Who Pays for E-Discovery in New York? 'It Depends'

Given the significant costs associated with e-discovery, litigants appropriately ask their counsel one important question: "Who pays for what?" As the state of New York law on this issue remains unclear, the answer is, "It depends."

Three decisions from the Appellate Division, 1st Department, as well as recent decisions from the Commercial Division highlight the need for clearer guidance in this area.

The 2006 1st Department decision in Waltzer v. Tradescape & Co., LLC,[FOOTNOTE 1] stated what many have long believed was the rule in New York: that the party "seeking" discovery bears the cost of its production. It further noted that such a "general rule" would apply to situations where, for instance, the discovery demand sought the "retrieval" of "deleted" electronically stored information, but counterposed such "general rule" with an example of where the "cost of copying and giving"[FOOTNOTE 2] ESI to the opposing side "would have been inconsequential."[FOOTNOTE 3]

The court held that where, as in Waltzer, ESI was "readily available," the costs of production are to be borne by the producing party. The court further noted that "the cost of an examination ... to see if [ESI] should not be produced due to privilege or on relevancy grounds should be borne by [the producing party]."

The 1st Department's 2009 decision in Clarendon Nat. Ins. Co. v. Atlantic Risk Mgmt. Inc.,[FOOTNOTE 4] citing Waltzer, then held that "we see no reason to deviate from the general rule that, during the course of the action, each party should bear the expenses it incurs in responding to discovery requests."

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Source: law.com
By: Mark A. Bearman