Containing E-Discovery Costs - And The Legislative Assault On Twombly And Iqbal

Monday, August 2, 2010 - 01:00

Editor: Are your corporate counsel clients concerned about litigation costs?

Schneider: Definitely.

Editor: To what extent do they attribute this to e-discovery costs resulting from notice pleading?

Schneider: The reality is that discovery now in most large cases is e-discovery - and nothing more or less. Information is created and exchanged electronically, and the filing of any case is in part an effort to fish for information in a vast electronic sea. Defendants rightfully insist on a relevance screen and oppose fishing expeditions launched in a shaky vessel of notice pleading. In my experience, it is not necessarily bare notice pleading that leads to extensive e-discovery costs. Instead, an opponent might assert a tenable claim that meets Twombly and Iqbal (Twiqbal), but then attempts to push the boundaries of relevance to inquire into matters and impose burdens that are not justified.

Editor: Do you feel that e-discovery costs and disclosures of confidential data as a result of e-discovery intimidate corporations into settlement of otherwise meritorious cases?

Schneider: Settlements are sometimes driven by the practical necessity to avoid costs - this is not caving into intimidation, but is typically a steely-eyed assessment of the practical realities. Corporations have a right to call on the courts to protect them from needless e-discovery costs. I have not had a case myself personally where e-discovery costs have driven a settlement.

Editor: Is the amount of new information uncovered by e-discovery sufficient to justify its cost? How much is used at trial?

Schneider: I would say there are typically five grains of wheat in every truckful of chaff. This is something like the paper discovery process, however, where you might uncover two or three memos that become marquee events out of a mountain range of bankers boxes each stuffed with 3000 pages of nothing. There are, however, two major differences. First, our modern systems and retention of electronic data mean that there are ten trucks for every one that we had before. Second, people do tend to say things with less precision in e-mails that they would ever say in a more formal memorandum or letter.

The key to discovery is for both sides to work together to refine the search process so that you undertake the most reasonable search under the circumstances and avoid imposing enormous costs on both sides of the case.

Editor: To what extent have settlements resulting from the burden of e-discovery reduced the number of cases actually tried? How does this affect the justice system?

Schneider: I do not have this kind of data at hand. It would no doubt be a sad situation if cases that should be tried as a matter of justice and fairness go untried due to the specter of endless e-discovery.

Editor: Have Twiqbal actually changed the outcome of most cases in the federal courts?

Schneider : Again, I have not done any formal data collection on this point. The congressional bills introduced by Sen. Arlen Specter (D-Pa.) and Rep Jerrold Nadler (D-N.Y.) to reinstate Conley v. Gibson might lead one to believe that many cases are being dismissed due to Twiqbal. If a case is dismissed under Twiqbal , it is a thin case at best in my view. Twiqbal has inspired renewed attention at the motion to dismiss stage, as defendants mount serious attacks on cases that are fueled by pure speculation and the hope that discovery might turn up something to give the case legs. Notice pleading was often viewed as a license to throw things up against the wall and see what sticks. Twiqbal simply demands that plaintiffs have some facts to support a plausible claim - which hardly seems unfair. Having said that, I think the consensus is that there have not been a raft of dismissals in the wake of Twiqbal and courts still approach motions to dismiss in basically the same way - except in cases where the allegations are really thin.

Editor: In your experience, has application of Twiqbal narrowed the scope of e-discovery by requiring a focus on the facts pleaded in the complaint?

Schneider: The combined thrust of Twiqbal , the 2006 e-discovery amendments, the continued study of the Federal Rules Advisory Committee and the suggested protocols for controlling discovery suggested by the American College of Trial Lawyers and others all counsel in favor of finding a sensible middle ground for e-discovery where undue burden is anathema and proportionality and reasonableness is the golden rule. Discovery is a tool to gather relevant evidence; it is not a fishing pole. I cannot say, however, that Twiqbal has noticeably stemmed the tide of discovery.

Editor: What has been the effect of Twiqbal 's requirement that e-discovery not take place until after a motion to dismiss has been decided?

Schneider: Deciding motions to dismiss before cranking up the machinery of discovery has always been a sensible way to proceed. Twiqbal gives motions to dismiss new credibility, puts them on an even playing field and waves away the notion that motions to dismiss should rarely be granted. Giving new muscle to motions to dismiss lends credibility to the notion that discovery should not be started until it is decided whether the case can survive. My general sense is that plaintiffs may be more willing to agree in a post- Twiqbal world to hold off on discovery until motions are decided.

Editor: To what extent does Twiqbal limit the scope of litigation holds and preservation obligations?

Schneider: Companies need to retain materials that may be relevant to claims asserted - and plaintiffs should not be able to use overly broad or speculative claims to require companies to "over-preserve." Holds should be reasonable, and defendants should object to unreasonable preservation demands. Twiqbal should assist defendants in issuing reasonable holds and in resisting overly burdensome demands.

Editor: In your experience, have cases been dismissed because an insufficient chain of facts has been pleaded?

Schneider: I am aware that cases have indeed been dismissed under the rationale of Twiqbal , although I have not yet had the pleasure of such an experience.

Editor: Are you of the view that a scientifically valid chain of causation is required by Twiqbal in cases involving pharmaceuticals, chemicals or similar complex products? In such cases, would amicus briefs from leading scientists pointing out breaks in that chain be helpful?

Schneider: Frankly, I corral scientific causation issues in my head under Daubert - but admittedly, both Daubert and Twiqbal are looking to weed out cases and theories that should be non-starters.

Editor: to what extent are state and federal courts applying Twiqbal ?

Schneider: State courts are not governed by Twiqbal, and we have not seen a change in approach there. Federal courts are still working through how to apply Twiqbal, and we have not seen a major sea change yet.

Editor: In your experience has Twiqbal substantially reduced the cost of e-discovery?

Schneider: Yes, in cases where discovery is postponed and a motion to dismiss is then granted.

Editor: H.R. 4115 would overturn Twiqbal and prohibit a federal judge from dismissing a case unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief." How would the passage of this legislation affect the scope of e-discovery?

Schneider: The bill would restore notice pleading and plaintiffs would no doubt seek to find in its penumbra an invitation to eliminate any constraint on discovery. The proposed bills themselves appear to address only the issue of dismissal and not discovery, but notice pleading has always been used by aggressive litigants as a rationale for open-field discovery, with as few boundaries as possible.

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