Courts Narrowing E-Discovery Rather Than Shifting Costs

February 7, 2022 | Brian L. Bank | Mirielle Nezamy | Commercial Litigation

Certain decisions from the past year suggest that New York courts addressing requests to shift costs in connection with e-discovery are more inclined to exercise their discretion under Article 31 of the CPLR to limit the scope of the requested e-discovery than they are to shift the costs of such discovery to the requesting party.

Historically, New York courts have held that the party requesting discovery, as opposed to the producing party, should incur the costs associated with the production of the requested discovery material. See Schroeder v. Centro Pariso Tropical, 233 A.D.2d 314 (2d Dep’t 1996); Rubin v. Alamo Rent-A-Car, 190 A.D.2d 661 (2d Dep’t 1993).

In 2012, however, the First Department, following the practice in the federal courts, held that in the first instance, a producing party, not a requesting party, should bear the cost of production of both electronically stored information (ESI) and physical documents, subject to the exercise of discretion by the IAS court on a proper motion. See U.S. Bank N.A. v. GreenPoint Mtge. Funding, 94 A.D.3d 58 (1st Dep’t 2012). The GreenPoint court further held that IAS courts should consider the standards articulated in the seminal case of Zubulake v. USB Warburg, 217 F.R.D 309 (S.D.N.Y. 2003) when exercising such discretion, including the (1) extent to which the discovery request is specifically tailored to discover relevant information; (2) availability of such information from any other sources; (3) total cost of production, compared to the amount in controversy; (4) total cost of production, compared to the resources available to each party; (5) relative ability of each party to control costs and its incentive to do so; (6) importance of the issues at stake in the litigation; and (7) relative benefits to the parties of obtaining the information. These factors, the GreenPoint court held, are not a checklist, but rather should be used “as a guide to the exercise of … discretion in determining whether or not the request constitutes an undue burden or expense on the responding party.”

Although GreenPoint has not been adopted by all Departments of the Appellate Division as controlling law, IAS courts outside of the First Department have nonetheless demonstrated a trend toward analyzing applications for cost-shifting of ESI discovery under the Zubulake factors, as opposed to formulaically applying the requestor-pays paradigm of the past. See, e.g., Jenack v. Goshen Operations, 2021 NY Slip Op 32528(U) (Sup. Ct. Orange County Jan. 19, 2021); Allen v. Yertle Operations, 70 Misc. 3d 934 (Sup. Ct. Westchester County 2020).

In recent years, courts following GreenPoint and employing the Zubulake factors have tended not to shift e-discovery costs to the requesting party, leaving the producing party to bear such cost. See Jenack; Allen. Notably, however, some courts applying the principals of GreenPoint and Zubulake have, rather than shifting costs, choosing to instead exercise their discretion to narrow the scope of the ESI discovery sought in order to better balance the needs of the case with the burden of such production.

For example, in Cedeno v. Pacelli, 2021 NY Slip Op.30545(U) (Sup. Ct. N.Y. County Feb. 23, 2021), the plaintiffs sought to shift the costs of their ESI discovery to the defendants, who requested same. The court, in the first instance, held the motion in abeyance and instructed the parties to provide further information regarding the necessary scope and expected cost of ESI discovery. After receiving same and determining that the cost remained unclear, the court applied the Zubulake factors to find that both sides appeared to have important issues at stake while neither side had superior resources to the other. As such, and given the inability to compare the cost of the ESI discovery with amount at issue in the case, the court declined to shift costs to the requesting parties at that time, but denied the motion without prejudice for the producing parties to renew their application should the cost of ESI production surpass a certain dollar threshold in the future. This approach thus incentivized the producing parties to control the costs of ESI discovery, while not closing the door on cost-shifting should those costs become disproportionate to the needs of the case.

Similarly, in Fpg Ch 94 Amity v. Pizzarotti, 2021 NYLJ LEXIS 437 (Sup. Ct. Kings County April 27, 2021), the court addressed dueling discovery motions disputing, among other things, search-term protocols and which party should bear the cost of ESI production. In resolving the motions, the court adopted what it called an “incremental approach” in which it directed that the defendant utilize certain search terms proposed by the plaintiff, but only on certain custodians identified by the court. The court theorized that this approach should yield the most relevant emails from the most relevant custodians at a modest expense, thus resolving some of the more pressing issues raised by the parties. The court further noted that, following the implementation of this approach, the plaintiff could seek further ESI discovery if it has a basis to do so, while the defendant could seek cost sharing should this approach prove overly burdensome and costly.

Without expressly stating so, Cedeno and Fpg Ch 94 Amity both invoked the concept of proportionality in resolving parties’ requests to shift costs for e-discovery. In both cases, the court declined to shift costs and instead exercised its discretion under Article 31 to impose a narrowing of the e-discovery sought in an effort to balance cost and burden, on the one hand, with the needs of the case, on the other. Notably, both courts left open the possibility of a future motion to shift costs, thus incentivizing both sides of the dispute to conduct e-discovery in an efficient and focused manner. Producing parties are incentivized to keep costs down, since they are on the hook in the first instance, while requesting parties are incentivized to keep their requests narrow, since they could be on the hook for costs if the court determines in subsequent motion practice that shifting is appropriate.

Whether more courts continue to adopt this approach in the future remains to be seen, but litigants should be cognizant of the possibility that a failure between the parties to agree upon the scope and cost for e-discovery may result in motion practice that seeks one form of relief, but results in another.

Reprinted with permission from the February 4, 2022, issue of the New York Law Journal©, ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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