As we anticipate the calorie-bomb of Thanksgiving dinner, let’s face it – litigation preservation is overweight, obese, and corpulent, torpidly dazed in a fat/sugar coma of way too much data. But effective Dec. 1, amended Rule 26 of the Federal Rules of Civil Procedure strikes back, limiting the scope of discovery to what is “proportional.” Will the amended rule tip the scales toward leaner litigation preservation, or is this simply another FRCP fad diet, doomed to fail?
The Overpreservation Problem
E-discovery-fueled litigation is extraordinarily expensive, largely due to the general explosion of data volumes in organizations, but also because of how companies must react to the preservation duty. Well-settled law requires litigants to preserve relevant data once litigation is reasonably anticipated. When an organization establishes a legal hold in advance of litigation, there are no certainties for how much is enough – no pleadings, no court orders, no court supervision, only the expectation of how some court, some day, may react to a spoliation charge. And waiting for eventual discovery requests to frame the legal hold’s scope is clearly not viable – despite the useful notions that “delete doesn’t mean delete” and email never goes away,” the reality is that organizational data can go AWOL in a hurry.
The predictable result is overpreservation, which is hugely expensive. For example, in testimony to the Judicial Conference’s Advisory Committee on Civil Rules last year, Microsoft revealed it had 261 terabytes of employee data under pending legal holds, equivalent to 11.5 billion “pages,” at an average of 1.3 million pages per custodian. In 2013, Microsoft’s per case averages were 59 million “pages” preserved, 10.5 million pages processed, 350,000 pages reviewed for privilege and responsiveness, and 87,500 pages produced– in other words, preserving nearly 700 times the data eventually produced in litigation.
Those who might not shed a tear for large companies like Microsoft should remember that preservation costs hit companies of every size, large and small. The February 2014 Preservation Costs Survey found 80 percent of companies experience significant burdens from preservation activity, particularly regarding email and hard drives. The annual cost of employee time in responding to legal holds, not counting service provider fees or the allocated cost of technology systems, was estimated to range from more than $12,000 for small companies to more than $38 million for large organizations.
And when data is preserved during one litigation matter, it remains in the possession, custody, or control of the organization, subjecting it to new, overlapping legal holds in future cases, with no end in sight.
The Proportionality Diet
The Federal Rules amendment process is governed by the Rules Enabling Act, which authorizes the Supreme Court to prescribe practice and procedure rules, so long as such rules do not “abridge, enlarge or modify any substantive right.” 28 U.S.C. § 2072. Because the preservation duty is commonly triggered before litigation commences, and as it may be viewed as a creature of substantive rather than procedural law, the Civil Rules Advisory Committee has understandably been reluctant to squarely address the problem of pre-litigation overpreservation through the FRCP. But the scope of preservation is derivative of the scope of discovery, and so how FRCP Rule 26 frames the permissible scope of discovery has a fundamental effect on how much information potential litigants preserve. The FRCP’s framers have tinkered with Rule 26 repeatedly over the years, in 1946, 1970, 1983, 1993, 2000, and 2006, trying to achieve the right balance. But the available vehicle for limiting discovery as disproportionate under Rule 26(b)(2)(C)(iii) has remained merely a procedural exception to the broad scope of discovery that shapes the preservation duty – until now.
Amended Rule 26(b)(1) provides the following, with its new language in bold italics:
(b) Discovery Scope and Limits.
(1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit. Information within this scope of discovery need not be admissible in evidence to be discoverable.
This proportionality limitation, inserted directly into the foundational scope of discovery (and coupled with amendments to Rule 37 governing spoliation sanctions), can now be used by courts when ruling upon the adequacy of a party’s preservation efforts. It could have a significant impact upon the scope of the preservation duty and the overpreservation problem.
But Will the Diet Work?
With rule changes and diets, time will tell. Success factors for the overpreservation diet include:
- Govern your data before the preservation duty arises. Reducing unnecessary data volumes in the ordinary course of business is crucial, through effectively implementing an up-to-date, legally valid retention schedule. And clarity about what data is stored where is imperative, allowing for more accurate, tailored holds.
- Consider proportionality when framing legal holds, and document your decisions. A Rule 26 proportionality argument for a limited hold should not be an afterthought. Instead, proportionality should be considered at the outset, when the hold’s scope is established. And what better time to capture the reasons and proportionality justifications? Document such decisions under privilege when the hold is established, so that down the line you will have the information needed to defend your position.
- Timely release expired holds. This point remains critical – as soon as the preservation duty expires, and if no other pending holds apply, data should be promptly returned to the ordinary course of business environment, subject to the organization’s retention schedule.
- Watch the courts. Proportionality in the scope of discovery will no doubt be raised as an argument justifying proportionality in preservation. Diets generally rely on portion control, and this one turns upon whether courts will provide proportionality control. As with any rule change, we’ll see how the courts react.