Has Rule 11-c Made Nonparties’ Yoke Easy and Burden Light When It Comes to e-Discovery?

Farrell Fritz, P.C.
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As we have come to expect, the Commercial Division Advisory Council periodically makes recommendations to amend and/or supplement the Rules of the Commercial Division, many of which are eventually adopted following a solicitation process for public comment by the Office of Court Administration.

In 2015, as a host of new Commercial Division rules and amendments were being rolled out, the NYSBA Commercial and Federal Litigation Section sponsored several panels throughout the metro-area to discuss the impact of the new rules on the various county bar associations.  At the time, Commercial Division practitioners and judges alike were still figuring out how and under what circumstances the new rules – concerning, among other things, interrogatory limitations, categorical privilege logs, nonparty electronic discovery, and expert disclosure – would be applied in their cases.  It’s been a couple years, so let’s take a look at some recent decisions to see how some of these rules are being applied.

Manhattan Commercial Division Justice Shirley Werner Kornreich, whose thoughtful decisions are no strangers to this blog, has at least twice this year addressed Commercial Division Rule 11-c concerning nonparty electronic discovery.  Under Rule 11-c and the corresponding guidelines found in Appendix A to the Rules of the Commercial Division, “[t]he requesting party shall defray the nonparty’s reasonable production expenses” – including, for example, “fees charged by outside counsel and e-discovery consultants” and “costs incurred in connection with the identification, preservation, collection, processing, hosting, use of advanced analytical software applications and other technologies, review for relevance and privilege, preparation of a privilege log . . . , and production.”

Recently, in Gottwald v Sebert, Justice Kornreich addressed Rule 11-c in the context of a motion to compel production of documents by a nonparty public-relations firm hired by pop star, “Kesha” Sebert, in connection with her allegations of sexual assault, battery, and harassment against her former manager and producer, “Dr. Luke” Gottwald.  Justice Kornreich granted Dr. Luke’s motion, assessing any burden on the PR firm as “minimal,” given that “hit count caps can be used to keep costs reasonable”; that hit counts for the limited time period in which the firm was involved “should be minimal or nonexistent”; and that Dr. Luke “must reimburse [the firm] for the reasonable costs of . . . review[ing] documents for responsiveness to the subpoena, and log[ging] those that are purportedly privileged.”

Earlier this year, in Bank of NY v WMC Mtge., LLC, Justice Kornreich addressed Rule 11-c in the context of motions to quash nonparty subpoenas in a RMBS put-back case.  In denying the motions, Justice Kornreich similarly assessed the burden on the nonparties as “relatively minimal,” given that the defendant serving the subpoenas “will have to defray the [nonparties’] reasonable document collection, review, and production costs, including certain legal fees.”

Justice Kornreich also addressed Rule 11-b (b) concerning the “categorical” versus “document-by-document” approach to logging of privileged materials in Bank of N.Y. Mellon.  Under Rule 11-b (b) (1), specifically, the Commercial Division had expressed a “preference . . . for the parties to use categorical designations, where appropriate, to reduce the time and costs associated with preparing privilege logs.”  Referencing the parties’ prior meet-and-confer on the subject, Justice Kornreich ruled that “a categorical privilege log, in the first instance, will be employed for the sake of cost efficiency,” and that once the defendant serving the subpoenas “is made aware of the hit count totals associated with the [nonparties’] privilege designations,” it may then “elect . . . to pursue such purportedly privileged documents in light of the legal fees necessary to do so.”

Be sure to check back in a few weeks when we take a look at a couple more recent decisions applying some of these newer Commercial Division rules.  In the meantime, Commercial Division practitioners, particularly those on the receiving end of a nonparty subpoena seeking ESI, should be mindful that the rules defraying the costs of e-discovery appear to have minimized the effect of the commonly-asserted “unduly burdensome” objection.

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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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