Tuesday, May 18, 2010

Electronic Discovery in Civil Litigation

Twentieth Century discovery jargon has gone the way of daisy-wheel typewriters and seersucker suits. As bankers' boxes are replaced by mega-bytes, so too are the rules of discovery changing. Several recent cases demonstrate the newly recognized propriety of electronic discovery in today’s civil litigation.

As demonstrated in the case of Rowe Entertainment, Inc. v. The William Morris Agency, 205 F.R.D. 421 (S.D.N.Y. Jan. 16, 2002), courts have now recognized the economic and strategic impact of the electronic transmittal of information on the civil discovery process. As noted in the opening lines of the Rowe Entertainment case, "[T]oo often, discovery is not just about uncovering the truth, but also how much of the truth the parties can afford to disinter. As this case illustrates, discovery expenses frequently escalate when information is stored in electronic form." Id. at 423.

In Rowe, which involved a federal lawsuit filed by a group of black concert promoters against booking agencies and other promoters, several of the defendants moved for a protective order, pursuant to Fed.R.Civ.P. Rule 26(c), which would have relieved them of their obligation to produce e-mail messages that may have been responsive to the plaintiffs' discovery requests. Specifically, "[e]ach of the moving defendants contend[ed] that it should be relieved of the obligation of producing e-mail responsive to the plaintiff's requests because the burden and expense would far outweigh any possible benefit in terms of discovery of additional information." Id. at 424. However, "[I]f production is nevertheless required," the defendants asked that "the plaintiffs bear the cost." Id.

Among other things, the Rowe defendants complained that the production of e-mail data would be "exorbitantly expensive" and a "technical impossibility." Id. at 424. The defendants alleged that compliance with plaintiffs' request would require a painstaking three-step process involving "cataloguing, restoring, and processing" the electronic data. Id. The cost estimates for such production ranged from $43,110 to $403,000. Id. at 424-26.

Undaunted, as litigants must often be, the plaintiffs reiterated their "critical" need for the electronic information and contended that the defendants' cost estimates were "wildly inflated." Id. at 426-27. Nonetheless, in the spirit of conciliation, plaintiffs agreed to reduce the cost of production by limiting the re-creation of the electronic information. The cost of production by plaintiffs' estimates, however, remained within a meaty range of $10,000 to $87,000.

Not surprisingly, given the liberality of Fed.R.Civ.P. 26(b)(1), the court found that the plaintiffs had "successfully demonstrated that the discovery they seek is generally relevant." Rowe, 205 F.R.D. at 428. Similarly, the court also found defendants' privacy concerns unavailing. Thus, the court reaffirmed the holding that "electronic documents are no less subject to disclosure than paper records." Id. at 428; see also Simon Property Group L.P. v. mySimon, Inc., 194 F.R.D. 639, 640 (S.D.Ind. 2000); United States Fidelity & Guaranty Co. v. Braspetro Oil Servs. Co., 2002 WL 15652 (S.D.N.Y. Jan 7, 2002)(Defendants required to produce all materials provided to their experts whether in paper or electronic form).

In allowing plaintiffs’ request for electronic discovery, the Rowe Court adopted a balancing test, consisting of eight factors, to determine whether discovery costs should be shifted to the requesting party:

1) the specificity of the discovery requests;
2) the likelihood of discovering critical information;
3) the availability of the information from other sources;
4) the purpose for which the responding party maintains the data;
5) the relative benefit to the parties of obtaining the data;
6) the total cost associated with the production;
7) the relative ability of each party to control costs and its incentive to do so; and
8) the resources available to each party.

Although this balancing test seems to modify the general presumption that a "responding party must bear the expense of complying with discovery requests," Oppenheimer Funds, Inc. v. Sanders, 437 U.S. 340, 358 (1978), it also seeks to protect the responding party from "undue expense." Id. (citing Fed.R.Civ.P. 26(c)).

The Rowe Court also set forth a "protocol" to guide the parties through the production of electronic discovery in order to protect any privileged information. Specifically, the court noted that the parties should designate an expert responsible for implementing search protocols, isolating responsive electronic mail content, and preparing the material for review.

In the case of Murphy Oil USA, Inc. v. Fluor Daniel, Inc., 2002 WL 246439 (E.D.La. Feb 19, 2002), the court confirmed the discoverability of e-mail messages contained on computerized 'backup tapes.' In Murphy Oil, the specific issue before the court was "which party should bear the cost of retrieval, production, and review of the responsive e-mail." Id. at *3. In that case, the court used the eight-factor balancing test set forth in Rowe to determine the proper operating protocols and cost shifting formula.

In Murphy Oil, the court allowed the producing party to elect one of two proposed protocols. Id. at *8. Under the first option, the costs rested with the requesting party, but allowed them to review the evidence first. The second option followed the traditional rule requiring the producing party to bear the cost of producing the data if they wished to review the materials first.

In light of these recent decisions, it is significant to note that courts have now recognized the discoverability of electronic communications in today's high-tech world of civil litigation. However, depending upon the facts and circumstances of the request vis a vis the difficulty of retrieval, the requesting party may bear the potentially high cost of the production of the electronic material.