is a material imbalance in the discovery being requested when compared to the claims and damages at issue. Boeynaems v. LA Fitness Int'l, LLC, 285 F.R.D. 331, 336 (E.D. Pa. 2012). The fact that the corporate defendant often has more documents and ESI than the opposing party does not necessarily mean that the production should be limited, but where the cost of production is very significant, the asymmetry should be identified for the court and application made to reallocate the costs of discovery on fairness grounds. See Fed. R. Civ. P. 26(b)(2)(C) 2006 advisory committee's note; F.D.I.C. v. Brudnicki, 291 F.R.D. 669, 676 (N.D. Fla. 2013).

Changing Your Approach
To improve the chances of compelling cost-shifting for discovery or materially impacting the course of discovery, corporate litigators need to progressively solve perceived disputes and inject more flexibility and less animosity when evaluating and negotiating the discovery protocol. Once discovery is underway, counsel and corporate clients are well advised to collaboratively devote their efforts toward identifying justifiable discovery issues and, in this endeavor, recognize that general and unsubstantiated objections will likely only complicate the proceedings and increase the costs for all parties. To accomplish this objective, counsel and clients need to focus on proportionality, and substantiating their specific concerns in order to justify prosecuting or defending any particular discovery dispute.

If in-house and outside corporate counsel coordinate and retool their litigation strategies, focusing on tactical and selective opposition and justifiable cost-shifting opportunities, counsel will have an increased likelihood of impacting the court when discovery disputes do arise and mitigating the cost-benefit imbalance inherent in discovery disputes.

Keywords: litigation, commercial, business, discovery, overbroad objections, sanctions, fee-shifting, cost-shifting, ESI, Rule 26

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