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The first electronic database I supervised in litigation ended up costing a dollar a page. And that was before a single lawyer had looked at any of it.
Making TIFF images, using Optical Character Recognition software to create searchable text, entering basic descriptive coding for each document and exporting all this data into a usable format were handled by an outside vendor that charged separately for each step. This was actually cheap, because we started with paper documents, not dozens of hard drives and servers full of e-mail, Word files, PowerPoint presentations and Excel spreadsheets that first had to be forensically imaged and treated like evidence at a homicide scene on “CSI: Miami.”
Luckily, my client was a major corporation facing claims that its opponents contended were worth many millions of dollars. The client could afford this cost, and the database created ultimately paid for itself by allowing us to find documents that changed the direction of the case.
But we built this database by choice, not in response to our opponent’s demand. The client wanted to preserve all the relevant documents and retrieve them quickly and decided the cost was worth it.
Since that time, the discovery landscape has evolved. Even before the amended Federal Rules of Civil Procedure required all parties to include electronically stored information — ESI for short — in their mandatory disclosures and early discovery planning, lawyers learned that the smoking gun in any case was likely to be found in their opponents’ e-mail files.
Demands for producing ESI grew, and now preserving, searching and producing ESI has become standard operating procedure in federal litigation (and in most state court litigation, too). Now, even the most routine business dispute requires either two parties who can agree to lay off each other’s e-mail (unthinkable, and verging on malpractice), or a significant budget for electronic discovery services.
With electronic discovery consultant fees starting at $275 an hour, and costs of collecting, reviewing and producing a single e-mail running between $2.70 and $4, experts in this market estimate that in 2007, litigants will spend more than $2.4 billion on electronic discovery services, with no end in sight to this growth.
What impact will this new burden have on the litigation playing field? Will this simply be an additional cost of doing business, like Sarbanes-Oxley compliance, that American businesses will have to absorb? Or can this monster be tamed before it consumes the litigation process, with the actual resolution of disputes being lost in the shuffle?
In some kinds of litigation, electronic discovery costs aren’t likely to prevent a fair resolution because the burdens of electronic discovery are roughly equal on both sides. When Behemoth Business Software sues Venerable Financial for patent infringement, each side likely has a similar volume of ESI to preserve, search and produce, and is likely able to pay for high-end consultants to help them fulfill their e-discovery duties. The costs are high in these cases, but they are not likely to skew the outcome of the case.
But in cases where one party either has little ESI (a former employee or consumer, for example) or both parties have similar amounts of ESI but one party has more money, the burdens are not equivalent. The costs required to produce ESI in formats that comply with the highest standards of forensic practice — even in a routine dispute — can bring a weaker opponent to its knees.
The flip side of this phenomenon, of course, is the time-honored technique of burying the small party under a blizzard of purportedly relevant documents. Depending on how broadly the producing party defines the search for relevant ESI, Goliath can now defeat David with terabytes of data.
While in the now-famous “Zubulake” case, the court attempted to formulate a test for shifting the costs of e-discovery to requesting parties, and the amended federal rules include a cost-shifting provision in Rule 26(b)(2), this issue has not been litigated enough times or in enough forums to provide a reliable general rule to guide the parties. So when ESI burdens appear disproportionate, the parties have the choice of swallowing those costs or paying the costs of filing motions to get relief (and then having to wait for the decision).
Threat of Sanctions
Because all litigators and in-house counsel have heard about the sanctions that are being imposed on parties who mishandle ESI, hiring an e-discovery consultant is starting to look mandatory (and running up litigation costs).
In case after case, courts are imposing sanctions for spoliation or late production of ESI. Some of these cases note that the parties’ conduct is especially blameworthy because they dared to use their own IT employees to handle their ESI instead of paying a pricey consultant. Don’t get me wrong — a skilled e-discovery consultant can be a real asset in the right kind of case. But when is the last time you read a case sanctioning a litigant for daring to make the copies on the litigant’s own machine, instead of paying a vendor to do it?
With serious sanctions on the line, many parties simply will have to pay the money, or embrace more litigation risk.
The committee that reviewed the 2006 amendments to the Federal Rules of Civil Procedure did consider such cost issues. The committee’s report mentions the question of costs more than 40 times, and a few provisions try to contain those costs. But each provision includes loopholes and provisos that the courts are only beginning to clarify. If the courts do not use these provisions to limit e-discovery and shift costs to parties that are requesting extremely burdensome e-discovery, our clients could end up paying more for civil litigation without getting better justice.
For instance, when the ESI rules were being considered, many businesses worried they would face spoliation sanctions if they failed to incur the cost of preserving all ESI in perpetuity.
The “safe harbor” for routine document destruction in Rule 37 appears to protect litigants from that threat — but only until they knew or should have known they were under a preservation obligation.
Privilege review also imposes high costs. Because ESI proliferates so quickly, the cost of reviewing it all for privilege fast enough to allow the rest of the case to proceed promptly can be prohibitive. The “clawback” provision in Rule 26 provides some assurance to both sides that inadvertent disclosure of privileged documents won’t be deemed a waiver — at least until your opponent manages to convince the court that it should be. And under the new “reasonably accessible” provision of Rule 26, parties do not have to incur the costs of reconstructing data on backup tapes — unless a court finds that there is good cause to order the discovery in spite of the cost.
All this means that there will be some new risks in litigation, at least for the next few years while the courts consider these issues. Effective lawyers should help their clients battle these costs using these rules, improved technology and a strong dose of common sense.
We have a new mandatory, expensive weapon to use against each other but no guarantee that it will help us reach the truth faster or more reliably. Even more so now than in the past, the civil litigation system needs lawyers and judges who will respect and police the boundary between appropriate discovery and extortion, and make sure the e-discovery sideshow leaves room for resolving the parties’ real dispute.
About the Author
Ann G. Fort is a partner in the Intellectual Property group at Sutherland Asbill & Brenna, where she heads the firm’s Electronic Discovery and ESI Management initiative.
This article was first published in the Fulton County (Georgia) Daily Report, an American Lawyer Media publication. Copyright © 2007. All rights reserved.