By Michael J. Faris and Cameron R. Krieger, Latham & Watkins LLP
In a decision that could mark a significant shift in the allocation of costs and risk in high-stakes class actions, Judge Baylson of the U.S. District Court for the Eastern District of Pennsylvania recently ordered plaintiffs' counsel in a putative class action to pay for extensive discovery that plaintiff said it needed in anticipation of a hearing on whether a class could be certified.
As Judge Baylson summarized in Boeynaems v. LA Fitness Int'l LLC (Boeynaems)1:
Where (1) class certification is pending, and (2) the plaintiffs have asked for very extensive discovery, compliance with which will be very expensive, absent compelling equitable circumstances to the contrary, the plaintiffs should pay for the discovery they seek.2
Although the Boeynaems court treated the case as one of first impression, it was not issued in a vacuum. Cost-shifting has been addressed by many courts in the past. Most of these courts, however, have addressed the question after a class has been certified, and most have based their decisions on the inquiry whether the data at issue is reasonably inaccessible.3 In 2008, however, a case out of the Northern District of Ohio under similar circumstances prefigured the Boeynaems approach.4 In Schweinfurth v. Motorola, Inc. (Schweinfurth)—another putative class action addressing the allocation of costs incurred by the defendant in pre-certification class discovery—the court required plaintiffs' counsel to pay 50 percent of the cost of document production without addressing the accessibility issue, but instead focusing on the “sheer size and scope of discovery,” as well as its concern that discovery “could be used as a weapon to compel settlement.”
It is too early to tell the extent to which other courts will follow the Boeynaems/Schweinfurth approach to cost-shifting in the class action context, but both plaintiff and defense counsel will be watching closely to determine whether they represent the beginning of a trend.
In cost-shifting cases, courts have typically made a preliminary determination as to whether the data at issue can be considered “reasonably accessible.” If it is inaccessible, cost-shifting can be considered.5 If it is accessible, cost-shifting cannot be considered.6 Courts focus on this requirement from Zubulake v. UBS Warburg LLC despite the fact that Federal Rule of Civil Procedure 26(c) gives federal courts discretion to condition discovery on certain terms, including the apportionment of costs.7 As the oft-cited Sedona Principles express the inquiry:
Absent a specific objection, party agreement or court order, the reasonable costs of retrieving and reviewing electronically stored information should be borne by the responding party, unless the information sought is not reasonably available to the responding party in the ordinary course of business. If the information sought is not reasonably available to the responding party in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information may be shared or shifted to the requesting party.8
Judge Baylson went on to provide defense counsel with a nice judicial soundbite that echoes a common defense argument: “If Plaintiffs' counsel has confidence in the merits of its case, they should not object to making an investment in the cost of securing documents from Defendant and sharing costs with Defendant.” He supported this approach by noting that, if the class were certified and if a settlement were reached, those costs would be returned to plaintiffs' counsel as part of the settlement disbursement.
Judge Baylson stopped short, however, of articulating a rule that automatically shifts the costs of pre-class certification discovery to plaintiffs. While defense counsel will focus on the portions of the decision that emphasize the need to level the playing field in asymmetrical discovery situations, plaintiffs will undoubtedly argue that Boeynaems should be limited to the narrow facts of the case.
In Boeynaems, the court had previously ordered discovery to proceed simultaneously on issues related to class certification as well as issues related to the merits of the case if those issues bore on certification. The parties were unable to agree on the scope and burden of the requested discovery and the issue ended up before the judge again. So at the point that Judge Baylson was addressing the cost-shifting issue, the defendant had already produced a substantial number of documents at its own expense.
There are indications in the opinion that the court felt it was time for plaintiffs to share the burden: “Plaintiffs need to assess the value of additional discovery for their class action motion. … Plaintiffs should pay for that additional discovery from this date forward, at least until the class action determination is made.” The court gave no hint as to whether the result would have been different if defendants had not already provided substantial discovery before the issue of cost-shifting was addressed, or at what point a plaintiff should be expected to pitch in.
While it is too early to answer this question definitively, certainly the opinions provide fodder for future courts that may see the equities tipping in favor of plaintiffs' counsel bearing some of the burden of class action discovery in the pre-certification phase.
Boeynaems leaves other questions unanswered as well, particularly in terms of what costs exactly would be covered. The order references the defendant's “internal costs,” and specifies that those costs may include “appropriately allocated salaries” of people employed by the defendant who had to participate in gathering and producing the requested information. It does not, however, clearly include costs paid to hire an ediscovery vendor, for example, or the expense of outside counsel to review documents.10
Even with these limitations, however, the Boeynaems opinion in particular represents a fascinating development—particularly for class action defense counsel—looking for ways to limit the cost to their clients of complying with often onerous discovery requests prior to class certification.
By focusing on the asymmetry of class discovery as well as the economic realities of certification of a class, such cases provide added impetus to the argument that the costs of class certification fishing expeditions should, in the right circumstances, be borne by plaintiffs' counsel rather than by perceived deep-pocket defendants.
Michael J. Faris is a partner in the Chicago office of Latham & Watkins LLP. He has extensive experience in complex litigation matters, with a focus on securities and professional liability litigation, and can be reached at firstname.lastname@example.org.
Cameron R. Krieger is an eDiscovery Services Attorney in the Chicago office of Latham & Watkins. She previously practiced litigation for eight years, focusing on class actions, and can be contacted at email@example.com.
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