The Rule 26 Proportionality Standard in Practice

April 2017

Kristen G. Hilton, CIPP/US

The Rule 26 Proportionality Standard in Practice
~How Courts in the Ninth Circuit Are Approaching the 2015 Amendments to FRCP Rule 26(b)

In December 2015, a new version of Rule 26(b)(1) of the Federal Rules of Civil Procedure ("Rule 26") took effect.  Discovery of relevant information is no longer based on whether the information is "reasonably calculated to lead to the discovery of admissible evidence."  In place of that familiar phrase, there is now a proportionality standard to guide the discovery process.  Specifically, amended Rule 26(b)(1) reads:

 Unless otherwise limited by court order, the scope of discovery is as follows: 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, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefits. Information within this scope of discovery need not be admissible in evidence to be discoverable.

The Civil Rules Advisory Committee noted that the revision simply "restores the proportionality factors [previously found in Rule 26(b)(2)(C)(iii)] to their original place in defining the scope of discovery", but "does not change the existing responsibilities of the court and the parties to consider proportionality, and the change does not place on the party seeking discovery the burden of addressing all proportionality considerations."  Fed. R. Civ. P. 26 advisory committee's note to 2015 amendment.  Nevertheless, the amendment "reflects the need for continuing and close judicial involvement in the cases that do not yield readily to the ideal of effective party management."  Id.  As Chief Justice John Roberts wrote in his 2015 Year-End Report on the Federal Judiciary, the changes to Rule 26 "may not look like a big deal at first glance, but they are."  Available at  Justice Roberts went on to state that the amendments to Rule 26 emphasize the need to impose "reasonable limits on discovery through increased reliance on the common-sense concept of proportionality."  Id. at 5.

More than a year into the new Rule 26 regime, how are courts in Ninth Circuit jurisdictions addressing the proportionality factors?  Has there been any shift in the way they view the limits of discovery, or is it business as usual?  To date, the Ninth Circuit Court of Appeals has not weighed in on the meaning or application of the rule change.  A survey of opinions from Oregon, Washington, and California shows the increased prominence of proportionality in discovery disputes and expectation that parties will engage in meaningful analysis of the factors listed in Rule 26.

A Common Sense Approach

Courts in all three states appear to be following Justice Roberts' advice and are taking a common sense approach to discovery disputes.  In McArthur v. The Rock Woodfired Pizza & Spirits, 318 F.R.D. 136 (W.D. Wash. Dec. 1, 2016), an employment case, the court found that plaintiff's document requests for company-wide financial information were not proportional given that plaintiff's allegations focused on her personal work environment at one business location.  While the court held that defendants did not have to produce responsive documents or a witness to testify on related subjects, it did not foreclose all corporate-level discovery. Plaintiff was entitled to a witness on the topic of whether defendants engaged in interstate commerce during a three-year time period, because that was both relevant to an essential element of plaintiff's Fair Labor Standards Act (FLSA) claim and narrowly tailored in scope.

Similarly, in Lauris v. Novartis AG, No. 1:16-cv-00393-LJO-SAB, 2016 U.S. Dist. LEXIS 170203 (E.D. Cal. Dec. 7, 2016), the court considered the proportionality factors and determined that it was not proportional to add four executives to the list of document custodians but found that the time period of the document search should be extended by nine months.  In reaching that decision, the court commented on the high cost of e-discovery (estimated in excess of $1 million) and the fact that defendants had already agreed to search nine custodians who appeared likely to possess documents regarding any risks from taking the drug Tasigna.  The court also noted that though defendants had already produced 1.9 million pages of discovery and the case involved the death of only one patient, plaintiff demonstrated that documents from the nine months after patient's death could have information relevant to causation.

The Amount In Controversy Is Significant; Parties' Resources, Less So

One proportionality factor mentioned prominently in some opinions is the amount in controversy.  In Milliner v. Mut. Sec., Inc., Case No. 15-cv-03354-THE, 2017 U.S. Dist. LEXIS 43614 (N.D. Cal. March 24, 2017), class action plaintiffs had demanded tens of millions of dollars in compensatory damages but objected that defendant Mutual Securities, Inc.'s ("MSI") document requests were not proportional to the needs of the case because "the vast majority of the documents Defendant seeks to compel are Defendant's own documents."  The court, pointing to cases pre-dating the 2015 amendment, which remain good law, noted that a party is required to produce documents in his or her possession, custody, or control, regardless of whether he or she believes the opposing party already has those documents.  The court criticized plaintiffs for having made no showing of disproportionality beyond boilerplate objections.  Given the case law in favor of discoverability, the amount in controversy, and the fact that MSI had voluntarily narrowed its 78 document requests to 18 categories and was willing to bear the cost of plaintiffs' production, the court concluded the requested discovery was proportional.

The court in Vesta Corp. v. Amdocs Mgmt., No. 3:14-cv-01142-HZ, 2017 U.S. Dist. LEXIS 25898 (D. Or. Feb. 21, 2017), a breach of contract and misappropriation of trade secrets with alleged damages in excess of $100,000,000, found that discovery of defendant's source code was proportional to the needs of the case considering the amount in controversy.  In so doing, the court expressed the expectation that plaintiff would work in good faith to narrow its discovery request and made clear that defendants would not be required to produce source code that pre-existed anything that plaintiff shared.  The court in Vesta Corp. also made a point of commenting that the discovery was further justified by the parties' resources, an issue discussed in Goes Int'l, AB v. Dodur Ltd., No. 14-cv-05666-LB, U.S. Dist. LEXIS 4999 (ND Cal. Jan. 12, 2017).  The discovery dispute in Goes Int'l AB, a copyright action, centered on whether the plaintiff could "recover damages flowing from the defendant's distribution of the challenged software outside the United States – so-called ‘extraterritorial damages.'"  The court granted plaintiff's motion, but recognized that defendant, located in China, was a small concern with limited resources.  Nevertheless, the court did not find the discovery requests posed an excessive burden because "the defendant's financial wherewithal is not decisive" when weighing proportionality.  The court went on to warn that "[b]oth parties should tailor their efforts to the needs of this case.  Discovery and its costs are neither a shield to ward off nor hammer to throttle the opposing party."

Courts Can Make Discovery More Proportional

One way courts have found to alleviate the burdens of discovery and make it more proportional is to order cost-shifting.  For example, in Elkharwily v. Franciscan Health System, 2016 U.S. Dist. LEXIS 99795, No. 3:15-cv-05579-RJB (W.D. Wash. July 29, 2016), plaintiff broadly requested all emails and text messages concerning himself between employees, agents, and attorneys of defendant and between defendant and third parties.  The court found defendant demonstrated that producing the electronically stored information (ESI), which was contained on backup tapes, would result in an undue burden and cost of $157,500 to retrieve, restore, and review the tapes.  This was weighed against the lack of need demonstrated by plaintiff.  He did not name individuals that he believed exchanged emails about him, describe suspected content of the emails, or even represent that responsive emails exist.  While the court found that the archived emails were discoverable, it was not proportional to require defendant to bear the cost of responding to plaintiff's requests.  Rather, the court ordered that "[d]efendant should facilitate access to the discovery, but should do so only at Plaintiff's expense, payable in advance."[1]    

Another tool courts have employed to facilitate proportionality is phased or staged discovery.  In Ciuffitelli v. Deloitte & Touche LLP, No. 3:16-cv-0580-AC, 2016 U.S. Dist. LEXIS 163546 (D. Or. Nov. 28, 2016), an Aequitas-related case, defendant accounting firms filed motions for protective order and stay of discovery pending ruling on their motions to dismiss.  The defendants argued that full merits discovery was disproportionate to the needs of the case because "the requests for production encompass a large number of documents, [and] the gathering, reviewing, and production of those documents would require substantial time and cost hundreds of thousands of dollars." Plaintiffs proposed a compromise that they produce audit workpapers for the years each firm acted as auditor to any Aequitas companies.  Defendants countered that they would produce "transaction level" documents showing details of the named plaintiffs' purchases of Aequitas-company securities.  In evaluating proportionality, the court noted that "[i]n a complex case where pending motions to dismiss raise credible legal and factual issues, ‘the needs of the case' have not yet been finally established."  Under those circumstances, "[d]elaying discovery or limiting its scope until those issues are decided is appropriate and implements the 2015 Amendment's mandate for a renewed consideration of the time and money litigants must expend on discovery." Accordingly, the court ordered limited discovery pending the outcome of the motions to dismiss, namely the audit workpapers for the two-year period that each accounting firm provided audit services and the transaction-level documents defendants had offered to produce. The court in Goes Int'l AB, U.S. Dist. LEXIS 4999, also raised the possibility of phased discovery to solve the parties' dispute, saying "[t]he court remains open to staging damages discovery after an early summary judgment motion on the extent of the alleged infringement." 

Proportionality Is a Shared Responsibility

Courts have also noted that "the revised rule places a shared responsibility on all the parties to consider the factors bearing on proportionality before propounding discovery requests, issuing responses and objections, or raising discovery disputes before the courts."  Salazar v. McDonald's Corp., No. 14-cv-02096-RS (MEJ), 2016 U.S. Dist. LEXIS 23293 (N.D. Cal. Feb. 25, 2016) (ordering parties to meet and confer regarding search terms and encouraging plaintiffs "to carefully and precisely delineate these search terms" in recognition of cost to defendants).  In Adidas Am., Inc. v. TRB Acquisitions LLC, No. 3:15-cv-2113-SI, 2016 U.S. Dist. LEXIS 163309 (D. Or. Nov. 28, 2016) the court directed "the parties to hold a meaningful additional discovery conference either in person or over the telephone within two weeks from the date of this Opinion and Order." Plaintiffs Adidas and Reebok alleged claims of trademark infringement, unfair competition, trademark dilution, and deceptive trade practices against defendant TRB Acquisitions LLC and fourteen licenses of TRB.  They had served 124 separate document requests on TRB and additional requests to the licensee defendants, which defendants objected to as overbroad and not proportional to the needs of the case.  Judge Simon described in detail two options under consideration by the court to resolve the dispute, but wanted the parties to work together on a possible compromise before entering any order on the motion to compel. The court left the door open for plaintiffs to seek further guidance from the court, but made clear it was the parties' responsibility in the first instance.  

Lessons for Attorneys and Litigants:

-       Draft a discovery plan at the outset of your case.  Identify claims or issues that may be carved out for phased discovery, which would be less burdensome to the responding party. 

-       Engage in proportionality discussions with opposing counsel early and often. Don't wait until motion practice to explain a boilerplate proportionality objection.  Court involvement should be a last resort. 

-       Before propounding or responding to any discovery, analyze the requests in terms of the factors set forth in Rule 26(b)(1).  Be prepared to argue your position(s) at a Rule 16 conference or in meet and confer. 


[1] Notably, the court expressly excluded from plaintiff's responsibility all costs relating to defendant's review of the information for privileged material.

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