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Civil Procedure Fall2014

Professor Lonny Hoffman

Section 6 (CM Pages 422 - 489)

* SLJ~1~1ER 2010 23

LIVING DAILY WITH WEEKLEY HOMES BY KENNETH J WITHERS & MONICA WISEMAN LATIN

INTRODUCTION Texas led the nation in adopting a specific rule addressing the of electronically stored information

Tex. R. Civ P 196.4. has been with us since and although it was a ne\V and novel there have been

fevv appellate opinions addressing the After ten years, the Texas Supreme Court took the opportu-

presented by In re Homcs2 to provide a detailed for requesting ESL That blueprint is not

from a pattern book of ESI custom for reasons. It takes planning, and

communication between counsel to avoid of ESI into a money pit. While Rule l 96.4 provides a

framework for who instst on formal motion

to

dtscuss different of paper to which accustomed

before the 1999 amendments, and how the Texas Rules of Civil Procedure address these dtfferences m Rule 196.4. Then we review the facts of Homes and explore the Supreme Court's apphcation of the rule. We also see how

Homes has been applied in court decisions. Finally, we look at the Court's practical advice for

seeking or respondmg to of ESI and the Court's call for planning and cooperanon between

I. Why discovery of ESI is different We live in a world of electronic mformanon Almost eYery

write, or communicate to others is generated. or transmitted using computer technology In business, government, education, entertainment, and almost all other human little mformation is committed to paper in the first instance. Although exact stattstics are difficult to come by, experts have long believed that 93 percent of all business documents are created electronically and only 30 percent are ever printed to paper. 3 While paper documents abound, almost all paper documents are printouts information from computer files. Ask 1

yourself when you last saw a typewriter being used routinely

in a business, go\'ernment office. or even at home.

Recent statistical research confirms that we are overwhelm-"digital" information to the

of California at San Diego's Global Information Industry Center, American consumers receive about 8.61% of their information in print form, measured in words. Measured in time, the average American spends .6 hour per reading printed materiaL Measured in rn•mrlrP~<::c•ri

print constitutes .02% of all information media.f The researchers note that digital continue to remake the American home."

Ten years ago 40 percent of US. households had a personal and one~quarter of those had Internet access. Current estimates are that over 70 percent of Americans now own with Internet access. and

via broadband and other ·smart' w1reless

a personal computer that access is

iPhones

in all but name, computer mcreases to more than 80 percent. [. .. ] The average Amencan spends nearly three hours per day on the computer, not including time at work "

The use of computers to generate, manage. and communicate information has significant consequences that go far simply changing the way we write and store information. Some of these are extensions of problems that could occur in the paper document world. Others are to the computer world. But these consequences require us to approach the

of stored mformation than we approached the of paper documents.

A. Volume The first-and perhaps the most our conversion to digital information technology is an sion in the volume of data that may be subject to discovery, or that needs to be stfted through to locate that which ts subject to discovery. Two leading electronic discovery thinkers note that "[i]n a small business, whereas formerly there was usually one four-drawer file cabinet full of paper records, now there is the equivalent of two thousand four-drawer file cabinets full of such records, all contained m a cubic foot or so in the form of electronically stored information.

422

i I I·

~ADVOCATE * 5U1Y!MER 2010

The increase in volu= is due to a n!llllber of factors. One is that-electronic information systems tend to automatically replicate and store n,umerous copies cif fik.s in a varu:ty of locations. The same hle-or slightly different versions-may be found on several acthre areas of the computer hard drive, or as duplicate files maintained for backup purposes, or on archival and disaster media. A second reason for the

essential environment for translating electronic impulses into information) and the ever-growing array of application software that allows the information to be created, managed, and viewed. Wuhout the proper clements of the system in place, ESI is just a vast assembly of positive and negative charges arrange.d on magnetic.media. As Baron and Paul write:

proliferation of ESI is that users tend to d+;;tribute copies [Q]uite recently there has been an evolutionary burst of their work far and wide, because it is so fast and easy to in writing technology- a jagged punctuation on a 50 do. Gone are the days when one copy of io. office report or century'" long sine wave. A quick succession of advances memorandum was circulated to 20 or more people, each of clustered or synced together, to emerge into a radically whom checked their name off the distribution list and passed new and more powerful writing technology. These it on to the next. Today, a report or memorandum, with a few include digitization; real time computing; the micro-keystrokes, is re.plicated in the file directories or on the hard processor; th~ personal computer, e-mail; local and drives of every member of the organization. A third reason wide-area networks leading to the Internet; the evolution for the proliferation of ESI is that many human co=unica- of software, which has "locked in" seamless editing as an tions that used to be relatively or purely ephemeral, such as almost universal functio~ the World Wide Web; and of telephone calls and handwritten notes, are now routinely course people and their technique. These constituents conducted using electronic information systems, leaving a have swirled into an information complex, now known more-or-less pt:.L-manent record. The sheer volume of email, as the "Information Ecosystem.~ In such a system, ~ for instance, is staggering. According .-----------------...., whole exhibits an emergent behavk to the respected technology research that is much more than the sum of the

According to the respected fum Radicati Group, 247 billion parts. Critically for law, such systems email messages were sent per day in technology research firm Radicati ca=ot be understood or e.y;plained by 2009, and that number -will double Group, 247 billion email messages any one person. 8

by 2013.7 1[ the average office worhr were sent per day in 2009, and that sends or receives approximately 100 number will double by 2013. business-related email messages a day

Simply put, lawyers without information management expertise are

(a conservative estimate) and all were saved, 25,000 email messages will accumulate in that office worker's mailbox in the course of a year. In an organization with even a rudimentary electronic information system, that volume would be magnified by the system's automatic replication and backup operations, as well as users' tendency to send email to multiple recipients.

B. Complexity A second important feature of ESI that distinguishes it from paper documentation, and that necessitates a different approach to discovery, is that ESI is created, maintained, and stored in complex systems, and often cannot be extracted from those systems without difficulty. Almost anyone can understand the technology of paper records-pen and ink, typewriter and filing cabinet, carbon and photocopier. Wbile the physical file organization might have been complex, no special equipment or expertise beyond literacy in the relevant language was needed to access the information stored on paper documents. E51, however, is the product of a complex set of relationships between physical equipment (computer drives and s-torage media), operating systems (providing the

seldom in a position to either know what they should be asking for in electronic discovery, or provide a. response to a request, without an understanding of the systems with which they are dealing. Even when they have the relevant ESI, they are hard pressed to aplain here ir came from or lay the proper foundation for admission of the ESI as evidence.9

C. Preservation One important element of the complexity of ESI that further distinguishes it from paper documentation is its essentially ephemeral nature. This is not the same as the ephemeral nature of unrec~rded spoken words, which are truly gone once they are uttered, but closer to the original meaning of ephemera-information recorded for very short retention. Information systems record information in a variety of ways, almost all intended for short retention or migration to less transitory media. Electronic information s-;stcrns are constantly taking in new data, moving data to varioJ temporary storage areas, overwriting stale or duplicat~ d§.!f:..,. and deleting whole files. Most of this activity is occui:ring-at · high speed and without any human intervention. Traditional

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~ADVOCATE * SUMMER 2.010

concepts of "preservation" developed for the paper world simply cannot apply.

This is not to say that "preservation" is impossible.. In fact, electronic info=ation syste.IIlS are capable of storing vast amounts of information for long periods of time, and because of the complexity and replication of data within systems, almost nothing is actually lost. However, locating speci..t'lc data and locking it down in a form that can be accessed for later use required prompt action, may require specialized expertise, and can be con:,'iderably more expensive thac:p. simply setting aside a box of paper documents.

D. "Dark Data" A final factor that distinguishes electronic discovery from discovery of paper documentation is what some information scientists have dubbed "the rise of dArk data." This refers to ESI that is created by info=ation systems themselves, and not intentionally by people using the :>jstems. "Dark data" goes beyond the email, word processing, spnadsheets, databases, videos, and other documents that use.c-s create 3..J.J.d access rourfuely. The phrase "dark data" was coined recently by researchers at the Umversity of Cahlornia at Sar1 Diego, who hy-pothesized

. . . that most data is created, used, a.11d throvn1 away without =y person ever being awa:re of its ex'!.Stence. Just as cosrr.ic dark matter is detected indi:rectly only Lh.rough its eif~ct on things that we can see, dark data is not di:rectly visible to people. The family a'!to (or automobiles) is a more typical example of dark data. Luxury and high-perfo=ance cars today carrj more than 100 micro controllers and several hundred sensors, with update rates ranging from one to more than 1,000 readings per second.. One estimate is that from 35 to 40 percent of a car's .stil:ker price goes to pay for software and electronics. As microprocessms and sensors 'talk' to each other, their ability to process information beccmes critical for auto safety. For example, airbags use accelerometers, which measure the physical motion of a tiny silicon beam. From that motion, the car's acceleration is calculated, and approximately 100 times each second, this data is sent to a microprocessor, which uses the last few seconds of measurements to decide whether and at what intemity to in.flate the airbag in the event of a collision. Over the life of ar1 auto, each accelerometer "lllill produce more than. one billion measurements. Yet in a crash, only the last few data points are critical.10

.. ': This ESI is buried in the volume 3..J."ld complexity of elec-

tronic information :>jStems, but may be highly relevant to a legal action and is entirely within the potential scope of discovery in the appropriate case. More co=on forrr!.S of "dark data" that have been the subject of discovery in civil litigation are the addresses of people who vk-it web sites, automatically recorded by web senrer software,11 and the structure of comple..x: databases from which a party needs to derive particular data.12 Perhaps the most co=on fo= of udark data" subject to discovert is metadata, the tracking info=ation that computer applications and systems generate about computer files themselves, such as the date of creation or the date a file was last accessedP .

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~ADVOCATE * Sl!l:vf:M!::R 2010

TACKLING E-DISCOVERY ON A BUDGET BY 51:-IAW"N RAYMOND

M ANYCOMMERCJALC.ASESARELARGEENOUGH tojustiJ'·t hiri.cJ.g m outside vendor to takE: charge of the entire data collection md production process, including

hosting m on-line platfonp. for document review. But goi....Tlg this route is not cheap. 1ndeed, for many clients, particularly individuals and small businesses, it is prohibitivdy_expe... .. Jsi:ve.

Ha-v--ing recently completed several moderately sized electronic document productions in plaintiff-side co=ercial contingency fee cases for clients who are pay'wg expenses, I am happy to share my still evolving approach to carrying out "do-it-yourselfn e.kcuonic discovery for cost-conscious clier:ts.

Reach Early A.greement on How to Produce E-Discovery At the outset of each case:, I work to get all parties to agree on the format for how all electronic particularly emails, will take place. At Susman Godfrey, we propose the followi....cJ.g standard agre:=ent:

Electronic documents w'Jl be to e..xtent possible, in PDF formaL 1£ r:e:cessarf, will exchange data in the native forrn.at kept by the produlli--rg pa.-rty. We w'Jl produce a bates numbered file of Lh.e file r2.ames and directorf su--ucture of what is on any CDs or DVDs exchmged that do not contain electronic documents produced in the PDF format. If such application data is used at trial or in deposition, the party introducing the data w'Jl indicate in the footer on the hard-copy version (or en a separate cover sheet) (a) the CD or DVTI from whmce it came, (b) the directory or subdirectory where the file was located on the CD or DVD, and (c) th nawe of the file itself including the file e.x::msior:...

I find that producing electronic documents in FDF format is almost always sufficimt and cheaper. Tb.e alternative, producing electronic documents in native is usually an u=e:cessarily expensive, cumbersome: approach ucless special circumstances dictate. The: biggest exception that comes to mind involves the production of Excel spread.sheers that contain more than one page of columns - thq em be e..xtremely difficult to read as individual PDF pr..Ilt outs ar2.d may be meaningless without the abilicf to see the formulas 'hat create the nurnbers in the Excel spreadsheets.

Even if it turns out tlUt some amount of mttve-format production needs to take place, I nonetheless press opposing counsel for an agreement to initially produce all electronic documents in PDF format and then give each side the opportunity to request a supplemental native-format production for particular documents (e.g., documents difficult to read as PDFs, or documents in which the parties want to review the metadata).

If you go the "production as a PDF" route, malr..e sure to specifj whether or not the parties will produce respolli"ive electronic documents as searchable PDFs. I pr~:fer producillg documents in searchable PDF format because it is easy to upload the them to my number of stmdard docummt revie.w tools (e.g., Summation Blaze, CaseMap, Concordmce) that do not require you or your.client to pay m outside vmdor to host the documents on m e..;::pensive extt:rnal platform.

Keep an Eye Out for Certain Types of E-Discovery Until recmtly, I viewed the te.c---m "E-Discove..ry" as limited tf email md electronic Word or Excel documents. But with everexpanding forms of electronic co=1.Jllica:ion, 1 now make it a in my docummt requests to ask for t;m types of electronic media that mmy people o7erlook: instant messages and electronic recordings of voice mail.

In a number of industries, particularly ones involving oil and gas brokers and traders, instant messaging serves as au importmt method for inte:rml md e..xternal communication. .A..Ild because people write them in real t:ime, instant messages ("IMs") ca::J. be m evidmtiary People type Ilv'J..S back and forth so quic..1dy- each llA: includes the date, hour, minute, and even second of the co=unication - reading them makes me feel as if I am reviewic"lg a uawcript from a government wire tap. Given the real-time natun: of llA: conversations, people have a te.ndmcy to be careless (some may say more "honest") with what they write. And whm witnesses write LM.s that touch upon key matters at issue in a case, I am always on the lookout for ways to use them to

my advmtage on cross exa::n.ir...ation.

You also rr...ay be surprised to find out how far back companies keep arc11ived IMs. Many businesses utilize lMs as a way to

record particular trades or transactions. It is therefore not unusual for some of them to store llvis along with back-up email or document server tapes. Because IMs are: cornrnor~'

425

J

~ADVOCATE * SUMMER 2010

used today by individuals and corporations, you should consider specifically referencing them as part of your document requests.

Voicemail is another co=oruy used co=unifation tool Because of that, I find out whether the parties :!lave access to electronic recordings of voice mail In recent years, new voice i:nail features have become available that automatically convert a voice message to a .WAV file and then send the voice message to the phone recipient's crnail address as an attachment. If users save these WAV files, ycur requesting ~ type of data could lead to a treasure trove of g_ood (or bad) evidence for your case.

Other new voicemail-rdated products now offered, including GoogkVoice and Phonetag, either use an automated system to transcrilie voice messages and send rh= to the user as an email text, or automatically route voicemails to transcribers who listen to the voice messages, convert them to text, and email the typed message to the re.cipient. That makes them discoverable.

A" t'hpoo:;po ovnpc; nf vnirP mail se-rvice.s become more urevalent - ~- - ~- - - J ;:;: -- - 4

I think they can become increasingly important evidentiary tools. You should give some thought to having your document reque.sts specifically cover these types of co=unications.

Do-lt-Yourself Email Review Rather than hiring an outside vendor to host a WEbsite so you can n:view a manageable number of e.rnails- a single gigabyte equals about 100,000 pages of ernails without attachments, so my rule of thumb is to try to perform an "in-house" review if rny client's email production is less than four gigabytes. I have borrowed the following email review technique that rny partner, Trey Peacock, introduced. me to some time ago.

I do not pretend to have the technical expertise necessary to search for and capture ernails off a client's server, but most small compa.nks have an IT department or an available thirdparty consultant capable of running word searches or finding emails from particular users without having to consult with (and pay for) an outside litigation vendor. In such cases, I rcly on these IT personnel to gather potentially responsive ernails.

When it comes to conducting word. searches for possible responsive documents, I make every effort to reach an agreedupon list of search terms with opposing counsel This puts all parties on notice o£ what is being searched, and it decreases the likelihood of having to perform subsequent searches, which can be a budget-busting time killer.

Focusing exclusively on word searches is not, in my view, the end of the story in terms of what I eventually produce. I still think it is crucial to review these emails for relevance, privilege, and confidential or trade secret information.

To accomplish this without having to pay for an external platform to host the emails, I have the search results saved as a .PST file on a CD or thumb drive- ".PST," I have come to learn, stand.s for Personal Storage Table. I then download the .PST tci my desktop. As shown in the screen shot below, I next open Outlook, click on "File," then click on "Open," and then click on "Outlook Data File:."

I locate the .PST file containing the emails I want to review and then click on that file name to have the eruails contai::::led in the .PST opened in my Outlook under "Personal Folders." Once I have completed this loading process, I have to remind myself to remove the CD or thumb drive and store it in a safe place: in case: I need to refer to the original assembly of emails.

With the .PST files now loaded onto my Outlook, I then create eight new file folders as shown in the screenshot below: (l) Dupes, (2) Highly Confidential, (3) Non-Responsive, (4) Privileged, (5) Redact, (6) Responsive, (7) To Discuss, and (B) To Review.

8 ~ Perscnal Folders @ Deleted Items D Dupes [393] D Highly Confidential [3] g.

D Non-Responsive [7fM] tJ Privileged [ 457] D Redact [196] D Responsive [227] D To Discuss [9] D To Review lO} . rq Search Folders .

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~ADVOCATE * SUMMER 2010

Regardless of how the .PST files are organized (they may be assembled in different file folders based on individual users or search term results), my next step is to merge all of the as-yet-unreviewed e:ri!.ails into the "To Review" folder.

Once l have placed all the emails in the "To Review" folder, l work some magic trying to reduce the overall number of em ails I need to review by removing any duplicative emails. The program 1 use, MAJ'ILab Duplicate Email Remover, costs about $25.00 to download as a pe.nnanent feature on Outlook. CNET, Topalt, and other companies offer similar types of de-duping software. Whate-.,rer software you choose em be downloaded onto your email inbox in no time. The programs are simple to use, enabling the do-it-yourself email reviewer to send all duplicate emails into the "Dup·es Folder." This can greatly reduce the number of emails you ha-ve to review.

To begin my review, l oftentimes arrange the emails by "Sender" so I can identify emails sent to/from counsel or other persons when a privilege may likely exi.sL This step allows me to more quickly identify privileged emails for placement into the "Privilege" file folder. This also is a useful way to

ferret out spam and other irrelevant emails and moye them to the "Not Responsive" folder. I also will sometimes sort the emails by "Subject Matter" to group email chains together. This makes it ea.:,-ier to be consistent and to treat one email in a chain the same way as all others in that chain.

With these housekeeping matters out of the way, I turn to actually reviewing the emails. Once I determine whether the email is responsive, non-responsive, privileged., highly confidential, or needs redaction or further review, I use the mouse to click on the email (or blocks of Bp.ails) and drag it into the appropriate file folders I have created.

Ha-ving "de-duped" the data set, I am now ready to begin the actual review. Well, almosL To el.irnin2te unnecessary keystrokes and to make the n:view go as quickly as possible (which are important goals if you are reviewing thousands of emails), I click "View," "Reading Pane," and then "RighL" That way, as shown in the fictitious email exchange below, I can read the email on the screen without having to use the mouse ·to open the text of each email being reviewed.

l use the file folder titled "to Discuss" for emails that I am not sure are respoi:Lsive or pri7ileged. And I make it a point to review each of these emails with my client to find out in which folder I need to put them.

When the review is complete, the "To Review" file fold:er is empty, as all the emails in that folder are now in the: respon

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sive, non-responsive:, pri-vileged, highly confidential, highly confidential, or needs redaction or further re~ew folders.

After I have put all of the emails in the appropriate buc.l<:ets, 1 save the now reviewed .PST file to a CD or thumb lli-ive with instructions for rny fum's or the client's IT department (or an outside vendor) to produce the appropriate files with the proper confidentiality or redaction stamps ("Produce," "Highly Confidential," and "Redact") as bateslabeled PDF files or in

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~ADVOCATE * SlJM1viER 2010

native format, depending on what agreement I have reached with the other side. I also have the: emails located in the "Privileged" folder bates-labeled and printed out for me to create a privilege log.

I fi.'ld this approach to be: an effecti¥e, mao.1.age~ble way to tackle email review in cases that do not involve that much data. And if questioiJS arise after the email production ha.s taken place, I always can refer back to the .PST files, which will allow me to fuid, sort, and retrie.¥e the e.r=ils.

TakEaway Thoughts E-Discovcry can be hugely expensive for your clieu'r or for you if your firm is advancing expe.Il5es in a plaintiff case. But many smaller co=erdal cases do not require a highpriced vendor to nm the entire collection arc.d review process. Coordinating with your client's or your firm's IT department, you can create a fast, efficient format for completing. email review. It Can. save you time: and your client (or you) e:xpe.Il5es.

I am happy to share in greater detail. the process I use to negotiate E-Discove:ry agreements with opposir:.g counscl and to perform a "do-it-yourscl.C email docu=t review. Shoot rr.e an email (sorry, no IMs), or give me a call

Shavm Ra-ymond is a partner at Susrna.n Godfrey in HOU5tDn, and hf:'s se:riDlLS abO!Lt his offe.r to v'illt with JO!L abO!Lt

stmtegie.s. Fed free tD contru:t him at mr;mond@susmangodfrey.

com.*

428

E-DISCOVERY/lN-HOUSE- CONTINENTAL AIRLINES EXPERIENCE BY KARLA EW • .NS EPPERSON

(

ONTINENTAL'S LEGAL DEPARTMENT CONSISTS of 22. attorne.ys, includir,g our Gencral Counsel a:cd .A_ssi..sta:ct General Counsel. Seven of the attorneys, illcluding

this article's author, har:dle litigation a:cd othcr Company legal matters ill-house and m.anage certaill -with the assistance of outside counsel.

The Legal Department is very lelliy staffed, y::t the Company e:>eperiences a significant amount of litigation both domestically a:cd internationally: employment (illcluding state and federal agency proceedings),

Our collection efforts vary depending en the complexity of the case, the number of custodians and the ease of identifying relevant documents. We sometimes rely on internal IT personnel to assist with collection of relevant data, but their focus is not generally on compliance w :th electroDjc discov-ery rules. Ihcrefore, we may, at considcrable cost, rely on outside vendors to assist with collection of relevillt data. Giv-en the lack of internal resources ;;!vailable to assist, outside counsel usually leads the review effort once rde:vant information has be.en colle.cte.d.

personal ir4ury, passenger complaillts, patent illfrtnge:r:nent, trademark, regulatory and other co=erciallitigation. Tbe burde::JS of electronic discovcry are felt across the board.. It affects not only litigation but also bears on govern:r:nent agency illvesrigatio::JS, as well as pre-suit demands. Give.n Lhat we st:J.-vi.ce

Despite increasing requests for electronically stored information by

The. collection process also takes extensive. time eveil though our custodians-employees at all levels both ill and outside of headquarters and in the fi_eld-have been educated about n:tention and preservatio~ obligations. Devoting time and attention to trammg on these

counsel, we have yet to see either side find any information of noticeable value (i.e., influence the outcome of a

case) despite the exorbitant time and costs related with the process.

tE-:J.S of millions of passengers in a::y yec.r, it is not that we have ~'i'~LUuc.'"·'L

Our Experience Our electronic discovery process has and is constanr:ly changing, but historically has been a largely ma:mal process .. As a first step, attorneys and three full~rime legal assistants identifj (through phone calls and e-maili) proper custodia_ns_ We also spend amounts of rime preparing, issuing and managing litigation holds to er"'ure. the preservation of data, as well as follow up with collecting that data-either in-house or with tl:e assistance of outsi..de. discov-ery vendors.

issue.s can mitigate. some coll.l'l_:-sicn over whar to do w:::Cm to a litigation l:old, but it

makes the manual collection process easicr or fas~er~ Still, ContinEJ.J.tal has been praised by outside cowJ.Sel for e.n.suring that our illternal busi.ness clients understand the legal obligations. Nevertheless, the t:iJ:::le. coillillitrnem and costs to comply -with electrovJc discovt:ry obligations are daunting. For one. maun alone, we. incurred over in costs for collecting and stori.ng eiectronic which does not include: fees for reviewing the infomation.

Lessons Learned It is no surprise that many climts view electrorJc discovery as extremely time: consmning and costly, and rarely fruitful for eithcr side in litigation. From our vantage point, any value of electronic discovery is compktdy dwarfed by its downside.s: fees charged by ouLcide counsel to review the process and the collected data, fee.s charged by consultants to review tho: process, costs charged by vmdors to collect and prod:.1c:: tht: data, use of clients' invaluable time, technology costs and discovery-dispute related costs.

Despite increasing requests for electronically-stored biormation by plaintiffs' counsel, we have yet to see either side

On average, the. attorne.ys a:cd legal assistants send over 20 new litigation holds or reminder holds per month. This number may vary dependi.J.g on the nature of the matter and Lhe number of pe.rtinent custodians. ll,e process re.qurre.d to acJ.alyze the issues, idmt:ify the custodi;m;; <L'1d pre.pare and issue the holds may take several hours for each case. Follow up co=unications with the custodians about therr data somces takes many more hours. Some of those custodial'15 are high-level management who use :r:nultiple data sources. Some are first-line supe.rvisors who rarely use a shared computer. fi_nd any mlonnation of nn&dle >aluc G ' . influmc~ ~--~

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~.ADVOCAte * SU1v1MER 2010

outcome of a C!15e) despite rhe exorbitant time and costs related wirh the process. Some of our members of management are subject to multiple litigation holds, all of which take time and focus away from pressi.ng and, frankly, more important issues, 5'W.ch as rur...n.ing a clean, reliable and safe operation for our passengers and employees. The airline industry continues to suffer economically, 1virh Continental having reported a significant loss in 2009. We are not alone. l\1.anyin-house legal departments simply do not hzve the financial resources to hire teams of personnel dedicated to m;u12ging rhe collection and processing of electronically-stored information. Over-tasked IT personnel devote resources when a-;,c.ilable, but rhat is not an adequate staffing solution. On a daily basis, we must reach out to management and clerical staff for assista=e wirh data collection. Ensuring compliance wirh record retention obligations and preservation obligations require significant time by borh legal and non-legal

For e:xzmple, in-house counsel need to co=unicate with IT personnel to understand the process for imaging hard drives ~ a fore.Ib'ically sound manner, to underst;uJ.d the process for loc.."king down the automatic deletion of e-mails, to suspend rhe process for writing over backup tapes if m:cessa...-y, and to

unde_,_;;tand the various data sources for custodi;u"l.S, i:J.eluding not orJy the usual Exchange e-mails, but also mobile computing devices, rhumb Ch-ives, shared lli-ives, hard drives, V!eb-based docurnmt management systems and the like.

Current Solutions We certzinly hope that the Advisory Committee on Civil Rules gathers pertinent and persuasive data to re-write tht: Federal Rules of Civil Procedure so that electronic discoverj is justified, tailored, proportionate to the case: or amount in controversy, and reasoned.

personneL Answers to questions associated wirh litigation holds are not often quick or simple., but rarher require detailed analysis of a speciJic

While some cases may implicate only a handful of custodians,

given the proliferation of e-mail

In the future, we hope to make our process more srreaTfllined by acquiring software that will allow us to issue the litigation holds m.d track the custodians searnlessly. There are numerous vendors with various products designed to me.et the needs of any organization. For us, the.

cu.stcdiznts job re..spo~J:iliti~s ?.Ild!or ccrw.:ritcticn ta :::.ac.h cz.se. 1.7-lbile_ sam::

throughout the comp:::ny, in mo5t

ca.se.s, the number of custodians cases may implicate only a handful of custodians, given the proliferation of e-mail rhroughout the compa;.'1y, in

easily reach into the dozens.

most cases, the: number of custodians can reach i:J.to rhe dozt:J."l.S. In larger accident cases involving an airline, rhe number of custodizns may reach ir:to rhe hur:.dreds.

One of our most significant c:D.allrnges has been conveyi.ng the increasi:lg demands of electronic discovert to our IT personnel in such a way that they understand the obligations. The demands hive increased significantly in the: past year. In a leanly-staffed company, that tra...nslates into frequently overlapping requests to the same IT personnel with occa:,'ional breakdowns in co=unication if not closely monitored. It is paramount for any legal department to have a designated liaison or team in IT. The liaison or team should be trained to understa..Tld the: legal obligations of the company with respect to electronic discovery. Management needs to recognize rhe time consuming nature of this person's role. He or she will need to be available on short notice: to answer outside counsel's and consultants' frequmt questions regarding the process for collecting data and the IT systems for the company. This person should be able to testify in court regarding the same: process and systems. The process for prese,_ving and collecting data is a shared responsibility-i..J.-house lawyers must develop that relationship with IT to ensure rhat the shared responsibilities are understood from an IT standpoL'1t.

sofrw--a.re we have sdected wiJl allow us to automate somt: of tht: m=y steps that our attome.ys a.:.1d legal assista;."lts must now employ to ensure. For example, ratl:-.er than drafting litigation hold memos or e.-mails from scratch and sending them to custodians, the sofrware bas ten;tplates, which will be: tailored by attorneys and legal assistants, and will not only disseminate the memos, it will allo.;, us to track receipt, ac..lmowledgment and compliance. The sofrware also wiJl allow more transparency and provide a tool by which the Legal Departm.ent can better interface wirh our clients and with IT.

One suggestion for ouG-ide counsd is to have a comprehensive discussion ·with your client ver; early in Lhe course of litigation or e::_,.en prior to litigation to make sure that you understand your clit:J.!t's process for preservation of ele:ctronically-stored information and not:L9.cation of preservation obligations. Outside: counsel should speak with the designated IT liaisons to make slue they understand the: client's systems and process for preserving data-not only L11 terms of the legal department's obligations but also in terms of the IT department's re:spon...<ibilities-and ensure compliance:. Too often, outside counsel either fails to ask us anything about our electronic discovery process or waits until the litigation or LTJ.vestigation is fully developed. Timely

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~ADVOOclt: -k Su1v!:MER 2010

addressing this issue can help save costs, something that is important to all clients.

f..s quickly as electronic discovery has evolved 1n the past few years, we expect and hope that it will continue tQ cha_TJ.ge in the next few years. Perhaps the lessons learned by com.parie.s, such as ourselves, ca.c"L help shape the fl.lture amendments to the rules. V/e encourage other cow.pacie.s to share their experiences.

Karla Epperson is a SmiDT Attorney at Continental Airlines. She is a grad:.mte of t:M Unive:rsity of Tt:X11.5 School of Law. *

j :I

431

DEFINING THE PROBLEM OF COST IN FEDERAL CIVIL LITIGATION

EMERY G. LEEillt

THOMAS E. WILLGINGtt

TABLE OF CONTENTS

Introduction ··························-······················································-··-····---765 I. Is Litigation Too Expc:nsive? ............................................................ 769 II. Relative to Stakes? ............................................................................ 771 ill. Models for Reform? ........................................................................ 776

IV. Rush to Judgment? ······'······································-··-·························779 Conclusion ................................................................................................ 786 Appendi.x .................................................................................................. 788

b!:"RODUCTION

We begin v,ith a prediction: At some point in the relatively near future, the 2010 Civil Litigation Review Conference (Duke ConferenceY v,ill be labeled a failure. 2 We can say tills with a bigh degree of confidence because the conference's most notable precedent, the National Conference on the Causes of Popular

Copyright© 2010 by Emery G. Lee ill & Thomas E. Willgi.ng. t Senior researcher at the Federal Judicial Center (FJC). Affiliation is provided for

identification purposes only. The views expressed hen:in represent those of the authors and not the viev.'S of the FJC or any other judicial-branch entity; therefore, any use of "we" or "our" in this Article refers solely to the authors. The authors wish to acknowledge the assistance and comments of several FJC colleagues-George Cart, Megban Dunn, Margaret Williams, and Till Curry.

tt Retired as a senior researcher at the FJC on July 1, 2010. L The Civil Litigation Review Conference, sponsored by the Advisory Committee on

Civil Rules of the Judicial Conference, was held at Duke University School of Law on May 10--11, 2010. An impressive group of judges, attorneys, and researchers convened to discuss the current state of civil litigation in the federal courts and potential reforms of the Federal Rules of Civil Procedure.

2.. To be dear, this is decidedly not the authors' view.

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Dissatisfaction with the Administration of Justice (Pound Conference), has been called a failure, most recently in a joint report of the American College of Trial Lawyers (ACTL) and the Institute for the Advancement of the American Legal System (IAALS).3 Chief Justice Burger called the Pound Conference in 1976 to address a number of issues facing the American legal system, including the problem of discovery abuse.~ Following the Pound Conference, significant revisions to the Federal Rules of Civil Procedure were proposed, debated, and, in many cases, adopted-decades of what Professor Richard L. Marcus has termed "discovery containment."5

But as a joint report by the ACTL and IAALS sharply concludes, "There is substantial opinion that all of those efforts have accomplished little or nothliig. "6

To the list of allegedly failed conferences, one might add the 1997 conference at Boston College, convened by the Judicial Conference Advisory Committee on Civil Rules (Committee) to focus on cost, delay, and abuses in the pretrial discovery process. Expressing the refrain, "Here we go again," Judge Paul Niemeyer, then-Committee Chair, reprised the course of changes in discovery rules in the years since the Pound Conference.7 He asserted that changes to the discovery rules in 1980, 1983, and 1993 aimed "to curtail the expansiveness of discovery, but they have either failed or been so diluted as to have little effect."8

3. See A'Yf. COLL OF TRIAL LA'I'<YERS & LNST. FOR THE ADVANCEMENT OF TrlE A'Yf. LEGAL SYS., fiNAL REPORT ON THE JO~! PROJECT OF THE AJ,.fERICAN COLLEGE OF TRl.A.L LA 'I'<YERS TASK FORCE ON DISCOVERY AND Tr.::E IKSTITL!E FOR THE ADV A..l-{CEMEO/T OF THE AMERICA."! LEGAL SYSTEM 9-10 (2009), available at http://ww-w.actLcornfAMffemplate.c:fm? Section=Home&template=/ClvfJContentDisplay.cfm&ContentiD:=4008.

4. Am. Bar Ass'n, Report of Pound Conference Follow-Up Task Force, in THE Pourm CmiFERE"<CE: PERSPECTIVES ON JUSTICE IN THE FUTURE 295, 318 (A. Leo Levin & Russell R. Wheeler eds., 1979) ("Substantial criticism has been leveled at the operation of the rules of discovery. It is alleged that abuse is widespread, serving to escalate the cost of litigation, to delay adjudication unduly and to coerce unfair settlements. Ordeal by pretrial procedures, it has been said, awaits the parties to a civil law suit.").

5. See, e_g., Richard L. Marcus, Discovery Containmer.t Redux, 39 B.C. L. REV. 747, 747-48 (1998) ("(S]ince 1976, proposals for amendment to the rules have generally involved retreats from the broadest concept of discovery-in essence to try to contain the genie of broad discovery without killing it.").

6. AM. COLL OF TRIAL LA'NicRS & L"'ST. FOR THE ADV.A~"'CEME!:-<1 OF THE A!.-L LEGAL SYS., supra note 3, at 10.

7. Paul V. Niemeyer, Here We Go Again: Are rhe Federal Discovery Rules Really in Need of Amendment?, 39 B.C. L. REV. 517,519-21 (1998).

8. I d. at 519.

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2010) DEFINING THE PROBLEAf OF COST 767

A theme begins to emerge. After further rule amendments in 2000 and 2006, the complaints are louder than ever. The ACTLIAALS joint report stated, for example,

The existing rules structure does not always lead to early identification of the contested issues to be litigated, which often leads to a lack of focus in discovery. As a result, discovery can cost far too much and can become an end in itself. As one respondent noted: "The discovery rules in particular are impractical in that they promote full discovery as a value above almost everything else." Electronic discovery, in particular, needs a serious overhaul. It was described by one respondent as a "morass." Another respondent stated: "The new rules are a nightmare. The bigger the case the more the abuse and the bigger the nightmare."9

Again, rule amendments have only resulted in failure. These complaints did not fall on deaf ears. At its fall 2008 meeting, the Committee voted to proceed with a major conference on the state of civil litigation in the federal courts. In support of that conference, the Committee-following the path it pursued in 199710-asked the Federal Judicial Center (FJC) to conduct an empirical study of civil litigation, especially v.-i.th respect to costs.

The findings of that sfl.rdy have been reported e1sewbere,11 and,

9. AM. COLL OFTRLA.L LAWYERS & L'IST. FOR THE .J\DVAJ.;'CEME."ff OF THE A\1. LEG.-\L SYS., supra note 3, at 2.

10. See Niemeyer, supra note 7, at 521-22 ("The Committee engaged the Federal Judicial Center to study the expense of discovery as well as related questions and to report to the Boston Conference."); see also Thomas E. Willging, Donna Stienstra., John Shapard & Dean Miletich, An Empirical Srudy of Discovery and Disclosure Practice Under the 1993 Federal Rule Amendments, 39 B.C. L REv. 525, 526 (1998) ("[T]he Advisory Committee on Civil Rules ... asked the FJC to conduct research on discovery as part of a Committee decision to m:idertake a comprehensive examination of that subject.").

11. EMERY G. LEE III & THOMAS E. WTI.LGJNG, FED. JUDICIAL CTR., NATIONAL, CASEBli.SED CiviL RULES SlJRVEY: PRELIMINARY REPORT TO Tiffi JUDJOAL CONFERENCE ADV1SORY COMMITTEE ON CIVIL RULES (2009) [hereinafter LEE & Wll.LGJNG, CASE-BASED Crv1L RULES SURVEY], available at httpJ/www.ijc.gov/public/pdf.nsf!lookup/dissurvl.pdf!$file/ dissurvl.pdf; see also EMERY G. LEE III & THOMAS E. WILLGING, FED. JUDICLA.L CTR, LmGATION COSTS IN CIVIL CASES: MULTIVARIATE ANALYSIS: REPORT TO THE JUDIOAL CONFERENCE ADV1SORY COMMITTEE ON CIVIL RULES 2-4 (2010) (hereinafter LEE & WILLGJNG, MULTIVARIATE ANALYSIS), available at http:l/v.-'WW.fjc.govlpublic/pdf..nsf/lookup/ costcivl.pd£1$filelcostcivl.pdf ("This report, prepared for the Committee's March 2010 meeting, presents multivariate analysis of litigation costs in the closed cases."); THOMAS E. WILLGING & EMERY G. LEE III, FED. JliDICIAL CTR., L"' THEIR WORDS: ATTORNEY VIEWS ABOUT COSTS Al•iD PROCEDURES IN FEDER.-\L crvrr.. LmGATION 1-2 (2010) (hereinafter WILLGL'IG & LEE, 1"1 THEJR WORDS], available at http://www.fjc.govfpublidpdf.nsf!lookuplcostciv3.pdfl$file/ costciv3.pdf ("To supplement the multivariate analysis, ... the Center ... interview(ed] a

434


given space constraints, we will not attempt in tbis Article a summary drained of nuance and precision. Instead, we propose to survey the research, including the FJC reports, prepared for the Duke Conference, to define what, exactly, the problem is with civil litigation. In Part I, we argue that the problem cannot be simply that "litigation is too expensive."'2 Without a normative standard, it is impossible to say, in any meaningful way, that litigation is too expensive. Moreover, the limited empirical evidence that exists does not support the broad statement that litigation costs, in general, are out of control. In Part II, we discuss our finding that the stakes in the litigation are, empirically, the best predictor of costs. Indeed, in most federal civil cases, the costs appear to be proportionate to the monetary stakes. If so, the problem is not out-of-control costs generally. Nevertheless, there is a desire ·in some quarters to find general solutions to the as-yet-undefined problem of too-expensive litigation. The usual suspects are the pretrial discovery rules. But, as in Casablanca,13 the usual suspects are often not the perpetrators. In Part III, we demonstrate that there is little reason to think that the state procedural limits on discovery advanced as models for federalrules reform accomplish the goals set out for them. Part IV argues, based on empirical research, that there is scant evidence that alternative discovery rules would result in lower costs or shorter processing times in any predictable fashion. Tbis leads to the larger question of whether the pretrial discovery rules are really the cause of the perceived problem of costs. Although we do not answer that question, we end with the suggestion that before any further amendments to the discovery rules are proposed in the name of reducing costs, more effort must be made to define the problem that such rule amendments are supposed to address.14 Part IV ends,

number of the attorneys who responded to the case-based survey .... This report documents those interviews, organizing them where possible to track the results of the multivariate analyses .... ").

12. See, e.g., lNST. FOR THE ADVANCEMENT OF THE AM. LEGAL SYS., PRESERVING

ACCESS AND IDENTIFYING EXCESS: AREAS OF CONVERGENCE Ao'ID CONSENSUS IN THE 2010 COFFERE."iCE MATERIALS 5 (2010), available at http://civilconference.uscourts.gov/ LotusQuickr/dcc!Main.nsfl$defau!tviewnB6B047956592D3A8525771900011F6Al$Ele!IAALS, Preserving Access and Identifying Excess.pdf ("The collected survey research indicates a very strong consensus among nearly all respondent groups that broadly speaking, the civil justice system is too expensive.").

13. CASABLANCA (Warner Bros. Pictures 1942). 1-t This is not to say that discovery-rule amendments tied to other goals might not be

fruitfully pursued. Specifically, proposed rules for issuing preservation orders or imposing sanctions seem designed primar'Jy to bring clarity and predictability to unsettled procedures,

f

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2010] DEFINING THE PROBLEM OF COST 769

fittingly enough, with a call for more empirical research into the costs of litigation.

L Is LmGATION Too EXPENSIVE?

When asked, large percentages of practitioners agree that "[l]itigation is too expensive."15 But it is difficult to know what one is supposed to make of this finding. In one sense, litigation is almost always too expensive. It would often be less expensive to not have the dispute in the first place, or, barring that, less costly to find a way to resolve the dispute without recourse to the courts.16 But more importantly, our empirical research calls into question the view that litigation is always expensive.17 We surveyed more than two thousand attorneys of record in federal civil cases terminated in the last quarter of 2008. We excluded large categories of cases from the study because

not solely to reduce costs. See, e.g., Memorandum from Judge Mark R. Kravitz, Chair, Advisory Co=. on Fed. Rules of Civil Procedure, to Judge Lee H. RosenthaL Chair, Standing Co=. on Rules of Practice & Procedure, Report of the Civil Rules Advisory Committee 12-14 (1-fay 17, 2010), available at http://v.ww.uscolli-ts.gov/uscourtsfRulesAndPolicies/rulesfReports/CV05-2010.pdf (discussing preservation issues on the Committee's agenda). Moreover, efforts at chaneine attorney behavior might yield !Cains that rules chanr;e< cannot. Sn· SFVf'NTif r:mo ITT

Fr FCDI':rroVFRYPn nTPRnGRAM. PHA~F 0NT Orrmn:R.l, ?OO'l-MAY 1,2010: STATFMF"-"I

OF PuRPOSE AND PREPARATION OF PRINCIPLES 9-10 (2009), available at http:// wv;wilcd.uscourts.gov/Statement -Phase One. pdf ("The goal of the Principles is to incentivize early and informal information exchange on commonly encountered issues relating to evidence preservation and discovery ... n); The Sedona Conference, The Sedona Conference Cooperation Proclamation, 10 SEDONA COl"<r. J. 331, 331 (Supp. 2009) ("This Proclamation challenges the bar to acbieve these goals and refocus litigation toward the substantive resolution of legal disputes.").

15. L"<ST. FOR THE ADVANCEMENt OF THE A'-'L LEGAL SYS., supra note 12, at 5.

16. In another sense, litigation may be too expensive in the aggregate compared to its general societal benefits. Most of the criticisms advanced at the Duke Conference, however, focused on the micro case-level costs of discovery and litigation, and not this macro level of costs. In this Article, therefore, we focus on the clainl that the costs in individual cases are too high.. not the much more difficult-to-assess claim that the costs of all litigation in the United States substantially outweigh any possible benefits of that litigation. It should be noted, however, that even small cost savings in most cases--as a result of attorney cooperation, for example-would represent substantial savings in the aggregate.

17. For a discussion of discovery costs and the lack of agreement regarding whether discovery limits ameliorate perceived problems, see infra notes 52-66 and accompanying text. Empirical sources cited in that discussion support the proposition that litigation costs as a whole are not excessive in the typical federal court case. See, e.g., LA WYERS FOR CIVIL JUSTICE, CIVIL JUSTICE REFORM GRP. & U.S. CHAMBER L'IST. FOR LEGAL REFORM, LmGATION COST StJRVEY OF MAJOR CoMP.A.."'IES 6-7 (2010), available at http://civilconference.uscourts.gov/ LorusQuickrldcc!Main.nsf!$defaultview/33A2682A2D4EF700852577190060E4B5/$FiJe! litigation Cost Survey of Major Companies.pdf (citing the ACIL-LMLS final report and joining these organizations in the call for "fundan1ental reforms").

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they generally do not involve discovery, including prisoner civil rights and habeas corpus cases. In cases in which one or more types of discovery was reported, we found median litigation costs, including attorneys' fees, of $15,000 for plaintiffs and $20,000 for defendants.18

The median is, of course, the 50th percentile of the distribution of reported costs, so half of plaintiffs' attorneys reported costs under $15,000, and half of defendants' attorneys reported costs under $20,000. These medians do not support the claim that the typical case in federal court has escalating costs-indeed, these reported costs are largely consistent 'l.rith inflation-adjusted figures from the 1997 FJC study.19 Although it would be inappropriate to infer a trend from two data points,20 the empirical evidence for out-of-control costs is limited. In the context of a push for radical change in the rules of procedure to remedy allegedly disproportionate litigation expenses, it seems reasonable that the burden of presenting empirical evidence lies with the proponents of change.

At the Duke Conference, the Lawyers for Civil Justice (LCJ) presented some evidence of escalating litigation costs. Reporting litigation costs from 2000 to 2008 for Fortune 200 companies, the LCJ found that outside legal fees and costs had increased from an average nf 'thh millir.-n i-n '){){)() tn nParhr 't11" millir.n in ')()()Q 21 h'nr th-" htr<>nhl .._..t.. '.jJ"-.1"-J ~ ....... .A.J.. ..t....l..J.. 4L'<J'-1"-' "'"-' L-1......,'-'-L.l.J 4J.LJ.......J ~,L,,.'I,J.L.J.. .L.I...L ~"-''-'"-'~ ...._ .._. ... 11-.1-1......., L.•t-..r...J._I.-J

companies reporting costs for the entire time period, the comparable figures rose from $66 million in 2000 to $140 million in 2008.72 But given its relatively small sample size of two hundred companies, its response rate of 10 percent, its short nine-year timeframe, and its lack of adjustment for inflation, the value of the study's findings is limited. Even taking the LCJ's findings at face value, it is difficult to know what to make of them. For example, the LCJ also found that, in 2009, thirty-six Fortune 200 companies spent a total of $4.1 billion in U.S.,

18. LEE & \VILLGL>.;G, CASE·BA.SED CIY.L RCLES S1JRVEY, supra note 11, at 35-36.

19. See id. (discussing the differences between the median inflation-adjusted cost of litigation and discovery in the 1997 a.'ld 2008 studies); see also Willging et aL, supra note 10, at 531,548 tbL3 (offeri.ng statistics on reported litigation expenses).

20. As researchers, we are acutely aware that we do not know very much about discovery costs in civil litigation, largely because of the lack of studies, which in turn is the result of the inherent difficulties of studying this topic. See Judith A. McKenna & Elizabeth C. Wiggins, Empirical Research on Civil Discovery, 39 B.C. L REv. 785, 796-97 (1998) (discussing the methodological difficulties in sl1Jdying discovery).

21. LAW'{ERS FOR CIVIL JUSTICE ET AL, supra note 17, app. 1 at 2-3, 7 fig3. Of course, not every Fortune 200 company reported costs to the LCJ. !d. app. 1 at 4.

22. I d. app. 1 at 8--9 & fig.S.

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outside-litigation costs.23 This finding, however, does not decide the issue; many relevant questions remain. In absolute terms, $4.1 billion is quite a lot. But is it too much? Relative to what? Moreover, how typical are these reported costs for other litigants?

As empiricists, we are not equipped to answer these largely normative questions. That is a matter left to the Committee and other policymakers. But empirical research can shed some light on these questions. Cost is a numerator in search of a denominator. As our study indicates, monetary stakes is a great candidate for that denominator. Running with this, we next report our findings with respect to the proportionality of discovery costs to stakes. Finally, we return to the LCJ report and discuss what it says about the relationship between litigation costs and stakes.

II. RELATIVE TO STAKES?

The monetary stakes in a case represent the single best predictor of litigation costs in that case. Graphically depicting the data for private-firm plaintiffs' and defendants' attorneys in the FJC study, Figures 1 and t• present scatter plots of the bivariate relationship between monetary stakes25 and reported litigation costs. The plots demonstrate a strong li!lear ielationship between stakes and costs; variation in the stakes alone explains almost 37 percent of the variation in reported costs for plaintiffs' attorneys and almost 47 percent of the variation in reported costs for defendants' attorneys. This relationship holds in the multivariate analysis as well. For both plaintiffs' and defendants' attorneys, and after controlling for other factors including time to disposition, a 1 percent increase in stakes is associated with a 0.25 percent rise in costs.;ot; In other words, if the monetary stakes in a case double, all else being equal, the costs

23. JcL app. 1 at 8 fig.4.

24. See infra Appendix. These figures were created using the Lattice package in R For more information on R, see generally R DEV .. CORE TE.AM, R: A LANGUAGE A.l'HJ ENVIRONMENT FOR STATISTICAL COMPUTING: REFERENCE INDEX (2010), available a1

bttp:l/cran.r-project.orgldoc/manuals/refman.pdf, and DEEP A Y AN SARJCA.R, LATTICE: MULTIVARIATE DATA VISUALIZATION WITHR (2008).

25. Respondents were asked to estimate, in dollars, the best and worst ulikely" outcomes from the point of view of their clients. Stakes were then calculated as the "spread" between these two figures. See LEE & WILLGING, CASE-BASED CiviL RULES SURVEY, supra note 11, at 41-42 (describing in detail the variables used). For a reprint of the questions used, see id. app. C at 94--95.

26. LEE & WILLGING, MULTIVA.'UATE ANALYSIS, supra note 11, at 5, 7.

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increase by 25 percent. The complete multivariate models explain approximately 62 percent of the variation in plaintiffs' attorneys' reported costs and 76 percent of the variation in defendants' attorneys' reported costs.27 Thus, stakes alone account for about 60 percent of the explained variation in the complete models. In a very real sense, there are stakes, and then there is everything else.

In our interviews, we found that many practitioners emphasize the overarching importance of monetary stakes when deciding on discovery and pretrial practices that are likely to increase litigation costs. A number of interview subjects indicated that clients understand the relationship between stakes and costs, too. The following statements are illustrative:

• "Companies are willing to invest more ill cases where the stakes are ... high."

• "Even the client expects an attorney to invest more time in high stakes cases."

• "One has to take into account the possibility of being enjoined from selling a product, which increases the stakes."

• "If there's a lot of money involved, parties dig in their heels ::1nd litigate every little thing."

• "Stakes make a difference in that clients are willing to pay and more likely to dig deeper into discovery."2ll

Our findings indicate that the monetary stakes in the litigation represent the primary cost driver in most civil litigation. This very robust relationship between stakes and costs leads directly to the much-debated question of proportionality. Since it was amended in 1983, Rule 26(b)(2)(C)(iii) has directed courts to limit discovery if they determine that "the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. "29 This proportionality principle is somewhat broader than monetary stakes but requires, at minimum, that judges and parties consider both the "amount in controversy"

27. Id. 28. WILLGING & LEE, IN THEIR WORDS, supra note 11, at 5-6 (alteration in original).

29. FED. R. Crv. P. 26(b )(2)(C)(ili).

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and the value of the "issues at stake in the action" in relation to the burden or cost of proposed discovery.

The rule itself, however, is unclear as to the proper ratio of discovery costs to stakes. The Committee commentary is also not terribly instructive. Professor Arthur :Miller, Reporter to the Commiti.ee in 1983, described disproportionate "discovery with this example: "In a $10,000 damage case, spending $50,000 on discovery is disproportionate."30 It seems beyond cavil that a five-to-one ratio of costs to stakes is disproportionate; the much more interesting case is a ratio of one to five. Is that proportionate? As is usually true, it depends. As Miller noted, "Everybody understands you can have a case where the values at stake transcend the economics of the case, so this is not a pure dollar test."31 Nor, it would seem, does the rule call for a straightforward ratio.

Lawyers and academic commentators often opine that judges infrequently invoke the proportionality principle.31 But if the parties limit their requests with an eye toward stakes, or if they negotiate to modify disproportionate requests, judges will have little or no need to invoke the rule. Our research indicates that disproportionate discovery may be less of a problem than critics of the Federal Rules often asseverate. In the survey, we asked respondents to rate the rP.l~tinnc'h~n nF t'h.o rllcrrn:TPrtT rnctc ;n "-l T"'l.,rf;,......,..,1.., .......... 1.-. .... .,.,rl ,........,,...,,.,. +,.. +'hn. "-'-'""-~ .. .._.,_....._.._u.L...l....l.l:-' ......., ...... .,......._.,...,. .._..._....,-....,...._,~.....,...._) ._....._..,_,,_o.J .l....L.L 1.-4 t"l...LJ..I..J..Vl..J-J.U.L '-'LVJ.._U \..O;:)V I.V Lll\...r

client's stakes in the litigation. They were asked to rate proportionality on a seven-point scale, "with [one] being too little, [four] being just the right amount, and [seven] being too much."33 A majority of respondents-59 percent of plaintiffs' attorneys and 57 percent of defendants' attorneys-answered that the costs of discovery were "just the right amount" compared to the stakes.34

About one in four respondents-23 percent of plaintiffs' attorneys and 27 percent of defendants' attorneys-rated their client's costs at

30. ARTHUR R. MILLER, FED. JUDIOAL CTR., THE AUGUST 1983 AME."<"DMEl'.'TS TO THE FEDERAL RlJLES OF CIVIL PROCEDURE: PROMOTING EFFECTIVE CASE M.A..."'AGEMENT A."""D LAWYER RESPONSIBILITY 32 (1984).

3L I d. at 33.

32. See, e.g., KIRSTEN B.-'Ll<RETT, RHODA COHE'i & JOHN HA.LL, MATHEMATICA POUCY

RESE-'L'<Oi, INc., ACfL CIVIL LITIGATION SURVEY, FINAL REPORT 41 (2008) (finding that "76,8% of Fellows agree that judges do not invoke Rule 26(b )(2)(C) on their own initiative").

33. LEE & WILLGING, CASE-BASED CrVIL RULES St.JRVEY, supra note 11, at 28 & fig.14. The unweigbted sample sizes were 1,184 for plaintiffs' attorneys and 1,193 for defendants' attorneys.

34. Id. at 27-28 & fig.13,

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five or higher, but ratings of six or seven were relatively rare.35 Thus, relatively few respondents believed that discovery costs had been disproportionate in those particular cases.36 More than three-quarters of the responses, in fact, clustered between three and five on the seven-point scale.37

In our interviews, attorneys pointed out mechanisms they use to keep costs proportionate to stakes. Some simply kept the stakes in mind: "[O]ne always tailors the amount of discovery to the stakes. The difference between a $50,000 case and a $500,000 case is always on one's mind. "38 Others followed the limits of a scheduling order: "I go as far as the law will allow. There are time constraints .... "39

Attorneys appear to use these and other mechanisms to adjust costs to conform to the stakes of the litigation.40 These mechanisms, in tum, may help explain why the majority of attorneys surveyed concluded not only that the costs in their case were "just the right amount" in relation to their clients' stakes but also that they obtained the right amount of information.41

This case-based finding that costs are generally proportionate to stakes is again at odds with the views expressed by other participants at the Duke Conference. The IAALS-ACTL survey found that ACTL fellows overwhelmingly believe that the costs of litigation are not proportionate to the value of a case. In versions of the survey administered to the members of the American Bar Association (ABA) Section of Litigation and the National Employment Lawyers Association (NELA), the proportionality question was split into one question asking whether litigation costs are proportionate to the value of large cases and one asking whether the costs are proportionate to the value of small cases. Respondents to these

35. Id. at 28.

36. The 1997 FJC study found that 54 percent of all respondents reported that discovery expenses in the closed case were "about right" in relation to stakes, v.ith 15 percent reporting that such expenses were "high" and ZO percent reporting that they were "low." Eleven percent did not express an opinion. Willging et al., supra note 10, at 531, 55(}... 51 & tbl.8.

37. Id. 38. WILLGJJ-;"G & LEE, L>-< THEIR WORDS, supra note 11, at 5. 39. I d. at 22.

40. For a more complete discussion of attorney responses to the question "How much discovery is enough?," see id.. at 21-24.

41. See LEE & WILLGlNG, CASE-BASED ClV1L RULES SURVEY, supra note 11, at 27 & fig.13 (reporting that 56.6 percent of plaintiffs' attorneys and 66.8 percent of defendants' attorneys reported that the discovery in their cases bad resulted in "just the right amount" of information).

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questions expressed the general view that litigation costs are disproportionate to the value of small cases but not necessarily disproportionate to the value of large cases.42

These impressionistic findings are difficult to square \Vith our case-based survey findings. Perhaps the members of the AcrL, ABA Section of Litigation, and NELA have had markedly different experiences than the randomly selected attorneys surveyed by the FJC. Perhaps the responses in the more impressionistic surveys are affected by well-known cognitive biases, such as availability and recall-in other words, the tendency of respondents to call to mind problematic cases when asked a general question.43 Whatever the explanation for these differences, the case-based surveys provide empirical evidence of greater proportionality in the relationship of discovery costs to stakes than one would predict based on the complaints raised by critics of the Federal Rules.44

But what of the $4.1 billion in outside legal costs reported by the LCJ? Could costs that high be considered proportionate to anything? The LCJ report itself does not address the stakes in the underlying cases, but it does present some information about litigation costs for outside counsel as a percentage of companies' U.S. revenues. Without knowing more about the confidential underlying data, it is difficult to know exactly how to interpret th"' numbers B11t Fignre R in that report, which excludes outliers, seems informative. For companies in sectors other than health care and insurance, from 2000 to 2008, outside litigation costs as a share of U.S. revenues were relatively constant, hovering around 0.3 percene5 In other words, for the reporting Fortune 200 companies in these sectors, outside litigation costs consumed about one in every three hundred dollars of total U.S. revenues. This percentage varied only between 0.27 percent and 0.4

42. EMERY G. LEE ill & THOM-A.S E. W!LLGING, FED. JlJDICIAL CIR., ATIOR.";"EY

SATISFACTION WTm THE FEDER.A..L RULES OF C!v!L PROCEDURE: REPORT TO THE JUDIOAL

CONFERENCE ADV1SORY COMMITTEE ON C!viL RULES lG-11 & fig.ll (2010), available at b ttp:l/www .fj c. g ov lpu bliclpdf.nsffl ookupl costci v2. pdf!$ file/ costciv2. pdf.

43. There is a lengthy literature on the role of heuristics in cognition. For an application of this literature in the legal literature, which applies an availability heuristic to risk perception, see, for example, Cass R Sunstein, Precaurions Against What? The Availabilily Heuristic and Cross-Cultural Risk Perception, 57 ALA.. L. REV. 75, 87-89 (2005). For the classic essay on availability heuristics, see Amos Tversk:y & Daniel Kahneman, Availability: A Heuristic for Judging Frequency and Probabilily, 5 COGNITIVE PsYOiOL 207 (1973).

44. See supra text accompanying note 9. 45. See LAWYERS FOR C!viL JUSTICE ET AL, supra note 17, app. 1 at 11, 12 fig.8 ("(A)ll

other industries report an average of 0.33 percent of revenue.").

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percent over the time period and was at almost exactly the same level in 2000 as in 2008.46 Health care and insurance companies, on the other hand, reported increasing percentages of revenues consumed by litigation, from 0.45 percent in 2000 to 1.15 percent in 2008, V¥ith a particularly sharp increase between 2004 and 2005.47 Even so, the 2008 figure for health care and insurance enterprises represents about one in every one hundred dollars of U.S. revenues consumed by outside litigation costs.

It is not our place to say whether one in every one hundred-or every three hundred-----Dollars of revenues is a disproportionate amount for the largest U.S. companies to spend on litigation. Once again, the problem is the lack of a normative standard for evaluating the cost data. But the question should be put to the authors of the LCJ report to specify what the appropriate ·outlay for litigation would be, if, as the LCJ argues, the reported costs are too high. The answer would be informative.

III. MODELS FOR REFOru"\1?

Given the lack of empirical evidence for a cost problem, it should not be surprising that the empirical support for some of the solutions put forward by rule critics is also pretty weak. The IAALS, for example, puts forward the limits on discovery in the Arizona and Oregon state-court procedures as models for the Committee to consider.40 But the IAALS studies themselves suggest that neither of these systems accomplishes the goals that the IAAJ~ sets out for them. In both systems, for example, attorney respondents indicate that litigation in the state courts is still too expensive, despite the limits on discovery. In Arizona, S4 percent of respondents agreed

46. I d. app. 1 at 12 fig.8.

47. Jd.

48. See L'IST. FOR T1ffi ADVA.'lCEME!\11 OF T'rlE Av.. LEGAL SYS., SlJRVEY OF THE ARIZONA BE"iCH & BAR ON THE ARIZONA RULES OF CIVIL PROCEDlTRE 26-27, 29-42 (2010) [hereinafter I.NST. FOR THE ADVA..'ICEMEJ-..'T OF THE AM. LEGAL SYS., THE A.'UZONA RuLES OF CIVIL PROCEDURE] (discussing the A1izona Rules of Civil Procedure's presumptive limits on discovery); I.NST. FOR THE ADV.A . ..'ICEMENT OF THE AM. LEGAL SYS., SURVEY OF THE OREGON BE'ICH & BA.'l. ON THE OREGON RULES OF CIVIL PROCEDURE 31-43 (2010) (hereinafter L'lST. FOR THE ADVNICEMENT OF THE AVL LEGAL SYS., THE OREGON RULES OF CIVIL PROCEDURE] (discussing restrictions on discovery under the Oregon Rules of Civil Procedure). Oregon, in addition, adheres to a form of fact pleading, which the IAALS also supports. See Rebecca Love Kourlis, Jordan M. Singer & Natalie Knowlton, Reinvigorating Pleadings, 87 DE'iV. U. L. REV. 245, 266-67 (2010) ("The Oregon Supreme Court has repeatedly reaffirmed the state's cornrcitment to fact pleading.").

443

2010) DEFINING THE PROBLEM OF COST 777

with the statement that civil justice in Arizona superior court is "too expensive";49 in Oregon, 79 percent of respondents agreed that civil justice in Oregon circuit court is "too expensive."50 Somewhat oddly, the IAALS cites these state figures in a document calling for reform of the Federal Rules. 51 That experienced practitioners in these model systems think civil justice is too expensive despite the discovery limits, however, undercuts the argument that adopting similar rules would reduce the perceived unnecessary expenses in federal court litigation.

More tellingly, however, Arizona and Oregon practitioners seem rather cool to the purported advantages of limited discovery. This is not to say that limits on discovery do not have any effect. For example, when asked about the potential benefits of Arizona's presumptive limits on discovery as a whole, 64 percent of respondents agreed that the limits focused discovery, and 58 percent agreed that the limits actually reduced the volume of discovery.52 With respect to whether the presumptive limits make costs more predictable or reduce costs, time to disposition, or the threat of forced settlement, however, opinions were mixed, or even negative. Forty-seven percent of respondents agreed that the presumptive limits reduced costs, but 44 percent disagreed-within the reported margin of error of 3.5 percent.53 In other words, not even a statistically significant plurality of su.,rveyed ... A ........ rl....zona practitioners agreed that the -l:n.L.l.T··izona discovery limits reduce costs. Furthermore, 53 percent disagreed that the limits reduce time to disposition, and 55 percent disagreed both that the limits make costs more predictable and that they reduce the threat of forced settlemenLs.~ This does not make a very strong case for reform based on the Arizona model.

49. lNST. FOR THE .ADVA..'<CEMEl•IT OF THE AM. LEG.AL SYS., THE ARIZONA RtJLES OF CTVIL PROCEDURE, supra note 48, at 44 & fig.44.

50. lNST. FOR THE .ADVA."<CEME""T OF THE AM. LEGAL SYS., THE OREGON RULES OF CTVIL PROCEDURE, supra note 48, at 54 & fig.51.

51. See L"<ST. FOR THE .ADVANCEMENT OF THE A!v1. LEGAL SYS., supra note 12, at 4-5 (grouping the Oregon and Arizona surveys v;ith the ACTL, ABA Section of Litigation, and l'<'ELA surveys).

52. INST. FOR THE .ADVANCEMENT OF THE A.\1.. LEGAL SYS., THE ARJZONA RlTLES OF CiviL PROCEDURE, supra note 48, at 37 & fig.35. This latter advantage is somewhat tautological It would be strange if respondents did not agree that limits on discovery actually limit discovery. Interestingly, 35 percent of respondents expressed just this view. I d.

53. See id. at 7, 37 & fig.35 (providing a 95 percent confidence level at plus or minus 3.54 percent for the entire sample of 767 valid responses).

54. I d. at 37 & fig35.

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Perhaps one could argue in rebuttal that Arizona practitioners with federal-court experience prefer state court to federal court, thus indicating the superiority of state courts and their limited discovery. Almost half of the attorney respondents with federal-court experience--49 percent-expressed a preference for Arizona state court over federal court, whereas only 25 percent expressed a preference for federal court.55 A "two-to-one ratio" 56 is a large margin in favor of the Arizona state courts. But the report's assertion that "nearly three-quarters of respondents either prefer the state forum or have no preference" is a bit much.57 Although about half of attorney respondents with federal-court experience prefer state courts, about half either prefer federal court or have no preference. One can spin these results, but this is not a knockdmvn case for reform.58

The results of the Oregon survey are ·very similar. The Oregon discovery limits as a whole fare about as well as the Arizona limits. Again, a majority of respondents-64 percent-agreed that the limits on discovery reduce the volume of discovery.59 Similarly, 51 percent agreed that the limits focus discovery, whereas only 41 percent disagreed.60 But there is simply no agreement among respondents that the limits make costs more predictable or that they reduce costs, time to disposition, or the threat of forced settlement. Forty-three percent agreed that the limits make costs more predictable, but 48 percent disagreed.61 Forty-six percent of respondents agreed that the limits

55. lei at 12 fig.6.

56. !d. at 12.

57. Jd. 58. Moreover, there are many reasons why attorneys may prefer one forum to another;

procedural rules are just one-and probably not the most importa.'"lt one. In a study of choice of forum in class action litigation, for example, 78 percent of plaintiffs' attorneys identified the source of the claims (state law) as a reason for filing in state courL Only 28 percent identified the favorableness of discovery rules, and only 31 percent identified lower costs of litigation. Respondents could, however, identify more than one reason for filing in a particular forum. See THOMAS E. WILLGL"-;G & SHANNON R. WHEATM.A.N, FED. }L"DIOAL CTR., A."' EMPIRIC.-".L

EX:.-".MLN"ATION OF ATIOR.'<'EYS' CHOICE OF FORUM IN CLAss ACTION LmGATION 18 tbl.2 (2005). Without knov,i.ng more about why attorneys prefer the state courts to federal courts, it is not clear what one should conclude from this finding with respect to procedural rules. The IAALS report includes a long list of reasons why respondents preferred the state forum, but these are not given particular weights. See L'<STIIUTE FOR TIIE ADVANCEMEN1 OF TrlE /L>.{,

LEG.A.LSYS., THE ARIZONA RULES OF C!v1.L PROCEDURE, supra note 48, at 13,

59. L'<ST. FOR THE ADVA.'-'CEMENT OF THE .A.J'.cL LEGAL SYS., THE OREGON RULES OF

CP.'JL PROCEDURE, rupra note 48, at 41 fig.33,

60. Id.

61. Id.

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reduce costs, but 45 percent disagreed that they did so.62 Forty-five percent agreed that the limits reduce time to disposition, but 46 percent disagreed.63 And 42 percent agreed that the limits reduce the threat of forced settlement, but 44 percent disagreed. 54

Moreover, the Oregon attorneys with federal-court experience do not show much of a preference for state court. Forty-three percent of respondents indicated a preference for state court, and 37 percent expressed a preference for federal court65 -a difference of only six percentage points in a study with a reported margin of error of 4.5 percent for the entire sample, of which these percentages represent a subset. We doubt that this result is statistically significant, and the report does not say. And although the report asserts that "[a]lmost two-thirds of respondents either prefer the state forum or have no preference,"66 it is also true that almost 60 percent prefer federal court or had no preference.

In short, Arizona and Oregon attorneys, in evaluations based on their experience, revealed the shortcomings of limits on discovery as a solution to the perceived problems of cost and delay. The responses provided by these attorneys simply do not provide much support for adopting such rules at the federal level.

A careful review of the empirical research prepared for the Duke Conference begs the question with which we began-what, exactly, is the problem to be solved? The usual suspect, at least since the 1976 Pound Conference, has been pretrial discovery costs. But empirical research does not support the charge.

Empirical research has not provided support for the prevailing view that discovery costs are necessarily the major cost driver in litigation. The 2009 FJC case-based study found that the median percentage of total litigation costs accounted for by discovery was 20

62. Id. 63. [d.

64. [d. The Oregon report also notes a number of co=only held complaints about the Oregon discoverf limits that are worth considering. Almost 40 percent of respondents complained that the complete absence of interrogatories in Oregon "diminishe[ d) counsel's ability to prepare for trial," and "a majority indicated that the absence of expert discovery decreases counsel's ability to prepare for triaL" !d. at 2.

65. !d. at 12 fig.6.

66. I d. at 12.

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percent for plaintiffs' attorneys and 27 percent for defendants' attorneys.67 Although that figure has struck some as low-a claim to which we will turn shortly-the point to remember is that the FJC estimate is generally consistent with previous studies. The Columbia Project study from the 1960s estimated that discovery accounted for between 19 and 36 percent of litigation costs, depending on whether a party was a requesting or requesting-and-producing party.68 The Civil Litigation Research Project in the 1970s found that, in the ordinary case, 16.7 percent of attorney time, a proxy for cost, was spent on discovery. 69 And in the 1990s, the RAND Corporation found that "lawyer work hours on discovery are zero for 38 percent of general civil cases, and low for the majority of cases," making discovery "not a pervasive litigation cost problem for the majority of cases. "70

Focusing on cases lasting longer than 270 days, RAND found that postfiling discovery consumed a little over one-third (36 percent) of attorney work hours.71 The highest estimate of the percentage of total cost associated with discovery was that reported in the 1997 FJC study-a median estimate of 50 percent for both plaintiffs' and defendants' attorneys.72

The LCJ report presented at the Duke Conference may also shed some light on the percentage of total litigation costs allocated to discovery in "major cases," which that study defines as cases with attorneys' fees exceeding $250,000.73 Figure 11 in that report provides the average discovery costs, for at least some corporations, for major cases closed from 2004 to 2008.74 Figure 10 provides the average outside legal fees for major cases closed during the same years. Unfortunately, the number of corporations included in the two figures is not the same, making it impossible to draw any meaningful

67. LEE & WILLGWG, CASE·BASED CML RULES SURVEY, supra note 11, at 38--39 tbLs.6 &7.

68. WILLIA..'-1 A. GLASER, PRETRL-\.L DISCOVERY A~'.'D TI1E ADVERSARY SYSTEM 180 tbL43 (1968).

69. DaVid M. Trubek, Austin Sarat, William L.F. Felstiner, Herbert M. Kritzer & Joel B. Grossman, The Costs of Ordinnry Liligation, 31 UCLA L REV. 72, 91 tbl.3 (1983).

70. James S. Kakalik, Deborah R. Hensler, Daniel F. McCaffrey, Marian Oshiro, Nicholas M. Pace & Ma..-y E. Vaiana, RAJ'-;'1) INST. FOR CIVIL JuSTICE, DISCO'VERY .MANAGEMENT: FUR TriER AN.A.L YSIS OF THE Cf\/IL JUSTICE REFOR.\1 AcrEV.A.LUATION DATA, at XX (1998).

71. I d. at xxi tbl.S.2.

72. Willging et al., supra note 10, at 548 tbL4.

73. LA'W'YERSFOR CMLJUSTICE ET AL., supra note 17, app. 1 at 13--14.

74. Id. app. 1 at 15 fig.ll. Note that for 2006 and 2007, the number of responding corporations is only four.

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comparisons. It is impossible, for example, to assess how the average discovery costs for major cases closed in 2008 for twenty reporting corporations-$621,880-relate to the average outside legal fees for major cases closed in 2008 for thirty reporting corporations$2,019,248.75 But with that caveat, simply dividing the average discovery costs per major case closed in 2008 by the average outside legal fees per major case closed that year yields an estimate of discovery costs as a share of outside legal fees of 30.8 percent. That is surprisingly close to the 2009 FJC report's figure for defendants' attorneys (a median of 27 percent) and is well within the bounds of previous empirical research. :lvforeover, because this estimate does not appear to include in-house legal costs or other litigation costs beyond legal fees in the denominator, it may actually overstate the percentage of costs associated with discovery.76

The empirical studies of discovery costs, in short, indicate that in the typical case-and perhaps even in the typical major case, although that data is very limited-one should expect discovery costs to account for more than 20 percent, on the lower end, and maybe, on the higher end, about half of the total litigation costs. There will be some more discovery-heavy cases, of course, but 20 to 50 percent is what we would expect in a typical case.

'11,p irnnrPccinnict1f"' Ci-nrliPC: nrll\Tif1P -:l 'UP.IO rliffP.rP.nt n~rfllrP. ~ .. ~ ~.t'~-~~-~~~~- ---~-- .t'.~ .. -- ~ --~.! -·~---~- .t'·-·~-,

however. In the ACTL, ABA Section of Litigation, and NELA surveys, the median estimate of the percentage of litigation costs attributable to discovery in cases not going to trial was 70 percent.77

Again, this figure is rather hard to square with the other studies. The likely reason for the disparity is cognitive bias-respondents are providing answers based on problematic cases or on what can be described as the conventional wisdom.78 Although it is plausible that discovery costs account for 70 percent of total litigation costs in some cases, the weight of empirical evidence indicates that it is unlikely to reach 70 percent in many cases. In the October 2009 FJC report, the 95th percentile for the reported percentage of litigation costs incurred in discovery was 80 percent for both plaintiffs' and defendants'

75. [d. app. 1 at 14--15 figs.lO & 11.

76. The report itself states, however, that its numbers "understate ... discovery costs, because many discovery costs may go unmeasured and unreported." [d. app. 1 at 15.

77. L"'ST. FOR THE ADV.A..NCEME."'TOFTHE A'>1. LEGAL SYS., supra note 12, at 13.

78. For a discussion of the role of heuristics in cognition, see supra note 43 and accompanying text.

448

782 DUKE LAW JOUPJIAL [Vol. 60:765

attomeys.79 Additional analysis of that data shows that, in cases with any reported discovery event, only 10 percent of respondents reported that discovery costs were as much as 70 percent of total costs. This is the result of only one study, of course, but 10 percent of cases "With discovery as a share of total costs as high as 70 percent is not really typical of federal cases in general.

If one frames the problem as discovery costs accounting for 70 percent of litigation costs in the typical case, then there is little empirical evidence that any such problem exists on a wide-scale basis. Only the impressionistic survey responses support the view that this is a problem in the typical federal case. There is nothing else, unless one wants to credit survey responses stating that discovery is "too expensive. "80

Has the case for wide-ranging reform of the discovery rules been made? The argument is being made insistently, for sure. But, as District Judge Lee Rosenthal, chair of the Judicial Conference Committee on Rules of Practice and Procedure and former chair of the Advisory Committee on Civil Rules, recently observed, "Since their inception in 1938, the rules of discovery have been revised with what some view as distressing frequency. And yet the rulemakers continue to hear that the rules are inadequate to control discovery costs and burdens."81 The critics of the Federal Rules believe that the long-term project, arguably initiated with the Pound Conference, to devise cost-controlling discovery rules has failed.82 There are, however, two ways in which the project may have failed. On the one hand, the project may not have gone far enough, largely because the potential for gamesmanship inherent in the system makes it difficult to achieve perfection or even "excellence. ,B3 Attorneys will exploit the rules and the rulemaking process to seek advantages over their

79. LEE & W!lLGI"G, CASE-BASED CIVIL RULES SURVEY, supra note 11, at 38-39 tbls.6 &7.

80. See, e.g., L'\ST. FOR THE .ADVA.'ICEMEl'i OF THE AM. LEGAL SYS., supra note 12, at 14

("At least 70% of respondents ... agreed that discovery in general is too expensive.").

81. Lee H.. Rosenthal, From Rules of Procedure io How Lawyers Litigate: 'Twixt the Cup and rhe Lip, 87 DENV. U. L. REV. 227, 228 (2010).

82. See supra notes 6, 8 and accompanying text.

83. See Paul D. Carrington, Making Rules to Dispose of Manifestly Unfounded Assertior.s: An Exorcism ofrhe Bogy of Non- Trans-Substantive Rules of Civil Procedure, 137 U. PA. L. REV. 2067, 2070 (1989) ("Not only is perfection [in procedural rulemak.ing) impossible, but even excellence is unstable, especially so in a system dependent on the adversary tradition, because of changing circumstances and the corrosive effect of perpetual exploration and exploitation of systemic weaknesses by adversaries.").

449


adversaries, to the detriment of the system and society as a whole.&~ Thus, only radical changes can make the strategic exploitation of the rules impossible. Yet radical change appears unlikely to survive the rulemaking process.

On the other hand, the project may have failed to reduce costs because it does not address the actual drivers of cost. Perhaps the procedural reforms have not reduced the purportedly high costs of litigation because those costs have a source other than the Federal Rules themselves. Professor Charles Silver argued just that in an article published in 2002: "[P]rocedural reforms have not reduced [litigation] costs because adjudicatory procedures are not generating these costs."as "Costs," he continues, "instead reflect the need to figure out how much claims are worth and the difficulty of bargaining, which in turn reflect, respectively, properties of claims and of relationships between claimants and respondents. Empirical studies support this idea." 86 Our study also supports Silver's argument. The monetary stakes in litigation best predict the costs.87 Claims that are worth more also cost more to litigate, primarily because the parties will spend more when more is at stake. It seems difficult to believe that any but radical rule changes could affect this basic pattern.

But other properties of claims impact costs in wavs that rule rh:::~nOP<;! ~T'P nnl~lrP.lv tn !':lffPrt 88 p~,...·tn-::ti f""'flm--nl~~t-·u -fnr"" PV~m.,......lo. ~C" ---........ o-- -- -~-"'.J _....,. ~---· ..- ..................... ~ ---~1:"' ........... "'~'-J' ..L...._. ... -.n.~p ......... , J._,J

associated with higher costs, probably because it makes it harder for the parties to uncover the evidence necessary to price claims and bargain toward settlement. Respondents in the 2009 FJC case-based survey rated the factual complexity of the closed case on a sevenpoint scale, with one being "[n]ot complex at all," four being "[a]verage complexity," and seven being "[e]xtremely complex."89

Even controlling for other factors, each one-unit increase in this subjective scale of factual complexity was associated with an 11

84. ld. 85. Charles Silver, Does Civil Just:U:e Cost Too Much?, 80 TEx. L REv. 2073, 2074 (2002).

86. Id. 87. See supra Pa.;t II.

88. Interestingly, we find that, in general, nature-of-suit categories of cases do not affect costs, though there are a few notable exceptions. We find that, once other factors are controlled for, tort cases are less costly for plaintiffs and that intellectual property cases are much more expensive for defendants than other kinds of cases. But the other nature-of-suit categories are no more or less costly, on a consistent basis, than the baseline. LEE & W!LLGING, MGLTIVA.RIATE A."i.-\LYSIS, supra note 11, at 6, 8.

89. LEE & WILLGING, CASE-BASED CrviLRULES SURVEY, supra note 11, app. Cat 96.

450


percent increase in costs for plaintiffs and a 13 percent increase in costs for defendants.90 The most complex cases, in short, are going to have higher costs than the least complex cases, even after one controls for other factors related to the Federal Rules.

Contention among the parties also increases costs, at least for defendants. Respondents were asked to rate the contentiousness between the parties on a seven-point scale, with one being "(n]ot contentious at all," four being"[ a]verage contentiousness," and seven being "[e]xtremely contentious."91 All else being equal, defendants reported an 8 percent increase in costs for each one-unit increase in contentiousness.92 This suggests that difficulties in litigating and bargaiillng that result from the relationship between the parties can generate much higher costs than other factors can explain.

The economics of the legal practice als"o affect costs in a way not directly related to specific procedural reforms. In general, the larger the law firm handling the case-as measured by the number of attorneys-the higher the costs, even after controlling for factors such as stakes, complexity, and levels of discovery. Using a solo practitioner as the baseline and holding everything else constant, costs for a fum of more than five hundred attorneys would be more than double for both defendants (156 percent higher) and pl:1intiffs (109 percent higher).93 Hourly billing was also associated with higher costs for plaintiffs.94 Our interview subjects said a number of interesting things on this front. One put it quite graphically: "You have to feed the tiger first before defendants will settle a case. "95

This is not to say that pretrial discovery does not explain some of the variation in costs-it does. But once one accounts for nonrules factors, the effects of discovery on costs are much more mixed than one might expect based on the criticisms of the Federal Rules. The bete noire of the critics---electronic discovery--shows a very

90. LEE & WILLGJNG, ML'LTIVAili-\TE AJ4ALYS1S, supra note 11, at 6-7.

91. LEE & WILLGJNG, CASE-BASED Clv1L RuLES SURVEY, supra note 11, app. Cat 96.

92. LEE & WILLGJNG, ML'LTIV A.RJA TE ANALYSIS, supra note 11, at 7.

93. I d. at 6, R 94. Id. at 6. Attorneys representing plaintiffs in the closed cases who reported using hourly

billing reported costs 25 percent higher than other attorneys, all else being equaL Tnere were so few defendants' attorneys using altema tive fee arrangements that we cannot say what the effects of hourly billing are on defendants' costs. Fewer than 5 percent of defendants'-attomey respondents reported using a billing method other than hourly billing. I d. at 8.

95. WILLGL'lG & LEE, lN THEIR WORDS, supra note 11, at 10 (internal quotation marks omitted).

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interesting pattern. All else being equal, a request by plaintiffs for production of electronically stored information (ESI) appears to be associated with higher costs for those plaintiffs, regardless of whether the plaintiff is also a producing party. The costs for plaintiffs who were requesting-only parties with respect to ESI were approximately 37 percent higher than for plaintiffs in cases without electronic discovery, and costs for plaintiffs both requesting and producing ESI were 48 percent higher than for plaintiffs in cases -without electronic discovery.% For defendants, however, producing-only and requestingonly parties did not have higher costs, after controlling for other factors, than parties in cases without electronic discovery.97 But in cases in which the defendant was both a producing and requesting party with respect to ESI, costs were approximately 17 percent higher than in cases without electronic discovery.98

·

The results for plaintiffs make a great deal of sense. The requesting plaintiff incurs higher costs as a result of electronic discovery. But how could it be that defendants producing ESI did not have consistently higher costs, once other factors were accomited for? The answer, it appears, is that the costs of producing ESI are highly variable from respondent to respondent.99 In other words, defendants producing ESI do not consistently face higher costs than similarly situated defendants in cases without electronic discovery. Factors internal to the company and its information systems, not the Federal Rules, are responsible for some of these costs.100

With that said, however, it is important to note that electronicdiscovery disputes are costly when they occur.101 All else being equal, for plaintiffs and defendants alike, each reported type of dispute over

96. LEE & WILLGING, MULTIVARIATE ~'iALYSIS, supra note 11, at 5. Not surprisingly, very few plaintiffs' attorneys reported that their clients were producing-only parties. I d.

97. I d. at 7.

98. Id. 99. This finding is consistent v.ith those of the RAND study, which was also presented at

the Duke Conference. Email from Nicholas M. Pace, Behavioral/Soc. Scientist, ~"'T) Corp., to Thomas E. Willging, Senior Researcher, Fed. Judicial Ctr. (June 28,2010, 16:12 EDT) (on file with the Duke Law Journaf). For a video of Mr. Pace's presentation at the Duke Conference, see Civil Litigation Conference, DUKE UNIV. SCH. OF LAW (May 10, 2010), http:/fwww.law. duke.edu/webcast (follow "Civil Litigation Conference- 2" hyperlink).

100. See supra note 99.

101. This is not as often as some might believe. LEE & WILLGJNG, CASE-BASED CIVIL RULES SURVEY, supra note 11, at 24 (reporting that the overwhelming majority of plaintiffs' and defendants' attorneys--72.4 percent and 78.3 percent, respectively-reported that no disputes bad occurred in the closed case).

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ESI was associated with a 10 percent increase in costs.102 To the extent that rule changes make such disputes less common or less costly to resolve, the Committee would potentially provide a great deal of cost savings for parties.

Finally, a ruling on sur:rimary judgment adds considerably to the cost of litigation for both plaintiffs and defendants. All else being equal, including duration, summary judgment added 24 percent to plaintiffs' costs and 22 percent to defendants' costs.1

m Though the procedures for ruling on summary judgment are rule based, the costs are associated with a ruling on a motion. Thus, the costs seem to be, in substantial part, a product of a party's decision to move for summary judgment and not of the procedural mechanics of Rule 56.104

Moreover, the participants in the Duke Conference did not entertain any serious suggestions for reforming, let alone eliminating, summary judgment procedures.

Despite the findings of the FJC study, however, there is still much to learn about the costs of litigation. The Duke Conference's focus on empirical research may inspire additional work in this area. No one knows better than us the inherent difficulties of studying the costs of litigation. But given that this will likely continue to be an area of interest to the judiciary for many years to come, there is a need for more information to inform the policy debate.

CONCLUSION

The FJC study found that discovery and overall litigation costs were largely proportionate to stakes, and that the stakes in a case were the single best predictor of overall costs. In general, litigation costs were lower than one might have expected, given what Professor Linda S. Mullenix has called "[t]he [p]ervasive (m]yth of [p]ervasive [d]iscovery [a]buse."u15 Participants in the Duke Conference-and many others-will disagree with the myth characterization. But this raises its own questions. First, why is this belief so enduring, when it

102. LEE & WILLGIC<G, MCLTIVARL"-Tc A"ALYSIS, supra note 11, at 5, 7. 103. I d. at 6, 8. 104. Many plaintiffs' attorneys argue that summary judgment practice is not teL'lered by the

constraints of Rule 56(c)(2) that there be "no genuine issue as to any material facl" See

WILLGL'IG & LEE, IN THEIR WoRDS, supra note 11, at 29-31 (quoting plaintiffs' attorneys who argue that summary judgment is overused).

105. Linda S. Mullenix, The Pervasive Myrh of Pervasive Discovery Abuse: The Sequel, 39 RC. L. REV. 683 (1998).

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has never been supported by a single empirical study of costs, as opposed to beliefs about costs? Second, have the critics of the Federal Ru1es carried their burden of persuasion? Is there really a need for sweeping, radical procedural reforms, as opposed to more-focused reforms of particu1ar federal rules?

Although we do not endorse Professor Silver's conclusion, we think that it deserves the consideration of the rulemakers. His argument is an increasingly plausible alternative to the widespread belief that the procedural reforms enacted since the Pound Conference have failed to reduce costs. Perhaps the procedures that have been reformed were not causing the problem in the first place. Instead of pursuing sweeping, radical reforms of the pretrial discovery rules, perhaps it would be more appropriate to pursue more-focused reforms of particularly knotty issues (such as preservation duties with respect to ESI) and additional, credible research on the relationship between pretrial discovery and litigation costs.

Otherwise, we may simply find ourselves considering an endless litany of complaints about a problem that cannot be pinned down empirically and that never seems to improve regardless of what steps are taken. In other words, we might find ourselves, again, right back where the Pound Conference set off almost four decades ago. Deja 'tTll inrlPPrl ...... , .LLL~ ........... ~-

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Figure 1. Relationship Between Monetary Stakes and Total Litigation Costs, Private-Finn Plaintiffs' Attorneys (N=828)

"' Ui 0 u

. -.. ..

Stakes

Figure 2. Relationship Between Monetary Stakes and Total Litigation Costs, Private-Finn Defendants' Attorneys (N=715)

Ill

Ui 0 u

. ..

Stakes

..

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Readings on Proposed Amendments to Discovery Rules

I. I~TRODVCTIO~ In April 2014. the Judicial Conference Advisory

Committee on Civil Rules recommended proposed revisions to Rule-; 1, 4, 16. 26, 30, 31, 33, 34. and 37 of the Federal Rules of Civil Procedure. The Committee on Rules of Practice and Procedure then approved these recommendations in May 2014. The proposed amendments will now become effective if they are approved by the Judicial Conference and the Supreme Court. and if Congress does not act to defer, modify, or reject them. Provided these conditions are met, the amendments will become effective on December 1, 2015. It is important to note that these proposed rules have not been adopted at the time of this writim: (June 2014) and arc accordingly subject to modification.

Since their publication in August 2013. the proposed amendment5 have been the subject of considerable public debate. The proposals \verc examined at three capacity-filled public hearings in November (Washington. D.C.). January (Phoenix), and February (Dallas). where a total of more than 120 \\itncssc-; provided testimony. During a six-month public comment period concluding in February 2014. over 2300 comments were submitted to the Advisory Committee. Of particular controversy during the public comment period \\ere propmcd amendments placing numerical limit-. on some forms of discovery and ne\\ standards for di:-;covery sanctions. After the public comment period. the Ad\ isory Committee \\ ithdrc\\ the proposed di~cmcry limitation~ and substantially rc\ i'>cd the proposed discovery sanctions rule. Otherwise. the Advisory Committee recommended adoption of the remaining proposals. \\ ith only minor changes.

II. PROPOSED RULE CHANGES Bclmv arc summaries of the proposed rule

changes currently under consideration. The summary is followed by two sets of public comments that \\ere .;;ubmittcd as part of the public debate. They arc included to illustrate the argumcnb being made in favor and against the proposed rule changes. The first. submitted by a group of law professor:; including Professor Lonny Hoffman of the University of Houston Law Center, argues against the proposed rule changes. The second. submitted by Brad Berenson, Vice President and Sr. Counsel for Litigation and Legal Policy on behalf of the General Electric Company. argues in fa\or of the proposed rule changes.

A. Rule 1 (Scope and Purpose). Under the proposed amendments. nc\v language

\Vould be added to Rule l providing that the rules

should be ··employed by the court and the parties"' to secure the just. speedy, and inexpensive determination of every action and proceeding. The accompanying Committee Note explains that the purpose of the amendment is to emphasize that the parties share with the court the responsibility to ·'construe and administer these rules to secure the just, speedy. and inexpensive determination of every action."

B. Rule 4 (Summons). The proposed amendment \\ould reduce the time

for the service of a complaint and summom after the filing of the complaint from 120 days to 60 day~.

C. Rule 16(b) (Scheduling Orders). Under the proposed amendments. the i-;suancc of

scheduling orders would be modified in several respects.

To begin with. the prO\tston of Rule l6(b J(l J(B) allowing for consulting at a scheduling conference by ''telephone. mail. or other means"' would be eliminated. According to the Committee Note. a scheduling conference is more effective if conducted through "'simultaneous communication.'· which may include .. in pcr.;;on. by telephone. or by more sophisticated electronic means ...

Second. the timing of the scheduling conference. which is governed by Rule \6( b)( 2).

would be conducted "' ithin the earlier of 90 day~ after any defendant has been served with the complaint or 60 day~ after any defendant has appeared. Current!;. a scheduling conference is held \\ ithin the longer timcframc of 120 days of service of the complaint or 90 days after the appearance of a defendant. Under the proposed amendment, a scheduling conference may be delayed for good cause.

Finally. propo~ed amendment~ to Rule l6(b)(3)(8) would modify the '"permitted contents·· of a scheduling order in the following three re~pccts: (I J allo\\ the order to address the ·'prc-.crvation.. of electronically stored information. in addition to existing provisions for "'disclosure"" and .. discovery": (2 1 specify that agreements reached under Federal Rules of Evidence 502 related to privileges arc among those agreements that the scheduling order may include: and (3J add new sub-part (b)(3)(v) whereby the court may direct that a movant is required to request a conference with the court bcf,Jrc filing a discovery motion.

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D. Rule 26 (General Provisions Governing Discovery).

The proposed amendments to Rule 26 embody a number of changes to the conduct of both discovery and case management.

Perhaps most noteworthy are those changes intended to limit the scope of discovery by, among other means, emphasizing the requirement that discovery must be "proportional" to the case. To that end. Rule 26(b)(l) would be amended to require that discovery must be "proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, 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." This language is taken from existing Rule 26(b)(2)(C)(iii) which imposes on the court the duty to limit discovery where the burden or expense of proposed discovery outweighs "its likely benefit." As amended, Rule 26( b )(2 )( C)(iii) would cross-reference the "proportionality" standard set forth in Rule 26(b )(I). The intent behind transferring this language, according to the Committee Note. is to "restore the proportionately factors to their original place in defining the scope of discovery."

Under the proposed amendments, the scope of permissible discovery \vould further be limited by deleting a sentence from Rule 26(b)( I) \Vhich authorizes the court to order discovery, where good cause is shown, of any matter ·'relevant to the subject matter involved in the action."' Instead. according to the Committee Note, the scope of discovery should be governed by the requirement found elsewhere in current Rule 26(b)(l) that discovery must be ·'relevant to any party's claim or defense."

Proposed amendments to Rule 26(b )( 1) would also eliminate the "reasonably calculated" standard in the current version of the rule which provides that ·'relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.'' In its place, the revised rule would provide: "Information within this scope of discovery need not be admissible in evidence to be discoverable."' This proposed change also may have the effect of limiting the scope of permissible discovery. The Committee Note states that the phrase "reasonably calculated" has been used "incorrectly" to define the scope of discovery. Nevertheless under the new proposed language, discovery of inadmissible evidence remains available "so long as it is otherwise within the scope of discovery .. ,

Other proposed amendments to Rule 26 would allow earlier service of requests for production and modify certain provisions of discovery plans and protective orders.

New section 26(d)(2) would permit "early Rule 34 requests."' Under the proposed new rule, a party may serve a Rule 34 request after the expiration of 21 days from the time the summons and complaint are served on a party even though the parties have not yet had a required Rule 26(f) conference. The receiving party must respond within 30 days, measured from the time of the first conference. Under current practice, parties may not serve discovery until after the conference is conducted. subject to certain limited circumstances.

Amendments to Rule 26( f)( 3) would require the parties· discovery plans to state views and proposals on two additional matters. Under sub-part (C), the parties would be required to address issues about the preservation of electronically store information. in addition to currently-required issues related to disclosure and discovery. Pursuant to suppart (D). the parties would be required to state views and proposals on whether any agreement related to privileges should be included in an order under Federal Rule of Evidence 502.

Finally. a proposed amendment to Rule 26( e)( I )(B) would expressly allmv the inclusion in protective orders of a term allocating discovery expenses among the parties.

E. Rules 30 (Oral Depositions). Pursuant to proposed amendments to Rule

30(a)(2) and Rule 30tdJ( l ). where a party must seek leave to take a deposition or seeks leave for additional time to conduct a deposition. the court must grant the requested relief to the extent consistent with the proportionality requirement in Rule 26(b )(I). Initially, there were proposed amendments that would have reduced the presumptive limits on the number of depositions from ten to five for both oral and written depositions. These changes were eliminated, however, from the package of proposed amendments forwarded to the Standing Committee and were not transmitted to the Judicial Conference. The proposed amendment reducing the presumptive limit on an oral examination from one day of seven hours to six hours also has been eliminated.

F. Rule 33 (Interrogatories). Pursuant to a proposed amendment to Rule

33(a)( I), where a party seeks to serve additional

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Update of Federal Courts and Federal Rules of Civil Procedure Chapter 1

interrogatories, the court may grant the requested relief to the extent consistent with the proportionality requirement in Rule 26(b)( I). Initially, there were proposed amendment that would have reduced the presumptive limit on interrogatories from 25 to 15. These changes were eliminated. however, from the package of proposed amendments forwarded to the Standing Committee and were not transmitted to the Judicial Conference.

G. Rule 34 (Requests for Production). Under the proposed amendments, new language

would be added to Rule 34 altering existing practices for requests for production in several respects.

First, where pursuant to the new Rule 26(d)(2) requests are served on a party 21 days after the service of the complaint and summons, the party to whom the requests is directed must respond within 30 days after the parties' first Rule 26(fJ conference.

Second, new language would be added to Rule 34(b)(2)(B) requiring a responding party to state ··with specificity the grounds for objecting to the request.·· thus adopting the language of Rule 33(b)(4) which requires specificity in interrogatory objections.

Third, Rule 34(b)(2)(8) would further be amended to reflect the common practice of producing copte-; of documents or electronically stored information rather than inspecting documents. Under the proposaL a responding party must state that copies will be produced and then must complete the production either by a reasonable time identified in the response or by the date for inspection contained in the request.

Finally. Rule 34(b)(2)(C) would be amended to provide that an objection "must state whether any responsive documents arc being withheld on the basis of that objection.'' According to the Committee Note, this amendment is intended to end the confusion caused when a responding party states multiple objections and still produces information, leaving the requesting party uncertain whether responsive information has been withheld on the basis of the objections.

H. Rule 37(a) (Motion to Compel). Under a proposed amendment to Rule

37(a)(3)(B)(iv), a party seeking discovery may move for an order compelling production where a '"party fails to produce documents." The Committee Note states that this amendment reflects "the common practice of producing copies of documents or electronically stored information rather than simply

permitting inspection.

I. Rule 37(e) (Discovery Sanctions). Under the proposed amendments, Rule 37(e).

which addresses the failure to provide electronically stored information (ESI), would be superseded by a new version of the rule.

Current Rule 37(e) provides: "Absent exception circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good faith operation of an electronic information system.'' According to the Committee Note, "Federal circuits have established significantly different standards for imposing sanctions or curative measures who fail to preserve electronically stored information." As a result, litigants expend "excessive effort and money'' on preserving ESI to avoid the risk of sanctions. Proposed Rule 37(e) is intended to address this state of uncertainty by setting uniform standards for discovery sanctions.

The proposed new rule is triggered \vhere the court finds that ESI that should have been preserved in the anticipation or the conduct of litigation is lost because a party failed to take reasonable steps to preserve the ESI, which cannot be restored or replaced through additional discovery. The Committee 1\'ote states that the duty to preserve is based on the existing common la\V duty to preserve relevant information when litigation is reasonably foreseeable; it docs not attempt to create a new duty to preserve. Among the factors relevant to determining the reasonableness of preservation efforts is the sophistication of the parties and the proportionality of the preservation requests to the parties· resources. The proposed rule also directs. as the Committee 1\'ote explains, that upon a finding a party failed to take reasonable steps to preserve ESl and that the information is lost as a result, "the initial focus should be on whether the lost information can be restored or replaced through additional discovery."

If the information cannot be restored or replaced by additional discovery, then the court may resort to the measures specified by proposed Rule 37(e)(l}, but only "'upon finding prejudice to another party from the loss of the information.'' According to the Committee Note. the rule leaves courts with discretion to determine how best to assess prejudice in particular cases, including whether the party who did not lose the information bears the burden of proving prejudice. Once a finding of prejudice is made, the court may order measures "no greater than necessary to cure the prejudice." The Committee Note states

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that the severity of the measures must be "calibrated in terms of their effect on the particular case."

In the alternative, pursuant to proposed Rule 37(e)(2), if the court finds that the party "acted with the intent to deprive another party of the information's use in the litigation," it may order, in the words of the Committee Note, "very severe measures" to address or deter failures to preserve ESI. The measures specified by sub-part (e)(2) are three-fold: ( 1) presume that the lost information was unfavorable to the party; (2) instruct the jury that it may or must presume the information \Vas unfavorable to the party: and (3) dismiss the action or enter a default judgment. The Committee Note states that the proposed rule is intended to provide a uniform standard for usc of these measures and rejects those cases where the measures have been imposed on a finding negligence or gross negligence.

Chapter 1

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Joint Comments by Professors Helen Hershkoff, Lonny Hoffman, Alexander A. Reinert, Elizabeth M. Schneider, David L. Shapiro, and Adam N. Steinman on Proposed

Amendments to Federal Rules of Civil Procedure

Submitted February 5, 2014

Committee on Rules of Practice and Procedure Administrative Office ofthe United States Courts One Columbus Circle, NE Washington. D.C. 20544

To the Committee on Rules of Practice and Procedure:

We vvrite to urge this Committee to reject the proposed amendments that redefine the scope of discovery, lower presumptive limits on discovery devices. and eliminate Rule 84 and the pleading forms. The undersigned are law professors who teach and write in the area of federal civil procedure. Each of us also litigated in the federal courts prior to entering the academy, and remain actively involved in professional practice.

In our judgment two key issues bear close consideration by the Committee as it considers how to proceed: ( 1) What problem does the Committee seek to solve? (2) On balance, how likely is it that the proposed amendments will improve the status quo? As in 1993 and 2000. the Committee is focused on addressing a perceived problem of excessive discovery costs. In supporting the current proposed amendments. the Committee recognizes that empirical data show no widespread problem. but nevertheless hopes that new across-the-board limits on discovery will lessen discovery costs in the small number of complex, contentious. high stakes cases where costs are high. The Committee is correct about the data: most critically. the Federal Judicial Center's ( .. FJC") 2009 closed-case study shows that in almost all cases discovery costs are modest and proportionate to stakes. As in 1993 1 and in 2000,2 evidence of system-wide. costmultiplying abuse does not exist, and the proposed amendments are not designed to address the small subset of problematic cases that appear to be driving the Rule changes. We anticipate that.

1 Linda S. Mullenix. Discove1y in Disarray The Pervasive J~vth a/Pervasive Discovety Ahuse and the Consequencesfbr [ ·n/bunded Rule making. 46 STAN. L. REv. 1393. !411-43 ( 1994) (strongly criticizing the "'soft social science"' opinion evidence used by the rulemakers behind the !993 reforms. while noting that the findings of the methodologically sound empirical studies did not support the reforms),

2 James S. Kakalik, Deborah R. Hensler, Daniel McCaffrey. Marian Oshiro. Nicholas M. Pace, and ivlary E. Vaiana. Discover} .\!anagemem. Further Analysis of the Civil Justic·e Rc(orm Act Evaluation Data. 39 B,C. L Rr-.v. 613, 636 ( !998) (evaluating the RAND corporation study of the 1993 reforms, which found that under that set of rules lawyer work hours on discovery were 0 for 38% of general civil cases, and low for the majority of cases.); see also id. at 6-1.0 (table 2.10 shov,s that while discovery costs grow with size and complexity of case. the proportion of total costs they represent does not dramatically increase: the median percent of discovery hours for the bottom 75%. top 25° o. and top l O"o of cases by hours worked were 25°;o. 33%, and 36% respectively): Thomas E. Willging. Donna Stienstra. John Shepard, and Dean Miletich, An Empirical Study ofDiscovel}' and Disclosure Practice Cnder the 1993 Federal Rule Amendments. 39 B.C. L. REv. 525, 531-32 ( 1998) (finding that under the 1993 amendments, the median reported proportion of discovery costs to stakes was 3%. and that the proportion of litigation costs attributable to problems with discovery was about 4% ).

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!..I!Qate of Federal Courts and Federal Rules ofChil Procedure Chapter I

Comments b~ Professors Hershko ff. Hoffman. Reinert. Sc hneider. Shapiro. and Steinm an on Proposed Amendments to Federal Rules of Civil Procedure F ebruar. 5. 2014. Page 2 of 18

as\\ ith past Rule changes. untargeted amendments will fail to eliminate complaints about the small segment of high-cost I itigation that elicits head I ines about litigation gone \\ ild: instead the~ \\ill create unnecessa0 barriers to rdief in meritorious cases. \\aste judicial resources. and dri\ e up the cost of chi I justice. The amendments are unnecessar~. um\ arran ted. and counterproductive.

In our\ ie\\. those \\ho support major change to the Federal Rules are responsible fur demonstrating that proposed amendments \\ill. on balance. make the overall system fairer and more efficient. Percepti\el~. Judge Lee Rosenthal has noted that ··[s]ince their inception in 1938. the rules of disco\ ery ha\ e been re\ ised \\ ith \\hat some \ ie\\ as distressing frequenc~. And ~ et the rulemakers Clmtinue to hear that the rules are inadequate to control discovery costs and burdens:·' E\en assuming that a small subset of cases presents a problem that should be sohed. the proposed amendments\\ ill do little. if an~ thing. to decrease costs in these cases. As the t\\O authors of the F JC s 2009 empirical study commented:

Instead of pursuing S\\ eeping. radical reforms of the pretrial disco\ er~ rules. perhaps it \\ould be more appropriate to pursue more-focused rdorms of particular\) knotty issues. . Otherwise. \\e ma~ simp\) tind ourseh es considering an endless litan) of complaints about a problem that cannot be pmned dl)\\ n c:mpiricall;. and that ne\ er seems to impm\ e regardless of\\ hat steps are taken.~

Our concern is not just that the proposed amendments\\ ill be indlectual Our greater \\OtT~ is that the~ \\ill increase cost:> to litigants and the court s~stcm in those a\crage cases that operate snwothl) under the current rule:,. In our\ ie\\. the amendments arc like!) tt) spa\\ll CLJn fusHm and create incenti\ es for \\lhteful disco\ er~ disputes E~ \en more troubling. b~ increasing costs and decreasing inf,;rmation tll>\\. the pr\)posed amendments arc like\) to undermine meaningful access tt) the courts and to impede enforcement of federal- and staterecognized substanti\ e rights.

IL Rule 26: Proposed Amendments Re-Defining the Scope of Discovery

Three of the proposed amendments \\ould change the \\a~ Rule 26 ddines the scope of disco\ ery· eliminating the trial judge·s discretion to allo\\ discO\ery relevant to the ··subject matter .. ofthe action: eliminating the \\ell-established ··reasonabh calculated to lead to the

~ .

Lee & \\ illging. Defining the Problem. supru note 6. at 783. !d. at 784.

s !d. at 783.

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Comments by Professors Hershko ff, Hoffman, Reinert Sc hneider, Shapiro, and Steinm an on Proposed Amendments to Federal Rules of Civil Procedure February 5. 2014. Page 5 of 18

discovery of admissible evidence'' language; and inserting proportionality limits into the very definition of matter within the scope of discovery. All three proposals reflect an unsupported but profound distrust of trial-level judges and their exercise of discretion. The current rules give those judges the power and the tools to limit discovery to what is reasonable, making the amendments unnecessary. Vague complaints that the proportionality rules are underutilized hardly establish that judges are balancing improperly or are unaware of the need to do so. Yet implicit criticism of the way trial judges are managing cases and ruling on discovery issues animates the proposed rule changes, many of which claim to make little or no change in the substance of Rule 26. This is no substitute for a coherent explanation of the need for change or why the proposed changes are the appropriate tool to fix the perceived problem.

A. Rule 26(b)(l): Elimination of a district judge's discretion to order discovery relevant to the "subject matter" of the action

The Committee's current proposal to amend Rule 26(b)(l) eliminates the power of courts to grant-upon a showing of good cause-access to discovery relevant to the subject matter of the action. This proposed change is without basis. would narrovv judicial discretion, and make it more-not less--difficult to carry out reasonable case management. Moreover, these changes vvould unduly narrow the scope of discovery and lead to additional and complex discovery disputes. vvhile giving courts minimal guidance for resolving them.

Some historical background about Rule 26 can inform this discussion. For the first six decades of the Federal Rules of Civil Procedure. parties vvere permitted to seek and obtain discovery that was relevant to the "subject matter .. of the action. 10 The 2000 Amendments altered this formulation. permitting discovery relevant to the '·claims or defenses .. in the action. with broader .. subject matter .. discovery available only upon a showing of good cause. Giving district judges the power to broaden discovery was recognized as necessary to ensure flexibility and encourage judicial involvement in discovery management. The Committee also recognized that defining which information is relevant to subject matter but not to claims or defenses could be difficult. 11 Accordingly. the Committee thought it important to maintain the possibility of court involvement to .. permit broader discovery in a particular case depending on the circumstances of the case, the nature of the claims and defenses. and the scope of the discovery

d ,d2 requeste .

In 1978, the Committee considered a proposal nearly identical to the current one. but ultimately rejected it for reasons that resonate toda). The Committee reasoned that deleting the term ·'subject matter'" would simply invite litigation over its distinction from "claims or defenses." l\.loreover. although the Committee was aware of no evidence that discovery abuse was caused by the broad term ·'subject matter." it also was doubtful ··that replacing one very general term with another equally general one will prevent abuse occasioned by the generality of language." Preliminary Draft of Proposed Amendments to the Federal Rules of Civil Procedure. 77 F .R.D. 613. 627-28 ( 1978).

11 Commentary to Rule Changes, Court Rules, 192 F.R.D. 340.389 (2000) ('"The dividing line between infom1ation relevant to the claims and defenses and that relevant only to the subject matter of the action cannot be defined with precision.'').

12 Id

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Comments by Professors Hershko ff, Hoffman, Reinert Sc hneider, Shapiro. and Steinm an on Proposed Amendments to Federal Rules of Civil Procedure February 5. 2014. PaQ:e 6 of 18

The Committee's current proposal gives little consideration to the principles that guided its decision fourteen years ago. The explanation for eliminating the discretionary power of the court is inadequate, based centrally on the conclusory assertion that ·'[p ]roportional discovery relevant to any party's claim or defense suffices.'' 13 The Committee has offered no substantive reason for moving a\vay from the discretion currently afforded the parties and the court to shape discovery according to .. reasonable needs of the action:· !-I We urge this Committee to reject this kind of unsupported assertion. Had there been a pattern of judicial abuse of the discretion afforded them by the current Rule 26(b )( l ). one would expect that it would be evident in the case la\v. However, the decisions applying this aspect of Rule 26(b )(I) suggest that courts have exercised their discretion sparingly and appropriately. 15 Perhaps the Committee has a different understanding of how courts have exercised discretion under Rule 26(b )(l) but, if so, the basis for that alternative view has not been shown. Nothing suggests that the authority to allow such discovery-upon a showing of good cause-plays any role in the ·'worrisome number of cases .. where ·'excessive discovery" is thought to occur. 16

Not only is the existing evidence insufficient to justify making this change to Rule 26{b)( 1 ). but we believe that the Committee underestimates the potential disruption the proposed rule would have on litigation. For instance, the proposed Advisory Committee Notes state that "[i]f discovery of information relevant to the claims and defenses identified in the pleadings shows support for new claims or defenses. amendment of the pleadings may be allowed when appropriate.',~ 7 But this is precisely the opposite of what the 2000 Committee believed would be

1' .')ee Committee on Rules of Practice and Procedure of the Judicial Conference of the United States.

Prelim ina!) Draft of Proposed Amendments to the Federal Rules of Bankruptcy and Civil Procedure 297 (Aug. 20 13) [hereafter ·'Preliminary Draft of Proposed Amendments"].

11 192 F.R.D. at 389. Of the reported district court cases we reviewed interpreting the .. good cause"' standard, none suggests

unreasonable decisionmaking. See. e.g .. Jones v. McMahon. 2007 WL 2027910 * !5 (N.D.N.Y. July II. 2007) (finding good cause to permit a limited deposition regarding matter relevant to the subject matter of the action, but denying request in large part because of lack of good cause showing); Rus. Inc. v. Bay Indus .. Inc., No. 0 I Civ. 6133.2003 WL 17-+075, * 1-t (S.D.KY Apr. I, 2003) (good cause not shown in motion to compel discovel) of material relevant onl~ to subject matter of action where movant did not make "'any showing of need''); RLS Assoc .. LLC v. United Bank of Kuwait. PLC. No. 01 Civ. 1290.2003 \VL 1563330, *8 (S.D.N.Y. March 26, 2003) (good cause not shown in motion to compel discovery of material relevant only to subject matter of action where movant did not show that '·production would serve the reasonable needs of the action"): Johnson t\tatthey. Inc. v. Research Corp. et al., No. 0 I Civ. 8115. 2002 WL 31235717. *2 (S.D.N.Y. Oct. 3, 2002) (finding no good cause for disclosure of documents relevant to subject matter, but not to claims or defenses): Hill v. l\lotel 6, 205 F.R.D. 490. 493 (S.D. Ohio 200 I) (good cause not shown for broad discovery of personnel files in disparate treatment case. where discovery would relate to disparate impact. but finding good cause for the disclosure of specified employees· personnel files): Cabell v l\:orton. 226 F.R.D. 67 (D.D.C. 2005) (rejecting request for discovel) beyond the scope of plaintiffs statuto!) claim in a suit seeking an accounting oflndian trust funds. Discovery related more generally to asset management was not permissible as it \vas beyond the scope of plaintiffs' statutory claim): Jenkins v. Campbell, 200 F .R.D. 498 (:VI. D. Ga. 200 I) (breach of contract plaintiff was entitled to discovery only on those claims remaining after the entl)· of partial summary judgment against him, although court retained authority to revise partial summary judgment order at any time prior to the entry of final judgment).

16 Pre liminal) Draft of Proposed Amendments. supra note 13. at 265. 17 Id at 255-56.

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achieved by limiting discovery to claims and defenses asserted in the pleadings. 18 It is unclear hO\v discovery limited to what is already pleaded would provide an information-poor litigant with access to the information needed to expand its legitimate claims. Thus the elimination of "subject matter'' discovery eliminates a tool necessary to address the problem of information asymmetry that is so common vvhen an individual or small business faces a large entity in litigation. If Rule 26(b)(l) vvere amended to preventjudges from ordering discovery relevant to the "subject matter'' of the action, the ability to balance this informational asymmetry would be more severely limited. For example, a plaintiff who has a valid§ 1983 claim against a municipal official would be hard-pressed to seek discovery relevant to a potential Monell claim against the municipality, absent the power of a court to grant access to material relevant to the subject matter of the action. And the plaintiffvvith a valid claim against the municipality may have little additional opportunity to develop information necessary to support her claim. Finally and relatedly, we have great concerns that the uncertainties that will follow from this amendment will create incentives for parties resisting discovery to file more motions to litigate relevance. increasing discovery costs and forcing judges to spend time ruling on a new group of motions. We have seen how past changes to Rule 11 increased satellite litigation pertaining to sanctions rather than improving the efficiency or fairness of the civil justice system.

In sum. the Committee has articulated no specific benefit that will outvveigh the costs of altering the current framework of Rule 26(b )(I). The existing text requires an affirmative showing of good cause to justify discovery that is relevant to the ··subject matter involved in the action"' but not to "any party's claim or defense." Even when good cause is shown. such discovery is subject to the limits already articulated in Rule 26(b)(2)(C). and may be limited by a protective order under Rule 26(c). No adequate explanation has been offered for vvhy these existing protections are insufficient to ameliorate any negative consequences of permitting occasional discovery regarding the subject matter of the litigation. There is no basis for believing that the proposed amendment would. on balance. produce more good than harm. and so we urge the Committee not to adopt this proposed change to Rule 26(b)(l ).

B. Rule 26(b)(l): Admissibility and Relevance

As the Committee recognizes, it has long been the case that discovery is permitted even as to information that-standing alone-would not be admissible at trial. 19 Yet the Committee's current proposal to amend Rule 26(b)( I) would eliminate an important sentence that has guided courts for decades: ·'Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.'' 20 Again the Committee's proposed amendment does not target a documented problem and runs the risk of creating wasteful satellite litigation.

18 192 F .RD. at 389 ( .. The rule change . . signals to the parties that they have no entitlement to disco vel) to develop new claims or defenses that are not already identified in the pleadings.").

1g See Preliminary Draft of Proposed Amendments, supra note 13, at 266.

In its place, the proposal would add a sentence that omits the phrase ··reasonably calculated to lead to the discovery of admissible evidence." See id at 289-90 r·tnformation within this scope of discovery need not be admissible in evidence to be discoverable.").

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The Committee explains that this change is not meant to modify the definition of ··relevance,'" but rather to prevent improper use of the "reasonably calculated"' language to allo\\ discoverv into information that is not. in fact. relevant. 21 As an initial matter. these concerns appear t~ be based on nothing more than anecdotal impressions. 22 There is no empirical evidence that this language has had the effect hypothesized by the Committee. The current Rule already makes clear that the .. reasonably calculated·· language applies only to .. [,]elevant information"; that was the point of the 2000 amendment. 23

Even if vievved in isolation, however, the phrase ··reasonably calculated to lead to the discovery of admissible evidence'" cannot permit discovery beyond what is otherwise authorized by Rule 26(b )( 1 ). Under the Federal Rules of Evidence. evidence is only admissible if it is relevant. 2-1 The need to obtain information that is '·reasonably calculated .. to lead to the discovery of admissible, relevant evidence is especially crucial in the context of pretrial discovery. As the Committee recognized in 2000:

A variety of types of information not directly pertinent to the incident in suit could be relevant to the claims or defenses raised in a given action. For example. other incidents of the same type. or involving the same product. could be properly discoverable under the revised standard. Information about organizational arrangements or filing systems of a party could be discoverable if likely to yield or lead to the discovery of admissible information. Similarly, information that could be used to impeach a likely witness. although not otherwise relevant to the claims or defenses. might be properly discoverable. 25

The ··reasonably calculated .. language does not give parties carte blanche. of course. All discovery is subject to the limits articulated in Rule 26(b)(2)(C). and may be limited by a Rule 26(c) protective order.

To delete the .. reasonably calculated"" language. by contrast. will send courts and litigants a misguided and fundamentally incorrect message: that there is some category of information that is '·reasonably calculated to lead to the discovery of admissible evidence·· but is not relevant to the claims or defenses and. therefore. wholly outside of the permissible scope of discovery. This vvill almost certainly be perceived as narrowing the definition of relevance and mandating a

!d. at 266 (expressing concem that the •·reasonably calculated .. language is being improperly invoked ""as though it defines the scope of discovery .. and as setting "a broad standard for appropriate discovery .. ).

22 Minutes of the April 20 13 Meeting make reference to a survey that revealed ""hundreds if not thousands of cases that explore·· the language "'reasonably calculated to lead to the discovery of admissible evidence.'' with ·'many"" of these cases suggesting that courts thought this phrase "'defines the scope of discovery ,. Committee on Rules of Practice and Procedure Agenda Book. June 3-4. 2013. at 147 (draft minutes of April 2013 Advisory Committee meeting). There is no indication that any analysis of the cases was made to detem1ine whether they pennitted discovery that would not be considered ··relevant"" under the current or proposed Rule.

21 192 F .R.D. at 390 (""Accordingly, this sentence has been amended to clarify that infonnation must be relevant to be discoverable, even though inadmissible, and that discovery of such material is permitted if reasonably calculated to lead to the discovery of admissible evidence."").

24 See FED. R. Evm. 402 (""Relevant evidence is admissible ... Irrelevant evidence is not admissible.''). ::s 192 F.R.D. at 3&9.

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more restrictive approach to discovery that is wholly unjustified. This proposal is a particular cause for concern because it affects the meaning of a word-'·relevant"-that has been called by a leading treatise in the field as .. [p ]erhaps the single most important word in Rule 26(b )(I ).'' 26

At a minimum, the proposed change will invite wasteful satellite litigation over the amendment's purpose and effect-an unintended outcome that would undermine the goal of reducing unnecessary costs and de lay.

C. Rule 26(b)(l) & (b)(2)(C): Proposal to incorporate the "proportionality" factors into the "scope of discovery"

We also oppose the proposal to move the cost-benefit considerations that are currently set forth in Rule 26(b)(2)(C)(iii) to Rule 26(b)(l ). There is a serious risk that the amendment will be misread to impose a more restrictive discovery standard across the board. contrary to the Committee's intent and without any empirical justification for a more restrictive approach. There is also a danger that the rewritten rule would be misinterpreted to place the burden on the discovering party, in every instance. to satisfy each item on the (b)(2)(C)(iii) laundry list in order to demonstrate discoverability. This would improperly shift the responsibility to shmv burdensomeness from the party resisting discovery to the party seeking discovery. vvhich in turn will encourage a higher degree of litigation over the scope of discovery and increase costs both for litigants and the court system. Moreover, the rule change does not explain how the costbenefit analysis is to be undertaken or shown. and we are concerned that the requirement will create perverse incentives for the hiring of experts, the holding of additional court conferences, and the over-litigation of discovery requests.

\Ve recognize that the Committee has not expressed the view that the cost-benefit considerations that novv appear in Rule 26(b)(2)(C)(iii) should be re-balanced to make discovery harder to obtain. Rather. the proposed Committee Note states that the proposal will merely ··move·· Rule 26(b)(2)(C)(iii)'s already '·familiar .. considerations to Rule 26(b)(l). 27 During public hearings on these proposals. Committee members emphasized repeatedly that this change will not alter the burdens that currently exist. 28

The Committee appears to believe that the cost-benefit provisions are underutilized and that they will acquire greater attention. use. and citation if relocated to an earlier portion of Rule 26. The Committee provides no evidence that lawyers and judges are unaware ofthe provision's current existence. It seems far more likely that the standards for proportionality are infrequently cited because-as the empirical evidence suggests-discovery is usually proportional and appropriate. Rule 26 is already crystal clear about a party· s obligation to respect Rule 26(b)(2)(C)(iii)'s considerations vvhen making discovery requests, a party's ability to object to discovery requests that it believes are excessive in light of Rule 26(b)(2)(C)(iii)'s considerations. and the court's obligation to limit discovery requests that run afoul of Rule 26(b)(2)(C)(iii)'s

CHARLES ALA~ WRIGHT, ARTHl'R R. MILLER, & RICHARD L. MARCl'S, 8 FEDERAL PRACTICE & PROCEDCRE

§ 2008. 27 Preliminary Draft of Proposed Amendments, supra note 13, at 296 (page 16 of the red lined proposed

amendments). 28 See Transcript of Nov. 7, 2013 Hearing [hereinafter "Nov. 7 Hearing'·]. at 32, 139-40, 154-56. 180-81

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considerations. Although the proposed Committee Note states that moving these considerations to Rule 26(b )(l) will require parties to observe them "without court order.''29 that obligation already exists under Rule 26(g). 30 ~

Relatedlv. the Committee asserts that these cost-benefit considerations are ·•not invoked often enough to.dampen excessive discovery demands." 31 But this assertion also lacks empirical support. If the lavvyers who expressed concerns about '·excessive discovery'' in response to the survey questions are the same ones who are "not invok[ing] Rule 26(b )(2)(C) often enough.'d2

then it is their advocacy on behalf of their clients-not Rule 26-that requires improvement. It seems especially improbable that the cases about which the Committee is most concerned''those that are complex. involve high stakes, and generate contentious adversary behaviot·" 33

are the same ones in vvhich parties are not '·invok[ing]" cost-benefit considerations often enough. More likely. lawyers complaining about excessive discovery are fully aware of Rule 26(b)(2)(C)(iii)'s considerations. but they are not uniformly successful in limiting discovery requests that they view as excessive. 3-'

Admittedly, judges may sometimes make mistakes in concluding that a particular discovery request should not be limited pursuant to Rule 26(b)(2)(C)(iii)-just as they may sometimes make mistakes in concluding that a particular discovery request should be limited pursuant to Rule 26(b)(2)(C)(iii). But there is no empirical support for the idea that transplanting the same considerations one subsection earlier in Rule 26(b) will improve the discovery process. It is difficult to believe that judges and attorneys regularly fail to read past Rule 26(b )(I) and that. even when they make it that far, they deliberately ignore its explicit reference to "the limitations imposed by Rule 26(b)(2)(C)."

It would also be umv ise for the Committee to proceed with this proposal on the view that. because it makes no substantive change to the discovery standard. the amendment at least vvould do no harm. In fact the amendment could have serious. unfortunate consequences. The puzzling justification for the proposal is precisely why so many who have commented on it perceive it to make the overall discovery standard more restrictive than it currently is. For there is no other logical purpose for making the proposed change: judges would be hard-pressed to imagine that the goal is simply to remind them of the existence of a provision within Rule 26 that is already

Preliminary Draft of Proposed Amendments, supra note 13, at 296 (page 16 of the redlined proposed amendments).

Fed. R. Civ P. 26(g )(\) ( .. By signing. an attorney or party certifies that to the best of the person· s knowledge. information. and belief formed after a reasonable inquiry. [any] discovery request .. is not interposed for any improper purpose. such as to harass. cause unnecessary delay. or needlessly increase the cost of litigation: and ... neither unreasonable nor unduly burdensome or expensive. considering the needs of the case, prior discovel) in the case. the amount in controversy. and the importance of the issues at stake in the action."). See also Nov. 7 Hearing. at 139. 15-t. 172-73 (discussing Rule 26(g)).

Jt Pre liminal) Draft of Proposed Amendments. supra note 13. at 265. '2 !d. n !d. 1 ~ Cj. Arthur R. Miller. Simplified Pleading, Jleaningfzd Days in Court, and Trials on the Jferils Reflections on

the Deformation of Federal Procedure. 88 N.Y .U. L. REv. 286. 361 (20 13) ("[A]ccording to the practicing bar, ... litigation abuse is anything the opposing lawyer is doing.").

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Februan 5. 201-L Pa!le llof 18

knO\\n and emplo;.ed Because the Committee·s proffered explanation for the transition is so difficult t(\ comprehend. there is a real danger that judges\\ ill mistakenly infer that the Committee must ha\ e intended a more restrictive disco\ ery standard. or at least one that places greater burdens on the requesting part). This \\auld be a penerse result: but it is a quite

predictable one. and on.: that can and should b.: a\ oidd .

. -\ccurdingl). the C\m1mittee shl1uld lea\ e Ruk 26( b)( 2 )(C)( iii f s cost-benefit factnr'> \\here the\ currenth reside If there is concern that liti!lants are failin!l to reali/e that tht1SC Ct1nsidera~ions mus~ be .. obsen ed \\ ithlJUt court order..":

1< then an altc;nati\ e \\ould b.: tll suggest

discus:>ion ofthese facturs at the preliminar) disco\er) conferenc.: alread) contemplated under

Rule 26(t\

IlL Restricted t'sc of DiscOYef! Devices: Rules 30. 31,33 & 36 and Lm'\er Presump tin Limits

1 he Committee defend~ pmp\.>s.:d limits to the pr.:sumpti\ e numb.:r of disco\ er) de\ ice:> each part) can use a-, a \\a: ttl r.:duce cost and incr~as~ efficiency. H~.1\\e\er. like the CPmmittec·s pr~.1pc,sed amendments t1.1 Rule 26. the;. arc insuffici.:ntl~ supported b) rclc\anl cmpirical e\idence. and the;. \\illlikd;. spa\\n m~.m.: discmer) disputes and undermine the Ruk· ~ gual achie\ ing ju-;t outcome~ in indi\ idual case-.,. The mo;;t pmblcmc1tic pn1pnsal in the current pc1ckage L>f ref,)rnb i" the change from a presumpti\ e !1mit of tcn dep~.1sititm~ pcr part: t .. ,

a pre~umpti\ e limit of fi\.: In certain t) pes of ca:-;e-;. dcpll'iiti~.ms art: the mnst Important di-,cl•\er;. de\ ice that pMtie-., u'ie ThLh. esp.:ciall; a,; di:>cG\er) d.:\ ice. limiting acces-.; slwuld he justified Clnl~ if there is a has1 hl lt:\e that this rcfl1m1 is neded and that

de-.,ircd hendih \\ill f,l!IP\\ [Remainder of this section deleted]

IV. Elimination of the forms

F ina! I:. \\ e turn to a proposed chang.: the abrogation of Rule 8-l- and the elimination

the simplest but most significant: Forms. The Forms \\ere once described as

··the ml1St important part of the rules:· particular!: fl.:ading. because ··\\hen : ou can "t define )UU can at least dra\\ pictures to show :our meaning:· ~The Committee offers t\\O principal reasons for ahandnning them. ( l) according to .. informal inquiries that confirmed the initial impressions of .. m-:mbers:· la\\)ers and prose litigants do not tt:nd to rei) on the Forms: and (2) the curr~nt Form:; .. live in knsion \\ith recent!) developed approaches to general pleading standards.""' J The Committee· s first justification is \\holly lacking in empirical rigor and. moreo\er. ignores the t:1.ct that federal judges ate\ er) le\ el do look to the Forms fur assistance. The second justification is certain!~ accurate-hromh/_~ and hjhal create tension\\ ith the forms-but that t.:nsion is not insurmountable and. e1.en if it \\ere. one still n.:eds a rationale for choosing one O\er th-: other. Thc Committee has pnn id.:d no explanatiLm for opting h1 abandon th.: Forms rather than tl) reexamin.: plausibilit;. pleading.

The Committee·s first explanation for \\h) it i:-; abandnning the Forms is based on casual empiricism and sc:lf-e\ ident bias. As \\e understand it. a Subcommitt.:e to study the Forms apparently started v, ith the intuition that iawy ers tend not to rely on the Forms. and then conducted an informal sun ey _of undisclosed Ia\\) ers-unsurprisingl) concluding that their initial intuitions \\ere correct. ' 11 Needless to sa). this is not a valid \\a) to ansv .. er the question of \\ hether Ia\\) ers rely on the Forms to construct their complaint. If one starts \\ ith a bias in one direction or another. one should be extremely cautious in conducting empirical research so as to ensure that the initial bias does not influence the ultimate interpretation of the results. Gi\ en the Committee· s description of its research. \\ e are not comforted that an) steps \\ere taken to reduce the potential for this confirmatof) bias. 468

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Furthermore, it is surprising that the Advisory Committee would rely on the supposed irrelevance of the forms, when its own staff prepared a memo for the April20 13 Meeting that summarized in great detail the numerous lower courts that have grappled with the ongoing viability of the forms after Iqbal and Twombly. 51 Although \Ve do not claim to have conducted a rigorous survey, our examination of the case law is consistent with the material already presented to the Committee. We note that the Supreme Court has relied on the Forms in the pleading context numerous times-perhaps most significantly in Twombl_v itself. 52 Moreover, lower court opinions cite to the forms often. relying on them as indicative of the pleading required under the Federal Rules, even after Tvvombly and Iqbal. 53 If federal judges have found the Forms illustrative of the relevant pleading standard, as our and the Committee· s research suggests, it stands to reason that practicing lawyers have done so as well. Indeed. practitioner "blogs" indicate that lawyers pay close attention to lower courts' reliance on the Forms. particularly in

'4 the area of intellectual property.)

The Committee's second explanation, that the Forms cannot be squared with the Supreme Comt's decisions in Twombly and Iqbal, prematurely resolves a question that the Committee has yet to fully consider. As the Committee is a\vare. the conflict between the ru\emaking contemplated under the Rules Enabling Act and the Court's decisions in Twombl_v and Iqbal is a live one. Indeed. the Committee has noted in the past that it will be open to considering instituting rulemaking if it is shown that plausibility pleading is having a significant impact on the business of federal courts. It is premature to call an end to the debate, especially in light of recently emerging empirical data. 55 Given that the Committee has yet to take a definitive position on plausibility pleading, striking the Form Complaints commits the Committee to a position that implicitly adopts plausibility pleading as the standard going forward. This is all the more troubling given that one trenchant criticism of Iqbal and Twombl_v is that the Couti abandoned its previously stated commitment to modifying the Federal Rules through the rulemaking process rather than through case adjudication. 56 If the Committee adopts this proposaL the door will be effectively shut and the pleading rules will have been altered without any of the participatory deliberation that legitimizes the Federal Rules.

51 See Memorandum by Andrea L. Kuperman at 8-26 (July 6. 20 12). in Advisory Committee on Civil Rules Agenda Book, April ll-12. 2013. at 230-248.

52 See Twomb!_v. 550 U.S. at 565 n.l 0 (arguing that there was no conflict between Form 9 (now Form II) and plausibility pleading): see also Mayle v. Felix, 545 U.S. 644,660 (2005); Swierkiewicz v. Sorema N. A., 534 U.S. 506.513 n.4 (2002).

51 See, e.g, K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc .. 714 F.3d 1277. 1288 (Fed. Cir. 2013) (resolving tension between Form 18 and Twomh/_t and Iqbal); Hamilton v. Palm, 621 F.3d 816. 818 (8th Cir. 2010) (relying on Form 13): Tamayo v. Blagojevich. 526 F.3d 1074, 1084 (7th Cir. 2008) (drawing analogy from Form 9).

~~See, e.g, Charles L Hawkins, Iqbal And Twomb/_1· Xotwithstanding. Form 18 Is The Standard For Direct lnfi'ingement Allegations. available at http::\\\\\\ .mondag.com unitedstat.:s x 2431.58 Pat.:nt Iqbal- And- T\\omblv · :\otwithstandirw. ·Form- 18- ls- The ·Standard- For- Direct -Infringement· Allegations (last visited January 23. 2014) (posting ·'practice note" related to intellectual property).

55 See, eg, Kevin M. Clermont and Stuart Eisenberg. Plaintiphobia in the Supreme Court, 162\.J. PENN. L. REV._ (forthcoming 2014 ). available at http:/ papers.ssrn.com/sol3ipapers.cfm?abstract_id=2347360.

56 See Swierkiewicz v. Sorema. N.A., 534 U.S. 506, 514-15 (2002); Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit. 507\.J.S. 163. 168-69 (1993).

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Moreover, the Committee· s explanation of its proposal to abrogate Rule 84 and the Forms seems strikingly inconsistent. For although it acknO\vledges the tension in its report to the Standing Committee. it states in the proposed Committee Notes that "[t]he purpose of providing illustrations for the rules, although useful when the rules were adopted, has been fulfilled." 57

This public explanation, hmvever, flies in the face of its description of the conflict between the Forms and plausibility pleading. The real problem may be that the plausibility standard articulated by the Court is so vague, standardless, and subjective that it is at odds with efforts to provide examples of pleadings that are sufficient. At times, the Committee's report to the Standing Committee suggests this conclusion. 58 This. hO\vever, is an indictment of the plausibility standard of pleading. not of the Form Complaints. Eliminating the Forms may eliminate the conflict. but in this case conflict avoidance may amount to a derogation of the Committee's institutional obligations.

CONCLUSION

In conclusion. we urge the committee to closely attend to the two key questions that we think must be answered as it considers how to proceed. As to the first-whether the Committee is solving a well-identified problem-the empirical evidence is clear that in the vast majority of cases discovery costs are not disproportionate to their estimated value. Given the available empirical record. it appears to us that a key underlying assumption made by those who support these amendments is fundamentally called into question.

As to second inquiry-whether proponents have shown that the proposed amendments will make things better-we believe that their burden has not been satisfied. Indeed. quite to the contrar). in our judgment the proposed amendments unnecessarily risk a host of adverse consequences, including that they are likely to spa\vn confusion and \vasteful satellite litigation. outcomes that. perversely. are contrary to the Committee· s expressed intent to reduce costs and improve judicial efficiency.

Perhaps most perplexing to us is that many of the proposed amendments are predicated on a lack of faith in the ability or willingness of trial judges to manage the cases that come before them. We are av,are that a majority of Supreme Court Justices in both Twombly and in Iqbal expressed their belief that ·'careful case management"' has been beyond the ability of most district judges. 59 That view is at odds with the best current empirical evidence suggesting that trial judges are managing the vast majority oftheir dockets well. 60 Even assuming that a small subset of cases present problems that the current rules cannot solve, the proposed changes do not address and so cannot resolve these problems. Rather. the amendments will generate different problems and shift costs to litigants in cases where the rules are working well. We urge the Committee to reconsider and to reject the package of proposed amendments.

,-Preliminary Draft of Proposed Amendments, supra note 13. at 329. 'E See Preliminary Draft of Proposed Amendments. supra note 13, at 276-77 ( .. Attempting to modernize the

existing forms. . would be an imposing and precarious undertaking.'"). 59 Iqbal. 556 U.S. at 685 (citing Twombly. 550 U.S. at 559). "

0 See. e.g, Lee & Willging, Defining the Problem, supra note 6, at 779-8\ (summarizing empirical literature demonstrating that discovery costs are generally low).

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Respectfully submitted,

Jren Htshko'fttD Herbert M. and Svetlana Wachtell Professor of Constitutional Law and Civil Liberties Ne\v York University School of Law

Lonny Hoffman Associate Dean and Law Foundation Professor University of Houston Law Center

J~ r Alexander A. Reinert Professor of Law Benjamin N. Cardozo School of La\V

I

Adam N. Steinman Professor of Law and Michael J. Zimmer Fellow Seton Hall University School of Law

~~4tft_~· Elizabeth M. Schneider Rose L. Hoffer Professor of Law Brooklyn Law School

David L. Shapiro William Nelson Cromwell Professor of Law. Emeritus Harvard Law School

Institutional affiliations pro\ided for identification purposes only

471

Questions to tbin..\: about in advance of Hickman v. Taylor

1. How did this interlocutory order on a discovery matter get to the United States Supreme Court?

2. Wily would the defendant tug owners and attorney F ortenbaugh litigate the discovery issue all the way to the Supreme Court? Th:inJrJng about this may help clat--ift what is at stake with work product doctrine.

3. Vlhy w=re Fotenbaugh's intervie-..,vs not protected by the attorney client privilege? ln this regard, a frequently invoked te:,i for the attorney client privilege looks Eke this:

(1) the relation of attorney an_d . client existed at the time the commumcation was made, (2) the communication was mad~ in confidence, (3) the communication relates to a matter about which the attorney is being professionally consulted, (4) the communication was made in the course of giving or seeking legal advice for a proper purpose although litigation need not be contemplated and (5) the client has not waived the privilege.

472

HICKMAN

v. TAYLOR etal.

Argued Nov. 13, 1946.

Decided Jan. 13, 1947.

Mr. Justice MURPHY delivered the opinion of the Court.

This case presents an important problem under the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, as to the extent to which a party may inquire into oral and written statements of witnesses, or other information, secured by an adverse party's counsel in the course of preparation for possible litigation after a claim has arisen. Examination into a person's files and records, including those resulting from the professional activities of an attorney, must be judged with care. It is not without reason that various safeguards have been established to preclude unwarranted excursions into the privacy of a man's work. At the same time, public policy supports reasonable and necessary inquiries. Properly to balance these competing interests is a delicate and difficult task.

On February 7, 1943, the tug 'J. M. Taylor' sank while engaged in helping to tow a car float of the Baltimore & Ohio Railroad across the Delaware River at Philadelphia. The accident was apparently unusual in nature, the cause of it still being unknown. Five of the nine crew members were drowned. Three days later the tug owners and the underwriters employed a law firm, of which responden Fortenbaugh is a member, to defend them against potential suits by representatives of the deceased crew members and to sue the railroad for damages to the tug.

A public hearing was held on March 4, 1943, before the United States Steamboat Inspectors, at which the four survivors were examined. This testimony was recorded and made available to all interested parties. Shortly thereafter, Fortenbaugh privately interviewed the survivors and took statements from them with an eye toward the anticipated litigation; the survivors signed these statements on March 29. Fortenbaugh also interviewed other persons believed to have some information relating to the accident and in some cases he made memoranda of what they told him. At the time when Fortenbaugh secured the statements of the survivors, representatives of two of the deceased crew members had been in communication with him. Ultimately claims were presented by representatives of all five of the deceased; four of the claims, however, were settled without litigation. The fifth claimant, petitioner herein, brought

suit in a federal court under the Jones Act on November 26, 1943, naming as defendants the two tug owners, individually and as partners, and the railroad.

One year later, petitioner filed 39 interrogatories directed to the tug owners. The 38th interrogatory read: 'State whether any statements of the members of the crews of the Tugs 'J. M. Taylor' and 'Philadelphia' or of any other vessel were taken in connection with the towing of the car float and the sinking of the Tug 'John M. Taylor'.

Attach hereto exact copies of all such statements if in writing, and if oral, set forth in detail the exact provisions of any such oral statements or reports.'

Supplemental interrogatories asked whether any oral or written statements, records, reports or other memoranda had been made concerning any matter relative to the towing operation, the sinking of the tug, the salvaging and repair of the tug, and the death of the deceased. If the answer was in the affirmative, the tug owners were then requested to set forth the nature of all such records, reports, statements or other memoranda.

The tug owners, through Fortenbaugh, answered all of the interrogatories except No. 38 and the supplemental ones just described. While admitting that statements of the survivors had 473

been taken, they declined to summarize or set forth the contents. They did so on the ground that such requests called 'for privileged matter obtained in preparation for litigation' and constituted 'an attempt to obtain indirectly counsel's private files.' It was claimed that answering these requests 'would involve practically turning over not only the complete files, but also the telephone records and, almost, the thoughts of counsel.'

In connection with the hearing on these objections, Fortenbaugh made a written statement and gave an informal oral deposition explaining the circumstances under which he had taken the statements. But he was not expressly asked in the deposition to produce the statements. The District Court for the Eastern District of Pennsylvania, sitting en bane, held that the requested matters were not privileged. 4 F.R.D. 479. The court then decreed that the tug owners and Fortenbaugh, as counsel and agent for the tug owners forthwith 'Answer Plaintiff's 38th interrogatory and supplemental interrogatories; produce all written statements of witnesses obtained by Mr. Fortenbaugh, as counsel and agent for Defendants; state in substance any fact concerning this case which Defendants learned through oral statements made by witnesses to Mr. Fortenbaugh whether or not included in his private memoranda and produce Mr. Fortenbaugh's memoranda containing statements of fact by witnesses or to submit these memoranda to the Court for determination of those portions which should be revealed to Plaintiff.' Upon their refusal, the court adjudged them in contempt and ordered them imprisoned until they complied.

The Third Circuit Court of Appeals, also sitting en bane, reversed the judgment of the District Court. 153 F.2d 212 . It held that the information here sought was part of the 'work product of the lawyer' and hence privileged from discovery under the Federal Rules of Civil Procedure. The importance of the problem, which has engendered a great divergence of views among district courts, 1 led us to grant certiorari. 328 U.S. 876 , 66 S.Ct. 1337 .

The pre-trial deposition-discovery mechanism established by Rules 26 to 37 is one of the most significant innovations of the Federal Rules of Civil Procedure. Under the prior federal practice, the pre-trial functions of notice-giving issue-formulation and fact-revelation were performed primarily and inadequately by the pleadings. 2 Inquiry into the issues and the facts before trial was narrowly confined and was often cumbersome in method. 3 The new rules, however, restrict the pleadings to the task of general notice-giving and invest the depositiondiscovery process with a vital role in the preparation for trial. The various instruments of discovery now serve (1) as a device, along with the pre-trial hearing under Rule 16, to narrow and clarify the basic issues between the parties, and (2) as a device for ascertaining the facts, or information as to the existence or whereabouts of facts, relative to those issues. Thus civil trials in the federal courts no longer need be carried on in the dark. The way is now clear, consistent with recognized privileges, for the parties to obtain the fullest possible knowledge of the issues and facts before trial. 4

*** In urging that he has a right to inquire into the materials secured and prepared by

Fortenbaugh, petitioner emphasizes that the deposition-discovery portions of the Federal Rules of Civil Procedure are designed to enable the parties to discover the true facts and to compel their disclosure wherever they may be found. It is said that inquiry may be made under these rules, epitomized by Rule 26, as to any relevant matter which is not privileged; and since the discovery provisions are to be applied as broadly and liberally as possible, the privilege limitation must be restricted to its narrowest bounds. On the premise that the attorney-client privilege is the one involved in this case, petitioner argues that it must be strictly confined to confidential communications made by a client to his attorney. And since the materials here in issue were secured by Fortenbaugh from third persons rather than from his clients, the tug owners, the conclusion is reached that these materials are proper subjects for discovery under Rule 26.

As additional support for this result, petitioner claims that to prohibit discovery under these circumstances would aive a coroorate defendant a tremendous advantaQe in a suit by an 474

individual plaintiff. Thus in a suit by an injured employee against a railroad or in a suit by an insured person against an insurance company the corporate defendant could pull a dark veil of secrecy over all the petinent facts it can collect after the claim arises merely on the assertion that such facts were gathered by its large staff of attorneys and claim agents. At the same time, the individual plaintiff, who often has direct knowledge of the matter in issue and has no counsel until some time after his claim arises could be compelled to disclose all the intimate details of his case. By endowing with immunity from disclosure all that a lawyer discovers in the course of his duties, it is said, the rights of individual litigants in such cases are drained of vitality and the lawsuit becomes more of a battle of deception than a search for truth.

But framing the problem in terms of assisting individual plaintiffs in their suits against corporate defendants is unsatisfactory. Discovery concededly may work to the disadvantage as well as to the advantage of individual plaintiffs. Discovery, in other words, is not a one-way proposition. It is available in all types of cases at the behest of any party, individual or corporate, plaintiff or defendant. The problem thus far transcends the situation confronting this petitioner. And we must view that problem in light of the limitless situations where the particular kind of discovery sought by petitioner might be used.

We agree, of course, that the deposition-discovery rules are to be accorded a broad and liberal treatment. No longer can the time-honored cry of 'fishing expedition' serve to preclude a party from inquiring into the facts underlying his opponent's case. 8 Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession. The depositiondiscovery procedure simply advances the stage at which the disclosure can be compelled from the time of trial to the period preceding it, thus reducing the possibility of surprise. But discovery, like all matters of procedure, has ultimate and necessary boundaries. As indicated by Rules 30(b) and (d) and 31 (d), limitations inevitably arise when it can be shown that the examination is being conducted in bad aith or in such a manner as to annoy, embarrass or oppress the person subject to the inquiry. And as Rule 26(b) provides, further limitations come into existence when the inquiry touches upon the irrelevant or encroaches upon the recognized domains of privilege.

We also agree that the memoranda, statements and mental impressions in issue in this case fall outside the scope of the attorney-client privilege and hence are not protected from discovery on that basis. It is unnecessary here to delineate the content and scope of that privilege as recognized in the federal courts. For present purposes, it suffices to note that the protective cloak of this privilege does not extend to information which an attorney secures from a witness while acting for his client in anticipation of litigation. Nor does this privilege concern the memoranda, briefs, communications and other writings prepared by counsel for his own use in prosecuting his client's case; and it is equally unrelated to writings which reflect an attorney's mental impressions, conclusions, opinions or legal theories.

But the impropriety of invoking that privilege does not provide an answer to the problem before us. Petitioner has made more than an ordinary request for relevant, non-privileged facts in the possession of his adversaries or their counsel. He has sought discovery as of right of oral and written statements of witnesses whose identity is well known and whose availability to petitioner appears unimpaired. He has sought production of these matters after making the most searching inquiries of his opponents as to the circumstances surrounding the fatal accident, which inquiries were sworn to have been answered to the best of their information and belief. Interrogatories were directed toward all the events prior to, during and subsequent to the sinking of the tug. Full and honest answers to such broad inquiries would necessarily have included all pertinent information gleaned by Fortenbaugh through his interviews with the witnesses. Petitioner makes no suggestion, and we cannot assume, that the tug owners or Fortenbaugh were incomplete or dishonest in the framing of their answers. In addition, petitioner was free to examine the public testimony of the witnesses taken before the United States Steamboat Inspectors. We are thus dealing with an attempt to secure the production of written statements and mental impressions contained in the files and the mind of the attorney Fortenbaugh without any showing of necessity or any indication or claim that denial of such production would unduly prejudice the preparation 475

of petitioner's case or cause him any hardship or injustice. For aught that appears, the essence of what petitioner seeks either has been revealed to him already through the interrogatories or is readily available to him direct from the witnesses for the asking.

The District Court, after hearing objections to petitioner's request, commanded Fortenbaugh to produce all written statements of witnesses and to state in substance any facts learned through oral statements of witnesses to him. Fortenbaugh was to submit any memoranda he had made of the oral statements so that the court might determine what portions should be revealed to petitioner. All of this was ordered without any showing by petitioner, or any requirement that he make a proper showing, of the necessity for the production of any of this material or any demonstration that denial of production would cause hardship or injustice. The court simply ordered production on the theory that the facts sought were material and were not privileged as constituting attorney-client communications.

In our opinion, neither Rule 26 nor any oth r rule dealing with discovery contemplates production under such circumstances. That is not because the subject matter is privileged or irrelevant, as those concepts are used in these rules. 9 Here is simply an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties. As such, it falls outside the arena of discovery and contravenes the public policy underlying the orderly prosecution and defense of legal claims. Not even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney.

Historically, a lawyer is an officer of the court and is bound to work for the advancement of justice while faithfully protecting the rightful interests of his clients. In performing his various duties, however, it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel. Proper preparation of a client's case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference. That is the historical and the necessary way in which lawyers act within the framework of our system of jurisprudence to promote justice and to protect their clients' interests. This work is reflected, of course, in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways-aptly though roughly termed by the Circuit Court of Appeals in this

case ( 153 F.2d 212, 223) as the 'Work product of the lawyer.' Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney's thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served.

We do not mean to say that all written materials obtained or prepared by an adversary's counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and non-privileged facts remain hidden in an attorney's file and where production of those facts is essentia to the preparation of one's case, discovery may properly be had. Such written statements and documents might, under certain circumstances, be admissible in evidence or give clues as to the existence or location of relevant facts. Or they might be useful for purposes of impeachment or corroboration. And production might be justified where the witnesses are no longer available or can be reached only with difficulty. Were production of written statements and documents to be precluded under such circumstances, the liberal ideals of the depositiondiscovery portions of the Federal Rules of Civil Procedure would be stripped of much of their meaning. But the general policy against invading the privacy of an attorney's course of preparation is so well recognized and so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate

476

reasons to justify production through a subpoena or court order. That burden, we believe, is necessarily implicit in the rules as now constituted. 10

Rule 30(b), as presently written, gives the trial judge the requisite discretion to make a judgment as to whether discovery should be allowed as to written statements secured from witnesses. But in the instant case there was no room for that discretion to operate in favor of the petitioner. No attempt was made to establish any reason why Fortenbaugh should be forced to produce the written statements. There was only a naked, general demand for these materials as of right and a finding by the District Court that no recognizable privilege was involved. That was insufficient to justify discovery under these circumstances and the court should have sustained the refusal of the tug owners and Fortenbaugh to produce.

But as to oral statements made by witnesses to Fortenbaugh, whether presently in the form of his mental impressions or memoranda, we do not believe that any showing of necessity can be made under the circumstances of this case so as to justify production. Under ordinary conditions, forcing an attorney to repeat or write out all that witnesses have told him and to deliver the account to his adversary gives rise to grave dangers of inaccuracy and untrustworthiness. No legitimate purpose is served by such production. The practice forces the attorney to testify as to what he remembers or what he saw fit to write down regarding witnesses' remarks. Such testimony could not qualify as evidence; and to use it for impeachment or corroborative purposes would make the attorney much less an officer of the court and much more an ordinary witness. The standards of the profession would thereby suffer.

Denial of production of this nature does not mean that any material, non-privileged facts can be hidden from the petitioner in this case. He need not be unduly hindered in the preparation of his case, in the discovery of facts or in his anticipation of his opponents' position. Searching interrogatories directed to Fortenbaugh and the tug owners, production of written documents and statements upon a proper showing and direct interviews with the witnesses themselves all serve to reveal the facts in Fortenbaugh's possession to the fullest possible extent consistent with public policy. Petitioner's counsel frankly admits that he wants the oral statements only to help

prepare himself to examine witnesses and to make sure that he has overlooked nothing. That is insufficient under the circumstances to permit him an exception to the policy underlying the privacy of Fortenbaugh's professional activities. If there should be a rare situation justifying production of these matters, petitioner's case is not of that type.

We fully appreciate thew de-spread controversy among the members of the legal profession over the problem raised by this case. 11 It is a problem that rests on what has been one of the most hazy frontiers of the discovery process. But until some rule or statute definitely prescribes otherwise, we are not justified in permitting discovery in a situation of this nature as a matter of unqualified right. When Rule 26 and the other discovery rules were adopted, this Court and the members of the bar in general certainly did not believe or contemplate that all the files and mental processes of lawyers were thereby opened to the free scrutiny of their adversaries. And we refuse to interpret the rules at this time so as to reach so harsh and unwarranted a result.

We therefore affirm the judgment of the Circuit Court of Appeals.

Affirmed.

Mr. Justice JACKSON, concurring.

The narrow question in this case concerns only one of thirty-nine interrogatories which defendants and their counsel refused to answer. As there was persistence in refusal after the court ordered them to answer it, counsel and clients were committed to jail by the district court until they should purge themselves of contempt. 477

The interrogatory asked whether statements were taken from the crews of the tugs involved in the accident, or of any other vessel, and demanded 'Attach hereto exact copies of all such statements if in writing, and if oral, set forth in detail the exact provisions of any such oral statements or reports.' The question is simply whether such a demand is authorized by the rules relating to various aspects of 'discovery'.

The primary effect of the practice advocated here would be on the legal profession itself. But it too often is overlooked that the lawyer and the law office are indispensable parts of our administration of justice. Law-abiding people can go nowhere else to learn the ever changing and constantly multiplying rules by which they must behave and to obtain redress for their wrongs. The welfare and tone of the legal profession is therefore of prime consequence to society, which would feel the consequences of such a practice as petitioner urges secondarily but certainly.

'Discovery' is one of the working tools of the legal profession. It traces back to the equity bill of discovery in English Chancery practice and seems to have had a forerunner in Continental practice. See Ragland, Discovery Before Trial (1932) 13-16. Since 1848 when the draftsmen of New York's Code of Procedure recognized the importance of a better system of discovery, the impetus to extend and expand discovery, as well as the opposition to it, has come from within the Bar itself. It happens in this case that it is the plaintiff's attorney who demands such unprecedented latitude of discovery and, strangely enough, amicus briefs in his support have been filed by several labor unions representing plaintiffs as a class. It is the history of the movement for broader discovery, however, that in actual experience the chief opposition to its extension has come from lawyers who specialize in representing plaintiffs because defendants have made liberal use of it to force plaintiffs to disclose their cases in advance. See Report of the Commission on the Administration of Justice in New York State (1934) 330, 331; Ragland,

Discovery Before Trial (1932) 35, 36. Discovery is a two-edged sword and we cannot decide this problem on any doctrine of extending help to one class of litigants.

It seems clear and long has been recognized that discovery should provide a party access to anything that is evidence in his case. Cf. Report of Commission on the Administration of Justice in New York State (1934) 41, 42. It seems equally clear that discovery should not nullify the privilege of confidential communication between attorney and client. But those principles give us no real assistance here because what is being sought is neither evidence nor is it a privileged communication between attorney and client.

To consider first the most extreme aspect of the requirement in litigation here, we find it calls upon counsel, if he has had any conversations with any of the crews of the vessels in question or of any other, to 'set forth in detail the exact provision of any such oral statements or reports.' Thus the demand is not for the production of a transcript in existence but calls for the creation of a written statement not in being. But the statement by counsel of what a witness told him is not evidence when written plaintiff could not introduce it to prove his case. What, then, is the purpose sought to be served by demanding this of adverse counsel?

Counsel for the petitioner candidly said on argument that he wanted this information to help prepare himself to examine witnesses, to make sure he overlooked nothing. He bases his claim to it in his brief on the view that the Rules were to do away with the old situation where a law suit developed into 'a battle of wits between counsel.' But a common law trial is and always should be an adversary proceeding. Discovery was hardly intended to enable a learned profession to perform its functions either without wits or on wits borrowed from the adversary.

The real purpose and the probable effect of the practice ordered by the district court would be to put trials on a level even lower than a 'battle of wits.' I can conceive of no practice more demoralizing to the Bar than to require a lawyer to write out and deliver to his adversary an account of what witnesses have told him. Even if his recollection were perfect, the statement would be his language permeated with his inferences. Every one who has tried it knows that it is almost impossible so fairly to record the expressions and emphasis of a witness that when he testifies in the environment of the court and under the influence of the leading question there will 478

not be departures in some respects. Whenever the testimony of the witness would differ from the 'exact' statement the lawyer had delivered, the lawyer's statement would be whipped out to impeach the witness. Counsel producing his adversary's 'inexact' statement could lose nothing by saying, 'Here is a contradiction, gentlemen of the jury. I do not know whether it is my adversary or his witness who is not telling the truth, but one is not.' Of course, if this practice were adopted, that scene would be repeated over and over again. The lawyer who delivers such statements often would find himself branded a deceiver afraid to take the stand to support his own version of the witness's conversation with him, or else he will have to go on the stand to defend his own credibility-perhaps against that of his chief witness, or possibly even his client.

Every lawyer dislikes to take the witness stand and will do so only for grave reasons. This is partly because it is not his role; he is almost invariably a poor witness. But he steps out of professional character to do it. He regrets it; the profession discourages it. But the practice advocated here is one which would force him to be a witness, not as to what he has seen or done but as to other witnesses' stories, and not because he wants to do so but in self-defense.

And what is the lawyer to do who has interviewed one whom he believes to be a biased,

lying or hostile witness to get his unfavorable statements and know what to meet? He must record and deliver such statements even though he would not vouch for the credibility of the witness by calling him. Perhaps the other side would not want to call him either, but the attorney is open to the charge of suppressi g evidence at the trial if he fails to call such a hostile witness even though he never regarded him as reliable or truthful.

Having been supplied the names of the witnesses, petitioner's lawyer gives no reason why he cannot interview them himself. If an employee-witness refuses to tell his story, he, too, may be examined under the Rules. He may be compelled on discovery as fully as on the trial to disclose his version of the facts. But that is his own disclosure-it can be used to impeach him if he contradicts it and such a deposition is not useful to promote an unseemly disagreement between the witness and the counsel in the case.

It is true that the literal language of the Rules would admit of an interpretation that would sustain the district court's order. So the literal language of the Act of Congress which makes 'Any writing or record*** made as a memorandum or record of any*** occurrence, or event,' 28 U.S.C.A. § 695, admissible as evidence, would have allowed the railroad company to put its engineer's accident statements in evidence. Cf. Palmer v. Hoffman,318 U.S. 109 , 111, 63 S.Ct. 477 , 479, 87 L.Ed. 645, 144 A.L.R. 719. But all such procedural measures have a background of custom and practice which was assumed by those who wrote and should be by those who apply them. We reviewed the background of the Act and the consequences on the trial of negligence cases of allowing railroads and others to put in their statements and thus to shield the crew from cross-examination. We said, 'Such a major change which opens wide the door to avoidance of cross-examination should not be left to implication.' 318 U.S. at page 114 , 63 S.Ct. at page 481 . We pointed out thatthere, as here, the 'several hundred years of history behind the Act*** indicate the nature of the reforms which it was designed to effect.' 318 U.S. at page 115 , 63 S.Ct. at page 481 . We refused to apply it beyond that point. We should follow the same course of reasoning here. Certainly nothing in the tradition or practice of discovery up to the time of these Rules would have suggested that they would authorize such a practice as here proposed.

The question remains as to signed statements or those written by witnesses. Such statements are not evidence for the defendant. Palmer v. Hoffman,318 U.S. 109 , 63 S.Ct. 477 . Nor should I think they ordinarily could be evidence for the plaintiff. But such a statement might be useful for impeachment of the witness who signed it, if he is called and if he departs from the statement. There might be circumstances, too, where impossibility or difficulty of access to the witness or his refusal to respond to requests for information or other facts would show that the interests of justice require that such statements be made available. Production of such statements are governed by Rule 34 and on 'Showing good cause therefor' the court may order 479

their inspection, copying or photographing. No such application has here been made; the demand is made on the basis of right, not on showing of cause.

I agree to the affirmance of the judgment of the Circuit Court of Appeals which reversed the district court.

480

UPJOHN COMPANY et at., Petitioners, v.

UNITED STATES et al.

Argued Nov. 5, 1980. Decided Jan. 13, 1981.

Justice REHNQUIST delivered the opinion of the Court.

We granted certiorari in this case to address important questions concerning the scope of the attorney-client privilege in the corporate context and the applicability of the work-product doctrine in proceedings to enforce tax summonses. 445 U.S. 925, 100 S.Ct. 1310, 63 L.Ed.2d 758. With respect to the privilege question the parties and various amici have described our task as one of choosing between two "tests" which have gained adherents in the courts of appeals. We are acutely aware, however, that we sit to decide concrete cases and not abstract propositions of law. We decline to lay down a broad rule or series of rules to govern all conceivable future questions in this area, even were we able to do so. We can and do, however, conclude that the attorney-client privilege protects the communications involved in this case from compelled disclosure and that the work-product doctrine does apply in tax summons enforcement proceedings.

Petitioner Upjohn Co. manufactures and sells pharmaceuticals here and abroad. In January 1976 independent accountants conducting an audit of one of Upjohn's foreign subsidiaries discovered that the subsidiary made payments to or for the benefit of foreign government officials in order to secure government business. The accountants, so informed petitioner, Mr. Gerard Thomas, Upjohn's Vice President, Secretary, and General Counsel. Thomas is a member of the Michigan and New York Bars, and has been Upjohn's General Counsel for 20 years. He consulted with outside counsel and R. T. Parfet, Jr., Upjohn's Chairman of the Board. It was decided that the company would conduct an internal investigation of what were termed "questionable payments." As part of this investigation the attorneys prepared a letter containing a questionnaire which was sent to "All Foreign General and Area Managers" over the Chairman's signature. The letter began by noting recent disclosures that several American companies made "possibly illegal" payments to foreign government officials and emphasized that the management needed full information concerning any such payments made by Upjohn. The letter indicated that the Chairman had asked Thomas, identified as "the company's General Counsel," "to conduct an investigation for the purpose of determining the nature and magnitude of any payments made by the Upjohn Company or any of its subsidiaries to any employee or official of a foreign government." The questionnaire sought detailed information concerning such payments. Managers were instructed to treat the investigation as "highly confidential" and not to discuss it with anyone other than Upjohn employees who might be helpful in providing the requested information. Responses were to be sent directly to Thomas. Thomas and outside counsel also interviewed the recipients of the questionnaire and some 33 other Upjohn officers or employees as part of the investigation.

On March 26, 1976, the company voluntarily submitted a preliminary report to the Securities and Exchange Commission on Form 8-K disclosing certain questionable payments. 1 A copy of the report was simultaneously submitted to the Internal Revenue Service, which immediately began an investigation to determine the tax consequences of the payments. Special agents conducting the investigation were given lists by Upjohn of all those interviewed and all who had responded to the questionnaire. On November 23, 1976, the Service issued a summons pursuant to 26 U.S.C. § 7602 demanding production of:

"All files relative to the investigation conducted under the supervision of Gerard Thomas to identify payments to employees of foreign governments and any political contributions made by the Upjohn Company or any of its affiliates since January 1, 1971 and to determine whether any funds of the Upjohn Company had been improperly accounted for on the corporate books during the same period.

481

"The records should include but not be limited to written questionnaires sent to managers of the Upjohn Company's foreign affiliates, and memorandums or notes of the interviews conducted in the United States and abroad with officers and employees of the Upjohn Company and its subsidiaries." App. 17a-18a.

The company declined to produce the documents specified in the second paragraph on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the work product of attorneys prepared in anticipation of litigation. On August 31, 1977, the United States filed a petition seeking enforcement of the summons under 26 U.S.C. §§ 7402(b) and 7604(a) in the United States District Court for the Western District of Michigan. That court adopted the recommendation of a Magistrate who concluded that the summons should be enforced. Petitioners appealed to the Court of Appeals for the Sixth Circuit which rejected the Magistrate's finding of a waiver of the attorney-client privilege, 600 F.2d 1223 , 1227, n. 12, but agreed that the privilege did not apply "[t]o the extent that the communications were made by officers and agents not responsible for directing Upjohn's actions in response to legal advice ... for the simple reason that the communications were not the 'client's.' " /d. , at 1225. The court reasoned that accepting petitioners' claim for a broader application of the privilege would encourage upper-echelon management to ignore unpleasant facts and create too broad a "zone of silence." Noting that Upjohn's counsel had interviewed officials such as the Chairman and President, the Court of Appeals remanded to the District Court so that a determination of who was within the "control group" could be made. In a concluding footnote the court stated that the work- product doctrine "is not applicable to administrative summonses issued under 26 U.S.C. § 7602." /d. , at 1228, n. 13.

II

Federal Rule of Evidence 501 provides that "the privilege of a witness ... shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in light of reason and experience." The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. 8 J. Wigmore, Evidence § 2290 (McNaughton rev. 1961). Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. As we stated last Term in Trammel v. United States , 445 U.S. 40 , 51, 100 S.Ct. 906 , 913, 63 L.Ed.2d 186 (1 980) : "The lawyer-client privilege rests on the need for the advocate and counselor to know all that relates to the client's reasons for seeking representation if the professional mission is to be carried out." And in Fisher v. United States, 425 U.S. 391 , 403, 96 S.Ct. 1569 1577, 48 L.Ed.2d 39 (i 976) , we recognized the purpose of the privilege to be "to encourage clients to make full disclosure to their attorneys." This rationale for the privilege has long been recognized by the Court, see Hunt v. Blackburn , 128 U.S. 464, 470, 9 S.Ct. 125 , i 27, 32 LEd. 488 (1888) {privilege "is founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure"). Admittedly complications in the application of the privilege arise when the client is a corporation, which in theory is an artificial creature of the

law, and not an individual; but this Court has assumed that the privilege applies when the client is a corporation. United States v. Louisville & Nashville R. Co. , 236 U.S. 318, 336, 35 S.Ct. 363 , 369, 59 L.Ed. 598 {1 915) , and the Government does not contest the general proposition.

The Court of Appeals, however, considered the application of the privilege in the corporate context to present a "different problem," since the client was an inanimate entity and "only the senior management, guiding and integrating the several operations, ... can be said to possess an identity analogous to the corporation as a whole." 600 F.2d at 1226. The first case to articulate the so-called "control group test" adopted by the court below, Philadelphia v. Westinghouse Electric Corp., 210 F.Supp. 483,485 (ED Pa.), petition for mandamus and prohibition denied sub nom. General Electric Co. v. Kirkpatrick, 312 F.2d 742 (CA3 1 962), cert. 482

denied, 372 U.S. 943 , 83 S.Ct. 937 , 9 L.Ed.2d 969 (1963) , reflected a similar conceptual approach:

"Keeping in mind that the question is, Is it the corporation which is seeking the lawyer's advice when the asserted privileged communication is made?, the most satisfactory solution, I think, is that if the employee making the communication, of whatever rank he may be, is in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney, ... then, in effect, he is (or personifies) the corporation when he makes his disclosure to the lawyer and the privilege would apply." (Emphasis supplied.)

Such a view, we think, overlooks the fact that the privilege exists to protect not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice. See Trammel, supra , at 51, 100 S.Ct.. at 913 ; Fisher, supra , at 403, 96 S.Ct., at 1577 . The first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the legally relevant. See ABA Code of Professional Responsibility, Ethical Consideration 4-1:

"A lawyer should be fully informed of all the facts of the matter he is handling in order for his client to obtain the full advantage of our legal system. It is for the lawyer in the exercise of his independent professional judgment to separate the relevant and important from the irrelevant and unimportant. The observance of the ethical obligation of a lawyer to hold inviolate the confidences and secrets of his client not only facilitates the full development of facts essential to proper representation of the client but also encourages laymen to seek early legal assistance."

See also Hickman v. Tavlor ,329 U.S. 495, 511, 67 S.Ct. 385 , 393-394, 91 L.Ed. 451 (194 7) .

In the case of the individual client the provider of information and the person who acts on the lawyer's advice are one and the same. In the corporate context, however, it will frequently be employees beyond the control group as defined by the court below-"officers and agents ... responsible for directing [the company's] actions in response to legal advice"-who will possess the information needed by the corporation's lawyers. Middle-level-and indeed lower-levelemployees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. This fact was noted in Diversified Industries, Inc. v. Meredith . 572 F.2d 596 (CA8 1978) (en bane):

"In a corporation, it may be necessary to glean information relevant to a legal problem from middle management or non-management personnel as well as from top executives. The attorney dealing with a complex legal problem 'is thus faced with a "Hobson's choice". If he interviews employees not having "the very highest authority", their communications to him will not be privileged. If, on the other hand, he interviews only those employees with the "very highest authority", he may find it extremely difficult, if not impossible, to determine what happened.'" /d. , at 608-609 (quoting Weinschel Corporate Employee Interviews and the Attorney-Client Privilege, 12 B.C.Ind. & Com. L.Rev. 873,876 (1971)).

The control group test adopted by the court below thus frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees of the client to attorneys seeking to render legal advice to the client corporation. The attorney's advice will also frequently be more significant to noncontrol group members than to those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation's policy. See, e. g., Duplan Corp. v. Deering Milliken, Inc., 397 F.Supp. 1146, 1164 (DSC 1974) ("After the lawyer forms his or her opinion, it is of no immediate benefit to the Chairman of the Board or the President. It must be given to the corporate personnel who will apply it").

483

The narrow scope given the attorney-client privilege by the court below not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem but also threatens to limit the valuable efforts of corporate counsel to ensure their client's compliance with the law. In light of the vast and complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most individuals, "constantly go to lawyers to find out how to obey the law," Burnham, The Attorney-Client Privilege in the Corporate Arena,24 Bus.law. 901 , 913 {1969), particularly since compliance with the law in this area is hardly an instinctive matter, see, e. g., United States v. United States Gygsum Co. , 438 U.S. 422 , 440-441, 98 S.Ct. 2864, 2875-2876, 57 L.Ed.2d 854 (1978) ("the behavior proscribed by the [Sherman] Act is often difficult to distinguish from the gray zone of socially acceptable and economically justifiable business conduct"). 2 The test adopted by the court below is difficult to apply in practice, though no abstractly formulated and unvarying "test" will necessarily enable courts to decide questions such as this with mathematical precision. But if the purpose of the attorney-client privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected. An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all. The very terms of the test adopted by the court below suggest the unpredictability of its application. The test restricts the availability of the privilege to those officers who play a "substantial role" in deciding and directing a corporation's legal response. Disparate decisions in cases applying this test illustrate its unpredictability. Compare, e. g., Hogan v. Zietz, 43 F.R.D. 308,315-316 (NO Okl.1967), aff'd in part sub nom. Natta v. Hogan, 392 F.2d 686 (CA 10 1968) (control group includes managers and assistant managers of patent division and research and development department), with Congoleum Industries, Inc. v. GAF Corp. , 49 F.R.D. 82, 83-85 (ED Pa.1969), aff'd, 478 F.2d 1398 (CA3 1973) (control group includes only division and corporate vice presidents, and not two directors of research and vice president for production and research). The communications at issue were made by Upjohn employees 3 to counsel for Upjohn acting as such, at the direction of corporate superiors in order to secure legal advice from counsel. As the Magistrate found, "Mr. Thomas consulted with the Chairman of the Board and outside counsel and thereafter conducted a factual investigation to determine the nature and extent of the questionable payments and to be in a position to give legal advice to the company with respect to the payments." (Emphasis supplied.) 78-1 USTC ~ 9277, pp. 83,598, 83,599.

Information, not available from upper-echelon management, was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. 4 The communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. The questionnaire identified Thomas as "the company's General Counsel" and referred in its opening sentence to the possible illegality of payments such as the ones on which information was sought. App. 40a. A statement of policy accompanying the questionnaire clearly indicated the legal implications of the investigation. The policy statement was issued "in order that there be no uncertainty in the future as to the policy with respect to the practices which are the subject of this investigation." It began "Upjohn will comply with all laws and regulations," and stated that commissions or payments "will not be used as a subterfuge for bribes or illegal payments" and that all payments must be "proper and legal." Any future agreements with foreign distributors or agents were to be approved "by a company attorney" and any questions concerning the policy were to be referred "to the company's General Counsel." /d. , at 165a-166a. This statement was issued to Upjohn employees worldwide, so that even those interviewees not receiving a questionnaire were aware of the legal implications of the interviews. Pursuant to explicit instructions from the Chairman of the Board, the communications were considered "highly confidential" when made, id. , at 39a, 43a, and have been kept confidential by the company. 5 Consistent with the underlying purposes of the attorney-client privilege, these communications must be protected against compelled disclosure.

The Court of Appeals declined to extend the attorney-client privilege beyond the limits of thP. c.nntrol arouo test for fear that doina so would entail severe burdens on discovery and create 484

a broad "zone of silence" over corporate affairs. Application of the attorney-client privilege to communications such as those involved here, however, puts the adversary in no worse position than if the communications had never taken place. The privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney:

'Tnhe protection of the privilege extends only to communications and not to facts. A fact is one thing and a communication concerning that fact is an entirely different thing. The client cannot be compelled to answer the question, 'What did you say or write to the attorney?' but may not refuse to disclose any relevant fact within his knowledge merely because he incorporated a statement of such fact into his communication to his attorney." Philadelphia v. Westinghouse Electric Corp. , 205 F.Supp. 830 , 831 ( q2.7).

See also Diversified Industries , 572 F.2d., at 611; State ex ref. Dudek v. Circuit Court. 34 Wis.2d 559, 580, 150 N.W.2d 387, 399 (1967) ("the courts have noted that a party cannot conceal a fact merely by revealing it to his lawyer"). Here the Government was free to question the employees who communicated with Thomas and outside counsel. Upjohn has provided the IRS with a list of such employees, and the IRS has already interviewed some 25 of them. While it would probably be more convenient for the Government to secure the results of petitioner's internal investigation by simply subpoenaing the questionnaires and notes taken by petitioner's attorneys, such considerations of convenience do not overcome the policies served by the attorney-client privilege. As Justice Jackson noted in his concurring opinion in Hickman v. Taylor , 329 U.S., at516, 67 S.Ct., at 396: "Discovery was hardly intended to enable a learned profession to perform its functions ... on wits borrowed from the adversary."

Needless to say, we decide only the case before us, and do not undertake to draft a set of

rules which should govern challenges to investigatory subpoenas. Any such approach would violate the spirit of Federal Rule of Evidence 501. See S.Rep. No. 93-1277, p. 13 (1974) ("the recognition of a privilege based on a confidential relationship ... should be determined on a case-by-case basis"); Trammel, 445 U.S., at 47, 100 S.Ct., at 910-911 ; United States v. Gillock , 445 U.S. 360 , 367, 100 S.Ct. 1185 1190, 63 L. Ed.2d 454 {1980) . While such a "case-by-case" basis may to some slight extent undermine desirable certainty in the boundaries of the attorneyclient privilege, it obeys the spirit of the Rules. At the same time we conclude that the narrow "control group test" sanctioned by the Court of Appeals, in this case cannot, consistent with "the principles of the common law as ... interpreted ... in the light of reason and experience," Fed. Rule Evid. 501, govern the development of the law in this area.

Ill

Our decision that the communications by Upjohn employees to counsel are covered by the attorney-client privilege disposes of the case so far as the responses to the questionnaires and any notes reflecting responses to interview questions are concerned. The summons reaches further, however, and Thomas has testified that his notes and memoranda of interviews go beyond recording responses to his questions. App. 27a-28a, 91 a-93a. To the extent that the material subject to the summons is not protected by the attorney-client privilege as disclosing communications between an employee and counsel, we must reach the ruling by the Court of Appeals that the work-product doctrine does not apply to summonses issued under 26 U.S.C. §

7602. 6

The Government concedes, wisely, that the Court of Appeals erred and that the workproduct doctrine does apply to IRS summonses. Brief for Respondents 16, 48. This doctrine was announced by the Court over 30 years ago in Hickman v. Tavlor ,329 U.S. 495 , 67 S.Ct. 385 , 91 L.Ed. 451 (1947) . In that case the Court rejected "an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties." /d. , at 510, 67 S.Ct., at 393 . The Court noted that "it is essential that a lawyer work with a certain degree of

485

privacy" and reasoned that if discovery of the material sought were permitted "much of what is now put down in writing would remain unwritten. An attorney's thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served." /d. , at 511, 67 S.Ct., at 393-394.

The "strong public policy" underlying the work-product doctrine was reaffirmed recently in United States v. Nobles, 422 U.S. 225, 236-240, 95 S.Ct. 2160 , 2169-2171, 45 L.Ed.2d 141 (1975) , and has been substantially incorporated in Federal Rule of Civil Procedure 26(b)(3). 7

As we stated last Term, the obligation imposed by a tax summons remains "subject to the traditional privileges and limitations." United States v. Euge, 444 U.S. 707,714, 100 S.Ct. 874, 879-880, 63 L.Ed.2d 741 (1980) . Nothing in the language of the IRS summons provisions or their legislative history suggests an intent on the part of Congress to preclude application of the work- product doctrine. Rule 26(b)(3) codifies the work-product doctrine, and the Federal Rules of Civil Procedure are made applicable to summons enforcement proceedings by Rule 81 (a)(3). See Donaldson v. United States, 400 U.S. 517,528,91 S.Ct. 534,541,27 L.Ed.2d 580 (1971) . While conceding the applicability of the work-product doctrine, the Government asserts that it has made a sufficient showing of necessity to overcome its protections. The Magistrate apparently so found, 78-1 USTC ~ 9277, p. 83,605. The Government relies on the following language in Hickman :

"We do not mean to say that all written materials obtained or prepared by an adversary's counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and nonprivileged facts remain hidden in an attorney's file and where production of those facts is essential to the preparation of one's case, discovery may properly be had .... And production might be justified where the witnesses are no longer available or can be reached only with difficulty." 329 U.S., at 511 , 67 S.Ct., at 394 .

The Government stresses that interviewees are scattered across the globe and that Upjohn has forbidden its employees to answer questions it considers irrelevant. The above-quoted language from Hickman , however, did not apply to "oral statements made by witnesses ... whether presently in the form of [the attorney's] mental impressions or memoranda." /d. , at 512, 67 S.Ct., at 394 . As to such material the Court did "not believe that any showing of necessity can be made under the circumstances of this case so as to justify production .... If there should be a rare situation justifying production of these matters petitioner's case is not of that type." /d. , at 512-513, 67 S.Ct., at 394-395 . See also Nobles, supra , 422 U.S., at 252-253 , 95 S.Ct., at 2177 (WHITE, J., concurring). Forcing an attorney to disclose notes and memoranda of witnesses' oral statements is particularly disfavored because it tends to reveal the attorney's mental processes, 329 U.S., at 513 , 67 S.Ct., at 394-395 ("what he saw fit to write down regarding witnesses' remarks"); id, at 516-517,67 S.Ct., at 396 ("the statement would be his [the attorney's] language,

permeated with his inferences") (Jackson, J., concurring). 8

Rule 26 accords special protection to work product revealing the attorney's mental processes. The Rule permits disclosure of documents and tangible things constituting attorney work product upon a showing of substantial need and inability to obtain the equivalent without undue hardship. This was the standard applied by the Magistrate, 78-1 USTC ~ 9277, p. 83,604. Rule 26 goes on, however, to state that "[i]n ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions or legal theories of an attorney or other representative of a party concerning the litigation." Although this language does not specifically refer to memoranda based on oral statements of witnesses, the Hickman court stressed the danger that compelled disclosure of such memoranda would reveal the attorney's mental processes. It is clear that this is the sort of material the draftsmen of the Rule had in mind as deserving special protection. See Notes of Advisory Committee on 1970 Amendment to Rules, 28 U.S.C.App., p. 442 ("The subdivision ... goes on to protect against disclosure the mental impressions, conclusions, 486 --:-: ___ ~~ 1~~~1 +h~~~;~~ ,._.f "'"' "'*"'rnoH nr 1"\thar ranracantl:lti\/P nf Q n:::lrt\1 ThP Hir.kmRn

opinion drew special attention to the need for protecting an attorney against discovery of memoranda prepared from recollection of oral interviews. The courts have steadfastly safeguarded against disclosure of lawyers' mental impressions and legal theories ... ").

Based on the foregoing, some courts have concluded that no showing of necessity can overcome protection of work product which is based on oral statements from witnesses. See, e. g., In re Grand Jury Proceedings , 473 F.2d 840 , 848 (CAS 1973) (personal recollections, notes, and memoranda pertaining to conversation with witnesses); In re Grand Jury Investigation , 412 F.Supp. 943 , 949 (ED Pa.1976) (notes of conversation with witness "are so much a product of the lawyer's thinking and so little probative of the witness's actual words that they are absolutely protected from disclosure"). Those courts declining to adopt an absolute rule have nonetheless

recognized that such material is entitled to special protection. See, e. g., In re Grand Jury Investigation , 599 F .2d 1224 , 123 i (CA3 1979) ("special considerations ... must shape any ruling on the discoverability of interview memoranda ... ; such documents will be discoverable only in a 'rare situation'"); Cf.ln re Grand Jurv Subpoena, 599 F.2d 504,511-512 (CA2 1979).

We do not decide the issue at this time. It is clear that the Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work-product doctrine. The Magistrate applied the "substantial need" and "without undue hardship" standard articulated in the first part of Rule 26(b)(3). The notes and memoranda sought by the Government here, however, are work product based on oral statements. If they reveal communications, they are, in this case, protected by the attorney-client privilege. To the extent they do not reveal communications, they reveal the attorneys' mental processes in evaluating the communications. As Rule 26 and Hickman make clear, such work product cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship.

While we are not prepared at this juncture to say that such material is always protected by the work-product rule, we think a far stronger showing of necessity and unavailability by other means than was made by the Government or applied by the Magistrate in this case would be necessary to compel disclosure. Since the Court of Appeals thought that the work-product protection was never applicable in an enforcement proceeding such as this, and since the Magistrate whose recommendations the District Court adopted applied too lenient a standard of protection, we think the best procedure with respect to this aspect of the case would be to reverse the judgment of the Court of Appeals for the Sixth Circuit and remand the case to it for such further proceedings in connection with the work-product claim as are consistent with this opinion.

Accordingly, the judgment of the Court of Appeals is reversed, and the case remanded for further proceedings.

It is so ordered.

487

Discovery Practice Exercises

Here are tv;o questions from tv.ro different exams, relating to work product md attorney client privilege issues that we may discuss in class tomorrow. My guess is that we will have a bit oftiille to cover these but that you will probably be able to spend more tir:J.e on them in your TA groups this week:

From Fall2003 exam [note, this was two different questions on the e:xam, and the work product/attorney Client material only relates to the second question Still, because the second question rr::ferences the facts from the first question, I needed to include it here}:

Ernst & Y oW1g, L.L.P. and Cendant CoYporation are co-defendaTits in a secu,--ities case brought in the United States District Court for the Southern District of Texas. Ass-wne that Ernst & Young is a Pennsylvania corporc.tion and that Cendant is incorporc.teq in DelawCite, SLd that bot'l have their principal place of business i.ri New York.

The plai:r:tif£5, a group ofi.i1vestors all of whom are from Texas, allege that the two cornpa,lies com--pired to defraud them as to the true firu:ncial condition of Ceudant. They clairu that they never would have bought shares in the company if they had known of Cendru--:t's poor financial condition. They allege claims &--ising under federal secmities law. L11 particular their claims are based on Sections lO(b) and 20(a) of the Securities

Act of 193 4 (tle Act") and Rule 1 Ob-5 promulgated th::reunder by the Secl.L-ities and Exchange Co:r:n.c-nission (the "SEC"), Sections 1 O(b) and 20(a) of the LA'-'"'=~;~ Act and Ru1e 1 Ob- 5 promulgated thereunder by the SEC. Section 1 O(b) of De Ex chang:: Act and Rule 1 Ob-5 prohibit "fraudulent, material misstatements or omissi oTis m with the sale or purchase of a security."

Both CeTid~-:t ~-:1d Ernst & file pe-e-answer motio::1s for d:is::rissal ur:der Fed. R Civ. P. 1 In addition to its 2..-:!SVver, Ernst & files end serves a cross-clai<lJ

Cendac"1t under Federal Rule of Civil Procedure 13(g). Ernst & alleges that Cendc.nt o\ves it indemnity, based on the terms of the audit contn:ct between Cendant ar1d Ernst & Young, for any monies it rnigtt pay--by judgment or by setdement-to the plaintiffs. That contract was negotiated ru-:id ,finalized inN ew York, following extensive discussions between Cendar1t and Ernst & Young in Cendant's New York office. Please note t}:mt DE cross-claim is based on state law for pmposes of the claim, neither Cendant nor its auditor are considered "purchasers" or "sellers" of

r,",tH>C vritbin the meru·1i;1g of Section 1 O(b) 2.."1d Rule lOb-5. Cendmlt timely files fu"l

ansv;er to the cross-claim, assertii1g as its princi:;Jal defer:se that bec~use Ernst & was in preparir:g the audits, it does not owe contractual indemnity.

the plai:ctiffs se[Je all of their claims aga2nst Cenda.Dt 2.r1d Err:st & YolL1g. All appear befcre the couii to fu'"'10l.L"1Ce that a sertlerr:.e:ct has beer:

as to t.1e plaint1rTs' claims, &1d they ask tbe court to sign a judgment disposi:::g of all ofplc.intiffs' claims. The judge enters the judgment and dismisses all of the plaintiffs' claims. At L'lis sc._rne hearing, Emst & Young emphasizes that its cross-claim agc.inst Cendc..--:t remains ar1d asks for a trial s.etfing. The judge acknowledges that the cross-claim s-Grvives the but says she wants to wait before setting the case for tris..L

488

[the first question asked students the following: If Cendant does not want to have to continue to litigate in this federal district court, what argument(s) should it make. Prepare a memorandum out.lining the options available to Cendant, citing any specific authority. Be cert.ain to assess the likelihood of success for any option you discuss.]

In the same litigation, assume that Cendant deddes it wants to remain in the United States District Court for the Southern District of Texas and does not take any of the actions you may have discussed in your previous answer. L11stead, Ceridant notices and ta.lces the oral deposition of Simon Wood, a former Ernst & Young senior manager and auditor who prepared the Cendant financial statements at issue in the underlying litigation. At Wood's deposition, Cendant inquires into communications that took place between Wood, Ernst & Young's counsel (who also represented Wood) and Dr. Phillip C. McGraw of Courtroom Sciences, Inc. Dr. McGraw is a consulting expert i11 trial strategy and deposition preparation who was retained as a non-testifying trial expert to assist Ernst & Young's counsel in preparing the case. Dr. McGraw participated in a deposition preparation meeting with Wood and his counsel before the deposition was conducted.

At the deposition, Cendant's counsel specifically asks Wood, "Did Dr. McGraw provide you viith guidance in your conduct as a witness?" and "Did you rehearse any of your prospective testimony in the presence of Dr. McGraw?

Co-LlTisel for ,.ilood ubjccts.l citiug the .. ;;rork product docti'we:f and directs lris client nut to answer. After the deposition, Cendant brings a motion to compel. If you were the trial judge ruling on whether to allow these inq~--ies, how would you rule?

From Fall2002 exam:

In May 2001, Mary Lou Scott was badly injured when a car in which she was a passenger crashed. Ms. Scott filed suit against XYZ Company, th.e manufacturer of the tire, alleging that defects in the tire design caused the accident. She has noticed the deposition ofXYZ's general cow1sel for next month. You are an associate in a private law finn retained by XYZ. In interviewing the general counsel of the company you learn that he plays golf once a month with the company's chief of engineering and has done so for the last ten years. You learn further that at their last outing together, the chief of enfi..neeriTJg informed the general counsel that he, the chief of engineering, had raised questions with a now-deceased XYZ vice-president concerni11g the safety of the company's X-12 tire in 1998, two years before the product was sold to L~e public.

Is the general coU.t""1Sei's conversation >vith the Chief of Engineering priyjleged from disclosure? Must the general counsel testify about his conversation if be is asked about it at the deposition? Write a memorandu1-n to the file addressing these,questions.

489

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