Silverman v. Shaoul
Silverman v. Shaoul
30 Misc.3d 491 (N.Y. Sup. Ct. 2010)
November 3, 2010

Bransten, Eileen,  Justice

Cost-shifting
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Summary
The Court denied the Defendants' Order to Show Cause to Compel Plaintiffs to Pay for Costs of Electronic Discovery. The Court found that the data requested was not “readily available” and thus the Defendants should not be required to pay for its production. The Court found that the data at issue was neither archived nor deleted, but simply stored in a number of places and “interspersed with defendants' various documents for their several business entities.” The Court found that the documents requested by Plaintiffs have not been shown to be unduly difficult or burdensome to obtain and produce.
BLAKE SILVERMAN et al., Plaintiffs,
v.
BENJAMIN SHAOUL et al., Defendants
603231/08
Supreme Court, New York County, New York
November 03, 2010

Counsel

Alan M. Winchester, Esq. and Stanley Goos, Esq. of Harris Beach PLLC, for the Defendants.
Arthur M. Rosenberg, Esq. and Gerard Schiano–Strain, Esq. of Kane Kessler, P.C., for the Plaintiffs.

Opinion

*492 Defendants Benjamin Shaoul, Marc Ravner, Lemadre Development, LLC and Magnum Management, LLC (the “Defendants”) move to compel plaintiffs Blake and Tracy Silverman (the “Plaintiffs”) to pay for costs of electronic discovery. Plaintiffs oppose.
The parties are familiar with the facts of this matter, and therefore the facts are only discussed as necessary.
ANALYSIS
Defendants move to compel Plaintiffs to pay for the costs of “collecting, processing and hosting electronic data” incurred due to Plaintiffs' requests for disclosure. Defendants' Memorandum of Law in Support of Order to Show Cause to Compel Plaintiffs to Pay For Costs of Electronic Discovery (“Defendants' Memo.”), p. 1. Defendants argue that New York law places such costs on the shoulders of the producing party. Defendants further argue that the data requested was not “readily available,” and thus they should not be required to pay for its production.
Defendants rely heavily on T.A. Ahern Contractors Corp. v. Dormitory Authority, 24 Misc.3d 416, 875 N.Y.S.2d 862 (Sup.Ct., N.Y. County 2009) for the proposition that New York law is well-settled in that the “party seeking discovery bears the cost incurred in its production.” Id. at 424, 875 N.Y.S.2d 862 (citing Waltzer v. Tradescape & Co., LLC, 31 A.D.3d 302, 304, 819 N.Y.S.2d 38 [1st Dep't 2006] ); Defendants' Memo., p. 2; Reply Affirmation of **872 Stanley Goos in Support of Order to Show Cause to Compel Plaintiffs to Pay for Electronic Discovery (“Reply Aff.”), ¶ 4. In T.A. Ahern, both parties moved to compel electronic and other discovery. The plaintiff, Ahern, argued that either the producing party should bear the cost of reviewing the data in question, or turn it over in full subject to a confidentiality agreement, so that Ahern would be able to undertake its own review. T.A. Ahern, 24 Misc.3d at 418–419, 875 N.Y.S.2d 862. *493 The court declined to compel production of each party's requests for electronic discovery until each party agreed to cover the costs of producing the data that party requested. Id. at 424, 875 N.Y.S.2d 862. Any agreement between the parties allocating production costs was specifically subject to reallocation at trial. Id.
By contrast, in the instant case, without Plaintiffs' agreement Defendants performed work for which they now seek reimbursement. Defendants argue that Plaintiffs' failure to respond to Defendants' July 9, 2010, letter regarding production cost estimates, coupled with August 2010 email discussions between Plaintiffs and Defendants regarding search terms to be utilized in discovery, constitutes Plaintiffs' agreement to bear the costs of production. Reply Aff., ¶ 8; see Reply Aff., Ex. C (“August Emails”); Affirmation of Stanley Goos in Support of Defendants' Order to Show Cause to Compel Plaintiffs' to Pay for Electronic Discovery (“Goos Aff.”), Ex. C (July 9, 2010 letter from Stanley Goos to Arthur Rosenberg). However, a party's silence will only be “deemed an acquiescence where he or she is under such a duty to speak that his or her conduct, accompanied by silence, would be deceptive and beguiling.” Russell v. Raynes Associates Ltd. Partnership, 166 A.D.2d 6, 15, 569 N.Y.S.2d 409 (1st Dep't 1991) (quoting Brennan v. National Equitable Investment Co., 247 N.Y. 486, 490, 160 N.E. 924 [1928] ). Plaintiffs had no duty in law to respond, and Plaintiffs' lack of response may not be deemed acquiescence.
Defendants have neither alleged nor shown anything about Plaintiffs' August Emails such that the Court will interpret Plaintiffs' lack of response to the July 9th Letter as acquiescence to its terms. Plaintiffs' silence and subsequent conduct were neither deceptive nor beguiling.
Furthermore, even if T.A. Ahern was more factually similar to the instant case, the proposition for which Defendants cite the case, when contextualized, does not advance their argument. In stating that it is the “well-settled rule in New York State that the party seeking discovery bear[s] the cost incurred in its production,” T.A. Ahern cites the First Department's decision in Waltzer. T.A. Ahern, 24 Misc.3d at 424, 875 N.Y.S.2d 862. Waltzer, as Defendants repeatedly cite, declares: “as a general rule, under the CPLR, the party seeking discovery should bear the cost incurred in production of discovery material.” 31 A.D.3d at 304, 819 N.Y.S.2d 38; Defendants' Memo., p. 3; Reply Aff., ¶ 4.
However, Defendants chose to cite Waltzer selectively. The cited quote continues “however, here we are not dealing with the retrieval of deleted, electronically stored material.” *494 Waltzer, 31 A.D.3d at 304, 819 N.Y.S.2d 38. Nor does the instant case involve deleted or similarly impeded data. Indeed, the cases cited by Defendants for the proposition that the requesting party should bear the costs of electronic discovery demonstrate a higher burden to obtain and produce upon the producing party than Defendants allege here. Defendants' data was available, but “interspersed amongst data related to [Defendants'] other business entities.” Defendants' Memo., p. 5; Reply Aff.,¶ 12.
**873 Defendants next cite Lipco Elec. Corp. v. ASG Consulting Corp., 4 Misc.3d 1019(A), 2004 WL 1949062 (Sup.Ct., Nassau County 2004) for the proposition that the requesting party pays for the costs of production. The court in Lipco declined to order the electronic discovery sought and thus the actual burden that would have been visited upon ASG, the party from whom production was sought is unknown. However, ASG alleged that “[i]n order to provide the data sought ... a separate program would have to be devised to search for and extract each individual table of data ... a relational database would then have to be created to store the store the extracted data and a program devised to transfer the data on to a disc or hard drive ... [then] a compatible version of [the original program] would have to be acquired and installed in order to read and collate the data.” Lipco Elec. Corp., 4 Misc.3d 1019(A) at 6–7, 2004 WL 1949062.[1] The burden on ASG was thus much greater then in the case at bar.
Defendants also rely on Delta Financial Corp. v. Morrison, 13 Misc.3d 604, 819 N.Y.S.2d 908 (Sup.Ct., Nassau County 2006) for the proposition that “allocating costs to the requesting party is appropriate where the producing party implemented search and de-duplication protocols in order to harvest responsive information.” Defendants' Memo, p. 4. Extensive discovery had already been conducted in that case, including restoration of back-up tapes containing requested data. Therein, the defendants sought additional discovery from the plaintiffs including additional searches on data already restored from which discovery materials had been produced and searches that would require restoration of additional back-up tapes. Id. at 606–614, 819 N.Y.S.2d 908. Importantly, the defendants volunteered to pay the costs associated with further discovery and raised the possibility that further searches might *495 not be worthwhile. Id. at 607, 819 N.Y.S.2d 908. The court, skeptical that any relevant documents would be found, accepted defendants' offer to pay and ordered test searches to determine whether further discovery was appropriate. Id. at 612, 614, 819 N.Y.S.2d 908. Delta Financial Corp. is distinguishable from the case at bar. Plaintiffs have not offered to pay for the costs incurred, relevance is not at issue, and, importantly, the burden borne by the Delta Financial Corp. defendants included restoration of archived material, whereas in the instant case, Defendants' burden does not.
Defendants next cite Etzion v. Etzion, 7 Misc.3d 940, 796 N.Y.S.2d 844 (Sup. Ct., Nassau County 2005) for the proposition that “ordering the requesting party to pay for costs may be appropriate where the producing party must copy or clone entire hard drives of information.” Defendants' Memo., p. 4. The Court in Etzion ordered the requesting plaintiff to pay the costs of her own computer expert, but not simply because files had to be copied or cloned. The Court stated that “[i]n cases in which it is suggested that some files might have been deleted or altered, the services of a computer expert is required to insure complete and accurate discovery of relevant data. Notwithstanding an effort to delete certain information, computer experts assert that they can nonetheless clone' a hard drive and restore or rescue deleted documents.” Etzion, 7 Misc.3d at 943, 796 N.Y.S.2d 844. Indeed, the plaintiff in that case did suggest that files had been altered, and the services of computer experts **874 for both sides were required. Id. at 941–942, 796 N.Y.S.2d 844. The Court in Etzion thus envisioned a heavier burden than Defendants suggest.
Furthermore, contrary to Defendants' assertions, the First Department recently stated that it saw “no reason to deviate from the general rule that, during the course of the action, each party should bear the expenses it incurs in responding to discovery requests.” Clarendon Nat. Ins. Co. v. Atlantic Risk Management, Inc., 59 A.D.3d 284, 286, 873 N.Y.S.2d 69 (1st Dep't 2009). Reading Clarendon with Waltzer, precedent shows that the requesting party bears the cost of electronic discovery when the data sought is not “readily available.” Data is not readily available upon a showing of undue burden by the producing party to obtain the data. Cf. Waltzer, 31 A.D.3d at 304, 819 N.Y.S.2d 38; MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 27 Misc.3d 1061, 1075–1076, 895 N.Y.S.2d 643 (Sup.Ct., N.Y. County 2010); Delta Financial Corp., 13 Misc.3d at 605–617, 819 N.Y.S.2d 908; Lipco Elec. Corp., 4 Misc.3d 1019(A) at 6–7, 2004 WL 1949062.
*496 The data at issue in the instant case was neither archived nor deleted; it was simply stored in a number of places and “interspersed with defendants' various documents for their several business entities.” Defendants' Memo., p. 5; Reply Aff., ¶ 12. The fact that Defendants were required to “process” the data discloses no undue burden, but merely the normal burden of litigation. Indeed, Defendants suggest they keep their records in accordance with the general expectations of the business world. Reply Aff., ¶¶ 10, 17. We do not suggest that retrieving archived data is the only circumstance that renders electronic data not “readily available.” However, Defendants' documents requested by Plaintiffs have not been shown to be unduly difficult or burdensome to obtain and produce. Defendants repeatedly suggest that their allegedly incurred high cost of producing the requested documents is a product of producing responsive documents. Defendants' Memo., pp. 2–3, 5; Goos Aff., ¶¶ 12, 14; Goos Aff., Ex. F., Affidavit of Deborah Duffy, ¶¶ 11–14; Reply Aff., ¶ 10. This is a cost that Waltzer places squarely on the shoulders of the producing party: “The cost of an examination by Defendants' agents to see if [material] should not be produced due to privilege or on relevancy grounds should be borne by [the producing party].” 31 A.D.3d at 304, 819 N.Y.S.2d 38.
We have considered Defendants' arguments and find them unavailing.
Accordingly, it is
ORDERED that Defendants' Order to Show Cause to Compel Plaintiffs to Pay for Costs of Electronic Discovery is denied.

Footnotes

Furthermore, Lipco's holding regarding cost-sharing in e-discovery derives from two cases predating the explosion of e-discovery.