Understanding the proportionality rule can help in-house counsel control discovery costs.

Federal and Texas rules of civil procedure allow the discovery of any matter that is not privileged and is relevant to the claim or defense. The scope of discovery in civil cases is very broad. However, the discovery rules have never sanctioned what the 10th U.S. Circuit Court of Appeals in Murphy v. Deloitte & Touche Group Insurance Plan called an “unwieldy, burdensome, and speculative fishing expedition.”

The relevance standard for discovery purposes is “not so liberal as to allow a party to roam in shadow zones of relevancy and to explore matter which does not presently appear germane on the theory that it might conceivably become so,” noted the U.S. Court of Appeals for the D.C. Circuit in Food Lion Inc. v. United Food and Commercial Workers International Union. These principles — permitting broad discovery but disallowing fishing expeditions — can be hard to reconcile. Fortunately, the proportionality rule exists, found in Texas Rule of Civil Procedure Rule 192.4(b), which mirrors Federal Rule of Civil Procedure 26(b)(2)(C)(iii).

Texas Rule 192.4(b) provides that a court can limit the scope of discovery “if the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.”

This proportionality rule essentially allows a court to pare down broad, potentially relevant discovery if the burden or expense outweighs the benefits. The rule applies to all discovery, and lawyers can use it as an important and effective tool in controlling the often excessive costs associated with e-discovery.

Although the proportionality rule has been around for some time, courts have begun to place more emphasis on the rule in discovery disputes. This development is proving beneficial to organizations and in-house counsel struggling daily with the burdens of e-discovery.

For example, in a 2010 decision in Tamburo v. Dworkin, U.S. Magistrate Judge Nan R. Nolan of the Northern District of Illinois ordered the parties to meet and confer to prepare a phased discovery schedule and “to actively engage in cooperative discussions to facilitate a logical discovery flow.” Nolan also ordered the parties to identify claims more likely to go forward and to concentrate discovery on them before moving to other claims. Nolan relied on the proportionality rule as the basis for his ruling, finding his order was necessary “to ensure that discovery is proportional to the specific circumstances of this case, and to secure the just, speedy, and inexpensive determination of this action.”

Making a case for proportionality requires proof. Consider a 2010 decision by U.S. Magistrate Judge Craig B. Shaffer of the District of Colorado in Cartel Asset Management v. Ocwen Financial Corp., et al.

Cartel Asset involved numerous discovery issues, including a request by the defendants to limit the scope of discovery of a backup email system on the ground that the costs outweigh the benefits of that discovery. Shaffer rejected the argument, finding that the responding parties had not met the burden of proof.

Specifically, Shaffer said the court not been provided specific information indicating how defendants “store electronic information, the number of back-up or archival systems that would have to be searched in the course of responding to [plaintiff's discovery], or Defendants’ capability to retrieve information stored in those back-up or archival systems.”

The court said the testimony of the defense witness that “the process of producing responsive information ‘would affect our profitability and ability to serve our clients’ ” was nothing more than the “ e-discovery equivalent of an unsubstantiated claim that the ‘sky is falling.’ “

The court wanted hard evidence, such as specifics on the systems involved, actual estimates of costs and specific evidence of the burden. It felt it saw only “mere speculation or unsubstantiated assumptions.”

On the other hand, in 2004, the evidence presented in In Re Sears, Roebuck & Co. and In Re Ford Motor Co. was sufficient for Beaumont’s 9th Court of Appeals to limit, using the proportionality rule, what it found to be overly broad discovery. There, the court found that the responding parties presented enough specific evidence of the costs and difficulties in searching for potentially responsive documents.

Costs

Discovery costs in civil litigation always have had the potential to be a substantial portion of the total costs of a suit. When electronically stored information (ESI) is involved, discovery costs can quickly escalate, often becoming the most expensive aspect of the litigation.

Texas Rule 192.4(b) and FRCP 26(b)(2)(C)(iii) offer the courts, attorneys and parties to litigation important tools to help control and reduce litigation costs. Litigants should become well versed in the rules and should not be afraid to use them. Here are some recommendations:

1. Texas and federal law require a party requesting discovery to certify that the discovery is not unreasonable or unduly burdensome or expensive. Responding parties should not be afraid to question these certifications.

2. Lawyers should consider the cost-benefit analysis in the proportionality rule at every stage of the discovery process, including — and most importantly — at the beginning.

3. If a responding party is going to pursue an undue burden motion, it must develop and be ready to present hard evidence supporting the analysis. Further, responding parties should start to develop that evidence at the beginning of the process.

4. Lawyers should consider phased discovery, especially the discovery of ESI. Agreements between the parties, and perhaps court involvement, will be critical to the successful and cost-effective implementation of those types of plans.