Opinion
59662/2019
12-17-2020
Barbara ALLEN, as Attorney-in-Fact of Judith Allen, and Jose Dos Santos as Administrator of the Estate for Maria Dos Santos, Individually and on behalf of all others similarly situated, Plaintiffs, v. YERTLE OPERATIONS LLC d/b/a Fishkill Center for Rehabilitation and Nursing, Machla Abramczyk, Esther Farkovits, Richard Platschek, Robert Schuck, and Does 1-25, Defendants.
Plaintiffs are represented by Finkelstein, Blankinship, Frei-Pearson, & Garber, LLP, One North Broadway, Suite 900, White Plains, NY 10601, (914) 298-3284 Defendants are represented by Caitlin Robin and Associates, PLLC, 30 Broad Street, Suite 702, New York, NY 10004, (646) 524-6026
Plaintiffs are represented by Finkelstein, Blankinship, Frei-Pearson, & Garber, LLP, One North Broadway, Suite 900, White Plains, NY 10601, (914) 298-3284
Defendants are represented by Caitlin Robin and Associates, PLLC, 30 Broad Street, Suite 702, New York, NY 10004, (646) 524-6026
Joan B. Lefkowitz, J. Motion by defendants Yertle Operations LLC d/b/a Fishkill Center For Rehabilitation and Nursing, Machla Abramczyk, Esther Farkovits, and Richard Platschek seeking an order pursuant to CPLR § 3103(a) : (a) directing plaintiffs to bear the incurred and ongoing costs of collecting, processing, hosting, and producing electronically stored information (ESI) by defendants in complying with plaintiffs' discovery demands; and, (b) directing plaintiffs to bear the cost of photocopying, scanning, and producing records for potential class members in the event the proposed class is certified by the Court; and (c) for other and further relief as to this Court seems just and proper and for such other and further relief as this Court deems just and proper.
This motion is determined as follows:
Factual & Procedural History
This action sounding in negligence and violations of New York State Public Health Law 2801-d was commenced by the filing a summons and complaint on June 26, 2019 (NYSCEF Doc. No.1). Defendant Yertle Operations LLC d/b/a Fishkill Center for Rehabilitation and Nursing operates a nursing home facility (the "Facility") which was acquired by defendants on or about April 27, 2017. The individually named defendants are the Facility's owners. Among the allegations in the complaint is that upon the acquisition of the Facility staffing was reduced which has resulted in inadequate care to its residents. Defendants' answer was interposed on August 13, 2019 (NYSCEF Doc. #11).
On August 28 2019 plaintiffs served their First Request for Production (the "demand") which sought paper and ESI discovery. Defendants responded to that demand on February 11, 2020 (Defendants' Exhibit A). These responses reflected the parties' communications and efforts to limit the scope of the ESI discovery in an effort to reduce the number of custodians and refine the search terms (Defendants' Exhibit B). ESI was collected from 17 Facility custodians including 234 search terms (Defendants' Exhibit C).
The Parties' Contentions:
Here defendants seek to have plaintiffs bear the costs that defendants have incurred and will continue to incur concerning the production of ESI to respond to plaintiffs' discovery demands. Defendants also seek to have plaintiffs pay for the costs for photocopying, scanning, and producing documents for potential class members in the event the proposed class is certified by the Court.
In support of their motion, defendants state that in response to plaintiffs' demand they have produced 543,563 pages of documents and 10,482 native files, which does not include a more recent supplemental production concerning the individual owners' personal email accounts. In providing these responses, defendants retained Empire Discovery ("Empire") an e-discovery vendor to assist in the process of collecting, processing, hosting, and producing the discovery. Defendants also retained Fronteo an agency that supplied attorney document reviewers who reviewed the documents concerning issues of responsiveness and privilege. Defendants' counsel, Caitlin Robin & Associates, hired Korman Kim, Esq., an attorney with 13 years' experience in e-discovery to oversee the e-discovery in this and several other similar actions that Caitlin Robin & Associates is defending in Orange and Dutchess Counties.
In his affirmation, Kim explains the processes used to produce the ESI, including efforts taken to reduce the costs associated with the production of ESI, and an explanation of the line items appearing on the invoices for Empire and Fronteo.
Defendants state that to date they have paid Empire $437,354.16 for the collection, processing, hosting, and preparation of ESI discovery from February 2020 through July 2020, and Fronteo $101,332.35 for reviewing the discovery by attorneys to screen for privilege, responsiveness, and to prevent inadvertent disclosure of potentially confidential documents (Exhibit D). Defendants state that these amounts do not include time spent by facility staff members to copy, scan, and Bates-number the paper documents, or time spent by Kim in vetting training, and monitoring the Fronteo document reviewers to ensure accuracy and efficiency in document production.
Concerning the production of documents, defendants argue that the rule in the Appellate Division, Second Department is that the party seeking document discovery should pay the costs of their reproduction. A practice that defendants state is routinely followed in nursing home cases. Defendants state that the Facility, like many nursing homes, prepares and maintains residence care records in paper form in which case it is customary for the requesting parties to pay a reasonable per page duplication fee. Defendants contend that to date plaintiffs have not paid for any of the expenses incurred in defendants' production of nearly 550,000 pages of documents.
Concerning ESI, defendants, note the lack of decisional authority on the issue of cost allocation for e-discovery in the Second Department. They rely on several trial court decisions for the proposition that the requesting party should bear the costs of e-discovery.
T.A. Ahern Contractors Corp. v. Dormitory Authority , 24 Misc. 3d 416, 423, 875 N.Y.S.2d 862 (Sup. Ct., New York County 2009) ; Delta Financial Corp. v. Morrison, 13 Misc. 3d 604, 819 N.Y.S.2d 908 (Sup. Ct., Nassau County 2006) ; Lipco Electrical Corp. v. ASG Consulting Corp. , 4 Misc. 3d 1019(A), 2004 WL 1949062 (Sup. Ct., Nassau County 2004).
Alternatively, defendants argue that in the event this Court disagrees and finds that defendants are responsible for discovery costs, that it should apply the balancing of discretionary factors approach used by some courts for cost-shifting in the context of e-discovery. In this regard, defendants state that the Facility has a professional liability insurance policy with a policy limit for defense costs of $1,000,000. Pursuant to the terms of the policy, defendants state that any judgments or settlements will be reduced by the amounts incurred for defense costs. Defendants state that it has incurred costs of $538,000 in responding to the demands, not including the additional production of ESI from the personal email accounts of the individually named defendants. Defendants state that once the policy limit is exhausted, any additional attorneys' fees and defense costs will be borne by the Facility itself. Defendants contend that since the facility began operations in April 2017, it has operated at a net loss and that it does not have the financial resources to bear the incurred and ongoing costs associated with e-discovery, or with anticipated paper discovery related to class certification (Exhibit F).
These factors were formalized by Judge Scheindlin in Zubulake v. UBS Warburg, LLC , 217 F.R.D. 309 (S.D.N.Y. 2003) ("Zubulake I ") and Zubulake v. UBS Warburg, LLC , 216 F.R.D. 280 (S.D.N.Y. 2003) ("Zubulake III ") and thereafter adopted by U.S. Bank Nat. Ass'n v. GreenPoint Mortg. Funding, Inc. , 94 A.D.3d 58, 64, 939 N.Y.S.2d 395 (1st Dept. 2012) ; see Greenberg v. Spitzer , 63 Misc. 3d 554, 94 N.Y.S.3d 810 (Sup. Ct., Putnam County 2019). In cases where cost-shifting was deemed appropriate the Zubulake I court identified a seven-factor analysis including: "(1) The extent to which the request is specifically tailored to discover relevant information; (2) the availability of such information from other sources; (3) the total cost of production, compared to the amount in controversy; (4) the total cost of production compared to the resources available to each party; (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; and (7) the relative benefits to the parties of obtaining the information" (Zubulake I at 322 ).
In his affirmation, Kim states that the parties conferred to reduce the number of employee email accounts that would be subject to discovery and modified the search terms to reduce false positive results (Exhibits B, C). He states that ultimately the parties agreed that the accounts of 17 employees would be subject to discovery which required defendants, with the assistance of Empire, to review 53 email accounts on 72 computers, and a shared network drive. Kim states that the retrieved data was processed for the relevant time period and to remove duplications. Plaintiffs' modified search terms were then applied which yielded 530,864 documents that were uploaded to a workspace for hosting. Defendants then performed email threading yielding a final set of 306,302 documents which were identified for review. Of these documents, almost 52% were determined to be nonresponsive. Kim states that from March 2020-July 2020 Fronteo reviewed the responsive documents for privilege, confidentiality, and responsiveness. Kim asserts that the amount of time expended on review was reduced by the use of his time in implementing a streamlined review protocol. Kim states that the average expected cost for review is $1/document, but defendants' costs were approximately $.33/document. Kim states that the costs were further reduced because he took on the responsibilities of onsite management functions that otherwise would have been provided by Fronteo.
Plaintiffs argue that defendants' reliance on Lipco is outdated and that each party should bear its own expenses for responding to discovery. Plaintiffs contend that defendants have the burden of demonstrating why the costs of producing ESI should be shifted and that Zubulake I is the present standard for determining allocating costs in discovery, including document production, and searching for, retrieving, and producing ESI. Plaintiffs also argue that the cases cited by defendants do not concern ESI production. Plaintiffs state that under Zubulake I cost-shifting is only appropriate when the data is kept in an inaccessible format. Plaintiffs contend that it is only when the movant satisfies this initial prong, that the court should consider the seven Zubulake I criteria to determine whether cost-shifting is appropriate. Plaintiffs argue that defendants have not demonstrated that the requested materials are inaccessible and have failed to satisfy the first prong of Zubulake I .
Plaintiffs contend that even if defendants had satisfied the first part of the Zubulake I analysis, they have failed to demonstrate the applicability of any of the seven factors necessary to shift the burden of costs to plaintiffs. Plaintiffs argue that the fact that defendants are required to process the data is part of the normal burden of litigation that is to be borne by the producing party. Plaintiffs argue that they appropriately tailored their discovery requests seeking information that relates to the quality and deficiencies of care provided to the facility's residents. Plaintiffs argue that if defendants believed the requests were overly broad the appropriate response was to make a motion limiting those requests. Plaintiffs contend that the information they seek is within defendants' exclusive custody and control. Plaintiffs state that defendants have included costs other than those eligible for cost-shifting. They contend that defendants' costs are not disproportionate to the amount in controversy. Plaintiffs contend that while they have few financial resources, defendants have adequate resources to cover ESI discovery costs. Plaintiffs also contend that defendants have not substantially attempted to minimize costs associated with ESI production. Plaintiffs state that defendants did not solicit bids from ESI vendors to ensure competitive pricing. Plaintiffs argue that the issues of this action are of critical importance as they involve the rights of plaintiffs as well as future Facility residents. Lastly, plaintiffs contend that both parties will benefit from the production of the data since it will be beneficial to defendants on a motion for summary judgment.
Plaintiffs contend that their damages are $9,000,000.00-$39,600,000.00. The analysis used to arrive at these numbers assume class certification.
Plaintiffs contend that contrary to defendants' representations, defendants' insurance policy provides that the limit for "each medical incident" is $1,000,000, and the "aggregate limit" is $3,000,000. Plaintiffs assert that the policy will cover up to $3,000,000.000 in costs since the present action was brought individually and on behalf of a class of similarly situated nursing home patients. Plaintiffs contend that Defendants also have access to significant capital through the Facility itself and the Facility's owners, who plaintiffs contend are individually liable pursuant to PHL § 2808-a.
Plaintiffs also submit the affidavit of Alvin J. Flowers, Jr. who is a partner and Technology Director of Meta-E Discovery LLC. In his affidavit, Flowers states that he has twenty years' experience in information technology and litigation and has designed, supervised, and participated in the technical collection, processing, hosting, and production aspects of electronic discovery in hundreds of matters. Based on his review of the ESI protocol and the papers submitted in support of the motion, Flowers opines that there are several inadequacies in defendants' attempts to mitigate their costs in ESI production, including inflated pricing, irregularities in the e-discovery process, and inefficiencies in the review workflow design and vendor management.
In reply, defendants argue that Zubulake I is not binding precedent in the Second Department. Defendants argue that the majority of decisions from the trial courts in the Second Department still adhere to the presumption that the requesting party pays. Defendants cite Lipco Electrical Corp. v. ASG Consulting Corp. , 4 Misc. 3d 1019(A), 2004 WL 1949062 (Sup. Ct., Nassau County 2004), Etzion v. Etzion , 7 Misc. 3d 940, 796 N.Y.S.2d 844 (Sup. Ct., Nassau County 2005), and Matter of Maura , 17 Misc. 3d 237, 842 N.Y.S.2d 851 (Sur. Ct., Nassau County 2007) for the proposition that the seeking party should pay the costs of producing e-discovery. Defendants also cite Westchester Stone Co., Inc. v. Master Mason of N.Y. Inc . and most recently Greenberg v Spitzer for recognition by the courts that the issue of cost allocation in New York is still developing and the courts have not spoken on this issue "with one voice" ( Westchester Stone Co., Inc. v. Master Mason of N.Y. Inc. , 51 Misc. 3d 1214(A), 2016 WL 1688598 (City Court, City of Rye 2016). Defendants also assert that the court in Greenburgh did not apply the Zubulake I analysis rigidly and required the defendant in that case to reimburse plaintiffs half of the production costs subject to a further determination and award of disbursements at the conclusion of the action.
51 Misc. 3d 1214(A), 2016 WL 1688598 (City Court, City of Rye 2016).
63 Misc. 3d 554, 94 N.Y.S.3d 810 (Sup. Ct., Putnam County 2019).
Defendants argue that in the event this Court applies the Zubulake I criteria the issue of accessibility should not be strictly applied and that the Court should consider the costs of producing the ESI not the accessibility of the ESI. Defendants argue that Zubulake I factors support allocating the ESI discovery costs to plaintiffs.
Defendants argue that plaintiffs' discovery requests were not specifically tailored to discover relevant evidence and included generic and irrelevant demands. Defendants contend that plaintiffs seek documents that are in their possession or are available from other sources, including from the Department of Health. Defendants also argue that the amount in controversy used by plaintiffs is for a certified class but that the actual amount in controversy for the two presently named plaintiffs is much less. Defendants assert that when considered in terms of the amount presently in controversy, the ESI production costs are far greater than the actual amount presently in controversy. Defendants also argue that they have provided financial documents that demonstrate that the Facility is operating at a loss. Defendants deny plaintiffs' allegations that the individual defendants have access to significant capital as without any basis. Defendants also state that whether the individually named defendants are liable under PHL § 2808-a is a disputed issue in this case. Defendants further argue that they have minimized their expenses by hiring Kim to manage the ESI production. Defendants argue that producing the e-discovery provides them with little benefit. In his reply affirmation, Kim states that the procedures used to capture, process, and produce the ESI are consistent with generally accepted industry standards and with the agreed-upon ESI protocol.
Defendants calculated the amount in controversy limited to the claims of the two named plaintiffs, as follows "Ms. Allen's claim is 1,065 days (fact) x $225 daily rate (assumption) for a total of $239,625. If the statutory minimum of 25% of the daily rate under Public Health Law § 2801-d(2) is applied, the amount in controversy for Ms. Allen is $59,906.25. The actual amount in controversy concerning Ms. Dos Santos's claim is 425 days (fact) x $225 daily rate (assumption) for a total of $95,625. If the statutory minimum of 25% of the daily rate under Public Health Law § 2801-d (2) is applied, the amount in controversy for Ms. Allen [sic] [Ms. Dos Santos] is $23,906.25" (Thompson-Tinsley Reply Affirmation at ¶ 19).
Analysis
CPLR 3101(a) mandates full disclosure of all matter material and necessary in the prosecution or defense of an action. Unlimited disclosure is not mandated, however, and a court may issue a protective order pursuant to CPLR 3103 denying, limiting, conditioning or regulating the use of any disclosure device to prevent unreasonable annoyance, expense, embarrassment, disadvantage or other prejudice to any person or the courts. The supervision of disclosure and the setting of reasonable terms and conditions thereof rests within the sound discretion of the trial court (see Ligoure v. City of New York , 128 A.D.3d 1027, 9 N.Y.S.3d 678 [2d Dept. 2015] ).
As an initial matter, insofar as the plaintiff class has yet to be certified the Court is unable to rule on the second branch of defendants' motion concerning future costs of discovery in the event of class certification. Any determination would be tantamount to impermissibly issuing an advisory opinion "[c]ourts may not issue judicial decisions which "can have no immediate effect and may never resolve anything" ( New York Pub. Interest Research Group v. Carey, 42 N.Y.2d 527, 531, 399 N.Y.S.2d 621, 369 N.E.2d 1155 [1977] ; see Cuomo v. Long Is. Light. Co. , 71 N.Y.2d 349, 525 N.Y.S.2d 828, 520 N.E.2d 546 [1988] ). Moreover, since that discovery has not yet occurred the costs associated with producing any responsive discovery are purely conjecture.
Pursuant to the Referee Report & Compliance Conference Order dated February 24, 2020, the application to file for class certification was extended to June 30, 2020. No subsequent filings, nor additional extensions appear on NYSCEF.
While defendants contend that the party seeking discovery should pay the costs associated with producing that discovery, plaintiffs assert that the costs of electronic discovery should be borne by the party producing the discovery in keeping with the cases followed by the First Department, Appellate Division and the federal courts. It was in the case of U.S. Bank N.A. v. GreenPoint Mtge. Funding, Inc. , 94 A.D.3d 58, 939 N.Y.S.2d 395 [1st Dept. 2012], that the First Department departed from the requestor pays approach, holding instead that "it is the producing party that is to bear the cost of the searching for, retrieving, and producing documents, including electronically stored information" ( U.S. Bank at 62, 939 N.Y.S.2d 395 ). In so doing the court recognized Zubulake I , being "now persuaded that the courts adopting the Zubulake I standard are moving discovery, in all contexts, in the proper direction" ( U.S. Bank at 63, 939 N.Y.S.2d 395 ) and noted that the requestor pays rule had been criticized by other courts and commentators.
The "all contexts" language has been interpreted to include the usual paper documents as well as electronically stored information (243 Siegel's Practice Review, Which Party Is to Pay the Cost of Retrieving "Electronically Stored Information" (ESI)? Another Major Treatment by First Department Appellate Division, Again Adopting Federal Zubulake Decision and Placing Initial Burden on Responder [March 2012]).
"Second, we note, with some concern, that commentators and courts have called into question the underpinning of the requestor pays rule (see e.g. MBIA Insurance Corp. v. Countrywide Home Loans, Inc., 27 Misc. 3d 1061, 895 N.Y.S.2d 643 [2010], supra and Connors, Which Party Pays the Cost of Document Disclosure? 29 Pace L. Rev. 441, 450 [2009]."
The U.S. Bank court further reasoned that placing the burden of discovery costs on the requesting party could deter the filing of potentially meritorious claims particularly in cases where the requesting party is an individual ( U.S. Bank at 65, 939 N.Y.S.2d 395 [internal citation omitted]). The court noted that the "adoption of the Zubulake I standard is consistent with the long-standing rule in New York that the expenses incurred in connection with disclosure are to be paid by the respective producing parties and that these expenses may be taxed as disbursements by the prevailing litigant" ( U.S. Bank at 63-65, 939 N.Y.S.2d 395 [internal citation omitted]). Ultimately the U.S. Bank court denied defendant's motion because it determined it did not have enough information upon which to perform the cost-shifting analysis.
U.S. Bank has been characterized as a "watershed" decision (Robert L. Haig, Commercial Litigation in New York State Courts, § 30:44 [5th ed 4 West's NY Prac Series October 2020] ) and notable in that it "resolved the previous debate among the trial courts as to whether the requesting party or the producing party is presumptively required to pay ESI production costs." (E-Discovery Working Group, Bench Book for New York State Judges Pertaining to the Discovery of Electronically Stored Information ["ESI"], Bench Book (00183718).DOCX (nycourts.gov), NY St Unified Ct Sys [November 2020 edition]). The case is recognized as an indication of New York State courts to "follow federal case law on cost-shifting and adopting the cost-shifting standards and principles set forth in Zubulake I and its progeny" ( Commercial Litigation in New York State Courts, § 30:44 ).
Additionally, the U.S. Bank decision recognized the court's "broad discretion" to shift the costs between the parties, as the circumstances may warrant and to follow the seven factors set forth in Zubulake I " (243 Siegel's Practice Review, Which Party Is To Pay The Cost Of Retrieving "Electronically Stored Information" (ESI)? Another Major Treatment by First Department Appellate Division, Again Adopting Federal Zubulake Decision and Placing Initial Burden on Responder [March 2012]). The Zubulake I analysis "should not be used by courts as a mere checklist but rather "as a guide to the exercise of their discretion in determining whether or not the request constitutes an undue burden or expense on the responding party" ( U.S. Bank at 64, 939 N.Y.S.2d 395 ).
Defendants rely on the holding in Lipco Electrical Corp v. ASG Consulting Corp , 4 Misc. 3d 1019(A), 2004 WL 1949062 [Sup. Ct., Nassau County, 2004], the "leading ‘requestor pays’ case" ( U.S. Bank at 65, 939 N.Y.S.2d 395 ). The Lipco court while acknowledging Zubulake I , distinguished the state court analysis and stated that "cost shifting of electronic discovery is not an issue in New York since the courts have held that, under the CPLR, the party seeking discovery should incur the costs incurred in the production of discovery material." In so holding the Lipco court relied on the cases of Schroeder v. Centro Pariso Tropical and Rubin v. Alamo Rent-A-Car . As noted in MBIA Ins. Corp. v. Countrywide Home Loans, Inc., Lipco, Schroeder and Rubin each trace back to Rosado v. Mercedes—Benz of North America, Inc . The Countrywide court examined the Lipco holding and found it to be unsupported by the precedent it cited, noting that " Rosado supports a much narrower holding than the cited cases imply" ( Countrywide at 1075, 895 N.Y.S.2d 643 ). Rosado involved which party should bear the costs to produce a translation of an eight-page German language document. The Rosado court stated that "each party should shoulder the initial burden of financing his own suit, and based upon such a principle, it is the party seeking discovery of documents who should pay the cost of their translation " ( Rosado at 398, 480 N.Y.S.2d 124 ) (emphasis added). The cases of Etzion v. Etzion and Matter of Maura relied upon by defendants are also distinguishable from the present matter. Unlike here, Etzion involved a heavier burden on the producing party because it involved data files that may have been deleted or altered requiring restoration and the services of a computer expert. The Matter of Maura decision is problematic as it also relies on the Lipco holding and is furthermore distinguishable from the present matter in that it involved the costs of producing discovery by a nonparty (see CPLR 3122 [d] ).
233 A.D.2d 314, 649 N.Y.S.2d 820 (2d Dept. 1996).
190 A.D.2d 661, 593 N.Y.S.2d 284 (2d Dept. 1993).
27 Misc. 3d 1061, 1075, 895 N.Y.S.2d 643 (Sup. Ct., New York County 2010).
103 A.D.2d 395, 480 N.Y.S.2d 124 (2d Dept. 1984).
7 Misc. 3d 940, 796 N.Y.S.2d 844 (Sup. Ct., Nassau County 2005).
17 Misc. 3d 237, 842 N.Y.S.2d 851 (Sur. Ct., Nassau County 2007).
The issue of which party should initially bear ESI costs is an evolving one in the state ( Greenberg v. Spitzer , 63 Misc. 3d at 562, 94 N.Y.S.3d 810 ). Although the Second Department has not squarely addressed the issue of who bears the costs of producing ESI since the decisions in Zubulake I and U.S. Bank , trial courts located within the Second Department have acknowledged the lack of consensus in the courts on this subject (see Ratner v. Robinson , 2013 WL 10905343 [Sup. Ct., Nassau County 2013] ; Westchester Stone Co., Inc. v. Master Mason of New York , 51 Misc. 3d 1214(A), 2016 WL 1688598 [City Ct., City of Rye, Westchester Co. 2016] ); and a willingness among some trial courts outside of the First Department to initially place costs on the responding party subject to applying the Zubulake I cost-shifting analysis under the appropriate circumstances ( Wade v. McConville, 53 Misc. 3d 1216(A), 2016 WL 6989403 [N.Y. Sup. Ct. Monroe County 2016] ; Ratner v. Robinson , 2013 WL 10905343 [Sup. Ct., Nassau County 2013] ; Westchester Stone Co., Inc. v. Master Mason of New York , 51 Misc. 3d 1214(A), 2016 WL 1688598 [City Ct., City of Rye, Westchester Co. 2016] ; see ( Commercial Litigation in New York State Courts, § 30:44 ); Bench Book for New York State Judges Pertaining to the Discovery of Electronically Stored Information ["ESI"]. Courts have also acknowledged the implicit application of the Zubulake I criteria found in Court Rules 22 NYCRR §§ 202.12 (b), (c) and 202.70 ( Greenberg v. Spitzer at 562, 94 N.Y.S.3d 810 ).
As a threshold matter, cost-shifting is only appropriate when electronic data is kept in an inaccessible format ( Zubulake I at 324, 325 ; see Novick v. AXA Network, LLC , 2013 WL 5338427 [S.D.N.Y. 2013] ; Kennedy Assoc. v. JP Morgan Chase Bank N.A., 2014 N.Y. Slip Op. 30025[U], 2014 WL 48360 [Sup. Ct., New York County 2014] ). In Zubulake I the court explained that "[f]or data that is kept in an accessible form, the usual rules of discovery apply: the responding party should pay the costs of producing responsive data" ( Zubulake I at 324 ). Using Zubulake I as a guide, this Court notes that there has been no argument that the ESI produced by defendants was inaccessible ( Zubulake I at 318-320 ) or required the restoration of back up tapes (see Delta Financial Corp v. Morrison , 13 Misc. 3d 441, 820 N.Y.S.2d 745 [Sup. Ct., N.Y. County 2010] ), involved recovering deleted or altered data (see Etzion v. Etzion , 7 Misc. 3d 940, 796 N.Y.S.2d 844 [Sup. Ct., Nassau County 2005] ), or that a separate computer program would need to be created in order to retrieve the data ( Lipco Electrical Corp. v. ASG Consulting Corp. , 4 Misc. 3d 1019(A), 798 N.Y.S.2d 345 [2004] ). Here, defendants have not argued that the data was in any way inaccessible. As stated by the court in Silverman v. Shaoul "[T]he data at issue in the instant case was neither archived nor deleted; it was simply stored in a number of places and interspersed with defendants' various documents The fact that Defendants were required to "process" the data discloses no undue burden, but merely the normal burden of litigation." ( Silverman v. Shaoul , 30 Misc. 3d 491, 496, 913 N.Y.S.2d 870 [Sup. Ct., New York County 2010] ). Under these circumstances, the cost of producing responsive documents is placed "squarely on the shoulders of the producing party" ( id. ).
Even if defendants had established that the data were inaccessible, when applying the Zubulake I factors that defendants have not shown cost-shifting is warranted. The seven factors outlined in Zubulake I were intended to be applied in descending order of importance ( Zubulake I at 323 ; see Kennedy Assoc. v. JP Morgan Chase Bank N.A. , 2014 N.Y. Slip Op. 30025[U], 2014 WL 48360 [N.Y. Sup. Ct., New York County 2014] ). The Zubulake I court considered the first two factors as the most important in the analysis, with factors 3-5 being next in importance. Factor 6 although least likely to apply in most cases is a "critical consideration" and one that would balance the factor of the total costs associated with the production that almost always weighs in favor of cost-shifting ( Zubulake I at 321 ), and factor 7 as the least important ( Zubulake I at 323-324 ).
The first factor requires us to look at the extent to which the request is specifically tailored to discover relevant information. A review of plaintiffs' demand and the email correspondence between counsel concerning ESI, reflects plaintiffs' willingness to prune the scope of the search terms and the number of employee email accounts. Additionally, it is noted that the parties memorialized their understanding of the scope of the ESI discovery in a stipulation (NYSCEF Doc. No. 29). Moreover, defendants did not object to the scope of plaintiffs' demands nor did they move for relief in an attempt to limit those demands. The second factor to consider is the availability of such information from other sources. While defendants argue that some of the information produced is available from other sources, the bulk of the ESI produced was from the email accounts of defendants' employees and other ESI which is not otherwise available to plaintiffs.
The next factor requires an analysis of the total cost of production, compared to the amount in controversy. Here, the Court agrees with defendants that until such time as the class is certified an amount in controversy based upon a class of plaintiffs is speculative. Accordingly, the amount in controversy to be considered for these purposes is limited to the approximate amount of damages for the present plaintiffs. As part of this analysis, it is relevant to note that not all costs of ESI production are subject to cost-shifting. "As a general rule, where cost-shifting is appropriate, only the costs of restoration and searching should be shifted.... [T]he responding party should always bear the cost of reviewing and producing electronic data once it has been converted to an accessible form" ( Zubulake III at 290 ; see Kennedy Associates , 2014 WL 48360 ). Examples of costs that are not subject to shifting include those for reviewing privileged and confidential communications ( Fleisher v. Phoenix Life Ins. Co. , 2012 WL 6732905 [S.D. N.Y. 2012] ); retaining a forensic technological expert to pursue a search for the metadata ( Doe v. Bivens , 2018 WL 3439805 [Sup. Ct., New York County 2018] ); and those associated with attorney (or non-attorney) review time ( Commercial Litigation in New York State Courts, § 30:44 ). Insofar as the bulk of Empire's costs and all of Fronteo's costs are connected with producing the ESI, or reviewing for privilege, responsiveness, or confidentiality (Defendants' Exhibit D, Kim's affirmation ¶¶ 11-15), these costs are not subject to cost-shifting.
See footnote 8, supra.
In Kim's affirmation in support, he identifies the categories of functions performed by Empire, two of which may include allowable expenses for purposes of cost-shifting, including costs appearing under the headings of EDD: Early Case Assessment & Data Analysis ("EDD") and Forensic Collection Costs — Per Hour ("Forensic Collection Costs") (¶ 11). According to his affirmation, the EDD costs represent "the costs of processing email data from the Facility." The Forensic Collection Costs "represent the cost of identifying and collecting data from email accounts, desktop hard drives, and shared drives" (Kim's Affirmation in Support (¶ 11). Arguably, these functions might include costs attributable to searching that could be considered in the cost-shifting analysis. While costs attributable to searching may be subject to shifting those costs are not readily ascertainable upon what is presently before the Court and the Court is unable to complete this part of the analysis.
The fourth factor requires an analysis of the total cost of production compared to the resources available to each party. Here both sides are asserting they are without resources to pay for these costs. Defendants have proffered sufficient proof that the Facility is operating at a net loss. However, contrary to their assertions, the insurance policy limits as plaintiffs correctly assert is for $1,000,000 per occurrence—or $2,000,000 based on the two presently named plaintiffs, notwithstanding any potential for an award of punitive damages. The ability of the individual defendants to pay has not been established, nor have plaintiffs substantiated their claims that they are unable to bear the costs.
The next factor is the relative ability of each party to control costs and its incentive to do so. Here, other than agreeing to more limited search terms and email accounts, plaintiffs had no ability to control costs. Defendants solely controlled the retrieval, review, and production of the ESI and the vendors retained to assist in its production. Defendants, in an effort to control costs in this and similar cases hired Kim to reduce the amount of work that would normally be outsourced, however most of the cost savings attributable to Kim relate to costs not subject to cost-shifting.
While the next factor concerning the importance of the issues at stake in the litigation is rarely invoked when it is, it "has the potential to predominate over the others" ( Zubulake I at 323 ) and "if it is a case that has the potential for broad public impact then public policy weighs heavily in favor of permitting extensive discovery" ( Zubulake I at 321 ). The neglect of those in nursing homes is a serious problem with significant social implications (see Amanda Bassen, Patient Neglect in Nursing Homes and Long-Term Care Facilities in New York State: The Need for New York to Implement Programs and Procedures to Combat Elder Neglect , 8 Cardozo Pub Law, Policy & Ethics J 179, 181 [2009]). Lastly, factor 7 concerns the relative benefits to the parties of obtaining the information. Here while this discovery obviously benefits plaintiffs, there is no discernible benefit to defendants associated with producing this discovery.
While defendants presented no argument that the ESI they produced was inaccessible in order to trigger a cost-shifting analysis, upon the foregoing analysis defendants have failed to demonstrate that cost-shifting is presently appropriate. The first two factors weigh against cost-shifting as do the fifth and sixth factors. While the third factor also appears to weigh against cost-shifting, based upon the information presented, the Court is unable to make a determination in this regard. Although the parties have offered differing accounts of their respective abilities to pay the costs, defendants' insurance policy weighs against cost shifting. Despite defendants' attempts to mitigate costs, as stated above the costs affected by those measure were, most if not all, those that are not subject to cost-shifting. Notably, the issues at stake militate against cost-shifting as well.
All other arguments raised on this motion and evidence submitted by the parties in connection thereto have been considered by this Court, notwithstanding the specific absence of reference thereto.
In light of the foregoing it is:
ORDERED that defendants' motion is denied at this time and it is further
ORDERED that the parties are directed to appear for a virtual conference with Chief Court Attorney Diane Clerkin via Microsoft Teams, or as the Court shall otherwise direct, in accordance with the Virtual Courtroom Protocol implemented in the Ninth Judicial District, on January 12, 2021, at 12:30 p.m. The parties will be contacted by the Court with further instructions concerning this appearance; and it is further
ORDERED that defendants shall serve a copy of this Order with notice of entry upon plaintiffs within three (3) days of entry, with proof of such service filed to NYSCEF within three (3) days thereof, or as the Court shall further direct due to the COVID-19 health emergency.
The foregoing constitutes the Decision and Order of this Court.