MER 2014 Recap: The Imminent Revisions to the Federal Rules of Civil Procedure (FRCP)

MERLogoThis is a part of a series of recaps from the 2014 National Conference on Managing Electronic Records, otherwise known as the MER Conference.

The opening keynote for MER 2014 went into great detail about the proposed amendments to the Federal Rules of Civil Procedure, or FRCP. The FRCP comprises rules for courts to follow when adjudicating civil lawsuits in United States district (federal) courts. Title V, which encompasses Rules 26-37, is the part of FRCP that dictates rules for legal discovery. Two of those rules are under consideration for amendment, and were the topic of the keynote.

The panel for the keynote consisted of the Honorable David G. Campbell, who was the chair of the advisory committee for the FRCP, Honorable John M. Facciola, Kenneth Winters, Esq., and Carol Stainbrook, Executive Director of Cohasset Associates, Inc., who was our moderator. Each of them provided mountains of useful information and insight into the proposed changes.

The Problem

First, Hon. Campbell told us that four years ago, the committee held a conference to ask about civil litigation in the United States – does it work? Is it keeping up with technology? One of the panels recommended that the committee write a new rule to address eight questions about dealing with electronic information in court. These included:

  • When electronically stored information (ESI) has to be preserved for litigation, what is the trigger for when ESI has to be preserved?
  • What is the scope of the preservation obligation (how much do we have to preserve)?
  • How long do we have to keep the ESI?
  • What are the consequences when we lose it?

The committee tried to work on those points but they simply could not write a rule that would address those specific points and that would also cover the wide variety of cases that come before federal courts. The one thing they could address was, “What happens when ESI is lost? What are the consequences when somebody should have preserved information, but failed to do so?”

The answer seems fairly simple: a judge can issue sanctions. However, over the years, different judges would issue sanctions for different reasons. Some judges would say that if you lose information negligently, then that is enough to get an “adverse inference instruction.” That means that a jury would be told that, basically, you were supposed to have the information and you’ve lost it — and therefore the jury can assume that the lost information would have been unfavorable. This is such a severe sanction that it can cause a party to lose a trial. So, in some cases, a judge will issue an adverse inference instruction if a party simply loses information negligently. Other courts of appeals say that negligence is not enough – the party that is seeking an adverse inference instruction against the opposing party must show that the information was lost in bad faith. That is, the opposing party willfully destroyed the information.

For state governments, who will generally only be sued in one particular circuit, this isn’t so much of a problem. You would simply need to find out what the judge in your circuit thinks, and preserve information accordingly. However, many companies do business in multiple circuits and might be sued in a circuit where negligence is enough for the adverse inference instruction. As a result, those companies end up over-preserving information. As we’ve talked about before, keeping electronic information for too long brings its own set of problems!

Reasonableness, not perfection

To help address the discrepancies between circuits, the advisory group proposed the following rule:

FRCP_Sanctions

From “The Imminent Revisions to the Federal Rules of Civil Procedure (FRCP) – Where We Are Headed and the Implications for the Management of Electronic Records,” 2014 MER Conference.

Rule 37(e)

Failure to Preserve Electronically Stored Information. 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 may:

(1) upon finding prejudice to another party from loss of teh information, 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:

(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.

Hon. Facciola and Mr. Winters both interjected that the rule is operable as long as the party has taken reasonable steps for preservation. I took that to mean that as long as a party has a solid records management program in place, they probably won’t face an adverse inference instruction. Facciola even opined that keeping everything out of fear might seem cheaper at first, but actually more dangerous in the end because you would need to spend more time and money to find what you need. Keeping everything becomes, in his words, “craziness, destruction.”

The bottom line: This rule will prevent judges from issuing sanctions to parties who lose information through negligence. One hopes that organizations will stop over-retaining records out of fear of being sanctioned, and will begin practicing defensible disposition (if they aren’t already).

Proportionality

The other major proposed rule change is to Rule 26(b)(1). This rule is related to the relevance of documents that are produced during discovery – in short, documents need to be relevant in order to be subject to discovery. However, some people take “relevance” to an extreme. For example, Campbell told the story of a lawyer who ended up spending $300,000 on depositions in order to pursue a $10,000 claim. He did so because of attorney’s fees – even though he spent 30x as much money as the claim in question, he also earned $300,000. So, the new rule aims to address this by saying that the discovery must be relevant and proportional to the need of the case.

From “The Imminent Revisions to the Federal Rules of Civil Procedure (FRCP) – Where We Are Headed and the Implications for the Management of Electronic Records,” 2014 MER Conference.

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 the scope of discovery need not be admissible in evidence to be discoverable.

Winters explained the subtle change that is in the last line: “Information within the scope of discovery need not be admissible in evidence to be discoverable.” The previous version of the rule said, “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” However, lawyers have misinterpreted this as, ““I want discovery of stuff that isn’t relevant to issues of this case but that will help me find stuff that is relevant to the case.” What it really meant was that the discovery, which should be relevant to begin with, need not be admissible as long as it is reasonably calculated to lead to the discovery of admissible evidence. An example of this is discovery about information systems. What information system a company uses, and how they use it, is probably not relevant to the facts of a case, but it can be reasonably calculated to lead to the discovery of admissible evidence.

With the new rule, the request for “information about information” will have to be more carefully justified. It can still be inadmissible – hearsay would be an example of relevant but inadmissible information which can be included in discovery – but it still has to be relevant. In other words, the discovery of inadmissible evidence still needs to be relevant (and proportional!) to the case at hand.

The bottom line: Discovery requests must be proportional to the needs of the case, and information produced in discovery must be relevant, but not necessarily admissible as evidence.

The Inverted Pyramid

In a blog post for Microsoft, the company’s assistant general counsel presents an inverted pyramid to show how a typical Microsoft case starts with the preservation of over 59 million pages. Through the course of discovery, that number is whittled down and if the case goes to trial, then only 88 pages are typically used in the trial. The inverted pyramid itself is not a problem. As Winters explained, the inverted pyramid is proof that the system is working. The problem is the ludicrous number of pages at the top of the pyramid. 59 million pages at the top is the result of over-preservation, which, as I mentioned above, results from a fear of sanctions that could be issued during discovery. The hope is that with these rules, the inverted pyramid will be a little less top-heavy. Stainbrook pointed out that five years ago, the risk-averse approach used by lawyers was to save everything. Now, the risk averse approach that lawyers want to use is to have a good information governance program in place and to utilize defensible disposition.

Final Questions and Answers

The session closed out with Stainbrook posing some questions to the panel, the answers to which helped sum up the session.

Question: Will the proposed amendments define the duty of preservation and when it is triggered?
Answer: The committee tried to write a rule that would specify trigger and scope and simply couldn’t. The trigger for preservation will still be, “when you can reasonably foresee litigation in which the records would be relevant.”

Question: Will the scope of discovery change?
Answer:
The new proportionality rule might make a difference in scope. For years, the scope of discovery was “the subject matter of litigation,” which is quite broad. The phrase “subject matter” is dropped under the proposed new rule. So the revisions are not talking about reductions in the scope of discovery – it’s just talking about focusing discovery more.

Question: Will the scope of preservation change?
Answer: It is hoped that the language in the first rule (which only applies to electronic information) will help address this. The rule will only apply if a party that was supposed to preserve information did not take reasonable steps to do so. If a party did take reasonable steps to preserve information – if they had a defensible deletion policy, or a RIM/IG program in place – and they lose information, the rule will not apply because the party acted reasonably. Therefore, the scope of preservation will probably only change if a party was previously over-preserving information out of an abundance of fear. With the new rules, their scope of preservation will probably narrow a bit.

Question: Does the proposed rule create a safe harbor for reasonable conduct?
Answer: Yes. The rule only applies if a party fails to take reasonable steps.

Question: Will more uniform standards be established for sanctions based on failure to preserve discoverable information?
Answer: Yes. Previously, the courts relied on “inherent authority,” where a judge decided what was right and fair in a case and does it – including issuing sanctions for negligently losing information. Now that there will be a rule that says, “This is what you do when information is lost,” the rule displaces that inherent authority. So we would see more consistency among judges once they start using these rules.

Question: Will uniformity lessen the fear of sanctions, which often results in over-preservation as a conservative approach?
Answer: One hopes so. Facciola opined that “affirmative behavior to create a records management system is what you should be doing as a matter of course. That is, by definition, reasonable.” Winters also said that with the new rules, we want to incentivize organizations to get their information governance act in order. That, in itself, is the goal and the reward.

What now?

The rules are not effective at this point in time. Last month, the Judicial Conference of the United States considered the amendments. From this month until May 1, 2015, the United States Supreme Court will consider the amendments. After that, Congress has a six month period to reject or modify the rules. If all goes well, the amended rules will become effective on December 1, 2015. That leaves plenty of time to start getting your RM/IG program in order!