E-discovery costs have dramatically changed the dynamics in all manner of litigation but most acutely in the putative class-action context, where the respective discovery burdens of would-be class plaintiffs and defendants are grossly asymmetrical. Class-action defendants must include this cost burden in their risk and exposure calculus — even in frivolous cases where plaintiffs have no hope of ever certifying a class. This inherent litigation cost differential, which is largely unique to putative class actions, can lead to an undeniably unjust result: cases being settled based on cost pressure, rather than the relative merits. Some courts, though — most recently the District Court for the Eastern District of Pennsylvania in Boeynaems v. LA Fitness Int’l, 285 F.R.D. 331 (E.D. Pa. 2012) — recognize these inequities and shift to class-action plaintiffs and their counsel some of the e-discovery cost burdens that ordinarily fall only on the defense. But what does it take to arrive at such a ruling?
The Legal Backdrop
Many courts, including courts in the Third Circuit, have applied the seven-factor test for cost allocation set forth in Zubulake v. UBS Warburg, 217 F.R.D. 309, 322 (S.D.N.Y. 2003), which largely tracks the "rule of proportionality" set forth in Fed. R. Civ. P. 26(b)(2)(C)(iii):
The degree to which the request for information is designed to discover germane information;
The availability of the same information from different sources;
The cost of production compared to the amount in controversy;
The cost of production compared to the resources of each party;
The parties’ relative abilities, and their incentives, to control discovery costs;
The degree of importance of the issues being decided in the litigation; and
The relative benefits to each of the parties in obtaining the information at issue.
Straightforward application of this test might make sense in ordinary, bilateral litigation. But the putative class action lawsuit is, quite simply, a different animal, deserving of a context-specific, policy-driven test accounting for the economic realities of this unique species of litigation. Indeed, courts considering cost-shifting applications in the putative class-action context grapple with a variety of unique issues, including:
• Whether the discovery sought by plaintiff pertains to putative class members, see Schweinfurth v. Motorola, 2008 U.S. Dist. LEXIS 82772, *6 (N.D. Ohio Sept. 30, 2008) (ordering plaintiffs to pay 50 percent of document production costs where discovery sought did "not pertain to phones used by named Plaintiffs");
• Whether to consider the resources of the named plaintiff or class counsel, compare Wiginton v. CB Richard Ellis, 229 F.R.D. 568, 586 (N.D. Ill. 2004) ("Plaintiff’s counsel, however, obviously has been willing to front substantial amounts of money, and probably could contribute to these discovery costs.") with Fleisher v. Electronically Filed Phoenix Life Ins. Co., 2012 U.S. Dist. LEXIS 182698, *12 (S.D.N.Y. Dec. 27, 2012) ("[I]t is far from clear why the resources of counsel should be taken into consideration."); and
• Whether the amount in controversy considers only the named plaintiff’s claims or those of the entire putative class, compare Spieker v. Quest Cherokee, 2008 U.S. Dist. LEXIS 88103, *6-7 (D. Kan. Oct. 30, 2008) ("[D]efendant’s argument that discovery expenses are evaluated by reference to only the value of the individually named plaintiff claims is also not persuasive.") with Wood v. Capital One Servs., 2011 U.S. Dist. LEXIS 61962, *21, *38 (N.D.N.Y Apr. 15, 2011) (holding that this factor did not favor plaintiff since "[t]he amount in controversy in this action, absent class certification, is exceedingly modest").
In Boeynaems, the court announced a new test governing the cost-shifting inquiry in the class-action context, focusing on both "economic motivation" and "fairness." The court first recognized the very real "possibility that a litigation cost differential may sometimes enable plaintiffs’ attorneys to engage in practices that resemble extortion," a potential that other courts have also acknowledged. For example, in Schweinfurth, the court had concerns that such discovery "could be used as a weapon to compel settlement." Cognizant of this concern, the Boeynaems test dictates that, "where (1) class certification is pending, and (2) the plaintiffs have asked for very extensive discovery, compliance with which will be very expensive,  absent compelling equitable circumstances to the contrary, the plaintiffs should pay for the discovery they seek."
The litigation and economic incentives that spring from the parties’ asymmetrical cost burdens in the class-action context can cause plaintiffs to embark on a course that runs afoul of the basic mandate of Fed. R. Civ. P. 1 — "the just, speedy, and inexpensive determination of every action and proceeding." To address this problem, the Boeynaems test asks plaintiffs seeking "extensive" and "expensive" discovery to assess the value of additional discovery. "If Plaintiffs conclude that additional discovery is not only relevant, but important to proving that a class should be certified, then Plaintiffs should pay for that additional discovery …, at least until the class action determination is made."
Some Practical Pointers
Regardless of whether the Boeynaems test takes hold, putative class-action defendants can take the following measures to best position themselves to make a successful cost-shifting application.
• Seeking active discovery management. Keep the court well-informed of discovery abuses. Discovery seeking to bolster a plaintiff’s settlement leverage (through cost pressure), rather than its claims, is more likely to result in cost-shifting. But the court cannot hear of this for the first time in the context of a cost-shifting motion.
• Negotiating an ESI protocol. Make clear from the outset the reasonable steps the defense is willing to take to satisfy its discovery obligations, establishing early on that the defendant’s goal is to limit costs while complying with discovery obligations. Even if the parties cannot agree, carefully document, for example, a plaintiff’s refusal to narrow search terms or limit custodians to yield a reasonable data set for review. Although it will almost certainly be rebuffed, attempting to incorporate cost-shifting provisions into a protocol flags the issue early and may set the stage for timely judicial intervention.
• Negotiating a qualified claw-back order. Every class action defendant should have a Fed. R. Civ. P. 502(d) order in place before making a production. That order should always include a "no fault" provision — meaning defendant can demand the return of any privileged or protected information produced, even without having taken steps to prevent the production of such information. But counsel should also expressly reserve the right to undertake a reasonable privilege review, or plaintiffs (and the court) may point to the "no fault" provision as a basis for ordering discovery of ESI unaccompanied by one of the largest cost components in e-discovery — a privilege review.
• Volunteering other avenues, as appropriate.Counsel should always look for more affordable ways to produce responsive information. In its "Commentary on Proportionality in Electronic Discovery," published in January 2013, The Sedona Conference® noted, "[w]here relevant information is available from multiple sources," Fed. R. Civ. P. 26(b)(2)(c)(i) "allows courts to limit discovery to the least expensive source." Indeed, The Sedona Conference’s Second Principle of Proportionality is that "[d]iscovery should generally be obtained from the most convenient, least burdensome and least expensive sources." Offer deposition testimony or interrogatory responses in lieu of responding to amorphous document requests, or produce exemplary information instead of "all" information to show the court that the defendant is not seeking to avoid legitimate discovery in the name of proportionality.
• Demonstrating the lack of an appreciable responsiveness rate. A paltry return on the defendant’s investment of time and money is valuable ammunition in the fight to shift costs. Document the responsiveness rate of the data set searched at plaintiff’s demand. Offer the court specifics in terms of the search terms applied, the resultant quantum of data reviewed, and what subset of that data was actually responsive to plaintiff’s request.
• Tracking discovery costs. Anticipate the cost-shifting application from inception. Tally the costs incurred to implement a litigation hold and to access, restore, search and process data, including attorney and litigation support time billed to review and produce data. Minding these costs, both on a macro level and for discrete projects — most especially those likely to result in a low responsiveness rate — will enable counsel to make the necessary detailed showing when the time comes to seek to shift costs.
• Structuring your application for a Rule 26(c) protective order, and advocating for the Boeynaems approach. At the appropriate time, counsel should make a two-tiered application seeking: (1) to bar further discovery on relevancy grounds; and (2) if appropriate, to produce the requested discovery subject to plaintiff’s willingness to finance the undertaking. And, of course, the defendant should rely on the authorities highlighted here in making the case for cost-shifting, focusing on the important policy considerations unique to the class action context.
The flood of ESI in the last decade has only widened the gulf, in terms of the cost burden, between named plaintiffs and defendants in putative class actions. To keep the named plaintiffs at bay, class-action defense counsel should begin teeing up a cost-shifting application as early as possible, signaling that discovery abuses will not be tolerated. As the Boeynaems decision demonstrates, in the class-action context, defendants have cause for renewed hope that named plaintiffs may now face a reciprocal burden — financing the discovery they claim to need — that will incentivize them to approach discovery in a cost-efficient manner. •