Civil Procedure & Federal Courts Blog

Company Cannot Assert Attorney-Client Privilege Against Its Director, Delaware Court Holds

Plaintiff is a director of the defendant Company, a Delaware corporation, and he owns an entity that was the Company's largest shareholder. The remaining directors of the Company are also defendants. The Board of Directors established a Special Committee to explore strategic alternatives for the Company. Plaintiff was a member of the Special Committee. Later, the entity owned by Plaintiff announced it would nominate candidates for election at the Company's annual meeting. The defendants then secretly "sprang into action" and 11 days later, Company counsel notified Plaintiff by email that a special Board meeting would occur the next day to approve a recapitalization in which an entity controlled by one of the defendants would emerge as the largest shareholder of the Company. At meetings of the Special Committee and the Board of Directors the next day, the recapitalization was approved over Plaintiff's negative vote. The day after that, the Company announced the recapitalization and also announced that it was postponing the annual meeting and deferring the record date. That same day, Plaintiff filed suit challenging the recapitalization and the postponement of the annual meeting and record date.

Plaintiff subpoenaed counsel to the Company and to the Special Committee for documents relating to the planning and scheduling of the special meetings and the structuring of the recapitalization. Defendants asserted the attorney-client privilege and work product protection.

The court granted Plaintiff's motion to compel, holding that until the day the Board voted to approve the recapitalization, the Company could not assert either privilege against Plaintiff, who was a director of the Company. After the Board voted to recapitalize, however, sufficient adversity existed between Plaintiff and the Company such that Plaintiff could no longer have a reasonable expectation that he was a client of the Board's counsel. Kalisman v. Friedman, 2013 Del. Ch. LEXIS 100 (Delaware Court of Chancery, April 17, 2013).

PM

Miller on the Deformation of Federal Civil Procedure

Now available online is an article by Arthur Miller (NYU) entitled Simplified Pleading, Meaningful Days in Court, and Trials on the Merits: Reflections on the Deformation of Federal Procedure, 88 N.Y.U. L. Rev. 286 (2013). Here’s the abstract:

When the Federal Rules of Civil Procedure were promulgated in 1938, they reflected a policy of citizen access for civil disputes and sought to promote their resolution on the merits rather than on the basis of the technicalities that characterized earlier procedural systems. The federal courts applied that philosophy of procedure for many years. However, the last quarter century has seen a dramatic contrary shift in the way the federal courts, especially the U.S. Supreme Court, have interpreted and applied the Federal Rules and other procedural matters. This shift has produced the increasingly early procedural disposition of cases prior to trial. Indeed, civil trials, especially jury trials, are very few and far between today.

The author examines the significant manifestations of this dramatic change, and traces the shift in judicial attitude back to the three pro-summary judgment decisions by the Supreme Court in 1986. Furthermore, he goes on to discuss the judicial gatekeeping that has emerged regarding (1) expert testimony, (2) the constriction of class action certification, (3) the enforcement of arbitration clauses in an extraordinary array of contracts (many adhesive in character), (4) the Court’s abandonment of notice pleading in favor of plausibility pleading (which, in effect, is a return to fact pleading), (5) the intimations of a potential narrowing of the reach of in personam jurisdiction, and (6) a number of limitations on pretrial discovery that have resulted from Rule amendments during the last twenty-five years.

All of these changes restrict the ability of plaintiffs to reach a determination of their claims’ merits, which has resulted in a narrowing effect on citizen access to a meaningful day in court. Beyond that, these restrictive procedural developments work against the effectiveness of private litigation to enforce various public policies involving such matters as civil rights, antitrust, employment discrimination, and securities regulation.

Concerns about abusive and frivolous litigation, threats of extortionate settlements, and the high cost of today’s large-scale lawsuits motivate these deviations from the original philosophy of the Federal Rules, but these concerns fail to take proper account of other systemic values. The author argues that these assertions are speculative and not empirically justified, are overstated, and simply reflect the self-interest of various groups that seek to terminate claims asserted against them as early as possible to avoid both discovery and a trial. Indeed, they simply may reflect a strong pro-business and pro-government orientation of today’s federal judiciary. The author cautions that some restoration of the earlier underlying philosophy of the Federal Rules is necessary if we are to preserve the procedural principles that should underlie our civil justice system and maintain the viability of private litigation as an adjunct to government regulation for the enforcement of important societal policies and values.

--A 

Meier on the Summary Judgment Standard

Professor Luke Meier of Baylor University has posted on SSRN his new article, "Probability, Confidence, and the 'Reasonable Jury' Standard."

Abstract:

The modern summary judgment standard requires that a judge consider how a "reasonable jury" would resolve a particular dispute. By creating the impression that a judge's analysis at summary judgment replicates that of a jury at trial, the "reasonable jury" standard masks a component of the judge's summary judgment analysis. To appreciate this concept, it is necessary to distinguish between the concepts of probability and confidence. Whereas a jury primarily -- if not exclusively -- engages in a probability analysis, a judge performs both a probability and confidence analysis. This article discusses the dual nature of a judge's summary judgment inquiry through a reconsideration of Professor Tribe's "blue bus" hypothetical. In addition, this article demonstrates how the "reasonable jury" standard makes it difficult to identify the confidence concept as a component of federal procedure.

PM

Discovery Sanctions Order in Apple Patent Litigation

U.S. District Judge Leonard Davis of the Eastern District of Texas imposed sanctions last week on Apple for halting a deposition of one of its employees, Mr. Allié, in a patent dispute. Might be of use for civil procedure professors looking for a current example for teaching purposes. Below is the portion of the order setting forth the sanctions:

(1) Apple must pay VirnetX’s reasonable attorneys’ fees and costs associated with responding to Apple’s motion for a protective order and the filing of VirnetX’s motion for sanctions;

(2) Apple must produce Mr. Allié for completion of his deposition at a time and location selected by VirnetX, all costs of such deposition to be paid by Apple. Apple shall not, through counsel or otherwise, further communicate in any way with Mr. Allié regarding the patents about which the witness was testifying prior to termination of his deposition. To the extent Apple has communicated with Mr. Allié about the patents since his deposition was terminated, Apple and Mr. Allié are deemed to have waived any privilege they might otherwise assert as to these conversations, and the witness will truthfully answer any and all questions regarding any such communications between Mr. Allié and Apple or any of its counsel, employees or representatives. Apple is precluded from asking any questions of the witness with regard to the comparison of the two patents.

(3) However, in lieu of Sanction #2 above, Apple may elect the following sanction and no further deposition of Mr. Allié will be taken:

a. Apple is precluded from calling Mr. Allié at trial, or providing any rebuttal or counter-designations from Mr. Allié’s deposition testimony regarding the comparison of ‘225 application and ‘135 patent; and

b. The Court will give the following adverse inference instruction to the jury at an appropriate time during the trial:

“During the deposition of Mr. Allié, counsel for VirnetX asked questions related to comparison of VirnetX’s ‘135 patent and Apple’s ‘225 patent application. Counsel for Apple improperly terminated the deposition and did not permit Mr. Allié to answer these questions. You may, although you are not required to, infer that had Apple’s counsel not terminated Mr. Allié’s deposition, the testimony provided would have been unfavorable to Apple, and that Apple’s counsel’s reason for terminating the deposition was to prevent such unfavorable testimony from being presented to you in this case.”

This choice of sanctions allows Apple to complete the deposition and avoid the adverse inference instruction, but prohibits it from potentially profiting from having stopped the deposition.

--A

(Hat Tip: Beth Thornburg, via twitter at @btSMU)

Judge Sanctions Greenberg Traurig and TD Bank for Discovery Abuses

The ABA Journal online reports:

Saying that a well-known law firm and its client bank had often handled a major case "in an Inspector Clouseau-like fashion,” a federal judge in Miami has sanctioned both for what she called a “pattern of discovery abuses before, during, and after trial.”

U.S. District Judge Marcia Cooke declined, however, to sanction individually any of the lawyers at Greenberg Traurig whose “handling of this case left much to be desired.” That's because she found they didn't act willfully or in bad faith as they helped client TD Bank defend against a civil damages suit brought by some of the investors fleeced by then-attorney Scott Rothstein, reports Bloomberg. Over 200 attorneys worked on the matter at Greenberg Traurig.

Cooke did find that TD Bank, against whom Texas-based Coquina Investors won a $67 million verdict in January for aiding and abetting Rothstein's fraud, "willfully concealed relevant evidence from its trial counsel.”

In addition to requiring both the bank and the law firm to pay the investors' legal fees for pursuing the sanctions motion, the judge also made a finding that TD Bank "had actual knowledge of Rothstein’s fraud.” While the finding was made after the verdict, it would benefit the investors in a potential appeal.

The case is Coquina Investments v. Rothstein, No. 10-60786-Civ-COOKE/BANDSTRA (S. D. Fla. Aug. 3, 2012).

PM

Law Student Research & Writing Competition on E-Discovery

Details are available here. From the announcement:

The DISH® “Best in Class” eDiscovery Legal Research and Writing Competition encourages law students to develop a thorough understanding of the evolution and practice of Information Governance and Discovery in civil litigation.  The competition is the only one of its kind designed to challenge law students to explore the evolving issues of document management, electronically stored information, and ever-expanding technology—along with their application to the law.

The 2012 competition asks students to address the following topic: Under what standard should a court subject an employee's non-business personal computing activities (e.g., social media, documents stored on a personal computer, and/or personal email accounts) to civil discovery involving her or his employer?

And:

The first-place selection will receive a $2,500 cash award along with an invitation to present his/her paper on a webinar hosted by Redgrave LLP. Two runners-up will also be selected and will each receive a $1,000 cash award.

The deadline for submissions is October 13, 2012.

--A

Lynch on Discovery Stays

Prof. Kevin Lynch (Denver) has posted on SSRN his article, When Staying Discovery Stays Justice: Analyzing Motions to Stay Discovery When a Motion to Dismiss is Pending, which appears in the Wake Forest Law Review. Here’s the abstract:

Discovery plays a central role in our judicial system, and while discovery provides many benefits to the parties and to the courts, it also imposes burdens and costs. Discovery reduces informational asymmetries, clarifies claims and defenses for trial, and encourages settlement. But it costs money to take depositions of witnesses, produce documentary evidence, and pay for the time of experts and lawyers. When a motion to dismiss is filed, the possibility that discovery will not be necessary presents a risk of wasted resources if discovery is not stayed while the motion to dismiss is resolved. However if discovery is stayed and the motion to dismiss is ultimately denied, even in part, then the entire case was delayed unnecessarily. Delay also presents a risk of deterioration of evidence as documents are lost, memories fade, or witnesses become unavailable. These are the considerations that judges must weigh against one another when deciding a motion to stay discovery due to a pending motion to dismiss.

Despite the importance of judicial decisions regarding discovery stays, this issue has received hardly any attention from legal scholars. This may be due to the relative scarcity of appellate decisions laying out standards for deciding motions to stay discovery, or it may be due to the difficulties in gathering reliable data on the discovery process. This Article fills this gap by examining what judges are doing currently on motions to stay discovery and recommending prescriptions for what judges should do in order to exercise their discretion and promote the goals of the Federal Rules of Civil Procedure. Relying on extensive research into federal court cases discussing discovery stays, the Article identifies eight primary considerations that affect discovery stays and provides guidance to judges regarding the appropriate standard to apply based on the characteristics of individual cases, focusing on the benefits of efficiency and transparency.

The Article proceeds in five parts. Part I lays out the issue of discovery stays when a motion to dismiss is pending. Part II provides background on the costs and burdens of discovery, the various interests at stake, and the judicial role overseeing discovery. Part III presents the current state of the law by looking at the various standards that courts have explicitly applied when deciding motions to stay discovery. Part IV develops a framework for understanding and reconciling existing precedent on discovery stays with reference to eight primary considerations. Part IV also lays out a prescription for judges to use in exercising their discretion in this context. Part V examines the broader issue of “discovery abuse” and specific cases where discovery is automatically stayed while also noting areas for further inquiry into this issue.

--A

New FJC report on Rules 26(f) and 16(b)

Posted to the Civ Pro prof listserv by Emery Lee of the Federal Judicial Center:

The report [from here on quoting Mr. Lee's email]:

Can be accessed at this link:

http://www.fjc.gov/public/pdf.nsf/lookup/leeearly.pdf/$file/leeearly.pdf

Executive Summary
At the request of the Judicial Conference Advisory Committee on Civil
Rules, the
Federal Judicial Center designed and conducted a closed-case survey about
the
early stages of litigation, especially Federal Rules of Civil Procedure 26
(f) and
16(b). The survey was sent to almost 10,000 attorneys of record in civil
cases
terminated in July–September 2011 and yielded a 36% response rate.
Key findings of the survey include:
• 72% of all survey respondents reported that, in the sampled case, they
met
and conferred with the opposing side to plan for discovery, as required by
Rule 26(f). Among respondents also reporting a Rule 16(b) scheduling
conference
with a judge in the sampled case, the comparable figure was 92%.
• The most common method of conducting the Rule 26(f) meeting was by
telephone
or videoconference, reported by 86% of respondents with a meeting.
• Most respondents with a Rule 26(f) meeting in person and/or by telephone
reported that the meeting lasted between 10 and 30 minutes.
• 71% of respondents with a Rule 26(f) meeting reported that the meeting
assisted
them in making arrangements to make initial disclosures in the sampled
case, 60% reported that it helped in developing a proportional discovery
plan, 50% reported that it helped them to better understand the opposing
side’s claims and/or defenses, 40% reported that they discussed discovery
of
electronically stored information, and 30% reported that the meeting
increased
the likelihood of a prompt resolution of the sampled case.
• Of the 40% of respondents reporting a discussion of discovery of
electronically
stored information at the Rule 26(f) meeting, 60% reported discussing
preservation obligations.
• 50% of all respondents, and 60% of respondents with a Rule 26(f) meeting,
reported a Rule 16(b) scheduling conference, either in person or by
telephone,
with a judge in the sampled case.
• Most respondents with a Rule 16(b) conference in person or by telephone
reported that the conference lasted between 10 and 30 minutes.
• 94% of respondents with a Rule 16(b) conference also reported a
scheduling
order in the sampled case.
• Attorneys representing plaintiffs at least half of the time were asked
whether
their pleading practices have changed since the Twombly and Iqbal
decisions.
Half said yes, half said no. The most common change in pleading
practices reported was including more factual detail in complaints,
reported
by 92% of those with changed practices. --PM

Hoffman on Hubbard on Preservation Under the Federal Rules

Now available on the Courts Law section of JOTWELL is an essay by Prof. Lonny Hoffman (Houston) entitled A Modest Proposal on Preservation. It reviews an article by Prof. William Hubbard (Chicago), Preservation Under the Federal Rules: Accounting for the Fog, the Pyramid, and the Sombrero.

--A

Computer Assisted Discovery in SDNY

Magistrate Judge Peck has issued an opinion in Moore v. Publicis Groupe, 11 Civ. 1279, permitting the use of computer assisted discovery in an employment discrimination class action pending in the S.D.N.Y.  The protocol will use trainable computer programs and a "seed set" of data coded by lawyers to engage in predicitve coding of a large number of documents.  

The opinion is notable not only for the ruling itself, but for the lucid descriptions of computer assisted discovery methods and how they may or may not apply to situations beyond the case at hand.

More coverage is available at Law Technology News.

RJE

Pilot Project on Initial Discovery Protocols for Employment Cases

Now available on the Federal Judicial Center’s website are Initial Discovery Protocols for Employment Cases Alleging Adverse Action. From the Introduction:

The Initial Discovery Protocols for Employment Cases Alleging Adverse Action provide a new pretrial procedure for certain types of federal employment cases. As described in the Protocols, their intent is to “encourage parties and their counsel to exchange the most relevant information and documents early in the case, to assist in framing the issues to be resolved and to plan for more efficient and targeted discovery.” Individual judges throughout the United States District Courts will pilot test the Protocols and the Federal Judicial Center will evaluate their effects.

This project grew out of the 2010 Conference on Civil Litigation at Duke University, sponsored by the Judicial Conference Advisory Committee on Civil Rules for the purpose of re-examining civil procedures and collecting recommendations for their improvement. During the conference, a wide range of attendees expressed support for the idea of case-type-specific “pattern discovery” as a possible solution to the problems of unnecessary cost and delay in the litigation process. . . . Following the conference, Judge Lee Rosenthal convened a nationwide committee of attorneys, highly experienced in employment matters, to develop a pilot project in this area. Judge John Koeltl volunteered to lead this committee. By design, the committee had a balance of plaintiff and defense attorneys. . . . The committee’s final product is the result of rigorous debate and compromise on both sides, undertaken in the spirit of making constructive and even-handed improvements to the pretrial process.

The Protocols create a new category of information exchange, replacing initial disclosures with initial discovery specific to employment cases alleging adverse action. This discovery is provided automatically by both sides within 30 days of the defendant’s responsive pleading or motion. While the parties’ subsequent right to discovery under the F.R.C.P. is not affected, the amount and type of information initially exchanged ought to focus the disputed issues, streamline the discovery process, and minimize opportunities for gamesmanship. The Protocols are accompanied by a standing order for their implementation by individual judges in the pilot project, as well as a model protective order that the attorneys and the judge can use a basis for discussion.

--A

(Hat Tip: Emery Lee)

Federal Judicial Center Report on the Timing of Scheduling Orders and Discovery Cut-Off Dates

The Federal Judicial Center has released a report to the Advisory Committee on Civil Rules entitled The Timing of Scheduling Orders and Discovery Cut-Off Dates, authored by Emery G. Lee III. Here’s the executive summary:

This report summarizes findings on the timing of scheduling orders and discovery cut-off dates in more than 11,000 civil cases filed in 11 districts in 2009 and 2010. The first part of the report examined times from the filing of the case to issuance of the first scheduling order.

• The median time from filing to first scheduling order was 106 days, or 3.5 months (N = 11,483). The comparable mean was 126.1 days, or 4.1 months.

• The 11 districts studied had median times from filing to first scheduling order that ranged from 77 days, or 2.5 months, to 125 days, or 4.1 months, for a difference of 1.6 months.

• The nature-of-suit category with the shortest median time from filing to first scheduling order was torts, at 97 days, or 3.2 months. Complex and the catch-all other cases had longer medians (121 and 122 days, or 4 months).

The same analysis was performed for times from entry of the first scheduling order to first imposed discovery cut-off (i.e., the discovery cut-off date in the scheduling order).

• The median time from entry of the first scheduling order to first imposed discovery cut-off, without regard to any extension, was 187 days, or 6.2 months (N = 11,348). The comparable mean was 198.6 days, or 6.5 months.

• The 11 districts had median times from entry of the first scheduling order to first imposed discovery cut-off that ranged from 143 days, or 4.7 months, to 240 days, or 7.9 months, for a difference of 3.2 months.

• The nature-of-suit category with the shortest median time from entry of the first scheduling order to first imposed discovery cut-off was the catch-all other category, at 157 days, or 5.2 months. The contracts (6.6 months) and complex (7.1 months) categories had the longest observed medians.

These two analyses can be combined to capture the time from the filing of the case to first imposed discovery cut-off date.

• The median time from filing to first imposed discovery cut-off for all cases (N = 11,281) was 312 days, or 10.2 months. The comparable mean was 324 days, or 10.7 months.

• Districts ranged from a median time from filing to first imposed discovery cut-off of 252 days, or 8.3 months, to 378 days, or 12.4 months, for a difference of 4.1 months.

• In terms of nature-of-suit categories, the category with the shortest median time from filing to first imposed discovery cut-off was consumer, at 295 days, or 9.7 months. The longest median time from filing to first imposed discovery cut-off was observed in complex cases, 359 days, or 11.8 months (or about one year).

--A

Exclusion of evidence containing belated damages estimates upheld as sanction for violation of automatic disclosure obligations

            In Dynegy Marketing & Trade v. Multiut Corp., 2011 WL 3347848 (7th Cir. Aug. 4, 2011), plaintiff supplier sued defendants, a distributor and its owner, for unpaid invoices for natural gas.  Defendants counterclaimed for breach of an agreement to supply gas at fixed prices, among other claims.  After discovery, plaintiff moved for summary judgment.  In opposition to the summary judgment motion, defendants submitted the declaration of the owner, which “contained [defendants’] first and only estimates of Multuit’s lost profits and some of its other alleged damages.” 

            The district court excluded the declaration as a sanction under Rule 37(c) for defendants’ violation of Rule 26(a)(1)(A)(iii) and Rule 26(e), which require parties to disclose and supplement “a computation of each category of damages.”  The district court then granted plaintiff’s summary judgment motion.

            The Seventh Circuit affirmed: 

Multiut and Draiman started off discovery on the right foot by providing Dynegy with rough estimates of the damages associated with their counterclaims in their original disclosures. At that time, they averred, “As a result of Dynegy's breach of an agreement to supply gas at a fixed price, Multiut has sustained damages in an amount that Multiut believes exceeds $6 million. Multiut will supplement with a computation of these damages when they are ascertained through the course of continuing discovery.” They made a similar statement with respect to their breach of confidentiality agreement counterclaim, for which they estimated at least $1 million in damages. But even after Dynegy filed several motions to compel and repeatedly sought (and occasionally obtained) sanctions, Multiut and Draiman failed to disclose how they arrived at those numbers. Even if we fully credit the defendants' contention that the numerical information in Draiman's declaration was duplicative of that already disclosed in spreadsheet form, nothing in the record—not even Draiman's declaration—shines light into the black box of their damages calculation process. A reasonable district court could and did conclude that exclusion of the declaration, which contained the only ballpark estimates of Multiut's lost profits and alleged credits due, was an appropriate sanction for the defendants' continued dilatory and opaque behavior. Without an idea of where the defendants' numbers were coming from, Dynegy was unable to investigate and raise arguments against the claimed damages; the district court did not err in concluding the omissions were not harmless. 

--Patricia Hatamyar Moore

Do Your Students Think Discovery Is Boring?

From Elie Mystal (Above The Law) comes the story Beverly Hills Brawl: Escape From The Deposition Room! It begins:

Have you ever been to a deposition that got physical? Maybe some fisticuffs, or a little shoving? No? Well, obviously you’ve been hanging out in the wrong conference rooms. A complaint filed in Santa Monica Superior Court and reported on by Courthouse News Service accuses a Drinker Biddle partner of “robust, unlawful force” that resulted in opposing counsel breaking his wrist.

The story includes excerpts from the deposition transcript as well.

--A

Singer on Discovery and Proportionality

Professor Jordan Singer (New England) has posted on SSRN a draft of his article, Proportionality's Cultural Foundation, which is forthcoming in the Santa Clara Law Review. Here’s the abstract:

Since the 1980s, a variety of provisions designed to prevent excessive pretrial discovery have been incorporated into the Federal Rules of Civil Procedure. By almost all accounts, however, these “proportionality” rules have not met their stated goals. The percentage of cases with high levels of discovery has not changed in decades, and concerns about disproportionate discovery are as pronounced as ever. I argue that the failure of the proportionality rules stems from a disconnect between the rules and the prevailing litigation culture. The rules incorrectly assume that excessive discovery is caused by attorneys abusing their discretion during the discovery process, and accordingly seek to limit that discretion. But attorney discretion is not the problem, and in fact attorneys and judges rely on the broad exercise of attorney discretion to create efficient, predictable, and fair resolutions to civil cases. Because the rules directly conflict with cultural norms, they are largely ignored in practice. I therefore propose a radically different approach to combating excessive discovery, by removing the existing restrictions on attorney discretion and implementing new procedures designed to emphasize the cultural values of civil litigation that naturally promote controlled discovery.

--A

Spencer on Pre-Litigation Preservation & Spoliation

Prof. Benjamin Spencer (Washington & Lee) has posted on SSRN a draft of his article, The Preservation Obligation: Regulating and Sanctioning Pre-Litigation Spoliation in Federal Court, which is forthcoming in the Fordham Law Review. Here’s the abstract:

The issue of discovery misconduct, specifically as it pertains to the pre-litigation duty to preserve and sanctions for spoliation, has garnered much attention in the wake of decisions by two prominent jurists whose voices carry great weight in this area. In Pension Committee of University of Montreal Pension Plan v. Bank of America Securities, Judge Shira Scheindlin - of the Zubulake e-discovery cases - penned a scholarly and thorough opinion setting forth her views regarding the triggering of the duty to preserve potentially relevant information pending litigation and the standards for determining the appropriate sanctions for various breaches of that duty. Not long afterwards, Judge Lee Rosenthal - Chair of the Judicial Conference Committee on the Rules of Practice and Procedure (the Standing Committee) and former Chair of the Civil Rules Advisory Committee - issued an opinion (Rimkus Consulting Group, Inc. v. Cammarata ) describing her understanding of many of the same issues touched on in Pension Committee. Both of these opinions have come at a time when the legal community is looking for better and more consistent guidance regarding the preservation obligations attendant to prospective litigation in the federal courts. Unfortunately, although other courts may draw some guidance from these two opinions, the fact is that variation among district courts and among the circuits will persist as long as policing pre-litigation preservation obligations remains largely the product of common law regulation via the inherent power of the courts.

Given this state of affairs, the time is ripe for a uniform federal approach to the pre-litigation duty to preserve and sanctions for spoliation. After reviewing the existing frameworks for determining the duty to pre-serve and imposing sanctions that prevail among the federal courts, this Article will explore how the Federal Rules of Civil Procedure might be amended to define and enforce pre-action preservation obligations more effectively and consistently across jurisdictions.

--A

 

Decision of Interest: Mohawk, Perlman, and the Appealability of Privilege Rulings (U.S. v. Krane)

As covered earlier here, the Supreme Court decided last year that an order compelling disclosure of a document despite a claim of attorney-client privilege is not immediately appealable under the collateral order doctrine. Mohawk Industries, Inc. v. Carpenter, 130 S. Ct. 599 (2009). A recent decision in the Ninth Circuit, United States v. Krane, No. 10-30247, 2010 WL 4260978, 2010 U.S. App. LEXIS 22605 (Oct. 29, 2010), holds that Mohawk does not abrogate the so-called Perlman rule, which derives from Perlman v. United States, 247 U.S. 7 (1918). The Ninth Circuit writes (some citations omitted): 

Under Perlman, a discovery order directed at a disinterested third-party custodian of privileged documents is immediately appealable because the third party, presumably lacking a sufficient stake in the proceeding, would most likely produce the documents rather than submit to a contempt citation.

The Perlman rule survives the Supreme Court's recent decision in Mohawk. In Mohawk, the Supreme Court held that “disclosure orders adverse to the attorney-client privilege” are not subject to interlocutory review under the Cohen “collateral order” exception to the final-judgment rule of 28 U.S.C. § 1291.

Perlman and Mohawk are not in tension. When assessing the jurisdictional basis for an interlocutory appeal, we have considered the Perlman rule and the Cohen collateral order exception separately, as distinct doctrines.

Mohawk forecloses interlocutory appeal of some district court orders in reliance on the fact that “postjudgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege.” 130 S.Ct. at 606; see also id. at 607-08 (surveying “several potential avenues” by which “litigants confronted with a particularly injurious or novel privilege ruling” might seek its immediate review “apart from collateral order appeal,” including by not complying with a disclosure order and then receiving, and appealing, a contempt citation). In contrast, the Perlman rule applies only when the privilege holder is powerless to avert the mischief of a district court's discovery order because the materials in question are held by a disinterested third party. Such third parties . . . may be likely to forgo suffering a contempt citation and appealing in favor of disclosure. . . . Further, in this case, neither the privilege holder nor the custodian of the relevant documents are parties to the underlying criminal proceedings. Thus, for all practical purposes, this appeal is [the privilege holder’s] only opportunity to seek review of the district court's order adverse to its claims of attorney-client privilege.

For more information on the case, see U.S. Law Week (79 USLW 1599).

--A

Discovery Order in Toyota MDL incorporates elements of parallel state and federal administrative investigations

The National Law Journal reports that the California federal judges hearing the Toyota MDLs has approved a new joint discovery plan.

Of interest to civ pro folks is the fact that the plan takes advantage of discovery and facts already prepared for cases pending in other states and from a federal administrative investigation:

In their joint discovery plan, the parties submitted 21 topics to be covered in depositions, including the location and access to documents and people associated with the electronic throttle control systems in Toyota vehicles -- specifically, documents in two state court cases in Michigan and California.

Discovery will include information about customer complaints and internal studies of sudden unintended acceleration, the whereabouts of electronic data recorders and Toyota's advertising, sales and public relations materials. Toyota must provide nonprivileged documents that it produced earlier this year to the National Highway Traffic Safety Administration, Congress and state attorneys general.

RJE

Redish & McNamara on Discovery Cost Allocation

Professor Martin H. Redish (Northwestern University School of Law) and Professor Colleen McNamara (Northwestern University School of Law) have posted "Back to the Future: Discovery Cost Allocation and Modern Procedural Theory" on SSRN.  

The abstract states:

It has long been established that as a general rule, discovery costs are to remain with the party from whom discovery has been sought. While courts have authority to "shift" costs in an individual instance, the presumption against such an alteration in traditional practice is quite strong. Yet at no point did the drafters of the original Federal Rules of Civil Procedure ever make an explicit decision to allocate discovery costs in this manner. Nor, apparently, did they (or anyone since) ever explain why such an allocation choice is to be made in the first place. As a result, our procedural system has developed a virtually unwavering practice as to discovery cost allocation which has never been rationalized or justified. 

In this article, we argue that had those who adopted the Rules in the first instance actually given appropriate thought to the issue, they would have realized how counterintuitive the choice to leave discovery costs on the producing party actually is. We reach this conclusion on several grounds. Initially, discovery costs are properly viewed as a form of quantum meruit: the producing party is incurring costs not for his own benefit, but solely to benefit the discovering party, who reasonably expects this benefit to be conferred on him. Viewed in this manner, discovery costs are a classic case for precepts of quasi-contract, which are designed to prevent injustice. Secondly, principles of economic efficiency dictate a presumption in favor of imposing costs on the discovering party, because that party is “the cheapest cost avoider.” In other words, he is in the best position to determine whether particular discovery is necessary in light of its costs. When discovery costs are imposed on the producing party, an externality is created for the requesting party, who lacks any incentive to make economically efficient discovery choices. Finally, we argue that principles of constitutional due process dictate that the discovering party, rather than the responding party, pay for discovery costs, at least where the defendant is the responding party. Otherwise, a defendant will be required to pay a benefit to the plaintiff on the basis of nothing more than plaintiff’s unilateral, unproven allegations of liability. 

We recognize that it is, as a practical matter, too late in the day to expect a reversal of the cost allocation presumption. However, we hope that by returning to what should have been recognized as the relevant first principles at the time of the Rules’ origination, we will have encouraged modern day courts to be more willing to consider requests to shift costs to the requesting party.

~clf

"To Stay or Not to Stay" the Gulf of Mexico Oil Spill Cases

Two federal courts have responded to BP's motions to stay law suits regarding the oil spill in the Gulf of Mexico pending a determination of a multidistrict litigation panel on whether to combine the 130+ cases.  One granted the stay and one denied it.  A federal court in Mobile, Alabama denied BP's request to delay filing an answer, while another federal court in New Orleans, Louisiana granted BP's motion to stay proceedings. Judge Martin Feldman based his decision to stay the New Orleans proceedings on the "grave potential of conflicting discovery orders," which poses "a hardship for defendants [and] mocks an efficient and orderly judicial system."

The National Law Journal has more about the conflicting decisions on BP's motions to stay proceedings here.

~clf