Cost-Shifting Discovery and Third-Parties

e-Discovery, Electronically Stored Information

There are different standards for cost-shifting when the producing party is not a party in the lawsuit.  EEOC v. Kronos Inc., 2011 U.S. Dist. LEXIS 47350, 3-4 (W.D. Pa. May 3, 2011).

EEOC v. Kronos Inc., involved the EEOC seeking discovery from a nonparty with a production estimate of $75,000.  Kronos Inc., at *6.

The production of electronically stored information from third-parties is controlled by Federal Rule of Civil Procedure Rule 45(d)(1)(D).  As prior case authority on the production from third-parties states:

Although party witnesses must generally bear the burden of discovery costs, the rationale for the general rule is inapplicable where the discovery demands are made on nonparties. Nonparty witnesses are powerless to control the scope of litigation and discovery, and should not be forced to subsidize an unreasonable share of the costs of a litigation to which they are not a party. Although we decline to curtail district courts’ discretion over the discovery process by adopting the formal guidelines favoring nonparty reimbursement advocated by the studios, we nevertheless emphasize that a witness’s nonparty status is an important factor to be considered in determining whether to allocate discovery costs on the demanding or producing party.

EEOC v. Kronos Inc., at *3-4, citing United States v. CBS, 666 F.2d 364, 371-72 (9th Cir. 1982)

The Court ultimately found the requesting party and producing nonparty would split the costs 50%-50%.  Kronos Inc., at *6.

The Court based its decision on the “magnitude” of the discovery ordered for production and cost estimate.  Kronos Inc., at *6. The Court’s logic was that the nonparty should not bear the significant production costs alone.  Id.

In the words of the Court, “[T]he Court finds that a 50/50 cost share is fair and equitable, and would lessen the burden on non-party Kronos.” Kronos Inc., at *6.

Bow Tie Thoughts

There was an old joke in law school: It all boils down to equity.

In this case, the Court recognized the EEOC’s need for the electronically stored information and the nonparty’s financial burden in producing $75,000 worth of discovery