Candice Chan-Glasgow, Director, Review Services and Counsel
August 28, 2020
In a rare cost shifting order out of the United States, Lawson v. Spirit Aerosystems (D. Kan. June 18, 2020), the Kansas District Court granted defendant, Spirit Aerosystems, Inc’s motion to shift the costs of a technology-assisted review to the plaintiff, Larry A. Lawson. This case is a helpful reminder to litigants that the eDiscovery process must be proportionate to the needs of the case and that pursuing unnecessarily broad requests can lead to cost consequences.
Lawson is Spirit’s former CEO who retired on July 31, 2016. He executed a retirement agreement which contained a two year non-compete provision. In early 2017, he was hired by Elliot Associates, L.P. and Elliott International, L.P. (collectively, “Elliott”) to provide consulting services in connection with Elliot’s proxy contest to replace board members of Arconic Corporation (“Arconic”).
Spirit notified Lawson that his involvement with Arconic violated his non-compete, stopped paying him, and demanded that Lawson repay what he had already received under the Retirement Agreement. Lawson maintained that he did not breach the non-compete, arguing that Spirit and Arconic were not in the same “Business”, as defined in the Retirement Agreement.
The parties did not agree on custodians or search terms and Lawson filed a motion to compel Spirit to search the ESI of 69 custodians, along with each custodian’s assistant, using about 90 search terms. The search terms included generic aviation industry terms such as “paint”. On hearing Lawson’s motion to compel, the Court encouraged Lawson to prioritize his list of custodians and warned that at some point the Court would start shifting costs.
Lawson provided Spirit with his top 10 custodians (only 3 of which were on Spirit’s list of custodians most likely to have relevant ESI) along with 803 search terms, which returned 468,595 documents. Spirit reviewed a sample of these documents and determined that 7.8% were “technically responsive”, though many were irrelevant to the claims and defences. Lawson then sent revised search terms, which returned approximately 322,000 documents. Spirit completed a further sampling exercise which resulted in a 5.1% responsive rate. Spirit again characterized many of the “technically responsive documents” as “largely irrelevant to the dispute”.
Lawson sought to have Spirit complete a technology-assisted review (TAR) of the remaining 322,000 documents. Spirit stated that it had been separately identifying relevant documents through custodian interviews. Based on these interviews, Spirit already produced 4,700 documents on the issue of “business overlap”, including fabrication, R&D, collaboration, and capital expenditure slide decks and reports to try to avoid “searching through everyone’s email for things like ‘fuselage’ or ‘wing kit'”. Spirit argued that this method was more effective because the “business” issue did not lend itself to the use of such search terms.
At this point, Spirit had already spent hundreds of thousands of dollars on document collection, processing, hosting, and the sampling exercises. Spirit tried to persuade Lawson that, based on the sampling, a review of the 322,000 documents was unlikely to yield many responsive documents. Spirit proposed to continue in its own efforts to identify custodians with relevant information. However, Lawson wanted to continue with the TAR process.
The parties agreed to proceed with the TAR review on the set of 322,000 documents, subject to Spirit filing a motion to shift these costs to Lawson. Spirit completed the review and only 3.3% of the documents in the TAR set were responsive.
On reviewing Spirit’s motion to shift the costs of the TAR review, the Court reviewed the proportionality factors. The Court noted that although the TAR expenses ($600,000) are not unreasonable compared to the amount in controversy ($39 million to $53 million), Spirit had already borne its fair share of other discovery expenses and produced fulsome discovery separate and apart from the TAR process. Central to the Court’s proportionality analysis was whether the documents produced through the TAR process were important to resolving the dispute:
But even more to the point than the exceptionally low responsiveness rate, Lawson does not articulate any way in which the documents produced as a result of the ESI/TAR process added anything of meaningful value to the documents and information Spirit produced separate from the ESI/TAR process on the issue of “Business” overlap. As noted previously, Spirit has repeatedly lamented the uselessness of this batch of documents compared to the targeted collections it produced via custodian interviews.
The Court concluded that although a producing party should ordinarily bear the costs of production, Lawson wanted to proceed with the TAR process at a point in time when it was disproportionate to the needs of the case. Spirit’s motion to shift the costs of the TAR review was therefore granted.
