PROPORTIONALITY: Tipping the Scale

Federal Rule of Civil Procedure 1 mandates a “just, speedy, and inexpensive resolution of civil disputes.” In a perfect litigation world, parties would operate in good faith, draft reasonable discovery requests, answer requests completely and thoroughly, cooperate throughout the meet and confer process, and discovery would flow seamlessly. The real litigation world, however, does not usually follow this pattern.

For example, we are all familiar with discovery requests that call for the production of  “all communications” or “all documents” related to the subjects, issues, or persons involved. While it is generally accepted that such requests can be construed as “reasonably calculated to lead to the discovery of admissible evidence,” such broad requests often result in discovery disputes based on claims of being overly broad and unduly burdensome.

In December of 2015, the amended FRCP Rule 26(b)(1) sought to address the burdens associated with preservation and production by emphasizing proportionality and defining the scope of discovery. Rule 26(b)(1) states: “Unless otherwise limited by court order, the scope of discovery is as follows:  Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of case…”  The rule also lists six factors to determine proportionality:

1. The importance of the issues at stake in the action;
2. The amount in controversy;
3. The parties’ relative access to relevant information;
4. The parties’ resources;
5. The importance of the discovery in resolving the issues; and
6. Whether the burden of expense of the proposed discovery outweighs its likely benefit.

With this new amendment, the phrase “reasonably calculated” was removed and proportionality is now front and center. While it is debatable whether proportionality is a new concept, there is a renewed emphasis on it that seems here to stay. Over the past two years, when objections based on proportionality have been made, the courts have addressed the issue using the above factors.

How Have Courts Addressed Proportionality Since the Amendments?

A great example of a court analyzing each proportionality factor is in Oxbow Carbon & Minerals LLC, et al. v. Union Pac. R.R. Co., et al., 322 F.R.D. 1 (D.D.C. Sept. 11, 2017). In this multimillion-dollar anti-trust claim, defendants filed a motion to compel plaintiffs to produce all relevant documents belonging to their CEO. Based on their review of documents produced by other custodians, defendants believed the CEO “possesses relevant, unique information responsive to their requests.” Plaintiffs countered that adding the CEO as a custodian would be “unduly burdensome and disproportionate to any value the documents might possess” because the documents would be duplicative of those of the nineteen other custodians, and the initial estimated cost would be $250,000. The court held defendants motion in abeyance pending a sample analysis, which determined the following:

• 467,614       Total number of CEO’s documents provided to the vendor.
• 45,639         Number after vendor removed duplicate records and applied the search terms.
• 82,600         Number of documents including families.
• 12,074          Sample analysis of 10% of hits.
• 1,300            11.67% were responsive to search terms.  Plaintiff produced these.
• $57,000       Cost of sample analysis review.
• $85,000       Cost to review the remainder.
• $142,000     Total cost of the review of the CEO’s documents.

The sample analysis provided information that both parties relied upon in making their arguments. Plaintiffs believed the complete production of the CEO’s documents would be an unnecessary burden or expense in light of the low responsiveness rate. Additionally, plaintiffs refused to negotiate the agreed-upon search terms or provide defendants with the data from the sampling to evaluate the effectiveness of the terms. Finally, plaintiffs did not deem this effort worth the attorney time it would take to accomplish because it was “unlikely to dramatically reduce the number of hits” plaintiffs would ultimately need to review. 

Defendants argued the results of the sampling as proof of the existence of relevant and unique documents in the CEO’s records, and the search terms effectively narrowed the universe of documents that plaintiffs must review. Defendants further contended the CEO’s responsiveness rates were commensurate with plaintiffs’ other custodians although they offered to renegotiate the agreed-upon search terms in an effort to decrease the number of potentially responsive documents needing review.  Defendants opposed cost-sharing and sought a ruling on their motion to compel.  

The court looked to the six proportionality factors:

1. The Importance of the Issues at Stake:  The court noted the “case involves important issues and has the potential to broadly impact a wide range of third-parties not involved in the litigation.”
2. The Amount in Controversy:  An undisputed $150 million. Plaintiffs’ estimated cost of complying with proposed discovery did not strike the court as excessive.
3. The Parties’ Relative Access to the Relevant Information:  Courts look for “information asymmetry,” a circumstance in which one party has very little discoverable information while the other party has vast amounts. The court concluded there would be no other way for defendants to obtain this information.
4. The Parties Resources:  Plaintiffs represented they did not object to the request based on the inability to pay. The court held there was no reason to deny the request on this basis.
5. The Importance of Discovery in Resolving the Issues:  While the court appreciated the CEO’s files did not contain a high proportion of responsive documents, it “strains reason to suggest” the CEO would have no unique information relevant to the litigation in his possession.
6. Whether the Burden or Expense of the Proposed Discovery Outweighs Its Likely Benefit: The Court did not find the $85,000 unduly burdensome or disproportionate, given plaintiffs had spent $1.391 million to date to review and produce 584,000 documents from nineteen custodians. “[T]he Court is unwilling to find that the burden of reviewing the remaining 65,000 responsive documents for a fraction of the cost of discovery to date should preclude Defendants’ proposed request.”

After analyzing each factor, the court concluded all factors tipped the scale in favor of granting defendants motion to compel and denied plaintiffs’ request to shift discovery fees.

Lessons Learned from Oxbow:

#1 Proportionality is Made Up of Multiple Factors.

Parties should consider each factor when deciding whether to object to discovery on proportionality grounds. Plaintiffs’ focus in Oxbow on only one factor (burden outweighing the benefit), fell short of the court’s expectations. “The Court’s responsibility, using all the information provided by the parties, is to consider [all the proportionality factors] in reaching a case-specific determination of the appropriate scope of discovery.” See Fed. R. Civ. P. 26 advisory committee note. In a recent motion to compel hearings, a court held that “No single factor is designed to outweigh the other factors in determining whether the discovery sought is proportional.” See Williams v. BASF Catalysts, LLC, No. 11-1754, 2017 WL 3317295 (D.N.J. August 23, 2017). Even further, courts have cited Rule 26 advisory committee notes regarding the last factor and held “[t]his factor may combine all the previous factors into a final analysis of burden versus benefits.” See Oxbow and Arrow Enterprises Computing Solutions, Inc. v. BlueAlly, LLC, No. 5:15-37, 2017 WL 876266 (E.D.N.C March 3, 2017).  

#2 Follow the Metrics.   

Parties must support their proportionality arguments. Federal Rule 26(b)(1) does not “permit the opposing party to refuse discovery simply by making a boilerplate objection that is not proportional…The burden or expense of proposed discovery should be determined in a realistic way.” See Fed. R. Civ. P. 26 advisory committee note. “The application of proportionality should be based on information rather than speculation…Burden and expense should be supported by hard information and not by unsupported assertions.” See Sedona Conference Commentary on Proportionality in Electronic Discovery, Principle 4 (2017). Courts will look to parties to substantiate their burden and expense claims with search results and quantitative metrics. “Quantitative metrics in support of burden and expense argument may include the projected volume of potentially responsive documents. It may also encompass the costs associated with processing, performing data analytics and review, taking into consideration the anticipated rate of review and reviewer costs, based upon reasonable fees.” Id. 

“The Parties may begin discovery without a full appreciation of the factors that bear on proportionality.” See Fed. R. Civ. P. 26 advisory committee note. However, as the costs of discovery become apparent, parties should be willing to reevaluate their positions. In Oxbow, plaintiffs initially argued production of the CEO’s documents “would be unduly burdensome and disproportionate” to the benefit of the documents. Plaintiffs did not change that position even when sample analysis appeared to show otherwise. They refused to renegotiate search terms or share the data from the analysis. As a result, the court found that there was no undue burden on Plaintiffs to conduct the additional discovery and ordered them to produce all the responsive documents, without the benefit of renegotiating search terms to further cull the documents needing review, and to bear all of the associated costs.

#3 Cooperate, Cooperate, Cooperate.

Oxbow illustrates a theme that cannot be emphasized enough…cooperation. Parties should cooperate and consider proportionality from the inception to completion of discovery. “The parties and the court have a collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.” See Fed. R. Civ. P. 26 advisory committee note. “Under the Court’s reading, the revised rule places a shared responsibility on all parties to consider the factors bearing on proportionality before propounding discovery requests, issuing responses and objections, or raising discovery disputes before the courts.” See Salazar v. McDonald’s Corp., No. 14-02096-RS(MEJ), 2016 WL 736213 (N.D. Cal February 25, 2016).  One court noted “Effective advocacy is consistent with–and indeed depends upon–cooperative and proportional use of procedure.”  See Solo v. United States Parcel Serv. Co., No. 14-12719, 2017 U.S. Dist. LEXIS 3275 (E.D. Mich. January 10, 2017).

In Oxbow, the court held the motion in abeyance giving the parties time to run sample analysis and provide proportionate counterproposals. The plaintiffs’ defiance of the court’s desire and opportunity for cooperation was costly and supports the notion that parties must be willing to cooperate and make adjustments throughout discovery.

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