Could New Discovery Rules Help Reduce Business Litigation Costs?

Discovery is one of the most expensive and burdensome phases of any business litigation.

To help reign in the process, the Judicial Conference of the United States recently approved amendments to the Federal Rules of Civil Procedure. The proposed changes limit the scope of discovery and clarify the sanctions for failing to preserve electronic documents.

Narrowing the Scope of Discovery

Amendments to Rule 26(b)(1) are intended to ensure that discovery is not more expansive than necessary by requiring that all requests be “proportional to the needs of the case.” Under the revised rule:

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 amount in controversy, the importance of the issues at stake in the action, 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.

Also of note, Rule 26(c)(1)(B) would be amended to include “the allocation of expenses” among the provisions that may be included in a protective order. The change is intended to give courts the explicit authority to require the requesting party to bear part or all of the costs of responding.

E-Discovery Sanctions

Changes are also likely coming to Rule 37(e), which governs the imposition of sanctions for failure to preserve discoverable information. The goal of the amendment is to establish greater uniformity in how federal courts respond to the loss of electronically stored information (ESI).

As noted in the rule proposal, “The lack of uniformity—some circuits hold that adverse inference jury instructions can be imposed for the negligent loss of ESI and others require a showing of bad faith—has resulted in a tendency to over preserve ESI out of a fear of serious sanctions if actions are viewed in hindsight as negligent.”

In response, Proposed Rule 37(e)(1) provides that the court must first find that the loss of information has prejudiced another party. It may then order measures “no greater than necessary to cure the prejudice.” The amended e-discovery rule also only authorizes adverse inference instructions [under which the jury can presume that the unavailable documents are unfavorable to that party]  upon a finding that the party “acted with the intent to deprive another party of the information’s use in the litigation.”

What’s Next?

The U.S. Supreme Court must still approve the proposed changes. Assuming the justices sign off and Congress does not intervene, the new rules would likely take effect on December 1, 2015. We are closely tracking the status of the new federal discovery rules and will provide updates as they become available.