Revisions to several key provisions of the Federal Rules of Civil Procedure took effect on December 1, 2015, and will have a significant impact on discovery procedure and practice in federal court. The aim of these revisions is to reduce discovery costs by promoting proportionality in the discovery process, requiring parties to be transparent and cooperative in their discovery responses and increasing active case management of discovery by the judiciary.
During the recent spike in single-borrower financial services cases, financial institutions have frequently been forced to expend significant resources responding to broad discovery requests seeking emails and other electronically stored information. Significantly, in the overwhelming majority of single-borrower cases, the probative value of electronically stored information is minimal because, most, if not all, of the relevant information regarding the servicing of a particular loan is memorialized in the loan file and servicing notes. Nevertheless, borrowers have seemingly used broad discovery requests seeking largely irrelevant electronically stored information as a means to increase defense costs of financial institutions in cases involving minimal damages. While the FRCP previously provided some protection from expensive fishing expeditions, courts have been hesitant to utilize cost-saving measures, such as phased discovery and fee-shifting, presumably with the aim of staying true to the broad scope of discovery previously permitted under Rule 26(b).
Two significant changes to Rule 26(b) have the potential to curb the use of overly broad discovery requests and reduce the burden associated with production of electronically stored information. First, revised Rule 26(b)(1) omits language designating information “reasonably calculated to lead to the discovery of admissible evidence” within the scope of permissible discovery. Instead, revised Rule 26(b)(1) now limits the scope of discovery to information relevant to the claims and defenses asserted in the case. Second, the amendments to Rule 26(b)(1) further limit the scope of discovery with an explicit requirement that discovery be “proportional to the needs of the case.” Under revised Rule 26(b)(1), proportionality is defined by six factors:
- importance of the issues at stake in the action;
- amount in controversy;
- parties’ relative access to relevant information;
- the parties’ resources;
- importance of the discovery in resolving the issues;
- whether the burden or expense of the proposed discovery outweighs its likely benefit.
While these proportionality factors are not new, they are now an explicit component of the general definition of the scope of discovery. These proportionality factors were previously buried in Rule 26 and federal courts rarely invoked them to tighten the scope of discovery. The revisions to Rule 26(b)(1) prioritize proportionality by explicitly connecting the scope of discovery to the needs of each case.
In addition to redefining the scope of discovery under Rule 26, the amendments also place a greater emphasis on clearly articulating specific objections to discovery requests and identifying any information withheld on the basis of each objection. See Fed. R. Civ. P. 34(b)(2)(C). Under the amended Rule 34(b), a party responding to requests for production must now: (1) specifically identify the grounds for objecting to discovery; (2) affirmatively state whether any responsive materials are being withheld on the basis of any objections; and (3) produce or permit the inspection of documents within a “reasonable time.” These changes place significant pressure on the responding party to quickly review electronically stored information, assess the burden of producing any responsive information, and accurately state whether responsive information is being withheld based on case-specific objections.
The amendments to the FRCP have the potential to dramatically decrease discovery costs by expressly connecting the scope of discovery to the needs of a case. These revisions may ultimately change the culture of discovery in federal court by limiting the scope of discovery, forcing parties and courts to focus discovery on key issues in a given case, and promoting the use of cost-saving measures, such as phased discovery orders and cost shifting. While the true impact of the changes to the FRCP on landscape and practice of conducting discovery in federal court will depend on how courts interpret and enforce the new rules, there is no doubt that promoting proportionality in discovery will be a priority going forward.