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May 24, 2016 Articles

Civil Rule Amendments May Allow Parties to Limit Costs and Scope of E-Discovery

By Rebecca Kahan Waldman and Meghan Rohling Kelly

The amount of discovery is perhaps the biggest factor affecting the cost and duration of litigation, especially for corporations and other business entities, because of the steady growth in electronically stored information (ESI). On December 1, 2015, the most significant amendments in modern history to the Federal Rules of Civil Procedure went into effect. These amendments, largely focused on discovery practices, promote early and active case management by the parties and courts, encourage early and open dialogue about the scope and timing of discovery, and endorse proportionality in discovery. Counsel who know these amendments and strategically use the principles they embody may be able to resolve cases at a faster pace and reduce the burden of ESI discovery.

Focus on Efficiency
The need for increased efficiency is a central theme of the amendments. Rule 1 emphasizes that the court and parties should take all steps necessary to “secure the just, speedy, and inexpensive determination of every action and proceeding.” The amendment’s new inclusion of “the parties” in Rule 1 makes it clear that the duty to achieve an efficient resolution in litigation is shared by those who practice before the bench and those who serve on it. As the Civil Rules Advisory Committee notes, “just as the court should construe and administer these rules to secure the just, speedy, and inexpensive determination of every action, so the parties share the responsibility to employ the rules in the same way.” This focus on the responsibilities of the parties in discovery carries throughout the amendments. They are structured to encourage cooperative and proportional use of discovery and to “discourage over-use, misuse, and abuse of procedural tools that increase cost and result in delay.”

Proportionality in the Scope of Discovery
One amendment that may have a significant impact on the scope of discovery is Rule 26(b)(1)’s change to permit discovery only as to information 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 amendment puts the proportionality factors in their proper place, expressly limiting the scope of discovery. The amendments also removed the rule’s reference to information “reasonably likely to lead to the discovery of admissible evidence,” language that was often misused to expand the scope of discovery in a manner that was never intended. The test that parties should keep in mind is whether the information sought is relevant to a claim or defense in the litigation and, if so, whether it is proportional considering the particulars of the information and litigation.

The new language announced in Rule 26, “relevant to any party’s claim or defense and proportional to the needs of the case,” refocuses the limits of discovery, particularly in cases in which the actual value of a claim (as opposed to the amount being demanded by a plaintiff) is relatively small or the information sought is of marginal utility.

To ensure that early party discussions focus on the sources and scope of potentially relevant information, Rule 26(d) now permits discovery requests to be propounded as early as 22 days after service of the complaint. These early requests are deemed served as of the parties’ initial discovery conference. The hope is that litigants who understand which categories of information are sought will be in a better position to discuss custodians and the scope of information.

Changes to Case Management and Discovery Plans
The amendments revise Rule 16, which governs pretrial conferences and case management, to accelerate the timeline for scheduling conferences, promote early cooperation, and expand the issues to be addressed in initial scheduling orders.

Under Rule 16(b)(1), initial case management conferences must now be conducted with the court in real time, preferably in person. The prohibition on conducting these conferences by mail, as was often the prior practice, is intended to foster cooperation and thoughtfulness. This change also presents an opportunity for well-prepared counsel to gain a strategic advantage by setting the tone and focusing the issues early on.

Rule 16(b)(2) now requires that scheduling orders be filed the earlier of 90 days after service on the defendant or 60 days after any defendant has appeared (unless the court finds good cause for delay), speeding up the process by 30 days. The advisory committee observes that “[t]his change, together with the shortened time for making service under Rule 4(m), will reduce delay at the beginning of litigation.”

The amendments to Rule 16(b)(3) expand the specifically permitted contents of a case management scheduling order. Parties may now stipulate that a status conference must be requested before they file discovery-related motions. This means that, prior to briefing, the parties may present discovery disputes to the court in a conference. As the court may resolve issues outright, or at least narrow the issues to be briefed, such a stipulation presents an opportunity to greatly reduce the cost and burden of discovery fights. In some cases, briefing may be eliminated altogether.

Rule 16(b)(3) now expressly permits the scheduling order to include two additional topics, which reflect the two new items that must also be addressed in the parties’ initial Rule 26(f) report: (1) the scope of ESI preservation and (2) the need for entry of a Federal Rule of Evidence 502 privilege-clawback order. Thus, the Rule 26(f) report can and should be used to educate the judge about the scope of the case at its outset. The resulting agreements may be memorialized as part of a court order that incorporates ESI preservation agreements and clawback orders.

The changes to Rule 16 and Rule 26(f) provide important opportunities for the parties to set a reasonable plan for discovery early in litigation. To take advantage of those opportunities, however, litigants need to understand the plaintiff’s claim, the potential magnitude of exposure, and the potential defenses to each cause of action. Given how quickly scheduling orders must now be entered, counsel must make this initial assessment within weeks of the start of litigation. Without such knowledge, it will be impossible to take full advantage of the amendments when responding to requests for discovery, which can now be served much earlier.

Moreover, litigants need to be ready to speak intelligently about the burdens and costs associated with overbroad demands for discovery and the related needs to preserve ESI. Understanding a client’s sources of ESI, including the various technical sources and custodians who may have information, will be essential to a meaningful meet and confer process. Relevant information will include the volume of stored data, whether certain individuals or sources have duplicative information, the costs of extracting data, the methods for preserving information, and the additional costs of extracting data if they are archived and accessed in the future. The amendments should encourage potential litigants to put practices and procedures in place before litigation so that this information is robust, tracked, and readily available when needed.

Spoliation and Sanctions
Amended Rule 37 imposes a uniform standard on claims of spoliation of ESI. Previously, the various jurisdictions had widely varying approaches to sanctions for spoliation. The advisory committee believes that uncertain standards, together with potentially draconian sanctions, led many entities to institute overly cautious preservation systems, greatly driving up costs and increasing the volume of data retained.

Sanctions guidelines are now standardized. The sanctions determination focuses on, among other things, whether the destruction of ESI was intentional and whether the lost information can be generated or substantially replaced from another source. The advisory committee notes make clear that the amendments are intended to eliminate over-preservation of ESI and the costs associated with it. The new framework provides for sanctions only if there was prejudice to a party from the loss of information or onlyif there is a finding that a party acted with the specific intent to deprive its adversary of access to information for use in litigation. When a court finds prejudice, but no intent to hide information, sanctions are limited to “measures no greater than necessary to cure the prejudice[.]” Only upon finding intent—when prejudice is presumed—may the court impose an adverse inference against the spoliating party, dismiss the action, or enter a default judgment.

The amendments to Rule 37 give practitioners greater comfort that failure to preserve marginally relevant or duplicative ESI, or the inadvertent destruction of a limited amount of ESI, should not have a seriously detrimental impact on a case. The new framework for spoliation motions also provides reassurance that punitive sanctions will not be imposed if the parties follow the parameters of preservation they originally discussed. And the most punitive sanctions will be imposed only in instances of intentional destruction of relevant evidence.

What Will the Future Bring?
As a result of the amendments, some cases will move to discovery much more quickly than in the past. To take advantage of the new rules, inside and outside counsel must be prepared for early dialogue with the court and their adversaries on both technical and legal issues.

Litigants also have grounds for optimism that the amendments will reward their efforts to curb discovery throughout a case. Although any party can issue broad and onerous discovery demands, the new focus on proportionality makes well-reasoned motions for protective orders more likely to succeed. Educating the court early about the scope of the case and the importance and magnitude of the claims is essential to success. The possibility of requiring a court conference before discovery motions are filed will help limit costs associated with seeking relief from the court. Many courts will now rule on discovery disputes after only limited briefing or even no briefing at all. Court conferences will at least focus the parties on the appropriate scope of their briefs.

On the other hand, now that early discovery requests are likely to become the norm, litigants may be forced to expend resources early on discovery that previously might have been held in abeyance until after initial motion practice. Although courts are instructed to rein in disproportional discovery, fights over what is proportional will be hotly contested, particularly at the outset of litigation, when its contours are the most difficult to anticipate. How these fights over proportionality will play out remains to be seen. In some cases, the amendments may actually lead to more, rather than less, discovery.

Although it is too early to tell exactly what the impact of the amendments will be, they take a step in the right direction by cautioning against overly broad discovery demands and eliminating many of the pitfalls of ESI preservation. Through preparation and strategic use of the amendments’ mandates, practitioners may have a real opportunity to streamline litigation, curb the costs associated with protracted litigation, and eliminate excessive preservation. Doing so requires in-house and outside counsel to work together at the first signs of litigation—if not beforehand—to gather and organize the information they will need to present a realistic and persuasive picture about how discovery can, and should, be limited. 

Keywords: litigation, woman advocate, federal rules amendments, Federal Rules of Civil Procedure, Rule 26, Rule 16, Rule 37, proportionality, spoliation, sanctions, case management, scheduling orders

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