They’re Heeeere! Get Ready for the Specter of Mandatory Initial Discovery in All Cases, Even Consumer Class Actions and Other Complex Cases
The Mandatory Initial Discovery Pilot Project has started in the District of Arizona (for cases filed after May 1, 2017) and the Eastern Division of the Northern District of Illinois (for cases filed on or after June 1, 2017). See General Order 17-08 (D. Az. Apr. 14, 2017); General Order 17-005 (N.D. Ill. Apr. 27, 2017). The bottom line is that the pilot project will require defendants in these courts to quickly marshal the relevant facts and in short order produce a level of substantive disclosures, documents, and ESI that could pose a considerable challenge in consumer class actions and other complex cases. While these requirements set an ambitious goal for responsive pleadings and early disclosure of a broad swathe of information, there are proactive measures companies can take to be better prepared to respond to consumer class actions in the tight timeframe set by the pilot project.
Scope of the Pilot Project and Its Requirements
The two courts’ respective Standing Orders outline the details of the project, which will run for three years and applies to nearly all civil cases. See General Order 17-08 (D. Az.) and Standing Order Regarding Mandatory Initial Discovery Pilot Project (N.D. Ill.). The only civil cases exempted from the project are (1) actions under the Private Securities Litigation Reform Act, (2) patent cases governed by local rule, (3) cases transferred for consolidated administration by the Judicial Panel on Multidistrict Litigation, and (4) the assortment of cases listed in Rule 26(a)(1)(B) (i.e., review on administrative record, in rem forfeiture actions arising from federal statute, any proceeding challenging a criminal conviction or sentence, cases brought by someone in custody without the aid of an attorney, actions by the U.S. to recover benefit payments, actions by the U.S. to collect on government-guaranteed student loans, proceedings ancillary to cases in other courts, and actions to enforce arbitration awards). Parties are not allowed to opt out.
While the MDL exception may cover the odd consumer class action or products liability case now and then, the majority of suits brought in these Districts by consumers will be subject to the new disclosure requirements. In these cases, it will be no small feat to meet the letter of the mandatory disclosure requirements, which include:
- Responsive pleadings to be filed even if a motion to dismiss is pending. Answers, counterclaims, crossclaims, and replies must be filed as required by FRCP 12(a)(1)-(3) – within 21 days of service or within 60 days of a request for waiver – even if the party files a motion to dismiss. The only exception is if the motion to dismiss is for lack of subject matter jurisdiction, lack or personal jurisdiction, sovereign immunity, or absolute or qualified immunity for a public official, in which case FRCP 12(a)(4) will apply.
- Claims promptly investigated and responses verified. A party must respond based on information reasonably known at the time of response. Responses must be signed under oath by the party and cannot be deferred based on a party having not fully investigated the case.
- Swift, broad disclosures not tied to any request by the other side for discovery. Without awaiting a request from the other party, a party must disclose “both favorable and unfavorable information that is relevant to the claims and defenses in the case. This includes claims and defenses asserted by all parties to the litigation, and a responding party must provide relevant information regardless of whether it intends to use the information in presenting its claims or defenses.” Mandatory Initial Discovery Users’ Manual for the Northern District of Illinois. Parties must begin disclosures within 30 days after their first pleading, unless (1) the parties agree that discovery is not necessary or (2) the parties seek a one-time, 30-day extension and jointly certify that settlement is likely in that timeframe. Mandatory initial disclosures must include identification of:
- All individuals with discoverable information;
- All individuals who gave a written or recorded statement relevant to claims or defenses, and the individual who possesses the statement(s);
- A listing of documents, ESI, tangible things, land, and/or property relevant to claims or defenses (documents and ESI may be disclosed by category, but it must be done with particularity as to specific categories and include the name and contact information for each custodian), and custodian contact information for any documents that are not in the party’s possession, custody, or control;
- For each claim or defense, the relevant facts and legal theories;
- Computation of damages and a description of the documents on which the computation is based; and
- Applicable insurance agreements, which must be either described or produced.
- Prompt ESI conference and quick completion of ESI production. ESI production must be completed within 40 days of service of the initial disclosure – in some instances within 3 months of being served with a complaint! Parties must meet and confer regarding ESI production, including preservation, scope of any searches, and the form of production. The default production format is the format requested by the opposing party.
- Privilege logs due with each production.
- A continuing duty to supplement promptly. Parties must supplement their disclosures within 30 days of learning additional relevant information.
A receiving party may request more detailed or more thorough responses. Additional discovery is also permitted under normal Federal Rules of Civil Procedures rules, but the mandatory disclosure requirements are court-ordered discovery that must be responded to before commencing broader discovery under Rules 26, 30, 31, 33, 34, 35, and 36 (i.e., no depositions, requests for admissions, interrogatories, requests for inspection, or targeted requests for production of documents, ESI, or tangible things until the mandatory initial disclosures are made).
Collectively, the requirements of the new pilot program will be a heavy lift in any case where the facts go beyond recent events, will require collection from more than a few custodians, or will generate any volume of review and production, which describes virtually all consumer class actions and all but the simplest and smallest of product liability claims. It strains credulity to think that in as little as three months a defendant could investigate the allegations and determine defenses, collect documents and ESI from dozens of custodians and sources, review those documents, provide the level of detail required by the initial disclosures, produce “both favorable and unfavorable information that is relevant to the claims and defenses in the case [including] claims and defenses asserted by all parties to the litigation, and . . . provide relevant information regardless of whether it intends to use the information in presenting its claims or defenses,” AND supply an accompanying privilege log of anything withheld. Nonetheless, defendants must try to do so, as there is no exception for more complex cases, and the “MIDP courts will vigorously enforce the requirement to provide mandatory initial discovery responses through the imposition of sanctions if appropriate under the Federal Rules of Civil Procedure.” Mandatory Initial Discovery Users’ Manual for the Northern District of Illinois §A.2(h).
Lighten the Heavy Lift and Improve the Chances of Timely (and Accurate) Responses Through Pre-Suit Housekeeping
While meeting the letter of the new mandatory initial disclosures scheme is ambitious, there are steps that companies who may face suits by their customers can take before being served with a suit to improve their ability to respond:
- Develop a reliable archive for product labeling, advertising, marketing materials, and other key consumer-facing materials that documents when it was used and where. The claims on and appearance of these materials are often at the heart of plaintiffs’ consumer protection claims and the pertinent defenses, yet plaintiffs rarely provide the actual documents or even a reliable recollection of the material and the circumstances where they were seen. Being able to quickly identify and evidence the what, when, and where of the allegedly problematic statements is critical because defendants must file an answer even if they file a motion to dismiss. Under FRCP 9(b) plaintiffs have an obligation to plead allegations of fraud with particularity, and defendants can ordinarily use a Rule 12(b)(6) motion to dismiss to put their answer on hold while they prod plaintiffs to provide more detail on the allegedly misleading statements, omissions, or deceptive conduct -- an option often winnows the specific products, time period, geography, or statements really at issue, but that is no longer available in these pilot Districts. With no route to force plaintiffs to give the guidance about what they likely saw, defendants must develop the likely facts more clearly on their own in short order. Additionally, being able to confirm what a customer in that place and time frame may have seen can provide an early basis for narrowing the scope of the information and documents that are relevant to the case, winnowing down the facts that must be pinned down and disclosed, the employees, former employees, and other individuals who must be interviewed and their statements disclosed, and the volume of documents that must be collected, reviewed, and produced. Moreover, having a business record that contemporaneously documents this information will be a valuable tool for quickly proving the elusive negative, allowing a defendant to confidently answer in the event that no such statement was made. See Federal Rule of Evidence 803(6) and (7).
- Keep an archival record of key portions of the website and changes to them. Websites are an important information source for customers and one on which consumer protection claims are increasingly based, yet the dynamic nature of websites too often means that the information customers saw at a particular point in time – and the statements that this plaintiff saw – cannot be verified without extensive investigation. In the fast-paced environment of the pilot Districts, it will be all the more important to pin down the crucial question of who-saw-what-when in short order.
- Maintain a product-by-product chart that details who served in key roles for the product over time. For companies that regularly face consumer protection claims, these may include lead responsibility for research & development, claims testing, and marketing roles. Being able to quickly identify current and former employees with knowledge of critical facts and to collect relevant documents will be essential, and it can be particularly challenging where mergers and divestitures have transitioned ownership of and responsibility for products. Companies cannot depend on longstanding employees with institutional knowledge to rapidly provide this foundational information, especially the further back the claim goes. According to a September 2016 report from the Bureau of Labor Statistics, the median number of years that workers had been with their current employers was 4.2 years, a tenure that has been declining. “Employee Tenure in 2016,” Bureau of Labor Statistics, U.S. Department of Labor (Sept. 22, 2016).
- Preserve historical org charts. The “up-to-date” feature of dynamic, web-based org charts is both a blessing and a curse. On the one hand, they are helpful guides for finding all of the current employees of a particular department or who may have relevant knowledge or documents. On the other hand, the tendency to no longer create static org charts makes it difficult to pinpoint the people who would have knowledge or documents relevant to a particular critical timeframe or crucial decision. Making a fixed record of the org chart at regular intervals helps address this problem and ensure that the relevant individuals can be identified, even if the record is clunky because of matrixed reporting relationships.
- Commit to your retention policy. Having an up-to-date retention policy that takes into account your current systems allows regular, appropriate destruction of documents and information that are no longer needed. Implementing such a policy is good housekeeping that can dramatically reduce the volume of data and documents that are unlikely to be relevant, but would need to be waded through to find relevant information and responsive documents. The quick turn required under the pilot programs makes such streamlining all the more valuable.
Additional information about the Mandatory Initial Discovery Pilot Program, including user manuals, answers to questions, instructions, and forms, can be found on the respective websites for the District of Arizona, the Northern District of Illinois, and the Federal Judicial Center.