1 PRACTICAL EFFECTS OF THE 2015 AMENDMENTS TO THE FEDERAL RULES OF CIVIL PROCEDURE Kenneth L. Racowski Samantha L. Southall Buchanan Ingersoll & Rooney PC Philadelphia - Litigation Susan M. Roach Senior Counsel Employment & Commercial Litigation Hewlett Packard Enterprises 2016 In House Counsel Conference
2 Agenda Purpose and History of the Amendments The Relevant Rule Changes How the Amendments Affect You and Your Company Recent Opinions Interpreting the Amendments Questions
3 PURPOSE AND HISTORY OF THE AMENDMENTS
4 Rationale Behind Amendments The 2006 Amendments, the first to address ESI, had several unintended consequences: Expansion in generation, types, usage and storage of ESI. Increase in expense and burden to large organizations. Perception of an increase in sanctions Failure to have a uniform national standard for imposing sanctions
5 History of the Amendments In 2010, the Advisory Committee began to examine whether the FRCP were achieving Rule 1 s goal of the just, speedy and inexpensive resolution of Federal lawsuits. A decision was made to try to improve the rules, rather than start over, and a four year process of drafting and enacting the Amendments began.
6 Purpose of the Amendments: Promote the just, speedy and inexpensive resolution of district court cases. Fed. R. Civ. P. 1. There is a new focus on cooperation among lawyers. Emphasis on a commitment by the parties and courts to undertake and oversee discovery that is proportional to the needs of a particular case. Uniform national standard on sanctions.
7 Goals of Amendments Improve disposition of cases by reducing costs and delay Enhance cooperation among the parties Elevate proportionality Promote early and active judicial case management
8 SUMMARY OF THE AMENDMENTS
9 Rules Changed The 2015 Amendments contain significant amendments to Rules 1, 4, 16, 26, 34, and 37. We will focus on the amendments to Rules 26 and 37.
10 Applicability Apply to all cases commenced after December 1, 2015 and, insofar as just and practicable, all cases then pending. Courts in the Third Circuit are regularly applying the amendments to cases commenced before December 1, 2015. But some are not Trowery v. O Shea (D.N.J. Dec. 30, 2015)
Amended Rule 1 -- Just, Speedy, and Inexpensive Intended to emphasize that the parties, as well as the Court, have a responsibility to employ the rules to secure the just, speedy, and inexpensive determination of every action. Encourages counsel and parties to cooperate. Meant to discourage over-use, misuse, and abuse of procedural tools that increase cost and result in delay. 11
12 Amended Rule 4 Timing for Service Complaints now need to be served within 90, not 120, days. A plaintiff will need to focus on effectuating service sooner. Will reduce delay at the outset of an action.
13 Amended Rule 16 Encourages in-person initial case management conferences Shortens the time for a judge to issue a scheduling order It is now 90 days after service or 60 days after appearance by a defendant.
14 Required Topics at a CMC Requires that the court and parties address at the Rule 16 case management conference: (1) Preservation of ESI; (2) Agreements reached under Fed. R. Evid. 502; and (3) Agreements as to pre-motion conferences on discovery disputes.
15 Amended Rule 26(b)(1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties 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, 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. Relevant and Proportional
16 Amended Rule 26(b)(1) - Relevance Relevant to a party s claim or defense Information within the scope of discovery need not be admissible in evidence to be discoverable Reasonably Calculated language deleted. Advisory Committee Note to Rule 26: Information is discoverable under revised Rule 26(b)(1) if it is relevant to any party s claim or defense and is proportional to the needs of the case. The considerations that bear on proportionality are moved from present Rule 26(b)(2)(C)(iii), slightly rearranged and with one addition.
17 Amended Rule 26(b)(1) - Proportionality Proportionality is defined by determining whether the burden outweighs the benefit using five factors: (1) importance of the issues at stake, (2) the amount in controversy, (3) the parties relative access to relevant information, (4) the parties resources, and (5) the importance of the discovery to resolve the issues.
18 Amended Rule 26(b)(1) - Proportionality The factors are now part of the affirmative definition of the proper scope of discovery. This change suggests that proportionality will play a much greater role going forward. Intent was to reduce discovery costs.
19 Amended Rule 26(b)(1) - Proportionality The Advisory Committee Notes state that the amendment to Rule 26(b)(1) is not intended to place the burden of establishing proportionality on the party seeking discovery. not intended to permit the opposing party to refuse discovery simply by making a boilerplate objection that it is not proportional. the burden of responding to discovery lies heavier on the party who has more information, and properly so. Early case law indicates this burden is placed on the party resisting discovery while the party seeking discovery bears the burden of demonstrating relevance.
20 Amended Rule 26(c) - Cost Allocation Advisory Committee Note to Rule 26(c)(1)(B): Recognizing the authority to allocate expenses does not imply that cost-shifting should become a common practice. Courts and parties should continue to assume that a responding party ordinarily bears the costs of responding. No downside in asking for cost-shifting, particularly where the evidence sought is marginally relevant.
Amended Rules 26(d) and 34 - Early Service of Document Requests Under the prior version of the Rules, written discovery could not be served until after the Rule 26(f) meet and confer. Now, parties may deliver document requests 21 days after service of process. Courts will expect that discovery will be delivered in advance of the Rule 26(f) conference and parties should use requests to set the framework for the Rule 26(f) discussion. Delivery does not count as service; the time to respond runs from the Rule 26(f) conference. 21
22 Decisions in the First 100 Days Bell v. Reading Hospital, 2016 WL 162991 (E.D. Pa. Jan. 14, 2016) [P]roportionality determinations are to be made on a case-by-case basis using the factors listed in Rule 26(b)(1), and [] no single factor is designed to outweigh the other factors in determining whether the discovery sought is proportional. Court considered importance of information to case; the amount in controversy against the cost of conducting the discovery; and the defendant s ability to assemble the information. Court observed that the proportionality standard does not require a court to analyze whether one party has more discovery to offer than another party.
23 Decisions in the First 100 Days Dixon v. Williams, 2016 WL 631356 (M.D. Pa. Feb. 17, 2016) The present amendment restores the proportionality factors to their original place in defining the scope of discovery, but does not change any of the existing responsibilities of the court or the parties in considering proportionality.
24 Decisions in the First 100 Days Gilead Scis., Inc. v. Merck & Co., Inc., 2016 WL 146574 (N.D. Cal. Jan. 13, 2016) Proportionality in discovery under the Federal Rules is nothing new. Old Rule 26(b)(2)(C)(iii) was clear that a court could limit discovery when burden outweighed benefit, and old Rule 26(g)(1)(B)(iii) was clear that a lawyer was obligated to certify that discovery served was not unduly burdensome. New Rule 26(b)(1), implemented by the December 1,2015 amendments, simply takes the factors explicit or implicit in these old requirements to fix the scope of all discovery demands in the first instance. What will change hopefully is mindset. No longer is it good enough to hope that the information sought might lead to the discovery of admissible evidence. In fact, the old language to that effect is gone. Instead, a party seeking discovery of relevant, non-privileged information must show, before anything else, that the discovery sought is proportional to the needs of the case.
25 Decisions in the First 100 Days Henry v. Morgan s Hotel Group, Inc., 2016 WL 303114 (S.D.N.Y. Jan. 25, 2014) Relevance is still to be construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on any party's claim or defense. However, the amended Rule is intended to encourage judges to be more aggressive in identifying and discouraging discovery overuse by emphasizing the need to analyze proportionality before ordering production of relevant information. The burden of demonstrating relevance remains on the party seeking discovery, but the newly-revised rule does not place on [that] party... the burden of addressing all proportionality considerations.
26 Decisions in the First 100 Days Carr v. State Farm Mut. Auto Ins. Co., 2015 WL 8010920 (N.D. Tex. Dec. 7, 2015) [T]he amendments to Rule 26(b) and Rule 26(c) (1) do not alter the basic allocation of the burden on the party resisting discovery to in order to prevail on a motion for protective order or successfully resist a motion to compel specifically object and show that the requested discovery does not fall within Rule 26(b)(1)'s scope of proper discovery (as now amended) or that a discovery request would impose an undue burden or expense or is otherwise objectionable.
27 Decisions in the First 100 Days In re Takata Airbag Prods. Liab. Litig., MDL N. 2599 (S.D. Fla. March 1, 2016) Permitted Defendants to redact or withhold certain competitively sensitive irrelevant information from responsive documents and document families, despite the existence of a Protective Order. A party is not entitled to receive every piece of relevant information and that [i]t is only logical, then, that a party is similarly not entitled to receive every piece of irrelevant information in responsive documents if the producing party has a persuasive reason for why such information should be withheld. Defendants provided a persuasive reason for permitting the redaction of certain irrelevant information that, even with the entry of a protective order, they would need to produce copious amounts of competitively sensitive information to their competitors and perhaps to the media to the detriment of each Defendant.
28 Takeaways Seeking additional discovery, absent proof that information already produced is insufficient, is not proportional to the needs of the case. Discovery that is outside the scope of the issues in the case or is otherwise overbroad is disproportionate.
29 Takeaways Easy to obtain discovery is likely proportional, if relevant. Highly relevant and narrowly tailored discovery is proportional. Proportionality can be used to withhold irrelevant information.
30 Amended Rule 37 Amendments to Rule 37(e) regarding sanctions Creates a safe harbor regarding the preservation of ESI Intended to resolve circuit split on the most serious of sanctions for ESI spoliation i.e. dismissal or adverse inference; comments indicate that there should not be a reliance on a court s inherent authority Applies only to ESI
31 Important Changes to Rule 37 Emphasis on preservation not production -- title changed from Failure to Produce ESI to Failure to Preserve ESI. Deletes Absent exceptional circumstances, a court may not impose sanctions under these rules for failing to provide electronically stored information lost as a result of the routine, good faith operation of an electronic information system. Replaces it with 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...
32 Three Step Application Three step test for application of Rule 37(e) (1) ESI should have been preserved; (2) party failed to take reasonable steps to preserve; and (3) ESI cannot be restored or replaced. To even consider sanctions, must have been a duty to preserve, a failure to take reasonable steps to do so and no way to replace or restore the lost ESI. Third part may prove the most important as ESI is often in multiple places.
33 Amended Rule 37 If the three part test is met, next step is to determine if there (1) was an intent to deprive or, if not, whether the court can make a finding of prejudice. If there is a finding of an intent to deprive the other party of the information then the court may (a) presume the lost information was unfavorable to the party, (b) instruct the jury that it may presume the information was unfavorable or (c) dismiss the action or enter a default judgment no finding of prejudice is required. If no intent to deprive, court determines if prejudice occurred. If so, court may order measures no greater than necessary to cure the prejudice. Basically anything short of an adverse inference or dismissal; so could still have very serious consequences
34 Amended Rule 37 There is (a) no definition of what is reasonable, (b) no clear guidance as to what proof is needed to find an intent to deprive, and (c) a lack of clarity as to who bears the burden. Committee Notes bring in the proportionality concept to the reasonableness requirement. Committee Notes confirm that reasonable steps does not mean perfection. Focus on the preservation steps taken, e.g., hold letters.
The Federal Lawyer prepared a useful decision tree 35
CAT3 v. Black Lineage, 2016 WL 154116 (S.D.N.Y. Jan. 12, 2016) Broadly applied definition of lost ESI. Held that e-mails from different parties productions displaying different versions of e-mail addresses but no different content were lost because it cannot be restored or replaced through additional discovery. Found intent to deprive, but refused to enter severe sanctions. Preclusion from relying on altered versions, and imposed costs and fees. 36
Nuvasive, Inc. v. Madsen Med. Inc., 2016 WL 305096 (S.D. Cal. Jan. 26, 2016) Court vacated prior order imposing adverse inference. Lost text messages. Court initially found fault for not enforcing compliance with litigation hold but no finding of intentional spoliation. On reconsideration, Court determined new Rule 37(e) did not permit adverse inference based on its prior findings. Allowed both sides to present evidence to jury regarding the lost text messages and alleged failure to preserve. 37
SEC v. CKB168 Holdings Ltd. (E.D.N.Y. Feb. 2, 2016) Modified pre-amendment sanction. Hard drive with missing IPO information. Initial sanction - adverse inference due to gross negligence. Under new rule, record insufficient as to intentional spoliation. SEC motion for sanctions denied without prejudice; able to attempt requisite showing of intent at trial. 38
Living Color Enterprises, Inc. v. New Era Aquaculture, Ltd., 2016 WL 1105297 (S.D. Fla. Mar. 22, 2016) Sanctions motion arose after amendment. Defendant had failed to turn off the 30-day auto-delete function on his cell phone and had replaced his phone twice during the litigation. Met all 3 steps for sanctions under Amended Rule 37(e). But no prejudice to plaintiff because majority but not all lost text messages were found on other custodians devices and the missing texts appear to be unimportant Also no finding of any intent to deprive finding it is common practice amongst cell phone users to delete text messages as they are received or soon thereafter. Seems to provide more leeway for deleted text messages than would be allowed for e-mails. 39
40 Practical Implications of Amended Rule 37 1. Remain Aware of Your Duty to Preserve Amendments did not alter a party's duty to preserve ESI. Need to monitor all potential litigation, remain vigilant as to when the duty to preserve arises, and institute litigation hold. 2. No Need to Over-Preserve ESI If information is stored in two separate locations, no need to preserve both forms. Perfect preservation of ESI is not required. 3. Always Employ "Reasonable Efforts" When Preserving ESI "Reasonable efforts" not defined, but courts will still expect clear, defensible preservation practices. 4. Negligent Spoliation Is Still Risky Negligence is not enough for adverse inference of dismissal, but a finding of prejudice can still lead to exclusion of supporting evidence and the jury hearing evidence as to the loss of information. 5. New Focus on Proportionality May Lead to Lower Discovery Costs Optimistic expectation that new emphasis on proportionality and the higher thresholds for severe sanctions will ultimately reduce discovery expenses.
41 Rule 37 - Takeaways Amendments helpful to larger entities because they may: Reduce the burden of e-discovery; Require litigants to focus on proportionality; Facilitate meaningful cooperation; Allow parties to implement reasonable preservation without the fear of terminating sanctions.
42 Practical Advice It is too early to tell how this will be embraced by parties and the courts Critical that you undertake the changes in a consistent and uniform way concerning: Case Management (early meet and confers, requesting in-person Rule 16 conferences, requesting conferences in advance of motion practice); Discovery (serving discovery early, eliminating use of general objections, withholding information on clearly stated and specific objections) Proportional preservation and discovery (developing a defensible and documented plan; using meet and confers to reach agreements on scope) Sanctions (implementing reasonable preservation guidelines/tools/practices)
QUESTIONS 43
44 Contact Information Kenneth L. Racowski Samantha L. Southall Buchanan Ingersoll & Rooney PC Buchanan Ingersoll & Rooney PC 215.665.3608 215.665.3884 kenneth.racowski@bipc.com samantha.southall@bipc.com Susan M. Roach Senior Counsel Commercial & Employment Litigation Hewlett Packard Enterprise susan.roach@hpe.com