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PROPORTIONALITY. Are discovery costs proportional to the value and importance of the case?

It is well-documented that e-discovery consumes increasing percentages of overall civil litigation costs. Judges and legal professionals are actively exploring a variety of initiatives to address the problem, and several recent conferences and legal rulings have taken up the theme of proportionality. Proportionality shifts attention from the general problem of high-volume, prohibitively expensive productions to a more focused analysis of whether discovery costs are proportionate to the value and the importance of the specific case in question. The American College of Trial Lawyers Task Force on Discovery has declared that "Proportionality should be the most important principle applied to all discovery."1
Federal Rule 26(b)(2)(C)(iii), the existing procedural rule that addresses proportionality, is remarkably lucid and robust:

On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that… the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.

Considerable attention has been paid in the last few years to the many factors contributing to the growing "burden or expense" of e-discovery, yet it is striking in retrospect how quiet the judiciary has been, until very recently, about the concept of proportionality as it appears in the Federal Rules. The rule unambiguously states that the court must balance the scope of proposed discovery against case-specific variables such as the amount of damages and fees in question, the risks to the parties, the magnitude of the legal issues at stake and the relative importance of electronic evidence in arriving at a resolution. Although proportionality has often been ignored or overlooked in the past, it now appears that the judiciary is undergoing an important cultural shift. Before, judges may have been waiting for properly formed motions to invoke the proportionality requirement in considering broad discovery requests. That is no longer the case, as Judge Lee H. Rosenthal recently demonstrated in Rimkus v. Cammarata, where she makes explicit reference to the rule and cites proportionality as the decisive factor in determining what is "acceptable" and "reasonable" in "preservation and discovery conduct."
Judge David J. Waxse, author of several ground-breaking decisions in e-discovery disputes, noted he was surprised when he recently re-read the rule and realized it set forth an explicit requirement—"the court must"—rather than a mere recommendation or guideline. Waxse now refers to the proportionality provision in the Federal Rules as "probably the most underused, valuable rule we have… Judges on their own are supposed to consider this…We don't need to change the rule; we need to start using the rule.

A CASE STUDY
In a recent example, a corporate client defending itself in a matter in which plaintiff's proposal for expanded discovery would actually have cost more than the entire amount at issue in the case!The original discovery request was for seven core custodians, requiring collection of 38GB of data; of that, 1.4GB (or less than 4%) was determined to be relevant after searching the data with the latest technology, using client-supplied search terms. The cost of discovery for those seven custodians was a reasonable $10,000, but in a motion to compel, the opposition requested an additional 65 custodians. Looking at actual processing and searching performed for the original custodians, reasonable per-unit cost estimate was established and, in response to the motion, the court was provided with an affidavit showing tiered costs: actual costs for the original seven custodians, and cost projections that included half (39 total) and all (72 total) of the additional custodians requested in the new motion. Based on the original "sample" of seven, discovery experts were able to project collection of all additional custodians at a cost of $153,000, an amount clearly out of line with the $140,000 at issue in the entire case. In light of the documented lack of proportionality between the discovery request and the value of the case, and given the low percentage of relevant data in the initial sample from the most promising custodians, the motion to expand scope made little sense and was dismissed.

WHAT DOES THE SHIFT TO PROPORTIONALITY MEAN FOR LITIGANTS?
The new emphasis on proportionality has a number of practical implications for e-discovery. For starters, both the number and the scope of discovery requests are likely to be subject to more limits and to closer judicial scrutiny, reducing costs. Adversarial conduct in the discovery process will be increasingly discouraged. Meaningful cooperation between counsel—which Judge Paul Grimm in Mancia has already called out as a clear requirement of FRCP 26(g)—will be paramount, and providing accurate, court-consumable documentation will be the best means for counsel to demonstrate compliance with that standard and avoid possible sanctions. Aggressive, boilerplate discovery requests designed to overwhelm an adversary and force settlement clearly undermine proportionality and reasonable inquiry 26(g) principles and are increasingly unlikely to succeed.

Whether your case involves massive volumes of electronic evidence from across the enterprise or just a single custodian, it is now essential that you have the means to quantify the impact of proposed discovery in terms of costs, time and risk, and be able to monitor your progress as discovery proceeds.
In effect, both parties to a case will find it necessary to undertake a detailed cost-benefit analysis early in the litigation process. Parties should specify the anticipated impact of proposed discovery (in terms of such factors as cost, time, risk and disruption of day-to-day business activities), and then be prepared to weigh these burdens against the overall value of the case, the significance of its core legal issues and the anticipated benefits of the requested evidence for its resolution.

Proportionality considerations effectively shift the focus in discovery arguments from broad, universal standards to data-based, case-specific information:

  • What is the average number of documents per custodian?
  • How much will it cost per gigabyte to prepare, review and produce a particular data set with a specified combination of file types?
  • What percentage of documents can we expect to be relevant, given a proposed scope of discovery?
  • And how might that percentage change if the scope were limited by a reasoned data reduction strategy?

 WHEN SHOULD YOU ENGAGE AN E-DISCOVERY SERVICES PROVIDER?

  • When your opponent's discovery requests are disproportionate to the value and importance of the case
  • When you need third-party validation to back up claims or counterclaims about the scope and cost of proposed discovery
  • When a case involves complex file types or combinations of file types, such as multiple email platforms
  • When a case requires multiple rolling productions
  • When a case requires multiple productions to multiple parties
  • When your IT department is overtaxed (and perhaps already outsourcing some of its functions)
  • When you expect to be litigating multiple matters that are related or overlapping, and may be able to apply repeatable processes across those matters and increase efficiency
  • When you anticipate long-term litigation
  • When you face...
  • a government investigation of a class action suit
  • a high-stakes IP-related matter that threatens the business model
  • an employment-related matter

In many cases, litigants will be urged to focus discovery efforts on the data that appears, from initial assessments, to be the most relevant to the issues and least burdensome to produce. Productions should be conceived as an iterative, phased activity in which the scope of each successive effort is narrower and more closely targeted to the core legal issues of the case.

It's clear that defensible data sampling and search techniques using advanced tools designed specifically for e-discovery will play an increasingly important role in this process. But before meaningful sampling can be employed, data must first be processed effectively and defensibly to expose underlying information that can be used to create useful and representative samples. Statistical data sampling using vetted, state-of-the-industry technology can be extremely valuable for testing search terms, specifying data quantities and types (and the per-unit cost of processing, reviewing and producing them), and identifying sensible, cost-effective culling and review strategies. Also, at various stages in the e-discovery process, attorneys using a robust review tool with a flexible, intuitive search interface can perform ad hoc sampling to test search terms and strategies as a way of validating and refining their discovery approach.

Proportionality requires a more formal, quantified approach to discovery, and it is critical to engage project managers that have the legal and technical expertise to help you substantiate discovery arguments with detailed, data-based documentation. Of course, this intense focus on the details of e-discovery and data handling can distract attorneys from their primary responsibility, which is to focus on legal strategy. Involve your e-discovery partners early, because they understand cost drivers best. They can also help legal teams use the most precise methods and technologies available for projecting early on what scope of inquiry is reasonable and proportional to the value of the case, and provide timely reporting on the status of discovery activities as they proceed.

The recent attention paid by judges and other legal experts to the proportionality requirement of the Federal Rules is a promising development in the battle against escalating discovery costs. The rule is clear, the judges have declared their intention to enforce it, and thus it is likely to become a valuable tool for defendants fending off overly broad discovery requests designed to force early settlement.When the volume of requested data and the burdens of processing it are disproportionate to the value of a given case and to the legal issues at hand, legal teams with the right partners, the technology and the expertise to provide defensible documentation will now be able to fight back.

Samantha Green

Samantha Green serves as e-Discovery Counsel for DTI. She is an attorney with over 10 years experience. Samantha has substantial expertise in all aspects of electronic discovery, including drafting best practices for both law firms and corporate clients, as well as formulating workflow solutions for large discovery projects. She has an in depth understanding of electronic discovery, litigation readiness, ESI hosting, review and production processes as well as the different technology and business approaches and cost implications associated with each. Samantha has taken cases from pre-discovery through trial. Samantha has advised, written and spoken on all phases of the electronically stored information (ESI) life cycle with a broad range of experience in initial case assessment and engagement management. She has worked on many government investigations, including FCPA and antitrust matters, as well as, second requests and litigations that cross all spectrums. Prior to joining DTI, Samantha was the e-Discovery Attorney for Blank Rome LLP.

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About the Author: Samantha Green serves as e-Discovery Counsel for DTI. She is an attorney with over 10 years experience. Samantha has substantial expertise in all aspects of electronic discovery, including drafting best practices for both law firms and corporate clients, as well as formulating workflow solutions for large discovery projects. She has an in depth understanding of electronic discovery, litigation readiness, ESI hosting, review and production processes as well as the different technology and business approaches and cost implications associated with each. Samantha has taken cases from pre-discovery through trial. Samantha has advised, written and spoken on all phases of the electronically stored information (ESI) life cycle with a broad range of experience in initial case assessment and engagement management. She has worked on many government investigations, including FCPA and antitrust matters, as well as, second requests and litigations that cross all spectrums. Prior to joining DTI, Samantha was the e-Discovery Attorney for Blank Rome LLP.

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