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Five Proportionality Principles That Can Reduce eDiscovery Costs and Burdens

by Philip J. Favro

Talk to most any enterprise about legal issues and invariably the subject of eDiscovery will come up as a thorny point. These discussions typically focus on the high costs of eDiscovery, particularly for data preservation and document review. Such costs and the inevitable delays that accompany the discovery process provide ample justification for organizations to be on the alert for ways to address these issues.

As a solution to these costs and delays, the eDiscovery cognoscenti are emphasizing the concept of “proportionality.” Proportionality typically requires that the benefits of discovery be commensurate with its corresponding burdens. See Eisai Inc. v. Sanofi-Aventis U.S., LLC, No. 08-4168 (MLC), 2012 WL 1299379, at *6 (D.N.J. Apr. 16, 2012) (invoking proportionality standards to deny the majority of plaintiff’s production requests). Under the Federal Rules of Civil Procedure (“Rules”), the directive that discovery be proportional is found in Rule 26. See Fed. R. Civ. P. 26. In what may be a surprise to some practitioners, Rule 26(b)(2)(C) empowers courts to restrict the liberal bounds of federal discovery practice. For example, discovery must be limited where requests are unreasonably cumulative or duplicative, the discovery can be obtained from an alternative source that is less expensive or burdensome, or the burden or expense of the discovery outweighs its benefit.

This provision is reinforced by Rule 26(g), which imposes an express certification obligation on counsel to engage in proportional discovery or face sanctions. An additional proportionality provision specific to eDiscovery is found in Rule 26(b)(2)(B). That rule limits the discovery of electronically stored information (ESI) such as backup tapes that may not be “reasonably accessible because of undue burden or cost.” Finally, Rule 26(c) provides an enforcement mechanism for these provisions. Parties may seek protective orders under this provision, which limits or even proscribes discovery that causes “annoyance, embarrassment, oppression, or undue burden or expense.”

While proportionality standards were underused for years after they were first included in the Rules, they are now being championed by various district and circuit courts. As more opinions are issued that analyze proportionality, several key principles are becoming apparent in this developing body of jurisprudence. To better understand these principles, it is instructive to review some of the top proportionality cases issued this year and last. These cases and the proportionality standards they espouse provide a roadmap of best practices which, if followed, will help courts, clients and counsel reduce the costs and burdens of eDiscovery.

Encourage Reasonable Discovery Efforts
The first of these cases, Larsen v. Coldwell Banker Real Estate Corp., No. SACV 10-00401-AG (MLGx), 2012 WL 359466 (C.D. Cal. Feb. 2, 2012) emphasizes that discovery efforts need only satisfy a standard of reasonableness, not perfection. See id. In Larsen, the court rejected the plaintiffs’ assertion that the defendants should be made to re-do their production of documents. See id. at *7. The plaintiffs had argued that doing so was necessary to address certain discrepancies – including missing emails – in the defendants’ production. See id. The court disagreed, holding instead that plaintiffs had failed to establish that such discrepancies had prevented them from obtaining relevant information. See id.

The court also held that a “do over” would violate the principles of proportionality codified in Rule 26(b)(2)(C). After reciting the proportionality language from Rule 26, the court determined that “the burden and expense to Defendants in completely reproducing its entire ESI production far outweighs any possible benefit to Plaintiffs.” Id. at *8. There were simply too few discrepancies identified to justify the cost of redoing the production.

The Larsen decision provides a reminder that organizations’ discovery efforts need not be perfect. The Rules were never intended to exact perfection in the discovery process. That misguided understanding of federal discovery practice has spawned too many expensive and futile eDiscovery sideshows. See Brigham Young Univ. v. Pfizer, Inc., No. 2:06-cv-890 TS, 2012 WL 1302288, at *5-6 (D. Utah Apr. 16, 2012) (denying plaintiffs’ fourth motion for “doomsday” sanctions since evidence was destroyed pursuant to defendants’ “good faith business procedures”). Instead, the parties’ efforts must be reasonable such that the overall purposes of discovery can be fulfilled.

Discourage Unnecessary Discovery
The next case underscores the corollary principle of discouraging unnecessary discovery. In Bottoms v. Liberty Life Assurance Co. of Boston, No. 11-cv-01606-PAB-CBS, 2011 WL 6181423 (D. Colo. Dec. 13, 2011), the court drastically curtailed the written discovery that plaintiff sought to propound on the defendant. See id. Plaintiff had requested leave in this ERISA action to serve “sweeping” interrogatories and document requests to resolve the limited issue of whether the defendant had improperly denied her long-term disability benefits. See id. at *1, 7. Drawing on the proportionality standards under Rule 26(b)(2)(C), the court characterized the proposed discovery as “patently overbroad” and as seeking materials that were “largely irrelevant.” Id. at *10. The court ultimately ordered the defendant to respond to some aspects of plaintiff’s interrogatories and document demands, but not before limiting their nature and scope. See id.

The Bottoms case emphasizes what courts have been urging for years: that organizations should do away with unnecessary discovery. This typically requires counsel to steer away from boilerplate demands or “robotically recycling” requests from previous lawsuits. See id. at *5. Instead, lawyers should “stop and think” about what discovery is actually needed and then prepare well-tailored requests. See id. For as Bottoms teaches, the obligation to ensure that discovery is both reasonable and proportional principally rests with the parties and their counsel.

Encourage Defensible Deletion of ESI
Another recent proportionality decision demonstrates the importance of defensibly deleting ESI, particularly for preservation purposes. In Grabenstein v. Arrow Electronics, No. 10-cv-02348-MSK-KLM, 2012 WL 1388595 (D. Colo. Apr. 23, 2012) the court refused to sanction a company for eliminating emails pursuant to a good faith document retention policy. See id. at *1. The plaintiff had argued that drastic sanctions (evidence, adverse inference and monetary) should be imposed on the company since relevant emails regarding her alleged disability were not retained in violation of an EEOC retention requirement. Id. at 1. The court rejected that argument, finding that sanctions were inappropriate because the emails were overwritten pursuant to a reasonable data retention policy before the common law preservation duty was triggered. See id. at *4.

The court also determined that sanctions would be inappropriate since plaintiff managed to obtain the destroyed emails from a third party. See id. at *6. Without expressly mentioning “proportionality,” the court implicitly drew on the “other source” language from Rule 26(b)(2)(C) to reach its “no harm, no foul” approach. Given that the plaintiff actually had the emails in question and there was no evidence suggesting other ESI had been destroyed, proportionality standards tipped the scales against sanctioning the company for not observing a regulatory retention norm.

The Grabenstein case reinforces the notion that a party’s preservation obligations must be analyzed through the lens of reasonableness and proportionality. See Pippins v. KPMG LLP, 279 F.R.D. 245, 255 (S.D.N.Y. 2012) (explaining that “proportionality is necessarily a factor in determining a party’s preservation obligations”). In addition, Grabenstein teaches organizations to develop and then follow reasonable retention policies that eliminate data stockpiles before litigation is reasonably anticipated. See Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011) (approving corporate retention policies adopted for “good housekeeping” purposes). It also demonstrates the value of deploying a timely and comprehensive litigation hold to ensure that relevant ESI is retained once a preservation duty is triggered. See Viramontes v. U.S. Bancorp, No. 10 C 761 (N.D. Ill. Jan. 27, 2011) (denying sanctions motion since defendant issued a timely litigation hold to preserve relevant documents once a preservation duty attached). By following these “good faith business procedures,” organizations can establish a defensible information governance plan that is consistent with principles of proportionality.

Encourage Cooperation in Discovery
The Pippins v. KPMG L.L.P., 279 F.R.D. 245 (S.D.N.Y. 2012) case exemplifies how proportionality also encourages litigants to cooperate in discovery. In Pippins, the court ordered the defendant accounting firm to preserve thousands of employee hard drives. See id. at 255-56. The firm had argued that the high cost of preserving the drives was disproportionate to the value of the ESI stored on the drives. See id. at 249-250. Instead of preserving all of the drives, the firm hoped to maintain a reduced sample, asserting that the ESI on the sample drives would satisfy the evidentiary demands of the plaintiffs’ class action claims. See id. at 249.

The court rejected the proportionality argument primarily because the firm refused to permit plaintiffs or the court to analyze the ESI found on the drives. See id. at 254. Without any transparency into the contents of the drives, the court could not weigh the benefits of the discovery against the alleged burdens of preservation. See id. The court was thus left to speculate about the nature of the ESI on the drives, holding that it went to the heart of plaintiffs’ class action claims. See id. at 254-55. As the court caustically noted, the firm may very well have obtained the relief it requested had it engaged in “good faith negotiations” with plaintiffs over the preservation of the drives. See id. at 254.

The Pippins decision reinforces a common refrain that proportionality is generally available to those parties who have engaged in reasonable, cooperative discovery conduct. Staking out unreasonable positions in the name of zealous advocacy stands in stark contrast to the clear trend that discovery should comply with the cost-cutting mandate of Rule 1. Cooperation and proportionality are two of the principal touchstones for effectuating that mandate. As Pippins demonstrates, the failure to cooperate may very well foreclose proportionality considerations.

Encourage Better Information Governance Practices
Proportionality also encourages organizations to think ahead and develop effective information governance practices, a point emphasized in Salamone v. Carter’s Retail, Inc., No. 09-5856 (GEB), 2011 WL 310701 (D.N.J. Jan. 28, 2011). In Salamone, the court denied a motion for protective order that the defendant retailer filed to stave off the collection of thousands of personnel files. See id. at *1. The retailer had argued that proportionality precluded the search and review of the personnel files. See id. at *6. In support of its argument, the retailer asserted that the nature, format, location and organization of the records made their review and production too burdensome: “[T]he burden of production…outweigh[s] any benefit to plaintiffs considering the disorganization of the information, the lack of accessible format, the significant amount of labor and costs involved, and defendant’s management structure.” Id. (internal quotation marks omitted).

In rejecting the retailer’s position, the court identified its information retention system as the culprit for its burdens. See id. at *12. That the retailer, the court found, “maintains personnel files in several locations without any uniform organizational method does not exempt Defendant from reasonable discovery obligations.” Id. After weighing the various factors that comprise the proportionality analysis under Rule 26(b)(2)(C), the court concluded that the probative value of production outweighed the resulting burden and expense on the retailer. See id.

Having an intelligent information governance process in place could have addressed the cost and logistics headaches that the retailer faced. Had the records at issue been digitized and maintained in a central archive, the retailer’s collection burdens would have been significantly minimized. Furthermore, integrating these “upstream” data retention protocols with “downstream” eDiscovery processes could have expedited the review process. The Salamone case teaches that an integrated information governance process, supported by effective, enabling technologies, will likely help organizations reach the objectives of proportionality by reducing discovery burdens and making them more commensurate with the demands of litigation.

Conclusion
The foregoing cases exemplify how proportionality standards can help lawyers and litigants conduct eDiscovery in an efficient and cost-effective manner. By faithfully observing these principles, organizations truly stand a better chance of conducting litigation in a “just, speedy, and inexpensive” manner. See Fed. R. Civ. P. 1. This will ultimately reduce the costs and burdens of litigation.

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