Recent Decisions Provide Practical Guidance

New York courts recently have issued a series of e-discovery decisions that provide real guidance to practitioners. In Kennedy Assoc. v. JP Morgan Chase Bank N.A.,¹ a motion court set forth a detailed analysis of how it determined that cost-shifting was appropriate. It analyzed each of the seven factors set forth in Zubulake v. UBS Warburg² and then, in part, on the basis that the cost of production was high relative to the estimated recovery costs for plaintiff, authorized limited cost-shifting. On the other hand, in Mancino v. Fingar Ins. Agency,³ a motion court declined to shift costs to the requesting party, and required the producing party at its expense to provide documents in native format with TIFF images. The First Department decision in Pegasus Aviation I v. Varig Logistica S.A.,⁴ provides guidance as to when an entity has sufficient degree of control over a related entity in order to trigger its duty to preserve such related entity’s electronically stored information. Pegasus and Roberts v. Corwin⁵ stand for the proposition that the First Department does not require a formal written “litigation hold” in every instance, and whether one is required is fact specific. However, because such judicial determination naturally is predicated, years after the fact, on how discovery proceeds during the course of a litigation, the failure to implement such a hold is fraught with risk. Lastly, cell phone records can provide a wealth of information, and three motion courts recently issued orders relating to the production of such records.

Cost Shifting

In Kennedy,⁶ JP Morgan Chase Bank moved “to shift costs of the production of electronically stored information, to toll its time to produce, and for a protective order against production.” In support of its application, defendant submitted an affidavit outlining the procedure and costs of production and plaintiff, arguing that defendant should bear the entire cost of production, provided “no expert affidavit of its own” and did “not provide any alternative calculations of the cost of production of the ESI discovery.” The motion court noted that the “presumption in New York is that the producing party must bear the costs of discovery for all reasonable requests,” and relying upon the test for determining when cost-shifting is appropriate as set forth in Zubulake,⁷ held:

The seven Zubulake factors weigh more heavily against cost-shifting. The first factor weighs against total cost-shifting because of the relevance of the potentially found information. As noted, this factor is slightly mitigated by plaintiff’s failure to provide evidence that makes such a finding more likely. The second factor weighs against cost-shifting, as defendant is the only possessor of the requested emails. The third factor weighs in favor of some cost-shifting, as the cost of production is high relative to estimated recovery costs for plaintiff. However, the fourth factor weighs firmly against cost-shifting, as defendant is a multi-national corporation that can commit significant resources to litigation, including discovery costs. Defendant corporation has the sole ability to control costs of the ESI production, the fifth factor, which militates against cost-shifting.

Thus, the balance of the factors requires some cost-shifting here. Three of the five most important factors weigh more heavily against cost-shifting, while only one of the five most important factors (cost versus amount in controversy) weighs strongly in favor of cost-shifting. Combining this analysis with the presumption that the producing party pay, the apportionment must weigh more heavily towards defendant. Therefore, the costs will be apportioned, with 20% ($36,506.40) preliminarily to be borne by plaintiff and 80% by defendant ($146,025.60).