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Justice Leonard Austin of the Nassau County Supreme Court Commercial Division has tackled a growing but largely uncharted area of the law in New York — who bears the cost of electronic discovery. In a case last week, he used the rule that has been applied to paper document production. The extraction of information from an old computer will be borne by the side requesting it. But he said he was ruling in what appeared to be an absence of precedent that specifically bore on electronic discovery. Lipco Electrical Corp. v. ASG Consulting Corporation, No. 8775/01, reflected the fact that some material on computers is buried but can still be retrieved. Does a party need to search for it when equivalent paper records are available? And who pays for what in a costly retrieval when data stored in an obsolete system requires a computer archeologist to dig it out? The case involved litigation between parties in the electrical contracting business. Lipco Electrical Corp. and Action Electrical Contracting Co. formed an electrical contracting joint venture, Lipco/Action, and hired ASG Consulting Corp. to prepare estimates and bids for public works projects and to maintain bookkeeping records of ongoing projects. At first, Lipco/Action paid ASG on an hourly basis. That changed in 1993. The terms of the new arrangement are at the center of the dispute. ASG claimed that under the new agreement, it would receive a flat monthly amount. Lipco/Action countered that it agreed to pay a flat fee only to simplify billing procedures but that the parties would adjust the final bill upward or downward after ASG computed its actual hours of service upon completion of a project. Among a number of discovery disputes, the thorniest involved Lipco/Action’s demands for electronic files, including back-up tapes, accounting records and a cash disbursement book. “Electronic discovery raises a series of issues that were never envisioned by the drafters of the [Civil Practice Law and Rules],” Austin said. “Neither the parties nor the Court have been able to find any cases decided by New York State Courts dealing with the issue of electronic discovery.” In issues over paper discovery, a judge must determine whether the demanded material exists, whether it is material and necessary for the case and is not privileged, he said. “With electronic discovery, totally different issues arise,” he wrote. “Some of the questions presented include: are the documents still on the hard drive or are they on some form of back-up; have the documents been deleted, what software was used to create and store the documents; and is that software commercially available or was the software created and/or licensed specifically for the user.” PRINTED AND ELECTRONIC ASG did not dispute the materiality of the requested information. But it argued that it had turned over printed copies of the same material. Extracting it electronically would be difficult and costly, it said, because its current software could not retrieve data stored from 1993 to 1997. New software would be needed to extract the data and manipulate it to a presentable form, the firm said. Lipco/Action claimed the software used by ASG was common to the construction industry. Retrieving it should present no special problem, it said, arguing that ASG should pay the cost of retrieval. Austin ruled that the information held in the electronic files was discoverable. Addressing the cost issue, he noted that in federal courts the party holding the discoverable information generally pays the costs of extracting it, as long as the process is not unduly expensive and burdensome. In limited circumstances, federal courts shift the costs in accordance with federal rules. In New York, the costs fell upon the party demanding the materials, said the judge. “Therefore, the analysis of whether electronic discovery should be permitted in New York is much simpler than it is in federal courts,” he wrote. “The court need only determine whether the material is discoverable and whether the party seeking discovery is willing to bear the cost of production of the electronic material.” As a result, Austin declined to order the production of the electronic evidence until Lipco/Action agreed to pay the bulk of the costs. He also demanded that the parties present the court with detailed cost estimates of the process.

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