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Are E-Discovery Sanctions More Fear Than Reality?

By Gina Passarella
August 22, 2011
The Legal Intelligencer

Are E-Discovery Sanctions More Fear Than Reality?

By Gina Passarella
August 22, 2011
The Legal Intelligencer

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One gigabyte of electronic information is about equal to 9,000 e-mails with 3,000 attachments or 75,000 printed pages. A fast-moving associate can review about 200 pages an hour. Now comes a case with an exabyte of data, or 1 billion gigabytes.

Task: preserve, collect, review, and produce the relevant data from that stockpile in a timely, cost-efficient way while still being responsive to the opposing party and avoiding any sanctionable conduct for the client or the attorney.

The above scenario makes it easy to see why e-discovery is such a daunting, intimidating task for lawyers who are fearful of the cost of failing at any one of those steps. But despite attention-grabbing headlines where jail is threatened as a sanction for e-discovery violations or attorneys are on the hook for millions of dollars in sanctions, the threat of sanctions is actually pretty low, many e-discovery lawyers say. The trick is knowing how the court and judge in a case have come down before and what rules or standards apply in each jurisdiction. With e-discovery case law entering its teen years and rules varying widely across federal and state courts, that too can be a daunting task. . . .

LDiscovery's Leonard Deutchman, a contributor to The Legal Intelligencer, said judges should probably use sanctions more frequently to send a message not just to litigants in a specific case, but as a deterrent for other parties who may go before the court. At some point, he said, the sanctions won't be needed as frequently.

Sandra JeskieDuane Morris' Sandra Jeskie said clients have to make sure their own house is clean before seeking sanctions against the opposing party. She said a lot of parties are seeking monetary and adverse inference sanctions, but courts are "appropriately reluctant" to deal with those things.

With both the attorney and the client at risk of sanctions, there needs to be a strong working relationship so that the client knows the attorney has an obligation to participate in the preservation and collection process, she said. . . .

Cost-Sharing and Taxing of Costs

Federal rules provide for cost-sharing and cost-shifting of e-discovery costs in an effort to balance the asymmetrical cases in which plaintiffs have no documents to hand over but can ask the defense for seemingly unlimited amounts of information. The problem, defense lawyers would say, is that these provisions are rarely granted when requested. . . .

One issue that has lawyers' attention in Pennsylvania involves two cases that forced the losing parties to pay e-discovery costs and that cost was taxed wholly outside of any e-discovery rules.

In May, U.S. District Court Judge Terrence F. McVerry of the Western District of Pennsylvania taxed the losing plaintiffs in Race Tires America Inc. v. Hoosier Racing Tire Corp. $367,000 in discovery costs. The order was done under the 2008 amendments to Section 1920(4) of the Federal Rules changing the words "fees for exemplifications and copies of papers" to "fees for exemplification and the costs of making copies of any materials."

McVerry found Race Tires aggressively pursued discovery by making 273 discovery requests, including 119 separate requests for documents.

Earlier this month, the clerk for the Eastern District of Pennsylvania taxed the losing plaintiffs in In re Aspartame Antitrust Litigation $576,000 in e-discovery costs.

Neither case included costs for the work done by attorneys or paralegals to review the requested electronic data, but rather simply the costs of copying. The cases found that the work of outside vendors to collect and house the data, however, was taxable.

"The cases are telling the plaintiffs's bar that asking for the world of e-discovery may come back and bite you," Deutchman said. "E-discovery is going to be taxable. That's the future." . . .

Jeskie said the rulings should force clients to start thinking about how much e-discovery they want to request.

"It certainly ups the ante of filing a case and ensuring you have done the appropriate due diligence," she said. "You certainly don't want to lose the case and have hundreds of thousands of costs assessed."

Reprinted with permission from The Legal Intelligencer, © ALM Media Properties LLC. All rights reserved.