How Courts Have Dealt With the New Federal Rules on E-Discovery

December 19, 2016

By Timothy M. O’Shea

The new amendments to the Federal Rules of Civil Procedure have been in place for one year. So how have the courts addressed the new rules regarding e-discovery?

Relevancy and Proportionality

One of the most significant changes to the rules was the narrowing of discovery to only information “relevant to any party’s claim or defense and proportional to the needs of the case,” and the deletion of “reasonably calculated to lead to the discovery of admissible evidence.” Fed. R. Civ. P. 26(b)(1). Most courts have applied the new rules in defining the scope of discovery.

In Inline Packaging, LLC v. Graphic Packaging Int’l, 2016 WL 6534394, at *4 (Nov. 2, 2016), a Minnesota federal court acknowledged that Rule 26(b)(1) was amended to emphasize proportionality and affirmed the Magistrate Judge’s Order because “limiting discovery to the patents, products, entities, and instances of anti-competitive conduct specifically alleged in the pleadings ensures that the discovery is ‘relevant to any party’s claim or defense and proportional to the needs of the case.’”

In Noble Roman’s, Inc. v. Hattenhauer Distributing Company, 314 F.R.D. 304, 311-12 (S.D. Ind. 2016), the defendant served documents and deposition subpoenas on a major shareholder of the plaintiff. The defendant’s requested discovery essentially asked for “every document and every piece of information [that the shareholder of the plaintiff] has… about every aspect of [the plaintiff’s] business operations, finances, marketing plans, and management structure.” The plaintiff moved to quash the subpoenas by filing a motion for protective order. In granting the protective order, the court applied the proportionality requirement of amended Rule 26(b)(1) and pointed out that the defendant “beats the drum of ‘relevancy’” but “never attempts to demonstrate that the discovery is in any way proportional to the needs of the case.” Simply put, the court held “[t]hat’s not good enough.”

In a patent infringement suit, the court in Gilead Sciences v. Merck & Co., Inc., Case No. 5:13-cv-04057, 2016 WL 146574 (N.D. Cal. Jan. 13, 2016), found that certain document requests were not proportional to the needs of the case, and noted that “[n]o longer is it good enough to hope that the information sought might lead to the discovery of admissible evidence. In fact, the old language to that effect is gone. Instead, a party seeking discovery of relevant, non-privileged information must show, before anything else, that the discovery sought is proportional to the needs of the case.”

However, and rather surprisingly, some courts are still relying on the eliminated “reasonably calculated to lead to discovery of admissible evidence” phrase to define the scope of permissible discovery. For example, in Shell v. Ohio Family Rights, 2016 WL 4523830, at *2 (N.D. Ohio Aug. 29, 2016), the court held that “[t]he relevance burden is met if the party can show that the discovery sought “appears reasonably calculated to lead to the discovery of admissible evidence.” And other courts have cited the eliminated language as though it were still part of Rule 26(b)(1). See, e.g., Kuczak v. City of Trotwood, Ohio, No. 3:13–CV–101, 2016 WL 4500715, at *1 (S.D. Ohio Aug. 26, 2016) (“Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.”)

Sanctions

Amended Rule 37(e) has also had an impact on judicial decisions with respect to sanctions.

In Kramer v. Ford Motor Co., 2016 WL 7163084, at *1-2 (D. Minn. Feb. 3, 2016), Ford turned over 70 compact discs to the plaintiffs containing, among other things, Common Quality Indicator System (CQIS) reports. According to the plaintiffs, the letters “polic” did not appear in the vehicle description heading of the CQIS report entries.

Ford advised plaintiffs that the words had not been deleted from the database, and explained how to search for police-equipped vehicles in the database by VIN number. The plaintiffs sought sanctions against Ford for its failure to produce CQIS reports in unredacted form. After the plaintiffs filed its motion, Ford produced the unredacted CQIS reports. In applying amended Rule 37(e), the Court noted that it “cannot grant plaintiffs sanctions pursuant to Rule 37(e) unless there is a finding that the electronic stored information is ‘lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery…’” The court observed, however, that the plaintiffs were only able to recover the unredacted CQIS reports because of the motion for sanctions they filed. Pursuant to Rule 37(c)(1)(A), the court granted the plaintiffs their reasonable costs and attorney’s fees incurred for bringing the motion.

In FiTeq Inc. v. Venture Corp., 2016 WL 1701794 (N.D. Cal. Apr. 28, 2016), the court denied the plaintiff’s motion for an adverse inference jury instruction because the deleted emails were recovered from another computer and also obtained and produced from the email accounts of others. The court relied on amended Rule 37(e) in finding that sanctions can only be imposed where the ESI “cannot be restored or replaced through additional discovery” and where there has been a “finding [of] prejudice to another party from the loss of the information.”

Brown Jordan International, Inc. v. Carmicle, 2016 WL 815827 (S.D. Fla. Mar. 2, 2016) is an example of a case where the court issued sanctions under amended Rule 37(e). The court found that the defendant intentionally destroyed relevant evidence when he remotely wiped his company-owned iPad and failed to preserve relevant data on his personal iPad, his personal laptop computer, his personal iPhone and on his wife’s laptop computer. The court ordered adverse inferences to be made regarding the lost ESI, but declined to grant case terminating sanctions because “[d]ismissal and default are the most severe sanctions available to the Court, and are therefore appropriate only when less drastic measures are insufficient.”

Takeaways

Although some courts are still holding to the old rules that discovery shall be construed broadly, it is clear that most courts are applying the new rules and incorporating proportionality for purposes of defining the permissible scope of discovery. It is also clear that sanctions can be avoided when parties take reasonable steps to preserve potentially relevant information.