The Discovery Tax

Abstract

The American civil discovery regime is what is known as producer-pays: one side requests information and the other side has to pay whatever it costs to produce it. The 2015 amendments to the Federal Rules of Civil Procedure have not changed this much and are not likely to in the future. But producer-pays leads to two big problems: requesters have an incentive to request too much, and, because defendants tend to have more to discover than plaintiffs, the parties’ mutually-beneficial settlement range ends up skewed against defendants, leading cases to settle for more than they are worth. No one has proposed a realistic alternative to producer-pays that solves both of these problems. In this Article, I propose such an alternative: a discovery tax. If the government taxes requesters an amount equal to whatever producers have to pay to respond to their requests, both sides in litigation fully internalize the costs of discovery. Moreover, the mutually-beneficial settlement range stays symmetric, helping cases settle for the same price they would be resolved at trial. The government could use the tax revenue for any socially useful purpose, including offsetting the cost of the court system.

Keywords: Discovery, fee shifting, litigation, civil procedure, law and economics