The case of the day is In re Michael Wilson & Partners, Ltd. (D. Colo. 2012). It’s a § 1782 case, but the case doesn’t involve the merits of the application for judicial assistance or a motion to quash. Instead, it involves an award of the reasonable costs of complying with the discovery request. I don’t review the details of the legal analysis on how the judge arrived at a reasonable cost figure. Instead, I just want to note the numbers, which are wicked scary, as we say in New England.

Back in 2006, Michael Wilson & Partners, a British Virgin Islands company providing consultancy services in Kazakhstan among other places in Eastern Europe and Asia, applied for leave to serve subpoenas on Sokol Holdings, Inc., Frontier Mining, Ltd., and their principals, Thomas Sinclair and Brian C. Savage, both Australians. According to Wilson, its former director, John Forster Emmott, an Englishman, and its former employees, Robert Colin Nicholls and David Ross Slater, had wrongfully deprived Wilson of corporate opportunities by doing business with Sokol and Frontier, and Sokol, Frontier, and their principals were likely to have information relevant to Wilson’s claims against Emmott, Nicholls, and Slater, which were pending before the High Court in England and the Supreme Court of New South Wales. The judge granted the ex parte application, and after much further wrangling, Sokol, Frontier, et al. produced documents responsive to the subpoenas and provided testimony under FRCP 30(b)(6). In 2011—nearly five years after Wilson’s application—Sokol, Frontier, et al. moved for reimbursement of costs and fees incurred in responding to the subpoenas. In total, they sought $2.15 million, of which nearly $1.6 million was costs and approximately $550,000 was fees. There were 325,000 documents reviewed and 15,000 ultimately produced. Here is how some of the major costs broke down: 1

Fee to KPMG, which “set up the searchable document database,” plus the attorney’s fees incurred in negotiating a reduction of KPMG’s bill $506,307
Cost of contract attorneys and paralegals to review the documents $989,131
Attorneys’ fees in the § 1782 action $20,078
Attorneys’ fees in briefing KPMG $20,861
Attorneys’ fees in “devising and negotiating search terms” $25,579
Attorneys’ fees for “dealing with KPMG anomalies” $182,024
Attorneys’ fees for initial review and advice on the subpoena $25,684
Attorneys’ fees for preparing the response to the subpoena $27,623
Attorneys’ fees on “set up, data capture, and to inform and instruct the review team” $169,542

This seems, ahem, pricey, and it’s not just me saying it: Sokol, Frontier, et al. sued their lawyers in the Delaware Superior Court for overbilling on the matter, asserting that the reasonable cost should have been $571,187. Just to put things in context, spending $2.15 million to review 325,000 documents and produce 15,000 documents is spending about $6.60 per document reviewed and $143.33 per document produced.

As I said, I’m not going to delve into the details on the ruling on the merits. I just want to highlight the costs of complying with US document discovery and the importance for clients to have probing discussions with their lawyers about the costs of reviewing documents, methods of increasing efficiency and decreasing costs, and the like. For our part, lawyers need to be up on the technologies that are available to reduce the crushing costs of document review. Clients need to be aware of the issues and to push their lawyers to justify their doc review strategy choices.

Notes:

  1. The figures don’t add up to the totals suggested above; I’ve excluded some miscellaneous expenses.