Proportionate E-discovery: The Ruby Slippers That Will Save Litigation?

May 23, 2016New Jersey Law JournalAttorney: Susan M. Usatine

Reprinted with permission from the May 23, 2016 issue of the New Jersey Law Journal. © 2016 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

Proportionate E-discovery: The Ruby Slippers That Will Save Litigation?

Susan M. Usatine, New Jersey Law Journal

Clients believe e-discovery costs have run amok and litigators fear that, unless something changes, clients will no longer view litigation as an effective way to resolve disputes. Are the recent amendments to Federal Rule of Civil Procedure 26 the answer to practitioners' and clients' pleas for a practical approach to e-discovery? Is the requirement that discovery be proportionate to the dispute a new weapon in the war to control discovery costs? Or has proportionate discovery been a component of Rule 26 for decades?

For years, litigators have possessed the ability to require that discovery be proportionate to the importance of the issues at stake in the action, the amount in controversy, 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; but the proportionality requirement has been largely under-utilized. Perhaps now, with a newly revised Rule 26, the bench and bar will enforce proportionality and return to the practice of permitting the merits of a case to control a client's decision to litigate.

The concept of proportionate discovery is not new. In 1983, Rule 26(b)(1) granted courts the authority to limit disproportionate discovery and, in 1993, Rule 26 was amended to add additional judicial flexibility to address the "information explosion of recent decades" and the corresponding increase in discovery costs by adding subsection (b)(2), which included proportionality factors. See The Sedona Conference Proportionality Doctrine, at 3 (Conor R. Crowley et al. eds., 2013) (citing Advisory Committee Notes to 1983 Amendments to F.R.C.P. 26(b)). However, in the late 1990s, the Federal Rules Advisory Committee recognized that Rule 26(b)(2) was having little effect and suspected the proportionality factors were too deep within Rule 26 to be effective. Id.

Perhaps it was the location of the proportionality factors that explains why such factors were previously under-utilized, even in the face of growing lawyer and client e-discovery anxiety and/or anger concerning discovery expenses. Another conceivable explanation (other than a lack of understanding), is the perceived or actual tension between the proportionality considerations and old Rule 26(b)(1), which permitted discovery of relevant but inadmissible information that appeared "reasonably calculated to lead to the discovery of admissible evidence." Id. at 4 (stating that despite years of effort and multiple amendments, "courts have not always insisted on proportionality when it was warranted") (citing Committee Notes to 2000 Amendments to F.R.C.P. 26(b)(1) ("The Committee has been told repeatedly that courts have not implemented these limitations with the vigor that was contemplated."); C.A. Wright & A.R. Miller, "Federal Practice & Procedure" §2008.1, at 121 (2d ed. 1994) (describing the "paucity of reported cases" applying the proportionality rule and concluding "that no radical shift has occurred.")). Perhaps counsel and the bench believed that the "reasonably calculated" standard effectively eliminated any possibility that a court would rule in favor of a movant who sought to limit discovery on the basis of proportionality.

Proportionality Today
Proportionality in discovery has the capacity to refocus parties and counsel on the merits of each case and restore confidence in the litigation process as an efficient means of resolving disputes. Specifically, new Rule 26(b)(1) permits parties to "obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case[,]" with consideration provided to the following factors:

The importance of the issues at stake in the action;

The amount in controversy;

The parties' relative access to relevant information;

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.

Notably, these factors are not identical to the considerations previously included in subsection (b)(2) of the old Rule 26; specifically, the "importance of issues at stake" factor has been elevated to above the "amount in controversy" factor in response to public comments to the then proposed, now effective rule amendments, and the "parties' relative access to relevant information" is a newly added proportionality consideration.

Discussion of new Rule 26 has largely focused on the restoration of the proportionality factors to their original place in Rule 26(b)(1) and elevating them from their prior location in subsection (b)(2)(C)(iii) of Rule 26. What has received less attention, however, is what was deleted from Rule 26—specifically, old Rule 26(b)(1)'s provision for the discovery of relevant but otherwise inadmissible information that appears "reasonably calculated to lead to the discovery of admissible evidence."

Courts React: The First Six Months After the Amendments
Parties share the responsibility to achieve proportionality in discovery. Early dialogues considering data repositories to be searched, time frames, search terms and custodians should regularly occur and disputes should be brought promptly before the courts by way of objection or by motion to resolve the discovery parameters. In a recent decision interpreting new Rule 26(b)(1), the District Court for the Northern District of Texas reinforced the Rules Advisory Committee's position that restoring the proportionality calculation to new Rule 26(b)(1) did not change the responsibilities of the court and the parties in seeking either to compel or oppose discovery. Carr v. State Farm Mut. Auto Ins. Co., 312 F.R.D. 459, 468-69 (N.D. Tex. Dec. 7, 2015). Indeed, the court found that a party seeking to resist discovery on proportionality grounds still bears the burden of making a specific objection to the request and demonstrating that the discovery fails the proportionality calculation by coming forward with specific information relative to the proportionality factors. Additionally, the court found that the party seeking the discovery may also need to make its own showing of many, or all, of the proportionality factors.

Similarly, the Northern District of California District Court also underscored the parties' shared responsibility to achieve proportionate discovery and noted that such a responsibility begins at the time the discovery demands are drafted. Gilead Sci. v. Merck & Co., No. 5:13-cv-04057 (N.D. Cal. Jan. 13, 2016) (holding that new Rule 26(b)(1) "simply takes the factors explicit or implicit in these old requirements to fix the scope of all discovery demands in the first instance …."). The court in Gilead held that "[n]o longer is it good enough to hope that information sought might lead to the discovery of admissible evidence[,]" and found there that the defendant's request was "precisely the kind of disproportionate discovery that Rule 26—old or new—was intended to preclude." In so finding, the court began with a discussion of "old" Rule 26(b)(2)(C)(iii) and 26(g)(1), which limited discovery when burden outweighed benefit and required lawyers to certify that the requested discovery was not unduly burdensome, respectively. Gilead admonishes practitioners that the big change is our mindset when crafting discovery demands. For example, although the defendant asserted that it should not have to take the plaintiff's word as to the lack of a nexus between the requested documents and the subject of the parties' dispute, the court flatly rejected such demands for expansive and confirmatory discovery, finding that:

[Defendant's] demands are exactly the type of disproportionate demands that Rule 26(b)(1) proscribes …. And so that leaves [plaintiff] in the position of having to produce discovery on all sorts of compounds that bear no indication of any nexus to the disputes in this case. This is untenable. It would be like requiring GM to produce discovery on Buicks and Chevys in a patent case about Cadillacs simply because all three happen to be cars. In the absence of any reason to doubt the proof [plaintiff] has tendered about the identity of the disputed compounds, and given the cost and potential delay introduced by the requested production, [defendant's] request is precisely the kind of disproportionate discovery that Rule 26—old or new—was intended to preclude.

Another illustrative post-amendment decision is In re: Takata Airbag Prods. Liab. Litig., MDL No. 2599 (S.D. Fl. Mar. 1, 2016). There, the court began its discussion of the amended Rules by citing Chief Justice John Roberts Jr., 2015 Year-End Report on the Federal Judiciary, 6 (2015), which states that the "[new Federal Rule 26(b)(1)] crystallizes the concept of reasonable limits on discovery through increased reliance on the common-sense concept of proportionality." In re: Takata Airbag Prods. Liab. Litig., (citation omitted). The court in Takata further held that "a party is not entitled to receive every piece of relevant information[,]" and it was therefore "logical" that "a party is not similarly entitled to receive every piece of irrelevant information in responsive documents if the producing party has a persuasive reason for why such information should be withheld." The court consequently found the defendant was entitled to redact or withhold irrelevant information where disclosure of the information could "provide its competitors with competitively sensitive information to the ultimate detriment of each defendant." See also Noble Roman's v. Hattenhauer Distrib. Co., No. 1:14-cv-01734 (S.D. Ind. Mar. 24, 2016) (stating that "[e]ach time the language and/or structure of" Rule 26 "was changed, it was to rein in popular notions that anything relevant should be produced and to emphasize the judge's role in controlling discovery[,]" and further stating that the defendant's assertions of relevance as to subpoenaed nonparty documents were "not good enough" and requests for "every documents" and every piece of information" regarding a corporation's business operations, finances, marketing plan and management structure in the shareholder's possession constituted "discovery run amok").

Today, we face unprecedented client scrutiny of the value of litigation. With the deletion of the "reasonably calculated to lead to the discovery of admissible evidence" provision in Rule 26(b)(1), we have an opportunity to retool our mindset that far-reaching discovery is a right and necessity. By tapping our heels together three times and embracing proportionality in discovery, we can increase clients' confidence that litigation continues to be an effective way to resolve their disputes.



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