Contractors know that discovery is the most time-consuming and expensive part of litigation. Until now, the Federal Rules of Civil Procedure have done little to address the problem. Parties that preserve too much data are burdened with the cost of collecting and reviewing it. Parties that preserve too little risk not having access to key evidence or being penalized for spoliation.
While we’re not sure the problem can be fixed with a few changes to the procedural rules, reducing discovery costs appears to be a key goal of the recently-proposed amendments to the Federal Rules of Civil Procedure [pdf]. The revised rules were passed by the Judicial Conference of the United States in September 2014 and are now awaiting approval by the Supreme Court. Assuming they are approved, the amendments will become effective on December 1, 2015.
The proposed amendments have three primary objectives: (1) improve early and active judicial case management; (2) enhance the importance of proportionality in the discovery process; and (3) encourage greater cooperation among litigants. The amendments would also resolve an apparent circuit split over when sanctions may be imposed for failing to preserve electronically stored information. The changes aimed at accomplishing these objectives appear in the proposed amendments to Rules 1, 4, 16, 26, and 37.
Rule 1 currently requires that the rules be “construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding.” The proposed rule would require that the rules be “construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” The change highlights the fact that both the court and the parties have the obligation to minimize delay and costs. In the Judicial Conference’s view, “[e]ffective advocacy is consistent with—and indeed depends upon—cooperative and proportional use of procedure.”
Improving early case management
Early case management is addressed in the changes to Rules 4, 16, and 26(d). Under current Rule 4, a plaintiff has up to 120 days to serve a complaint after it is filed. That period is reduced to only 90 days in the amended Rule 4.
Current Rule 16 requires that the court issue a scheduling order within the earlier of 120 days after any defendant has been served, or 90 days after any defendant has appeared. The proposed revision to Rule 16 would shorten those periods to 90 days and 60 days. New rule 16(b)(3) would also expressly allow scheduling orders to address the preservation of electronically stored information, any clawback or inadvertent disclosure agreements under Federal Rule of Evidence 502, and whether to require conferences with the court before allowing a party to file a discovery motion. The Judicial Conference noted that many courts already address these issues in their scheduling orders and have found them to be very helpful in controlling discovery costs and time.
Rule 26(d) would be amended to allow discovery to begin almost immediately upon filing the case. The current rule requires parties to conduct a discovery planning conference under Rule 26(f) before discovery begins. Since these conferences are conducted before any discovery is served, they are often perfunctory and ineffective in addressing substantive discovery issues. Amendments to Rule 26(d)(2) would allow delivery of document requests 21 days after a defendant is served, even if that date precedes the 26(f) conference. The hope is that early issuance of document requests will focus the discussion in the 26(f) conference and make it more productive. The requests would be deemed served on the date of the 26(f) conference.
Proportionality in discovery
The most substantive changes to discovery practice appear in the amendments to Rule 26. Although current Rule 26(b)(2)(C)(iii) allows a court to limit discovery if it would result in undue burden or expense, the Judicial Conference found that judges generally have been reluctant to apply this provision to limit discovery. The amendments to Rule 26 would move the proportionality requirement to Rule 26(b)(1), which defines the scope of discovery. The amended rule would include specific language noting that parties may obtain discovery that is “proportional to the needs of the case, considering . . . the parties’ relative access to relevant information.” The assumption is that discovery will be unavailable if the costs of obtaining the information are out of proportion to the underlying claims.
Beyond the proportionality requirement, the amendments to Rule 26 include a substantive change to the relevance standard that governs when discovery is available. The current rule provides that relevant information does not have to be admissible at trial to be discoverable, so long as “the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” According to the Judicial Conference, litigants have incorrectly relied on this provision to expand the scope of discovery to include not just “relevant” information, but information that is “reasonably calculated” to lead to relevant information. The Committee Notes explain that the “reasonably calculated” qualifier in the current rule was intended to apply only to information that was already within the scope of discovery (i.e. relevant information). The amended Rule omits the “reasonably calculated” language and provides simply that “[i]nformation within this scope of discovery need not be admissible evidence to be discoverable.”
New standards for spoliation sanctions
Changes to the standards for the assessment of discovery sanctions under Rule 37 could have an enormous impact even outside of litigation. Current Rule 37(e) provides that sanctions for the loss of electronically stored information due to “the routine, good faith operation of an electronic information system” should not be imposed “[a]bsent exceptional circumstances.” The Judicial Conference found that courts were split on when and how to sanction the loss of electronically stored information.
The Second Circuit, for example, has permitted the imposition of an adverse jury instruction when a party lost electronic data because of “purposeful sluggishness” without a showing of explicit bad faith. See, e.g., Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002). The Tenth Circuit, in contrast, prohibits the imposition of an adverse inference without evidence of bad faith. “The adverse inference must be predicated on the bad faith of the party destroying the records. Mere negligence in losing or destroying records is not enough because it does not support an inference of consciousness of a weak case.” Aramburu v. Boeing Co., 112 F.3d 1398 (10th Cir. 1997).
Amended Rule 37 would resolve this circuit split by creating a new two-step sanctions rule in cases involving negligent destruction of electronic data. The first part of the test looks at whether information was really lost:
- Electronically stored information should have been preserved;
- The information was not preserved because of the party’s failure to take reasonable preservation steps; and
- The information cannot be restored or replaced through additional discovery.
If the court makes these three threshold findings, the second part of the test would require the court to determine whether the other party has been prejudiced by the loss of data. Any sanctions imposed under the amended Rule 37(e)(1) must be “no greater than necessary to cure the prejudice.” Adverse inferences are not permitted under new Rule 37(e)(1).
Imposition of an adverse inferences and other harsh sanctions must satisfy the requirements of new Rule 37(e)(2), which requires a “finding that the party [that lost the ESI] acted with the intent to deprive another party of the information’s use in the litigation.”