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By Kristin Casler, featuring Jeffrey Sharer and Martin Tully, Co-Chairs of the Data Law Practice at Akerman LLP
A host of changes to the Federal Rules of Civil Procedure (FRCP) took effect on Dec. 1 with the aim of bringing further rationality to the civil discovery process. These amendments are more than little tweaks that only require a passing glance. They could be watershed changes to discovery as we know it, dramatically impacting document preservation, production and sanctions. If you or your clients expect to be in federal court anytime soon, you’ll need a primer on the most noteworthy rules changes.
The revisions have an extensive legislative history going back to the 2010 Conference on Civil Litigation, which was hosted at Duke University School of Law by the Civil Rules Advisory Committee. Among other things, cost concerns and uncertainty over preservation of electronically stored information (ESI) spurred the committee to act, said Martin Tully, Co-Chair of the Data Law Practice at Akerman LLP. The committee wanted to further advance the concepts of cooperation and proportionality, as well as more hands-on judicial case management, to promote the goals of Rule 1 of the FRCP—to secure the just, speedy, and inexpensive determination of every action. Throughout the process leading up to the 2015 amendments, there were more than 2,000 public comments and testimony from more than 100 witnesses, Tully said.
“The resulting changes hopefully will short-circuit some of the gamesmanship that was driving up litigation and discovery costs,” said Jeffrey Sharer, Tully’s Co-Chair at Akerman. “They should help to shift the focus away from discovery disputes and put it back on the merits of the cases.”
Reasonableness and proportionality had been crowded out of litigation in recent years, Sharer said, despite admonishments to cooperate. Tully added that the new amendments require, as before, that courts administer a case per Rule 1, but it now makes explicit that the parties themselves are expected to cooperate in order to achieve the rule’s objectives. In the end, he said, this should bring about a better outcome for the client.
“There were those among the bar who reacted with snickers in 2008 when the Sedona Conference issued its Cooperation Proclamation,” Sharer said. “Many asked how cooperation in discovery could be reconciled with the duty to be a zealous advocate? The Committee Notes to amended Rule 1 make it clear that they not only are reconcilable, but that effective advocacy depends on cooperation and proportionality in discovery.”
The way it was: Former Rule 26(b) allowed for liberal discovery, so companies often cast a very wide net when it came to preservation and saved nearly every document. Because the potential sanctions for failing to preserve the right documents were so substantial, Sharer said, there was considerable over-preservation. During discussions of the rules changes, Microsoft submitted a compelling letter outlining the document tally for an average litigation: what the company thought it had to preserve, how much actually entered the discovery process, how little actually showed up in litigation and then the infinitesimally small percentage that would actually be used in trial. What was being preserved went many orders of magnitude beyond what was meaningful to a case.
Tully said the perceived preservation requirements were particularly daunting for smaller companies that often lacked the personnel or infrastructure to handle the documents to be preserved.
All of this preservation stemmed from the fear of later being accused of spoliation – and being sanctioned – for failing to preserve potentially relevant ESI. These fears were exacerbated by the fact that the rules themselves did not provide any guidance on whether or when sanctions were appropriate, which contributed to wide-ranging decisions and uncertainty for litigants. The risk or threat of sanctions has inspired many, many “discovery sideshows,” the experts agreed. If a party has a less-than-compelling case on the merits, it has a strong incentive to spin a misstep in discovery into potentially case-altering sanctions. On one end of the spectrum were simple case management penalties such as allowing the requesting party to take some additional discovery or pay the other side’s attorney fees to fill in the gap. At the other end, a sanction could alter the outcome of the litigation, either with a damning jury instruction or even a default judgment in favor of the requesting party.
What has changed: Revisions to Rule 37(e) are garnering significant attention because of the potentially dramatic impact how litigants approach preservation. For the first time, a uniform framework exists for evaluating sanctions for spoliation of documents that should have been preserved. It takes much of the uncertainty out of the analysis and limits the availability of sanctions to the types of circumstances where they are truly necessary or warranted, Tully said.
Now, the court can only consider sanctions if the responding party failed to take reasonable steps to preserve a document and the information is lost and can’t be replaced.
“This change is significant because it reduces the lottery-ticket element and the potential upside to the ‘gotcha game’ for unintentional lapses,” Sharer said.
In corporate America, predictability is greatly preferred, Tully said. And the definition of “reasonable” steps does not include perfection. However, as eDiscovery becomes more and more commonplace, the standards for reasonableness will become more demanding. Companies will not be able to claim a lack of familiarity with the rules and best practices.
The way it was: It was always a best practice to discuss preservation at the discovery planning stage and at the parties’ Rule 26(f) conference.
What has changed: The revised rules now explicitly encourage the court to provide for preservation issues in the Rule 16(b) scheduling order, so parties need to address them up front. Rule 26(f) was similarly amended to explicitly require that the parties’ discovery plan address preservation issues.
The way it was: This rule allowed for a very broad scope of discovery. A party in litigation could obtain discovery of anything that the other side had that was relevant to the issues in the case as well as anything that was “reasonably calculated” to lead to the discovery of admissible evidence. Although the former rule allowed a party to seek a protective order if the cost of responding to a discovery request was not proportional to the benefit to the other party, the expansive scope defined by the rule typically trumped proportionality in practice.
What has changed: The Rule 26 amendment drops the language referring to information “reasonably calculated” to lead to admissible evidence and highlights the proportionality requirement. Now, a discovery request must be relevant to a party’s claim or defense and also must meet the list of factors to be weighed in considering proportionality. “We’ll have to see how courts apply the amended rule, but it has the potential to have a significant impact on the scope of litigation holds and the cost and burden of responding to discovery requests,” Sharer said.
Tully added that most courts justifiably felt that a broad scope of discovery warranted broad preservation and authorized production of many more documents than necessary to resolve the merits of the dispute. The 2015 amendments to the relevance and proportionality requirements of Rule 26 could be a watershed change to the scope of discovery that is allowed in practice, he said.
The way it was: It was fairly common to give boilerplate objections in response to a document request. If documents then were nevertheless produced, the requesting party often would have no idea what was withheld under the objection. It was somewhat of a game, Tully said.
What has changed: Now the party making the objection has to be more specific and if it then produces documents notwithstanding the objection, the responding party must state what was withheld on the grounds of the specific objection.
Until the courts begin applying the rules in cases with regularity, the accumulation of preserved documents continues. In the end, Tully and Sharer said they expect the 2015 revisions to reduce the discovery gamesmanship that can occur over the parties’ actions, inactions or fear of sanctions and shift the focus back on the merits of the case.
“It will take some time before we really know how far the amendments go toward fixing the problems that they were intended to address,” Sharer said.
company and multiply it times many, Ramasastry said. Even small companies can make a meaningful contribution to anti-trafficking efforts when they work cooperatively. Set an example, enlist the support of colleagues at other companies and work jointly toward supply chain and global objectives. Together you can establish guidelines and best practices for your industry. You can use the American Bar Association Model Business and Supplier Policies on Labor Trafficking and Child Labor as a starting place.
Coordinate the pressure. Take the collaborative efforts a step farther by exerting your combined influence on other companies, government agencies at home and abroad, civil societies and non-government organizations to get them on board. “Companies have no idea of their combined leverage,” Ramasastry said. “When there are problems with governments failing to act, companies working collectively can be a force for good.” By working with the U.S. State Department, the ILO, collaborating companies can pressure governments, she said.
Companies can target regions where efforts can be most effective. Ramasastry said she already is seeing coordinated efforts in Qatar surrounding the World Cup.
“Pick any geographic area— the Gulf States, Southeast Asia,” she said. “Civil society and NGOs only have so much clout to go to governments and to say, “Fix this!” She acknowledged that sometimes progress requires a little soft diplomacy. Working quietly, companies can exert combined power that achieves real change.
Turn your eyes homeward. 2015 saw the 150th anniversary of the 13th Amendment, ending slavery in the United States. Yet some estimates put the number of forced laborers on our shores today at more than 50,000. And the victims are hidden in plain sight, in agriculture, construction, hotels, restaurants and domestic work.
Ramasastry said most people are aware of trafficking for the sex trade, but the problem is clearly more widespread. Many victims are forced to work to pay off recruiting debts, food and housing. Their conduct is often controlled, or they are forced to live at the work site. Many promises are not delivered on, and the workers have no idea of their rights.
Last February, a federal jury awarded $14 million to Indian guest workers who were defrauded and exploited in a labor trafficking scheme engineered by a marine services company, an immigration lawyer and an Indian labor recruiter who lured hundreds of workers to a Mississippi shipyard with false promises of permanent U.S. residency. When the workers arrived, they were required to live with 24 men packed into a trailer with just two toilets, and were under the watch of a 24-hour guard. They were charged $35 a day—forced to pay more than $1,000 a month—for room and board. The lawsuit was filed by the Southern Poverty Law Center.
Of course, above all, you need to comply with anti-trafficking regulations. Be sure you know the ins and outs of the many, many regulations and what your liability is under them. And, as long as you are working on compliance with existing regulations, Amol Mehra, director of the International Corporate Accountability Roundtable, suggests complying with those that are proposed or that are merely guidelines, such as the ABA model rules. Companies can push those model rules down to their subsidiaries and suppliers.
“Don’t just respond to the regulations and how businesses are increasingly expected to perform now,” Mehra said. “Get ahead of the regulatory curve – stay apprised of what proposed bills are asking and work in advance. The scale of human trafficking is significant, and policy responses will only continue to develop to address it.”
While the federal government has not yet required companies to document that they and their supply chains are free of labor trafficking, California has. Even if you are not impacted by the California law, it is certainly good for a company’s image and work atmosphere to be able to make such a certification. It also is important to note that many investors seek socially responsible companies in which to place their money, Mehra said. Naturally, the penalties can be high for failing to make those certifications or to make them fraudulently.
In August, consumers filed a class action against Costco and its Asian shrimp suppliers under consumer protection laws and allege reporting violations under California’s Transparency in Supply Chains Act for knowingly selling slave-labor shrimp.
Complying with the multitude of requirements and leveraging combined power for change requires a great deal of time, effort and resources. But in the end, your company, its workers and the workers of the world benefit.