The U.S. Supreme Court hasn’t had much to say about civil litigation’s discovery process since Herbert v. Lando in 1979. The Court’s relative silence certainly hasn’t been due to a lack of disputes. In the full-contact sport that is civil litigation, battles over document access are commonplace. The advent of electronic discovery has intensified those battles, however, while also raising the costs of document retention, search, and production exponentially. Judges are now more likely to become directly involved, and their application of procedural rules promulgated by the Supreme Court can significantly impact a civil action’s ultimate outcome.
An appeal petition currently pending before the Supreme Court in Actavis Holdco, Inc. v. Connecticut presents an especially egregious misapplication of the discovery rules, one that has broad implications if allowed to stand. The justices should use this opportunity to remind lower courts of their authority to limit, not expand, the scope of discovery.
Federal Discovery Rules
The Federal Rules of Civil Procedure governing discovery (Rules 26 and 37, primarily) state that discovery “must” be limited to “relevant” documents. That mandate presupposes that producing parties may conduct pre-production review of what they discover. Courts may sanction litigants accused of withholding documents by compelling production, but the rules don’t empower them to expand the scope of discovery by allowing the recipient to determine relevance. The cost and other burdens of discovery requests must also be proportional to the information’s benefits to recipients. Chief Justice Roberts commented specifically on this new standard when announcing 2015 amendments to the discovery rules.
Before the MDL Court
The petition before the Court in Actavis Holdco arises from multidistrict litigation (MDL) in the Eastern District of Pennsylvania—a consolidation of over 50 price-fixing complaints filed by 49 States and various third-party payors against 37 generic drug manufacturers.
Responding to the plaintiffs’ request for unfettered access to millions of emails and other electronic documents, a court-appointed special master recommended that the defendants use “broad” search terms to identify responsive documents. His proposed order also suggested that the defendants “may not withhold prior to production any documents based on relevance or responsiveness.” The companies could mark certain documents as “Confidential,” but they would have to hand them over to the plaintiffs.
The special master also recommended that the companies be given 120 days to seek the return of certain documents through a “clawback” process. He cited no rule or precedent in support of his recommendation, instead noting the “extraordinarily high stakes involved” and explaining that “extensive” discovery was “essential for any meaningful settlement.”
The judge presiding over the MDL accepted the special master’s recommendation and then denied the defendants’ request that she stay the discovery order pending appellate review. She explained that the order would ensure that the process would go forward in a way that is “reasonably calculated to lead to the discovery of relevant information.” The Supreme Court removed that particular language from federal Rule 26 in 2015, so it no longer sets the standard for the scope of discovery.
In the Third Circuit: “Production before review and objection”
The companies appealed to the Third Circuit, and a divided three-judge panel refused to overturn the discovery order. The majority cited district courts’ “wide latitude in controlling discovery” and expressed confidence in the clawback procedure’s ability to protect the companies’ and their employees’ confidential information.
Dissenting Judge Peter J. Phipps wrote that the order is an “extraordinary outlier” that “constitutes serious and exceptional error.” The discovery process, and its production of only relevant data, relies upon a “sequence of events,” he explained, which includes pre-production review. Judge Phipps compared the order’s “production before review and objection” approach unfavorably to a search warrant.
The Supreme Court Should Review and Reverse
After the Third Circuit denied their request for rehearing en banc, the companies appealed to the Supreme Court. On February 28, Justice Alito ordered a stay of the discovery order, which the full Court denied on March 6. The Chamber of Commerce of the U.S., the National Association of Manufacturers, the American Tort Reform Association, and the Pharmaceutical Research and Manufacturers of America jointly filed an amicus brief supporting the petition, as has Lawyers for Civil Justice.
The Third Circuit committed manifest legal error when rubber-stamping the MDL judge’s discovery order. The Court could thus dispense swift justice by summarily reversing the appeals court. We’d certainly welcome that, but this petition merits a grant of certiorari and a full review.
The Supreme Court amended the discovery rules in 2015 to address the type of overbroad fishing expedition the MDL judge’s order would allow. The justices heard from many stakeholders that electronic discovery, especially in mass-tort litigation, imposes asymmetrical burdens on defendants. Discovery without a relevance review and consideration of the benefits and burdens “provides the requester with court-assisted settlement leverage, irrespective of the merits,” as attorney Rebecca A. Womeldorf wrote in a 2013 WLF Legal Backgrounder.
The purpose of discovery is not to motivate settlement. Quite to the contrary, it’s meant to help the parties determine the nature and strength of the claims at issue. For that reason, the special master’s statement about how discovery is essential for settlement is extremely troubling. How could the special master have known the plaintiffs had viable claims against each defendant, and thus deserved settlement, without discovery? Neither the district court nor the Third Circuit commented on what one could reasonably conclude was prejudgment by the special master.
The Supreme Court should also find compelling Judge Phipps’ statement about how the discovery order completely upends the critical sequence of document exchange. That sequence encourages cooperation between the parties, and courts should only step in after a party has allegedly refused to produce. The MDL judge skipped that step. Did she assume that the defendants would withhold documents the plaintiffs wanted, and thus denied them prior relevance review?
Such a broad discovery order also has profound data-privacy implications. The companies would need to hand over pricing information and other trade secrets, profoundly valuable, confidential information that could find its way into competitors’ hands. Employees’ private conversations, personal business transactions, and financial data, irrelevant for the lawsuits but otherwise potentially compromising, could show up in produced emails. The plaintiffs and the Third Circuit have put their faith in “Confidential” labeling and data clawback, but those procedures offer at most cold comfort to the defendants.
The state and private plaintiffs have sought to minimize the MDL judge’s order as uniquely applicable to such an “extraordinarily high stakes” case, and the overall battle with defendants as just another discovery dispute. The justices shouldn’t fall for such spin. The judge’s order, if allowed to stand, will become a model for plaintiffs’ lawyers to flack in any civil litigation. The amicus support the petitioners attracted certainly speaks to how much of a threat this supposedly mine-run pre-trial fight poses. It’s especially notable that “Big Pharma,” which normally fights tooth and nail with generic-drug companies, signed on to the joint brief.
The Supreme Court’s decisions on procedural matters such as pleading standards, expert evidence, and class-action certification over the past three decades have improved the civil-litigation process. The Court can do the same with discovery and the federal rules that govern it by reviewing Actavis Holdco and correcting the lower courts’ errors.
Also published by Forbes.com on WLF’s contributor page.