One of the most significant issues affecting corporate legal departments is the cost of discovery. As electronically stored information (ESI) continues to multiply, the costs to organizations for preserving and reviewing that information seemingly increase in corresponding fashion. Despite this challenging trend, organizations that are seeking to reduce their e-discovery costs are finding success in doing so through the legal doctrine of “proportionality.”
Proportionality empowers courts to restrict the liberal bounds of federal discovery practice by requiring that the benefits of discovery be commensurate with its burdens. For example, Rule 26(b)(2)(C) limits discovery 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. Rule 26(g) enforces the proportionality mandate by requiring courts to impose sanctions on those who do not conduct discovery in a proportional manner.
While proportionality has been underused for years, it has been more widely embraced of late. Indeed, several circuit and district courts have recently championed proportionality as a benchmark for decreasing e-discovery costs. For example, the Northern District of California just revamped its local rules to better emphasize proportionality. Even the states have gotten into the act, with Utah revising its rules to make proportionality the touchstone for civil discovery. Not to be outdone, the Civil Rules Advisory Committee is now considering multiple amendments to the Federal Rules that would spotlight the role of proportionality in federal discovery practice.
To understand how proportionality could reduce discovery costs, it is worth reviewing some recent cases that highlight its impact on organizations. Eisai Inc. v. Sanofi-Aventis U.S., LLC is particularly instructive in this regard. In Eisai, the court denied the plaintiff’s request that the defendants produce ESI from more than 200 company representatives. The requested discovery ran afoul of proportionality standards because it was unreasonably cumulative of the more than 12 million pages of documents that the defendants had already produced from 75 custodians. Given that the defendants had already incurred more than $10 million in discovery costs and that the requested materials were marginally relevant, the burdens and the projected expense of the discovery outweighed its likely benefits.
Eisai teaches that proportionality can meaningfully limit the cost of discovery. Just as the court in Eisai used proportionality to curtail expensive and redundant discovery, savvy courts that are aware of proportionality have taken similar approaches in the past couple of years. Importantly, several key principles are emerging from this developing body of jurisprudence. As detailed below, these principles underscore the role of proportionality in reducing e-discovery costs.
1. Unnecessary discovery requests should be eliminated
A key message from recent proportionality jurisprudence is that unnecessary discovery should be eliminated. For example, in Bottoms v. Liberty Life Assurance Co. of Boston, the court drastically curtailed the written discovery that the plaintiff sought to propound on the defendant. The plaintiff had requested leave to serve “sweeping” interrogatories and document requests to resolve a very limited issue—whether the defendant had improperly denied her long-term disability benefits. 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.” The court ultimately ordered the defendant to respond to some aspects of the plaintiff’s discovery, but not before curtailing their nature and scope.
Bottoms emphasizes that litigants should abandon unnecessary discovery. This typically requires lawyers to steer away from boilerplate demands or “robotically recycling” requests from previous lawsuits. Instead, counsel should “stop and think” about what discovery is actually needed and then prepare well-tailored requests.
While courts are drawing on proportionality to discourage abusive tactics, they are simultaneously using the doctrine to encourage organizations to defensibly delete ESI, especially for preservation purposes. This means that an organization is free to implement reasonable information retention policies, which discard ESI not subject to a preservation duty.
In E.I. Du Pont De Nemours and Co. v. Kolon Industries, Inc., the court refused to sanction the plaintiff manufacturer for eliminating emails pursuant to a good-faith document retention policy. The defendant had argued that drastic sanctions should be imposed on the manufacturer because many of the deleted emails were allegedly relevant to the defendant’s counterclaims. The court disagreed, finding instead that the emails were overwritten pursuant to a reasonable policy before a preservation duty was triggered. Moreover, the court rejected “relevance” as the sole touchstone of preservation, reasoning that it should also be viewed through the lens of proportionality. Since the manufacturer was not reasonably aware of the nature of the defendant’s counterclaims at the time the emails were destroyed, proportionality standards tipped the scales against sanctioning the manufacturer for not preserving the ESI.
DuPont reinforces the notion that a party’s preservation obligations turn on proportionality and reasonableness. In addition, it teaches organizations to develop and follow reasonable retention policies that eliminate data stockpiles before litigation is reasonably anticipated. It also demonstrates the value of deploying a timely, comprehensive litigation hold to ensure that relevant ESI is retained once a preservation duty arises.
3. Organizations need an information governance strategy
Proportionality also encourages organizations to think ahead and develop an information governance strategy, a point emphasized in Salamone v. Carter’s Retail, Inc. In Salamone, the defendant retailer filed a motion for protective order to stave off the collection of thousands of personnel files. The retailer argued that proportionality precluded the search and review of the personnel files. In support of this argument, the retailer asserted that the nature, format, location and organization of the records made their review and production too burdensome. The retailer complained that it would have to review 130,000 pages of documents spread out across multiple offices and storage sites, which were lacking uniform records management procedures.
In denying the motion, the court singled out the retailer’s own information retention system as the cause of the claimed disproportionate discovery burden. That the retailer, the court reasoned, “maintains personnel files in several locations without any uniform organizational method does not exempt Defendant from reasonable discovery obligations.” After weighing the various factors that comprise the proportionality analysis under Rule 26(b)(2)(C), the court concluded that the value of the requested information outweighed the resulting burden and expense on the retailer.
Having an information governance plan in place could have addressed the 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” e-discovery processes could have expedited the review process. Salamone teaches that an integrated process, supported by effective, enabling technologies, will likely help organizations realize the benefits of proportionality.
The foregoing cases exemplify how proportionality standards can help companies conduct e-discovery in an efficient and cost-effective manner. By observing these principles, corporate legal departments truly stand a better chance of managing litigation in a “just, speedy and inexpensive” manner. This will ultimately succeed in decreasing their discovery costs.