This paper answers the fundamental question of how much a lawsuit should cost. It does this by applying a new interpretation of Coase Theorem and Law and Economics. It applies that new theory by focusing on an area which has emerged as the source of the most expensive costs in complex federal litigation: Electronic Discovery. This paper is a must-read for every lawyer whose practice involves litigation and for every client seeking to understand his legal costs and their justification in relation to what benefits he is ...
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This paper answers the fundamental question of how much a lawsuit should cost. It does this by applying a new interpretation of Coase Theorem and Law and Economics. It applies that new theory by focusing on an area which has emerged as the source of the most expensive costs in complex federal litigation: Electronic Discovery. This paper is a must-read for every lawyer whose practice involves litigation and for every client seeking to understand his legal costs and their justification in relation to what benefits he is buying by paying those costs. As a reaction to the exploding costs of e-discovery, the 2015 amendment to Federal Rule of Civil Procedure 26 gives Judges more power to rein in costs, by making it explicit that e-discovery which fails the proportionality test is outside the scope of discoverable information. The proportionality doctrine of Rule 26 is so named because it asserts that the amount of money you spend on electronic discovery should be in proportion to the needs of the underlying case and should not exceed such an amount. Unfortunately, Judges after 2015 face a problem: the proportionality test articulated in Rule 26 is very vague and difficult to apply. In a test for a proportion, one might expect two quantitatively defined items and a correct ratio between them, which the test as written lacks and provides no clues for. Instead, proportionality motions in today's law practice are mere crybaby motions, where a litigant whines and complains about how expensive his costs are, hoping the Judge will take pity, with no rhyme or reason as to whether that cost is proportionate. This paper seeks to solve that problem and help Judges by articulating the details of a proportionality test, one grounded in the rich tradition of the Law and Economics jurisprudence in a theoretically rigorous derivation. In summary, the drafters of the 2015 amended Federal Rules want federal Judges to use the proportionality doctrine, but Judges are hesitant to do so absent a clear bright line test for how to apply it, and this paper solves that problem. A mathematical formula for the amount of money that should be spent on e-discovery for any given lawsuit is defined, and, in the process of solving the problem posed by the proportionality doctrine, the paper gets at the basic issue of why and how to ascertain the justifiable amount of money to spend on legal fees.
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