First Financial Bank v. Bauknecht: Creative Cost-Shifting in Discovery of ESI

by Reed Smith

On July 23, 2013, United States Magistrate Judge Byron Cudmore granted in part and denied in part plaintiff’s motion to compel in First Financial Bank v. Bauknecht, an action based on alleged wrongful conduct by Scott Bauknecht as he quit his employment with First Financial Bank, N.A. ("First Financial") and went to work for defendant State Bank of Graymont ("Graymont"). First Financial Bank, N.A. v. Bauknecht, Civil Action No. 12-cv-1509 (C.D. Ill. July 23, 2013). In deciding the motion to compel, the court addressed not only the number of custodians whose email must be searched and the type of searches to be conducted, but also which party must pay for those searches. First Financial, July 23, 2013 Opinion, 7-10. The court engaged in creative cost-shifting and reallocated the costs of certain searches to provide some relief to the producing party. See id.

Magistrate Judge Cudmore recognized that courts have discretion to allocate the costs of discovery of electronically stored information ("ESI") between the parties. Id. at 4. The court advised that, in determining whether to reallocate costs, it would consider: (1) the likelihood of discovering critical information; (2) the availability of such information from other sources; (3) the amount in controversy as compared with the total cost of production; (4) the parties’ resources as compared with the total cost of production; (5) the relative ability of each party to control costs and its incentive to do so; (6) the importance of the issues at stake in the litigation; (7) the importance of the requested discovery in resolving the issues at stake in the litigation; and (8) the relative benefits to the parties of obtaining the information. Id. (citing Wiginton v. CB Richard Ellis, Inc., 229 F.R.D. 568, 573 (N.D. Ill. 2004).

During discovery, plaintiff First Financial and defendant Graymont met and conferred to attempt to resolve production issues regarding the scope of emails to be searched and produced by Graymont, and the procedures for producing ESI. Id. at 2. The meet-and-confer sessions failed, however, and First Financial moved to compel the production of, inter alia, emails between defendant Bauknecht and Graymont employees concerning Bauknecht’s employment, and emails among Graymont employees regarding Bauknecht’s recruitment and hiring. Id. at 5. First Financial requested that Graymont search for responsive emails by using two separate searches – one keyword search and one sender/recipient search. Id. at 5-6. In addition, First Financial moved to compel Graymont to search all of its email accounts, not just the email accounts of the key players referenced in Graymont’s initial disclosures. Id. at 6.

Graymont objected to conducting searches both with keywords and by sender/recipient, arguing that the two different types of searches would be overly burdensome. Id. Moreover, Graymont’s computer consulting expert argued that a sender/recipient search was unorthodox and expensive, and would interfere with Graymont’s operations. Id. at 7. Graymont also objected to conducting a search of all of its employees’ email accounts, instead proposing that it search only the email accounts of the four employees it listed on its initial disclosures. Id. at 6.

The court determined that it would require Graymont to conduct the keyword search, but it would not require Graymont to conduct the duplicative sender/recipient search unless First Financial agreed to pay for it. Id. at 7-8. In making this determination, the court considered the testimony of Graymont’s computer consulting expert and also reasoned that the sender/recipient search seemed duplicative since Graymont agreed to search the email address fields as part of its keyword search. Id. at 7. The court also concluded that the relevant factors weighed heavily in favor of shifting the cost of a separate sender/recipient search to First Financial, highlighting that the likelihood of uncovering additional relevant information was small, while the cost of conducting a separate duplicative search was high. Id.

With regard to First Financial’s request that Graymont search all of its employees’ email accounts, although the court granted this request, it was "concerned with the cost of searching all email accounts at Graymont." Id. at 8-9. The court recognized that some of the employees, like maintenance employees, would not likely have relevant emails. Id. at 9. But, the information sought by First Financial was discoverable and important to First Financial in the litigation. Id. After considering the eight factors to determine whether to reallocate costs, the court ordered that Graymont pay 75 percent of the costs to conduct the keyword search through all employees’ email accounts and that First Financial pay 25 percent of the costs. Id. at 10.

In support of this reallocation, the court stated that the "allocation of the costs recognizes that Graymont has the primary obligation to bear the cost of producing responsive documents, but provides some relief to Graymont for the cost of including all Graymont employees’ email accounts in the search when some of the employees are less likely to have relevant documents." Id.

The court’s decision underscores the need to consider and attempt to quantify the burden and costs of conducting searches through ESI. Courts have been more willing to consider cost-shifting as the burden of searching and producing ESI continues to rise, often disproportionately at the expense of parties with large amounts of ESI. In First Financial, the court weighed the burdens and costs of the discovery requested by First Financial against the likelihood of locating relevant information, and fashioned a creative solution to shift some of the costs to the requesting party.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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