FRCP Project Overview
LCJ is committed to achieving meaningful reform of the civil justice system by advocating amendments to the Federal Rules of Civil Procedure that govern preservation, discovery and cost allocation. The May 2013 meeting took place at a very important time because, for the first time in many years, the Advisory Committee on Civil Rules (Rules Committee) and the Standing Committee on Rules of Practice and Procedure (Standing Committee) are poised to move forward with significant changes which, if enacted, will deliver real relief to LCJ members from some of the extraordinary costs and burdens of discovery.
As the Rules Committee seeks input from the public bench and bar, LCJ is actively advocating the defense perspective on all proposed changes to the Federal Rules and is working to achieve specific rule reforms by providing the committee with consensus proposals developed by LCJ and corporate and defense practitioners. In addition, LCJ’s recently created Class Actions Committee is moving ahead on deliberations to consider what rules affecting class actions are worthy of further consideration. The LCJ committee is examining the state of class action law today and formulating policy objectives, which could include: 1) some type of reform that could impact the interlocutory appeals from class action certification decisions; 2) banning or limiting cy pres settlement payments to non-class members; and 3) ensuring that putative class members have a meaningful right to choose their own lawyer. After LCJ members reach a consensus on these issues, LCJ will advocate strongly for its agenda with the Rules Committee and its Rule 23 Subcommittee just as other organizations representing the plaintiffs' bar are going through a similar process.
LCJ “Discovery” Rulemaking Objectives
LCJ’s current federal rulemaking agenda consists of reforming the Federal Rules of Civil Procedure to include three pillars of discovery reform: 1) a national and uniform spoliation sanction approach; 2) a fair and practical revised scope of discovery; and 3) incentive-based cost default rules. LCJ believes it is critical to address all three of these issues in order to rescue the civil justice system, which is in serious need of repair. The current system of discovery encourages broad, expensive and often unnecessary discovery, which thwarts the availability of a just, speedy and inexpensive determination of the issues.
Preservation and Sanctions – LCJ advocates a preservation rule that: 1) limits the imposition of spoliation sanctions only to instances where willful conduct was carried out for the purpose of depriving another party of the use of the destroyed evidence and the destruction results in actual prejudice to the other party; and 2) clarifies when the preservation obligation is triggered. In addition, LCJ’s advocacy for limiting the scope of discovery would also limit the preservation obligation.
Fair and Practical Scope of Discovery – LCJ advocates for a revised Rule 26(b)(1) that would focus discovery on information that is relevant and material to the claims and defenses and that is proportional to the needs of the litigation. The purpose of such a reform is to reduce the costs and burdens associated with the discovery explosion while ensuring that all participants in the civil justice system have access to the information required to assert or defend legal claims.
Cost Allocation – LCJ strongly supports amending the Federal Rules to require that each party pay the costs of the discovery it seeks. The purpose of discovery is to permit parties to access information that will enable fact finders to determine the outcome of civil litigation. The existing cost default assumptions undermine that purpose in a significant fraction of cases, providing a mechanism for undue economic pressure that can overwhelm the search for truth and force parties to settle claims for reasons other than the merits. A “requestor pays” default rule would be a self-executing restraint against runaway discovery requests, placing the cost-benefit decision with the party in the best position to limit those costs – the requesting party.
LCJ’S FRCP Accomplishments And Current Status
LCJ’s relentless advocacy has given voice to those members of the bar and judiciary who believe that parties are over-discovering and over-preserving at great cost to the American economy, our global competitiveness and the judicial system. The Rules Committee has made substantial progress in addressing all three of the areas that are of major concern to LCJ. Specifically, the committee: 1) approved a new preservation sanctions rule that requires willfulness or bad faith and prejudice; 2) approved an amendment limiting the scope of discovery to information relevant to claims and defenses – and specifically requires discovery to be proportional to the needs of the case; and 3) has tasked its Discovery Subcommittee to undertake a review of cost allocation. This progress was all but unthinkable just a few short years ago.
Preservation Sanctions – At its April 11-12, 2013 meeting, the Rules Committee finalized a replacement Rule 37(e), which would permit curative measures for failure to preserve discoverable information but prohibit sanctions unless that failure results from a “willful or bad faith” act and causes substantial prejudice. A very rare exception is created by 37(e)(1)(B)(ii): if the failure “irreparably deprived a party of any meaningful opportunity to present or defend against the claims in the action.” Unlike the current Rule, the proposed replacement would govern sanctions for failing to preserve all types of information, not just electronically stored information (ESI). LCJ expects the Standing Committee to approve this proposal at its June 2013 meeting for publication and public comment in August.
Scope of Discovery/Proportionality - The Rules Committee’s proposed amendment to Rule 26(b)(1) is drafted to narrow the scope of discovery to include only information that is relevant to claims or defenses and is proportional to the needs of the case. The amendment would strike the well-known phrase, “[r]elevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence” and import the “proportionality” elements from the current Rule 26(b)(2)(C)(iii). This revision is very significant because its limitation of discovery to information relevant to the claims and defenses should eliminate “subject matter discovery” and discovery “reasonably calculated to lead to admissible evidence.”
Class Actions Initiative Overview
LCJ’s FRCP Program now includes a Class Actions Committee that is in the process of evaluating existing class action rules and developing an agenda for meaningful reform. LCJ is committed to developing a consensus among its membership, and to advocating vigorously in support of Rule changes that will deliver significant value to its members. The LCJ Class Actions Committee is considering a broad range of reforms but with special consideration given to supporting reforms that would: 1) address issues of interlocutory appeals from class action certification decisions; 2) give serious consideration to limiting cy pres settlement payments to non-class members; and 3) ensuring that putative class members have a meaningful right to choose their own lawyer.
LCJ’s class action advocacy efforts will focus on the Rules Committee’s Rule 23 Subcommittee, which is currently exploring ideas for possible amendments to the rules governing class actions. The subcommittee’s emphasis to date has been on issues such as settlement class certification; class certification and merits scrutiny; Rule 23(c)(4) issues classes; refining settlement review criteria; and monetary relief under 23(b)(2), among several other issues. LCJ will endeavor to persuade the Rules committees to elevate their review so that additional, more far-reaching proposals will be given careful consideration. LCJ plans to provide the Rules committees with additional formal “comments” which are at the heart of our advocacy program.
In efforts to develop a strong advocacy position on rulemaking reforms, LCJ members expressed broad consensus on certain issues and various points of view on others. Without attributing remarks to individual LCJ members, the following summarizes some of the highlights of LCJ’s May 2013 Membership Meeting in Washington, DC. LCJ’s overarching goal is to advocate for realistic reforms in the rules arena, not in the legislative arena, and there was consensus as to the potential for meaningful and positive reform.
Mandatory interlocutory appeals from class action certification decisions – The current test for granting interlocutory appeals is inconsistent and gives wide, or even entire, discretion to the presiding judge. Thus, the process is arbitrary by definition. The appeal process should be more consistent, and reform efforts should focus on establishing a national standard. Further, a new rule should be established that gives a right of appeal to defendants when certification is granted, in addition to the current rule, which gives a right of appeal only to plaintiffs when certification is denied.
Addressing potential problems associated with cy pres settlement payments to non-class members – The current rules allow for disproportionately large settlements, based on both the size of the class and the possibility of punitive damages. Thus defendants often pay settlements that substantially exceed the amount that will ultimately be paid to injured parties, with remaining funds eligible for cy pres distribution at the judge’s discretion. The full settlement amount is used to calculate plaintiffs’ attorney fees; thus, the system encourages maximizing class size and seeking damages that will never be paid to an injured party. In short, punitive funds undermine civil justice. To this point, LCJ members largely agree. Some LCJ members deliberated the practical realities that defendants face. For example, some expressed that, on the one hand, a large punitive settlement might be a worse financial outcome than outright losing the case in a public trial; however, reputational concerns come into play, and defendants may opt for settlement notwithstanding the strong merits of their case. On the other hand, some members recognized the merits of cy pres distribution, largely for the sake of expedience.
Ensuring that putative class members have a meaningful right to choose their own lawyer – The current opt-out rule creates an artificial relationship between strangers, i.e., any potential class member and the plaintiffs’ attorney. There is an inherent conflict in the current system. First, it allows the determination of class size as well as the establishment of an attorney-client relationship to occur “by default” and possibly without any real informed consent on the part of an average class member. Second, the system encourages plaintiffs’ attorneys to maximize class size for its own sake: maximum class size yields a maximum settlement, which in turn maximizes attorneys’ fees. Amending the rules toward an opt-in standard removes the artificial incentives and better ensures that class members give informed consent.
Leveraging LCJ Resources To Support Reform
LCJ actively advocates the consensus positions of its members and allies by advocating positions designed to support improvements in the civil justice system before the Rules Committee and Standing Committee. LCJ periodically submits formal comments throughout the rulemaking process, just as it had done in earlier efforts leading to the 2000 discovery amendments, the 2006 e-discovery amendments and amendments to the rules governing summary judgment, expert testimony, subpoenas and protective orders.
The position papers illustrate the scope and depth of the current LCJ rulemaking project reaching back to its 2010 White Paper, “Reshaping the Rules for the 21st Century,” which laid the foundation for the progress to come on what LCJ considers the three pillars of discovery – scope, preservation and costs.
The formal comments, combined with full engagement in the public rulemaking process, can provide compelling reasons for judges, members of Congress and rule makers to give serious consideration to fundamental rule reform.
Published May 22, 2013.
