On February 28, 2012, the Appellate Division, First Department, issued its decision in U.S. Bank N.A. v. GreenPoint Mortgage Funding, Inc., 2012 N.Y. App.Div. LEXIS 1487, which adopted the standards established in the SDNY's 2003 landmark decision in Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (SDNY 2003). In its decsion, he First Department held that the party producing electronically stored information ("ESI") bears the the burden of paying for the production. This unanimous decision represents a reversal of several New York trial court rulings holding that the party requesting disclosure had the obligation to pay for its production.
As is often the case, interesting appellate decisions can be the product of discovery disputes that have a high chutzpah quotient. Here, not only did GreenPoint seek to have plaintiff pay for its ESI production, it went a step further in demanding that plaintiff pay for the cost of GreenPoint's attorneys' pre-production time in performing a pre-production privilege review. Would this appeal have been filed if attorneys' fees had not been in the mix?
Several weeks ago, I reported here about the First Department's adoption (in Voom H.D. Holdings) of Zubulake's standards for addressing the spoliation of ESI evidence. In U.S. Bank N.A. v. GreenPoint Mortgage Funding, Inc., the court has turned to Zubulake yet again, in the absence of any guidance in the CPLR concerning ESI disclosure cost allocation. Although it is unclear whether the other New York appellate departments will similarly embrace Zubulake, the decision harmonizes state and federal discovery practice in Manhattan courts, if not upstate.
Therefore, it is all the more important for the practitioner to appreciate that Zubulake's cost allocation mandate is by no means absolute. Under Zubulake, the producing party must only bear "the initial cost of searching for, retrieving and producing discovery". The decisions sets forth seven factors for courts to consider in evaluating whether to shift all or part of the cost of ESI production back to the requesting party. For example, costs may be shifted back to the requesting party if: (1) the request is not tailored to discover relevant information; (2) the discovery can be obtained from other sources; (3) the cost of production as compared to the amount in controversy; (4) the cost of production, compared to the resources available to the parties; (5) the relative ability of each party to control costs and their incentive to do so; (6) the importance of the stakes in the litigation; and (7) the relative benefit to the parties of obtaining the information at tissue.
We should expect that state court practitioners, seeking to avoid having their clients bear the costs of ESI production alone, will shortly be committing these seven factors to memory.