Proposed guidelines for nonparty e-discovery in New York’s Commercial Division

The guidelines are not intended to modify governing case law or replace any related rules

New York is known as the financial capital of the world, and as such its state and federal courts host more than their fair share of complex commercial litigation. Among the New York courts, the New York State Supreme Court’s Commercial Division is particularly busy with high-stakes litigation involving sophisticated businesses, and its opinions are watched by serious litigators everywhere. Nonparties are routinely drawn into this fray by subpoenas, a burden that is exacerbated by e-discovery.

Against this backdrop, a proposed new rule containing certain guidelines for e-discovery from nonparties in the Commercial Division (the Guidelines) has been published for public comment. If adopted, the nonparty e-discovery guidelines would take their place in a crowded field of e-discovery “guidelines” of all shapes and sizes, promulgated by official, unofficial and quasi-official bodies. Practitioners have the unenviable task, in navigating the right e-discovery course, of trying to harmonize or distinguish all of these guidelines with applicable case law and other rules and regulations in any particular venue. That being said, given the general paucity of law on e-discovery directed at nonparties, useful guidance would be welcome.

The pronounced intention of the six Guidelines is unassailable — to promote four key goals with respect to e-discovery from nonparties: efficiency; early assessment of potential burdens on nonparties in an effort to reduce those burdens; identification of costs to be borne by the requesting party; and cooperation in resolving disputes without court involvement. However, a fundamental principle underlies the Guidelines and will be critical in the practical application of them. They are not intended to modify governing case law or replace any related rules.

Guideline I encourages “parties seeking ESI discovery from nonparties” to discuss “the ESI to be sought as early as permissible in an action.” Nonparty e-discovery can be an important facet of many commercial cases and belongs as a subject for consideration and planning early in the case. This philosophy also suggests that nonparties who receive subpoenas and parties who issue them should discuss e-discovery “as early as permissible” — although this is not stated in the Guideline.

The second Guideline addresses the timing and scope of preservation by the nonparty. It states that upon receipt of a request for electronically stored information (ESI), a nonparty should enact preservation steps “promptly.” The scope of preservation should “reasonably cover the requested ESI.” This Guideline may prove controversial, as it arguably creates a new and different standard than what is articulated in the existing case law. “Promptly” is not a term that is defined and is likely to be the subject of dispute. In addition, some will argue that by defining the scope of preservation in terms of what is requested by the party, the nonparty is potentially in the position of having to preserve more than what is properly within the scope of preservation (for example, if the requests are overly broad and unduly burdensome). While there is no shortage of advice to “preserve broadly” and as a practical matter many business entities over-preserve due to the risk of spoliation sanctions, this Guideline may prove unsettling to frequent recipients of subpoenas. Furthermore, what is “reasonable” to the requestor may be patently unreasonable by any objective standard.

Guideline III imports proportionality principles into nonparty e-discovery. It exhorts parties issuing subpoenas for ESI to consider: the “nature” of the litigation; the amount in controversy; the “expected” importance of the requested ESI; whether the ESI is available from another source; the “relative accessibility” of the ESI; and the “expected” burden and cost to the nonparty. The idea of using proportionality analyses as a way to control e-discovery has been rapidly spreading in favor, and with good reason considering the disproportionate costs of e-discovery in relation to the amount in controversy in many cases. Accordingly, the basic idea behind this Guideline is sound. However, the articulation of the proportionality factors in Guideline III varies slightly from the formulations in some important cases and from other rules, and as such will likely be the subject of comment.

The fourth Guideline provides that when a nonparty objects to discovery because the ESI is “not reasonably accessible” (note the difference between this phrase and “relative accessibility” used in the previous Guideline) due to undue burden or cost, the objection “shall” be stated with “reasonable particularity.” Commentators may question whether this accessibility standard is actually intended to differ from either the previous Guideline’s accessibility standard or from the identical “not reasonably accessible” formulation in Federal Rules of Civil Procedure Rule 26(b)(2)(B). Moreover, it is unclear why a special Guideline is necessary with regards to objecting with reasonable particularity in the specific situation postulated by the Guideline, as such particularity is typically required in stating all objections.

In Guideline V, the elements of a meet and confer between a party and nonparty are identified. These include the scope of discovery, the timing and form of production, and the use of “informal” ways to resolve disputes that do not involve motion practice. Commentators may have their own suggestions for other e-discovery topics appropriate for discussion at these conferences. For example, additional topics might include ways to handle inadvertent production of privileged ESI.

The law is particularly sensitive about the burden on nonparties asked to provide voluminous discovery for a case in which they are merely innocent bystanders. Guideline VI recognizes the rules requiring that the requesting party pay for the nonparty’s expenses of production, at least insofar as these expenses are determined to be reasonable. The Guideline provides examples of such expenses in the context of e-discovery, such as fees associated with privilege review and consultants with e-discovery expertise, as well as costs from business disruption. These examples may be helpful in clarifying the application of the defrayal of cost rules to nonparty e-discovery. However, the idea of making business disruption costs a routine element to consider in the defrayal analysis may draw fire in light of New York case law, in particular a case called Tener v. Cremer.

In sum, the proposed Guidelines for nonparty e-discovery in the Commercial Division of the New York State Supreme Court have the potential to bring some order to the sometimes unruly, contentious and expensive process of e-discovery from nonparties. The thrust of the Guidelines is generally consistent with the development of the law and rules in other courts. The comment process may well bring clarification to the Guidelines in a way that optimizes their benefit — in a forum for some of the most complex, financially impactful litigation in the world.

The views expressed are those of the author and do not necessarily represent the views of Ernst & Young LLP.

Contributing Author

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Adam Cohen

Adam Cohen is a Principal with Ernst & Young LLP.  He is the co-author of the annually updated legal treatise “Electronic Discovery:  Law and Practice”,...

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