94 A.D.3d 58
N.Y. App. Div.2012Background
- This case addresses who bears the costs of searching for, retrieving, and producing discovery documents, including electronically stored information (ESI).
- GreenPoint Mortgage Funding, Inc. originated and securitized loans, with ownership chain ultimately to U.S. Bank as indenture trustee for related noteholders and insurers.
- U.S. Bank sued GreenPoint in 2009 for alleged breaches of representations and warranties and servicing violations related to 30,000 loans.
- GreenPoint sought discovery stays and a protective order conditioned on a cost-shifting protocol where each party would pay its own discovery costs.
- The motion court initially held that the requesting party bears discovery costs but did not endorse paying the other party’s ESI-review costs; this was later challenged on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who should bear discovery costs including ESI? | U.S. Bank: costs should be borne by the producing party. | GreenPoint: requesting party should pay all costs. | Producing party bears initial discovery costs, including ESI. |
| Should Zubulake standards govern cost shifting in NY? | Adopt Zubulake framework to allocate discovery costs. | Maintain traditional rule requiring requester pays. | Yes; adopt Zubulake standards for cost allocation with discretionary shifting. |
| Remand or further proceedings on cost allocation? | Record adequate to determine costs should be shifted. | Need proper showing and potential narrowing of discovery. | Remand to determine reallocation with proper showing; no final cost-shift ruling yet. |
Key Cases Cited
- Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (framework for cost shifting in discovery, including ESI)
- VOOM HD Holdings LLC v EchoStar Satellite L.L.C., 93 A.D.3d 33 (2nd Dep't 2012) (adopted Zubulake standards in preservation and spoliation context)
- Lipco Elec. Corp. v. ASG Consulting Corp., 4 Misc.3d 1019(A) (N.Y. Misc. 2004) (requestor pays costs; exception for readily available ESI)
- MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 27 Misc.3d 1061 (N.Y. Misc. 2010) (early adoption of Zubulake-like cost allocation)
- Waltzer v. Tradescape & Co., L.L.C., 31 A.D.3d 302 (1st Dept. 2006) (cost considerations in ESI production)
- T.A. Ahern Contrs. Corp. v. Dormitory Auth. of State of N.Y., 24 Misc.3d 416 (N.Y. Misc. 2009) (support for cost allocation principles in discovery)
- Wiseman v. American Motors Sales Corp., 103 A.D.2d 230 (1st Dept. 1984) (expenses of disclosure may be taxed as disbursements)