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E-Discovery: Cost Shifting Limited

March 1, 2012

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In the recent First Department case of <em>U.S. Bank Nat’l Assn, et al. v. GreenPoint Mortgage Funding, Inc.,</em> 2012 NY Slip Op 01515,<em> </em>plaintiff appealed from a New York County decision that required plaintiff to bear the cost incurred in the production of electronic discovery.  Prior to the First Department’s decision, New York courts generally required the party requesting the discovery to bear the cost.  This held plaintiffs back from making large scale demands for e-discovery because they would have to pay the cost involved with e-discovery.  
This decision, following the well known <em>Zubulake</em> decision, held that “it is the producing party that is to bear the cost of the searching for, retrieving, and producing documents, including electronically stored information.”  Although cost shifting is permitted, the First Department follows the factors set forth in<em> Zubulake</em>, 217 FRD at 222, in deciding who bears the cost of production. Those factors are: (1) the extent to which the request is specifically tailored to discover relevant information; (2) the availability of such information from other sources; (3) the total cost of production, compared to the amount in controversy; (4) the total cost of production, compared to the resources available to each party; (5) the relative ability of each party to control costs and its incentive to do so; (6) the importance of the issues at stake in the litigation; and, (7) the relative benefits to the parties of obtaining the information.
The First Department states that the <em>Zubulake </em>factors are not a “check list,” but rather should be used as a “guide” by the trial court when determining whether or not the discovery request constitutes an undue burden or expense on the responding party.  Interestingly, the Court concludes that “the adoption of the Zubulake standard is consistent with the long-standing rule in New York that the expenses incurred in connection with disclosure are to be paid by the respective producing parties and said expenses may be taxed as disbursements by the prevailing litigant.” It remains to be seen whether tens of thousands of dollars in e-discovery expenses can be taxed against a losing plaintiff and, even if allowed, defendants will never be able to collect it.   However, the threat of taxing a losing plaintiff significant amounts of money in a judgment may still provide some deterrent to a plaintiff’s counsel seeking to use e-discovery as a weapon of mass discovery.

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