A Word to the Wise

The cost of production of electronic discovery puts Rule 26(b)(2) to the test. What is the proper balance in this context? Who should bear the cost of such production? Perhaps the most influential and respected effort to balance the equities in this regard was the standard set forth by Judge Francis's decision in Rowe.

That is, until Judge Scheindlin issued her decision in Zubulake v. UBS Warburg, 2003 WL 21087884 (S.D.N.Y. 5/13/03). Judge Scheindlin's approach in Zubulake took the Rowe test for the discovery of electronic communications in a new direction, one that appears to favor employees. These competing tests are the focus of this column.

Rowe Test

Judge Francis established an eight-factor test to help courts evaluate whether the costs of production should be shifted. Those factors are: 1) the specificity of the discovery requests; 2) the likelihood of discovering critical information; 3) the availability of such information from other sources; 4) the purposes for which the responding party maintains the requested data; 5) the relative benefits to the parties of obtaining the information; 6) the total cost associated with 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.

The few decisions that have applied the Rowe analysis have all ruled in favor of shifting the costs of production to the requesting party. This, of course, is good news for employers in employment cases, and an additional burden for employees to bear in establishing their claims.

Zubulake Modifies Rowe Test

Judge Scheindlin acknowledged the Rowe test as the 'gold standard' for courts addressing the question of the cost of production of electronic discovery. Nonetheless, she concluded that it was 'incomplete' and applied the test, as modified, in the Zubulake case. Judge Scheindlin noted that the Rowe test did not include as relevant criteria the amount in controversy or the importance of the issues at stake, factors identified in Rule 26(b)(2). She also noted that the first and second criteria in the Rowe test are duplicative, and that the fourth criterion, the purposes for which the requested data are kept, is generally unimportant. Therefore, Judge Scheindlin's reformulated Rowe test is as follows: '1) the extent to which the request is specifically tailored to discover relevant information; 2) the availability of such information from other sources; 3) the total cost of production, compared [with] the amount in controversy; 4) the total cost of production, compared [with] the resources available to each party; 5) the relative ability of each party to control costs and its incentive to do so; 6) the importance of the issues at stake in the litigation; and 7) the relative benefits to the parties of obtaining the information.'

What Now?

Which test will prevail? Are the differences between the two tests a question of nuance or of a fundamentally different approach to discovery? Of course, only time will tell. However, a few points can be made now.

First, the target we are shooting at, electronic communications, is not standing still. New information technologies are being developed with ever-increasing frequency. Any set of criteria applied to the issue will have to adapt to meet new and as yet unforeseen needs.

Second, Judge Scheindlin's test may not prove very favorable to plaintiffs in the run-of-the-mill single-plaintiff case with damages within the caps established by the Civil Rights Act of 1991. In adding the 'amount in controversy' standard to her test, she noted that a production costing $100,000 is not unduly burdensome in a case potentially worth millions of dollars, as was the situation in Zubulake. It is doubtful that Judge Scheindlin would feel the same way in a case realistically worth $150,000. (Judge Scheindlin cautioned courts against relying on the often-inflated value of cases stated in ad damnum clauses.) Further, the second additional criterion added by Judge Scheindlin, 'the importance of the issues at stake,' which have the potential for broad public impact, will not often apply in the employment context with the examples cited by the Judge in support of her position in mind, such as toxic tort class actions, social reform litigation, criminal actions, and cases implicating important legal or constitutional questions.

Third, the post-9/11 response of the business community to disaster recovery has served to preserve data and information in many redundant and overlapping forms, further adding to the expense and complexity of the discovery of such data.

So does the decision in Zubulake evidence a dramatic shift in the tide favoring plaintiffs in this battle over the shifting of costs for the production of electronic discovery? Perhaps not. It does, however, constitute a step forward in the evolution of judicial analysis of this thorny issue.

Alfred G. Feliu is a partner in the firm of Vandenberg & Feliu, LLP, New York, and is editor-in-Chief of this publication.

Who Bears the Cost?

Discovery of electronic communications. Employees generally cannot live without it (if they hope to state a claim), but often cannot afford to pay for it. Employers can generally afford to pay for it, but resent paying to help a plaintiff make his or her case against them. This dilemma is only further exacerbated by the proliferation of electronic communications that has made the discovery of such information very time-consuming and expensive. As Magistrate Judge James C. Francis IV stated in Rowe Entertainment Inc. v. William Morris Agency, Inc. , 205 F.R.D. 421, 423 (S.D.N.Y. 2002), modern-day discovery 'is not just about uncovering the truth, but also about how much of the truth the parties can afford to disinter.'

Under the Federal Rules of Civil Procedure, the producing party generally bears the cost of complying with discovery requests. A district court, in appropriate circumstances, may shift the cost of production under Rule 26(c) to the requesting party where the production imposes an undue burden or expense on the responding party. Courts have applied a variety of tests in seeking to balance the equities relating to the cost of production. Indeed, such a balancing act is mandated by Rule 26(b)(2), which limits discovery where 'the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.'

The cost of production of electronic discovery puts Rule 26(b)(2) to the test. What is the proper balance in this context? Who should bear the cost of such production? Perhaps the most influential and respected effort to balance the equities in this regard was the standard set forth by Judge Francis's decision in Rowe.

That is, until Judge Scheindlin issued her decision in Zubulake v. UBS Warburg, 2003 WL 21087884 (S.D.N.Y. 5/13/03). Judge Scheindlin's approach in Zubulake took the Rowe test for the discovery of electronic communications in a new direction, one that appears to favor employees. These competing tests are the focus of this column.

Rowe Test

Judge Francis established an eight-factor test to help courts evaluate whether the costs of production should be shifted. Those factors are: 1) the specificity of the discovery requests; 2) the likelihood of discovering critical information; 3) the availability of such information from other sources; 4) the purposes for which the responding party maintains the requested data; 5) the relative benefits to the parties of obtaining the information; 6) the total cost associated with 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.

The few decisions that have applied the Rowe analysis have all ruled in favor of shifting the costs of production to the requesting party. This, of course, is good news for employers in employment cases, and an additional burden for employees to bear in establishing their claims.

Zubulake Modifies Rowe Test

Judge Scheindlin acknowledged the Rowe test as the 'gold standard' for courts addressing the question of the cost of production of electronic discovery. Nonetheless, she concluded that it was 'incomplete' and applied the test, as modified, in the Zubulake case. Judge Scheindlin noted that the Rowe test did not include as relevant criteria the amount in controversy or the importance of the issues at stake, factors identified in Rule 26(b)(2). She also noted that the first and second criteria in the Rowe test are duplicative, and that the fourth criterion, the purposes for which the requested data are kept, is generally unimportant. Therefore, Judge Scheindlin's reformulated Rowe test is as follows: '1) the extent to which the request is specifically tailored to discover relevant information; 2) the availability of such information from other sources; 3) the total cost of production, compared [with] the amount in controversy; 4) the total cost of production, compared [with] the resources available to each party; 5) the relative ability of each party to control costs and its incentive to do so; 6) the importance of the issues at stake in the litigation; and 7) the relative benefits to the parties of obtaining the information.'

What Now?

Which test will prevail? Are the differences between the two tests a question of nuance or of a fundamentally different approach to discovery? Of course, only time will tell. However, a few points can be made now.

First, the target we are shooting at, electronic communications, is not standing still. New information technologies are being developed with ever-increasing frequency. Any set of criteria applied to the issue will have to adapt to meet new and as yet unforeseen needs.

Second, Judge Scheindlin's test may not prove very favorable to plaintiffs in the run-of-the-mill single-plaintiff case with damages within the caps established by the Civil Rights Act of 1991. In adding the 'amount in controversy' standard to her test, she noted that a production costing $100,000 is not unduly burdensome in a case potentially worth millions of dollars, as was the situation in Zubulake. It is doubtful that Judge Scheindlin would feel the same way in a case realistically worth $150,000. (Judge Scheindlin cautioned courts against relying on the often-inflated value of cases stated in ad damnum clauses.) Further, the second additional criterion added by Judge Scheindlin, 'the importance of the issues at stake,' which have the potential for broad public impact, will not often apply in the employment context with the examples cited by the Judge in support of her position in mind, such as toxic tort class actions, social reform litigation, criminal actions, and cases implicating important legal or constitutional questions.

Third, the post-9/11 response of the business community to disaster recovery has served to preserve data and information in many redundant and overlapping forms, further adding to the expense and complexity of the discovery of such data.

So does the decision in Zubulake evidence a dramatic shift in the tide favoring plaintiffs in this battle over the shifting of costs for the production of electronic discovery? Perhaps not. It does, however, constitute a step forward in the evolution of judicial analysis of this thorny issue.

Alfred G. Feliu is a partner in the firm of Vandenberg & Feliu, LLP, New York, and is editor-in-Chief of this publication.