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August 31, 2017 Articles

Demands to Produce ESI: Demonstrating Undue Burden and Cost

Quantification based on "best predictions" is vital whenever a party challenges a discovery demand on the basis of undue cost.

By Ronald Hedges

Federal Rule of Civil Procedure 34(a)(1)(A) permits a party to “inspect, copy, test, or sample” electronically stored information [ESI] “stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form.” Rule 26(b)(2)(B) provides that a responding party need not provide discovery if the ESI is from a source that is “not reasonably accessible because of undue burden or cost” and imposes the burden of proving undue burden or cost on the party resisting discovery. And Rule 26(b)(2)(C) permits limitations on the frequency or the extent of discovery under certain circumstances. More generally, Rule 26(c)(1) allows for the issuance of protective orders against undue burden or expense.

How might these principles play out in specific litigation? Duffy v. Lawrence Memorial Hospital, No. 2:14-cv-2256-SAC-TJJ (D. Kan. Mar. 30 2017), offers answers for both requesting and responding parties with respect to discovery.

Duffy: Case Details
The court in Duffy addressed a demand made by the plaintiff, a registered nurse, against the defendant hospital for production of a large volume of electronic records. The plaintiff alleged that the hospital had violated the False Claims Act by “submitting or causing to be submitted false claims for reimbursement from Medicare and from Medicaid, and by making false certifications upon which payments from the federal government were based.”

In the course of discovery, the plaintiff demanded production of various emergency room–related records for “patients 18 years and older,” as well as “logs or other documentation of . . . patients presenting to LMH [the defendant] with chest pain or acute myocardial infarction.”

In response to these demands the hospital “determined that 15,574 unique patient records would have to be located and gathered” and that personnel would have to go into the hospital’s electronic records system and review each patient’s charts. Moreover, the hospital “rolls its patients’ Emergency Room visit records into their inpatient or observation visits, making it impossible to electronically segregate the Emergency Room portion from the hospital-based portion of any visit.” Based on a projection of the number of employees who would have to be dedicated to this task, the hospital estimated its cost to be $196,933.23. Moreover, to be HIPAA-compliant, personal confidential information would have to be redacted at an additional estimated cost of $37,259.50.

Due to these burdens and costs, the hospital asked the court to limit production to “random sampling of 252 patient records plus five spares,” a number created using a statistical tool known as RAT-STATS employed by the Office of the Inspector General of the Department of Health and Human Services. The plaintiff objected, arguing, among other things, that redaction was unnecessary because there was a protective order in place.

Duffy Court Ruling
How did the court resolve this dispute?

After rejecting procedural arguments made by the plaintiff, the court granted the defendant the relief that it sought. First, the court recognized its obligation to “secure the just, speedy, and inexpensive determination” of the litigation imposed by Rule 1 of the Federal Rules of Civil Procedure. Next, the court recognized that a manual search for and review of all the records meant that “the element of human error would be a realistic factor.” Third, the court found that the use of RAT-STATS would not prejudice the plaintiff. In so finding, the court rejected the plaintiff’s argument that allowing the hospital to use RAT-STATS would be “akin to giving her a raffle ticket” because the plaintiff “did not explain the analogy, nor is the similarity immediately apparent.”

Duffy Case Takeaways
What lessons can be drawn from Duffy?

The first is the need for proof of burden or cost. Rather than rely on anecdotal “evidence,” the hospital submitted two affidavits of estimated costs. Quantification based on “best predictions” is vital whenever a party challenges a discovery demand on the basis of undue cost.

Second, a requesting party should be prepared to respond to any proof by demonstrating either the necessity for the ESI being requested or a willingness, if appropriate, to accept a compromise solution that would be consistent with the goals of Rule 1 and the concept of proportionality now explicit in Rule 26(b)(1). Both necessity and compromise should be tempered by the recognition that courts are willing to entertain automated methodologies to sample and search large volumes of electronic records.

As volumes and varieties of ESI increase across the board in litigation, parties should be prepared to address solutions such as that approved by the court in Duffy.

Ronald Hedges is senior counsel with Dentons in New York, New York.

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