Federal Courts Move to Slow Litigation Expense

For several decades, the pre-trial investigation process known as “discovery” has been governed by an open-ended standard, designed to assure that all parties had full and fair opportunity to sift through all the evidence and make their own determinations as to what mattered and what didn’t.

Discovery has historically not been limited by what might be considered relevant to the issues in the case. It has extended to embrace matter “reasonably calculated to lead to” relevant evidence, as well as the relevant evidence itself. The federal courts system pioneered this standard, and state courts across the country followed suit in their own rules.

But as litigation expense has metastasized in recent years, this very broad discovery standard has been identified as one of the biggest cost drivers. The explosion of “e-discovery” in particular has fueled the bills clients see as cases progress. What used to be a conversation around a water cooler, provable only through the testimony of the participants, is now often the subject of innumerable e-mails, texts, chats, social media posts, etc. And increasingly, lawyers and paralegals have been spending countless billable hours plowing through the mind-numbing documentation the modern world is creating and saving.

It is now quite common to see each side in a court case incurring legal bills well into six, and sometimes even seven figures. One result is that a $50,000 dispute, though too large to ignore, is often a challenge to resolve on a proportional budget.

Effective last month, the federal courts have taken action to rein this in. Gone from the discovery rules is the “reasonably calculated” language that has long been ingrained in the minds of trial lawyers. That language has been replaced by a restrictive requirement that, before matter becomes discoverable, obtaining it must entail costs that are “proportional” to the needs of a case.

This rule change, of itself, will make only modest inroads into the litigation expense problem, because the federal courts handle only a fraction of all civil litigation. Federal courts can handle a claim only if it involves either a point of federal law, or a state law-based dispute between residents of different states with at least $75,000 at stake. The rule change is probably most needed for cases involving less than $75,000, and those cases are handled largely in our state courts.

But the federal courts will serve as the laboratory for seeing how the new rule works in practice. If it works as hoped, then we may well see state courts alter their rules as well in coming years.

This may add fuel to the economic pressures the recent “Great Recession” has placed on the nation’s very largest law firms. Keeping paralegals and junior attorneys busy with documents reviews and discovery battles has been their bread and butter. Reducing the volume of that work will likely continue the retrenchment the legal profession has been seeing over the past eight years.

But the person or company hoping to vindicate their rights through a process that considers the limitations of their means, the rule change has to be considered welcome and indeed, long overdue.