Opinion
98 Civ. 8272 (RPP)
May 8, 2002
Martin R. Gold, Christine Lepera, Robert E. Donnelly, Rubin Baum Levin Constant Friedman, New York, NY, Rickey Ivie, Ivie, McNeill Wyatt, Los Angeles, CA, Gary, Williams, Parenti, Finney, Lewis, McManus, Watson Sperando, Stuart, FL., Counsel for Plaintiffs.
Charles M. Miller, Helen Gavaris, Loeb Loeb LLP, New York, NY, Counsel for William Morris Agency, Inc.
Jeffrey Kessler, Jeffrey Klein, Weil Gotshal Manges, LLP, New York, NY, Counsel for Creative Artists Agency, Inc.
Sandor Frankel, Stuart E. Abrams, Frankel Abrams, New York, NY, Barry E. Mallen, Matthew Kanny, Manatt, Phelps Phillips LLP, Los Angeles, CA., Counsel for Monterey Peninsula Artists, Inc.
John J. Rosenberg, Carrie Fletcher, Epstein Becker Green, PC, Boston, MA., Tom Luz, Paul Kaplan, Epstein Becker Green, PC, New York, NY., Counsel for Howard Rose Agency Ltd.
Steven M. Hayes, Parcher, Haues Snyder, P.C., New York, NY., Counsel for Renaissance Entertainment, Inc.
Rebecca Ruppert, Stephen D. Williger, Benesch, Friedlander, Coplan Aronoff LLP, Cleveland, OH., Brian S. Fraser, Adam D. Mitzner, Richards Spears Kibbe Orbe, New York, NY., Counsel for Beaver Productions, Inc., Fantasma Productions of Fla., Inc., and Jam Productions Ltd.
Vincent A. Sama, Gerald D. Silver, Allyson D. Wenig, Winston Strawn, New York, NY., Counsel for QBQ Entertainment, Belkin Productions, Inc., Bill Graham Enterprises, Inc., Cellar Door Companies, Inc., Cellar Door Concerts of the Carolinas, Inc., Cellar Door Concerts of Florida, Inc., Cellar Door Productions of Michigan, Inc., Cellar Door North Central, Inc., Cellar Door Productions, Inc., Cellar Door Productions of D.C., Inc., Cellar Door Corporation, Concert/Southern Promotions, Inc., Contemporary Productions, Inc., Delsener/Slater Enterprises, Ltd., DiCesare-Engler, Inc., Don Law Co., Inc., Electric Factory Concerts, Inc., Evening Star Productions, Inc., Magicworks Concerts, Inc., Pace Concerts, Inc., SFX Entertainment, Inc., and Sunshine Productions, Inc.
OPINION AND ORDER
Pursuant to Fed.R.Civ.P. 72(a) plaintiffs filed written objections to the January 15, 2002 order of U.S. Magistrate Judge Francis respecting plaintiffs' discovery of e-mail communications (the "Order"), together with a motion dated February 4, 2002 seeking reversal of that portion of the Order that granted defendants' William Morris Agency, Inc. ("WMA"), Creative Artists Agency, LLC ("CAA"), Monterey Peninsula Artists Agency ("Monterey") and the SFX defendants ("SFX") ("the moving defendants") motion pursuant to Fed.R.Civ.P. 26(b)(2)(iii) and 26(c) to shift the costs of production of their e-mail communications to plaintiffs. Plaintiffs' motion is denied.
Under Fed.R.Civ.P 26(c) courts have the power to exercise discretion to protect parties from "undue burden or expense." In shifting the costs of production to plaintiffs, Judge Francis weighed eight factors: (1) the specificity of the discovery requests; (2) the likelihood of a successful search; (3) the availability from other sources; (4) the purposes of retention; (5) the benefit to the parties; (6) the total costs; (7) the ability of each party to control costs; and (8) the parties' resources. Judge Francis found all of the factors weighed in favor of shifting the costs of discovery to the plaintiffs except factor (3) and found that factor (8) was neutral.
At the argument on March 19, 2002, plaintiffs' arguments were 1) that moving defendants had waived their right to object to the production of their e-mail communications, with the exception of defendant CAA, with whom plaintiffs had a side agreement; and 2) that Judge Francis decided the following factors in a manner that they assert is contradicted by the record: the likelihood of a successful search; the specificity of the request; the relative resources of the parties; and the total costs. In their moving papers, plaintiffs also contested Judge Francis' findings regarding the purposes of retention of e-mail communications, benefit to the parties, and the ability to control costs, but did not press them at the oral argument.
Background
Plaintiffs are black concert promoters who assert that they have been excluded from the market for promoting events with white music artists and major black music artists by the racially discriminatory practices and anti-competitive practices of the defendants. There are two category of defendants: some are booking talent agencies that represent white artists and major black artists and allegedly exclude plaintiffs from biding on promotions of concerts by these artists; others like the plaintiffs are promoters who allegedly collude with the booking agency defendants to exclude plaintiffs from promoting concerts by white music artists and major black artists.
Procedural Background
The complaint was filed on or about November 20, 1998. Thereafter, a motion to dismiss was granted and an Amended Complaint was filed on August 9, 1999. The Amended Complaint contains six claims: the first two claims, brought by the corporate plaintiffs, are for damages under Section 1 of the Sherman Act and for an injunction under that statute; the third claim charges defendants with racial discrimination in violation of 42 U.S.C. § 1981; the fourth claim alleges a conspiracy by the defendants in violation of 42 U.S.C. § 1985 (3); the fifth claim seeks an injunction under §§ 1981 and 1985(3); and the sixth claim is for damages under 42 U.S.C. § 1986.
Discovery in this case has been the subject of considerable controversy. In August 2000 the Court suggested that in view of the breadth of the plaintiffs' claims and the plaintiffs' document requests that the parties agree that to save time and expense the plaintiff could inspect the defendants concert and other files without waiver of defendants' right to claim the lawyer-client privilege. Nonetheless the parties continued to dispute the scope and relevancy of plaintiffs' requests and the need for a confidentiality order.
On November 22, 2000 plaintiffs moved before this Court to compel all defendants to produce documents and information responsive to plaintiffs' request for documents in view of defendants' resistance to the broad scope of the discovery requested and defendants' demands for a confidentiality order. Oral argument was heard by this Court on February 27, 2001 and a conference on March 19, 2001. On March 19, 2001 the Court entered an Order of Confidentiality and a separate order that granted plaintiffs' motion to compel with express exceptions.
Thereafter, the case was assigned to Judge Francis for supervision of discovery in view of this judge's incapacity due to major surgery. Each of the defendants has complied with the courts' order on discovery, opening its concert files for plaintiffs' inspection and producing other documents as requested by plaintiffs. Plaintiffs then asked the defendants for the defendants computerized e-mail communications to which the moving defendants raised objections based on the burden and expense of such production outweighed its likely benefit. Fed.R.Civ.P. 26 (b)(iii). On July 2, 2001, defendants obtained an order from Judge Francis that permitted them, after another "meet and confer" process to move for a protective order with respect to production of their e-mail. On January 15, 2002, in a comprehensive decision, defendants' motion for a protective order was denied by Judge Francis insofar as it sought to preclude altogether the discovery of e-mail, but granted to the extent that the plaintiffs shall bear the costs of the production of moving defendants' e-mail communications. It is this order to which plaintiffs have filed objections.
Legal Standard
Magistrate judges are empowered to hear and determine pretrial matters. 28 U.S.C. § 636 (b)(1)(A). A magistrate judge's decision as to issues that are not dispositive of a claim or defense is entitled to substantial deference and may be overturned only upon a showing that the Order was "clearly erroneous or contrary to law." Fed.R.Civ.P. 72(a).Alpex Computer Corp. v. Nintendo Co., Ltd 1992 WL 51534 (S.D.N.Y. March 10, 1992). Neither party disputes that this is the applicable standard.
Rule 26(c): Undue Burden or Expense
Fed.R.Civ.P. 26(c) gives federal courts the authority to issue, for good cause shown, orders to protect parties from undue burden or expense in connection with discovery. Although there are no firm rules, courts may take into account "the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues." Fed.R.Civ.P. 26(b)(2)(iii).
Waiver
In an issue not ruled on by Judge Francis' opinion, plaintiffs argue that the moving defendants waived their right to object to the production of their e-mail communication because the Court entered its March 19, 2001 order granting plaintiffs' motion to compel the production of documents. Plaintiffs rely on the Court's statement that if defendants did not respond to issues raised in plaintiffs motion papers, those matters are deemed ruled on for plaintiffs. (2/27/01 Tr. at 55.; 3/19/01 Tr. at 27.) Accordingly, plaintiffs argue that these defendants' right to object to the production of the electronically stored e-mail has been ruled on. They point to a letter of October 23, 2000 from WMA's counsel predating the Court's statement as support for their position. The letter states WMA was "looking into whether there are any electronic mail communications that relate to the promotion of particular concert engagements and whether these are even retrievable and, if so, on what basis. We will discuss this with you at a future date and we, therefore, reserve our client's rights accordingly." (Primoff Dec. Ex. E, at 2.) Plaintiffs also argue that since CAA sought to preserve its objections to production of e-mails prior to the February 27, 2001 argument, that "clearly establishes that defendants were well aware that production of these materials were the subject of plaintiffs' requests, and their motion to compel." (Pls.' Written Objections to Magistrate Judge Francis' January 15, 2002 E-mail Order ("Pls.' Objections"), at 11.) Therefore, plaintiffs assert that Judge Francis, to whom this issue was presented, should have denied defendants' motion, and the Order's failure to do so is contrary to law and clearly erroneous.
Plaintiffs had agreed with moving defendant CCA, however, that e-mail production was not an issue in the motion to compel. (Pls.' Objections, at 10, 11.)
In response, defendants argue that the waiver issue was raised before Judge Francis and implicitly rejected by him in his July 2, 2001 Order that established a detailed procedure for dealing with the issues raised by defendants regarding e-mail discovery and therefore that plaintiffs have waived their right to object now to the procedure in which they engaged. (Mem. of Law in Opp'n to Pls.' Written Objections to Magistrate Judge Francis' January 15, 2002 Order ((Defs.' Opp'n), at 21.) Nowhere in the extensive submission in connection with the motion to compel is the burden and expense of producing e-mail communications raised. The principal focus of the motion was a massive search of defendants' files sought by plaintiffs for evidence of racially discriminatory conduct and anti-trust violations charged in the Amended Complaint.
Rules 26(b) and 34 of the Federal Rules of Civil Procedure instruct that computer-stored information is discoverable under the same rules that pertain to tangible, written materials. The 1970 Advisory Committee Notes of Rule 34(a) make clear that electronic data are part of the definition of `document,' and states that when discovery of e-mail would create an "undue burden or expense" on the respondent the appropriate relief is a motion under Rule 26(c) to shift costs:
The inclusive description of `documents' is revised to accord with changing technology. It makes clear that Rule 34 applies to electronics data compilations from which information can be obtained only with the use of detection devices, and that when the data can as a practical matter be made usable by the discovering party only through respondent's devices, respondent may be required to use his devices to translate the data into usable form. . . . The burden thus placed on respondent will vary from case to case, and the courts have ample power under Rule 26(c) to protect respondent against undue burden or expense, either by restricting discovery or requiring that the discovering party pay costs.
F.R.Civ.P. 34(a) advisory committee's notes, 1970.
Plaintiffs' argument that the Court decided this issue in the February 27, and March 19, 2001 oral arguments and in the March 19, 2001 order granting plaintiffs' motion to compel the production of documents overlooks the circumstances in which that motion was granted. That motion resolved the disputes of the parties over the scope and relevancy of plaintiffs' discovery of documents from all defendants and the scope of the order of confidentiality. No issue of burden and expense of production of e-mails from defendants computerized data base was raised. Defendants did waive many real and potential disputes in regard to the relevancy and the breadth of plaintiffs' discovery requests by failing to oppose the motion to compel. They did not, however, waive their right to bring a motion under Rule 26(c) of the Federal Rules of Civil Procedure once they determined that the production of e-mails from the computerized data base would cause them undue burden and expense. The Federal Rules of Civil Procedure do not set out time limits within which a motion for a protective order must be made.
There is an implicit requirement that the motion must be timely made. Nestle Foods Corp. v. Aetna Cas. and Sur. Co., 129 F.R.D. 483, 487 (D.N.J. 1990). "A motion for a protective order is timely if made prior to the date set for producing the discovery." Brittain v. Stroh Brewery Co., 136 F.R.D. 408, 413 (M.D. NC. 1991) citing In re Coordinated Pretrial Proceedings, etc. 669 F.2d 620, 622 n. 2 (10th Cir. 1982) (holding that one issue raised on appeal could be dealt with summarily — a motion for a protective order which was filed four days prior to the date set for production was timely).
In considering whether a motion is timely under Rule 26(c), courts have discretion to determine whether the issue of burden and expense of production of electronically stored material is timely made in complex litigation such as this. "Rule 26(c) . . . confers broad powers on the courts to regulate or prevent discovery even though the material sought are within the scope of 26(b), and these powers have always been freely exercised." F.R.Civ.P. 26(b) advisory committee's notes, 1970. Here the issue was promptly raised after the moving defendants had opened their concert files and had produced the other documents requested by plaintiffs when plaintiffs then raised the issue of e-mail production. Accordingly, Judge Francis did not abuse his discretion in considering the moving defendants' application.
Factors Considered by Judge Francis 1. Specificity
Judge Francis found that plaintiffs' "extremely broad" discovery requests favored shifting the costs of discovery to them. He contrasted plaintiffs' requests to other cases such as Daewoo where the plaintiff sought only specific data sets that were utilized in the administrative review that resulted in the challenged governmental order. Daewoo Electronics Co., Ltd v. United States, 650 F. Supp. 1003, 1004-05 (C.I.T. 1986). Similarly, in McPeek the court did not shift costs but required production of only the e-mails of specific persons who purportedly retaliated against the plaintiff. McPeek v. Ashcroft, 202 F.R.D. 31, 33 (D.D.C. 2001).
Plaintiffs argue that Judge Francis's order was based on plaintiffs' document demands from several years earlier. Instead, they argue, their papers discussed at length the proposals and concessions made by plaintiffs to narrow considerably the e-mail sought. (Pls.' Objections, at 18.) These proposals, they assert, involved curtailing discovery to a select group of e-mail users within each user, sampling of materials rather than restoration of the entire body of e-mail possessed by defendants, the use of automated searching using an agreed list of search terms, and electronic review and production. (Id.)
Defendants, in response, argue that the issue of the breadth of plaintiffs' proposal was squarely before Judge Francis, who rejected plaintiffs' contention that they had narrowed their requests, when they had not. (Defs.' Opp'n, at 11.)
Judge Francis did not find that plaintiffs could not narrow their requests as they suggest, rather he found that the broadness of their discovery requests favored shifting the cost of production to them. A review of the record by this Court shows that plaintiffs never made a specific, concrete proposal which narrowed these requests. Judge Francis' finding as to this factor was accurate and certainly not "clearly erroneous."
2. Likelihood of a Successful Search
Judge Francis followed the court in McPeek, in using a marginal utility analysis in determining whether to shift costs:
The more likely it is that the backup tape contains information that is relevant to a claim or defense, the fairer it is that the [responding party] search at its own expense. The less likely it is, the more unjust it would be to make [that party] search at its own expense. The difference is "at the margin."McPeek v. Ashcroft, 202 F.R.D. 31, 34 (D.D.C. 2001). Judge Francis found "there has certainly been no showing that the e-mails are likely to be a gold mine," nonetheless he found there was a high enough possibility that a broad search of the defendants' e-mails would elicit some relevant information so that the search should not be precluded altogether. In particular, Judge Francis pointed out that no witness has testified about any e-mail communications that allegedly reflect discriminatory or anti-competitive practices. Therefore, he found that the marginal value of searching the e-mails is modest at best, militating in favor of imposing the costs of discovery on the plaintiffs. (Order, at 20.)
Although the plaintiffs have had complete access to the defendants' files and many depositions have been completed, the only things that plaintiffs point to in favor of their "likelihood of a successful search" is one printed e-mail in defendants' concert files, testimony of Mr. Embree who is not involved in concert promotion that e-mail was used by employees of CAA, documents that were not in e-mail form regarding a Janet Jackson tour, handwritten notes the meaning of which is greatly disputed, and the general volume of e-mail communication.
The one printed e-mail that plaintiffs cite to as showing a "likelihood of a successful search" describes an upcoming meeting between CAA and SFX. Plaintiffs assert that this led them to the discovery that "at this meeting the outlines of an anti-competitive and discriminatory agreement were discussed." (Pls.' Objections, at 4.) The agreement is an alleged agreement by SFX, a concert promoter, and CAA, a booking agency, not to compete. Assuming such an agreement exists, which the defendants vigorously dispute, the anti-competition agreement "is not a theory that is alleged in the complaint" as plaintiffs admitted at the March 19, 2002 argument. (3/19/02 Tr. at 12.)
As for the Janet Jackson tour, at the March 19, 2002 plaintiffs assert, "Early 1998 Rowe was attempting to bid on the national tour of Janet Jackson. He was conveyed a set of terms by Mr. Light from CAA that purported to describe terms that were being directed to all interested promoters. It turns out that in fact that was a complete — that was a fraudulent statement, essentially. At the very same time he was sending those set of terms to Mr. Rowe, he was concluding a deal with Magicworks for far less onerous terms." (3/19/02 Tr. 22-23.) Once again, the facts surrounding this issue are vigorously disputed, but plaintiffs point to nothing in their extensive arguments on this subject that in anyway show a likelihood of a successful search. Plaintiffs do not offer any evidence that even suggests that any e-mails were exchanged in connection with Ms. Jackson's 1998 Tour.
As for Mr. Embree's testimony, at the March 19, 2002 Hearing, plaintiffs admitted ". . . we have not elicited testimony from a witness identifying any particular e-mail beyond what Mr. Embree testified to as relating to a particular subject that we are attempting to discovery [sic]." (3/19/02 Tr., 20.) In the deposition testimony cited by plaintiffs, Mr. Embree, a black employee of CAA, testified primarily about an act of racial discrimination by two white mail room employees who were promptly discharged. He also testified that an in-house e-mail advised of a meeting requiring the attendance of all employees and that Mr. Lovett responded by e-mail to a letter Mr. Embree sent him about his concerns about the company not being "colorful" enough. Mr. Embree testified that in that e-mail Mr. Lovett thanked him for his opinions, told him that he appreciated them, and said he would try to do what he could and that his door is open anytime. (Pls.' Reply Ex. C, at 29-30; 50.) This testimony does not point to any e-mails that will be of "explosive importance" as plaintiffs' assert or even that any e-mail discovery may be useful to plaintiffs case. Furthermore, Mr. Embree is not a witness likely to have evidence supporting plaintiffs claims: he started as a copier at CAA, Inc. in 1991 (Frank Dec. Ex. A at 8), then moved to the library where he was responsible for filing, data entry, copying, keeping track of files, answering the phone, taking in requests and, on occasion, helping the head researcher (Id. at 9-10.) He now works in the music contracts room handing out faxes, copying and putting the contracts together with riders, bios, pictures, sending the contracts to the promoter, entering the date of the shipment into the computer and checking to see if the other assistants need help when they are overloaded. (Id. at 10; 104-105.) Mr. Embree has no responsibility for the selection of concert promoters or the booking or routing of concerts. Accordingly, Mr. Embree's testimony does not show a likelihood of success in an e-mail search.
The Court ordered discovery of records of complaints of race discrimination by employees filed against the defendants as possibly tending to show a propensity to be racially discriminatory in business contacts. It did not contemplate plaintiffs' attorneys attempting to engender complaints in the discovery process as is suggested by the Embree deposition.
Lastly, the mere volume of e-mail which includes not just inter-company communications but in-house communication of all employees also does not point to a likelihood of a successful search and the couple of handwritten notes that plaintiffs point to, although relevant, do not indicate a that a search of e-mail communications would be helpful to plaintiffs.
Judge Francis did not set up a "goldmine" standard for the "likelihood of a successful search" factor in determining whether to shift costs, rather he used the marginal utility analysis that was completely appropriate and, given the miniscule evidence presented by plaintiffs of the likelihood of success, decided in a manner that was not "clearly erroneous or contrary to law" that "the marginal value of searching the e-mails is modest at best" and decided that "this factor, too militates in favor of imposing the costs of discovery on the plaintiffs." (Order at 20.) The Court agrees with this finding, especially since, as pointed out by the moving defendants, the non-moving defendants, who are alleged co-conspirators, have already produced their e-mail and plaintiffs have not identified any of that production to support their argument of the "likelihood of a successful search."
3. Availability from Other Sources
Judge Francis found that defendants had not shown that their e-mail communications are generally available other than by a search of the defendants' hard drives or back-up tapes and that the moving defendants' representations that "important" e-mails were probably printed out and contained in other files were entirely speculative. He found this factor favored requiring the defendants to produce the e-mail at their own expense. This finding has not been disputed.
4. Purposes of Retention
If a party maintains electronic data for business purposes, they will be obligated to produce that same information in discovery. The guiding principle is "information which is stored, used or transmitted in new forms should be available through discovery with the same openness as traditional forms." Daewoo Electronics Co., Ltd. v. United States, 650 F. Supp. 1003, 1006 (C.I.T. 1986). Conversely, a party that happens to retain data only in case of emergency or simply because it has neglected to discard it, should not be put to the expense of producing it. Judge Francis found that the back-up tapes clearly fell into the latter category as there is no evidence that defendants ever search these tapes for information or even have a means for doing so. Accordingly, he found that cost-shifting is warranted with respect to the back-up tapes. He made the same findings with regard to e-mails that, although deleted from the user's active files, remain on the hard drive. "Just as a party would not be required to sort through its trash to resurrect discarded paper documents, so it should not be obligated to pay the costs of retrieving deleted e-mails." (Order at 23.)
Plaintiffs argue that there is no case law that supports including this factor, and that the determination of this factor against the plaintiffs was in the absence of any evidence supporting such a conclusion. (Pls.' Objections, at 21-22.)
Defendants point to both Daewoo Elecs. Co. v. United States, 650 F. Supp. 1003, 1006 (Ct. Int'l Trade 1986) and McPeek, 202 F.R.D. at 33-34, which refer to whether the producing party has retained the discovery materials for active use in its business. Defendants also argue that plaintiffs have pointed to no business purposes for which defendants keep these e-mails and point to their affidavits which state that the back-up tapes and hard drive are retained for "emergency" purposes. (Defs.' Opp'n, at 15.)
Purposes of retention was merely one factor in Judge Francis' Order which found that the e-mails are on the back-up tapes or remained on the hard drive and were not used by defendants in the course of their business, and therefore that this factor tipped in favor of shifting the costs of discovery to plaintiffs. Plaintiffs did not press this argument at the oral argument on March 19, 2002. Certainly this factor relates to the burden and expense of such discovery. There is no reason to find that Judge Francis' opinion on this point was clearly erroneous.
5. Benefit to the Parties
Judge Francis noted that where the responding party itself benefits from the production, there is less rationale for shifting costs to the requesting party. However, he found in this case, since the e-mails are not relevant to any issue on which the defendants bear the burden of proof and cataloguing or searching e-mail would have little business value to them, there is no possible benefit to the defendants making cost-shifting more appropriate.
Plaintiffs assert that any number of relevant issues relating to the manner in which agencies and white promoters (and black promoters) communicate with one another (or internally within each defendant) would be revealed by defendants' e-mail communications, and beneficial to defendants, if their claims are correct. Plaintiffs contend that whether or not the defendants have the burden of proof should not be significant. (Pls.' Objections, at 23.)
The moving defendants respond that the argument that restoration of years of e-mail would benefit them by proving defendants' contention that they are not engaged in a race-based and antitrust conspiracy is nonsensical. They assert it would only show the absence of support for plaintiffs' meritless claims. (Defs.' Opp'n, at 16.)
Judge Francis specifically found that the recovery of e-mail will not benefit the defendants on any issue on which defendants bear the burden of proof. This finding was not disputed by plaintiffs at the March 19, 2002 and cannot be seriously disputed.
6. Total Costs
Judge Francis found that the costs of the discovery desired by plaintiffs would be substantial by any definition and therefore the magnitude of these expenses favors cost-shifting. (Order at 24.)
Plaintiffs argue that the Order disregarded entirely the extensive and uncontradicted case law governing e-mail discovery, cited by plaintiffs, that the cost estimates achieved by plaintiffs are well within the bounds of what has been held not to be so large as to justify cost-shifting. Defendants argue that the principal case on which plaintiffs rely, In re Brand Name Prescription Drugs Antitrust Litig., 94 Civ. C 897, 1995 WL 360526 (N.D. Ill. June 15, 1995) has been criticized for simplistically likening electronic files to paper documents and reflexively holding that the producing party should pay the costs citing McPeek v. Ashcroft, 202 F.R.D. 31, 33 (D.D.C. 2001). Defendants also argue that the plaintiffs misrepresent the other case they cite, United States v. Visa USA, Inc. 98 Civ. 7076, 1999 WL 476437 at *2 (S.D.N.Y. July 7, 1999) as the court in that case expressly "reserved decision about which party will ultimately bear the cost of producing e-mail." Defendants also argue that Judge Francis found the costs for e-mail restoration were substantial even using plaintiffs lower estimates without making a finding as to whether plaintiffs' or defendants' estimates were reasonable.
The issue of costs is strongly contested. Plaintiffs project that the costs of WMA would be between $24,000 and $87,000; for Monterey between $10,000 and $15,000; and for SFX and QBQ approximately $64,000. Defendants project that the costs of WMA would be $395,944 if eight selected back-up sessions were produced and as much as $9,750,000 if all of the back-up tapes were produced; for Monterey between $43,110 and $84,060; for CAA a minimum of $395,000; and SFX and QBQ for over $403,000. Monterey also proffered an estimate of $247,000 to review the e-mails for privilege and CAA approximated $120,000 for their privilege review.
The cases cited by plaintiffs do not support their position that Judge Francis disregarded the law governing e-mail discovery. The court in In Re Brand Prescription Drugs Antitrust Litig does not shift production costs to the plaintiffs, but the court in that case recognizes that "central to any determination of whether a cost should be shifted to a producing party is the issue of whether the expense or burden is `undue.'" 1995 WL 360526, at *5-6. The court in that case also required the Class Plaintiffs to narrow their request for the express purpose of "containing costs" which had been estimated at $50,000-$70,000 Id at 7. As defendants point out, in the other case cited by plaintiffs, United States v. Visa USA, Inc, 1999 WL 476437 at *2, the court simply reserved decision about which party will ultimately bear the cost of producing e-mail. Additionally, simply looking at the costs involved in this case and comparing it to the costs in another case where the court decided not to shift the cost of production, is not a sufficient analysis as there are the other factors that are being taken into account, particularly the likelihood of a successful search and the materiality of the information being sought to the claims in this case. Judge Francis did not base his decision on the substantial costs of the production alone, it was merely one factor in his analysis that favored the shifting of costs. In view of the amount in question, the finding that it was a substantial amount that favored cost-shifting was not "clearly erroneous or contrary to law."
7. Ability to Control Costs
Judge Francis found that "where the discovery process is going to be incremental, it is more efficient to place the burden on the party that will decide how expansive the discovery will be." (Order at 25, citing Bills v. Kennecott Corp, 108 F.R.D. 459, 464 (D. Utah 1985).) Therefore, he found that plaintiffs are in the best position to decide whether further searches would be justified, militating in favor of cost-shifting.
This factor has not been disputed.
8. The Parties' Resources
Judge Francis noted that all of the parties have sufficient resources to conduct this litigation (Order at 25-26.) As to plaintiffs argument that defendants are some of the most powerful players in the concert promotion business, Judge Francis found that as the plaintiffs purport to be able to compete with them in the market place, the relative financial strength of the parties at most a neutral factor. (Order at 26.)
Plaintiffs argue that defendants are the word's largest concert promotion companies and the largest and wealthiest talent agencies all of whom have pointed out the modest financial condition of plaintiffs whereas plaintiffs' financial situations have "declined precipitously since this action was commenced" and "the Order poses a substantial risk that they will not be able to acquire this material at all." (Pls.' Objections, at 25.) Plaintiffs argue the level of financial resources necessary for plaintiffs to be participants in the concert industry during the relevant period in the complaint "has no bearing on plaintiffs' current financial condition." (Id.)
Defendants argue in response that: 1) plaintiffs failed to present any evidence on this issue to Judge Francis and therefore plaintiffs' current attempt on this motion to introduce, through an attorney's affidavit, information relating to plaintiffs' financial resources is improper and should be disregarded; 2) plaintiffs clearly do have the resources necessary to conduct this litigation, hiring four different law firms to prosecute this action, and do claim to be able to compete with defendants in the marketplace; and 3) plaintiffs' unsupported contention that plaintiffs' financial situation have declined precipitously is contradicted by plaintiff Leonard Rowe's testimony that since the lawsuit began he has been making more money. (Defs.' Opp'n, at 20-21.) At oral argument, defendants stated without contradiction that one of the plaintiffs is extremely wealthy. (3/19/02 Tr. at 50-51.)
When objecting to a magistrate judge's report before a district court, a party has "no right to present further testimony when it offer[s] no justification for not offering the testimony at the hearing before the magistrate." Paddington Partners v. Bouchard, 34 F.3d 1132, 1137-38 (2d Cir. 1994), citing Pan Am World Airways, Inc. v. International Bhd. of Teamsters, 894 F.2d 36, 40 n. 3 (2d Cir. 1990). If plaintiffs wanted to argue that their resources had changed since the relevant time period in the suit, they should have brought that argument before the magistrate judge or at least moved for reconsideration with supporting affidavits.
Furthermore, the weighing of the parties' resources is not simply a test of which party has more resources, but as Judge Francis noted, "[i]n some cases, the cost, even if modest in absolute terms, might outstrip the resources of one of the parties, justifying an allocation of those expenses to the other." (Order, at 25.) Therefore, finding that this factor is neutral, in light of the ability of both parties to conduct this litigation and plaintiffs' assertion that they are able to compete with defendants on the market place was not "clearly erroneous." Judge Francis' conclusion was not that defendants' and plaintiffs' resources are equal as plaintiffs argue, but that in view of plaintiffs' resources it would not justify an allocation to the defendants.
Judge Francis clearly found the burden or expense of the proposed discovery outweighs its likely benefit, taking into account "the needs of the case, the amount in controversy, the parties resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues." Fed.R.Civ.P. 26 (b)(2)(iii). There has been no showing that Judge Francis' finding was "clearly erroneous."
Conclusion
For the above reasons, plaintiffs' motion to reverse Judge Francis' Order of January 15, 2002 with respect to that portion of the order that granted defendants motion to shift the costs of production of their e-mail communications to plaintiffs is denied.