United States: Preparing For Electronic Discovery In Litigation

The largest cost in litigation is discovery, an ever-growing percentage of which is electronic discovery ("e-discovery"). A 2012 study by the RAND Institute for Civil Justice found that the median cost for producing electronically stored information ("ESI") in the cases studied was $1.8 million.1 And these expenses are only increasing. In response, the Federal Rules of Civil Procedure (FRCP) have been amended several times in recent years, with the latest amendments taking effect on December 1, 2015. These changes have already begun to significantly impact the scope and costs of discovery, including e-discovery— particularly due to the renewed emphasis on the need for "proportionality."

Given the prevalence of electronic data and the myriad ways in which it is stored, combined with the shifting landscape of federal discovery rules, it is critical that attorneys and their clients educate themselves on the applicable rules and their practical implications for ESI and e-discovery in litigation.

Electronic Discovery Rules

The 2015 Committee Notes to the amended FRCP acknowledge the explosion of information and ESI, as well as advancements in technologies that are occurring. For instance, the notes to amended Rule 26(b)(1) state that "[c]omputer based methods of searching such information continue to develop, particularly for cases involving large volumes of electronically stored information," and "[c]ourts and parties should be willing to consider the opportunities for reducing the burden or expense of discovery as reliable means of searching ESI become available."

The 2015 amendments to the FRCP were designed to accomplish three primary goals: (1) clarify the consequences for failing to preserve ESI; (2) stress the importance of the proportionality principle in resolving discovery disputes; and (3) expedite litigation. As they relate to e-discovery, the amended rules can be grouped according to changes that affect cooperation, the pace of discovery, proportionality, cost allocation, responses and objections to document requests, and failure to preserve.2

COOPERATION

Amended Rule 1 provides that the civil rules are to 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 2015 Committee Notes on this rule, as amended, emphasize that the "parties share the responsibility to employ the rules in the same way," and that "[e]ffective advocacy is consistent with—and indeed depends upon—cooperative and proportional use of procedure." The 2015 Committee Notes further advise that Rule 1 neither creates a new or independent source of sanctions nor abridges the scope of any other of the Federal Rules.

DRIVING THE PACE OF DISCOVERY

Unnecessary delays, lack of planning, or non-cooperation at the outset of a case can result in inefficiency and expense. The amendments to Rules 4, 16, 26, and 34 address these problems by shortening timelines and requiring parties to identify and discuss discovery issues early in the course of litigation.

Amended Rule 4(m) reduces the time permitted to serve a defendant with a summons and complaint from 120 days to 90 days. If service has not occurred within the prescribed period, then the court must either dismiss the action without prejudice or order that service be completed by a certain date. The 2015 Committee Notes advise that this change, together with the shortened times for issuing a scheduling order set by amended Rule 16(b)(2), will reduce delay at the beginning of litigation.

To further reduce delay at the outset of a case, amended Rule 16(b)(2) requires courts to issue a scheduling order 90 days after any defendant is served, or 60 days after any defendant makes an appearance, whichever is earlier. Issuance of the scheduling order may be delayed, however, if the court finds good cause.

Amended Rule 16(b)(1), aimed at encouraging productive discussions during the scheduling phase, removes the former rule's reference to conferences being conducted by "telephone, mail, or other means." The 2015 Committee Notes explain the deletion of this language, particularly discussions by mail, by stating that "[a] scheduling conference is more effective if the court and the parties engage in direct simultaneous communication."

Amended Rule 26(f)(3) adds "preservation" and "privilege" as topics to discuss at the Rule 16 conference. The amended rule requires parties to discuss whether they will seek an order under Federal Rule of Evidence 502—a valuable but underutilized rule that allows courts to prevent waiver of privilege. A coordinating amendment to Rule 16(b) explicitly allows scheduling orders to include terms related to preservation and Rule 502 orders.

To further facilitate discussions during the Rule 26(f) conference, amended Rule 26(d)(2) permits the parties to serve document requests under Rule 34 before the conference, but no earlier than 21 days after service of the summons and complaint. This change to the former rule, which prohibited any discovery requests before the Rule 26(f) conference, allows the parties to address issues presented by the document requests at the Rule 26(f) conference. The early Rule 34 requests will be considered served at the first Rule 26(f) conference.

Finally, amended Rule 16(b) allows a scheduling order to include terms requiring the parties to confer with the court before bringing any discovery-related motions.

PROPORTIONALITY

Discovery under former Rule 26(b)(1) was extraordinarily broad: parties could obtain information "regarding any nonprivileged matter that is relevant to any party's claim or defense," including any information that "appears reasonably calculated to lead to the discovery of admissible evidence." With the increasing volume of data created and maintained by companies, significant time and money can be spent responding to discovery requests. When the parties have similar discovery exposure, they each have an incentive to narrow discovery without court intervention. Such self-regulation does not exist, however, when the parties' discovery obligations are asymmetrical. Former Rule 26(b)(2)(C) required the court to limit discovery when it found that the "burden or expense of the proposed discovery outweighs its likely benefit," but discovery limitations were rarely raised by the court on its own and, when objections to scope were raised by a producing party, courts were reluctant to impose restrictions.

Under the amended rule, the Committee made a few significant changes to combat the problems associated with asymmetric discovery. Amended Rule 26(b)(1) limits discovery to relevant, non-privileged information that is "proportional to the needs of the case." The rule lists relevant proportionality considerations as "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."3 As amended, Rule 26(b)(1) no longer includes language to the effect that discovery may include any information "reasonably calculated to lead to the discovery of admissible evidence."4

COST ALLOCATION

Former Rule 26(c)(1) authorized protective orders to preclude unduly burdensome or expensive discovery. Although not stated in the former rule, courts could issue protective orders that allocated some of the cost to the requesting party. Because the former rule was silent on cost allocation, parties sometimes disputed the court's authority to shift costs. Amended Rule 26(c) (1) states that the protective order may include "specifying terms, including time and place or the allocation of expenses, for the disclosure of discovery." As the 2015 Committee Notes explain, "[e]xplicit recognition [of cost shifting] will forestall the temptation some parties may feel to contest this authority." The Committee was careful to note, however, that this change does not alter the standard practice of having the responding party bear the cost of responding to discovery requests.

RESPONSES AND OBJECTIONS TO DOCUMENT REQUESTS

Parties responding to Rule 34 production requests typically list a litany of objections and often fail to specify whether any of the stated objections will be relied on as grounds to withhold any of the documents sought be the requesting party. Amended Rule 34 requires responding parties to state the specific grounds on which the party is objecting and whether any documents are being withheld on the basis of a given objection. The Committee intended for this change to facilitate meaningful meet-and-confer discussions between the parties.

FAILURE TO PRESERVE

The ability of courts to sanction a party for the spoliation of evidence is limited under the FRCP. Former Rule 37(e) permitted such sanctions, but only when a party failed to provide electronically stored information in violation of a court order. Because former Rule 37(e) applied to such a narrow set of circumstances, courts turned to their inherent authority or state laws to sanction parties for their failure to preserve evidence resulting in disparate standards for what constitutes a party's duty to preserve and wide-ranging sanctions for violations of that duty. Without clear guidance on what sanctions might be imposed for the spoliation of evidence, companies often over-preserved data to avoid the risk of severe penalties.

To provide clarity and consistency on sanctions for failure to preserve, amended Rule 37(e) was completely rewritten. Under amended Rule 37(e), the court may impose sanctions on an offending party for failing to preserve ESI where the ESI (1) "should have been preserved in the anticipation or conduct of litigation"; (2) is lost "because a party failed to take reasonable steps to preserve it"; and (3) "cannot be restored or replaced through additional discovery." If these three conditions are met, the court will determine whether or not another party is prejudiced by the offending party's loss of the ESI. Under amended Rule 37(e)(1), the court may impose "curative measures" on the offending party based on a finding that another party was prejudiced from losing the information, but such measures may be "no greater than necessary to cure the prejudice." Under amended Rule 37(e)(2), if the court determines that the offending party "acted with the intent to deprive another party of the information's use in the litigation"— regardless of prejudice—then the court may (a) presume that the lost information was unfavorable to the offending party, (b) instruct the jury that it may or must presume the information was unfavorable to the offending party, or (c) dismiss the action or enter a default judgment.

Thus, under the amended rule, sanctions are not permitted if evidence is lost despite a party's reasonable efforts to preserve it. Further, even if a party failed to try to preserve information, sanctions are not automatic. Under amended Rule 37(e)(1), a court may order "curative measures," but only upon a finding that another party was prejudiced from losing the information. More severe sanctions, such as an adverse inference or the entry of default judgment, are permitted under amended Rule 37(e)(2), but only when the court finds that a party "acted with the intent to deprive another party of the information's use in the litigation."

* * *

The amendments to FRCP encourage early and enhanced case management and cooperation, which should provide an opportunity for counsel who are familiar with a client's electronic systems and well-versed in the real world issues of discovery to obtain substantial savings in time and money. The amendments relating to proportionality and sanctions may result in a reduction in the costs associated with overly broad discovery and over-preservation of data. It is important to note, however, that the amended rules do not altogether eliminate the reality of asymmetric discovery. The notes acknowledge that one party may have more information than another and will therefore often bear a heavier burden in responding to discovery. Nevertheless, the amendments' focus on cooperation and proportionality in e-discovery provides a springboard by which to engage with the other side early on in discovery. It also encourages active judicial management of discovery to resolve disputes.

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Footnotes

1. Rand Institute for Civil Justice, where the money goes: understanding litigant expenditures for producing electronic discovery 17 (2012).

2. Wai Feng Trading Co. v. Quick Fitting, Inc., 2016 U.S. Dist. LEXIS 77672 (D.R.I. June 14, 2016) (invoking the policies of the amended FRCP and discussing a number of rules including FRCP 1, 26(b), 26(f), and 34).

Originally published 22 September 2016

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© Copyright 2016. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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