United States: The New Federal Rules Are Taking Effect

Amendments to several Federal Rules of Civil Procedure ("Rules"), five years in the making, go into effect December 1. This alert covers some key changes likely to have a big impact on litigation discovery in federal cases.

The Big Changes: Federal Rules of Civil Procedure 26(b)(1) and 37(e)

Two major amendments have received much attention and analysis: the changes to Rules 26(b)(1) - the Scope of Discovery, and the complete re-write of 37(e) – Failure to Preserve Electronically Stored Information ("ESI"). Both have already been cited in case law, despite the fact that they are only now going into effect.1

26(b)(1) – Discovery Scope and Limits, Scope in General Significant language regarding proportionality was moved from 26(b)(2)(C)(iii), the section on discovery limitations, to 26(b)(1), which defines the scope of discovery:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. 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 if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.

This new language essentially provides a six-factor test to determine the limits of discovery. However, each of the listed factors is open to subjective interpretation, so how these factors apply will be open to argument in any case.

Some judges and commentators have argued that merely moving the proportionality language from Rule 26(b)(2)(C)(iii) to Rule 26(b)(1) will not have a significant effect on the administration of proportionality in discovery, since the language was already part of the Federal Rules. But the more prevalent opinion is that this change has the potential to inspire major transformation, both in how the Rule is applied generally and how it affects parties' approach to discovery.

37(e) – Failure to Preserve Electronically Stored Information Subsection 37(e) was completely re-written in an attempt to reduce the tactical use of sanctions motions, by restricting remedial measures for loss of ESI to situations where they are required to cure prejudice, and limiting the most serious sanctions to instances of intentional misconduct:

If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

1. Upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

2. Only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may:

A. Presume that the lost information was unfavorable to the party;

B. Instruct the jury that it may or must presume the information was unfavorable to the party; or

C. Dismiss the action or enter a default judgement

Since the last Amendments to the Rules went into effect in 2011, there have been many court decisions ordering heavy sanctions for the failure to preserve and produce relevant information even where the party that failed to preserve had no bad intent. This new Rule seeks to provide a clear "if-then" analysis for dealing with ESI that is no longer available, and sets out enumerated factors that reserve the most severe penalties for situations where the non-producing party acted with intent to deprive the other party of the information.

More Emphasis on Federal Rule of Evidence 502(d)

One federal rule that can have a big impact on discovery isn't a Rule of Civil Procedure, but a Rule of Evidence. Since the enactment of FRE 502(d) in 2008, lawyers and judges in the know have been encouraging parties to take advantage of that Rule to protect against inadvertent privilege waivers in various instances. Now, FRE 502(d) has been explicitly referenced in both FRCP 16(b) (scheduling order contents) and FRCP 26(f) (meet and confer/contents of the discovery plan). The new emphasis on 502(d) is a nod to the realities of large-scale e-discovery: the unintentional production of privileged documents is virtually a statistical certainty, given the volume of data being collected, processed, and produced in large cases and sometimes "quick peek" production methodologies can be beneficial for all concerned. Rather than fighting about inadvertent production under 502(b), or the possibility of such documents being used in unrelated legal matters, the entry of a 502(d) order can provide significant protection to producing parties. Indeed, Magistrate Judge Andrew Peck (S.D.N.Y.) has gone so far as to say that "it is almost malpractice not to seek a Rule 502(d) order" for large e-discovery matters.2 Obtaining non-waiver orders can be a very good idea; however, one concern raised is that the new emphasis on the use of 502(d) orders could lead to accelerated production schedules if judges think they fully substitute for privilege reviews. Whether or not a non-waiver order is in place, most producing parties do opt to conduct privilege reviews before producing documents, because adverse parties can still take advantage of privileged information they learn from inadvertently produced documents, even if the documents may later be clawed back. Accordingly, non-waiver orders should include language noting that nothing in the order should be interpreted as limiting the right of any party to perform a full privilege review prior to production.

Federal Rule of Civil Procedure 34(b)(2) FRCP Rule 34(b)(2), dealing with responses and objections, now includes language requiring that the grounds for any objections be stated "with specificity" and that the objection must state "whether any responsive materials are being withheld on the basis of that objection." These new requirements, when coupled with the standard 30-day response period (or even an extended one), may create difficulties in cases that have large ESI burdens. In a discovery matter involving multiple gigabytes of data, it is unlikely that a producing party will have a full grasp on its preserved/collected data within 30 days, which will obviously limit its ability to identify all potential objections arising from the data and/or responsive material being withheld based on the objections. Accordingly, it will be interesting to see what strategies are employed by parties in pursuit of compliance with this Rule, in light of the realities of voluminous ESI.

Wrap-up

With changes ranging from minor (aligning Rules 30, 31, and 33 with the revised Rule 26(b) subsection) to the projected game-changers discussed above, the amended Federal Rules have the potential to dramatically alter discovery as we know it. Both in-house counsel and their outside lawyers should pay careful attention to the new Rules and how they may be leveraged to reduce costs and achieve optimal discovery outcomes.

Footnotes

1 See Adair v. EQT Prod. Co., No. 1:10CV00037, 2015 WL 505650, at *5 n.3 (W.D. Va. Feb. 6, 2015) ("Although the amendment is not yet in force, the proposed language provides guidance as to the scope of discovery and emphasizes that discovery must be 'proportional to the needs of the case.'"); Appler v. Mead Johnson & Co., LLC, No. 3:14-CV-166-RLY-WGH, 2015 WL 5615038, at *4 n.1 (S.D. Ind. Sept. 24, 2015) (Finding new Rule 26(b)(1) "to be instructive, if not yet binding legal authority"); and HM Elecs., Inc. v. R.F. Techs., Inc., No. 12CV2884-BAS-MDD, 2015 WL 4714908, at *29-30 (S.D. Cal. Aug. 7, 2015) (Examining the issues under both current and proposed amended Rule 37(e)).

2 Judge Andrew J. Peck, A Survey of Emerging Issues in Electronic Discovery: Forward, 26 Regent U. L. Rev. 1, 5 (2014).

This article is presented for informational purposes only and is not intended to constitute legal advice.

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