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In re Bristol-Myers Squibb Securities Litigation

February 4, 2002

IN RE BRISTOL-MYERS SQUIBB SECURITIES LITIGATION


The opinion of the court was delivered by: Hughes, U.S.M.J.

FOR PUBLICATION

MEMORANDUM OPINION

This matter comes before the Court on the Defendants' motion to require the Plaintiffs to pay for costs resulting from production of documents in response to discovery requests. Specifically, the Defendants seek (1) an order requiring reimbursement for the cost of reproducing paper documents responsive to the Plaintiffs' document request and (2) an order requiring the Plaintiffs to pay for one-half the cost of scanning the documents onto electronic form. The Plaintiffs originally opposed the motion on two grounds. First, the Plaintiffs argued that the Defendants "dumped " documents, thereby causing excessive reproduction costs. Second, the Plaintiffs argued that because the Defendants already possessed the information in electronic form, that is the form in which the discovery should have been produced. Their position has shifted somewhat to an argument that they were "fraudulently induced" into an agreement to pay for photocopying. In addition, the Plaintiffs seek to have all the documents produced in electronic form for which they originally offered to pay a fair share of the cost, but now assert they should pay nothing, including the nominal cost of reproducing compact discs. The motion is considered pursuant to FED. R. CIV. P. 78. For the following reasons, the Court will grant in part and deny in part the Defendants' motion for an order requiring the Plaintiffs to pay the agreed upon reimbursement for paper copying costs and will deny the Defendants' motion for a one-half contribution for scanning costs, but instead require payment only for the nominal cost of copying compact discs.

I. BACKGROUND

The issues presented here raise the increasingly common problem of fair allocation of costs associated with discovery in the age of electronic information. The case arises from consolidated complaints in a putative class action asserting claims of false and misleading statements by corporate and individual Defendants concerning an anti-hypertension drug (Omapatrilat) to be marketed under the brand name Vanlev. The various claims allege violations of Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b) and Rule 10b-5 at 17 C.F.R. § 240.10b-5, and negligent misrepresentation in violation of unspecified state law.

Prior to commencing document production, the Plaintiffs agreed to pay 10¢ per page for copying costs. The Plaintiffs allege that this agreement was based upon the Defendants' early estimate that the universe of responsive documents was approximately 500,000 pages. The Plaintiffs further claim that despite their request that they be advised of further estimates of the rolling number of responsive documents to be produced, the Defendants have currently "dumped" 3,085,994 pages of documents (or sixfold the original estimate) in response to the Plaintiffs' document request, totaling $308,599.40 in copying charges. The Plaintiffs say that many of the documents produced were unresponsive to actual requests. The Defendants counter that the Plaintiffs' requests were couched with the proverbial "All documents . . . but not limited to . . ." language, and that they carefully selected and produced all responsive documents. The Plaintiffs also argue that since this number of documents vastly surpasses any similar document production in class action cases of this nature in which Plaintiffs' Counsel have appeared, the Defendants must have necessarily produced unresponsive or irrelevant documents. Finally, the Plaintiffs assert that the Defendants are guilty of "fraudulent[ly] induc[ing]" them to enter into the photocopying cost agreement because some of the requested information was already in electronic form. It is apparently uncontested that the Defendants possessed information relating to the New Drug Application (NDA) for Omapatrilat in electronic form prior to discovery requests by the Plaintiffs.

At some later point, it became apparent to the Plaintiffs that the Defendants had "scanned" the remaining documents for their own use in the course of trial preparation and, perhaps, trial. "Scanning" is the process of transforming paper copies (photos, documents, diagrams, charts, and graphs) into digital files. *fn1 It is also of some interest, if not import, to note that the Defendants copied the paper documents requested by the Plaintiffs at the time they were scanning the same documents by, in the vernacular, "blowing back" the documents; that is to say that at the same time documents were being scanned, or copied, onto a disc, paper copies were also being created. After the Plaintiffs became aware of the electronic scanning of the documents and requested copies of the compact discs containing the documents, the Defendants requested another $216,109.58, or one-half the cost of scanning the documents at 14¢ a page. In total, the Defendants are seeking $524,618.98 in reimbursement from the Plaintiffs for discovery costs.

The Defendants' position, and the reason they have moved for orders requiring full payment, is straightforward. The Plaintiffs knew that a case of this magnitude would result in the production of a substantial number of documents. The Plaintiffs agreed, unconditionally, to pay the market rate of 10¢ a page. The Plaintiffs requested documents and the Defendants produced documents responsive to the requests. Now is the time, the Defendants argue, to abide by the terms of the agreement and pay up. Furthermore, the Defendants point out that it was only after the bill for paper copying costs became due that the Plaintiffs inquired as to whether any of the material existed in electronic form. The Defendants responded that the information was indeed in electronic form and the Plaintiffs could share in that good fortune by paying one-half the cost of scanning, or $216,109.58. The Plaintiffs have declined to pay the remaining amounts due for paper copying costs and now refuse to pay not only the one-half contribution for scanning but also the nominal cost of reproduction of compact discs.

The parties originally brought this dispute to the attention of the Court by letter memoranda and conference call, which is the proper method, by local rule, order, and custom in this District, of seeking judicial intervention. See L. CIV. R. 16.1(f)(1); see also Case Management Order filed October 17, 2001. After considering the respective positions of the parties at that time, the Court decided that the issue merited formal notice of motion and full briefing as it involved the increasing use of information in digital form. *fn2 However, the Court did order the Defendants to produce copies of the compact discs at that time so as not to delay discovery pending final resolution of the cost allocation issue. Defendants now seek orders from the Court requiring the Plaintiffs to pay the full cost of paper reproduction, as agreed to by the parties, and an order requiring payment of one-half the cost of electronic reproduction.

II. DISCUSSION

A. PAPER DISCOVERY

The Plaintiffs do not dispute the per-page rate of 10¢ *fn3 charged by the Defendants for photocopying and to which they freely agreed. However, they also point out, and the Court accepts based upon the submitted expert certifications, that the market rate for "blowing back" documents costs 8¢ a page. In addition, they argue that the Defendants, deliberately or otherwise, have "dumped" an extraordinary number of documents resulting in a prohibitive charge for reproduction. The Plaintiffs say that the Defendants have produced "boxes of documents" that are unresponsive to the Plaintiffs' specific document requests. However, the Defendants point out that many of these documents were specifically requested by Plaintiffs in paper form.

Somewhat troublesome to the Court is the fact that the Defendants apparently possessed the NDA in electronic form before producing the paper documents. However, the Defendants are correct in highlighting the fact that the Plaintiffs specifically requested paper documents in connection with the NDA, and did so apparently after the Court generally raised the issue of electronic information at the case management conference on October 10, 2001. The Court suggested that counsel might want to designate document custodians who could be deposed regarding electronic documents or other document retrieval issues. It is also important to note that the Defendants offered to permit the Plaintiffs to inspect the documents before blanket reproduction so that costs could be minimized. The Plaintiffs declined. Accordingly, it is apparent that the Plaintiffs had every opportunity to ask for electronic information but failed to do so until after the bill for paper discovery became due.

However, the Plaintiffs correctly point out that the FED. R. CIV. P. 26(a)(1)(B) advisory committee notes require parties to disclose "computerized data and other electronically-recorded information." Accordingly, the Defendants were mandated to advise the Plaintiffs that the NDA was in electronic form at the time 26(a)(1) disclosures were made. The Defendants did not disclose this fact and, accordingly, the Court will not ...


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