A concern that discovery burdens can "force [a] party to succumb to a settlement that is based on the cost of litigation rather than the merits of the case" has led to several significant decisions on discovery cost-shifting in the past several years. A recent Eastern District of Pennsylvania opinion in a class action case has broken new ground by extending cost-shifting to pre-certification discovery where the scope and cost burdens for that discovery are significantly asymmetrical.

In Boeynaems v. LA Fitness International, LLC, No. 10-2326, Judge Michael M. Baylson held that, absent compelling equitable circumstances to the contrary, the class plaintiffs should share in the cost of the defendant's collection and production where the plaintiffs have asked for extensive discovery while class certification is pending and the requested production will be very expensive for the defendant.

The named plaintiffs in Boeynaems purport to represent a class of persons who signed a membership contract for the defendant’s health club and subsequently canceled or attempted to cancel their memberships. The robust first round of discovery was directed principally at issues affecting class certification and included depositions of the defendant’s key employees and the defendant’s review and production of thousands of pages of documents. The plaintiffs then served additional document requests and a request that the defendant continue to preserve paper documents being stored at an Iron Mountain facility. When the defendant balked at this further discovery, the plaintiffs filed a motion to compel. In letter briefs to the court, the defendant estimated that its costs for responding to plaintiffs' supplemental discovery requests would be nearly $600,000.

The court observed that treating a case as a class action dramatically changes the strategies and economic considerations of the parties and their counsel. In an ordinary case, there is usually a well-defined range of economic consequences. If a class action is allowed by the court, however, the economic pressure on the defendant will dramatically increase. This shift can alter the dynamics of a case, irrespective of the substantive merits.

Class actions also often involve “asymmetrical” discovery, where one party has the majority of discoverable information and will incur most of the discovery burdens. If the cost of producing documents is very significant, the court has the power to allocate the cost of discovery. Doing so is fair, the court said, as "discovery burdens should not force either party to succumb to a settlement that is based on the cost of litigation rather than the merits of the case." The court further observed that, “[i]f Plaintiffs’ counsel has confidence in the merits of its case, they should not object to making an investment in the cost of securing documents from Defendant and sharing costs with Defendant.”

Addressing the specific discovery requested, the court applied the metaphor of a “discovery fence” to distinguish between information that is relevant to a specific aspect or phase of a case and information that is not relevant. In the court's view, only a subset of the information requested by the plaintiffs was within the class certification discovery fence. The court barred all discovery outside that discovery fence and directed the plaintiffs to provide the defendant with a list of documents within the discovery fence that had been requested but not yet produced. The defendant is to respond with a summary of its internal costs to provide that information. The plaintiffs are then required to advise the defendant whether they are willing to incur those costs and, if so, to tender payment.

By shifting some of the economic burden of pre-certification discovery to class action plaintiffs in this manner, the court in Boeynaems has continued the trend of making plaintiffs economically responsible for the large volume of discovery they frequently seek. If this trend continues, it will be a significant advantage for class action defendants in resisting overbroad discovery, and may ultimately rein in plaintiffs’ lawyers’ willingness to pursue more marginal claims.

Ballard Spahr's Litigation Department provides class action defense throughout the United States on matters including consumer fraud, UDAP, product liability, antitrust, securities, and employment issues. The firm’s E-Discovery and Data Management Group helps clients manage the challenges of electronic discovery and develop cost-effective, defensible strategies for compiling, storing, and protecting information. Our Consumer Financial Services Group is nationally recognized for its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). The group also produces CFPB Monitor, a blog focused on Consumer Financial Protection Bureau developments. To subscribe to the blog, use the link to the right.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, E-Discovery and Data Management Practice Leader Philip N. Yannella at 215.864.8180 or yannellap@ballardspahr.com, or Christopher J. Willis at 678.420.9436 or willisc@ballardspahr.com.

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