Cost shifting is the concept of shifting
the expense associated with your discovery obligations, in whole or in part, to
the party requesting the material. The
concept is not new, but it is historically underused, in part because courts
and third party decision makers have been hesitant at best, to grant costs
shifting requests in the past. This is
primarily because traditionally, litigation expenses, and discovery related expenses
in particular, are born by the party who has the data and is producing it –
this is both rule based, but also very much culturally based as well.
However, there is starting to be a sea
change as data volumes continue to grow exponentially and discovery costs grow
with it, and there is a growing sentiment that in some situations, it is unfair
and overly burdensome for a producing party to bear certain costs. What this means for you is that any
assertions, requests, or arguments to shift costs away from you are now more
likely to be considered and granted then ever before. I have noticed this in my practice working
with clients, who are not only requesting cost shifting more than ever before,
but being successful at it as well. The
rules makers are embracing this trend as well.
The new draft Federal Rules of Civil Procedure include modifications to
Rule 26 allowing protective orders to be issued for good cause to protect
against undue burden or expense and can include provisions allocating expenses,
which can include cost shifting. The
courts are likewise picking up on the trend.
In the context of third party subpoena requests and Federal Rules of
Civil Procedure Rule 45, the Ninth Circuit Court of Appeals endorsed, and seemingly
mandated, cost shifting in some circumstances, in its decision Legal Voice v. Stormans, Inc.,
738 F.3d 1178 (9th Cir. 2013), ruling that if the subpoena imposes expenses and
those expenses are significant, the court must shift enough costs so that the
expense is no longer significant for the responding party.
Making an effective cost shifting
argument, particularly to a court or some third party neutral, is dependent on
the case you can make regarding the burden and expenses, and nothing does that
better than time and cost metrics that demonstrate what the dollar impact and
burden would be; increasingly, courts are unwilling and unsympathetic to mere
assertions that something will cost a lot or be unreasonably burdensome. Having the facts to back up your statement
will add to your credibility and make it much more likely you will win a cost
shifting argument. How you develop those
metrics and cost points of reference depends.
For my clients, I keep detailed metrics on many different data points
allowing my team to provide collection, processing, review, and production
costs per document, per custodian, per GB and a variety of other measures. Working with client we then develop cost
affidavits that can be presented to the opposing party or the court and that have
proved quite powerful.
Pragmatically, Why not ask? The other
side may say yes, you may get some if not all of your costs shifted, and at a minimum,
it may make the party requesting the data carefully tailor and narrow their
request for what they truly want and need knowing they may have to pay for
it. Worst case is that they say no and
you are then in about the same position as if you had not asked. I have found it is best to first make an informal request to shift the costs
form the party itself (which will cost very little time or money), and if that
is unsuccessful, consider making a formal request to the third party decision
maker if you feel you have a good claim and reason for doing so.
Particularly for third party subpoena’s
I work with some counsel who make that their standard negotiating stance. As soon as they get the request, they reach
out to counsel for the requesting party, let them know how much it will cost
and ask them who we should bill for it. Often
they do not get any push back, and suddenly, the request for five custodians’
data shrinks to one or two; when they are bearing the cost burden, the
requesting party suddenly does not need every potential source of data under
the sun, and only ask for those that are most likely to contain relevant data.
