April 11 --The Advisory Committee on Civil Rules met April 10 and April 11 in Portland, Ore., for a public hearing in which they approved for adoption yet another version of the much revised Rule 37(e), as well as the Duke Conference Package, which includes proposed amendments to Rules 1, 4, 16, 26, 30, 31, 33, and 34. In addition, the Committee unanimously voted to withdraw the “presumptive limit” proposals contained in Rules 30, 31, and 33.
In an unanticipated move, Committee Chair Judge David G. Campbell, of the District of Arizona, announced April 10 that any discussion and vote on Rule 37(e)--which is considered one of the most controversial Rules in the amendment package--would be postponed until the following morning. Rule 37(e) had been slated for discussion on April 10, but the Committee acknowledged a need to meet again and revise the amendment before putting the Rule up for a vote. Rule 37(e) had already undergone a major overhaul in language and substance due to criticism it received during the public comment and public hearing period. On April 11, the Committee presented another new, streamlined version of the Rule, which was discussed and adopted.
Judge Paul Grimm, of the District of Maryland, led the discussion with a description of where the Rule 37 began and where it is today. The latest revision to Rule 37(e) was completed just the night before, after the April 10 day of public hearing had ended.
Judge Grimm explained that the current Rule 37(e) was a product of the reexamination of the Rule that resulted in the 2006 amendments. The existing rule now includes a limited safe harbor that would allow for exemption from sanctions in the event of certain systematic loss of electronically stored information, such as the operation of a company autodelete policy. But, according to Judge Grimm, a Duke Conference panel made a unanimous recommendation for a comprehensive review of what a court response should be when ESI is not available and may have contained relevant or necessary information in litigation.
“The question was presented that there was a significant volume of ESI that was building up because large organizations were trying to come up with a preservation regime that would apply to them and comply with the case law,” Judge Grimm said.
Judge Grimm explained that a circuit split began to develop, where the level of culpability required to issue sanctions when ESI was not preserved ran the gamut from negligence to recklessness to outright wilfulness. Up against the issue of when the duty to preserve attached was the fact that overpreservation was becoming a huge concern.
“While overpreservation was a concern repeatedly expressed at the Duke Conference, the decision of the Subcommittee was to focus on the breach already having occurred, and what the court's way of dealing with that would be, “Judge Grimm said.
Judge Grimm said that the public comment period brought in over 2,000 comments, many of which raised very serious questions about whether the framework and approach of Rule 37 was going to be adequate to address issues of duty to preserve and remedial and punitive measures.
“Based on the answers to our questions, the comments, and testimony, we reached a decision that the published version of the Rule in the Agenda book was not the best that we could recommend to deal with the problems we thought we could most adequately address in the Rule,” Judge Grimm said.
He said the Subcommittee reached a decision that there was an “absolutely great need” for the Rule to address the consequence of the loss of ESI and deal with the circuit split so that a uniform standard existed, and there was also a need to preserve the appropriately defined and cabined discretion of trial judges to handle the consequences of the loss of ESI.
“The first thing we wanted to do was determine what this rule should apply to, “ Judge Grimm said. “The Agenda book version and the revised Agenda book version both start with the notion that there has been a failure to preserve ESI.”
Judge Grimm noted the initial text of all three versions of the proposed Rule are the same.
“The second issue that stays the same is that acts of God would not result in the application of the Rule,” Judge Grimm continued. “The focus, then, is what should the courts do when ESI has not been preserved.”
Judge Grimm explained that comments that were submitted after the Agenda book version was printed raised additional concerns. The Agenda book version of the proposed Rule states that measures no greater than necessary to cure the loss should be contemplated, yet comments indicated that the language “cure the loss” was confusing. In addition, comments indicated a concern that 37(e)(2) could allow for sanctions without culpability.
Newest Version of Rule 37(e)
(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 the information, and the information cannot be restored or replaced through additional discovery, the court may:
(1) Upon a finding of prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice;
(2) Only upon a 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.
The new, unpublished language of revised Rule 37(e) has been greatly simplified.
Judge Grimm said that under the latest revision, all subsequent actions the court could take to remedy a failure to preserve ESI must rely on a party or attorney's failure to take reasonable steps to preserve. This language also gave the Subcommittee a chance to examine the contested factors in the current proposal and determine their utility. Ultimately, the Subcommittee determined the need for the factors was greatly diminished by the “reasonable steps” language and should be removed from the proposal.
The new revised Rule also divides the previous curative measures versus sanctions dichotomy between sections (e)(1) and (e)(2) without actually using either term.
In addition, a finding of culpability in (e)(2) is a prerequisite for issuing any of the three sanctions listed in (A), (B), and (C), which the Committee members drilled home in their discussion on April 11.
Comments raised at the hearing also addressed the fact that the term 'prejudice' is not included in (e)(2). Judge Grimm explained that where a court presumes under (A) that lost information was unfavorable, a finding of prejudice can likely be presumed. The Subcommittee intentionally shied away from including the term in (e)(2) so as to avoid any confusion that the term's use in (e)(1) would carry a different or weightier meaning.
Judge Grimm also said burden of proof was not specifically addressed in the new Rule, though the Committee members inquired about its absence at the hearing. The Subcommittee noted the case law has developed to address this issue.
“We have moved toward a more simple and modest rule, in part because we have found that when you try to write a rule in this area of the law, you encounter many, many problems,” Judge Campbell explained. “Of all the Rules I've been involved in in the last eight years, nothing has come close to the challenge of drafting this Rule.”
Judge Campbell also noted that the Committee cannot write a perfect rule. Committee member Parker Folse, of Susman Godfrey LLP in Seattle, echoed the sentiment.
“One factor that convinced me to pursue a modest approach was the realization over the course of the public hearings that there are substantial limitations as to what we can do when writing these Rules to decrease the burden of preservation,” Folse said. “The Rule cannot change the obligations to preserve ESI and it cannot change the law of the 50 states.”
He explained that although the Committee heard throughout the public hearing process a lot of information regarding the burden of preservation, but little on how the current proposed Rule would alleviate that burden.
The Committee voted to adopt the revised Rule that was crafted the previous evening. The Committee will amend the Rule's advisory note as necessary, with a new Note to be available as early as next week.
Previously, Committee Member Judge John Koeltl, of the Southern District of New York, led the discussion of the Duke Conference Package by sharing with the Committee the history and background of the Duke Conference and its goals. He explained that the Duke Conference in May 2010 resulted in the introduction of three themes that would guide the Rules amendment process--proportionality, cooperation, and early and active judicial case management.
“We believe the proposals we now put before you advance the three themes of the Duke Conference,” Judge Koeltl told the Committee members. “We view the proposals as a package that work together to accomplish those goals.”
Judge Koeltl addressed the proportionality-related amendments first, beginning with a conversation about the hotly contested changes to Rule 26(b)(1). Rule 26(b)(1) was modified before the public comment period so that proportionality is now explicitly brought up early in the rule in the section addressing scope of discovery, Judge Koeltl explained. He noted that while some of the public comments submitted questioned whether there was a need for addressing proportionality in discovery, there was a major consensus at the Duke Conference that it was indeed necessary. He also explained that the inclusion of proportionality in the discovery-related Rules has been extant for several decades. He observed that a history of the amendments in 1983, 1993 and 2000, which reinforced the proportionality language that currently resides in 26(b)(2)(iii), is found in the Rule's Advisory Committee Notes.
The amended Rule 26(b)(1) underwent a few changes from the proposed published version of the public comment era to the version that resides in the Portland Agenda book (14 DDEE 138, 3/27/14). Judge Koeltl said that the “amount in controversy” factor is no longer listed as the first factor to be considered based on objections received from both plaintiffs' and defense lawyers. The Committee also added a new factor that states “parties' relative access to relevant information” should be considered.
“This was added after the public comment period to take into account those cases where discovery is asymmetrical, as in employment discrimination litigation,” Judge Koeltl said.
Judge Koeltl also noted another change to the Rule that was included before the public comment period opened was that the list of discoverable items has been eliminated from the Rule's language because many of those items are plainly part of discovery today and “no reasonable person would dispute that.” Judge Koeltl acknowledged the concern that removing that list may cause some attorneys and litigants to argue that once the items have been removed from the Rule, they are no longer available as discoverable. The Committee Note has been revised to explain that those items are still discoverable.
Judge Koeltl also brought attention to the omission of the “relevant information need not be admissible” language in the proposal.
“The history of that provision demonstrates that it was never intended to expand the scope of discovery,” Judge Koeltl said. “We have received many comments that this provision is the core of the scope of discovery, and that is simply not right or historically correct.”
Before moving on to other Rules proposals in the package, the Committee members generally agreed that the changes to 26(b)(1) were a significant improvement. The Committee members also noted that the quality and quantity of the comments that were submitted during the public comment period improved the product and rule-making process.
Judge Koeltl then addressed Rule 26(c), which was modified to include the allocation of costs in the list of items that can be included in a protective order. In response to public comments, the advisory note was changed to make clear that cost-shifting should not become common practice. Judge Koeltl also quickly mentioned changes to Rule 34, which he called a “subject of true abuse.”
The Committee turned to a discussion of the “presumptive limit” proposals, which, Judge Koeltl said, “to put it mildly,” received great criticism. The organized bar told the Committee in comments and testimony that the presumptive limits would be counterproductive because they would lead to some courts viewing the limits as hard ceilings rather than as presumptive. In addition, the new limits would likely lead to increased motions practice or discovery disputes, the comments warned.
“We believe and we hope that lawyers who cooperate at the Rule 26(f) conference will discuss how many depositions are appropriate for a case, but we are persuaded by the organized bar's adamant display against the changes that these individual proposals should be withdrawn,” Judge Koeltl said.
Judge Koeltl introduced the proposals related to early and active judicial case management next. He noted that these proposed changes have caused little opposition. He stated there is a perception that the early stages of litigation take too long, and time is money. The proposals included Rule 4(m) and Rule 16.
As for the cooperation-themed amendments, Rule 1 was revised to specify that the Rules are to be employed by the court and the parties. Judge Koeltl said that change was generally well received, though there were some comments received stating the Committee should put the requirement of cooperation directly into the text of the Rule itself.
The Committee unanimously voted to adopt the Duke Conference Package proposals as printed in the Agenda book, including the withdrawal of the presumptive limit amendments.
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The full text of the revised proposed amendments to the Federal Rules of Civil Procedure and the agenda for the hearing in Portland, Ore., are available at http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/Agenda%20Books/Civil/CV2014-04.pdf
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