Who Pays for Discovery? A Cost Roadmap for Clients
John A. Schena, Esq.
Schwartz Semerdjian Ballard & Cauley LLP
The crossroads for nearly every client is where its idealistic notion of advocacy meets the reality of cost. Anywhere from half to three-quarters of the normal litigation fees are incurred during the discovery process. And the costs associated with discovery grow higher each year as expert witness fees rise with inflation, the fees of discovery motions increase to meet the budget shortfall, and electronic discovery becomes the rule rather than the exception. The general rule in California is that each party bears the cost of financing its own litigation, including the costs of conducting and responding to discovery. Recovery of certain costs may be permitted at the end of successful litigation, but normally not during the pendency of the action. The potential for a partial return of expended fees and costs years down the road is hardly salivating for the party who is contemplating whether to invest its money in the next round of depositions or the next prototype. As with the “American Rule” in general, the lack of cost-shifting discovery statutes presses each side toward settlement regardless of the merits of the underlying lawsuit. While the rule seems harshest on defendants, who whether by curse, bad luck, or their own doing, find themselves in litigation against their will, there are several mechanisms in place that operate to shift or help lower discovery costs along the long road to judgment. When the client asks, “who pays for discovery?” the answer is not as simple as replying, “you.”
Surprisingly, the California Code of Civil Procedure (“C.C.P.”) has only three statutes in place that “automatically” shift the cost burden from the responding party to the requesting party, each of which is known to the seasoned litigator but often not explained to the client. C.C.P. Section 2034.430 requires a deposing party compensate another party’s expert his or her “reasonable and customary hourly or daily fee,” which may total in the thousands of dollars after a full day’s deposition. Another basic tenant, but one that clients often do not realize at the onset of litigation, is that the party noticing a deposition pays the costs of transcription, which is often not a small sum. C.C.P Section 2025.510(b). And finally, C.C.P Section 2031.280(e) states that the party requesting electronic discovery pays the reasonable expense to “translate” electronic data sought through discovery into a “reasonably usable” form if necessary. In short, the cost of converting nebulous data into an actual production may be passed to the requesting party under the ideal scenario: where it is both reasonable and necessary. The common thread of the three cost-shifting statutes is the incentive for the party seeking discovery to “only demand what it really needs.” Toshiba America Electronic Components, Inc. v. Sup. Ct. (2004) 124 Cal.App.4th 762, 771. Note, that while these three statutes are “automatic” in their cost-shifting nature, the trial court has the authority to make an alternative determination that costs should be reasonably shared by parties other than the requesting party.
Outside of those three lonely statutory provisions, parties are generally expected to bear their own costs associated with responding to discovery. However, the expectation is not where the analysis ends as every trial court has the inherent authority to exercise reasonable control over discovery matters, including theoretically shifting the cost from the responding party to the requesting party. Notably, a party seeking discovery “is expected to bear any special attendant costs” associated with its request. San Diego Unified Port Dist. v. Barnhart, Inc. (2002) 95 Cal.App.4th 1400, 1404. Case law has been careful to avoid providing a precise or limited definition for what may qualify as a “special attendant cost,” however certain examples act as guideposts for the party seeking to shift costs associated with non-routine discovery demands. For example, the cost of testing subject property should only be borne by those parties who affirmatively request the testing or agree to the testing, not by the party simply in possession of the property. Id. Likewise, a responding party does not need to bear the cost of translating its documents from one language to another for the ease of the requesting party’s use. In re Puerto Rico Elec. Power Authority (1st Cir. 1982) 687 F.2d 501, 506. The foregoing illustrations, along with the automatic shifting in the electronic discovery statute, confirm that a party will generally not be responsible for the cost of altering its documents or information to a uniquely tailored discovery request.
Keep in mind that cost-shifting of responding to non-routine discovery demands requires some legwork. A party seeking to shift the cost of discovery should make its intention to do so apparent at the onset of the presentation of the issue by serving formal objections and thereafter affirmatively moving for a protective order. The moving party should appeal to the trial court’s broad discretion to protect a party against “undue burden and expense” in the furtherance of justice. C.C.P. Section 2025.420(b). A protective order should issue if the responding party shows that the burden of proceeding with the discovery request clearly outweighs the benefits sought to be obtained. See, e.g., C.C.P. Section 2017.020(a). Often, the simplest way to meet the burden is to show that the evidence sought may be obtained through a less expensive alternative mechanism, but that the requesting party is placing “special attendant costs” on the demand by requiring a response to be tailored in a specific manner. While the protective order itself may have upfront costs of attorneys’ fees, monetary sanctions are imposed against the losing party unless it acted “with substantial justification” or doing so would be “unjust.” See, e.g., C.C.P. Section 2025.420(h).
When discovery is sought from non-parties to the underlying litigation a few more possibilities exist that allow for shifting costs. California businesses may charge the party issuing a business records deposition subpoena all reasonable costs associated with producing records in a California civil case. These costs include postage, clerical charges and reproduction of documents. Cal. Evid. Code Section 1563(b). Payment of costs can be received when the subpoenaed records are delivered, and businesses have no obligation to deliver the records until the payment is made. Likewise, the deposing party must pay a non-party deponent a witness fee of $35 per day, and $0.20 per mile traveling expense to and from the deposition location. C.C.P. Section 2020.230(a). Of course the recovery of nominal costs provides little solace to the non-party who is put out to accommodate the needs of the litigants.
Effective lawyers should use the foregoing statutes and case law guideposts, along with improved document review programs, to keep discovery costs as low as possible for their clients as there simply are very few guarantees that the high costs associated with discovery will be recouped.