Cost-Benefit Analysis Adopted by the New York Supreme Court for Determining When a Nonparty Must Undertake the Burden and Expense of Recovering Deleted ESI

The production of electronically stored information (“ESI”) that has been deleted is potentially very expensive and time consuming. Often outside computer forensics experts are required to assist with the recovery of the deleted data and the routine business of the party is disrupted while resources are allocated to the recovery process. These are now commonplace burdens of parties involved in litigation. Whether these burdens should be placed on a nonparty with relevant ESI was recently addressed by the Appellate Division of the New York Supreme Court. In Tener, M.D. v. Cremer, M.D., et al., 2011 NY Slip Op. 06543, 2011 N.Y. App. Div. LEXIS 6421 (N.Y. App. Div. Sept. 22, 2011), the court, acknowledging that it was charting new territory, addressed for the first time “the obligation of a nonparty to produce electronically stored information (ESI) deleted through normal business operations.” Id. at 2. 

The nonparty was New York University and the computer at issue was located at Bellevue Medical Center. The plaintiff, a doctor, claimed that someone using the NYU computer posted a comment about her on a website known as Vitals.com. The plaintiff served a subpoena on NYU seeking the identity of all persons who had accessed the internet via the subject IP address on the date that the comment was posted. Id.  NYU did not produce any information in response to the subpoena and the plaintiff moved for contempt. NYU claimed that the “computers that simply access the web through NYU’s portal appear as a text file listing that is automatically written over every 30 days.” Id. According to NYU, it lacked the “technological capability or software, if such exists, to retrieve a text file created more than a year ago and written over at least 12 times.” Id. In response, the plaintiff submitted the affidavit of a computer forensics expert who opined that software with the capability to retrieve the deleted data did exist. 

The lower court denied the plaintiff’s contempt motion. It held that NYU did not have the capability to retrieve the deleted data and incorrectly concluded that “this allegation is unrefuted as a reply affidavit contradicting such allegation has not been supplied.” Id. at 3.

On appeal, the Appellate Division reasoned that “ESI is difficult to destroy permanently.” Id. at 4. Rather, “[d]eletion usually only makes the data more difficult to access.” Id. Thus, the “discovery rules contemplate data recovery.” Id. For instance, guidelines developed by the Commercial Division for Supreme Court, Nassau County (the “Guidelines”) “suggest that the parties be prepared to discuss ‘the need for certified forensic specialists and/or experts to assist with the search for and production of ESI.” Id. The Guidelines further explain that “ESI is not to be deemed inaccessible based solely on its source or type of storage media.”  Id. Rather, “[i]naccessibility is based on the burden and expense of recovering and producing the ESI and the relative need for the data.” Id. Thus, the Guidelines advocate a cost-benefit analysis when discovery of deleted ESI is sought.

Adopting the Guidelines’ cost-benefit analysis, the Appellate Division highlighted their similarity to the Federal Rules. Pursuant to Fed. R. Civ. P. 45(d)(1)(D), a nonparty “need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost.”   However, the Federal Rules give the federal courts the power to order the production of such information upon a showing of good cause and subject to the limitations of Rule 26(b)(2)(C), which considers, among other things, the burden and expense of production in relation to its likely benefit. Id. at 5.

The Appellate Division further reasoned that exempting inaccessible data from discovery “might encourage quick deletion as a matter of corporate policy, well before the spectre of litigation is on the horizon and the duty to preserve it attaches.” Id. A cost-benefit analysis eliminates the incentive to permanently delete information as a matter of course to protect it from production. Additionally, a cost-benefit analysis gives “the court the flexibility to determine literally whether the discovery is worth the cost and effort of retrieval.” Id. at 6.

The Appellate Division concluded that the plaintiff had demonstrated “good cause” for production of the deleted ESI, which had the potential to identify the person who posted the comment and potentially defamed the plaintiff. Given the showing of “good cause”, the court concluded that a cost-benefit analysis must be undertaken to determine whether the retrieval of the information was warranted. It therefore remanded the case to the lower court because the record did not provide enough information for a proper analysis. Id.

On remand, the Supreme Court was instructed to hold a hearing to determine “(1) whether the identifying information was written over, as NYU maintains, or whether it is somewhere else, such as in unallocated space as a text file; (2) whether the retrieval software plaintiff suggested can actually obtain the data; (3) whether the data will identify the actual person who used the internet on April 12, 2009 via the IP address plaintiff identified; (4) which of those persons accessed Vitals.com and (5) a budget for the cost of the data retrieval, including line item(s) correlating the cost to NYU for the disruption.” Id. The Appellate Division further instructed that the cost-benefit analysis should take into account the fact that NYU is a nonparty. Finally, in the event the Supreme Court determines that the benefits of production outweigh its costs, the court held that the plaintiff should bear the costs.

This decision is noteworthy because it clearly defines the analysis the New York state courts must undertake when determining whether a nonparty is required to expend the time and resources to recover ESI that has been deleted. Upon a showing of good cause, a court will analyze the costs of recovering the information against the need for the deleted information.  The fact that a nonparty is the entity in possession of the deleted data and the one burdened with recovering the data is a factor to be considered by the court.

Under this decision, nonparties served with subpoenas for deleted ESI may not rely on the fact that the data has been deleted in the course of its normal business as a means for avoiding the costs of complying with the subpoena. Instead, the nonparty should undertake an active investigation into whether the data can be retrieved, the difficulty of such retrieval and the concomitant costs.

 

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