[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




                 COSTS AND BURDENS OF CIVIL DISCOVERY

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON THE CONSTITUTION

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           DECEMBER 13, 2011

                               ----------                              

                           Serial No. 112-72

                               ----------                              

         Printed for the use of the Committee on the Judiciary









   Available via the World Wide Web: http://judiciary.house.gov







                  COSTS AND BURDENS OF CIVIL DISCOVERY

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON THE CONSTITUTION

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 13, 2011

                               __________

                           Serial No. 112-72

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE
71-623 PDF                WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001












                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             JARED POLIS, Colorado
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
MARK AMODEI, Nevada

      Sean McLaughlin, Majority Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

                    Subcommittee on the Constitution

                    TRENT FRANKS, Arizona, Chairman

                   MIKE PENCE, Indiana, Vice-Chairman

STEVE CHABOT, Ohio                   JERROLD NADLER, New York
J. RANDY FORBES, Virginia            MIKE QUIGLEY, Illinois
STEVE KING, Iowa                     JOHN CONYERS, Jr., Michigan
JIM JORDAN, Ohio                     ROBERT C. ``BOBBY'' SCOTT, 
                                     Virginia

                     Paul B. Taylor, Chief Counsel

                David Lachmann, Minority Staff Director



















                            C O N T E N T S

                              ----------                              

                           DECEMBER 13, 2011

                                                                   Page

                           OPENING STATEMENTS

The Honorable Trent Franks, a Representative in Congress from the 
  State of Arizona, and Chairman, Subcommittee on the 
  Constitution...................................................     1
The Honorable Jerrold Nadler, a Representative in Congress from 
  the State of New York, and Ranking Member, Subcommittee on the 
  Constitution...................................................     2
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Ranking Member, Committee on the 
  Judiciary, and Member, Subcommittee on the Constitution........    16

                               WITNESSES

Rebecca Love Kourlis, Executive Director, Institute for the 
  Advancement of the American Legal System, University of Denver
  Oral Testimony.................................................    18
  Prepared Statement.............................................    20
William H. J. Hubbard, Assistant Professor of Law, The University 
  of Chicago Law School
  Oral Testimony.................................................    65
  Prepared Statement.............................................    68
William P. Butterfield, Partner, Hausfeld LLP
  Oral Testimony.................................................   135
  Prepared Statement.............................................   137
Thomas H. Hill, Associate General Counsel, Environmental 
  Litigation and Legal Policy, General Electric Company
  Oral Testimony.................................................   318
  Prepared Statement.............................................   320

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Letter from the Department of Justice to the Federal Judicial 
  Conference.....................................................     4
Letter from the Committee on Rules of Practice and Procedure of 
  the Judicial Conference of the United States to the Honorable 
  Jerrold Nadler, Ranking Member, Subcommittee on the 
  Constitution, Committee on the Judiciary.......................    11

                                APPENDIX
               Material Submitted for the Hearing Record

Letter from the Committee on Rules of Practice and Procedure of 
  the Judicial Conference of the United States to the Honorable 
  Trent Franks, Chairman, Subcommittee on the Constitution, 
  Committee on the Judiciary, submitted by the Honorable Trent 
  Franks, a Representative in Congress from the State of Arizona, 
  and Chairman, Subcommittee on the Constitution.................   338
Prepared Statement of Lawyers for Civil Justice, submitted by the 
  Honorable Trent Franks, a Representative in Congress from the 
  State of Arizona, and Chairman, Subcommittee on the 
  Constitution...................................................   343

 
                  COSTS AND BURDEN OF CIVIL DISCOVERY

                              ----------                              


                       TUESDAY, DECEMBER 13, 2011

                  House of Representatives,
                  Subcommittee on the Constitution,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 1:39 p.m., in 
room 2141, Rayburn House Office Building, the Honorable Trent 
Franks (Chairman of the Subcommittee) presiding.
    Present: Representatives Franks, Chabot, Jordan, Nadler, 
Conyers, Scott, and Quigley.
    Staff Present: (Majority) Holt Lackey, Counsel; Sarah 
Vance, Clerk; (Minority) Heather Sawyer, Counsel; and Veronica 
Eligan, Professional Staff Member.
    Mr. Franks. Well, thank you all for being here. I thank 
those in the audience and the panel members and the Members 
here. I want to welcome you to the Constitution Subcommittee 
hearing on the ``Costs and Burdens of Civil Discovery.''
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    Since January, this Committee and the House of 
Representatives as a whole have worked to identify Federal 
rules and regulations that impose undue costs and burdens and 
destroy American jobs.
    Today's hearing examines whether unclear rules governing 
discovery in civil litigation are making our civil justice 
system too expensive. Rule I of the Federal Rules of Civil 
Procedure provides that all of the other rules ``should be 
construed and administered to secure the just, speedy, and 
inexpensive determination of every action and proceeding.'' 
Current discovery rules appear to fall short of this ideal.
    Instead of encouraging quick, fair and affordable fact-
finding, the current system of civil discovery encourages 
parties to bury each other in onerous requests for more and 
more data of dubious evidentiary value. The problem is 
exacerbated by the explosion of potentially discoverable data 
in our digital world. The amount of data generated in the world 
is increasing geometrically today, doubling every 2 years. In 
2010, the world created the zettabyte, which is 1 billion 
terabytes of data.
    By comparison, it is estimated that if one scanned every 
book and magazine in the entire Library of Congress, it would 
equal about 136 terabytes of information. This means that in 
the year 2010 alone, the world produced as much data as could 
be contained or would be contained in 7.4 million Libraries of 
Congress. The cost of retaining, collecting, producing and 
reviewing all of the data that may be subject to discovery runs 
from tens of thousands of dollars in a typical case to many 
millions of dollars in a larger case.
    The costs of civil discovery are increasing because the 
discovery rules are too vague. Current law gives parties little 
guidance as to what discoverable information truly is, when 
they are required to preserve information, and what their 
discovery obligations are. But the sanctions for running afoul 
of a court's interpretation of the discovery rules can be 
onerous, including striking a party's pleadings or adverse jury 
instructions. These vague standards and harsh sanctions combine 
to leave parties with little or no choice but to err on the 
side of preserving more documents and data, driving costs 
higher still.
    This system imposes considerable costs on American 
businesses, forcing them to spend money that could be put to 
more productive uses. It also makes access to the justice 
system more expensive for individuals and businesses alike. 
Everyone agrees that parties to civil litigation are entitled 
to discovery of relevant documents in the other party's 
possession, and that destruction of evidence for the purpose of 
preventing its use at trial should be sanctioned. Even a 
perfect discovery system would still cost money, but the 
current system is inefficient and costs far more money than 
needed to do justice.
    The high costs of discovery have led to a world in which 
cases are often resolved based upon the parties' ability to 
impose discovery costs on one another instead of the merits of 
their respective cases. The result is that many meritorious 
cases are not brought because the cost of litigation exceeds 
the plaintiff's likely recovery.
    Other cases settle based on the cost of litigation rather 
than the merits. As one of our distinguished witnesses, Justice 
Rebecca Kourlis has written, ``The status quo is not good 
enough. We created the current system. We must now create a 
better one.''
    The Civil Rules Advisory Committee of the Judicial 
Conference is currently considering proposed rule changes to 
address many of these issues, and I salute their efforts and 
look forward to their recommendations. Today's hearing is part 
of the same effort to create a better civil discovery system, 
and I hope that today's hearing helps return the rules of civil 
procedure to their purpose, ``to secure the just, speedy, and 
inexpensive determination of every action and proceeding.''
    With that, I thank you all for being here and would like to 
recognize now the distinguished Mr. Nadler for his opening 
statement.
    Mr. Nadler. Thank you, Mr. Chairman.
    Nothing in the title of today's hearing even remotely 
acknowledges any upside to civil discovery or recognizes its 
role in allowing parties and the courts to uncover the facts so 
that cases can be resolved based on the merits and in a timely 
and just manner. Discovery allows for early testing of claims, 
helping to cull those without merit and encouraging prompt 
resolution where culpability is revealed, and it minimizes the 
ability of any party to conceal facts or otherwise rely on 
gamesmanship or surprise.
    Electronic discovery, while unquestionably posing new 
challenges and burdens, has proven particularly valuable in 
uncovering critical evidence and improving accountability. For 
example, in a fraud lawsuit brought against the Swiss bank UBS 
AG related to sale of asset-backed securities, the types of 
securities that led to massive defaults on debt tied to 
subprime mortgages and to a worldwide credit crisis, email 
exchanges revealed employees referring to the asset-backed 
securities that they were selling as ``vomit'' and ``crap.''
    In a Medicaid fraud case brought against a pharmaceutical 
company for inflating prices of its drugs, the Attorney General 
of Mississippi attributed a $38.2 million verdict to the 
discovery of emails from a drug company executive revealing the 
pricing scheme.
    As Attorney General Jim Hood explained, ``It took a lot of 
hours and expense for the State to uncover these types of 
smoking gun documents to make our case. The facts are clear 
that the company used voodoo math to defraud the State.''
    We should not lose sight of the tremendous benefits of 
discovery in our focus on its alleged costs and burdens. And 
while we undoubtedly will hear much today about an urgent need 
to change our civil discovery rules to address skyrocketing 
discovery costs, that claim is not shared by many of the key 
experts and stakeholders in our civil justice system.
    In preliminary views provided to the Advisory Committee on 
Civil Rules of the Judicial Conference of the United States 
regarding reform of discovery rules, the Department of Justice 
has expressed, ``Significant concerns that a rule is being 
considered without adequate empirical evidence that a rule 
change is, in fact, needed.''
    The Justice Department is involved in one-third of all 
Federal civil cases, either as a plaintiff or a defendant. Its 
views on this issue should not be taken lightly, and I ask 
unanimous consent to include the DOJ's September 7 letter to 
the Federal Judicial Conference in the record of today's 
hearing.
    Mr. Franks. Without objection.
    [The information referred to follows:]
    
    
    


                               __________
    Mr. Nadler. Thank you.
    The Committee on Rules of Practice and Procedure of the 
Judicial Conference also sent a letter to the Subcommittee for 
this hearing. And I ask that a copy of that letter be included 
in the record as well.
    Mr. Franks. Without objection.
    [The information referred to follows:]
    
    
    
                               __________

    Mr. Nadler. Thank you. The Judicial Conference is the body 
that Congress has charged with responsibility for making rules 
governing ``practice, procedure and evidence'' in the Federal 
courts and, as explained in its letter to the Subcommittee, the 
``process for examining and addressing concerns [regarding the 
costs, burdens, and delays of discovery in civil cases] is 
already well underway.''
    The Judicial Conference Advisory Committees have conducted 
empirical research, reviewed existing statutes, regulations, 
and rules to assess how potential changes would interact with 
existing obligations, and have sought input from hundreds of 
judges and lawyers.
    In light of the considerable work that has and will 
continue to be done, the Judicial Conference's rules advisory 
committee, ``Urges us to allow the Rules Committee to continue 
their consideration of these issues through the thorough, 
deliberate, and time-tested procedure Congress created in the 
Rules Enabling Act.''
    Through this same process, we recently amended the civil 
discovery rules to address concerns about the increased costs 
and burdens of electronic discovery. Those amendments were made 
in 2006, a mere 5 years ago, and they emphasize greater 
coordination and cooperation among lawyers and parties to 
lawsuit driven by increased court oversight and management.
    Through these amendments, litigants can take advantage of 
the fact that existing rules require consideration of whether 
the costs of discovery outweighs potential benefits.
    Indeed, existing Federal Rules of Civil Procedure, 
26(b)(2)(C) tells courts that they must limit discovery if, 
among other things, ``the burden or expense of the proposed 
discovery outweighs its likely benefit, considering the needs 
of the case, the amount of controversy, the partyies' 
resources, the importance of issues at stake in the action, and 
the importance of the discovery resolving the issues.''
    Existing rules already require proportionality, and early 
and consistent efforts by parties and the courts to manage 
discovery. Before anyone rushes to amend the rules, we should 
first make sure there is a clear need to do so.
    I urge similar skepticism and exploration with regard to 
the claimed need to amend the rules to standardize preservation 
obligations or to revise discovery sanctions. The Justice 
Department is cautioning that language addressing these 
particular issues might, ``Create new unworkable burdens on the 
Federal Government, and would not result in the consistency or 
predictability sought.''
    While the need for revision of the rule seems far from 
clear, the potential for significant and unlikely--I'm sorry--
the potential for significant and likely unintended 
consequences, at perhaps a much greater cost, from making 
amendments is not.
    Given that, I am particularly interested in learning from 
our witnesses today how the committees of the Judicial 
Conference who are studying these issues have responded to 
their concerns and any recommendations that they have made to 
that body.
    With that, I yield back the balance of my time.
    Mr. Franks. I thank the gentleman. I yield now to the 
distinguished Ranking Member of the full Committee, Mr. 
Conyers.
    Mr. Conyers. Thank you very much, Mr. Chairman.
    We're here today to consider what could be a very important 
issue that concerns the Judicial Conference, the Federal 
Judicial Conference and the first question that has to arise 
is, they have been working on this for a considerable period of 
time, and on behalf of all those that are wondering why are 
they not scheduled as witnesses at this hearing on a subject 
matter that they have been working on longer than the Committee 
has, and so I would yield to our distinguished Chairman if he 
cares to respond to that part of my opening statement.
    Mr. Franks. Mr. Conyers, we conferred with those--did you 
ask me to respond to your question, sir?
    Mr. Conyers. Yes.
    Mr. Franks. Okay, I am sorry. I didn't want to--we did 
confer with some of those judges that they felt that a letter 
would be more appropriate since they were Article III judges, 
it wouldn't be appropriate for them to come to the Committee, 
just to clarify.
    Mr. Conyers. Well, then apparently their letter may not 
have been as persuasive upon you as they would have hoped that 
it would, because you determined to continue the hearings 
anyway.
    Now, let's be clear about this, we're talking about the 
largest kinds of cases, civil cases, that we can have. These 
are the very large corporation cases, and I should report to 
you that the Federal Judicial Conference pointed out that less 
than one-tenth of 1 percent of the total number of cases would 
fit the requirements of what it is we're discussing here today. 
And, even so, that only a fraction of those one-tenth of 1 
percent of the cases have the courts granted sanctions.
    And so what we're talking about is a small handful of 
cases, and this suggests that this may have--this whole hearing 
may be based on some corporation insisting that they be heard 
about this matter, and it would seem to me, gathering this much 
evidence, is an indication of creating jobs, not costing jobs. 
And so it's, to me, a very interesting look inside the court 
procedures.
    I think we have to remember that the Judicial Conference 
has been conducting themselves appropriately over the years, as 
far as I am concerned. Their recommendations, if any, could 
have come out from the Civil Rules Committee in--next spring. 
The Standing Committee of the Judicial Conference could have 
approval by the summer of next year. It would go to the full 
Judicial Conference in the fall, September of next year, then 
to the Supreme Court the end of the year. And then it would 
then go to the Congress in the summer of June, 2013, and we in 
the Congress--I am trusting that all of the Members, including 
myself, will be back in June of 2013--in which time we would 
have 6 months to approve or disapprove the recommendations of 
the conference committee.
    Now, I want to ask the witnesses, the distinguished 
witnesses that will appear before us, and the Members of the 
Subcommittee, what's wrong with this timeline and why are we 
complaining about this when it is not a confidential or secret 
matter, and we could get this with another letter.
    So I approach this hearing with the kind of skepticism that 
has been voiced in my opening statement, and I thank the 
Chairman.
    Mr. Franks. And I thank the gentleman for his opening 
statement.
    And now, without objection, other Members' opening 
statements will be made part of the record and I would invite 
the witnesses to come forward and be seated at the table. I 
want to welcome all of you again here this afternoon.
    Our first witness is Rebecca Love Kourlis. She is a former 
justice of the Colorado Supreme Court. She is now the Executive 
Director of the Institute for the Advancement of the American 
Legal System at the University of Denver. One of the areas in 
which the Institute works is its rule 1 initiative, which seeks 
to make the civil justice system more accessible, efficient and 
accountable.
    Our second witness, Professor William Hubbard, is an 
Assistant Professor of Law at The University of Chicago Law 
School. Professor Hubbard holds both a J.D. and a Ph.D. in 
economics from The University of Chicago. Professor Hubbard's 
current research primarily involves economic analysis of 
litigation, courts and civil procedure, including conducting 
empirical research on the costs of electronic discovery.
    Our third witness, William Butterfield, is a partner and 
the chair of the financial services practice group at 
Hausfield, LLP, in Washington, D.C. Mr. Butterfield is on the 
steering committee of The Sedona Conference Working Group on 
Electronic Document Retention and Production, nice short name, 
Mr. Butterfield. Mr. Butterfield is also an adjunct professor 
at American University where he teaches a course in electronic 
discovery. He is on the faculty of Georgetown University Law 
Center's Advanced E-Discovery Institute.
    And our fourth and final witness, Thomas Hill, is the 
Associate General Counsel For Environmental Litigation and 
Legal Policy at General Electric Company. Over his 20-year 
career at GE, Mr. Hill has managed some of the company's most 
complex litigation and gained first-hand experience of the 
costs and burdens of civil discovery. Prior to joining GE, Mr. 
Hill practiced law in Michigan.
    And welcome again to all of you. Each of the witnesses' 
written statements will be entered into the record in its 
entirety. I would ask that each witness summarize his or her 
testimony in 5 minutes or less. And to help you stay within 
that timeframe, there is timing light on your table. When the 
light switches from green to yellow, you will have 1 minute to 
conclude your testimony. When the light turns red, it signals 
that the witness' 5 minutes have expired.
    So before I recognize the witnesses, it is the tradition of 
this Subcommittee that they be sworn, so if you would please 
stand.
    [Witnesses sworn.]
    Mr. Franks. Thank you. Please be seated. I would now 
recognize our first witness, Justice Rebecca Kourlis, for 5 
minutes.

    TESTIMONY OF REBECCA LOVE KOURLIS, EXECUTIVE DIRECTOR, 
  INSTITUTE FOR THE ADVANCEMENT OF THE AMERICAN LEGAL SYSTEM, 
                      UNIVERSITY OF DENVER

    Ms. Kourlis. Mr. Chairman.
    Mr. Franks. Pull that microphone to you, Ms. Kourlis, just 
a little closer and then push the button.
    Ms. Kourlis. Down?
    Mr. Franks. Yes.
    Ms. Kourlis. There we go, thank you very much.
    Thank you for the opportunity to be here and for your 
interest in this subject.
    As a trial court judge in Colorado, and a member of the 
Colorado Supreme Court, and now as the executive director of 
IAALS at the University of Denver, I have become increasingly 
concerned about the functioning of the civil justice system.
    Over the three decades of my involvement on every side of 
the bench, it has become more and more expensive and, 
accordingly, inaccessible and mistrusted. As you have heard, 
one of the areas of focus for IAALS is, indeed, the civil 
justice process. We have done surveys, conducted legal research 
and docket studies. We have convened groups of stakeholders, 
including the American College of Trial Lawyers' Task Force, 
which consists of plaintiff and defense attorneys, and we have 
promulgated recommendations for change.
    The bottom line in what we have learned is reflected in the 
title of this hearing. The civil justice system in the United 
States is too expensive and too complex. A lawsuit takes too 
long and costs too much, and this is not just about big cases. 
Recent studies show that attorneys will not even take a case 
unless there is at least $100,000 at issue and lawsuits do, 
indeed, frequently settle for reasons related to the costs of 
litigation, not the merits of the lawsuit.
    As you will hear in more detail from other witnesses, the 
advent of the electronic age has, indeed, added a whole new 
layer of complexity and corporate counsel will say that if a 
case involves $2 to $3 million in legal fees, electronic 
discovery can easily add another 2 to 3 million.
    Civil jury trials have all but vanished, and that's a very 
bad thing. The involvement of citizens in the court system, 
both infuses common sense and provides another check and 
balance. The culprit seems to be, to some significant extent, 
the way in which the pretrial process unfolds.
    All of us here at this table and most of the bench and bar 
across the country, share a commitment to the preservation and 
realignment of the system. I would venture to say all of us 
would say that the goal of the pretrial process is to protect 
the search for the truth, but in a way that keeps the doors of 
the courthouse and the jury box open, a way that maintains 
certainty, efficiency and fairness, and these are not 
inconsistent goals.
    The solutions to these problems that are being addressed 
across the country and that you will hear addressed here today 
generally fall into three categories, rules changes, more 
effective judicial case management and cooperation among 
attorneys during the discovery phase of the trial. IAALS 
supports all three, the need for early judicial intervention, 
attentive and astute case management by judges, the need for 
cooperation and professionalism among counsel.
    However, it is IAALS' view that real change will only be 
institutionalized if it is accompanied by rules changes. 
Otherwise, it runs the risk of being episodic courtroom by 
courtroom or case by case.
    The Standing Committee and the Civil Rules Advisory 
Committee are struggling with these issues. The mandate of the 
judicial conference and the court is, indeed, to assure that 
the system is truly just, speedy and inexpensive. This is a 
problem that is bigger than a preservation rule.
    Some of the steps that the Judicial Conference will need to 
take to meet the goal of a just, speedy and inexpensive system 
will require courage and leadership. All of us defer to the 
Judicial Conference in that role, but all of us have a stake in 
the outcome far beyond the application of civil cases filed in 
Federal courts. It is not an overstatement to say that the 
public trust and confidence in the system is at stake.
    Our system must work for plaintiffs and defendants alike, 
it must be accessible and efficient. Our social contract 
depends upon it.
    Thank you.
    Mr. Franks. Thank you, Justice Kourlis.
    [The prepared statement of Ms. Kourlis follows:]
    
    
    
                               __________

    Mr. Franks. And now we will recognize Mr. Hubbard for 5 
minutes, sir.

TESTIMONY OF WILLIAM H. J. HUBBARD, ASSISTANT PROFESSOR OF LAW, 
              THE UNIVERSITY OF CHICAGO LAW SCHOOL

    Mr. Hubbard. Thank you, Chairman Franks and Ranking Member 
Nadler for this opportunity to testify.
    I'm going to begin by simply highlighting a few of the 
points with respect to the empirical data on the cost of 
litigation, discovery and preservation in particular.
    I'm going to begin with the data on the cost of litigation 
and discovery. In this context, I mean the cost of the 
processing, review, and production of documents and data in 
litigation. The studies that address the costs of litigation 
discovery do not include in those costs the costs of 
preservation. I'm going to address those separately in a 
moment.
    A recent major study shows that most cases in Federal court 
involve relatively modest spending on discovery. According to 
the study, the median case in Federal court has about $35,000 
in litigation costs split between the Plaintiff and the 
defendant. And of these costs, about one-third is attributable 
to discovery.
    In the median case, then, discovery costs do not appear to 
be overwhelmingly high. One needs to be careful in interpreting 
this data, however. If cases settle in order to avoid what 
would have been high discovery costs, we are unable to observe 
those costs, and those will not show up in the data. 
Furthermore, the median case is not representative of the 
entire distribution of cases, and in this respect, I'm drawing 
not only on the data from the FJC study, which was referenced 
in the comments earlier, but also a number of other studies 
focusing on the costs of litigation, and my own interpretation 
of data that I have collected.
    The median case is not representative of the entire 
distribution of cases. In fact, the distribution of litigation 
and discovery costs has what I'd like to refer to as a long 
tail. There are many cases that have relatively modest costs, 
but a small but substantial number of cases whose costs vastly 
exceed the cost of the median case.
    In this respect, looking only at the Federal Judicial 
Center study data, we see that the top 5 percent of cases have 
discovery costs that go into the hundreds of thousands of 
dollars. And, in fact, the distribution of costs is so skewed 
that the top 5 percent of cases in terms of litigation costs 
account for 60 percent of all litigation costs. This data 
suggests that this long tail of extreme outliers may have a 
great impact on the overall costs of the civil justice system.
    I'll now turn to the costs associated with the preservation 
of data. Here I'm going to highlight two findings. First, it 
appears that the costs of preservation, much like the costs of 
discovery, are highly skewed. There are a large number of 
matters that have a moderate amount of preservation and a long 
tail of matters in which the preservation burdens are very high 
and very costly.
    Secondly, there are many matters for which there are little 
or no discovery or litigation costs in the sense that I 
discussed above, but nonetheless have preservation costs and 
may, in fact, have very high preservation costs. This is 
because there are many cases that settle either before a 
lawsuit is filed or shortly after a lawsuit is filed and 
therefore have very little attorneys' fees.
    To the eyes of judges and outside counsel, these cases 
appear to be relatively inexpensive to the system. But to a 
party that has had to preserve large amounts of data in 
anticipation of litigation, the cost of that matter could be in 
the tens or hundreds of thousands of dollars.
    This is because, under current law, which is the product of 
judicial decisionmaking, parties are required to disrupt or 
alter their normal business activities for the sake of 
preservation, even before a lawsuit is filed. This brings me to 
the question of how the Federal rulemaking process might reduce 
the cost and burdens of the civil litigation system. In this 
respect, the rules need to create incentives for the proper 
consideration of both the costs and benefits of preservation 
and discovery.
    As I mentioned, under current law, there's an obligation 
imposed on parties not only in Federal court to abide by 
Federal judicial decisions on preservation, but also parties 
outside of Federal court, and, in fact, parties who may 
anticipate litigation but, in fact, never end up in Federal 
court, are, nonetheless, obligated to observe these rules with 
respect to preservation and incur the costs of preservation, 
even if, as I said, the matters for which they are preserving 
do not end up in court, let alone any Federal court.
    Clear Federal rules should help to reduce the ambiguity and 
overbreadth of current case law and reduce the costs of civil 
litigation to society. Thank you.
    Mr. Franks. Thank you, Professor Hubbard.
    [The prepared statement of Mr. Hubbard follows:]




                               __________

    Mr. Franks. We will now hear from Mr. Butterfield.

             TESTIMONY OF WILLIAM P. BUTTERFIELD, 
                     PARTNER, HAUSFELD LLP

    Mr. Butterfield. Thank you, Mr. Chairman, Ranking Member 
Nadler, Members of the Subcommittee. The purpose of discovery 
under our Federal rules is not a trivial one. The purpose of 
our civil justice system is to determine the truth and decide 
cases on the merits, and this depends on discovery of the 
facts. Making sure that cases get decided on the merits is one 
of the primary reasons why Congress stressed the ability to 
obtain discovery when it instituted the Federal Rules of Civil 
Procedure in 1938. Now, you have heard a lot, and you will hear 
undoubtedly a lot more today about the exorbitant costs of 
discovery, the costs of overpreservation and the urgent need to 
rein in those costs.
    But here's what you need to know. Let's talk about 
discovery costs in general. There's no question that in the 
electronic age, litigation has dramatically changed the way 
discovery is conducted and has increased the complexity and 
difficulty of discovery. But, even so, discovery costs are not 
significantly higher than they were 15 years ago. Objective 
empirical data--and that primarily comes from the Federal 
Judicial Conference--demonstrates that discovery costs for 
cases involving electronic discovery are about $30,000 to 
$40,000 at the median, and they're also modest in comparison to 
the stakes of the litigation and in comparison to the total 
litigation costs.
    Those who promote drastic changes to the Federal rules on 
discovery concede this because they must. Instead, they focus 
on what they admit are the outliers, and you have just heard 
Professor Hubbard talk about it. Discovery costs in the largest 
cases involving the largest corporations, what professor 
Hubbard refers to as cases in the long tail, the top 5 percent, 
most complex and costly cases.
    Well, it should come as no surprise to anyone here that 
discovery in those cases is costly. It always will be because 
there always will be some large, important and complex cases, 
but amendments to the Civil Rules won't change that. And 
clarifying the Rules of Civil Procedure that apply to all 
300,000 cases filed annually, to address the complexities in a 
few thousand of those cases, poses substantial risks to our 
civil justice system.
    So what do we know about the costs of preservation 
specifically? Well, as Professor Hubbard has acknowledged, our 
knowledge of that is rudimentary. We know next to nothing.
    And what about sanctions? Are they out of control? One of 
the things you are being told here today is that companies are 
overpreserving because there's no clarity by courts regarding 
sanctions. They're overpreserving and bearing the costs of that 
over-preservation because they sold fewer sanctions.
    What we do know is that the risks of sanctions for 
inadvertent failure to preserve documents is minimal. The data 
support that. A recent study by the Federal Judicial Conference 
showed that motions for sanctions were sought in just one-
fifteenth of 1 percent of the cases that were studied, one-
fifteenth of 1 percent. They were granted in only more than 
slightly half the time.
    So if my math is correct, you have about a one-thirtieth of 
1 percent chance of getting sanctioned for evidence 
spoiliation. As one e-discovery expert suggested the other day, 
you have a better chance of getting struck by lightning than 
getting sanctioned for failure to preserve.
    Beware of the unintended consequences here. Let me give you 
a few examples. One of the proposals would seek to apply 
preservation obligations only for loss of material information. 
Now, how do you know what is material? It's hard enough to know 
what's relevant before a lawsuit is filed or before we get very 
far in litigation. It's even more difficult to figure out 
what's material to that litigation.
    Another proposal would trigger preservation only on the 
filing of a complaint. So what happens when critical 
information gets destroyed between an event and the filing of a 
lawsuit where it's obvious that litigation will follow that 
event? Wouldn't this type of standard eviscerate long-standing 
statutes of limitation by forcing people to file lawsuits 
immediately without any opportunity to work things out before a 
lawsuit is filed, and wouldn't that cause more lawsuits to be 
filed? Wouldn't companies spend more money to litigate those 
lawsuits that were being filed?
    Companies say that they're worried about their reputation 
when they get sanctioned. Shouldn't they worry about their 
reputation when lawsuits are filed against them, and more 
lawsuits will be filed against them if people have to rush to 
the courthouse.
    Another proposal calls only for sanctions regarding willful 
conduct. What we do when conduct is not in bad faith, though a 
simple mistake, causes a complete loss of evidence to the other 
party.
    What do we tell the other innocent party in that case? 
Sorry, you're out of luck. Tough luck, you're out of court? We 
suggest that it's not appropriate to rush to amend the rules at 
this time. The Federal Judiciary Conference is closely studying 
it, and they should be allowed to continue.
    Thank you.
    Mr. Franks. Thank you, Mr. Butterfield.
    [The prepared statement of Mr. Butterfield follows:]
    
    
    

                               __________

    Mr. Franks. We will now recognize Mr. Hill.

    TESTIMONY OF THOMAS H. HILL, ASSOCIATE GENERAL COUNSEL, 
   ENVIRONMENTAL LITIGATION & LEGAL POLICY, GENERAL ELECTRIC 
                            COMPANY

    Mr. Hill. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to appear here today. My name is 
Thomas Hill, and I am the associate general counsel responsible 
in part for Environmental Litigation and Legal Policy for GE. 
We at GE are pleased to assist the Subcommittee as it examines 
the important issues related to the cost of discovery and, in 
particular, the costs associated with preservation that burdens 
potential litigants in the United States.
    Today, American companies incur litigation-related costs 
that provide minimal discovery benefit to the courts, the 
litigants or the jury. In this tough economic environment, the 
current Federal Rules of Civil Procedure result in parties, 
primarily American companies, wasting billions of dollars on 
unnecessary document preservation and production.
    I was a trial attorney in Michigan before joining GE in 
1991. I witnessed the explosion of electronically stored 
information, or ESI, and its impact on litigation and dispute 
resolution. Because preservation rules are unclear, American 
companies are forced to guess what claims might be brought, do 
their best to preserve an unspecified amount of information for 
an indefinite period of time and at great cost. Much of this 
information will never be reviewed, never be produced and never 
see the inside of a courtroom.
    Let me discuss two real-world examples of the costs imposed 
by the current rules and describe how the economy will benefit 
without harm to the judicial process if there is some increased 
clarity in these rules.
    First, it's the cost of preservation without litigation. 
Under the current standard, GE preserves documents whenever it 
reasonably anticipates litigation, even though no case may ever 
be filed. The rules apply, but there's no litigation. Because 
no court has jurisdiction, there's no opposing counsel, GE 
cannot negotiate or seek direction to confirm or otherwise 
adjust the scope of what we preserve.
    This example, which is explained in greater detail in my 
written statement, is relatively simple. It's a narrow case. It 
involves only 96 custodians, I would point out in a company the 
size of General Electric, it wouldn't be out of the ordinary 
for hundreds or even thousands of people to be involved in a 
subject matter.
    But in spite of this relatively narrow scope, over time, 
these 96 people have created over 3.8 million documents, which 
total 16 million pages of data. Simply collecting, storing, 
coding these documents to comply with a potential discovery 
request, has cost $5.4 million. It costs another $100,000 a 
month just to store the data.
    We haven't spent any money actually looking at the 
information. We're just saving it.
    Additionally, these individuals will create another million 
documents every year, adding to the cost. So let me repeat. 
Although no case has been filed, and no case may ever be filed, 
the rules required GE to save these documents, and we've spent 
$5.4 million in fees.
    This preservation problem is exacerbated once litigation is 
filed. Storing ESI creates a disproportionate increase in 
discovery costs. I have a case where the amount in dispute is 
less than $4 million. However, in order to comply with 
preservation and discovery applications, we've collected, 
preserved and produced over 3 million documents generated by 57 
people. Each of those documents had to be reviewed BY lawyers 
and produced in accordance with the rules.
    So that $4 million claim has resulted to date in about $6 
million in discovery costs. As a result, opposing counsel has 
little incentive to meet and confer to reduce this burden.
    As a practical matter, courts typically assume that we will 
bear the burdens of the cost of production. Once produced, many 
individuals fail to actually review the vast majority of 
documents that have been produced. Rarely do courts consider 
cost shifting, which can incentivize an efficient focus on 
information necessary to prove a case.
    This creates a perverse incentive which becomes leverage to 
skew dispute resolution, not on the merits, but on the 
economics. This is money wasted. These two examples 
unfortunately are closer to the norm and not really the 
exception to the rule.
    With clearer rules, including a narrower scope to avoid 
this waste, the discovery process will be faster, more fair. 
Litigants can have disputes resolved on the merits, and the 
savings can be used to create jobs, invest in the future and 
benefit the U.S. economy.
    We will continue to work with the Judicial Conference Rules 
Committee in its efforts to develop amendments to the rules 
that will help solve some of these preservation problems, as 
well as others. We agree with the diverse spectrum of 
stakeholders who feel reform should be implemented now, and we 
applaud the efforts of the Subcommittee in exercising its 
oversight role over the Rules Enabling Act. Thank you.
    Mr. Franks. Thank you, Mr. Hill, and I would thank all of 
the witnesses for their testimony.
    [The prepared statement of Mr. Hill follows:]
    
    
                               __________

    Mr. Franks. I will now begin the questioning by recognizing 
myself for 5 minutes.
    Professor Hubbard, I'll begin with you, sir. You estimate 
that rules clarifying a trigger and scope of preservation 
obligations would save billions of dollars for American 
businesses. Now while these savings would be most apparent in 
the largest cases that make up the long tail of discovery 
costs, wouldn't it be--wouldn't clearer rules save at least 
some money in even the other cases, in all cases?
    Mr. Hubbard. I certainly would expect that to be the case, 
particularly with respect to preservation, because there are 
many situations in which, as I mentioned before, preservation 
costs are incurred, but litigation and discovery costs are not 
incurred. And judging from the fact that for many large 
companies, there have been statements to the effect that 
somewhere between perhaps 40, 60, or 70 percent of their 
matters involving preservation are not--do not correspond to an 
active, filed lawsuit, a rule clearly establishing the boundary 
time in which the obligation to preserve is triggered would 
reduce, essentially, by 100 percent, the preservation costs 
associated with those cases no matter how large or how small 
they are.
    Mr. Franks. Well, thank you, sir.
    Justice Kourlis, some have argued that any savings realized 
by clarifying discovery and preservations rules would come at 
cost to the quality of evidence produced in litigation and the 
court's ability to find facts and to do justice.
    Do you agree with this analysis, or do you believe that we 
can better define discovery obligations without sacrificing 
courts' core mission?
    Ms. Kourlis. Mr. Chairman, the latter. I clearly believe 
that we can better define and manage cases, including 
discovery, without sacrificing justice. Furthermore, I believe 
that the failure to do so sacrifices justice every day because 
of the cases that can't be filed and the cases that are settled 
on the basis of the costs of litigation.
    Mr. Franks. Well, thank you. Mr. Hill, as far as the 
challenges faced by GE, are they the same as those faced by 
small businesses?
    Mr. Hill. Not really. Companies our size produce a 
significant amount of electronically stored information. I 
mean, it stands to reason that the larger the company, the more 
the employees, the more complex the organization, the more data 
you produce.
    So the burden on us is really in the preservation 
prelitigation. We probably can handle it a little bit better 
than a smaller company, it doesn't mean that we should have to 
or that it's a benefit. I think the impact on smaller 
businesses though, under the current rules, is once discovery 
has been filed. You take a small company that has a limited 
amount of staff, limited resource, but still have computers. 
Once litigation is filed, they have the same obligations that 
anyone does; they have to collect that information, sort it, 
review it and produce it.
    For a small company, reviewing the kind of data that even 
10 people can produce would be inordinately expensive, and I 
would suggest the burden on them is even greater than on us.
    Mr. Franks. Well, that seems to be a pretty compelling 
point that goes to Justice Kourlis' points. You know, the 
interest of courts should ultimately be justice and if, indeed, 
it is just too expensive for some of the smaller entities to 
access that justice, then justice is denied.
    And I, again, appreciate all of your testimony. And I am 
now going to recognize the Ranking Member for 5 minutes.
    Mr. Nadler. Thank you, Mr. Chairman.
    Justice Kourlis, you testified about the burden of 
discovery and so forth, as have everybody, and obviously that's 
a concern to us. You say in your testimony the Standing 
Committee is the appropriate forum for the discussion, both 
immediate and the long-term discussion, but it is a discussion 
which all of us have legitimate and significant stake. So do 
you think that that's the proper place for resolution of this, 
or do you see any role for Congress at this point in terms of 
any legislation?
    Ms. Kourlis. I don't see a role for Congress in terms of 
legislation. Congressman, I do, however, see a role in terms of 
level of attention and focus and interest. This clearly is a 
very significant problem. I welcome the opportunity to have all 
of you be made aware of the nature of the problem and aware of 
the efforts that are being undertaken to address it.
    Mr. Nadler. You think that the best forum for addressing it 
is the standing committee?
    Ms. Kourlis. Yes, at present I do.
    Mr. Conyers. Would the gentleman yield?
    Mr. Nadler. I'll yield.
    Mr. Conyers. Have you written or contacted the Judicial 
Conference about this subject?
    Ms. Kourlis. Oh, yes, indeed, Congressman, yes.
    Mr. Conyers. Well, do you----
    Ms. Kourlis. I think, actually, I can say that all of us 
have appeared----
    Mr. Conyers. Well, no, I don't think all of you have.
    Ms. Kourlis [continuing]. Have appeared in that forum for 
purposes of addressing these issues.
    Mr. Conyers. No, I don't think so. I didn't hear anybody 
else say. Tell me about your----
    Mr. Franks. Perhaps you could clarify that. Have others 
been to testify in that forum? Perhaps you could----
    Mr. Conyers. Yes. Let's let everybody testify for 
themselves.
    Ms. Kourlis. Okay.
    Mr. Conyers. But tell me what it is that you recommended.
    Ms. Kourlis. Congressman, our recommendations in my little 
corner of the world, the Institute at the University of Denver, 
where I live and work, is a streamlining and a reworking of the 
pretrial process in the civil justice system in an effort to 
try to assure that the process, is indeed, more streamlined, 
more efficient, more case-specific so that more cases get to 
jury trial, so that more cases can be resolved on the merits 
and fewer cases suffer from what former Chief Justice of the 
State of New Hampshire, John Broderick, calls trial by 
attrition as distinguished from trial by jury.
    Mr. Nadler. Thank you. I assume we can get a copy of some 
of that?
    Ms. Kourlis. You bet.
    Mr. Nadler. Mr. Butterfield, some proponents of reform seek 
amendment of Rule 37 to revise rules for sanctions with 
particular focus on sanctions with regard to the duty to 
preserve.
    How, if at all, has the 2006 amendment to Rule 37(e) to 
provide a safe harbor for loss of electronically stored 
information help with this concern?
    Mr. Butterfield. Congressman Nadler, those are those who 
criticize Rule 37(e), have said that the safe harbor is rather 
shallow. The safe harbor applies to sanctions for spoiliation, 
where the rules apply, so they are usually sanctions where 
there's been a violation of the preservation order.
    But, if you take a look at the case law out there, and the 
case law goes far beyond Rule 37(e), the case law makes it 
pretty clear that people and companies are not getting 
sanctioned for conduct that is not egregious. That's the key 
component.
    You know, there's lots----
    Mr. Nadler. And obviously they shouldn't be sanctioned if 
their conduct is not egregious?
    Mr. Butterfield. They're not getting sanctioned for good 
faith conduct. They're getting sanctioned for conduct that's 
clearly in bad faith, clearly egregious. So a lot of the 
concern here, in my opinion, is overblown.
    Mr. Nadler. Thank you. Mr. Hill, your focus is on the need 
to preserve in order to defend against a lawsuit. Businesses, 
however, also have an interest in preserving information 
because they might, after all, be the party bringing a lawsuit, 
or because otherwise required by law.
    How do you accurately separate, within your overall 
practices, for retaining requisite information, costs related 
solely to anticipation of litigation presumably where you might 
be a defendant, as I presume you're not complaining about costs 
where you want to sue someone else. And how do you respond to 
the DOJ's concerns that specific preservation rules might 
conflict with other existing obligations to retain records?
    Mr. Hill. Actually, the preservation rules impose costs 
whether you are a plaintiff or a defendant, and that raises the 
issue that there is a difference between the cost of 
preservation for litigation purposes, and the cost of 
preservation in the ordinary course of business, and I think 
that's an issue that----
    Mr. Nadler. Excuse me, why would that be?
    Mr. Hill. Because a company generates data for its normal 
business operations. For example, we manufacture jet engines. 
There are engineering diagrams. There's all kinds of data that 
are used by that organization while we continue in that product 
line, and that information will exist under our normal document 
preservation rules for, in many instances, decades, certain 
kinds of data.
    Mr. Nadler. You figure out how to make a better jet engine.
    Mr. Hill. The Federal rules, however, impose a separate, 
distinct and duplicative obligation in that once we believe 
that there is a reasonable chance of litigation, we have to 
take that electronic information and remove it from our normal 
course of business, create a separate platform to store it and 
save it and incur those costs so that we can demonstrate in a 
courtroom, and only in a courtroom, that that information has 
not been, in any way, altered.
    That doesn't, in any way, help the business model. It's not 
something that we would do normally, and it is simply a cost. 
And as I indicated in my earlier testimony, we do that time and 
time again when litigation is never filed, and we also do it in 
times where litigation is filed and then it's not requested.
    Mr. Nadler. And the second part of my question, which is, 
how do you respond to the DOJ's concerns that specific 
preservation rules that we might try to write might conflict 
with other existing obligations to retain records?
    Mr. Hill. It's not clear to me that that's accurate. We 
have obligations to preserve documents from regulatory reasons, 
for example. And I just believe that the courts and the 
Congress should sit down and determine what is the most 
efficient way to protect information to allow people to have a 
fair trial and not have the cost of litigation drive the 
outcome of that trial.
    The Justice Department is entitled to its opinion. I have 
seen the growth and cost of this, and it is impacting the 
system.
    Mr. Nadler. Thank you, my time has expired.
    Mr. Franks. I thank the gentleman. Just for point of 
clarification, Justice Kourlis indicated that some of the rest 
of you may have had input at some point to the Judicial 
Conference; is that correct?
    Mr. Hill?
    Mr. Hill. Yes, that's correct, I have.
    Mr. Franks. Mr. Butterfield.
    Mr. Butterfield. I have.
    Mr. Franks. Mr. Hubbard.
    Mr. Hubbard. Yes, I have.
    Mr. Franks. So that Justice Kourlis was correct and I just 
wanted to give everybody a chance to answer for themselves in 
that regard.
    We are hopeful that the Judicial Conference will come 
forward with some ideas of their own which the Congress, maybe 
even optimistic that they might do that, and the conference 
might bring some things that the Congress would deem 
worthwhile.
    So with that, I would yield to the distinguished Ranking 
Member of the full Committee, Mr. Conyers.
    Mr. Conyers. Thank you very much, Chairman.
    Now, I notice that the Justice didn't mention other 
problems that are raising the expenses of court litigation, 
like shortage of judges, the expense of counsel and a variety 
of other reasons.
    Was there any reason for those not being included in this? 
Because it gives you--it could give one the impression that 
this is the main problem of diminished, great, legal services 
in this country. Justice?
    Ms. Kourlis. Congressman, you are absolutely right, it is a 
multi-faceted problem, including budgets for courts, and 
judicial vacancies, and a host of other components. What I also 
believe is that the courts themselves, the way that the civil 
litigation process is structured, have a duty to reorganize, 
rethink how they present their services, and recalibrate them 
to the needs of the users. I tell an anecdote, Congressman.
    Mr. Conyers. Well, wait a minute.
    Ms. Kourlis. It is really short, I promise.
    Mr. Conyers. I believe you, but spare me. Now, here is the 
problem. We don't know what the Judicial Conference is going to 
do. Maybe they got your report and were so impressed with it 
that they are going to begin to deal with the questions of 
proportionality that you raised. And maybe they haven't 
considered these things. And maybe they will.
    Ms. Kourlis. Oh, indeed, I think they are. I think they are 
giving it great thought and deliberation.
    Mr. Conyers. I am happy to hear your confidence about it. 
Now, Mr. Hubbard, we have a little problem here. Your report 
was based on four major companies, right?
    Mr. Hubbard. The preliminary report, yes.
    Mr. Conyers. All right. Which four?
    Mr. Hubbard. Congressman, respectfully, I have kept those 
identities confidential. That was the basis upon which the data 
was shared with me.
    Mr. Conyers. And because of what reason did you keep them 
confidential?
    Mr. Hubbard. Concerns that information about the costs of 
preservation, which can be, in some cases, but not all, very 
high, could be used perhaps for strategic advantage against 
them.
    Mr. Conyers. Sure. All right. I understand. Now, does that 
mean that your final report is going to be confidential, too?
    Mr. Hubbard. The identities of specific companies will be 
kept confidential in the report.
    Mr. Conyers. Can I ask you this? Were they large 
corporations?
    Mr. Hubbard. Yes.
    Mr. Conyers. How large?
    Mr. Hubbard. These are, I guess, you would say very large 
corporations, in the order of Fortune 500 companies.
    Mr. Conyers. Well, you were candid enough to let us know 
that your report was preliminary, and that we should not take 
any congressional--make any congressional decisions based upon 
it because it was a preliminary report. Is that right?
    Mr. Hubbard. I think it is fair to say that we should not--
--
    Mr. Conyers. Is that right?
    Mr. Hubbard. I think that is right, yes.
    Mr. Conyers. Okay. All right. Thanks so much. Then in other 
words, all of us, including all of you, who I think you have 
all said that you have communicated with the conference, are 
going to be waiting, like the Subcommittee, to find out how 
much of your advice was taken by the conference. Is that 
correct?
    Mr. Hubbard. To an extent, yes. I think that is fair.
    Mr. Conyers. All right. Mr. Hill? Is that right?
    Mr. Hill. We certainly will see what they do.
    Mr. Conyers. Of course. So I am heartened by the fact that 
Madam Justice seems to feel that there may be some 
encouraging--that they may be taking at least some of her 
recommendations seriously. And I hope that they are taking all 
of your recommendations seriously. So I guess I will be 
waiting, just like you. Maybe we should have another hearing 
after the report comes out, and see how our opinions and 
estimations of what was being done and had been done came out. 
I would recommend that to the Chairman. I hope that all of you 
will as well. Thank you, sir.
    Mr. Franks. Thank you. Is it your thought that you will 
ratify whatever the Judicial Commission comes out with?
    Mr. Conyers. No, not me. I will be critically waiting the 
results of the final report.
    Mr. Franks. Waiting with bated breath. Listen, I want to 
thank all of the Members, and I especially want to thank the 
witnesses. Forgive me, Mr. Scott. You snuck up on me, sir. I 
will recognize Mr. Scott for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman. I just had a couple of 
questions. Mr. Hubbard, what are some of the costs involved in 
preservation? Preserving electronic data shouldn't be that 
expensive. What are some of the costs in preserving other data?
    Mr. Hubbard. Thank you, Congressman. Of course the costs 
that we all think of initially with respect to preservation is 
the cost of simply housing the data on a computer drive. And 
that cost, as I think we are all aware of, has decreased 
exponentially over time. However, the costs that I have in mind 
when I talk about the costs associated with preservation are 
not limited merely to the costs of storage of data, but the 
fact that in the process of implementing what is usually 
referred to as a litigation hold, sometimes dozens, maybe even 
hundreds or more of employees are called upon to review the 
documentation for which they are responsible, their emails, 
their computer files, in order to ensure compliance with the 
litigation hold. And it is that employee time, which can run 
into the hundreds or thousands of hours, that can become a very 
significant cost.
    Mr. Scott. Okay. Now, why shouldn't the present rules of 
proportionality and common sense and letting the judge 
determine what is reasonable and not reasonable based on the 
issues, the facts at issue, the size of the case, that kind of 
thing, proportionality, why shouldn't that be enough?
    Mr. Hubbard. Well, Congressman, certainly proportionality 
should be the touchstone to approaching questions of discovery 
and preservation. The question is whether it is under the 
current rules. The rules envision active judicial oversight of 
the proportionality balance. But in reality, that doesn't 
occur. The most obvious reason being that the decisions with 
respect to preservation often have to occur before litigation 
is even filed, and therefore a judge cannot be involved. 
Parties are then are forced to make judgments on their own 
given the risk that depending upon which jurisdiction they end 
up in and who the plaintiffs on the other side are, how broad 
the preservation obligation will be. And that is where I think 
the uneven and inconsistent case law that currently exists 
creates this tendency toward overpreservation.
    Mr. Scott. I think we have heard from some of the witnesses 
the idea that congressional action is not needed. I suppose 
that means congressional action might make matters actually 
worse. Do we have any recommendations to make it better? I 
mean, litigation is expensive. I am not sure that there is a 
lot we can do about that. Do you have any recommendations?
    Mr. Hubbard. Well, litigation certainly will always be 
expensive. The question is whether we can make it more 
efficient. Certainly, because the Judicial Conference's 
attention is directed to these issues right now, I think we all 
agree that the proper process is to participate and contribute 
to that process in the capacity that we can.
    Mr. Scott. Do we have any recommendations?
    Mr. Hubbard. Any recommendations for specific rules?
    Mr. Scott. Right.
    Mr. Hubbard. I certainly have made recommendations. First 
of all----
    Mr. Scott. We are here listening to the complaints, but 
what can be done about it?
    Mr. Hubbard. What can be done is for one, by implementing 
Federal rules that directly address preservation, there can be 
uniform treatment of the preservation obligation.
    Mr. Scott. But proportionality kind of works the other way, 
because some may be reasonable in some cases and others not. 
Does anybody have any specific recommendations as to what we 
can do to make the situation better?
    Mr. Hill. Congressman, I think an important role for the 
Subcommittee is to provide its oversight to the Committee. 
Because the Federal Rules Conference considers the way--my 
concern is that the Federal Rules Conference will consider the 
way litigation will operate once it is in a courtroom so that 
it appears fair and efficient, and they will draft rules that 
solve the problem that they focus on most. I think this 
Committee's obligation is to make sure that those rules work in 
an economic environment, that there are other issues involved 
in litigation, as we have pointed out. Preservation costs 
before litigation is filed imposes a burden. I think that is 
something that Congress could bring to the attention of the 
Committee.
    Mr. Scott. I am not hearing any recommendations.
    Ms. Kourlis. Congressman, I am not entirely sure whether 
your question is narrowly focused on recommendations for a 
preservation rule, or broader recommendations, or whether you 
are asking whether any of us have recommendations for action 
that we would ask Congress to be taking.
    Mr. Scott. I think we have heard that there are no 
recommendations for Congress to do anything yet.
    Ms. Kourlis. That is correct, from my perspective.
    Mr. Butterfield. Congressman, I wrote a paper about a year 
ago, along with my colleague behind me, Ariana Tadler, and the 
subject of our paper was give the rules a chance. The 2006 rule 
amendments, the ink was barely dry when some of these surveys 
were started and people started criticizing the rules. The 
rules are abundantly flexible. They have the mechanisms in 
place to curb the costs of litigation if people simply use 
them.
    Mr. Scott. Thank you. Well, Mr. Chairman, I thank you for 
the hearing, but I think what we are hearing from people is it 
is not timely for Congress do anything about it at this point.
    Mr. Franks. And I thank the gentleman. And I thank all of 
you again for being here, and the audience for being so 
attentive. And without objection, all Members will have 5 
legislative days to submit to the Chair additional written 
questions for the witnesses, which we will forward and ask the 
witnesses to respond as promptly as possible so that their 
answers may be made part of the record.
    Without objection, all Members will have 5 legislative days 
within which to submit any additional materials for inclusion 
in the record. With that, again, I thank the witnesses, and I 
thank the Members and observers, and the hearing is now 
adjourned.
    [Whereupon, at 2:48 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record





                                 
