The Evolution Of Electronic Discovery Practice - Burdensome Discovery

Monday, November 1, 2004 - 01:00

When corporations first began to use computer systems to store information electronically, the legal world was largely unaware of the dramatic effect such a change would have on litigation discovery practices. Even as the use of such systems began to spread rapidly, many attorneys remained content to conduct discovery in the traditional fashion as envisioned by the Federal Rules of Civil Procedure. However, eventually enterprising attorneys began to realize that the information stored in these corporate computers was relevant to the litigation in which they were involved. Taking the idea a step further, these attorneys realized that certain benefits could be derived from requesting such information in electronic format instead of permitting the company to translate the data into paper form. Before long, requests were being made by attorneys for all relevant documents in these information storage systems, and in some cases, the data was being requested in its native electronic format.

Once attorneys began requesting information stored in electronic format, corporations needed to respond effectively to such requests. Poorly-tailored requests could usually be stopped by typical objections based on burden; but when such requests were reasonable, corporate counsel understood they had an obligation to produce the relevant data. This of course, meant that the corporation needed to devise a method to extract the data, search it for relevant information, and protect privileged material, all before producing it to the opposing party. For many corporations, these tasks proved extraordinarily difficult, both in terms of successfully extracting the data and the relative costs involved. Realizing the magnitude of the burden plaintiffs could place on corporations by requiring such invasive discovery, corporate counsel would necessarily object to such requests, requiring court involvement.

When the courts began addressing these new electronic discovery disputes, many noted that existing rules provided little, if any, specific guidance in this area. Courts realized that they could generally control or limit discovery in a variety of ways, but were left to their own opinions as to how such discovery should be curtailed, if necessary, without prejudicing the rights of the parties. In deciding such disputes, courts had to balance the needs of the parties to engage in discovery against such counterbalancing factors as the ability of one party to use the expense of electronic discovery as a weapon for settlement. Without court intervention easing a corporation's discovery burdens, many would likely consider settlement over paying phenomenal discovery costs coupled with an ever-present risk that the corporation might fail to develop a comprehensive protocol to successfully extract the relevant information and then be open to the possibility of sanctions as a result.

An early case addressing a request to search and retrieve relevant email is In re Brand Name Prescription Drugs Antitrust Litigation.1 In that case, class plaintiffs requested that the defendant produce email from its internal computer systems. The defendant objected on a variety of grounds, including that the production was burdensome since it would cost $50,000 to $70,000 to retrieve the responsive email. The defendant further argued that if it had to produce the emails, plaintiffs should bear the costs of production. The court disagreed with the defendant's arguments. In analyzing the issue, the court found that substantial expense alone was not sufficient to justify requiring the plaintiffs to pay for the costs of discovery. While the court noted the apparent unfairness in forcing the defendants to incur the substantial expenses necessary to extract the relevant information, it was more persuaded by the fact that the defendant chose to implement such an electronic storage system in the first place. According to the court, the defendant's purchase of such a system created an ordinary and foreseeable risk that it might need to extract data from it. Because the defendant was on notice that such a situation might occur, it was not entitled to have the costs of production shifted to the opposing party.

While the In re Brand Name Prescription Drugs Antitrust Litigation case provided one possible solution to resolving electronic discovery requests, a much later case, heralded as a breakthrough in handling electronic discovery disputes, specifically disagreed with the earlier court's reasoning. In McPeek v. Ashcroft,2 the court found the notion that utilizing a computer system to back up data created an ordinary and foreseeable risk subjecting users to enormous production costs in litigation did not even attempt to mirror the traditional rules governing discovery. According to the court, such an approach would seriously hinder corporate litigants' ability to avoid burdensome discovery even if it were "undue," since those litigants "assumed the cost" of such discovery. The McPeek court found that the rationale set forth in In re Brand Name Prescription Drugs Antitrust Litigation assumes an alternative that does not practically exist in modern day society: refusing to use a computer system to avoid potential discovery burdens.

McPeek is also known for its use of a marginal utility analysis to determine the fairness of shifting discovery costs by comparing the ratio of the relevant information located in comparison to the total amount of information restored. In order to facilitate such an analysis without resorting to analyzing the entire amount of information requested, the court made use of "sampling" techniques to extrapolate the relative time and costs involved. In McPeek, the plaintiff demanded that the defendant search its backup tapes for relevant information. The defendant refused, arguing that the remote possibility that relevant evidence would be located did not justify the costs involved. In ruling on the issue, the court determined that the parties would share the discovery costs based on the likelihood that relevant information would be found. In order to determine whether the backup tapes contained relevant information, and to what extent, the court ordered the defendant to undertake a "test run" on a small subset of the tapes and document the time and money spent in performing the search, as well as the ratio of relevant information. By requiring the test run, the court sought to avoid the needless expense of restoring all of the tapes in the event that little relevant information existed.

Later cases have expounded on the groundwork set forth in McPeek by laying down a framework for determining when cost shifting should be permitted. In Rowe Entertainment, Inc. v. The William Morris Agency, Inc.,3 the court fashioned an eight-part test to determine whether the requesting party should be required to pay for some or all of the electronic discovery it requests. According to the court, each of the eight factors should be considered when determining the appropriateness of cost shifting, and the court incorporated the marginal utility test from McPeek into its factors. In Zubulake v. UBS Warburg,4 the court substantially revised the Rowe test to more accurately reflect the discovery obligations set forth in caselaw and the Federal Rules of Civil Procedure. According to the Zubulake court, the Rowe test inappropriately favored cost shifting since it did not take into consideration the presumption that the producing party pays. In order to include such a presumption, the Zubulake court created a threshold that needed to be crossed before even considering whether cost shifting was warranted based on whether the electronic data was in an "accessible" or "inaccessible" format. If the data was accessible, the traditional rule that the producing party pays applies, and no cost shifting is necessary, since the burden in producing such data is not "undue." If the data is inaccessible, an undue burden may exist and therefore cost shifting might be appropriate. In order to determine the appropriateness of cost shifting, the court devised a seven-factor test, essentially refining the test set forth in Rowe, to weigh whether cost shifting was appropriate and to what extent costs should be shifted. Unlike Rowe, the Zubulake test organized the factors in order of importance, with the first factors taking precedence over later ones, and placed the marginal utility test from McPeek at the top comprising the first two factors. However, the court cautioned that the test should not be mechanically applied, and that the central question should remain whether the request imposes an undue burden or expense on the responding party.

In response to the increasing court activity on electronic discovery issues, many jurisdictions have also passed or are considering rules and amendments dealing with electronic discovery. In fact, the Federal Standing Committee on Rules of Practice and Procedure recently approved for publication and public comment proposed amendments to the Federal Civil Rules specifically addressing electronic discovery practices. These new amendments are designed to help parties reach agreements on electronic discovery issues before resorting to court intervention and provide guidelines as to how electronic discovery should be pursued. The amendments address a great number of electronic discovery issues, including preservation obligations, privilege waiver, and the form of production. Taking a page from the ruling in Zubulake, the amendments also restrict access to electronic information that is not reasonably accessible unless good cause is shown. If approved, the rules will be a welcome addition to discovery practice as they provide needed guidance to litigants in a relatively new, complex, and growing area of the law.

With use of electronic storage systems on the rise in businesses today, discovery disputes surrounding the disclosure of electronic information will become more and more commonplace. Courts will continue to develop existing caselaw to aid in resolving such disputes, and new civil rules will be devised to assist litigants in navigating the maze that electronic discovery can create. In many ways, the developers and users of the electronic storage systems themselves will have a hand in how electronic discovery practices play out, by developing hardware and software to suit business needs. Such systems will likely be more capable of segregating and searching, retaining and destroying information based on user commands and programmed retention schedules. However, until such systems are designed, courts must continue to protect the interests of litigants by examining the burden on parties producing electronic information and fashioning a fair resolution for such disputes.

1 1995 WL 360526 (N.D. Ill. Jun. 15, 1995)
2 202 F.R.D. 31 (D.D.C. Aug. 1, 2001)
3 205 F.R.D. 421 (S.D.N.Y. Jan. 16, 2002)
4 217 F.R.D. 309 (S.D.N.Y. May 13, 2003)