Discovery in a lawsuit, at its core, is about finding the truth.[1][2] Due to the explosion of electronically stored information (“ESI”), discovery costs have become extreme.[3] Before ESI, discovery was lawyers sitting around in a room with boxes of paper. Now, it’s millions, if not billions, of pages of documents on a computer. The cost of discovery alone is staggering; and it shouldn’t be.[4] This blog has updates on the law surrounding ESI, which is essential for companies to understand because even good faith missteps resulting in the destruction of ESI can prove costly and, in some instances, irreversible
This blog argues for a phased system of discovery, where we find out the most important facts first.[5] An example would be determining liability before damages; or in a case where a Plaintiff has an expert that claims a product caused an injury, we can find out if the expert is even qualified to testify under Rule 702.[6]
Daubert hearings and motions in limine could be conducted on these limited issues.[7] The system will focus on proportionality consistent with the 2015 Amendments to the Federal Rules of Civil Procedure.[8] The system is designed to encourage settlement.[9] If parties quickly get to the most important facts at the lowest expense, they can determine liability quickly, and thus, the need for further litigation would be lessened.[10] An example would be if the expert seems credible, and there is strong evidence that a product caused injury. The parties might agree to enter a settlement to avoid further costs of litigation, or they could agree on liability and have a hearing on damages with further discovery on that issue alone.
Attorneys Agree That Discovery is Out of Control and Costs Are Too High.
A 2008 survey by the Federal Judicial Center of lawyers in 3550 cases found that 25% of attorneys believed that the costs of discovery in their cases was “too high” relative to the amount in controversy.[11] A third of attorneys said discovery cost influences settlement.[12] Half of attorneys knew of at least one client who settled a case based on litigation costs, including discovery costs.[13]
In one case, the original discovery order required seven parties to distribute 38 GB of data. Data software determined only 1.4 GB was relevant. The cost of this discovery collection was $10,000.[14] However, a motion to compel was filed that requested an additional 65 custodians.[15] The cost for all of these additional custodians would be $153,000,[16] an amount that was over the $140,000 at issue in the entire case.[17] The cost of fighting the case would exceed the value of the case.
Does this mean that only wealthy parties win their cases? Or does it mean that crafty plaintiffs’ attorneys can make the cost of discovery so high that any reasonable person would settle the case? The proposition that cost alone will drive the entire case, and merits will hold no value, illustrates changes are needed.
Changes in Proportionality from the 2015 Amendments.
Before the 2015 amendment, rule 26(b)(2)(c) provided a system of proportionality that was restrictive, kicking in when a litigant objected to the amount of discovery sought.[18] Rule 26(g)(1)(B)(iii) required an attorney to sign a discovery request, response or objection.; the signed request demonstrated it was “neither unreasonable nor unduly burdensome or expensive, it considered the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action.” FED R. CIV. P. 26(g)(1). Neither of these rules worked with the explosion of ESI.[19] In 2015, proportionality was put front and center.
The new rule 26(b)(1) puts proportionality first and explains that any discovery relevant to a party’s claim or defense needs to be proportional considering:
“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.”[20]
The committee explained that proportionality is the collective responsibility of the parties and the court.[21]
This blog argues that judges should be required to create scheduling orders that require parties to phase discovery. During the Rule 26 meet and confer session, parties would set a scope of their first round of discovery. The parties would first discuss the most important facts to be discovered; an example would be to discovery liability over damages as explained above.
An argument could be made that it would drain judicial resources to manage the discovery; however, the first phase will take no more effort than to define proportionality as required by the 2015 amendments to the discovery rules.[22] Later on is where it becomes more work. However, Chief Justice Roberts has strongly suggested that judges need to do more:
[Under the 2015 amendments] “[j]udges must be willing to take on a stewardship role, managing their cases from the outset rather than allowing parties alone to dictate the scope of discovery and the pace of litigation. Faced with crushing dockets, judges can be tempted to postpone engagement in pretrial activities.”[23]
Parties themselves could control the entire process by mutually agreeing to phases. However, should the parties fail to agree, the judge would set the scope of discovery.
The judge would look to the Rowe Entertainment factors: (1) the likelihood of discovering critical information; (2) the availability of such information; (3) the purposes for which the responding party maintains the requested data; (4) the relative benefit to the parties of obtaining the information; (5) the total cost associated with discovery; (6) the relative ability of each party to control costs and its incentive to do so; and (7) the resources available to each party.[24]
After the first phase, the parties would meet again to talk about a second phase and would be required to talk about settlement. The focus of this theory is that the strengths and weaknesses would be figured out early.[25] If needed, motions in limine could be addressed at these meetings as well.
Phasing Has Worked Before
Phasing is not new. In Haka v. Lincoln County, phasing was implemented because the amount in controversy was only $50,000, and the judge observed that the costs of discovery would quickly approach the amount in controversy. The judge ordered phased discovery, and both the parties split the costs equally.[26]
Other judges, such as Judge Paul Grimm in the United States District Court of Maryland, have it as a routine practice.[27] Grimm plainly states that he requires a two-step phasing of discovery in his cases; he does it differently where the first phase is to discovery the important facts and the second phase is an all-out discovery.[28] This paper does not recommend that. This article recommends a phase-by-phase approach to severely control discovery costs.
This suggestion would also not make discovery indefinite. Setting a trial date has long been seen as a way to speed up trials.[29] Judges can still set trial dates and times when each phase must be completed, but if the litigation is not going fast enough, the judge would have the authority to step in.[30]
Conclusion
With these easy changes to the rules, with a focus on proportionality and ending never-ending discovery, discovery can and will become less expensive, and these changes will encourage settlement. Businesses will thrive with lower legal cost and can pass down its savings onto the customer. Most litigators dread never-ending discovery, clients want less legal bills, and the legal system wants cases solved on the merits, not the parties’ budgets. With all this being said, this paper argues that phased discovery can and will work.
Endnotes:
[1] This paper was originally written, in part, for Electronic Discovery and Information Governance with Professor Cohen at Fordham University School of law and is reproduced here.
[2] Robert G. Johnson, Discovery in Illinois and Federal Courts, 15 J. Marshall L. Rev. 1, 1 (1982) (describing discovery as “an adversary proceeding in which is undertaken a ‘search for truth.”’ (quoting People ex rel. Noren v. Dempsey, 139 N.E.2d 780, 783 (1957))).
[3] See Gordon W. Netzorg & Tobin D. Kern, Proportional Discovery: Making It the Norm, Rather than the Exception, 87 Denv. U. L. Rev. 513, 513 (2010) (discussing the high costs of the current discovery system and declaring the system to be “broken”).
[4] Supra note 1.
[5] Michael Thomas Murphy, Occam’s Phaser: Making Proportional Discovery (Finally) Work in Litigation by Requiring Phased Discovery, 4 Stan. J. Complex Litig. 89, 91 (2016)
[6] Fed. R. Evid. 702
[7] Supra note 4. at 108.
[8] The Sedona Conference Commentary on Proportionality In Electronic Discovery, The Sedona Conference Working Group Series 3 (Jan. 2013)).
[9] Michael Thomas Murphy, Occam’s Phaser: Making Proportional Discovery (Finally) Work in Litigation by Requiring Phased Discovery, 4 Stan. J. Complex Litig. 89, 117 (2016).
[10] Robert G. Johnson, Discovery in Illinois and Federal Courts, 15 J. Marshall L. Rev. 1, 1 (1982) (describing discovery as “an adversary proceeding in which is undertaken a ‘search for truth.”’ (quoting People ex rel. Noren v. Dempsey, 139 N.E.2d 780, 783 (1957))).
[11] Judge David G. Campbell, Memorandum To Judge Jeffrey Sutton Re: Proposed Amendments To The Federal Rules Of Civil Procedure At Rules Appendix B-6 (June 14, 2014), http://www.uscourts.gov/file/18218/download/
[12] Id.
[13] Id.; Ann G. Fort, Rising Costs of E-Discovery Requirements Impacting Litigants, LAW.COM (Mar. 20, 2007), http5://www.nationallawjournal.com/id=900005554136/Rising-Costs-of-E-DiscoveryRequirements-Impacting-Litigants?slreturn=20160317173351
[14] Samantha Green, Proportionality. Are Discovery Costs Proportional to the Value and Importance of the Case?, Orange Cty. Attorney Journal (Apr. 4, 2015), http://attorneyjournalsd.com/blog/2015/03/01/proportionality-are-discovery-costs-proportional-to-the-value-and-importance-of-the-case/
[15] Id.
[16] Id.
[17] Id.
[18] FED. R. CIV. P. 26(b)(2)(C) (2014) (amended 2015).
[19] FED R. CIV. P. 26(g)(1).
[20] FED. R. CIV. P. 26(b)(1).
[21] Michael Thomas Murphy, Occam’s Phaser: Making Proportional Discovery (Finally) Work in Litigation by Requiring Phased Discovery, 4 Stan. J. Complex Litig. 89, 117 (2016)
[22] Id.
[23] John G. Roberts, Jr., 2015 Year-End Report On The Federal Judiciary 4 (Dec. 31, 2015], http://www.supremecourt.gov/publicinfo/year-end/2015year-endreport.pd
[24] 205 F.R.D. 421, 429 (S.D.N.Y. 2002)
[25] See Michael J. Hanrahan, Game-Changing Federal “Proportionality” Discovery Rule Effective December 1, 2015, Fox, O’neill, Shannon, S.C., http://www.foslaw.com/news-views/game-changing-federal-proportionality-discovery-ruleeffectivedecember-1-2015
[26] Haka v. Lincoln County, 246 F.R.D 577 (W.D. Wis. 2007).
[27] Michael Thomas Murphy, Occam’s Phaser: Making Proportional Discovery (Finally) Work in Litigation by Requiring Phased Discovery, 4 Stan. J. Complex Litig. 89, 119 (2016)
[28] Id.
[29] Id.
[30] Id.
