Committee Approves Amendments to Civil Rules

Earlier this month, the Federal Courts' Committee on Rules of Practice and Procedure approved for publication a package of proposals that would, if enacted, impact the scope of discovery under the Federal Rules of Civil Procedure.

The agenda for the committee's June, 2013 meeting is here. The various proposals would appear to narrow discovery and try to curb some of the abuses that have occurred in recent years.  Many of these ideas came out of the 2010 Duke Conference as methods for reducing cost and delay in civil litigation.

Some highlights: New Rule 4(m) would be revised to shorten the time to serve the summons and complaint from 120 days to 60 days. The desired effect will be to get the action moving in half the time. The amendment responds to the commonly expressed view that four months to serve the summons and complaint is too long.

Rule 16(b)(2) now provides that the judge must issue a scheduling order within the earlier of 120 days after any defendant has been served or 90 days after any defendant has appeared. The recommended
revision, however, cuts the times to 90 days after any defendant is served or 60 days after any defendant appears. 

Another proposal  would add a new Rule 16(b)(3)(v), permitting a scheduling order to "direct that before moving for an order relating to discovery the movant must request a conference with the court." Many courts now have local rules similar to this proposal. Experience with these rules shows that an informal pre-motion conference with the court often resolves a discovery dispute without the need for a motion, briefing, and order. The practice has proved highly effective in reducing cost and delay.

Currently, Rules 30 and 31 establish a presumptive limit of 10 depositions by the plaintiffs, or by the defendants, or by third-party defendants, and a time limit. Rule 33(a)(1) sets a presumptive limit of "no more than 25 written interrogatories, including all discrete subparts." There are no presumptive numerical limits for Rule 36 requests to admit. The new proposals reduce the limit on interrogatories to 15. They add to Rule 36, for the first time, presumptive numerical limits of 25 RFA (other than genuineness of documents). The proposals would reduce the presumptive limit on the number of depositions from 10 to 5, and would reduce the presumptive duration to 1 day of 6 hours. Rules 30 and 31 would continue to provide that the court must grant leave to take more depositions "to the extent consistent with Rule 26(b)(1) and (2)." 

The proposed rule changes would re-emphasize the notion of proportionality in Rule 26: discovery must be proportional to the needs of the case considering the amount in controversy, the importance of the issues at stake in the action, the parties’s 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 newly added proportionality language stems from the committee’s finding that the current rule’s “reasonably calculated” approach to the proper scope of discovery is too broadly interpreted.

Also, new proposed Rule 37(e) would provide certain protections against sanctions for the failure to produce any type of evidence (whether electronic or other evidence).  A party seeking sanctions would have to show both substantial prejudice and willful or bad faith conduct; or that the conduct irreparably denied a party any meaningful opportunity to present or defend against a claim. The amendments also seek to address the issue of parties who might otherwise be inclined to engage in burdensome and expensive “over-preservation.” 

Next step is a comment period that will extend into early 2014. It will important to keep an eye on the progress of these amendments.

CPSC Commissioners Testify At Hearing Regarding Database

Issues about the product complaint database set up by the U.S. Consumer Product Safety Commission bubbled over again last week.  We have posted on the topic before.

The CPSC-operated database allows consumers, government agencies, and others to submit reports of alleged injury or death allegedly caused by a product. Since the beginning of the database notion, there have been serious concerns about the accuracy and confidentiality of reports of alleged injury submitted and conveyed back to the public in the database. There has always been an apparent lack of attention to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that some plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.  Obviously, false or inaccurate information does not serve the interests of consumers. And CPSC allows reports by parties who are more likely to have an agenda that goes beyond merely advising CPSC of an incident. The possibility that someone might attempt to seed the database with inaccurate or misleading information to provide ostensible support for lawsuits is a real concern for many observers.

As we noted, an anonymous company sued the CPSC last Fall over an apparently false report in the database.

Last week, Commissioner Anne Northup testified before a Subcommittee on Commerce, Manufacturing, and Trade of the House Energy and Commerce Committee at a hearing on “Oversight of the Consumer Product Safety Commission.” She addressed generally the issues with CPSC regulatory approaches. Commissioner Nord also testified, and she has reported that many of the complaints on the database were filed by law firms.

Chairwoman Mary Bono Mack, R-Calif., noted that the public database remains a source of controversy. Manufacturers continue to express their concern that most of the complaints are not vetted by the CPSC before they are made public, "opening the door to all kinds of mischief, whether to fuel law suits or to try and ruin a competitor’s brand."

Video of the hearing here.

House Hearing on CAFA- Seven Years Later

A topic near and dear to the hearts of readers of MassTortDefense was the subject of a recent hearing by a subcommittee of the U.S. House Judiciary Committee. Entitled "Class Actions Seven Years After the Class Action Fairness Act,” the hearing was designed to address what has worked with the law, what has not, and what Congress overlooked when it passed CAFA.

Witnesses included a plaintiff-side attorney, who typically complained about CAFA's impact on consumer fraud class actions, and Professor Redish from Northwestern, who talked about the need for legislative revision of the use of so-called “cy pres” awards in class action proceedings in particular.

Rep. Trent Franks (R-Ariz.) is the chairman of the Subcommittee on the Constitution, and has expressed concern over the ability of plaintiffs to engage in a new form of forum shopping under CAFA, filing cases in particular federal circuits they think are more hospitable to class actions.

John Beisner, who typically represents defendants in class actions, testified on behalf of the U.S. Chamber Institute for Legal Reform; he noted that a small number of judicial rulings have ignored Congress’s intent behind this landmark legislation, meriting further legislative attention. From imposing a heightened “legal certainty” standard on defendants with respect to CAFA’s amount-in-controversy requirement to broadly construing CAFA’s narrow exceptions to federal jurisdiction, these rulings run afoul of CAFA’s presumption in favor of federal jurisdiction. Second, he argued that Congress should also assess certain troubling aspects of federal class action jurisprudence that were not affected by CAFA. These issues include: (1) efforts by a small number of federal courts to loosen the requirements of Rule 23; (2) the increasing use of cy pres settlements to support large fee payouts to class counsel; and, he noted, (3) judicial approval of class actions that encompass substantial numbers of uninjured individuals (that is, persons who lack Article III standing).

Why We Can't Sue Our Way to Prosperity

The House Judiciary Committee's Subcommittee on the Constitution held a hearing earlier this week on "Can We Sue Our Way to Prosperity?: Litigation's Effect on America's Global  Competitiveness."

Speakers included a public policy expert from NERA; a law school professor; and my friend, esteemed litigator John Beisner.

Paul Hinton testified that the direct cost of the U.S. tort system is estimated to be approximately $250 billion in 2009 or about 2 percent of GDP.  The U.S. costs are the highest as a percent of GDP amongst those reported for other industrialized countries and more than double the estimates for countries such as the U.K, France, and Japan.  Small businesses bear a relatively larger share of tort costs than larger businesses.

Professor Silver from Texas tried to make the case that the civil justice systems contributes greatly to the prosperity of the U.S.  He seemed to think that litigation is the only thing that deters doctors from committing widespread medical malpractice.

John Beisner noted that given the lucrative potential of private lawsuits in the U.S., it is not surprising that fraud has crept into the system. One notable example is the fraud that may have  occurred with respect to asbestos bankruptcy trusts. In addition, some lawyers have engaged in questionable tactics to recruit clients – tactics that have encouraged the filing of frivolous or fraudulent claims. The most notorious of these efforts, he observed, have been the massive screening programs undertaken in the silica and welding-fume litigation, both of which resulted in the mass filing of meritless and even fraudulent claims – and forced defendants to spend huge sums of money defending themselves against groundless allegations. In addition, Beisner pointed out, more and more plaintiff lawyers are using the internet to troll for clients and sow dissatisfaction with products in advance, in the hopes of generating large bodies of claims against targeted defendants. "These efforts have contributed to the deluge of meritless lawsuits that clog the civil justice system."

Another troubling development he noted in the American civil justice system has been the rise in
foreign lawsuits with virtually no nexus to the United States. In addition to transnational tort cases, the American civil justice system has also seen an uptick in efforts to enforce foreign judgments in U.S. courts.

Although the enactment of the Class Action Fairness Act of 2005 dramatically reduced class-action abuse, several serious problems remain in the aggregate litigation arena, including (1) state attorney general actions; (2) the routine deprivation of due process in class actions that remain in state courts; and (3) mass joinder actions.

The hearing comes as the Judiciary Committee considers the Lawsuit Abuse Reduction
Act
, which would call for greater sanctions for Rule 11 violations to deal with frivolous claims. 
 

Senate Judiciary Committee Approves "Sunshine" Bill That Clouds Up Settlements

Here at MassTortDefense we know that while not the "sexy" part of litigation, the nuts and bolts of settlement agreements are crucial to clients.  That is why it caught our eye that the U.S. Senate Judiciary Committee last week approved a bill that would require courts to consider so-called public health and safety concerns before approving the sealing of certain legal agreements and settlements in product liability suits.

The committee voted 12-6 to pass S. 623, the so-called Sunshine in Litigation Act. The bill would  prohibit a federal court, in any civil action in which the pleadings state facts relevant to the "protection of public health or safety," from entering an order restricting the disclosure of information obtained through discovery, or from approving a settlement agreement that would restrict such disclosure, or restricting access to court records, unless in connection with that order the court has first made certain findings of fact.  Specifically, the bill requires the court to find that: (1) the order would not restrict the disclosure of information relevant to the protection of public health or safety; or (2) the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information, and the requested protective order is no broader than necessary to protect the confidentiality interest asserted.

The bill similarly would prohibit the court from enforcing any provision of a settlement agreement that prohibits a party from disclosing that a settlement was reached or the terms of the settlement, other than the amount paid, or from discussing the civil action, or evidence produced in it, that involves matters relevant to the protection of public health or safety -- unless, again, the court finds that the public interest in the disclosure of past, present, or potential health or safety hazards is outweighed by a specific and substantial interest in maintaining the confidentiality of the information or records in question, and the requested order is no broader than necessary to protect the confidentiality interest asserted.

Surprisingly Republican Senators. Orrin Hatch, R-Utah, and Chuck Grassley, R.-Iowa, joined all 10 Democrat committee members in support. But the bill seems ill-conceived and even unnecessary. As pointed out by the American College of Trial Lawyers' Federal Rules of Civil Procedure Committee, the bill would establish an undesirable precedent by circumventing the procedure set out in the Rules Enabling Act that Congress established for amending the Federal Rules of Civil Procedure. These kind of ad hoc legislative initiatives that address specific parts of the Federal Rules contradict the careful, open, deliberative, rigorous ways that the rules have been amended from time to time.

Moreover, the bill would would unduly restrict the discretion of trial judges to regulate civil litigation and would impose substantial new fact-finding burdens on the courts, without a demonstrated need for those changes.  There is no compelling evidence that protective orders governing discovery or confidentiality provisions in settlement agreements are frequently abused. Nor is there evidence that federal courts do not currently have the power to regulate those agreements. 

Moreover, as written, the bill would lead to more confusion, not less, regarding what information has to be released, and when.  As pointed out by Steve Zack, President of the ABA, the language is is vague and indefinite, threatening to sweep up many cases having little to do with true public health or safety.  And it certainly would  require the parties and courts to spend extensive time and resources litigating whether and how the statute applies.  The politicians seem to forget  that protective orders are critical to both plaintiffs and defendants, including by helping to safeguard against dissemination of highly personal sensitive information or trade secrets.  

Perhaps Congress should spend less time on restricting judicial discretion and more on seeing that federal judges are paid a market-competitive wage.  A district court judge on the bench since 1993 failed to receive a total of $283,100 in statutorily authorized but then-denied pay. Appellate court judges have lost even more.