WLF Legal Backgrounder
A Toolkit For Change: How The Federal Civil Rules Advisory Committee Can Fix A Civil Justice System "In Serious Need Of Repair"
By Daniel E. Troy and John O'Tuel
May 21, 2010 (Vol. 25 No. 19)
The Federal Civil Rules Advisory Committee held an important conference at Duke University on May 10 and 11, 2010. The conference addressed potential amendments to the Federal Rules of Civil Procedure, including those addressing pleadings, the scope, burden, and cost of discovery, and document preservation. Why was this conference held? As in 1938, when the Federal Rules were first written, a combination of events likely precipitated the discussion of potential change. With the 1938 effort, Roscoe Pound and others had called for reform because of dissatisfaction with the old English writ system and separation of law and equity. Today, U.S. Supreme Court cases such as Iqbal and Twombly and a 2009 survey by the Institute for the Advancement of the American Legal System ("IAALS") and the American College of Trial Lawyers ("ACTL"), reflect the views of diverse stakeholders that there is a need for systemic reform.1
The results of the IAALS/ACTL survey, which included responses from some of the most accomplished members of the defense and plaintiff bars, were no surprise to those who try cases. In general, there was a concern that discovery takes too long, costs too much, is too much of a focus in any given litigation, and has become an end unto itself. As far as e-discovery, the results were worse: e-discovery was termed a "morass," the new Rules were described as a "nightmare," and respondents did not believe judges were enforcing the Rules effectively. Id. at 2. In light of those results, perhaps a kinder than necessary conclusion was drawn: the Report stated that although the current system may not be broken, "it is in serious need of repair." Id.
Between the time the IAALS/ACTL report was first issued and the recent conference, participants and interested observers have conducted many studies and engaged in much debate.2 Most studies were qualitative in nature, much like the IAALS/ACTL survey. Indeed, several modeled their questions after those used in the IAALS/ACTL survey.
There is a surprising degree of agreement among the qualitative studies that a problem exists. For example, a majority of the respondents to an American Bar Association ("ABA") survey3 as well as a Federal Judicial Center ("FJC") survey4 agreed that at least some amendments to the Rules are in order. Fifty-two percent of the respondents to the ABA survey did not believe that the current discovery mechanisms work well, ABA Survey, at 3, while 60% of the respondents to a survey by the National Employment Lawyers' Association ("NELA"), a group comprised of lawyers who represent claimants in employment litigation, believed that the "current rules as written are not conducive to securing a ‘just, speedy and inexpensive determination of every action.'"5 Many of the studies have endured criticism that their results are slanted in one direction or the other. For example, the FJC survey questioned attorneys responsible for cases closed in the federal system during a specific time period. Although seemingly unbiased, it is comprised of a substantial number of civil rights cases (and their correspondingly different discovery requirements), while MDL matters were excluded (excluding both those cases transferred out of a jurisdiction or transferred in). The NELA survey, by its nature, is comprised solely of responses from plaintiffs' counsel. Again, however, there is general agreement that problems exist.
There is substantially less agreement about what exactly the problems may be. For example, the ABA survey found that 66% of respondents believed that e-discovery was abused, ABA Survey, at 2, while the respondents to the NELA survey tended to believe that e-discovery provided a clearer factual picture of their cases and that the costs could be managed. NELA Survey, at 6. Nearly 60% of the respondents to the ABA survey believed that judges do not enforce mechanisms to limit discovery, ABA Survey, at 3, while the respondents to the FJC survey "seemed relatively satisfied with current levels of judicial case management." FJC Survey, at 3.
There is even less agreement about the remedy. Many are firmly opposed to actual Rules changes. They point to behavioral modification as a remedy: some believe cooperation between the parties can solve the ills of the system, while others point to more active judicial management and oversight of cases as a panacea. Both miss the point. Cooperation between the parties is only a viable remedy where clearly articulated and carefully drawn rules remove the leverage that comes from uncooperative behavior such as requesting excessively broad document discovery to drive up the producing party's costs and force settlement. In other words, certainty and predictability of the Rules inspire more meaningful cooperation between adversaries. Active judicial management can enhance that opportunity in a single case, but cannot provide certainty and predictability across the full spectrum of cases many parties have in the federal system. Indeed, more active judicial management, without clear and predefined rules at the national level, is likely to lead the system into further chaos. Inconsistent and ad hoc rulings from different courts have contributed significantly to the uncertainty and lack of predictability plaguing the discovery process today.
Although many of the surveys are qualitative, a few studies look at quantitative data. For example, the Litigation Cost Survey of Major Companies (hereinafter the "Searle Survey")6 asked respondents to provide objective data and cost information. As such, it reveals discrete areas of concern for producing parties in litigation. This, in turn, informs the inquiry on both the nature of the problem and possible remedies.
The Searle Survey was formulated by Lawyers for Civil Justice, The Civil Justice Reform Group and the U.S. Chamber Institute for Legal Reform. It was administered by Northwestern University Law School's Searle Center on Law, Regulation and Economic Growth. Although there is a wealth of anecdotal evidence that the U.S. discovery process has driven up litigation costs to unacceptable levels, there has been little empirical research or reporting of those costs, largely because of confidentiality concerns and the resources required to compile such data.
The Searle Survey sought to address this lack of empirical data. It contains data about outside litigation costs collected from Fortune 200 companies. The Survey looked at marginal costs directly identified with or allocated to litigation; it did not include judgments and settlements or examine embedded costs such as corporate investments in information technology and other expenditures to preserve documents in anticipation of litigation, or employee time spent on document production and depositions. All Fortune 200 companies received the Survey and 37 responded, representing 14 of 19 industries in the Fortune 200 and all four quartiles. The Survey is a first step in filling the gap in empirical research and provides some very interesting, and persuasive, data showing the excessive costs and the questionable utility of broad discovery in the United States.
First, the outside costs of litigation over the past decade have steadily grown. This is true both in an overall sense (the Searle Survey presented average total litigation costs per year) and as compared to the growth of the company (as measured by revenue). Specifically, the Searle Survey found that average total outside costs of litigation per company rose 73% from $66 million in 2000 to $115 million in 2008, representing 9% growth per year. Litigation Cost Survey of Major Companies 7-8 (2010). The Survey also found an upward trend over time in the cost of U.S. litigation as a function of U.S. revenues. Id. at 10.
Second, costs are disproportionately high in the United States versus the rest of the world. The Searle Survey found that the cost of U.S. litigation as a percentage of U.S. revenues far outweighed the cost of non-U.S. litigation as a percentage of non-U.S. revenues. Id. at 13. Specifically, respondents' costs of U.S. litigation were four to nine times higher than the costs of their non-U.S. litigation, depending on the year. Id. For example, in 2008, the ratio of U.S. costs to U.S. revenues was 0.51%; that same year the ratio of non-U.S. costs to non-U.S. revenues was 0.06%. Id. Moreover, the costs of U.S. and non-U.S. litigation are headed in separate directions: the ratio of U.S. costs/revenues increased from 0.48% in 2004 to 0.51% in 2008; the ratio of non-U.S. costs/revenues decreased from 0.11% in 2004 to 0.06% in 2008. Id.
Third, the Survey confirmed that discovery, in its current form, is monumentally inefficient. It was disturbing, although unfortunately not surprising, to find that it takes 1,044 pages of produced documents in discovery to yield one page worthy of being used at trial. In 2008, the average number of pages produced in discovery was 4,980,441 while only 4,772 pages were marked for use at trial. Id. at 16. This corresponds to a utility rate of one-tenth of one percent for produced documents.
The Searle Survey brings the following problems into sharp focus:
- Discovery is wasteful; litigation simply costs too much in the United States, and it appears to be getting worse.
- The e-discovery amendments to the Rules in 2006 have not ameliorated the situation.
- From a litigation-cost perspective, other countries' legal systems are many times less costly than the United States legal system, thereby placing companies in the United States at a global disadvantage.
- Document discovery is out of hand and is not in line with the mandate of Rule 1 of the Federal Rules of Civil Procedure: to "secure the just, speedy, and inexpensive determination of every action and proceeding." Instead, defendants are required to produce exorbitant amounts of material that will never be used in court.
What remedies are appropriate? Specific Rules changes make the most sense. A lack of uniformity and consistency has plagued the application and enforcement of the current Rules regarding discovery. While judicial discretion should not be eviscerated by Rules amendments, certain changes can reduce disputes between parties and assist judicial management of a case. The following changes would prove the most beneficial in reducing discovery costs, enhancing predictability for parties, and ultimately assisting the trier of fact.
- A mechanism should be put in place to narrow the issues at the outset of the litigation. That could be accomplished by requiring either: 1) particularized fact pleading; or 2) requiring an early judicial determination of those issues to be tried, after which discovery of those issues, and only those issues, can begin in earnest. The latter proposal mirrors that put forward by the ACTL and is preferred.
- A change in the scope of discoverable information is in order. Document discovery that requires production of 1,044 pages for every page marked for trial is grossly overbroad. Modifying the definition of discoverable information to those materials directly relevant to an issue to be tried would serve to reduce that inefficiency, reduce costs, allow adversaries to focus on those materials pertinent to their cases, and would bring cases more quickly to a point where they can be tried.
- Presumptive limits on document discovery should be applied. One proposal discussed at the Federal Rules Advisory Committee conference was "Susman's Checklist."7 Part of that proposal suggested that discovery of information be limited to five custodians in the first instance, chosen by the requesting party. After production from those five custodians, an additional five custodians may be selected by the requesting party. After production from the second set of five custodians, no further discovery will be had absent a showing of good cause. This proposal is an amalgam of presumptive limits and phased discovery and combines the best attributes of both.
- Finally, amendments to the Rules should be enacted that directly address preservation and permit spoliation sanctions only where willful conduct for the purpose of depriving another party of the use of the destroyed evidence results in actual prejudice to the other party. A clear preservation rule is needed to supply guidance to litigants in order to counteract inconsistent requirements established by courts around the country.
This is a time of opportunity. There is a chance to effect meaningful change in the way U.S. courts are managed and in the way that U.S. citizens view the judicial process. Litigation costs currently bar access to the courts by some and constitute an unnecessary drain on companies already affected by economic hardship. The broad discovery rules in the United States impose a heavy cost and burden with little corresponding benefit. Without any sacrifice to accomplishing justice, simple revisions to the Rules could go a long way towards reducing that cost and improving the current problems with discovery in a way that would benefit all parties.
Daniel E. Troy is Senior Vice President and General Counsel at GlaxoSmithKline. John O'Tuel is senior counsel at GlaxoSmithKline.
1. Final Report on the Joint Project of The American College of Trial Lawyers Task Force on Discovery and The Institute for the Advancement of the American Legal System (2009).
2. Empirical studies and White Papers prepared for the conference are available at the conference website: http://civilconference.uscourts.gov/LotusQuickr/dcc/Main.nsf/h_RoomHome/4df38292d748069d0525670800167212/?OpenDocument.
3. ABA Section of Litigation Member Survey on Civil Practice: Detailed Report 2, 8 (2009) (hereinafter "ABA Survey").
4. Emery G. Lee III & Thomas E. Willging, Federal Judicial Center National, Case-Based Civil Rules Survey: Preliminary Report to the Judicial Conference Advisory Committee on Civil Rules 3 (2009) (hereinafter "FJC Survey").
5. Summary of Results of Federal Judicial Center Survey of NELA Members, Fall 2009: A Report by the National Employment Lawyers' Association 4 (2010) (hereinafter "NELA Survey").
7. See The Hon. Paul W. Grimm & Elizabeth J. Cabraser, The State of Discovery Practice in Civil Cases: Must the Rule be Changed to Reduce Costs and Burdens, or Can Significant Improvements be Achieved Within the Existing Rules? 28-30 (2010). Stephen Susman is a prominent litigator with Susman Godfrey, LLP, and represents both plaintiffs and defendants.