Court Denies Defendant’s Post-Production Motion for Cost-Shifting as Untimely and Inappropriate in the Context of “Accessible” ESI

Cason-Merenda v. Detroit Med. Ctr., 2008 WL 2714239 (E.D. Mich. July 7, 2008)

In this class action litigation, defendant moved, pursuant to Fed. R. Civ. P. 26(c), for an order requiring plaintiffs to pay at least 50 percent of its third party vendor electronic discovery costs.

The court first observed that the parties had entered a Stipulated Order for Discovery of Electronically Stored Information, which noted that the parties held several discussions regarding the possibility of limiting the scope and extent of discovery and that future agreements might be reached.  The Stipulated Order also reserved to the parties the right to petition the court to limit the scope and burden of discovery and to request that the opposing party share the costs.

The court then cited Fed. R. Civ. P. 26(b)(2)(B) and stated that, among the measures available to the court is the apportionment (or shifting) of costs between the requesting and the producing parties.  However, the court observed that defendant had not identified any form of ESI “as not reasonably accessible because of undue burden or cost,” nor did it file a motion for an order protecting it from the obligation of production.  Rather, defendant produced the information requested of it and sought, after the fact, an order imposing 50 percent of its costs upon plaintiffs.

The court found that the motion was untimely in two respects.  First, the court’s Scheduling Order provided, in pertinent part, that “[a]ll motions … for protective orders … must be filed within 14 days of receipt or notice of such disputed discovery.”  Second, the court found that the provisions of Fed. R. Civ. P. 26(b)(2)(B) and 26(c) “plainly contemplate that a motion for protective relief (including cost shifting) is to be brought before the court in advance of the undue burden, cost or expense from which protection is sought.”

The court rejected defendant’s argument that Federal Rules do not envision a ruling on cost sharing early in the case.  The court explained:

DMC’s counsel argued at the hearing that the “issue” raised by the instant Motion is whether its discovery compliance involved “undue burden or expense.”  “Undue burden or cost” is precisely the basis upon which Rule 26(b)(2)(B) permits a party to refuse production “of electronically stored information from sources that the party identifies as not reasonably accessible ….“  On a Motion to Compel Discovery or for a Protective Order, the non-producing party must show that the information is not reasonably accessible because of undue burden or cost.  If that showing is made, the court may only order the discovery from such sources “if the requesting party shows good cause …,” in which case the court may specify conditions for discovery (including cost sharing).  Implicit in the grant of authority to impose such conditions is the proposition that the requesting party may elect either to:  (a) meet the conditions, or (b) not obtain the disputed discovery (thus avoiding undue burden or cost to the producing party).  It offends common sense, in my view, to read the rule in a way that requires (or permits) the producing party to suffer “undue burden or cost” before raising the issue with the court.  Under such a reading, a court would be powerless to avoid unnecessary expense or to specify any meaningful “conditions” for the discovery other than cost sharing.  Furthermore, the requesting party would be stripped of its implicit right to elect either to meet the conditions or forego the requested information.  The Rule, if it is to be sensible and useful, must be read as a means of avoiding undue burden or cost, rather than simply distributing it.  Indeed, Fed. R. Civ. P. 1 provides that the Rules are to be “construed and administered to secure the just, speedy and inexpensive determination of every action and proceeding.”  (Emphasis added).

This interpretation is further reinforced by Fed. R. Civ. P. 26(b) (2)(C)(iii) which provides that the court must limit the frequency or extent of discovery otherwise allowed by the rules 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 party’s resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.”  (Emphasis added).  Again the clear objective is the avoidance of undue cost rather than merely the apportionment of it.

DMC surely was, or should have been, aware of the substantial cost of responding to Plaintiffs’ discovery requests before it undertook to do so.  Rather than raising the issue of undue burden and cost before they were incurred, when there would have been an opportunity for the court to demand a showing of good cause by the requesting party, explore alternatives, impose conditions or otherwise encourage compromise, DMC elected to suffer the expense and only then seek contribution from the Plaintiffs.  I conclude that the movant has failed to make timely resort to Rule 26(b)(2) (B).

The court rejected defendant’s argument that the parties’ stipulation expressly reserved the right to seek cost-shifting, again referencing the court’s Scheduling Order which required that motions for protective orders be brought within 14 days of receipt of notice of a discovery dispute.  The court stated:  "Simply put, the parties are not at liberty to stipulate away their scheduling obligations, and nothing in their Stipulated Order can be fairly read to do so.”

In addition, the court was unpersuaded by defendant’s argument that the ESI addressed in the instant motion may be viewed as “accessible” for purposes of Rule 26(b), and that neither the Federal Rules of Civil Procedure nor the reported case law restricted cost sharing to “inaccessible data.”  The court noted that there is authority that “[a] court should consider cost shifting only when electronic data is relatively inaccessible, such as in back up tapes.”  Citing Zubulake v. U.B.S. Warburg LLC, 217 F.R.D. 309, 324 (S.D.N.Y.2003).  Thus, the court concluded that, to the extent that defendant maintained that the information produced was "accessible," court-ordered cost shifting was inappropriate.  The court noted that “[t]he highly respected Sedona Principles are in accord," and quoted Principle 13:

Absent a specific objection, party agreement or court order, the reasonable costs of retrieving and reviewing electronically stored information should be born by the responding party, unless the information sought is not reasonably available to the responding party in the ordinary course of business.  If the information sought is not reasonably available to the responding party in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information may be shared or shifted to the requesting party.

Finally, the court declined to invoke its broad authority under Rule 26(c) to protect defendant from “undue burden or expense.”  It found that the provisions of that rule simply underscore the untimeliness of defendant’s motion:

The clear import of the language employed is that the court has wide discretion to prevent undue burden or expense.  But for Defendant’s delay, the court would have been in a position to select from a range of alternative actions.  In addition, had the court determined to impose conditions upon DMC’s production, Plaintiffs presumably would have been in a position to elect either (a) to accept the conditions or (b) to forego the discovery and save DMC the burden and expense of producing it.  Unfortunately, DMC’s tardy filing has deprived this court of its most valuable prerogatives.  Having elected to martyr itself rather than to seek relief in a timely fashion, DMC seeks an order imposing the cost of its choice upon its opponents.  I find neither substantive merit nor equity in its request.

Accordingly, the court denied defendant’s motion for cost-shifting.