Author ORCID Identifier

Jonathan Nash 0000-0001-5816-6896

Joanna Shepherd 0000-0002-1435-0197

Document Type

Article

Publication Date

2018

Keywords

Cost allocation, Discovery, Federal litigation, Federal Rules of Civil Procedure

Abstract

Recent proposals to revise Federal Rule of Civil Procedure 26 to incorporate cost allocation of discovery have sparked considerable controversy. Advocates for reform argue that replacing the long-standing “producer-pays” presumption with something more akin to a “requester-pays” rule would better align economic incentives and reduce litigants’ ability to wield discovery as an instrument to force settlement. Opponents argue that such a reform would limit access to justice by saddling requesters with an ex ante burden of funding the opposition’s discovery.

In this Article, we explain that either a rule requiring both parties to share the costs of discovery (“cost-sharing rule”) or a rule creating a risk for both parties that they will bear the entire costs of discovery (“cost-shifting rule”) would minimize many of the negative incentives that exist under either a strict producer-pays or requester-pays rule. Whereas the producer-pays rule creates incentives for excessive discovery because requesters can externalize the costs of requests and use discovery to impose costs on producing parties to force settlement, requesters under a cost-sharing or cost-shifting rule cannot externalize the costs of discovery requests and have no incentive to abuse discovery to force settlement because they bear the costs or risk of that impositional discovery. Similarly, whereas a requester-pays rule gives producers the incentive to drive up the costs of producing discovery, a cost-sharing or cost-shifting rule forces producers to either share the discovery costs or risk paying the entire cost, thereby reducing the incentive to drive up the costs of production to deter discovery requests. Moreover, while a requester-pays rule has the potential to create an access-to-justice problem if financially constrained litigants are overdeterred from making useful discovery requests or bringing claims altogether, we propose including an undue hardship exception to the default cost-sharing or cost-shifting rule to minimize access-to-justice issues. We also explain that different cost-allocation rules provide opportunities for litigants to signal the strength of their cases. Given concerns about the rising costs of discovery and debate over discovery’s acceptable scope, the ability of litigation signals to convey relevant and important information without the expense of discovery is potentially invaluable. Finally, whatever the approach to the allocation of discovery costs, we argue in favor of greater clarity in order to reduce litigation over cost allocation and encourage private bargaining.

The Article proceeds as follows. Part I discusses current federal law governing discovery cost allocation, with a focus on the setting of electronically stored information—a setting in which discovery costs tend to be especially high. Part II explains the incentives created by the current producer-pays rule and how those incentives would differ under a requester-pays regime. In Part III, we present our proposal for cost-allocation rules that would minimize many of the negative incentives that exist under either a strict producer-pays or requester-pays rule.

First Page

2015

Publication Title

Vanderbilt Law Review

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