More than three years after their implementation, attorneys, courts, and litigants are still learning to navigate the new waters in Federal Rule of Civil Procedure 26. As a result of the 2015 amendments, federal courts have placed a new emphasis on proportionality of discovery, in accord with Rule 26(b). Yet many attorneys have focused primarily – or entirely – on one factor, cost. While the increasing cost burden of discovery is certainly an important factor in determining whether a particular set of data is “proportional” to the needs of the case, companies and their counsel should also think strategically about the other factors found in Rule 26(b).
Rule 26(b) outlines six factors in determining whether the propounded discovery is “proportional to the needs of the case:” (1) the importance of the issues at stake in the action; (2) the amount in controversy; (3) the parties’ relative access to relevant information; (4) the parties’ resources; (5) the importance of the discovery in resolving the issues; and (6) whether the burden or expense of the proposed discovery outweighs its likely benefit. Notably, expense is the last proportionality factor in the rule. While litigants understandably focus primarily on cost, particularly corporate defendants who may regularly have a greater portion of discoverable information in a case, the other five factors in the rule may provide strategic advantages and should not be ignored.
In a recent decision from the United States District Court for the District of Columbia, the plaintiff ignored all factors other than expense and burden to its detriment. That case, Oxbow Carbon & Minerals LLC v. Union Pacific Railroad Company, 322 F.R.D. 1 (D.D.C. 2017), involved an antitrust lawsuit between coal companies and railroads. The defendant railroads requested documents from plaintiff Oxbow’s CEO, which Oxbow initially estimated would cost $250,000 to review and produce. After applying agreed-upon search terms and technology-assisted review strategies to an initial sampling of the documents, that number was reduced to approximately $142,000. Oxbow found that only approximately 11 percent of the documents reviewed in the sample – after applying these strategies – were responsive to the defendants’ requests. Oxbow produced the responsive documents identified from the sampling and review but refused to review the remaining documents, and the defendants filed a motion to compel.
In opposing the motion to compel, Oxbow focused solely on the burden and cost of the proposed review, asserting that this factor outweighed all other factors in Rule 26. The court disagreed, considering each of the other factors and finding that they weighed in favor of granting the motion to compel. First, the court found that Oxbow itself had stressed the importance of the case and its potential impact on a large number of third parties. Second, the court found that the amount in controversy – ranging from $50 million to $150 million – did not render the $142,000 discovery costs per se unreasonable. Third, the court found that the “information asymmetry” favored Oxbow, because Oxbow’s CEO was in possession of relevant, unique information that could not be obtained from another source. Fourth, Oxbow’s refusal to provide the requested discovery was, by Oxbow’s admission, not based on an inability to pay the discovery costs. Fifth, Oxbow’s CEO possessed important information regarding the company’s finances and business strategies; the court concurrently found that the defendants’ discovery requests were not being used as a coercion tactic. Finally, the court noted that the burden and expense – in light of all the proportionality factors, was not excessive. Perhaps the most important portion of this analysis was the revelation that Oxbow had already spent $1.391 million reviewing and producing other documents.
Oxbow is a bit of a cautionary tale for producing parties. In a case where sampling yielded a false positive hit rate of nearly ninety percent, at a great cost to the producing party, the court still found that the discovery was proportional. While it is not apparent whether the result would have been different in any event, this case should encourage producing parties to articulate each proportionality factor in opposing production of specific documents. It is simply not enough to say, “It’s too expensive!” or “It’s too burdensome!” Litigants should be ready to explain why this discovery is not needed in or proportional to this case.
Authored by Valerie Diden Moore