It started in 1938

December 2017 | SPOTLIGHT | LITIGATION & DISPUTE RESOLUTION

Financier Worldwide Magazine

December 2017 Issue

Risk managers have long known that defending litigation in courts in the US is and will be expensive. In addition to defence counsel costs, there are major costs incurred in document production and in defending depositions. It was not always this way.

This American litigation journey can fairly be said to have started in 1938. That was the year the Federal Rules of Civil Procedure were adopted to include, essentially for the first time on a broad base, potentially wide open discovery of the other side’s documents and witnesses on the matters in dispute. Neither judges, nor lawyers, fully anticipated how deeply these new rules would influence American litigation.

The new Federal Rules applied in all federal courts. Since 1938, most states have adopted some form of those rules. They then moved to state courts in major cities and small towns and put down roots.

Before 1938, depositions were not regularly taken in American litigation. Document production in the course of litigation was also modest. The rationale behind the rule changes was the perception that it would make litigation fairer.

Needless to say, no one in 1938 foresaw the invention of the computer or the internet; no one foresaw that emails would become the basic written form of communication. Certainly no one was aware that, once written, an email might live forever in some cloud or other then unknown environment. A law review article published in early 1939 commented that the new rules “brought forth vigorous protests from many sources”. The author replied that pretrial discovery permitted by the new Federal Rules “will, in many cases, prove very helpful and quite salutary”. Battles are still being fought about the validity of that conclusion.

The guiding principle behind the Federal Rules was that a litigant was entitled to written or testimonial evidence from the adversary which could lead to the discovery of admissible evidence. In the hands of many judges who began to rule on pretrial discovery disputes, the admonition “could lead” was broadly interpreted.

Many agree that American broad-based litigation by governments or private parties witnessed an explosion in the 1960s and 1970s. It has not slowed down much since then. As internet and email activity took off toward the turn of the last century, everyone learned of the enormous costs involved. The costs included locating and reproducing the requested material, as well as a review of it, to eliminate irrelevant or privileged material. There have been estimates that up to 70 percent of the costs involved in document production involve document review. An industry, small though it may have been, soon appeared on the scene to assist litigants. It was not until a short time ago that the Federal Rules were amended to establish narrower boundaries of what is or what is needed to be produced and whether there needed to be cost-sharing. That phenomenon is being developed on a case-by-case basis. No one can reasonably predict how this serial dispute will be resolved or whether it will be resolved uniformly. We can reasonably predict it will take time, with no assurance that the states will follow whatever path the federal courts may chart.

Then there has been the deposition caravan. In all major litigations, the videotaped deposition has become the rule. In many litigations it also becomes the trial testimony shown at trial; usually edited and rarely shown in its entirety. There is common agreement that extended viewing of videotaped testimony bores many jurors, as well as trial judges. Much of videotaped depositions involve the effort to elicit a sound bite. In the end, that is much of what cross examination at trial endevours to do. Videotaped deposition testimony has put down deep roots. It will not pass quickly from the scene, if at all.

Thus the amount of effort expended by clients and counsel in preparing to take or defend these depositions is substantial. The same applies to the production of computer-generated materials. Yes, managers generally believe they have better things to do with their time. Depositions, however, are now facts of life. Those who deny the facts of life generally suffer adverse consequences.

So, with depositions and discovery of computer-generated material, we now have a phenomenon which the drafters of the Federal Rules could not have foreseen in 1938. Nevertheless, it is a fact of American life. So what are we to do?

The soundest answer reflects the fact that only a tiny percentage of lawsuits filed in courts of general jurisdiction in the US ever go to verdict. Why? First it is that clear-thinking risk assessors, whether it be in commercial litigation, suits brought by government agencies or products liability suits, that make judgments in the first stages of a suit regarding whether it has merit. If it does, a serious effort to resolve it without wandering deeply into the litigation world is done. More often than not, this effort succeeds. As to most of the rest of the cases, it is usually wisest to take the cases seriously, commit to their long-term management and let nature take its course. The weak cases almost always go away. Sometimes they leave the arena voluntarily; sometimes by some court-directed decision, which effectively ends the case, for example a Daubert resolution or summary judgment pre-trial dismissal. As to the handful which finally make it to trial, the numbers are small. They have become small because of early settlement, pretrial dismissals by active trial courts or – and this may be the most important fact of all – de facto abandonment by the lawyers prosecuting the cases. All of those reasons support resisting the suits on their merits. That is why so few have actually gone to verdict.

The expense and inconvenience which document production and depositions bring to the table as suits undergo discovery are, more often than not, managed in a way consistent with the matters at issue. The judiciary in the US is generally aware of the non-recoverable costs which litigation forces upon litigants, especially those for which the liability claims are thin. A recent editorial in a legal publication sums up where most courts are going: “It is time to reassess all our litigation processes for their cost-effectiveness without sacrificing the quality of justice. Establishing and driving a judicial culture aggressively looking for ways to trim costs are core functions of judicial leadership. Setting in motion protocols that require lawyers to practice in such a cost-saving culture would have enormous and lasting social value.” More courts should adopt the wisdom of such protocols.

Thomas F. Campion and Kenneth A. Murphy are partners at Drinker Biddle & Reath. Mr Campion can be contacted on +1 (973) 549 7300 or by email: thomas.campion@dbr.com. Mr Murphy can be contacted on +1 (215)988 2837 or by email: kenneth.murphy@dbr.com.

Thomas F. Campion and Kenneth A. Murphy

Drinker Biddle & Reath