Holding powers other branches lack, Congress enters e-discovery fray to probe new rules, growing costs

When Congress weighs in on an issue, the Executive and Judicial branches listen closely for one simple reason. Congress is the branch that controls the purse strings, including their budgets. The 435 members of the House and 100 Senators determine federal agency budgets, the programs they pursue and the reforms they must make. If an agency is ill-performing, Congress can slash its budget or excoriate its officials in public hearings with cameras glaring.

 

It will come as a surprise to some who work in e-discovery that Congress is also the ultimate arbiter of the content of the Federal Rules of Civil Procedure, the guidelines by which the 93 US judicial districts handle civil cases. Congress, whose present membership includes 151 lawyers, maintains similar veto power over the rules approved by the Supreme Court that apply in criminal cases.

 

Congress may nullify a court ruling. Through its various standing and special committees and subcommittees, it oversees the operations of the federal agencies to examine their efficiency, effectiveness and economy. Its powers often extend worldwide because of the role the United States plays in the world. E-discovery is no exception.

 

As e-discovery has evolved since December 2006 when the Federal Rules of Civil Procedure were amended to specifically include e-discovery obligations and penalties for noncompliance, Congress has been virtually silent on the issue.

 

That silence is about to end. Led by Congressman Trent Franks, Chairman of the Constitution Subcommittee of the House Judiciary Committee, Congress is about to start receiving evidence of what's going on and why it costs so much.

 

Since the new rules took effect in 2006, sanctions for mishandling electronically stored information (ESI) have increased greatly. A 2010 study published in the Duke Law Journal found that there were more e-discovery sanctions cases in 2009 than in all prior years since 2005 combined. More recent reports show the trend is continuing. There is wide consensus that e-discovery under the federal rules, and under the distinct rules of some states, is more expensive, more complicated and more contentious than ever.

 

The costs to society go deeper than dollars. E-discovery is time-consuming and labor-intensive, notwithstanding the varied technology that hundreds of vendors sell to lawyers, businesses, government agencies and other organizations at not insignificant cost.

 

So, on the fifth birthday of the e-discovery Federal Rules of Civil Procedure, a key subcommittee of the House of Representative will explore these issues. The December 13 hearings on "The Costs and Burdens of Civil Discovery" by the 10-member House Constitution Subcommittee led by Chairman Franks (R. AZ) will hear from various witnesses voicing various perspectives. Congressman Jerrold Nadler (D. NY) is the ranking minority member.

 

Law Professor Richard Marcus, of the University of California Hastings Law School, who helped write the 2006 rules amendments, says momentum has been building for revision of the rules with the goal of controlling costs. He adds that a subcommittee of the Judicial Conference of the United States, the federal judiciary's internal policy-making body, recently met in Dallas to explore changes. It is striving to offer a proposal in March 2012.

 

According to Marcus, most of the discussion focuses on clarifying the duties surrounding the preservation of evidence and the grounds on which sanctions should be imposed by judges. Special attention is being given to Civil Procedures Rule 37(e), which says “a court may not impose sanctions… for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system,” absent exceptional circumstances.

 

“There have been serious discussions in the last year-and-a-half about updating the rules,” Marcus says, “but I would be very cautious about trying to guess the impact [of the 2006 amendments] without an elaborate, extended review.”

 

The Franks hearing also has a focused target of examining soaring e-discovery costs.

 

“[The hearing] is an effort to assess the magnitude of the problem of skyrocketing discovery costs in civil cases,” says Rebecca Love Kourlis, Executive Director of the Institute for the Advancement of the American Legal System (IAALS) at the University of Denver, who will testify. “Discovery is often the driving factor behind the costs and delays in civil litigation. That impacts access to the courts in the first instance and access to a fair resolution once the case is filed.”

 

The expense of storing, searching, culling and producing voluminous ESI in litigation is believed to prevent parties of modest means from competing with well-funded litigants and even from filing meritorious cases.

 

E-discovery has also taken a steep economic toll on corporations, says attorney Barry Bauman, Executive Director of Lawyers for Civil Justice, in Washington DC, which primarily represents lawyers who represent corporate interests in litigation.

 

“Congress is taking notice of the enormous cost of e-discovery and discovery, generally,” Bauman says. “I hope it is able to take to heart that this has become a large economic problem.”

 

Though court-imposed sanctions get headlines, for corporate litigants the costs of preserving and reviewing great stores of data that may be relevant to a lawsuit often account for the largest part of expenditures related to e-discovery. This is why clarifying the "safe harbor" in Federal Civil Procedures Rule 37(e) is the focus of attention of many who are interested in amending the rules.

 

Rule 37(e) prohibits a court from imposing sanctions on a party for not producing electronically stored information (ESI) that is lost by virtue of "the routine, good-faith operation of an electronic information system," unless there are "exceptional circumstances."

 

This rule affects records retention and deletion policies of many businesses and other organizations. William Hubbard, an assistant professor at the University of Chicago Law School who will testify at the upcoming House hearings, told ACEDS his testimony will detail the large costs associated with preservation of ESI.

 

Changes to the Federal Rules are not inevitable, and the specifics of any amendment are unknown. Opponents to the amendments say not enough time has passed to fully grasp the impact of the 2006 changes.

 

William Butterfield, an attorney with Hausfeld, in Washington, DC, says amending the rules just five years after they took effect is premature and that the movement is possibly the product of faulty information.

 

“It still hasn’t been demonstrated that the current rules aren’t working,” says Butterfield, who will testify at the hearing. He says he would modify Rule 26 to delineate what parties should discuss during their obligatory initial pretrial meetings, which are commonly called "meet-and-confers." He argues that the rest of the rules should be left untouched until reliable studies and data emerge.

 

“The surveys on the effectiveness [of the 2006 rules] were taken before the ink was dry…. They asked the wrong people,” he says.

 

Butterfield cites a report by the University of Denver’s Institute for the Advancement of the American Legal System, which surveyed senior attorneys unfamiliar with e-discovery, many of whom didn’t practice in federal court.

 

He says, “Surveys by the ABA and Federal Judiciary Conference produced different [more accurate] results. People were anxious and conducted surveys that were not well thought out, unreliable and produced alarming results. That concern led us to this hearing.”

 

Amid the conflicting opinions and changes that may be in the offing, Hubbard, of the University of Chicago Law School, attempts to refocus the debate.

 

“I don’t think the question is whether the changes are premature, but whether the proposals are a good idea,” he says. “It’s uncertain at this point, but there are good arguments that there is room to improve.”  

 

Congress is uniquely suited to explore these issues, and has the power to effect great change. Combatants on both sides of the issue, along with service providers and vendors with a great stake in the outcome and international companies with ties in the United States, will be paying close attention.

 

The Constitution Subcommittee hearing led by Chairman Franks may well be the first and most visible salvo of the upcoming rules war.