This is the fourth in a series of articles detailing how e-discovery costs can be contained using mutually agreed-upon terms in commercial contracts to limit discovery (Parts 1, 2 and 3). In this installment, we show you how to use those contracts to limit the sources of data from which e-discovery can be drawn.

The major challenge of e-discovery is managing risk while controlling costs. A big chunk of most companies’ e-discovery budgets is eaten up by dealing with data that everyone involved knows is either irrelevant or duplicative. That data still has to be included, however, because of the combination of overbroad discovery requests and the belt and suspenders mindset imposed by the fear of the sanctions that may result from taking a more aggressive stance to control costs in the midst of litigation. The problem to avoid, then, is spending money to collect, review and produce documents from data sources that almost certainly will be irrelevant or duplicative of materials already produced. Designating the available sources of data for both sides prior to the onset of litigation will significantly reduce these costs. The less you collect, review and produce, the less it costs. If both sides are comfortable with including this idea in the contract, it’s smart to agree at that point, before tempers get hot.

This portion of the model language requires the most customization to your particular situation. Generally, a good place to start is by limiting the number of custodians who will be in play. You can do this based on the amount in controversy. For example, a case with $200,000 at stake might only require that five custodians’ files be produced and no third-party held data be preserved, while a case with $5 million at issue might allow for 20 custodians and require the preservation of third-party data upon notice of the complaint and the amount claimed. While this approach introduces more complexity into the original bargaining stage, it allows parties to tie available discovery to the amount at stake rather than following a one-size-fits-all method.

Here is an example of some terms you could use here:

a. Determination of Individual Custodians. The parties agree that:

i. In matters where the Claim Amount involves less than $5 million, each Party shall only be required to collect, search and produce Documents from no more than five (5) Individual Custodians directly involved in the dispute.

ii. In matters where the Claim Amount is greater than $5 million, the collection and production shall be limited to no more than twenty (20) Individual Custodians.

iii. The Requesting Party shall be entitled to identify the Individual Custodians specified in paragraphs i. and ii. above from whom documents are to be collected, by name or job responsibility.

iv. In the event that a Producing Party voluntarily produces Documents from an Individual Custodian not designated by a Requesting Party pursuant to paragraphs i. and ii. above (i.e. to support its own claims or defenses), such Producing Party may be required, upon request of the Requesting Party, to collect, search and produce Documents from such Individual Custodian.

(For more examples, see “Using Contract Terms to Get Ahead of Prospective e-discovery Costs and Burdens in Commercial Litigation.”)

This model language also makes provision for the situation where a party wishes to use documents from its own custodians in support of its claims or defenses. Fairness dictates that any such action would put that custodian “in play” and make them fair game for discovery.

The other major category of systems that cause expense and complication in discovery is those online transactional and data warehousing systems that may or may not contain relevant data. It can be very complicated to extract data from these systems, often requiring expensive database consultants — frequently with British accents. The reality of these systems is that because they are used to run your business, you will frequently find that the key reports from these systems already exist in your custodian centric collections. By limiting the scope of collection and review of data from these systems, you can eliminate a major category of cost and duplicative production. The following model language can be easily adapted to your particular situation:

b. Server Based Systems. The Parties agree that, upon request, each Party shall furnish to the other a listing of those Server Based Systems which are likely to contain responsive Documents, including the name of the system, a brief description of the system, a brief description of the likely responsive data stored in the system, a good faith estimate of the number of records likely to be responsive and their size, and the name and title of the System Custodian. Each Party shall only be required to collect, search, and produce Documents from no more than three (3) Server Based Systems as requested by a Requesting Party.

Designating the available sources of data ahead of time can help alleviate a major problem facing information governance professionals: legacy data structures that may or may not have relevant data subject to a discovery request or legal hold. By adopting the suggested contract terms into your standard agreements you can gradually whittle down the need for retaining such expensive systems by more rigorously defining the data sources that will be the subject of litigation in the future.

There are, of course, limitations and tradeoffs to adopting any of these strategies. Contractual limitations on discovery will not bind those who aren’t parties to the contract. They also do not alter duties imposed by statute. When adopting these limitations on the number and type of data sources subject to discovery, each side must take a calculated risk that the benefits of simplifying retention and possible future discovery will outweigh the possible costs of cutting off potentially valuable data sources in future litigation. By lessening the scope of discovery for both parties, you lessen the cost for everyone, leaving you free to concentrate on running your business rather than managing discovery.

Next in the series: Shifting cost and limiting potential sanctions.