The US Supreme Court Submits Proposed Changes in Discovery Rules to Congress

Last Wednesday, 29 April 2015, the Supreme Court of the United States adopted and submitted amendments to the Federal Rules of Civil Procedure (“FRCP”) to Congress for approval which have the potential to substantially change the discovery process. The approval by Congress is the last step in a series of events which began in May 2010 at the Conference on Civil Litigation held by the Judicial Conference’s Advisory Committee on Civil Rules where it was almost unanimously agreed that the procedure for civil lawsuits in the United States should be improved. The identified goal was to reduce costs and delays, to increase access to courts, and to further the overall goals of the FRCP - “to secure the just, speedy and inexpensive determination of every action.”

The Advisory Committee released proposed amendments for public comment on 15 August 2014. By the time the public comment period ended, on 18 February 2015, an overwhelming number of people sought to give their input into the new rules. The Advisory Committee received over 2,300 comments, heard 120 witnesses and held three public hearings which highlighted that excessive discovery occurs in more cases than should.

The years long process proved to be controversial including allegations that changes would impede a litigant’s access to information and that the proportionality standard would force requesting parties to prove that their requests are not unduly burdensome or expensive. Some thought changes would lead the courts to deny discovery important to prosecution of constitutional rights. Some judges, on the other hand, found the change to a proportionality standard to be unnecessary since parties can amicably agree to the extent of relevant information themselves.

Not all of the proposed amendments made it through the entire amendment process such as the reduction in the number of depositions and interrogatories allowed, but if adopted, relief for large corporations may be on its way.

In short, the proposed Rules attempt to increase cooperation and proportionality. For German companies, at least three of the ten rules proposed for amendment are noteworthy:

1. Scope of Discovery

The most hopeful change is in proposed FRCP 26 which defines the scope of discovery. The troublesome wording in the current rule, requiring the production of documents “reasonably calculated to lead to the discovery of admissible evidence” will be deleted. In its place will come a list of factors the court can consider when placing limits on discovery to only what is proportional. The court will now be able, on its own and without the parties request, “to limit the frequency or extent of discovery” if discovery is outside the permitted scope. The relevant factors are listed in a specific order in an attempt to clarify that the amount in controversy is not the decisive factor in determining proportionality and include: that discovery should be proportional to the needs of the case, the importance of the specific issue, the amount in controversy, the parties access to the data, the parties resources and whether the burden of discovery outweighs its benefits.

2. Preservation of Documents

On 18 February 2014, William H.J. Hubbard, an Assistant Professor of Law at the University of Chicago Law School, published a survey after interviewing 128 companies on the amount spent per year on document preservation. It showed that large companies spend USD 40 million per year preserving data. Companies were said to over preserve, in part because of fear of facing sanctions by courts.

Complicating matters further, various courts in the United States applied different tests as to when the most severe sanction could be applied - an adverse inference. The adoption of the new rule would reject cases such as Residential Funding Corp. v. DeGeorge Financial Corp. 306 F.3d 99 (2nd Cir. 2002) which held that ordinary negligence can result in an adverse inference instruction being given to the jury. The proposed rule would provide clarity to litigants and allow severe sanctions only when a party acts “with intent to deprive”, as opposed to negligence or gross negligence.

Finding it too complicated to define scope, duration and trigger events for the preservation of documents, the amendment does not clarify when a party should preserve documents. The trigger to preserve will continue to be when litigation is “reasonably anticipated”. Rather, the change provides judges an array of remedies for the failure to preserve documents based on various degrees of culpability. This will allow a more predictable and individual use of sanctions.

3. Discovery Disputes

Changes are also proposed to FRCP 34 which governs the production of documents and other items and has the goal of minimizing discovery disputes. Unlike many of the other rules proposed for change, the proposed changes to FRCP 34 enjoyed widespread support. The amendment seeks to minimize the use of boilerplate objections to discovery requests which many times manifested itself in a series of boilerplate objections leaving the receiving party to wonder whether documents were being withheld based on the objection. The changes would require the responding party to state their objection with specificity which will elicit the true reason for objecting to the discovery request. It also aims to discourage parties from stating the discoverable information will come in “due course” without a specification as to when the production will occur. Rolling discovery, in some cases, will still be allowed. It is hoped that with more communication, less discovery disputes will arise.

Unless Congressional action takes place, the amended FRCP will come into effect on December 1, 2015.