With the conclusion of the Federal Rules Advisory Committee’s public comment period last month, the first leg of what The Legal Pulse has described as the long and winding road to reform of the federal rules for discovery is now over. We have at last reached the “end of the beginning,” to borrow Churchill’s phrase.
Comments contributed by the business community conveyed the consistent message that the current rules encourage over-preserving documents, a practice that ill-serves the interests of justice. The committee record is replete with anecdotes demonstrating this point, but it had lacked aggregate data until recently. Enter a Preservation Costs Survey conducted by Professor William Hubbard (my former contemporary at the University of Chicago Law School who has returned to teach there now), which thoroughly documents systematic over-preservation of electronic materials and its profound costs. A summary of Professor Hubbard’s findings is available here.
Business Defendants’ Stories. In its comment to the Advisory Committee, 307,000-employee General Electric noted that in order to preserve information contained in emails alone, it is “faced with a universe of approximately 4,770 terabytes” of data. (Just 10 terabytes, by comparison, is roughly enough storage for the Library of Congress’s entire book collection.) The comment cited one example from 2011 in an instance where litigation had not yet been filed. GE incurred “fees of $5.4 million to collect and preserve 3.8 million documents totaling 16 million pages.” The company also reported it must spend over $100,000 a year to simply maintain those documents.
Pfizer explained in its comment that it currently has over 300 active legal holds in place impacting over 80,000 employees. It preserves 5 billion emails, and expects that amount to grow by 1 billion per year. Allstate reported that in the past 5 years it has spent over $17 million on e-discovery costs alone.
Ford provided several case studies in its comment, including one arising from a suit in Montana. There, Ford’s legal staff invested more than 800 hours and paid outside lawyers $2 million to produce nine computer hard drives containing 360 gigabytes of documents and 1,200 witness transcripts from past lawsuits. The plaintiff was unsatisfied with Ford’s production and filed a motion for sanctions, which the court denied. In the end, the plaintiff sought to introduce one document from the massive trove it requested from Ford. Continue reading
by Ross Coker*
Since its debut in the early 2000s, Google has grown at a startlingly rapid pace, becoming not only a global behemoth in the online search engine and advertising markets, but expanding its reach through smartphones, computer operating systems, and more. Just this month, Google surpassed ExxonMobil as the world’s second largest company by market capitalization.
In the United States, such success inevitably makes one a target of class-action lawsuits. To avoid being dragged into one of the country’s notorious Judicial Hellholes,® companies like Google include venue and forum selection clauses in their consumer contracts. In addition to avoiding plaintiff-friendly jurisdictions, such clauses allow companies to resolve legal disputes close to “home” in a manner that minimizes disruption to conducting business.
A recent federal district court ruling, Rudgayzer et al. v. Google Inc., reflects the importance and effectiveness of these forum-selection clauses and clarifies their strategic underpinning. Rudgayzer filed suit in the Eastern District of New York (EDNY) alleging improper notice after Google settled another class action suit involving the now-defunct “Buzz” product. The judge dismissed Rudgayzer’s suit because the plaintiff had assented to Google’s consumer contract, which contained the forum-selection clause.
Santa Clara County, CA
In order to reach that conclusion, the court had to first determine whether the clause could be enforced. The court noted that the federal circuits are split on the legal standard to apply in this situation. The Second Circuit, whose precedents bind the EDNY, permits dismissal under Federal Rule of Civil Procedure 12(b)(3) if the consumer was made aware of the forum-selection clause, the clause is mandatory by the terms of the contract, and state contract law permits the imposition of such a clause. The plaintiff can escape the clause only if it can show that the transfer of its case would be “unreasonable or unjust.” Continue reading
Cross-posted from WLF’s Forbes.com contributor site
The Supreme Court’s decision last month in Daimler AG v. Bauman has been viewed by many as having its principal impact on lawsuits involving overseas events. There is no question that the decision evinces the Court’s reluctance to permit federal courts to exercise jurisdiction over controversies arising within other nations. But to focus exclusively on this aspect of Daimler overlooks its potential bombshell consequences for domestic tort litigation; it could result in major upheavals in standard operating procedures for much of the plaintiffs’ bar. Indeed, Daimler may even conceivably spell the end of most nationwide class action lawsuits.
The plaintiffs in Daimler were 22 residents of Argentina who claim to have suffered human rights abuses at the hands of Argentina’s military rulers more than 30 years ago. The plaintiffs alleged that Mercedes-Benz Argentina, a subsidiary of Daimler, aided and abetted those human rights abuses. Daimler is a German corporation whose cars are sold world-wide. It sells its cars here through its American subsidiary, Mercedes-Benz USA (MBUSA). MBUSA is a Delaware corporation with a principal place of business in New Jersey, and it distributes Daimler-manufactured cars to independent dealerships throughout the U.S., including many in California.
The plaintiffs filed suit in a federal district court in California against Daimler, claiming that it should be held responsible for the alleged misdeeds of its Argentine subsidiary. They asserted personal jurisdiction over Daimler on the basis of MBUSA’s contacts with California, although they conceded that none of the events giving rise to their claim occurred in California. The Ninth Circuit upheld the assertion of personal jurisdiction; it held that MBUSA did sufficient business in California to be answerable for any lawsuit filed against it within the state and that Daimler was similarly answerable because MBUSA was Daimler’s agent for jurisdictional purposes. Continue reading
by Donald Earl Childress III, Associate Professor of Law, Pepperdine University School of Law
On January 14, 2014, the Supreme Court handed down its decision in Bauman v. DaimlerChrysler. N1 Writing for all members of the Court except Justice Sotomayor (who concurred only in the judgment), Justice Ginsburg explained (following her opinion for a unanimous court in Goodyear) N2 that general jurisdiction is only available over a corporate defendant in the place of its incorporation, the place of its principal place of business, or, “in an exceptional case,” in another forum where it is “essentially at home.” N3 Since none of these affiliations applied to the relationship between Daimler and California, the Court held that Daimler could not be sued in California for injuries allegedly caused by a subsidiary of Daimler in Argentina. The Court sidestepped the precise issue it was asked to decide by Daimler in its certiorari petition (an issue written about in the Washington Legal Foundation’s On the Merits publication here): whether a subsidiary’s contacts can be imputed to a parent corporation to establish general personal jurisdiction. N4 If the Court did not decide the precise issue it was asked to decide, then what did it decide?
The Court’s Ruling
In Bauman, the Supreme Court held that Daimler was not subject to general jurisdiction in California for injuries allegedly caused by a subsidiary of Daimler in Argentina. Before reaching this conclusion, the Court made several points designed perhaps to send not-so-subtle hints to lower courts. Continue reading
When we noted the beginning of the comment period for the Federal Rules Advisory Committee’s proposed amendments to the Federal Rules of Civil Procedure governing the discovery process with a post last August, the February 15 deadline seemed eons away.
But in mere two weeks, that stretch of the long-and-winding road that is Federal Rules reform will have come and gone. Along the way, WLF has been privileged to testify before the Advisory Committee last November and was the first public interest organization to file public comments with it last October. In order to inform the discussion and explain why the Rules reform effort is so vitally important, WLF published a “Conversations With” paper earlier this month featuring former Attorney General Dick Thornburgh, University of Denver’s (and former Colorado Supreme Court Justice) Rebecca Kourlis, and Goldberg Segalla LLP partner John Jablonski.
In a recent Corporate Counsel magazine, GlaxoSmithKline General Counsel Dan Troy authored a must-read article on e-discovery reform, “Changing Federal Rules to Reduce Discovery Costs.” WLF is honored to have Dan as a member of our Legal Policy Advisory Board. He brought the emerging effort to reform the Federal Rules to our and the public’s attention four years ago by authoring a WLF Legal Backgrounder along with GSK Assistant General Counsel John O’Tuel entitled A Toolkit For Change: How The Federal Civil Rules Advisory Committee Can Fix A Civil Justice System “In Serious Need Of Repair”. In his Corporate Counsel article, Dan focused on the extreme costs of document preservation in the digital age, and the need to not only adopt proposed amendments to Rule 37(e), but also further strengthen the standard for imposing sanctions for “spoliation.” In terms of the preservation burden, he wrote:
As just one example of the amounts of data at issue, my own company, GlaxoSmithKline, has preserved 57.6 percent of its company email, amounting to 203 terabytes of information. This would be 20 times the amount of the printed collections of the Library of Congress.
Last Friday just prior to the Veterans’ Day weekend, the Food and Drug Administration (FDA) issued a highly anticipated notice of proposed rulemaking which addresses the U.S. Supreme Court’s 2012 decision, PLIVA v. Mensing. The proposal, Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products, was introduced by Dr. Janet Woodcock, director of FDA’s Center for Drug Evaluation and Research, in an FDA Voice blog post. The proposal, according to her, is “intended to improve the communication of important drug safety information about generic drugs to both prescribers and patients.”
As emphasized in a New York Times story about the proposal, “The rule would also pave the way for lawsuits from patients who could now claim that generic companies did not sufficiently warn them of a drug’s dangers.”
As WLF’s Rich Samp argued here last August in Can FDA Lawfully Overrule SCOTUS Generic Drug Preemption Decision Through Regulation?, WLF doubts that FDA has the authority under federal law to take such an action. We look forward to participating in the regulatory process and the accompanying debate that will intensify now that FDA has formally proposed the rule.
Cross-posted by Forbes.com at WLF’s contributor page
As the process of amending the Federal Rules of Civil Procedure (FRCP) enters a critical juncture, most discussion and attention (including here at The Legal Pulse) have deservedly focused on proposed changes to rules governing the pre-trial discovery process. However, one particular proposed change, overlooked for the most part, would require plaintiffs alleging patent infringement to provide more information in their initial complaints. The Advisory Committee on Civil Rules proposes to abrogate Rule 84 and along with it, the sample complaint forms to which the rule refers, including one relating to patent suits: Form 18.
What Is Form 18? This form has become well-known to patent litigants, especially accused infringers. The judiciary created Form 18 in 1938. It permits plaintiffs to provide a bare minimum of information: a jurisdictional statement, general assertion of patent ownership, a claim of infringement, and a request for relief. A complaint crafted in compliance with Form 18 would thus be in accord with another Federal Rule of Civil Procedure, Rule 8, which dictates pleading standards. In its 2007 Bell Atlantic v. Twombly and 2009 Ashcroft v. Iqbal rulings, the Supreme Court found that the then-existing interpretation of Rule 8—that some relief is “possible”—was incorrect and ruled that plaintiffs must demonstrate that its version of the events is “plausible.” The Court pointedly said that Rule 8 “demands more that an unadorned, the-defendant-unlawfully-harmed-me accusation.”
Form 18 Trumps Rule 8. Patent infringement complaints drafted in minimal conformance with Form 18 are decidedly “unadorned.” Defendants are denied fair notice of their alleged violation, a fault which is magnified exponentially in some patent litigation, such as suits brought by “patent-assertion entities.” As stated in a 2011 letter urging the Administrative Office of the U.S. Courts to address Form 18′s flaws:
[Its] limitations are immediately apparent when the template is used—as is frequently the case—to accuse an entire website or channel of commerce of infringing, in some unspecified manner, a method or software patent. Continue reading
As we discussed in an August 15 post, the long and winding road to amending the Federal Rules of Civil Procedure began that day when an Advisory Committee on Civil Rules of the Judicial Conference of the United States began taking comments on its proposal. The amendments focus most prominently on changing what documents are “discoverable” and how judges determine sanctiosn for parties who allegedly fail to preserve documents.
In a WLF Counsel’s Advisory published last week, GlaxoSmithKline Assistant General Counsel Leah Lorber urged interested parties to file comments with the Advisory Committee, which are due by February 15, 2014.
Yesterday, Washington Legal Foundation filed its formal comments with the Advisory Committee. WLF Senior Litigation Counsel Cory Andrews has requested an opportunity to testify before the Committee during its hearing in Washington, D.C. on November 7.
Our comments frame the challenges the discovery process pose today for those who are subject to and must manage civil litigation:
The potency of discovery as a leverage weapon has intensified in the past two decades with the explosion of electronic data. The nature of such data, which can be easily and unintentionally deleted, has also given rise to so-called spoliation claims, where one litigant accuses the other of document destruction and urges courts to sanction the alleged offender. The outside costs of litigation for American businesses over the past decade have steadily grown. These costs are disproportionately high in the United States versus the rest of the world.
The comments specifically call on the Advisory Committee to:
- Amend proposed Rule 37(e) to eliminate a stated exception that can swallow the Rule; alter the conduct trigger for sanctions from “willful or in bad faith” to “willful and in bad faith”; move the list of factors to be assessed when evaluating conduct from the Rule to the Committee Note; clarify the standard for when parties must preserve documents; and clarify the prejudice standard that judges will use to impose “curative measures” under the Rule.
- Require that under proposed Rule 26(b)(1), the scope of discovery be “any non-privileged matter that is relevant
and material to any party’s claim or defense.”
- For Rules governing the presumptive numerical limits on discovery devices (depositions, interrogatories, etc.), consider limiting discovery to five “custodians” in the first instance, chosen by the requesting party, and then five more in the second instance; any further discovery would require a showing of good cause.
- Eliminate, as proposed, Rule 84, which through sample forms such as Form 18 used for patent litigation, elevate antiquated requirements over current Supreme Court precedents on pleading standards. In addition, the Committee should add a Committee Note for the Rule on pleading standards, Rule 8, to acknowledge those recent Court precedents.
Cross-posted at Forbes.com’s WLF contributor page
Washington Legal Foundation, along with other organizations, business, and individuals with an interest in the Supreme Court and free enterprise cases before it, watched with great anticipation this morning as the justices issued their first new list of certiorari grants since the Court adjourned last June (the so-called Long Conference). We came away from the big cert grant morning, as likely did many other interested parties, wanting more.
The orders list is here. The grants include a tax case, United States v. Quality Stores addressing whether severance payments made to employees whose employment was involuntarily terminated are taxable. Two other grants relate to the standard of review the U.S. Court of Appeals for the Federal Circuit uses when assessing a district court’s determination that a case is “exceptional” for purposes of imposing attorneys’ fees and other sanctions. Those cases are Octane Fitness v. Icon Health and Fitness and Highmark Inc. v. Allcare Management Systems Inc.
The final cert grant impacting free enterprise is Petrella v. MGM, which involves the movie Raging Bull and the defense of laches against claims of copyright infringement. Marcia Coyle at National Law Journal discussed the interesting facts of the case in a September 16 story.
The bigger story from the big cert grant morning was which petitions the Court did not act on. WLF filed amicus briefs in support of review in a number of the cases, which we’ll indicate below (all noted on SCOTUSblog’s “Petitions we Are Watching” page).
Failure to act on these and other petitions does not mean that the Court cannot reconsider them in a future “conference,” and it does not mean that they have been denied. The Court will be issuing an order list on First Monday, October 7, but that order traditionally has only contained cert denials.
Cross-posted at WLF’s Forbes.com contributor page
With new, strikingly similar class actions being filed seemingly every day, the litigation industry’s crusade against food and beverage companies for “fraudulent” or “misleading” labeling has almost become monotonous. Thankfully, the occasional mini-saga breaks the tedium. The latest involves the humble, though now ubiquitous, Greek yogurt, and a suit against producer Chobani. Kane v. Chobani has had many twists and turns, but with a ruling last week, the plot may be moving to a fulfilling denouement.
Good Enough for Kids. Before getting into the Kane saga, we must note a delicious irony. Contrary to the opinion of Ms. Kane and her unnamed (and unknowing) class of plaintiffs, the federal government is quite a fan of the protein-packed product. The U.S. Department of Agriculture announced in July that it will be purchasing Greek yogurt for schools participating in a federally assisted program that subsidizes school lunches.
Previous Developments. On July 12, Northern District of California Judge Lucy Koh dismissed one of Ms. Kane’s claims but allowed the majority of her complaint to survive. Three days later, Judge Koh denied Kane’s preliminary injunction against Chobani’s sale of products with “evaporated cane juice” on the label. On July 25, she agreed to Chobani’s request to vacate the July 12 order. Then, on August 2, the judge ordered the disqualification of one of Kane’s expert witnesses, but refused to disqualify Kane’s lawyers.
September 19 Order. In last week’s decision, Judge Koh reexamined Kane’s claims that Chobani’s use of the term “evaporated cane juice” (ECJ), its “no sugar added” claims, and its “all-natural” label statements were false or misleading under California law. Continue reading