While the Sarbanes-Oxley Act was intended to protect and increase publicly held corporations’ accountability, lurking in the background are judicial inequities resulting from mandatory Sarbanes-Oxley technology investment. Sarbanes-Oxley compels public companies to invest millions in new technology while exempting private corporations from these costs. Consequently, in the discovery phase of a private versus public company dispute, the private litigant’s discovery costs are likely to be more burdensome than the public corporation’s costs. This provides the private litigant with a stronger and more compelling judicial argument to transfer costs to the discovering party under the Zubulake framework. Both attorneys and judges must be mindful of this potential e-discovery loophole.

In 1970, the Federal Rules of Civil Procedure (“Federal Rules”) were amended in an attempt to clarify the issue of e-discovery. The Advisory Committee Notes for the 1970 amendments to the Federal Rules of Civil Procedure revised the description of “documents” in Rule 34(a) to accord with changing technology. “It makes clear that Rule 34 applies to electronic data compilations from which information can be obtained only with the use of detection devices, and that when the data can as a practical matter be made usable by the discovering party only through respondent’s devices, respondent may be required to use his devices to translate the data into usable form.” Corporations have been ordered to produce, sometimes at considerable expense, computerized information, including e-mail messages, support systems, software, voice mail systems, computer storage media and backup tapes and telephone records. The language of the Federal Rules, as well as recent case law, both affirm that e-discovery requests are controlled by the traditional discovery rules provided by Federal Rules 26 and 34.26

Over the past thirty years, courts have struggled to integrate digital data production’s highly variable cost structure into the Federal Rules’ traditional discovery principles. During the past decade, the federal courts have attempted to align ediscovery with technological advances in such cases as McPeek v. Ashcroft, Rowe Entertainment, Inc. v. The William Morris Agency, Inc., and Zubulake v. UBS Warburg, LLC. In each case, the respective court read and applied Rule 26(b)(2) with the intent of protecting producing parties from undue burden or expense. All three courts sought to resolve the digital discovery conundrum by: (1) clarifying the situations where courts should consider cost shifting; and (2) developing a test derived from the Federal Rules to determine which party should bear data production costs.

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