Following Comments on Cost Allocation, Court Orders Parties to Split Some Costs and that Plaintiff Post Bond to Receive other Requested Discovery

Lubber Inc. v. Optari, LLC, No. 3:11-0042, 2012 WL 899631 (M.D. Tenn. Mar. 15, 2012)

In this case, the court considered defendants’ motion for a protective order to restrict the relevant time frame for additional electronic searches and plaintiff’s motion to compel discovery in nine categories.  Upon consideration of the issues, the court denied defendants’ motion, but ordered the parties to split the expenses related to material not already produced.  Regarding plaintiff’s motion to compel, the court indicated its concern that “Plaintiff will be able to win on these issues” and therefore required that plaintiff post a $10,000 bond, intended to “allow the Plaintiff to secure this information if they wish to pursue this discovery, while at the same time offering some protection to the Defendants should they prevail.”

In this highly contentious case involving a “great deal of tit-for-tat” between parties who “themselves do not like each other” and counsel that, “in some cases,” threw “gasoline on the fire,” defendants sought a protective order “that they not be obligated to conduct an electronic search for electronically-stored information on Plaintiff’s claims other than from the period of October 4, 2010, until February 8, 2011, or in the alternative, that the Plaintiff be required to pay for all of the Defendants’ costs in connection with such discovery.”  Defendants’ arguments relied on a prior settlement between the parties and on comments made by the President of Lubber, Inc., both of which arguably limited the timeframe for recovery.  Defendants further indicated that the costs for the additional searching could “run at least $10,000 and produce gigabytes of ESI material.”

Before deciding the issue, the court noted that Rule 26(b)(2)(C)(iii) "gives the Court a great deal of latitude in controlling discovery" and offered its comments on cost allocation:

One of the concerns of discovery is the allocation of costs.  In general, costs are borne by the producing party.  While this works in the vast majority of cases, the requesting parties have little incentive not to ask for everything possible.  This leads to interrogatories and requests for production that are expressed in the broadest possible terms.

It is the Magistrate Judge’s experience and the view of a number of economists who have studied this issue that where the requesting party bears a part of the cost of producing what they request, the amount of material requested drops significantly.  When a party has to contemplate whether the last possible bit of information will cost them more than it is worth, they quit asking for items of marginal relevance.  As long as requesting the last bit of information costs them nothing they have little, if any, incentive not to request it.  Even if they choose never to look at it, they have put the opposing party to the cost of production.  In some cases discovery becomes a tool with which to bludgeon the other side into submission.  The Magistrate Judge believes that both sides are doing that in this case.

Ultimately, “in an effort to cut this Gordian knot,” the court denied defendants’ motion and ordered each party to bear one-half of the expenses associated with materials not already produced.  In so deciding, the court noted defendants’ own willingness to request information outside of the date restrictions they sought to enforce.

Turning to the plaintiff’s motion to compel, the court determined that plaintiff made a sufficient showing of relevancy but indicated its concerns regarding plaintiff’s ability to win on the issues before it in light of an underlying separation agreement which had not been rescinded.  Accordingly, the court ordered plaintiff to post a bond to receive the requested discovery:

Because of the separation agreement, which has not been rescinded, the Magistrate Judge does have concerns that the Plaintiff will be able to win on these issues and, therefore, the costs to the Defendants in producing this material is a consideration.  If the separation agreement is valid, the Plaintiff may well be responsible for costs to the Defendant in seeking this information.  The Magistrate Judge believes that the Plaintiff, in order to secure this information, should post a bond in a reasonable amount, which the Magistrate Judge believes would be $10,000, for costs to the Defendant of producing the information they seek prior to August 30th.  The claims, counterclaims, defenses, and credibility issues do open up the need for discovery prior to August 30th.

The court further commented that “the issue is so close that the Magistrate Judge believes that a bond is necessary to protect the Defendants from producing material which, in the end, may be protected under the separation agreement,” and also reasoned that the bond would “allow the Plaintiff to secure this information if they wish to pursue this discovery, while offering some protection to the Defendants should they prevail.”

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