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Proportionality Limits Coming to Scope of Discovery
RICHARD WEINER
Technology for Lawyers
Published: May 24, 2013
It looks like there may be major changes coming to some of the federal rules that deal with electronic document discovery. So hold onto your hats.
ESI has completely changed the discovery game, and the rules are set to change in tune with that. The Federal Rules of Evidence Advisory Committee has approved changes to Fed. Civ. Rules 26(1) (scope of discovery); 37(e) (sanctions for failure to disclose); and 34 (general e-discovery).
No information on these changes, buried in a 560-word report, has been let out to the public yet. They are scheduled to take effect in 2013.
The change to Rule 26(1) would be radical. Currently, the scope of discovery includes all material that either is admissible evidence or which may lead to admissible evidence. This is “open discovery.”
No more. Now the scope will be “proportional” to the value of the case versus the cost of discovery, although what is discoverable is still not limited to what is admissible. Nevertheless, there will be no more open discovery under these new rules. All discovery may be subject to a cost-benefit analysis.
The rule provides some flexibility, in that it is written “subject to court order.” But this is a major shift in the scope of discovery, brought on by the enormous costs of electronic discovery.
The change to 37(e), known as the “safe harbor” section, will limit sanctions for failure to disclose or cooperate, will now read, “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”
Failure to preserve now will impose curative, rather than punitive, measures. Sanctions will only be imposed if there is a deliberate act or a failure of good faith. The court is advised in this rule to consider all of the circumstances in figuring out whether or not to impose sanctions—including proportionality (cost-benefit).
Good luck figuring out the implications of this one.
With the federal rules in the process of shifting from absolute, open discovery to the cost-benefit proportionality analysis, issues of proportionality in recent cases are in the spotlight.
The federal rules do have some homage to proportionality already—particularly the current FRCP 26(b)(2)(B), which shifts the burden of the cost of the discovery to the non-producing party if the data is “not reasonably accessible.”
A recent case in point is W Holding Co. v. Chartis Ins. Co., 2013 U.S. Dist. LEXIS 52313, 4-9 (D.P.R. Apr. 3, 2013), a $176 million case dealing with negligent loan claims.
The W Holding case included a breakdown of the cost of one small portion of discovery—the cost of scanning all documents into a searchable digital format, which included 6.8 terabytes of ESI and 921,000 paper documents, at $450 per gigabyte:
$0.185 per page for scanning paper documents and generating searchable text;
$0.025 per page for Bates and confidentiality stamping;
$325 per gigabyte for imaging native-format ESI into TIFF files; and
$35 to $300 per labor-hour for technicians, quality control, and management staff.
The total amount of just this preparatory phase of e-discovery was estimated at $2.1 million.
The argument revolved around who would pay for this, since the document scan was for the benefit of the plaintiff. The FDIC argued that producing documents at this (speculative) expense was unduly burdensome under the proportionality analysis of 26(b)(2)(B).
The judge, in this case, did not buy the FDIC argument, fundamentally saying that any such ruling would be premature without some kind of expert testimony or “dry run” to help to determine that cost-benefit analysis.
As it was, just listing the potential cost of discovery was not enough, in that judge’s eye, to warrant the data being “not reasonably accessible” under FRCP 26(b)(2)(B).
According to one analysis (at least) of the current state of proportionality, we are now in a whole new evidentiary world, where, before a court can even look at evidence, experts have to give testimony on the potential proportionality of that very evidence.
That means, of course, that the cost of those experts, or those trial runs, work into the proportionality analyses—a Catch-22 if there ever was one.
Anybody want to talk about going back to open discovery?