with co-author David Rivera
On December 1, 2015, proposed amendments to the Federal Rules of Civil Procedure (FRCP) (which were last amended in 2006) became effective, as they were not rejected or modified by congressional legislation. The now effective amendments take into account not only the more “exotic” sources of electronically stored information (ESI) such as smartphones and the cloud, but also emphasize the value of “cooperation among parties, proportionality in the use of available procedures and early judicial case management.”[i] The key changes related to discovery will impact early judicial case management, the standard for proportionality and spoliation sanctions.
Under the amended FRCP, there will be an increased need for skilled lawyers who fully understand their clients’ data environments. This knowledge is necessary as early as when the duty to preserve is triggered and certainly at the meet-and-confers with the other parties. At those meetings where the parties hash out their own views and proposals on the proper “disclosure, discovery or preservation” protocols for the ensuing ESI production, the attorneys who have the best handle on the case’s merits as well as proportionality considerations will be in the best position to advocate for a scheduling order that can reduce eDiscovery costs (the main culprits being over-preservation and over-production) and minimize the risks of Rule 37(e) sanctions for their side.
Early Judicial Case Management
The amended FRCP expand the scope of the parties’ discovery plan and the court’s scheduling order. The amendment to Rule 26(f)(3)(C) requires that the discovery plan arising out of the meet-and-confer state the parties’ views and proposals on disclosure, discovery or preservation of ESI. Although this may already be the practice in complex eDiscovery cases out of necessity, this Rule change is not limited to complex eDiscovery cases and explicitly adds “preservation” to the scope of a discovery plan. For example, under the amended Rule 26(f)(3)(D), a party might urge the court to issue a Rule 502(d) order under the Federal Rules of Evidence, which allows parties to return privileged documents produced during discovery without fear that the disclosure waived the attorney-client privilege or work product protection. Likewise, a party might propose that before formally seeking an order relating to discovery, a party must first request a conference with the court. The committee notes observe that “[m]any judges who hold such conferences find them an efficient way to resolve most discovery disputes without the delay and burdens attending a formal motion.”[ii] In this way, judicial resources are not spent on “discovery about discovery.”
Perhaps most importantly, the amendment to Rule 26(f)(3)(C) allows an attorney who is well-versed in the client’s data systems and the matter’s substantive claims to propose preservation terms that are proportional to the needs of the case. Counsel may be able to define the scope of both preservation and discovery as to exclude both 1) custodians who many only have a tenuous involvement in the controversy and 2) data sources that are relatively inaccessible or duplicative. Formalizing such restrictions early in the discovery process with court approval could significantly reduce a party’s preservation, collection, processing and production costs.
A client who is confronted with a complaint that raises specific red flags about its operations should allow its counsel to map, sample and diagnose its data systems early on. This additional up-front work will likely yield valuable information, which counsel could use to obtain court approval for a more targeted operation of data preservation and collection. In this way, a client may realize savings in several different ways: 1) fewer and less global disruptions to its business operations under a narrowly tailored litigation hold, 2) cost savings from not over-preserving and 3) minimizing the risk of spoliation sanctions by documenting the “reasonable steps” it took to identify and preserve ESI (see Spoliation section, infra).
Amended Rule 26(b)(1), which defines the scope of discovery, specifically incorporates a proportionality standard. Before, proportionality was indirectly addressed in Rule 26(b)(2)(C)(iii), which required the court to determine whether the proposed discovery should be limited, taking into account “the amount in controversy, the parties’ resources, the importance of the issues at stake in the action and the importance of the discovery in resolving the issues.”
The new Rule 26(b)(1) requires that both the court and the parties share the responsibility of applying the constraint of proportionality to the scope of discovery when pursuing any particular request, response or objection. Under the new proportionality standard, “[p]arties 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.” In determining proportionality on a case-by-case basis, the court and the parties may consider the former Rule 26(b)(2)(C)(iii) factors listed above as well as “the parties’ relative access to relevant information” and “whether the burden or expense of the proposed discovery outweighs its likely benefit.”
Notably, in response to significant public comment, the committee took pains to make clear that the amendment is neither intended to shift the burden of establishing proportionality to the requesting party nor to provide a new basis for refusing discovery. Rather, the Rule should “prompt a dialogue among the parties and, if necessary, the court, concerning the amount of discovery reasonably needed to resolve the case.”[iii] The scope of discovery is further limited by the deletion of Rule 26(b)(1) language that allowed the court to order, upon a showing of good cause, discovery “of any matter relevant to the subject matter involved in the action.” Here, the committee notes observe that “the subject matter provision is virtually never used, and the proper focus of discovery is on the claims and defenses in the litigation.”[iv] Other deletions to former Rule 26(b)(1) now de-emphasize the role of relevancy that have expanded the scope of discovery.
Again, hiring counsel who is prepared to demonstrate how the client’s data systems work will allow the client to more effectively justify a narrower scope of preservation and discovery.
Data-savvy counsel will also be in a better position to save the client’s money by reducing risk of discovery sanctions as put forth in the new Rule 37(e). The former version provided that a party may not be sanctioned for losing ESI “as a result of the routine, good-faith operation of an electronic information system.” However, courts did not broadly apply this safe harbor. Without a reliable path to avoid spoliation sanctions due to lost ESI, parties erred on the side of over-preservation, a costly approach to all parties involved (including the courts).
The new Rule 37(e) dispenses with that troublesome safe harbor, inserting in its place provisions authorizing courts to impose “measures no greater than necessary to cure the prejudice” upon a finding that a party failed to take “reasonable steps” to preserve ESI that should have been preserved and that another party was prejudiced by its loss. If, however, the court finds that a party “acted with the intent to deprive another party of the information’s use in the litigation,” then it may presume that the information was unfavorable, instruct the jury that it “may or must” make such a presumption, or dismiss the claims or enter a default judgment. With these changes, the new Rule 37 “forecloses reliance on inherent authority or state law to determine when certain [judicial] measures should be used.”[v] In other words, it attempts to reduce the uncertainty that has motivated parties to over-preserve.
It remains to be seen how courts will interpret “reasonable steps;” however, clients and counsel who can document the processes they used to map the data environment and to preserve ESI may avoid significant costs. On one hand, a client may reduce the expenses stemming from over-preserving and over-producing. On the other hand, the client still may lower the chance that the court grants a costly motion for sanctions for the loss of ESI.
The committee notes suggest that “reasonable preservation” may be shaped by the collaborative discovery plans and orders contemplated by amended Rules 16(b)(B)(iii) and 26(f)(3)(C).[vi] Furthermore:
“Another factor in evaluating the reasonableness of preservation efforts is proportionality. . . a party may act reasonably by choosing a less costly form of information preservation, if it is substantially as effective as more costly forms. It is important that counsel become familiar with their clients’ information systems and digital data – including social media – to address these issues. A party urging that preservation requests are disproportionate may need to provide specifics about these matters in order to enable meaningful discussion of the appropriate preservation regime.[vii]” (Italics added).
It remains to be seen how courts will interpret this new rule, but it should provide parties more comfort that if they take reasonable preservation steps, they will be in good shape. Broad preservation notices to anyone and everyone may be a thing of the past if litigants are able to limit the scope of discovery early on through the meet-and-confer process.
The amendments are likely to significantly affect the discovery landscape once again. In light of the experience of many who are still adjusting to the changes brought about in 2006, it is wise to consider in advance how the changes may affect day-to-day practices and to plan accordingly. These changes may ultimately lessen the burden for ESI preservation, collection and production, but navigating such obligations requires counsel who is not only well-versed in the Federal Rules, but also in their clients’ electronic systems. Such knowledge may require additional time and effort at the outset, but is likely to pay off in the form of reduced discovery costs and risks over time.
[i] Committee on Rules of Practice and Procedure, Report of the Judicial conference, at Appendix B-2 (September 2014) available at http://www.uscourts.gov/uscourts/RulesandPolicies/rules/Reports/ST09-2014.pdf [hereinafter Report of the Judicial Conference].
[ii] Report of the Judicial Conference, Proposed Rule 37(e) Committee Note, at B-29.
[iv] Id. at B-9.
[v] Id. at B-58.
[vi] Id. at B-60.
[vii] Id. at B-61, B-62.