Practical ESI Lesson Concerning Non-Parties

January 2017 brought a series of decisions by motion courts in New York County Supreme Court concerning electronically stored information (ESI) discovery disputes with non-parties. Bank of N.Y. Mellon v. WMC Mtge., 1 2017 N.Y. Misc. LEXIS 222 (Sup. Ct. N.Y. Co. Jan. 18, 2017) (J. Kornreich) made clear a requesting party’s obligation to defray the ESI expenses on a non-party and, while requiring tailored ESI protocols to minimize cost, the expenses that would be paid by the requesting party included reasonable collection, review and production costs, including certain legal fees. In RSSM CPA v. Bell, 2 2017 N.Y. Misc. LEXIS 40 (Sup. Ct. N.Y. Co. Jan. 6, 2017) (J. Kornreich), a plaintiff entity in financial extremus was not permitted to assert that it could not afford to fund its ESI discovery obligations and, taking into account proportionality concerns and limiting what may need to be produced, the motion court indicated that the entity’s partners may well need to assume and fund certain of such expenses. Finally, warning that a party may be sanctioned for spoliation even when ESI is in the possession of a non-party, the motion court in Threadstone Advisors v. Success Apparel, 3 2017 N.Y. Misc. LEXIS 347 (Sup. Ct. N.Y. Co. Jan. 31, 2017) (J. Rakower), where the uncooperative principal of the defendant claimed to lack the know-how to access the requested ESI, cut through such claim by granting plaintiff’s expert supervised access to defendant’s accounting system.

Cost-Shifting and Proportionality

In WMC Mtge., the court noted that, when a party is seeking documents from a non-party, cost-shifting will be applied to “defray [the non-party's] reasonable document collection, review, and production costs, including certain legal fees,” citing 22 NYCRR 202.70, Rule 11-c, Appendix A (“Fees charged by outside counsel and e-discovery consultants … include “[t]he costs incurred in connection with the identification, preservation, collection, processing, hosting, use of advanced analytical software applications and other technologies, review for relevance and privilege, preparation of a privilege log (to the extent one is requested), and production.”).¹