Changing the Rules of the Game, Part II: Proposed Amendments to the Federal Civil Rules Potentially Shift Discovery Costs and Raise Bar for Awarding Sanctions When Evidence is Destroyed

February 5, 2014

Businessman looking through a magnifying glassThe Advisory Committee on the Civil Rules is currently considering sweeping amendments  to the Federal Rules of Civil Procedure.  Although the proposed amendments would initially impact only the federal civil rules, many states adopt the federal rules verbatim or nearly verbatim to govern litigation in state courts.

A previous post analyzed two key categories of proposed rule changes:

  • Imposing new limits to the scope of discovery that would require a party seeking discovery to establish the value and “importance” of its claims before getting any discovery from the opposing party; and
  • Imposing new or reduced limits on discovery mechanisms, such as depositions, interrogatories, and requests for admissions

Opponents of these proposed changes argue that the newly imposed restrictions would place a significant burden on claimants, who already face formidable – and mostly recently imposed – procedural challenges when prosecuting lawsuits.  Proponents contend that discovery is presently too burdensome, too intrusive, and disproportional to the amounts in controversy in many instances.

Against this backdrop, let’s examine two additional categories of proposed amendments:

  • Amending Rule 26 to grant judges explicit authority to shift the cost of producing discovery to the requesting party; and
  • Amending Rule 37 to provide a safe harbor for parties that fail to preserve discoverable documents and to place the burden on a party seeking meaningful sanctions of establishing that an opposing party acted “willfully” or “in bad faith,” and the failure to preserve materials caused “substantial prejudice” to the innocent party.

Shifting the Cost of Discovery

The proposed amendment to Rule 26(c)(1)(B), includes a statement authorizing courts to issue an order specifying the “allocation of expenses” for discovery.

Opponents of this amendment see this provision as altering a fundamental principle of  American law – that is, that each party bears its own costs in litigation, absent exceptional circumstances. Tasking courts with the responsibility to allocate expenses for discovery would invite such motions from virtually every party from whom discovery is sought, on the outside chance that a court might require the requesting party to pay all or some of the expense.  Moreover, opponents argue, this rule would effectively prejudice parties without deep resources, forcing them to go without potentially necessary discovery.

Proponents contend that, although not specifically stated in the current rule, this power is already inherent in the court’s powers under the rules, a position supported by the Advisory Committee’s Notes to the 2006 amendments.

Raising the Bar for Imposing Sanctions

The lengthy proposed amendment to Rule 37(e) seeks to replace the current scheme of discretion by courts in imposing sanctions with a two-tiered scheme for addressing loss of discoverable evidence:

  • Where a party “fails to preserve discoverable information that should have been preserved,” the court can permit additional discovery, order “curative measures,” or order the party to pay the reasonable expenses caused by the failure.
  • Only where a party seeking discovery establishes that the failure to preserve (1) caused “substantial prejudice” and was (a) willful or (b) “in bad faith,” then a court may impose all sanctions available under Rule 37(b)(2)(A) (adverse inference, preclusion, striking pleadings, staying proceedings until the violation is remedied, dismission the action, entereing a default judgment, or issuing a contempt citation).

Proponents contend that this amendment would create a national standard that would govern all federal court cases and, in doing so, would reduce or eliminate the disparity in how federal courts handle allegations of loss or destruction of evidence.  Proponents also argue that the amendment simply gives courts guidance for using a power to award sanctions that the courts already have under the current rules.

Opponents, including at least one well regarded federal judge, contend that the amendment’s language is imprecise and will likely cause additional confusion among trial courts.  Moreover, opponents argue, the amendment places the burden on the requesting party of proving a culpable state of mind of the opposing party, as well as the burden of proving that the absence of information that is entirely unknown to the requesting party has caused substantial prejudice.”  These burdens, some contend, are nearly impossible to meet in most instances, thereby giving quarter to bad actors who lose or detroy evidence.  In short, opponents argue, the amendment needs additional consideration and revision to address concerns of fundamental fairness.

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The Rules Committee will hold its last public hearing on the proposed amendments, at which I will be testifying, February 7, 2014 in Dallas, Texas. The deadline to submit comments regarding the proposed amendments is February 15, 2014 <http://www.regulations.gov/#!docketDetail;D=USC-RULES-CV-2013-0002>.