Proposed Amendments To Federal Rules Of Civil Procedure Could Result In Savings

Thursday, February 27, 2014 - 10:33

On Wednesday, February 19, Professor William Hubbard from the University of Chicago School of Law submitted to the Federal Civil Rules Advisory Committee the Summary of Findings and Final Report on his recently concluded Preservation Cost Survey. The Summary and Final Report were submitted in connection with the recently published proposed amendments (see discussion) to the Federal Rules of Civil Procedure currently being considered by the Committee. Marsha Rabiteau on behalf of CJRG’s EDiscovery and Federal Rules Subcommittee coordinated with Professor Hubbard on this survey, which was funded by CJRG. This study explored preservation costs of 128 different companies. The study was conducted in three phases:

  • Phase one involved detailed interviews of four companies on preservation practices and costs (including review of redacted information on litigation holds);
  • Phase two was a detailed survey completed by 13 companies;
  • Phase three involved survey questions to 128 companies. 

The Survey is the first study analyzing the impact of preservation on U.S. corporations, and we believe it is groundbreaking.

It found that larger companies spend over $40 million in costs attributed to preservation activities, including the time spent by custodians managing their litigation holds.  The proposed amendments to the Federal Rules of Civil Procedure could result in savings of over $1 million per year per company as a result of an anticipated three percent reduction in preservation activities that will likely follow the adoption of the proposed amendments. (The current climate in federal courts encourages significant overpreservation of information due to the lack of clear standards for imposing sanctions for spoliation.) This savings could be quite substantial for all businesses that will be impacted by the proposed amendments.

Professor Hubbard’s key findings are extracted below:

  • The Survey generated conservative estimates of costs that are solely attributable to preservation obligations. Among the largest companies in the sample, the estimated costs exceed $40 million per company per year.
  • Both larger and smaller companies report similar preservation burdens. Over 79 percent of respondents reported a “great extent” or “moderate extent” of preservation burdens. Further, smaller companies are far less likely than large companies to have specialized resources to address the risks and costs of preservation. Thus, smaller companies are more vulnerable to legal uncertainty in this area, including the possibility of sanctions with severe effects on their ability to do business.
  • A small percentage of litigation matters generate a disproportionate share of preservation costs. Five percent of litigation matters account for more than half of all litigation hold notices issued.
  • Companies report “overpreserving” to protect against serious uncertainty in the case law. Rules amendments that better define the standards for sanctions for failure to preserve could address this phenomenon.
  • Only a fraction of preserved data is ever collected. On average across all survey respondents, slightly less than half of all preserved data is ever collected, processed, and reviewed. Even less is produced or eventually used in litigation.
  • Rule changes with even modest effects would generate meaningful cost savings. For the largest companies in the sample, a three percent reduction only in employee time spent on litigation holds would equate to savings of over $1 million per company per year.
  • Because so little preserved data is ever used, reducing overpreservation in a reasoned fashion is unlikely to have much, if any, negative impact on the production and use of data in litigation. Rules amendments that rein in overpreservation will likely have essentially no adverse impact on discovery and the ultimate resolution of litigation.

We believe that Professor Hubbard’s work strongly underscores the case for Civil Justice Reform, particularly adoption of the proposed amendments to Rule 37(e) currently under consideration by the Federal Civil Rules Advisory Committee. 

Civil Justice Reform Group