Legal Intelligencer: Strategies for Successful Recovery of E-Discovery Expenses

There are avenues through which parties can seek recovery of e-discovery expenses. Parties should understand the basis upon which courts will allow recovery of these costs and establish reasonable limits on the scope of discovery at the beginning of the litigation process.

In the January 26, 2024 edition of The Legal Intelligencer, Kelly Lavelle wrote, “Strategies for Successful Recovery of E-Discovery Expenses.”

E-discovery has evolved into an integral component of the litigation process. With vast amounts of electronic data available, expenses associated with e-discovery can be substantial. In federal courts, the presumption is that the responding party is responsible for bearing the costs associated with discovery requests, including those related to electronic discovery. However, there are avenues through which parties can seek recovery of e-discovery expenses. Parties should understand the basis upon which courts will allow recovery of these costs and establish reasonable limits on the scope of discovery at the beginning of the litigation process. This proactive approach will allow litigants to manage and control the financial aspects of e-discovery more effectively.

The general rule is that a party producing documents pays the cost of production. However, an exception to this rule exists. Federal Rule of Civil Procedure Rule 26(c) provides parties with the possibility of cost-shifting during the course of litigation. In 2015, Rule 26 was amended to include a key change to 26(c)(1)(B). The amendment expressly confirmed the authority of federal courts to shift costs to protect parties from undue burden or expense. The advisory committee note accompanying the amendment clarified that the purpose of the change was “‘to include an express recognition of protective orders that allocate expenses for disclosure or discovery’ to ‘forestall the temptation that some parties may feel to contest’ a court’s authority to issue such orders.” It is important to note, however, that the advisory committee also cautioned against making cost-shifting a routine practice, emphasizing the need for restraint in its application.

A party seeking to shift costs under Rule 26 may do so by filing a motion with the court. The burden is on the responding party to demonstrate that the costs should be shifted. If the expenses associated with e-discovery are deemed an unreasonable burden on the producing party, a court may consider shifting some or all of the expenses to the requesting party.

Many courts have interpreted the language of Section 1920(4) as it applies to e-discovery expenses. Some courts have taken an expansive view of “making copies” and have awarded costs for TIFF conversion and project management; collecting, searching, and processing ESI; and costs related to applying date ranges, custodian filters, and deduplication. Conversely, other courts have adopted a narrower interpretation, disallowing many of the same costs. Consequently, a party seeking cost-shifting under Section 1920 must ensure that the costs align with the statutory limits. Parties often rely on invoices from e-discovery vendors to prove the expenses should be covered. However, the bills can be vague and confusing, which could lead a court either to deny cost-shifting altogether for failure to meet the statutory requirements or to create its own estimate of the costs. It is imperative for parties to meticulously review vendor invoices, ensuring a detailed breakdown of charges, as undocumented costs are unlikely to be awarded by the court.

To navigate current trends and strategies for successful cost-shifting, proactive e-discovery planning becomes crucial. Parties should engage in open discussions about the scope and cost of ESI productions, conducting a thorough early case assessment to determine e-discovery scope and estimate potential costs. Utilizing predictive advanced data analytics can further assist in evaluating the cost and relevance of ESI requests. Cooperative and good-faith negotiations between parties can streamline the e-discovery process and reduce costs. If one party unreasonably resists negotiations, there is an increased chance that a court will shift costs. When presenting the case to the court, clearly articulating reasons such as proportionality, good-faith cooperation, and the potential burden on the client will increase the chances that cost-shifting requests will be granted.

Effectively recovering e-discovery expenses through cost-shifting demands a strategic and proactive approach. Parties can significantly enhance their chances of shifting the financial burden associated with e-discovery by understanding the legal principles involved, engaging in open communication, and presenting a compelling case to the court. In cases with substantial e-discovery expenses, counsel should consider seeking advance relief under Rule 26 to either limit, share or shift vendor costs. The standards set by Rule 26 for such relief offer the court broader options than the potentially narrow interpretation of the “making copies” standard applicable to taxable costs recoverable post-judgment.

Furthermore, a comprehensive understanding of a jurisdiction’s laws governing the recovery of e-discovery expenses is crucial and should be assessed at the early stages of a case. This knowledge serves as a guide for proceeding with discovery and offers insights into potential exposure. Given the continuous evolution of technology, the significance of cost-effective e-discovery strategies, including mechanisms like cost-shifting, remains paramount. Legal professionals can effectively navigate the complexities of e-discovery and mitigate financial challenges by establishing clear guidelines, maintaining meticulous documentation, exploring innovative cost-shifting strategies, embracing technology and staying abreast of pertinent legal developments.