CEO’s Documents Found Proportional to Multimillion-Dollar Complaint

Oxbow Carbon & Minerals LLC v. Union Pac. R.R., 2017 U.S. Dist. LEXIS 146211 (D.D.C. Sept. 11, 2017).

In this multimillion-dollar antitrust claim, the defendants moved to compel the plaintiffs to include their CEO as a custodian and to produce all of his documents in discovery. The plaintiffs argued that that production “would be unduly burdensome and disproportionate” to the value of the documents. The court granted the motion, finding the documents responsive, relevant and proportional in light of the litigation’s overall value.

The plaintiffs, five related coal companies (collectively “Oxbow”), alleged that the defendants, two railroad companies that ship Oxbow’s coal, “conspired to engage in anticompetitive conduct” in violation of the Sherman Antitrust Act. Oxbow claimed that it had overpaid more than $50 million due to this price-fixing and sought to recover treble damages.

In this motion, the defendants moved to compel Oxbow to “produce all documents belonging to their CEO,” William I. Koch. The defendants argued that as the “founder, CEO, and princip[al] owner” he “indisputably possesses relevant, unique information responsive to their requests.”

Oxbow countered that including Koch as a custodian “would be unduly burdensome and disproportionate to any value [his] documents might possess.” Estimating that his documents would add “roughly 130 gigabytes of additional documents,” Oxbow argued that this effort would be duplicative, marginally responsive and unduly burdensome. However, in running a sample analysis of Koch’s data, Oxbow conceded that it identified “approximately 1,300” responsive documents. It provided those documents to the defendants. Oxbow also adjusted its estimate of the total cost for Koch’s production, concluding that it would cost less than $150,000. Oxbow nonetheless asked the court to deny the motion or at least to shift the production cost to the defense.

The court rejected both of Oxbow’s requests. Under Federal Rule of Civil Procedure 26, the scope of discovery encompasses information that is “relevant and proportional to the needs of the case.” Proportionality is governed by six factors, of which Oxbow addressed only one: the burden as compared to the expected benefit.

The court began by noting that, as Oxbow admitted, “Koch’s records contain documents that are responsive … and relevant to this litigation.”

The court then analyzed all six proportionality factors in detail. Each favored granting the defendants’ motion to compel.

First, the issues at stake were not only important to the parties but also had “the potential to broadly impact” third parties. Second, the amount in controversy — “over $150 million” — dwarfed the estimated cost of the remaining production. Third, any difference in the parties’ relative access to discoverable information weighed in favor of granting the motion. Fourth, regarding the parties’ resources, the court noted that Oxbow specifically stated that it did not base its objection on an inability to afford the production. Fifth, regarding the importance of the discovery to the litigation, the court found that it “strain[ed] reason to suggest” that Koch “would have no unique information relevant to th[e] litigation.” Sixth, the court concluded that the remaining $85,000 that it would cost to complete a search of Koch’s documents was not “prohibitively burdensome” in light of the expected benefit.

After considering all six proportionality factors, the court granted the motion. The court specifically observed that, contrary to Oxbow’s argument, the defendants’ request to add Koch as a custodian would be “neither unduly burdensome nor unreasonably expensive in light of the facts of this case.” Further, the court held that “the instant circumstances do not warrant shifting the costs” to the defense.

Takeaways on proportionality

Consider the long-term impact of taking a hardline stance during discovery. Here, Oxbow stuck to its untenable argument even after the sample analysis demonstrated its futility. Moreover, as the court noted in passing, the defendants “were willing to renegotiate the agreed-upon search terms” to control the costs of searching Koch’s documents. However, “Oxbow’s refusal to do so … dampened [the defendants’] enthusiasm.” Oxbow is now stuck with producing those documents, at its own expense, without any adjustment of the scope of that production.

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