Straight Talk: FRCP Rule Changes in Layman’s Terms

by Exterro, Inc.
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Here at Exterro, we recently closed a multi-year software licensing opportunity with a large city government.  We began talking with them about their acquisition of e-discovery software in April of this year, and from the very onset they kept saying, “Our goal is to have software implemented by December 1, 2015 when the amendments to the FRCP (Federal Rules of Civil Procedure) take effect.”  But there’s nothing in the amendments that state, “City governments must have e-discovery software solution up and running by December 1, 2015.”  So what was really driving this prospective (and now current) client, and how might the same impetus be meaningful to you?

This blog entry is for the legal layman, so we’ll start here.  The Federal Rules of Civil Procedure (which I’m going to refer to as “The Rules”) are a large body of rules which are written and recommended by a committee and ultimately approved by the Supreme Court.  Simply put, The Rules prescribe how federal lawsuits are governed.  The Rules are constantly evolving and many parts of The Rules change every few years.  (That is, the periodic amendments to The Rules are not exclusive to e-discovery, there just happens to be a few revisions to the FRCP that impact e-discovery this time around.)   The Rules are intentionally vague, with the idea that judges are not to be constrained by a rigid set of directives, and ultimately, judicial rulings will determine what The Rules really mean and how they are to be applied. There are many who will try to explore what exactly the rule changes mean, but there’s very little that can be definitely known at this point about the impact of these changes, and it may be several years before anyone really knows (by which time, they are likely to be changed yet again).

As a bit of a sidebar, I would also note that each state has their own version of the Federal Rules of Civil Procedure.  The Oregon Rules of Civil Procedure, for example, dictate how lawsuits are governed in Oregon state court.  (Whether a lawsuit is at the federal or state level is a lesson for another time.)  Many states closely adopt the federal rules as their state rules, but not all.  It’s important not to assume that The Rules referred to here dictate how all lawsuits are governed.

There are three items of interest as it relates to upcoming changes – one is generic, the other two are specific to e-discovery.

First, the generic rule: #1

On December 1, Rule 1 will state that “These rules should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.”

As described in the Committee note about this rule, this language is intended "to emphasize that just as the court should construe and administer these rules to secure the just, speedy, and inexpensive determination of every action, so the parties share the responsibility to employ the rules in the same way."

So this rule change means that parties need to work together and not prolong the lawsuit in a way that is unjust, slow, or expensive.We also know the reality of what (some) lawyers are capable, which is exactly this. You’ll also notice that there’s no penalty or sanction for not following this rule. However, judges can certainly get fussy about the application (or lack thereof) of this rule, and even admonish the non-complying party in their written opinion. So perhaps this amended rule will be meaningful in the long-run.Perhaps.

The next two changes, for Rules 26(b)(1) and 37(e) are specific to e-discovery.

On December 1, Rule 26(b)(1) will be about limiting the scope of discovery, and will state:

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.

In my opinion, the most meaningful revision here is the inclusion of the language “proportional to the needs of the case” and the omission of the language “any documents or other tangible things and the identity and location of persons who know of any discoverable matter.” (Yes, I added the emphasis.)  Very specifically, I’m looking at the word ANY in contrast to the word NEED.  That’s a pretty substantial shift.  Again, we know how (some) lawyers operate, so only time will reveal the impact on truly limiting the scope of discovery.  Let’s keep our fingers crossed there will be a meaningful impact so we can focus on the merits of the case, not the incessant busywork associated with “sky’s-the-limit” discovery.

On December 1, Rule 37(e) will state:

Failure to Preserve Electronically Stored Information.  If electronically stored information [ESI] 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.

The opening clause of the Rule 37(e) previously read, “Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”

I believe this is what should have in-house legal departments (including those in city governments) concerned.  You can no longer hope that “exceptional circumstances” will serve as the escape hatch to avoid sanctions.  Instead, the standard is “failed to take reasonable steps to preserve [ESI]” which is cause for concern for two reasons.  First, it is purposely vague (reasonableness is a favorite of the legal system) so you don’t really know what “failed to take reasonable steps” means, and second, it is very likely to occur.  In fact, lack of preservation is occurring in corporations and government agencies right now.   This rule is also scary because the Rules authorize sanctions for failure to take reasonable steps.

In light of these Rule changes, it is time to examine in what way(s) your organization is failing to take reasonable steps to preserve ESI.  And when you’re ready, give me (or Exterro) a call.  We can talk about how to stop the bleeding.

To hear EDRM founder, George Socha and Federal District Judge, Hon. Xavier Rodriguez discuss how to take advantage of these new rules to mitigate risk and reduce e-discovery spending: Download this free On-Demand Webcast: Taking Advantage of the New FRCP E-Discovery Amendments!

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