Recent changes to the Federal Rules of Civil Procedure will significantly alter the discovery proceedings in bankruptcy proceedings, particularly in adversary proceedings. See Fed. R. Bankr. P. Part VII (applying FRCP to adversary proceedings) and Rule 9014(c) (applying FRCP to most contested matters). While not intended to be a comprehensive analysis, below are some key considerations for bankruptcy practitioners navigating the amended rules.
Practitioners should bear in mind, generally, that the goal of the 2015 amendments to the Federal Rules is to refocus parties and their counsel on the merits of each case and restore confidence in the litigation process as an efficient means of resolving disputes. See FRCP 1, Advisory Comm. Note (“discussions of ways to improve the administration of civil justice regularly include pleas to discourage over-use, misuse, and abuse of procedural tools that increase cost and result in delay”).
Proportionality – A New Limit on the Scope of Discovery, Perhaps
The most notable change is to the scope of discovery under Rule 26(b), which is now expressly limited by the concept of proportionality. See FRCP 26(b). The redline below shows the extensive changes to this provision.
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At least one court has concluded that the addition of the proportionality requirement has not changed the scope of discovery, concluding that the amendments to the rules simply moved the limitations on discovery formerly found in Rule 26(b)(2)(C) into the definition of the scope of discovery in current Rule 26(b)(2)(1). See Gowan v. Mid Century Insur. Co., 2016 WL 126746, at *5 (D. S.D. Jan. 11, 2016). However, that reading of the amendment is inconsistent with the fact that the amendment does not just provide a means to limit discovery after it has been issued, but limits the permissible scope of the discovery that can be requested in the first instance by requiring the requesting party to self-regulate the proportionality of discovery requests. See Elliott v. Superior Pool Prod., LLC, 2016 WL 29243, at *2 (D. C.D. Ill. Jan. 4, 2016) (“The comments to the 2015 amendments indicate that the 2015 amendment of Rule 26(b)(1) adding the above language “‘restores the proportionality factors to their original place in defining the scope of discovery. This change reinforces the Rule 26(g) obligation of the parties to consider these factors in making discovery requests, responses, or objections.’” quoting Fed. R. Civ. P. 26(b)(1), Advisory Comm. Notes; Fosbre v. Las Vegas Sands Corp., 2016 WL 54202, at *4, n.2 (D. Nev. Jan. 5, 2016) (Foley, Mag.) (“The ‘proportional’ language was restored to the forefront of Rule 26(b)(1) to reinforce the obligation of the parties to consider these factors in making discovery requests, responses or objections.” citing Advisory Comm. Notes).
Moreover, the inclusion of proportionality in the scope of discovery addresses the fact that, “[d]espite the longstanding existence of proportionality provisions in the rules, … many courts simply did not apply them.” United States ex rel. Shames v. CA, Inc., 2016 WL 74394, at *7 (D. D.C. Jan. 6, 2016) (citing Advisory Comm. Notes). Thus, the amendment is meant to “‘encourage judges to be more aggressive in identifying and discouraging discovery overuse’ and to make proportionality considerations unavoidable.” Id. (quoting Advisory Comm. Notes).
The amendment to Rule 26(b)(1) may also impact the course of motion practice. The party resisting discovery has always had, and will continue to have, the burden of establishing that the discovery sought is disproportionate. See, e.g., Gober v. City of Leesburg, 197 F.R.D. 519, 521 (S.D. Fla. 2000) (“The party resisting production of information bears the burden of establishing lack of relevancy or undue burden in supplying the requested information.”); Shropshire v. Laidlaw Transit, Inc., 2006 WL 6323288, at *2 (D. E.D. Mich. Aug. 1, 2006). However, the party seeking to compel discovery has the initial burden of establishing that the discovery sought satisfies the scope of permitted discovery under Rule 26(b)(1). See, e.g., Gruenbaum v. Werner Enter., Inc., 270 F.R.D. 298, 302 (S.D. Ohio 2010); Morrison v. Philadelphia Hous. Author., 203 F.R.D. 195, 196 (D. E.D. Pa. 2001). When establishing that discovery was within the permitted scope simply required a party to satisfy a broad notion of relevance, the burden on the party seeking to compel discovery was light. However, if the party seeking to compel must now also satisfy the requirements of proportionality, the movant likely carries a heavier burden. Additionally, the considerations governing proportionality under Rule 26(b)(1) have been incorporated into the standard for limiting discovery under Rule 26(b)(2)(C)(iii).
Proportionality now permeates the Federal Rules, with reference to the concept now added to the rules governing the duration of depositions (FRCP 30(d)(1)) and the ability to serve more than 25 interrogatories (FRCP 33(a)(1)).
File Generic Objections at Your Own Risk
Prior to the amendments, many courts had already rejected the use of generic or boilerplate objections in discovery responses. See, e.g., Mancia v. Mayflower Textile Svcs. Co., 253 F.R.D. 354, 364 (D. Md. 2008); Novelty, Inc. v. Mtn. View Mktg, Inc., 265 F.R.D. 370, 375 (S.D. Ind. 2009); Buonauro v.City of Berwyn, 2011 WL 2110133, at *1-2 (N.D. Ill. May 25, 2011); Gonzalez v. ETourandTravel, Inc., 2014 WL 1250034, at *4 (D. M.D. Fla. Mar. 26, 2014); Fed’l Trade Comm’n v AMG Svcs., Inc., 2015 WL 5097526, at *9 (D. Nev. Aug. 28, 2015); Duracore Pty Ltd. v. Applied Concrete Tech., Inc., 2015 WL 4750936, at *6 (D. W.D. Ky. Aug. 11, 2015); Douty v. Rubenstein, 2015 WL 4163093, at *2 (D. S.D.W.V. Jul. 9, 2015). The amendments reflect the prevailing attitude on objections, at least with regard to responses to document requests. Rule 34(b)(2)(B) now requires that objections be stated with “specificity” and Rule 34(b)(2)(C) now requires an affirmative statement that documents are being withheld on the basis of an objection.
The amendments also remove the phrase “reasonably calculated to lead to the discovery of admissible evidence” from Rule 26(b)(1). The Advisory Committee Notes indicate that the drafters believed this phrase was being improperly invoked to narrow the scope of discovery. See FRCP 26(b)(1), Advisory Comm. Note. Thus, the standard objection invoking this language may no longer be of much use to the practitioner.
The Advisory Committee Note also discourages boilerplate “proportionality” objections. See id., Advisory Comm. Note (“Nor is the change intended to permit the opposing party to refuse discovery simply by making a boilerplate objection that it is not proportional.”).
Electronically Stored Information – Preserve It, Preserve It, Preserve It.
Rule 37(e), which formerly governed the failure to “provide” electronically stored information (ESI), now governs the failure to “preserve” such information and has been replaced entirely with the following:
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:
(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.
It is important to note that the most severe sanctions require a showing of intentional destruction of ESI. See FRCP 37(e)(2); Advisory Comm. Note (“This subdivision authorizes courts to use specified and very severe measures to address or deter failures to preserve electronically stored information, but only on finding that the party that lost the information acted with the intent to deprive another party of the information’s use in the litigation. It is designed to provide a uniform standard in federal court for use of these serious measures when addressing failure to preserve electronically stored information.”). The Advisory Committee Note indicates that the intent of the drafters was to reject cases holding that sanctions could be awarded in instances of negligence or gross negligence. Id. (rejecting Residential Funding Corp. v. DeGeorge Fin’l Corp., 306 F.3d 99 (2d Cir. 2002)).
The Advisory Committee notes indicate that the loss of information outside of a party’s control should not give rise to sanctions and that proportionality applies to the duty to preserve ESI. See FRCP 37, Advisory Comm. Note. Proportionality in this context may require a court to consider the sophistication of a party, the reasonableness of the steps taken by a party to preserve ESI and the resources of a party available for ESI preservation. See id. Additionally, the Advisory Committee Note makes clear that parties should not be sanctioned for the loss of ESI due to events outside of their control (e.g. flooding, “cloud” service failure, malware), but should consider the efforts taken to mitigate these risks. Id.
Courts are now encouraged to include agreements regarding the preservation of ESI and to incorporate clawback agreements regarding privileged material under Federal Rule of Evidence 502 into the scheduling order (FRCP 16(b)(3)(B)(iii) and (iv)). Additionally, the discovery plan agreed to by the parties must address issues related to the preservation of ESI and the parties’ positions on clawback of privileged material (FRCP 26(f)(3)(C) and (D)).
Timing is Everything – Or at Least Something to Consider
The amendments make several changes to the timing of various events during the course of litigation of which practitioners should be aware. These include:
The complaint must now be served within 90 days of being filed, not 120. (FRCP 4(m));
Scheduling conferences must be held in some manner that allows for “simultaneous communication” (FRCP 16(b)(1)(B) and Advisory Comm. Note) and scheduling orders must issue 90 days after the defendant is served with the complaint or 60 days after the defendant appears, rather than 120 days and 90 days, respectively (FRCP 16(b)(2));
Document requests under Rule 34 may now be issued to or by a party 21 days after the summons and complaint are served on that party (FRCP 26(d)(2)); the parties need not wait until the Rule 26(f) conference has occurred. The party receiving such requests must respond within 30 days of the initial Rule 26(f) conference (FRCP 34(b)(2)(A));
Documents must be produced in response to document requests within the time period specified in the document request (g. the 30 days afforded under Rule 34(b)(2)(A)) or “another reasonable time specified in the response” (FRCP 34(b)(2)(B)). Additionally, Rule 37(a)(3)(B)(iv) now makes clear that the failure to produce documents can serve as the basis for a motion to compel.