322 F.R.D. 1 (D.D.C. 2017)
This matter was referred to the undersigned for resolution of all discovery disputes. Presently ripe for resolution is Defendants' motion to compel, requesting that the Court order Plaintiffs to produce all documents belonging to their CEO, which Plaintiffs contend would be unduly burdensome and disproportionate to any value those documents might possess to Defendants in this litigation. Following two hearings, and upon consideration of the parties' filings and the entire record, the Court finds that Defendants' motion to compel should be granted.
Plaintiffs are five related companies (collectively, "Oxbow") that mine and sell coal and petroleum coke ("petcoke"). They allege in the Amended Complaint that Union Pacific ("UP") and BNSF Railway Company ("BNSF")—both railroad companies with which Oxbow contracts to ship coal and petcoke—conspired to engage in anticompetitive conduct from 2004 to 2012 in violation of the Sherman Antitrust Act, codified at 15 U.S.C. §§ 1 and 2, and that the conspiracy forced Oxbow to pay higher prices to ship coal and petcoke.
Specifically, Oxbow alleges that UP and BNSF conspired to (1) fix fuel rates applied to commercial rail freight service above competitive levels through a uniform fuel surcharge and (2) allocate certain markets for coal shipment to each other, granting UP a monopoly in at least one region of the country. Oxbow claims it paid Defendants more than $50,000,000 in illegal fuel surcharges as a result of the alleged conspiracy and seeks treble damages under 15 U.S.C. § 15, as well as its lost business and profits that proximately resulted from the conspiracy.
In their motion, Defendants request that the Court compel Oxbow to add William I. Koch ("Koch"), Oxbow's founder, CEO, and principal owner, as a document custodian whose records will be searched for material responsive to Defendants' discovery requests. Defendants maintain that Koch indisputably possesses relevant, unique information responsive to their requests, and argue that Oxbow has improperly refused to produce this information based on the unsupported theory that production of his documents would be disproportionately burdensome and duplicative of documents produced from searches of nineteen other Oxbow custodians' files.
Based on review of documents already produced from other Oxbow custodians, Defendants believe Koch's records contain information that would, among other things, reveal that market forces—as opposed to Defendants' alleged collusion—contributed to increasing rail freight costs and any of Oxbow's lost profits. Defendants also assert that their discovery request is proportionate and reasonable in light of the facts of this case, including the tens of millions of dollars Oxbow seeks in damages.
In opposition, Oxbow argues that Defendants failed to satisfy their burden of demonstrating that the discovery they seek is not unduly burdensome. Based on its calculations, Oxbow estimated that adding Koch as a custodian would result in roughly 130 gigabytes of additional documents to be filtered through the parties' previously agreed-upon search terms, a process Oxbow initially estimated would cost $250,000. Oxbow further contends that many of Koch's documents would likely be duplicative of other custodians' documents or only marginally responsive given Koch's senior position over a conglomerate of Oxbow companies, only some of which are involved in the coal and petcoke businesses.
At the first hearing on Defendants' motion, Oxbow represented that it was open to analyzing a random sample of Koch's records using the agreed-upon search terms to provide concrete numbers regarding the responsiveness of Koch's documents and a basis to negotiate new search terms if necessary. Accordingly, the undersigned held Defendants' motion in abeyance pending analysis of a sample of Koch's documents and the parties' attempt to negotiate a resolution themselves.
Following the hearing, Oxbow collected a total of 467,614 documents from Koch's electronic and physical files and provided them to a vendor for processing. After removing duplicative records, the vendor searched Koch's documents using the agreed-upon search terms, which yielded 45,639 document hits—82,600 documents in total when including "families" of documents. The vendor collected a random sample of ten percent of these hits and any associated families—12,074 documents in total—and provided them to Oxbow for review for privilege and responsiveness. Of these 12,074 documents, Oxbow determined that approximately 1,300 documents—about 11.67 percent—were actually responsive to the search terms and produced them to Defendants. The initial processing of Koch's records and review of the sample documents cost Oxbow $57,197.95.
Based on its experience reviewing the sample documents, Oxbow now estimates it will cost approximately $85,000 to process, review, and produce the remainder of Koch's documents to Defendants, bringing the total cost of the effort, including the sampling review, to approximately $142,000—significantly less than Oxbow's original $250,000 estimate. Oxbow's initial estimate had assumed it would need to review approximately 214,000 documents for false positives and privilege, but applying the agreed-upon search terms yielded only 45,639 hits on Koch's documents (82,600 documents including families).
The sampling effort did not resolve the dispute. In an August 2, 2017 Joint Status Report, the parties advanced dramatically different interpretations of the sampling results. Oxbow believes the results confirm that complete production of Koch's documents would be an unnecessary burden and expense, particularly given the documents' low responsiveness rate to the search terms. Following its sampling, Oxbow refused to negotiate with Defendants over the agreed-upon search terms or to provide Defendants with the sampling data necessary to evaluate the effectiveness of the terms, asserting that any renegotiation would not be worth the attorney time it would take because it was unlikely to dramatically reduce the number of hits Oxbow would ultimately need to review. Accordingly, Plaintiffs again asked the Court to deny the motion to compel or, in the alternative, order Defendants to bear the cost of production.
Defendants view the sampling results as proof of relevant and unique documents in Koch's records. While acknowledging Koch's records are less responsive to the search terms than other custodians' files, Defendants note this is to be expected because other custodians deal more exclusively with Oxbow's coal and petcoke business than Koch does. Defendants contend the lower number of hits confirms that the search terms effectively narrowed the universe of documents to be reviewed. Defendants estimate, by extrapolation from the sampling, that Koch's files likely contain approximately 10,000 responsive documents—roughly equivalent to the total number produced by each of Oxbow's other custodians—and they remained willing to renegotiate search terms following the sampling. Oxbow's refusal to share sampling data or renegotiate has prevented productive further discussion; given Oxbow's refusal and the large amount at stake, Defendants oppose cost-sharing and seek a ruling now.
Rule 37 of the Federal Rules of Civil Procedure provides that, on notice, a party may move for an order compelling disclosure of discovery from a party who fails to comply with its discovery obligations. The movant bears the initial burden of proving that the opposing party's answers were incomplete and explaining how the requested information is relevant. If the movant satisfies this burden, the burden shifts to the non-movant to explain why discovery should not be permitted.
Under Rule 26(b)(1), parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case. To determine proportionality, courts commonly weigh six factors: (1) the importance of the issues at stake; (2) the amount in controversy; (3) the parties' relative access to relevant information; (4) the parties' resources; (5) the importance of the discovery in resolving the issues; and (6) whether the burden or expense of the proposed discovery outweighs its likely benefit. No single factor controls; proportionality determinations are case-specific. The party resisting discovery must specifically object and show that a discovery request would impose an undue burden or expense.
Oxbow does not dispute that Koch's records contain documents responsive to the parties' negotiated search terms and relevant to this litigation; in fact, Oxbow has already produced approximately 1,300 such documents from the sampling. Instead, Oxbow objects to compelling review and production of Koch's remaining documents on burden and cost-shifting grounds, arguing the cost is so unreasonable that the Court should order Defendants to cover production expenses.
The Court is unpersuaded. Oxbow declined to address several Rule 26 proportionality factors—namely, the importance of the issues, the amount in controversy, the parties' relative access to information, the parties' resources, and the importance of the discovery in resolving the issues—and relied primarily on the contention that the burden and cost of complying would outweigh the benefits. Weighing the six Rule 26 factors demonstrates that adding Koch as a searched custodian will be neither unduly burdensome nor unreasonably expensive in light of this case, and the circumstances do not warrant shifting costs to Defendants. Accordingly, Defendants' motion to compel is granted and Plaintiffs shall produce all remaining responsive documents from Koch's files at their own expense.
The first Rule 26 factor calls for the Court to examine the significance of the substantive issues at stake. Courts should carefully scrutinize discovery requests in cases affecting important public policy interests. By Oxbow's own suggestion, this case involves significant issues with potential broad impact: Oxbow has stated a favorable ruling could benefit America's shippers and consumers by saving billions of dollars a year in reduced rail freight charges. Koch himself has publicly accused Defendants of relying on overreaching behavior to shortchange American consumers and of using tactics to prevent competition and intimidate customers. Defendants do not disagree with Oxbow's estimation of the case's significance. The undersigned finds that the importance of the issues weighs in favor of granting Defendants' discovery request.
Under the second factor, courts compare the cost of discovery to the amount in controversy. Oxbow seeks to recover more than $50 million in alleged illegal fuel surcharges and also seeks trebling of damages and recovery of lost business and profits; Defendants have suggested the total sought may exceed $150 million. Oxbow estimates the cost of complying with Defendants' proposed discovery at approximately $140,000, including $57,197.95 already spent. Given the substantial damages Oxbow seeks, the cost of producing information relevant to Defendants' defense does not appear excessive, so this factor favors granting the request.
Courts look for information asymmetry—where one party has far more discoverable information than the other. Here, Koch possesses relevant, unique information and there appears to be no other practical way for Defendants to obtain it. To the extent this factor applies, it militates in favor of granting Defendants' request.
Considering the parties' resources, the Court finds this factor favors granting Defendants' request. Discovery should not be used to wage a war of attrition, but Oxbow represented at the hearing that it does not object to the request based on inability to pay. The Court sees no reason to deny the request on resource grounds.
This factor requires the Court to determine whether the requested discovery goes to the heart of the litigation. Oxbow acknowledged that Koch's records contain unique and relevant documents and produced a portion of them. Given Koch's position as the principal owner and CEO and his public comments about the litigation and the company's financial health, it is reasonable to expect he would have unique information relevant to the case. The categories of relevant documents identified by Defendants after reviewing the approximately 1,300 produced documents indicate the discovery request has merit. This factor favors granting the proposed discovery.
Oxbow places primary weight on this factor, arguing many hits are false positives and that the estimated $85,000 to review and produce the remainder of Koch's files is prohibitively burdensome. The Court disagrees. Plaintiffs' counsel explained at the second hearing that Oxbow has spent $1.391 million to date reviewing and producing approximately 584,000 documents from nineteen custodians and an email archive. Considering that Oxbow seeks tens of millions in damages, the estimated additional cost—and the total projected cost of approximately $142,000 including sampling—is not so unreasonably high as to justify denial. The projected number of responsive and unique documents in Koch's files (about 10,000) is largely consistent with responsive counts from the other custodians, and Koch's responsiveness rate of 11.67 percent, while low, is not the lowest. For these reasons, and absent evidence that Defendants seek Koch's records to wage a war of attrition, the Court finds the burden does not outweigh the likely benefit and grants the motion.
Oxbow alternatively asks the Court to direct Defendants to bear discovery costs. The presumption under the Federal Rules is that the producing party bears the costs of complying with discovery requests, though a court may shift costs where discovery would unduly burden the producing party. Rule 26(c)(1)(B) permits a court, for good cause, to protect a party from undue burden or expense by specifying the allocation of expenses. Courts consider the needs of the case, the amount in controversy, the parties' resources, the importance of the issues, and the importance of the proposed discovery in resolving those issues when deciding cost-shifting requests.
Oxbow has failed to rebut the presumption that it should bear production costs. The proportionality analysis above—substantially the same factors considered for cost-shifting—confirms Defendants' proposed discovery does not impose an undue burden or expense warranting reallocation. Oxbow must therefore bear the cost of producing the unique and relevant discovery in its possession, custody, and control that Defendants need to defend against the Amended Complaint. Oxbow's request to shift discovery fees to Defendants in whole or in part is denied.
For the foregoing reasons, Defendants' motion to compel production of documents from Koch's records is GRANTED. Oxbow shall produce all unique and relevant documents from Koch's records within 30 days of the entry of this Memorandum Opinion. An appropriate order will accompany this Memorandum Opinion.
G. MICHAEL HARVEY
UNITED STATES MAGISTRATE JUDGE
Date: September 11, 2017