Oxbow Carbon & Minerals LLC v. Union Pacific R.R. Co.

Brief Fact Summary.

Plaintiffs sued, alleging that Defendants violated antitrust laws. During discovery, Plaintiffs produced documents from 19 records custodians. However, Defendants sought the records of William Koch, Plaintiffs’ founder, CEO, and principal. Plaintiffs resisted the discovery as unduly burdensome, expensive, and duplicative of the documents already produced by its 19 records custodians. Alternatively, Plaintiffs asked the court to shift the production costs to Defendants .

Synopsis of Rule of Law.

A court may compel production of relevant and necessary discovery proportional to the needs of the case.

Facts.

Plaintiffs sued, alleging that Defendants violated antitrust laws. Plaintiffs claimed Defendants conspired to fix fuel rates and surcharges at anticompetitive levels and maintain a monopoly. Plaintiffs claimed it paid $50 million in illegal fuel charges as a result and sought treble damages plus lost profits. During discovery, Plaintiffs produced documents from 19 records custodians. However, Defendants sought the records of William Koch, Plaintiffs’ founder, CEO, and principal. Defendants claimed Koch had unique information that would show market forces—not the alleged railroad conspiracy—caused increasing rail freight costs and Plaintiffs’ losses. Plaintiffs resisted the discovery as unduly burdensome, expensive, and duplicative of the documents already produced by its 19 records custodians. However, Plaintiffs willingly conducted a sample search to determine the relevant percentage. A vendor searched almost half a million documents from Koch’s physical and electronic files, at a cost of $57,000. About 12 percent returned as responsive, and Plaintiffs produced about 1,300 records from that sampling. But Plaintiffs estimated that searching, reviewing, and producing the remainder would cost another $85,000 and objected to production as unduly burdensome and costly. Alternatively, Plaintiffs asked the court to shift the production costs to Defendants .

Issue.

May courts compel production of relevant and necessary discovery proportional to the needs of the case?

Held.

Yes. The Court held that weighing the six proportionality factors of FRCP Rule 26 demonstrated that adding the owner of Plaintiffs as a custodian of documents to be searched for material responsive to Defendants’ discovery requests in this matter will be neither unduly burdensome nor unreasonably expensive in light of the facts.

Discussion.

A court may compel production of relevant and necessary discovery proportional to the needs of the case under FRCP Rule 37. Under FRCP Rule 26, discovery must be relevant, non-privileged, and proportional to the needs of the case. To determine whether a discovery request is proportional, courts weigh the following six factors: “(1) the importance of the issues at stake in this action; (2) the amount in controversy; (3) the parties’ relative access to relevant information; (4) the parties’ resources; (5) the importance of the discovery in resolving the issues; and (6) whether the burden or expense of the proposed discovery outweighs its likely benefit.” The party resisting discovery bears the burden of showing the requested discovery is unduly burdensome or costly. Although the Supreme Court recognizes a long-standing presumption that the responding party bears the costs, Rule 26 was amended specifically to recognize courts’ authority to shift unduly burdensome costs onto the other party. Whether a court will order cost-shifting depends on factors similar to proportionality. However, cost-shifting remains uncommon, and parties should expect to pay their own.

Here, Plaintiffs stressed only that the costs of the discovery would likely outweigh its benefits and did not address the other proportionality factors. Plaintiffs did not dispute that Koch’s records contained responsive documents. Indeed, Plaintiffs already produced some 1,300 as a result of the sampling. Plaintiffs contended that producing the remainder was nonetheless overly burdensome and costly at $85,000. However, weighing the proportionality factors showed otherwise. Important issues were at stake that may be resolved by Koch’s records. Plaintiffs sought some $50 million plus treble damages and lost profits, and $85,000 is a relatively reasonable cost given that amount in controversy. Plaintiffs undeniably had access to Koch’s records and had the resources to produce them. Therefore, Plaintiffs failed to rebut the presumption that it should bear its own costs. Thus, the court compelled production without cost-shifting.