The Amendments to the Federal Rules on Discovery: Using the New Rule 26 to Help Your Clients

Steven M. Puiszis Hinshaw & Culbertson LLP Chicago, IL Jill Cranston Rice Dinsmore & Shohl LLP Morgantown, WV

EFFECTIVE DATE “[t]he foregoing amendments to the Federal Rules of Civil Procedure shall take effect on December 1, 2015, and shall govern in all proceedings in civil cases thereafter commenced and, insofar as just and practicable, all proceedings then pending.” - April 29, 2015

History of Rule 26 Amendments

History of Rule 26 Amendments “Restoring proportionality as an express component of the scope of discovery warrants repetition of parts of the 1983 and 1993 Committee Notes that must not be lost from sight.” – 2015 Committee Note

1983 History of Rule 26 Amendments - 1983 1983 “The objective is to guard against redundant or disproportionate discovery by giving the court authority to reduce the amount of discovery that may be directed to matters that are otherwise proper subjects of inquiry.” The Committee’s intent was “to encourage judges to be more aggressive in identifying and discouraging discovery overuse.” “The objective is to guard against redundant or disproportionate discovery by giving the court authority to reduce the amount of discovery that may be directed to matters that are otherwise proper subjects of inquiry.” The Committee’s intent was “to encourage judges to be more aggressive in identifying and discouraging discovery overuse.” 1983

1993 History of Rule 26 Amendments - 1993 Freedom Indiana:  http://www.freedomindiana.org/ Freedom Indiana:  http://www.freedomindiana.org/ History of Rule 26 Amendments - 1993 The Committee added two factors: (1) whether “the burden or expense of the proposed discovery outweighs its likely benefit,” and (2) “the importance of the proposed discovery in resolving the issues.” These were “intended to provide the court with broader discretion to impose additional restrictions on the scope and extent of discovery . . . .” 1993

2000 History of Rule 26 Amendments - 2000 .” The Committee added to Rule 26(b)(1) a statement that “[a]ll discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii) [now Rule 26(b)(2)(C)].” The accompanying Note explained that courts were not using the proportionality limitations as originally intended, and that “[t]his otherwise redundant cross- reference has been added to emphasize the need for active judicial use of subdivision (b)(2) to control excessive discovery.” 2000

History of Rule 26 Amendments .” THE DUKE CONFERENCE

2015 2015 The previous amendments have not had their desired effect.” “[T]hree previous Civil Rules Committees in three different decades have reached the same conclusion as the current Committee – that proportionality is an important and necessary feature of civil litigation in federal courts. And yet one of the primary conclusions of comments and surveys at the 2010 Duke Conference was that proportionality is still lacking in too many cases.” The Committee’s purpose in returning the proportionality factors to Rule 26(b)(1) “is to make them an explicit component of the scope of discovery, requiring parties and courts alike to consider them when pursuing discovery and resolving discovery disputes. 2015

The Problem Excessive and unnecessary discovery and over Explosion in volume of electronically stored information. Broad / ill-defined duty to preserve Broad discovery / Producer pays Excessive and unnecessary discovery and over preservation of data.

Preserved at Microsoft - Legal Issues Avg. # pages per GB of Microsoft data: 43,753 Unique custodians on hold: FY10: 5732 FY11: 6904 FY12: 7629 FY13: 8881

Over Preservation Case Study: 2013 Average Microsoft Case (Custodians/Volume/Pages) Preserved: 45 Custodians - 1335 GB - 59,285,000 pp Collected & Processed: 8 Custodians -- 241 GB -- 10,544,000 pp Reviewed: 8 GB -- 350,000 pp Produced: 2 GB – 87,500 pp Used: 88 PAGES

E-Discovery Sanctions on the Rise

Proportionality in the Scope of Discovery

Proportionality in the Scope of Discovery – Rule 26(b)(1) Purpose “The parties and the court have a collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.”

Proportionality in the Scope of Discovery – Rule 26(b)(1) Rule 26(b)(1) will permit a party to “obtain discovery regarding any non-privileged matter 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 to be admissible in evidence to be discoverable.” Proportionality language was moved from Rule 26(b)(2)(C)

Omitted . . . “The existence, description, nature, custody, condition, and location of any documents or other tangible tings 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.” “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.”

1. “The importance of the issues at stake in the action”

2. “The amount in controversy”

3. “The parties’ relative access to relevant information”

4. “The parties’ resources”

5. “The importance of the discovery in resolving the issues”

6. “Whether the burden or expense of the proposed discovery outweighs its likely benefit”

Cost Allocation

Cost Allocation – Rule 26(c) (c) Protective Orders (1) In General. * * * The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following: * * * (B) specifying terms, including time and place or the allocation of expenses, for the disclosure or discovery; * * *

Preservation & Sanctions

Preservation & Sanctions Former Rule: Safe harbor for loss resulting from “the routine, good-faith operation of an electronic information system.”

Purposes of the New Rule Uniform national standard for sanctions Preservation & Sanctions Purposes of the New Rule Uniform national standard for sanctions Elimination of the Second Circuit’s negligence standard “[F]orecloses reliance on inherent authority” –Rule 37 Committee Note

Purposes of the New Rule, Cont’d. Preservation & Sanctions Purposes of the New Rule, Cont’d. Avoid punishing meaningless loss of ESI Emphasis on avoiding over-preservation Provide de facto safe harbor for “reasonable steps” Does not require perfection Proportionality to be considered

C. Requirements of the New Rule Preservation & Sanctions C. Requirements of the New Rule If Electronically Stored Information, that should have been preserved in anticipation 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…”

D. Authority Under the New Rule Preservation & Sanctions D. Authority Under the New Rule “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 judgment.”

Rule 37(e) Flowchart 2 3 4 5 7 6 1 Should have been preserved? NO Failure to take reasonable steps? 2 YES NO Information cannot be restored/replaced? 3 YES NO Intent to deprive? 4 YES Prejudice? 5 NO Presume unfavorable, Jury instruction, Dismissal 7 YES Measures no greater to cure prejudice 6 YES

Issues

1. Breach of Duty to Preserve

2. Reasonable Steps

3. Prejudice

4. Curative Measures Available

Other Amendments & Practical Tips

A. Production Requests & Objections – Rules 26(d), 34 & 37 Rule 26(d)(2): Allows any party to deliver Rule 34 requests more than 21 days after that party has been served (even if no Rule 26(f) conference has yet occurred)

A. Production Requests & Objections – Rules 26(d), 34 & 37 Time to respond to Rule 34 requests served prior to the Rule 26(f) conference is 30 days after the Rule 26(f) conference. Objections to Rule 34 requests must be stated with specificity, and must state whether any responsive material is being withheld on the basis of that objection. Responses must state whether copies of documents and/or ESI will be produced rather than allowed for inspection, and if they are to be produced, production must occur within the time specified for inspection or another reasonable time to be specified.

A. Production Requests & Objections – Rules 26(d), 34 & 37 Now allows sanctions for failure to produce copies of documents or ESI rather than only for failure to allow inspection.

Rule 4: Time for service is reduced from 120 days to 90 days. Rule 16: B. Case Management Rules Rule 4: Time for service is reduced from 120 days to 90 days. Rule 16: Scheduling conference requires direct simultaneous communication Scheduling order Must be issued within 90 days after service May include: An order governing preservation of ESI Agreements under FRE 502 An order requiring a conference with the court prior to any discovery motion

Case Management Rules FRE 502 Authorizes a federal court to issue a non-waiver order, and once entered a subsequent disclosure of privileged information or work product in that proceeding does not constitute a waiver in that proceeding or in any other state or federal proceeding. Clarifies that non-waiver discovery agreements – clawbacks or quickpeeks – are only binding on the parties, not third parties. While the information may be returned under such an agreement, the disclosure of privileged information or work product in your pending action may waive privilege or work product in other proceedings. Why non-waiver orders are important.

C. Cooperation – Rule 1 The Rule should help achieve the “just, speedy, and inexpensive determination of every action and proceeding.” The rule will be “construed, and administered and employed by the court and the parties to secure” those goals. The amendment emphasizes that “the parties share the responsibility to employ the rules” in that matter.  The Note says it is important to discourage “over-use, misuse, and abuse of procedural tools that increase cost and result in delay.”  The Note adds that “[t]his amendment does not create a new or independent source of sanctions” and “neither does it abridge the scope of any other of these rules.”

Consequences of not waiving service Costs can be assessed D. Forms – Rules 4(d) & 84 and Appendix of Forms New Forms Waiver of Service Consequences of not waiving service Costs can be assessed

Rule 4: Notice of a Lawsuit and Request to Waive Service of Summons What happens next? If you return the signed waiver, I will file it with the court. The action will then proceed as if you had been served on the date the waiver is filed, but no summons will be served on you and you will have 60 days from the date this notice is sent (see the date below) to answer the complaint (or 90 days if this notice is sent to you outside any judicial district of the United States). If you do not return the signed waiver within the time indicated, I will arrange to have the summons and complaint served on you. And I will ask the court to require you, or the entity you represent, to pay the expenses of making service.

Thank you.