Facts: DeGeer involved a compensation dispute between partners for failure to abide by the terms of a partnership agreement. Huron, a third party, produced 40,000 documents of electronically stored information pursuant to subpoena at a cost of over $130,000. Defendants maintained that there were additional documents responsive to the subpoena request. Huron contended that the defendants should pay for any additional expense incurred in responding to the subpoena.

e-Discovery Issue: When will the court shift costs in a third-party electronic discovery dispute?

Law: The court applied a three-factor test to weigh the equities and also looked to the Sedona Principles for guidance. The court asked: 1) whether the non-party has an interest in the outcome of the case; 2) whether the non-party can more readily bear its costs than the requesting party; and 3) whether the litigation is of public importance. Also, the Sedona Commentary provided the following factors: (1) the scope of the request; (2) the invasiveness of the request; (3) the need to separate privileged materials; (4) the non-party’s interest in the litigation; (5) the relative resources of the party versus non-party; (6) the reasonableness of the costs sought; and (7) the public importance of the litigation.

Holding: The court found that some cost shifting was appropriate, citing the parties’ lack of cooperation as a controlling factor. The parties did not approach the dispute with “a spirit of cooperation or efficiency” and never engaged in a meaningful discussion early in the case about search terms or data custodians. It ordered the parties to share the costs, with one exception — Huron’s former CEO. The former CEO had a practice of immediately deleting emails to avoid future discovery. Huron had to bear the cost of this search itself.

Takeway Points: Parties should engage in a meaningful discussion of specific search terms and data custodians early in the case, and engage in an open and transparent discovery process. The party holding the information is in the best position to propose data custodians and specific search terms, and should take the lead. It should be upfront about its proposals and receptive to the opposing party’s input. Employees should be counseled not to delete emails to avoid discovery as it does not permanently delete the email and will likely just increase the client’s burden in discovery should litigation arise.

Access the full opinion here.