#CaseoftheWeek Episode 92: The High Bar of Avoiding Paying Costs When You Lose a Motion to Compel

Our last Case of the Week episode of 2022 is a short one but one that we hope will leave you with thinking how you can to be more proactive in meeting discovery requirements. In episode 92, we’ll discuss whether Rule 37 requires bad faith to allow for cost recovery by a party who prevails on a motion to compel. 

Keep reading or watch the video to understand the eDiscovery issues.

Introduction

Hi, and welcome to Episode 92 of our Case of the Week series published in partnership with ACEDS. This is our final episode for 2022. Crazy to think how fast this year went.

My name is Kelly Twigger. I am the CEO and founder of eDiscovery Assistant, as well as the principal at ESI Attorneys. I’m very happy to be here with you today. Thank you so much for joining me.

Okay, events coming up in our space. I’ve sent this link out to you previously, but registration for the University of Florida [Levin College of Law} eDiscovery Conference is now live.

The conference is open for registration both in person, which is for a limited number of people (about 150 in Gainesville on US campus) and then also virtual registration is free. In the past, we’ve had a lot of folks who have gotten together in their offices or had parties with their ACEDS or Women in eDiscovery (WiE) Chapters or other organizations to be able to view the conference. So please get registered to sign up and put together your event viewing parties.

Background

Let’s dive into this week’s decision. This week’s decision comes to us from Mares v. Geo Grp., Inc. This is a very recent decision from December 8th of 2022 by United States Magistrate Judge John Robbenhaar. This is a very short Case of the Week session, but it’s a really important one that builds on our theme of whether or not there is useful expenditure in motion practice in discovery.

This decision raises the question of whether bad faith is required for a party to have to pay costs when it loses on a motion to compel under Rule 37 of the Federal Rules of Civil Procedure. As we are going to see, the Court answers this question with a very resounding no. That lends further credence to the theme that I just mentioned, which is that motion practice is making much of discovery of ESI more expensive than it needs to be.

Now, Judge Robbenhaar has nine decisions in our eDiscovery Assistant database. He’s well-versed in writing about decisions related to the discovery of electronically stored information. As always, we tag each decision with appropriate issues in our eDiscovery Assistant database. This week’s decision includes tags for sanctions, possession, custody and control, bad faith, cost recovery, cost shifting, and failure to produce.

Facts of the case are pretty simple. We are before the Court on a motion by the plaintiff to recover costs following the grant of a motion to compel against the defendant. The defendants are challenging the request for costs by arguing that they have not acted in bad faith and therefore should not have to pay the costs.

Court’s Analysis

That takes us straight into the Court’s analysis here. The Court’s discussion here is an excellent roadmap for you to consider when arguing about, and I’m talking internally, about whether failing to comply with your discovery obligations at all or in a timely manner is going to be the most cost-effective and best strategic solution.

Couple of instances of note in that language. The language is the court “must.” It’s not the court “can.” It’s not the court may, as it is in other rules, it is the court must.

There are three exceptions to Rule 37 (a)(5)(a), none of which apply here, but they are:

1. The movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action (i.e., was there a meet and confer process);
2. The opposing party’s non-disclosure response or objection was substantially justified; or
3. Other circumstances make an award of expenses unjust.

The Court looks at each one of these exceptions. As to the first, whether or not the parties engaged in a meet and confer, the Court says, “yes, they absolutely did.” There’s a substantial record of the plaintiffs trying to engage in a meet and confer with the defendants and defendants changing their position. So that exception does not apply.

Second, the Court also disagrees that the defendant’s position in failing to respond was justified. The defendant had argued that the documents sought were not in its custody or control, but it had also issued several third-party subpoenas in an effort to respond to plaintiff’s discovery requests. The Court didn’t understand why it could not have sent a third-party subpoena to this subsequent third party where they needed to obtain documents from, which was the New Mexico Department of Corrections. As such, the court found that that was not substantially justified.

Now, this particular exception and the Court’s discussion in this exception is a place where I want you to pay particular attention because this is one where if you were conducting this analysis sitting at your desk as to whether or not you had a substantially justifiable position not to respond, you might think that it would be justified. There are some takeaways here. That’s what I want you to pay attention to when it comes to this case. First, the fact that this party was providing documents that were not originally in its custody or control was very much undercut by the fact that it had submitted third-party subpoenas to get documents to respond to plaintiff’s request to other third parties but left one out.

The actions that this party took essentially negated its argument of possession, custody, or control in this situation as a substantially justifiable reason for not responding. Second, on that same issue, the Court also found that the party knew what they needed to do to be able to respond and essentially elected not to do it by not sending a subpoena to the New Mexico Department of Corrections.

The defendant also argued here that information sought about prior claims was publicly available information. While normally that can be a viable objection to producing information, here the Court notes that there was relative ease with which the defendants could access and provide the information, and that undercut their argument and any substantial justification for not providing it.

In the situation where information is publicly available, if it’s something that is easier for the party producing the information to provide than it is for the other side to obtain, as in this instance, the Court held that that was not a substantial justification for not providing it. That, again, is different than what we would normally expect to see in discovery.

Finally, on the substantial justification issue, the Court found that the defendant’s position that they are continuing to supplement and that the search was ongoing was insufficient given the timeline of events that included several extensions to respond, as well as the protracted process and failure to obtain the documents from the presumed custodian.

This particular point looks like it took the defendants a long time to figure out where the documents were and who had them and were likely not transparent with plaintiffs about their efforts to be able to uncover where the documents existed and what their efforts were to go and get them. That’s going to be another point in our takeaways as talking about transparency. That’s the second exception in which the Court determined that the defendant’s position was not substantially justifiable.

The final exception, the third exception, is whether or not an award of expenses is unjust. The Court here refuted any notion that an award of fees turns on whether a party has acted in good faith. As I mentioned at the outset, the defendants argued that they had not acted in bad faith and as such should not be required to pay expenses. Here’s the quote from the Court:

Indeed, or instead, the mandatory fee-shifting language of Rule 37 is designed to alter the standard American rule. Rule 37 is designed to shift the cost of litigating a discovery dispute to the party who loses that dispute. A finding of bad faith is not necessary or appropriate when granting a request for fees under Rule 37. Here, defendants lost the discovery dispute and point to no circumstances that would make the fee shifting rule the rule contemplates unjust.

Based on all of that, the Court ordered the plaintiff to file an affidavit as to its reasonable costs and expenses, but also encouraged the parties to come to a resolution of what would be a reasonable fee amount and submit it to the court for ruling.

Takeaways

What are our takeaways from this quick decision on a motion for costs under Rule 37?

These are going to be really important, and I’m hoping that you can look at these and adopt some of these as you engage in your practices within your various organizations moving into 2023.

Get more proactive in meeting your discovery requirements and be more transparent to avoid costly motion practice. Here, it took months for the defendants to identify who had documents and to be upfront about the challenges in getting them.

More and more, we’re seeing that with cloud-based services that we’re using and that clients are using, it’s really difficult to go and get this information. We’re seeing a lot more obligations on the part of parties to go and acquire information from third parties who are under their control, but for which we don’t actually have physical custody of the documents, so requires us to go out either on an agency relationship or on some other relationship and provide that information.

You need to be thinking about that very early on with regard to third parties and get started on that discovery very quickly. You won’t have the ability to hide behind anything other than a motion to compel and cost being awarded on it if you failed to respond. And that’s what this decision is telling us.

Plaintiffs here did their job. They sent the discovery, they followed up with their demand letters, they documented the extensions and how the defendant story changed as to whether they were getting documents, where they were getting documents from, when they would get documents. That really was what was telling for the court here. The more transparent the defendants could have been about what was happening here, the less likely they would have been to face a motion to compel.

Now, clearly, I’m Monday morning quarterbacking. That’s what we do on Case of the Week is try to look at these decisions and provide some practical takeaways for you. But give serious thought to the fact that if you are going to take a position that you’re not providing discovery under Rule 26, you will face a motion to compel under Rule 37, and if you lose, you will pay costs.

The question becomes, is that the best use of your client’s time and money at this point? It’s expensive for both sides. It takes up valuable time that could be spent on the litigation, and I think that no one would ever argue they have more time to spend on a case than they want.

This case clearly articulates, as if the language of Rule 37 were not enough to do so, that recovery of costs is going to happen unless you meet one of those exceptions. The language in the opinion, together with Rule 37 here, makes that a very high bar. That’s our takeaway for this week.

Conclusion

That is our Case of the Week for this week. A huge thank you to each one of you who has joined me this year on Case of the Week series. We’ll be back next year to start 2023 with another decision from our eDiscovery Assistant database.

From our entire team at eDiscovery Assistant and ESI Attorneys, we wish you a joyous, relaxing, and happy holiday season. Thanks so much. We’ll see you next year.

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