Case Law

#CaseoftheWeek Episode 69: 6 Proportionality Factors for Scope of Discovery

In episode 69 of Case of the Week, we discuss a District Court’s analysis of the six proportionality factors in determining the scope of discovery to be reviewed and produced. The decision we are analyzing comes from United States Magistrate Judge Andrew M. Edison on Edwards v. McDermott Int’l, Inc., 2022 WL 1568279 (S.D. Tex. 2022) from May 18, 2022.


Good morning and welcome to episode 69 of our Case of the Week series published in partnership with ACEDS. My name is Kelly Twigger, I am the CEO and founder of eDiscovery Assistant, as well as the principal at ESI Attorneys, and I am very happy to be here with you today. Thank you so much for joining me.

As you know, each week we choose a recent decision from our eDiscovery Assistant case law database and highlight key issues for what that means for you, your clients, your practice, and how to use those strategically.

Today’s case is actually going to be a pretty quick one, but it has some great takeaways from it as far as proportionality is concerned. Our decision comes to us from the class action securities fraud case titled Edwards v. McDermott Int’l, Inc. Today’s decision is from May 18th, 2022, written by United States Magistrate Judge Andrew Edison. Judge Edison has eight other decisions included in the eDiscovery Assistant database. He’s written thoughtfully on some key eDiscovery issues, so it’s worth taking a look at those if you’re in front of Judge Edison.

As you know, we always tag our case law and content in the eDiscovery Assistant database using our proprietary issue tagging structure, and those issues today include search terms, proportionality, and inaccessibility. All right let’s dive into what the facts of our case are.

As I mentioned, the underlying dispute here involves the securities class action fraud case. Before the Court is a discovery dispute regarding the scope of the documents to be reviewed and produced. In November of 2021 the plaintiffs here identified 50 custodians from whom they wanted to collect documents, and they also proposed search terms to the other side. The parties then spent about five months going back and forth exchanging proposals on search terms to try to come to some agreement on what should be collected and reviewed.

At this point before the Court, the parties are really at an impasse. The plaintiffs have identified search terms that provide for a total of 1.3 million documents to be reviewed, including families. The defendants have countered with a search term proposal that would identify just less than half of that or about 650,000 documents. Huge difference in terms of the number of documents that we’re talking about identifying for review and production.

There does not appear from this decision to be any additional evidence before the Court that the defendants have provided of sampling any of the information, providing feedback, hit reports, relevance as to particular hits on search terms. None of that seems to be before the Court on this motion.

At this point, the defendants claim that the costs of plaintiff’s proposal on the 1.3 million documents are too expensive, and the Court is undertaking an analysis as to how it should allow the parties to proceed.

In terms of that analysis, the Court starts with Rule 26(b)(1) of the Federal Rules of Civil Procedure. I’m going to just highlight for you this particular language, which we see in almost every eDiscovery decision, but it’s usually more on the relevant side than it is on the proportionality side. This is the key quote from Rule 26(b)(1):

Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to the party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the party’s relative access to relevant information, the party’s resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.

That section requires two things, relevance and proportionality, and the Court dives into here the definition of proportionality, which focuses on the marginal utility of the discovery sought. As you can tell from what I just listed for you in that quote, there are six factors that determine proportionality under Rule 26(b)(1):

1. The importance of the issues at stake in the action

2. The amount in controversy

3. The party’s relative access to relevant information

4. The party’s resources

5. The importance of discovery in resolving the issues

6. And whether the burden or expense of the proposed discovery outweighs its likely benefit

If a party resists discovery on the grounds of proportionality, that party bears the burden of making a specific objection and showing that the discovery fails Rule 26(b)’s proportionality calculation. Essentially, here it is on the defendants to show that the discovery that the plaintiffs are requesting, that results in 1.3 million documents for review is not proportional to the needs of the case. In order to be able to assess that proportionality, the Court looks individually at each of the six factors and takes really large picture view of the case, because that’s really the only evidence before the Court. There’s nothing specific for the Court to base on these specific six factors under Rule 26.

Starting with the importance of the issues at stake, the Court really finds that, given the central purpose of the security laws, is to protect investors and would be investors against misrepresentations like those alleged in this case, there’s not really any debate that the issues at stake in the case are meaningful. That factor weighs in favor of the plaintiffs.

The second factor is the amount in controversy and the Court notes that the large amount that the plaintiffs are seeking to recover here, which is more than a billion dollars in damages, weighs very heavily in favor of allowing the sought-after discovery that plaintiffs have asked for. That factor weighs in favor of the plaintiffs.

The third factor is the party’s relative access to relevant information. With regard to this particular factor, the Court looks at the fact that the requested documents really consist of emails and other electronic communications that are all maintained by the defendant, and the defendants have complete and exclusive control over their electronic platforms, and there is no additional way for the plaintiffs to obtain such information other than from the defendants through the discovery process. As a result, the Court finds that that factor weighs in favor of the plaintiffs and providing all of the discovery that the plaintiffs are seeking.

The fourth element is the party’s resources, and the Court notes that it really does not have much to go on here, and those are the Court’s exact words. The Court says:

I know that McDermott has been through a bankruptcy proceeding, and plaintiff’s main source of recovery is expected to be through an insurance agreement. But I am unaware of the specific policy limits, and neither side has offered any argument or evidence on this factor. As a result, I view this factor as neutral.

This one stays really neutral, not for either side. We’ve essentially got three factors in favor of the plaintiffs, and the fourth one is neutral.

The fifth factor is the importance of the discovery in resolving the issues. For this one, I’m going to read you exactly what the Court says because it’s the most crucial.

Plaintiff search terms appear, for the most part to be tailored to obtaining documents that are relevant to the claims and defenses in this case. As I have noted before, I am well aware of the costs associated with email pulls. I am also mindful of how important email searches can be to unlocking the truth in certain securities fraud cases. Nobody, of course, knows what the email searches will reveal until the documents are reviewed and nonprivileged relevant documents are produced, but it is awfully likely that the sought-after documentation is relevant and highly probative of plaintiff’s claims and defendants defenses in the case.

Based on that, the Court. Found that the importance of discovery in. Resolving the issues leans towards the plaintiffs.

We’ve got four out of five factors so far leaning in favor of the plaintiff.

The final factor is whether the burden or expense of the proposed discovery outweighs its likely benefit. Here is where the parties really fall short in providing evidence to the Court. By parties, I really mean the defendants because they’re the ones with the burden to show that discovery sought is not proportional to the needs of the case. Here the Court really says that it can’t say because whether or not the plaintiffs requested search terms will provide more information than defendants proposed search terms.

The Court goes on to state that one would expect that the additional search hits will yield more information, but where do you draw the line? The Court notes that the whole purpose of the proportionality requirement is to set boundaries on the amount of documentation plaintiffs can obtain through the discovery process, and it acknowledges that discovery and securities fraud cases is very costly. In order to protect the defendants and securities fraud cases from the burden and expense of premature discovery, the Private Securities Litigation Reform Act of 1995 precludes discovery until the district court sustains the sufficiency of the complaint.

The Court then addresses the fact that the Judge Hanks, has denied the defendant’s motion to dismiss brought under those sections, and as a result, that the defendants are fully entitled to employ the discovery devices provided by the Federal Rules of Civil Procedure. That discovery door has been “flung, wide open”, and plaintiffs should be allowed to probe inside according to the Court.

The purported damages in this case are huge and that indicated to the Court that the plaintiff’s proposal was proportional to the needs of the case. The Court notes that it’s a close call, but ultimately concludes that the scales tip in favor of the plaintiffs on the proportionality analysis.

As such, noting that five of the six factors weighed in favor of the plaintiffs, the Court orders the defendants to promptly apply plaintiff’s proposed search terms, review the responsive documents expeditiously for privilege and relevance, and produce relevant non privileged documents on a rolling basis.

That’s really the breakdown of the analysis, the proportionality factors and what I’d like to highlight is the fact that when arguing to the court on a motion for proportionality, you’re going to need to have specifics to be able to argue that sixth factor, which is, is the cost of providing the information really relative to the needs of the case. Here in order to be able to make that argument effectively, what the defendants needed to do was provide some sampling of search terms or hit reports or specifically review some samples of documents and be able to show to the Court why specific search terms are going to be over broad.

In cases that we’ve seen here on Case of the Week and other case law in the eDiscovery Assistant database, the proportionality considerations come down to you showing the Court specifically and factually based on search terms, why search terms are over broad and not going to be proportional to the needs of the case.

I think that’s our biggest takeaway from today’s case is that you’ve got to be able to show more evidence, particularly in a large-scale class action worth billions of dollars, where it seems that the plaintiffs have worked diligently to provide search terms that didn’t seem overbroad to the Court in this particular instance.

Nothing in the opinion about the analysis provided by the defendants as to the documents gave the Court any teeth to be able to chomp into to be able to say there’s no real need for this broad scope of discovery.

We’ve seen in other proportionality cases where the Court has ordered that the parties start with a certain level of information based on search terms and expand out, or that the parties agree on a certain set of sample search terms for custodians and then branch out based on rulings from the Court or come back to the Court with more specific information about what additional information is needed, but here the parties just didn’t do that. The defendants didn’t put anything before the Court that we can see in this decision.

There may be, as always, more information in the briefing than is available on this decision, but that’s not what we look at for purposes of our Case of the Week.

All right. That’s our Case of the Week for this week. Thank you so much for joining me. We’ll be back again next week with another decision from our eDiscovery Assistant database. If you are an ACEDS member and interested in using eDiscovery Assistant, there is a discount available to current ACEDS members, as well as a trial for folks who are taking the ACEDS exam. If you’re interested in either of those, there is information available to you in your ACEDS portal about how to contact us.

If you’re interested in doing a free trial of our case law database and resource tool at eDiscovery Assistant, sign up or reach out to us at support@eDiscoveryAssistant.com to set up a demo for you and your team.

Thanks so much. Stay safe and healthy out there and I’ll see you next week.

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