Home – Federal Rules of Civil Procedure Re-Tooled—The First Six Months

Federal Rules of Civil Procedure Re-Tooled—The First Six Months

By Kristin Casler, featuring Jeffrey Sharer of Akerman LLP, David Yerich of UnitedHealth Group and Hon. Kristen L. Mix of the U.S. District Court for the District of Colorado.


Since the Federal Rules of Civil Procedure overhaul took effect on Dec. 1, 2015, attorneys and judges have been fine-tuning their case handling and getting used to terms such as cooperation and proportionality. The rules updates were designed to standardize how discovery is handled, refocus on the merits of a case, reduce document retention and reign in discovery costs. A judge and two attorneys, armed with recent court decisions, offer some insights and strategies for navigating the revised rules and collaborating with judges, colleagues and opposing counsel.


Rule 1

Rule 1 provides some very explicit nudges for judges and parties to share responsibility and cooperate to move discovery, and consequently cases along. The advisory committee notes state that effective advocacy is dependent on this cooperation and proportional use of procedure.


“As I am hearing cases, if the parties are not doing their share to move discovery in the case along, I can use Rule 1 as a reminder that they have an obligation to do so,” said Magistrate Judge Kristen Mix of the U.S. District Court for the District of Colorado. “It’s no longer the exclusive province of the court to make sure they are handling discovery—it imposes a burden on the parties.”


While a judge has the authority and duty to require Rule 1 compliance, what can attorneys do to ensure a judge moves discovery along in a just, speedy and inexpensive way? Judge Mix suggested that attorneys think carefully how to tell the court that you need some rulings and some guidelines. You can be very frank about inefficiencies that are developing in your case, she said. You can request a status conference or file motions. Attorneys can even ask judges for input on how to accomplish discovery goals.


“But you set the tone from the beginning for how involved you want the court to be,” Judge Mix said. “If you carry the water in terms of your share of responsibility to make sure that the case is not going to be overlawyered or underlawyered, I think you are going to see the court respond.”


In Siriano v. Goodman Mfg. Co. (S.D. Ohio Dec. 9, 2015), the court highlighted the advisory committee’s comment to Rule 1 that cooperation is essential to effective advocacy. “To many lawyers, this is a sea change,” said Jeffrey Sharer, co-chair of the Data Law Practice at Akerman LLP. “Many attorneys have questioned how cooperation with their adversaries can be reconciled with the duty to be zealous advocates for their clients. Now, the comments to Rule 1 make clear that cooperation is not only consistent with that duty, it’s an integral part of it. This is groundbreaking, but it will take time to work its way through the bar.”


Judge Mix said that attorneys will always have a duty to their clients, but they also have a duty to this country’s tremendous and respected legal system. “Lawyers have got to begin to recognize their obligation to promote the efficiencies of our system instead of taking advantage of the ways it can be manipulated to cause delays, harass and cause the unnecessary expenditure of monies.”


Wichansky v. Zowine (D. Ariz. Mar. 22, 2016) likewise cited the committee’s note and applied it not just to discovery but to the trial. The judge wrote, “The parties should cooperate during trial to minimize delay and wasted time. Stipulations should be made on matters not disputed and on evidentiary foundations that clearly could be laid but would only consume valuable time before the jury. Each side shall also provide the opposing side with 24 hours’ notice of the witnesses who will be called on a given day.”


Relevance and Proportionality

Rule 26(b)(1) now requires discovery of non-privileged materials to be relevant to the claim and proportional to the needs of the case. Judge Mix said that the days of broad discovery are gone, but lawyers are slow to adjust to this change.


“You should be thinking about this before you file your complaint or answer,” she said. “You should be thinking about what applies specifically to your claims or defenses. This is what you need to do to win a discovery dispute.”


The proportionality factors are:


  • 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 discovery in resolving the issues
  • Whether the burden or expense of the proposed discovery outweighs its likely benefit


Judge Mix said most people focus on the amount in controversy, but she noted that it is not always the driving factor. More important, in her view, is the importance of discovery in resolving the issues. If legal claims are made that really will not withstand scrutiny, the case is not going to succeed, and you don’t need any discovery, she said.


“If you focus only on the amount in controversy, that’s a mistake,” she said. “There are two points of view about the value of a case. The court can hardly use the amount in controversy as the deciding factor when it is not cast in stone and there is the possibility of emotional distress or punitive damages or attorney fees.“


Proportionality is not new to the federal rules. As the judge in Gilead Sciences, Inc. v. Merck & Co. (N.D. Cal. Jan. 13, 2016), noted, it was added in 1983.


“What will change—hopefully—is mindset,” the court wrote. “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. The present dispute offers a good example of the wisdom of the Advisory Committee on Civil Rules in elevating proportionality in defining the scope of permissible discovery.”


In ArcelorMittal Ind. Harbor LLC v. Amex Nooter, LLC (N.D. Ind. Feb. 16, 2016), a lawsuit for damages to property resulting from a workplace explosion, the plaintiff sought discovery regarding settlement negotiations between the defendant and state OSHA regarding the explosion. The judge held that under the more narrow scope established by amended Rule 26(b)(1), plaintiff “had met its burden of explaining how the [settlement negotiations were] relevant.” And even though the plaintiff did not brief the proportionality issue, the court conducted its own analysis and held that the “discovery of the settlement negotiations appears proportional.”


The judge in Haines v. Cherian (M.D. Pa. Feb. 29, 2016) noted that the relevant and proportional amendment applies but then the judge quoted from a 2014 decision about the scope of discovery being very broad. “Even though the reasonably calculated-to-lead standard is no longer a permissible basis for discovery under Rule 26, lawyers and judges have been operating under it for so long, it’s going to take some time for it to drop out of arguments and opinions,” Sharer said.


Judge Mix said Haines is good reminder that judges aren’t perfect either. “Citation of the old standard was error,” she said. “It’s not useful in this new world that we have.”


Rule 37(e)

Rule 37(e) is one of the centerpieces of the amended rules. It creates a uniform national standard for evaluating spoliation claims in federal proceedings. Under the amended rule, it is no longer as simple as going to court and asking for sanctions for some emails that you think existed and that the other party failed to produce, Judge Mix said. You now have to prove that the emails did exist by doing your homework and presenting witnesses or other documentary evidence. Further, curative measures and sanctions can only be imposed after following a specific, multi-step process. The issue must involve electronically stored information; there must be a duty to preserve; the party must have failed to take reasonable steps to preserve; the information cannot be restored or replaced; and the failure must have caused the requesting party prejudice. Only then can the court impose curative measures no greater than necessary to cure the prejudice. And only if the court finds that the responding party acted with an intent to deprive the requesting party of information for purposes of the litigation, can it impose adverse inference or terminating sanctions. In the latter instance, prejudice need not be shown; the rule effectively presumes prejudice from the existence of an intent to deprive.


The new rules apply to all cases filed after December 1 and to pending cases to the extent just and practicable, Sharer said. In Nuvasive, Inc. v. Madsen Medical, Inc., a case decided in January in the U.S. District Court for the Southern District of California, the judge, ruling on a motion, overturned an adverse inference sanction that had been issued last summer. The case had not gone to trial when the rules went into effect, and although awarded before the amendments took effect, the sanction violated new Rule 37(e)(2) because there had been no showing of intent.


“This highlights the significant discretion that the trial court has,” Sharer said. Although it set aside the adverse inference, the court did allow the plaintiff to introduce evidence at trial concerning the lost information and permitted the jury be instructed how to consider it.


CAT3, LLC v. Black Lineage, Inc. (S.D.N.Y. Jan. 12, 2016) provides a terrific analysis of sanctions, Judge Mix said. During depositions for this trademark infringement case, in which a central issue was when the defendant had notice of the plaintiff’s use of its domain name, it was discovered that the domains of certain emails had been changed, so it looked like the domain appeared in earlier emails. Plaintiff’s expert suggested the addresses were changed when email was migrated to a new system. It also offered statements from three executives that the emails had not been changed. The judge found that they were changed.


The plaintiffs argued that the evidence wasn’t “lost” for purposes of Rule 37(e), because unaltered versions of the emails had been identified and produced. The judge rejected plaintiffs’ argument and held that the mere existence of the altered versions created questions regarding authenticity that otherwise would not have existed; conduct that results in evidence being less overwhelming than it otherwise would be can constitute “loss” of information for purposes of Rule 37(e).


“This is a unique holding and one that is going to speak loudly in cases in the future, since the rule does not define loss,” Judge Mix said.


The CAT3 judge also disagreed with the Advisory Committee note that suggests the rule forecloses reliance on inherent authority or state law when determining where to impose sanctions. The judge found there was a long history of courts using their inherent duty to address misconduct. Applying the clear and convincing standard of proof, the judge found there was intent to deny the opposing party evidence.


Because both the requirements of Rule 37(e)(2) and the “particularized showing of bad faith” required for inherent authority were satisfied, the judge found adverse inference and dismissal were available sanctions. The judge issued a two-fold remedy: Plaintiffs were precluded from relying on their versions of emails to demonstrate notice to defendants of the use of the mark, curing the substantive prejudice; and plaintiffs were ordered to pay defendants attorneys’ fees, which cured the economic prejudice, Judge Mix said.


In Freidman, et al. v. Philadelphia Parking Authority (M.D. Pa. Mar. 10, 2016), the plaintiff taxi cab operator alleged that the parking authority regulator retaliated for the operator’s expression of its First Amendment rights. Discovery from third parties revealed significant gaps in defendant’s email production. The parking authority never verified that its email archiving system was functioning before it told employees to delete old emails. Judge Mix said that what saved the authority from potentially severe sanctions were its substantial efforts to recover data from backup tapes and retired servers. The court considered this in its intent analysis. The court held that the defendant’s negligence was somewhat incredible, but the plaintiffs did not show that there was any specific information that was actually lost or any intentional deletion, so neither curative measures under Rule 37(e)(1) nor sanctions under Rule 37(e)(2) were appropriate. Mere negligence or gross negligence is insufficient for sanctions under Rule 37(e)(2), the court held.


However, the court noted that Rule 37(e) was only part of the analysis and that even where the requirements of Rule 37(e) are not met, Rule 37(a)(5) requires awards of attorneys’ fees and costs under certain circumstances to prevailing parties on motions to compel. The court went on to conduct a Rule 37(a)(5) analysis and found an award of attorneys’ fees against the parking authority was warranted.


“This opinion weighs the balance between the two types of sanctions,” Judge Mix said.


The judge in Carr v. State Farm Mutual Automobile Ins. Co. (N.D. Tex. Dec. 7, 2015) similarly awarded attorneys’ fees to the defendant after the plaintiff failed to appear for a deposition or to provide discovery, even though the defendant did not move for the attorneys’ fees. The court said that Rule 37(a)(5)(A) requires the attorneys’ fee award if the court grants a motion to compel.


Implementation Tips

Since all conduct in discovery should advance the twin goals of relevance and proportionality, Sharer suggested attorneys have early, candid discussions to help all parties understand the important issues at stake, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of discovery in resolving the issues and whether the burden or expense of proposed discovery outweighs its likely benefit.


He advised that counsel set a cooperative tone early, be prepared, exchange meaningful information, build a positive, trusting rapport and act with transparency, wherever possible. He said attorneys should resist responding with tit-for-tat; when an adversary is non-cooperative, try to understand whether there is a legitimate reason for his/her position. If there is not and cooperation is not forthcoming, then document your efforts at cooperation and good faith for later consideration by the court.


Sharer also suggested that where ediscovery is likely to be complex, parties should consider using designated ediscovery liaisons who are knowledgeable about technology and can have the meaningful technical discussions needed to move ESI issues forward. He added that a framework for doing so can be found in the Seventh Circuit E-Discovery Pilot Program Principles, among other places.


Data Preservation and Collection Under the New Rules

The rule amendments reinforce the importance of both attorneys and their clients having a plan for data preservation in the face of litigation. David Yerich, director of eDiscovery at UnitedHealth Group, said counsel will benefit from an early discussion to focus on the material factual issues in dispute, so the parties can focus their discovery efforts on what is needed to resolve the case.


He suggested early and thorough identification of potential sources of relevant data to position parties to agree on the scope of preservation consistent with the principles of proportionality. Attorneys should appreciate and address opposing counsel’s legitimate concerns and exemplify sound preservation practices to inspire confidence in opposing counsel.


Where circumstances require unilateral decision making, parties should act in good faith and in anticipation of cooperation. Requests should be reasonably focused on the material issues in dispute and objections should be grounded in fact and supported with specifics.


When it comes to collection, Yerich said it is important to consider proportionality on the scope and sequencing of the data to be collected to locate the most relevant data faster and more cost-effectively. Deduplication and related protocols are helpful to reduce the volume of documents. Sharer said that supplementing standard deduplication with technology to reduce other forms of redundancy, such as email threading and identification of near-duplicates, "can reduce volumes by 30 – 60%or more without compromising unique, discoverable content. Parties should understand how to best utilize available search methodologies, including how to test and design effective search terms and when and how to use predictive coding and other advanced technologies.


“Often, it can make sense to do a sampling to see if it is valuable to produce,” Yerich said.


When questions arise, parties should be able to explain their search methodology, how it was implemented, and the quality control procedures utilized, Yerich said.


This article is based on a LexisNexis® webinar by the same title, available on demand.