Egads! Cost is No Object for Complete E-Discovery

Thanks to Ralph Losey for pointing out a potential outrageous decision from the DC Circuit of the Court of Appeals, In Re Fannie Mae Securities Litigation, 2009 WL 21538 (CADC, Jan. 6, 2009) in which the Office of Federal Housing Enterprise Oversight -- a third party to the litigation -- was required to spend more than $6 million, an amount equal to nine percent of its annual budget, to respond to an electronic discovery request by affirming the district court's contempt citation. In part, it appears that the court's rationale was that OFHEO undertook the work without objection and thus was stuck with the consequences of its own decision. Neither the cost of the project nor the fact that OFHEO was a third party seemed of much importance to the court.

Early in the e-discovery era (a couple of years ago on the pages of this history book), I came across an employment discrimination case in which a municipality was ordered by a district court to spend $100,000 to comply with an e-discovery request. Ironically, the maxium amount in dispute in that lawsuit was $100,000.

These two examples collectively demonstrate a process out of control. Embedded in the Federal Rules amendments was a concept of proprotionality, a concept articulated in the "not-reasonably accessible" provisions of Rule 26. That concept seems lost on most courts, however. A failure to carryout thorough and expensive searches for electronic discovery or to implement "best practice" methods for retrieval and production could result in sanctions. It is like walking through a minefield without a map. You don't know which mistake you make is going to explode in your face; you only know for sure that the risk of making a mistake is substantial.

If e-discovery is not to destroy the system it is meant to serve, courts must be more sensitive to the need to balance cost against the value derived.