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`EXHIBIT C
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`31 No. 15 Com. Lending Litig. News 19
`
`Commercial Lending Litigation News
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`Volume 31, Issue 15
`December 18, 2018
`
`Litigation Strategies
`
`A CRITICAL VIEW OF THE MANDATORY INITIAL DISCOVERY PILOT PROJECT
`
`By Michael P. Daly and Mark D. Taticchi a1
`
`When the Federal Rules of Civil Procedure were enacted in 1938, one of the drafters' main goals was procedural consistency.
`At the same time, however, they adopted Rule 83 so local districts and individual judges could fill the gaps left by the Federal
`Rules and regulate the nuts-and-bolts aspects of practice in their respective courtrooms.
`
`In 2017, two federal district courts -- the District of Arizona and the Northern District of Illinois -- adopted an order, which was
`approved by the Judicial Conference of the United States, known as the Standing Order Regarding Mandatory Initial Discovery
`Pilot Project. 1 The Pilot Project fundamentally reorders the early phases of litigation. For example, the Pilot Project forces
`defendants to answer complaints before courts have ruled on motions to dismiss.
`
`Similarly, the Pilot Project ratchets up the parties' early-stage discovery obligations by mandating disclosure of both favorable
`and unfavorable information about each party's claims and defenses, even if the party has no intention of relying on that
`information.
`
`In short, several of the Pilot Project's mandates contradict or, at a minimum, conflict with, existing provisions of the Federal
`Rules. Given that Rules 83(a) and (b) require both local rules and judges' individual practices to be consistent with the Federal
`Rules, this commentary posits that the Pilot Project is an ultra vires exercise of judicial authority that should be rescinded unless
`the Rules Committee, the Judicial Conference, the Supreme Court, and Congress all approve it pursuant to the standard process
`for amending the Federal Rules.
`
`The current rulemaking process
`
`The Federal Rules “govern the procedure in all civil actions and proceedings in the United States district courts.” 2 The judiciary
`promulgates them pursuant to its statutory authority under the Rules Enabling Act. 3
`
`The Judicial Conference, whose task it is to oversee the rulemaking process, says the “pervasive and substantial impact of
`the rules on the practice of law in the federal courts demands exacting and meticulous care in drafting rule changes.” 4 This
`“exacting and meticulous care” is exercised through a seven-step process that generally takes several years. 5
`
`That process begins with the Judicial Conference's Advisory Committee, which drafts language, obtains the approval of the
`Standing Committee and then publishes amendments for public comment. The Advisory Committee then considers comments
`and revises amendments as appropriate. From this point, an amendment may go through iterative republication and comment
`periods, or it may be recommended to the Standing Committee for approval.
`
` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`Ultimately, the amendment must be approved by the Standing Committee, the Judicial Conference, and then the Supreme Court.
`Upon approval by the Supreme Court, Congress has seven months to reject or modify an amendment. If it does not act within
`this time, the amendment takes effect.
`
`While the Federal Rules govern procedure in federal courts, Rule 83 provides two ways for individual districts and judges to
`fill gaps in the Rules. First, pursuant to Rule 83(a), a district can adopt a local rule for that district if:
`
`•The district gives public notice and an opportunity to comment.
`
`•The majority of the district's judges approve the rule.
`
`•The rule is consistent with the Federal Rules.
`
`Second, pursuant to Rule 83(b), judges can issue standing orders for their own courtrooms, but only if they are consistent with
`the Federal Rules as well as any applicable local rules.
`
`Rules 83(a) and 83(b) thus create a mechanism for addressing local needs and norms without undermining national uniformity.
`It follows, then, that any “rule” -- whether classified as a local rule, a judge's individual practices, or anything else -- is void
`ab initio if it is not “consistent with” the Federal Rules.
`
`The question here, of course, is whether the Pilot Project is such a “rule.”
`
`Does the Pilot Project fit?
`
`The 3-year Pilot Project was implemented on May 1, 2017, in the District of Arizona and on June 1, 2017, in the Northern
`District of Illinois. Its stated purpose is “to test the use of robust mandatory initial discovery as a means of reducing cost and
`delay.” 6 To that end, it requires that civil litigants -- with only a few limited exceptions -- engage in extensive initial discovery
`that exceeds the initial disclosure requirements of Rule 26(a)(1).
`
`Specifically, the Pilot Project requires that a responsive pleading be filed even when a motion to dismiss under Rule 12(b) has
`been filed. 7 Within 30 days of the filing date of that responsive pleading, the parties must produce:
`
`•Information about people likely to have discoverable information relevant to any party's claims or defenses.
`
`
` •Information about people who may have given written or recorded statements relevant to any party's claims or defenses.
`
` •A list of documents, electronically stored information, tangible things, land, or other property that may be relevant to
`any party's claims or defenses.
`•All relevant facts and legal theories for each claim or defense asserted.
`
`
` •A computation of each category of damages claimed, with a description of the evidence on which the computation is based.
`
`•A description of any insurance that may satisfy all or part of a judgment. 8
`Finally, within 40 days after serving its initial discovery responses, each party must produce all electronically stored information
`identified during initial discovery. 9
`
`This mandatory initial discovery is framed as court-ordered discovery and must be completed -- without a request from either
`party, before any conference of the parties, and irrespective of any agreement between the parties -- before starting additional
`discovery under the Federal Rules.
`
`Noncompliance with Rule 83
`
` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`The Pilot Project currently governs civil procedure only in two districts. For it to be a lawfully enacted set of procedures,
`however, it must be a Federal Rule, a local rule, or a standing order for a specific judge's court. Anything else is not authorized
`by the Rules Enabling Act and is, therefore, ultra vires and void.
`
`A close examination reveals it is none of the above. Moreover, even if the Pilot Project had been formally promulgated as a
`local rule or a judge-specific standing order, it would nevertheless be invalid under Rule 83 because its procedures contravene
`several aspects of the Federal Rules.
`
`The Pilot Project is not a Federal Rule. Unlike the seven-step, multi-year process employed for amendments, a significantly
`streamlined process was used to produce the Pilot Project. On April 14, 2016, the chairperson of a subcommittee presented the
`concept to the Civil Rules Advisory Committee. The chairperson described the purpose of the project as “testing proposals that,
`without successful implementation in actual practice, seem too adventuresome to adopt all at once in the national rules.” 10
`
`Without citing any statutory authority to “test proposals,” and without providing public notice or accepting public comment, the
`Advisory Committee recommended the project to the Standing Committee. The Standing Committee recommended the project
`to the Judicial Conference on June 6, 2016, and the Judicial Conference approved it on Sept. 13, 2016. 11
`
`In short, the Pilot Project went from consideration by the Advisory Committee to approval by the Judicial Conference in only
`five months, and it was neither approved by the Supreme Court nor reviewed by Congress. Rather, in the two districts where
`it is active, the project was implemented by a general order issued by the chief judge, eight and nine months after the judicial
`conference approved it. Considering the above, the Pilot Project undoubtedly is not a Federal Rule.
`
`The Pilot Project is not a local rule. To be sure, the Pilot Project does bear some resemblance to a local rule promulgated under
`Rule 83(a). For example, all 13 district judges in the District of Arizona and 17 of 32 district judges in the Northern District of
`Illinois have chosen to participate, so it can be said that a majority of judges have signaled their approval, at least in some sense.
`
`But there was never a public notice or comment period as Rule 83(a) requires. And, perhaps more importantly, the Pilot Project
`does not meet Rule 83(a)'s requirement of consistency with the Federal Rules. 12 Rather, the Pilot Project differs from the
`Federal Rules in three significant ways.
`
`First, as the name of the program suggests, the parties may not opt out of the mandatory initial discovery requirements. That is
`a departure from normal discovery practice under Rule 26(a)(1)(A) and (C), which specifically allow the parties to forego their
`initial disclosures (or, at a minimum, to stipulate to an alternative deadline for them). This change is made more onerous by the
`fact that, as detailed below, the Pilot Project's disclosure requirements are far more extensive than those of Rule 26(a)(1).
`
`Second, each party must provide both favorable and unfavorable information related to any party's claims or defenses whether
`or not the party intends to rely on it. By contrast, Rule 26(a)(1) requires each party to produce as part of its initial disclosures
`only information on which it intends to rely in support of its own claims and defenses. This limitation is by design.
`
`The Rules were specifically amended in 2000 to remove any obligation to disclose witnesses or documents that a party did not
`intend to use, a change effected through the meticulous, multi-step amendment process described above. 13 The Pilot Project
`overrides that specific, deliberate choice.
`
`Third, filing a preliminary motion pursuant to Rule 12(b) does not automatically stay the time to file answers, counterclaims,
`crossclaims or replies. By contrast, under Rule 12(a)(4), filing a 12(b) motion typically stays the movant's obligation to file a
`responsive pleading until 14 days after the court acts on the motion. In fact, this time was lengthened in 2009. 14
`
` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`The Pilot Project is not an individual judge's action. Given that the Pilot Project is neither a Federal Rule nor a local rule, its
`only remaining path to validity is its ability to qualify as an individual judge's action pursuant to Rule 83(b). But it fails this
`test as well.
`
`First, the Pilot Project is not the result of a single judge acting to enforce procedural rules in one courtroom. Rather, it was
`developed by a subcommittee of an Advisory Committee of the Judicial Conference. After obtaining the approval of the
`Advisory Committee, Standing Committee and the Judicial Conference, it was implemented in two districts by a general order
`of the chief judge -- and not for his or her own courtroom, but for the entire district.
`
`Second, Rule 83(b) authorizes individual judges to act only “when there is no controlling law” on an issue. As reviewed above,
`however, there already are detailed rules governing, among other things, the timing and contents of parties' early disclosures to
`their opponents and the timing of, and conditions for staying, a defendant's obligation to file an answer. 15
`
`Third, and relatedly, Rule 83(b) requires a judge's individual orders to be “consistent with federal law, rules adopted under 28
`U.S.C. § § 2072 and 2075 [a category that includes the Federal Rules of Civil Procedure], and the district's local rules.” But, as
`already discussed, the Pilot Project is inconsistent with the Federal Rules in several significant ways.
`
`In short, the Pilot Project is not a Federal Rule, a local rule or the action of an individual judge. It is, in other words, not an
`exercise of rulemaking authority authorized by the Rules Enabling Act.
`
`No justification from alternative sources of authority
`
`So, from where, exactly, does the authority for the Pilot Project come? The subcommittee that advanced it did not cite any law
`permitting the Judicial Conference to experiment by prescribing temporary rule changes for specific districts.
`
`And, in early discussions about potential pilot projects, the Advisory Committee acknowledged that “implementation of a pilot
`project through a local district court rule must come to terms with Rule 83 and the underlying statute, 28 U.S.C. § 2071(a),
`which direct that local rules must be consistent with the national Enabling Act rules.” 16
`
`Even so, and despite the acknowledgment that the project's mandatory discovery “goes well beyond initial disclosures under
`Rule 26(a)(1),” no discussion of the authority for the Pilot Project appears anywhere in the meeting minutes of the Advisory
`Committee, the Standing Committee or the Judicial Conference. 17 It seems the Judicial Conference simply sidestepped the
`need to come to terms with Rule 83 and the underlying statute.
`
`Ultimately, the Pilot Project was implemented through model standing orders that state that the Pilot Project is implemented
`“pursuant to the court's inherent authority to manage cases, Rule 16(b)(3)(B)(ii), (iii), and (vi), and Rule 26(b)(2)(C).” But that
`does not withstand scrutiny. 18
`
`Rule 16(b) governs the timing and contents of the initial pretrial order. Subsection (3)(B)(vi) simply allows the court to include
`dates for pretrial conferences and trial in the scheduling order, and subsections (3)(B)(ii) and (3)(B)(iii) allow the court to modify
`the extent of discovery and provide for discovery of electronically stored information. But each of those provisions clearly
`contemplates a case-specific determination made after the parties have had a chance to be heard and the court has considered
`the case's particular circumstances. 19
`
`What is more, the “scheduling order” contemplated by Rule 16(b) can be issued only “after receiving the parties' report under
`Rule 26(f)” or “after consulting with the parties' attorneys and any unrepresented parties at a scheduling conference.” 20 Clearly,
`a blanket district-wide policy that is in place before the case begins does not meet that requirement.
`
` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`Rule 26(b)(2)(C) is no help either because it grants the court authority to limit discovery, not to expand it. Plus, none of the
`cited rules authorizes a district court to implement a standing-override of Rule 12's directive that a defendant not be required
`to answer a complaint unless and until the complaint survives a motion to dismiss.
`
`As for the argument that inherent authority can support the imposition of the Pilot Project, even if an individual district judge
`-- acting based on the facts of a particular case and the characteristics of the specific parties -- could institute requirements that
`paralleled the provisions of the Pilot Project, such a thoughtful and carefully tailored approach is worlds apart from the one-
`size-fits-none scheme that the Pilot Project mandates.
`
`In short, the cited authority simply does not vest the Judicial Conference with the power to implement “radical rule change[s]”
`outside of the statutorily authorized amendment process. 21
`
`The failure to follow the established process for enacting Federal Rules -- including the requirements of public notice and
`comment -- is not merely a technical violation of a procedural rule. It is a decision that carries significant, substantive
`consequences for real parties in actual cases.
`
`Consider the example of class actions, which are subject to the Pilot Project's requirements to the same extent that virtually all
`other types of civil actions are. As Judge Richard Posner once wrote, class action plaintiffs use “discovery to impose asymmetric
`costs on defendants in order to force a settlement advantageous to the plaintiff regardless of the merits of his suit.” 22
`
`Front-loading that power and conferring it on all plaintiffs, including those whose complaints clearly fall short of the
`requirements of Rules 8 and 9, only gives plaintiffs more leverage to negotiate a settlement.
`
`That leverage, in turn, risks distorting substantive outcomes by forcing some defendants to settle meritless claims and compelling
`others to settle for sums greater than the merits of the case would otherwise demand -- all to avoid the crushing expense of early,
`burdensome and fast-paced discovery in a case that may not involve a plausible claim for relief. 23
`
`As the drafters of the Federal Rules likely know better than anyone, process drives outcome in many cases, which is why
`amendments are subjected to such extensive vetting before they are placed into practice.
`
`If the Judicial Conference had allowed an opportunity for public notice and comment as part of the amendment process (or
`pursuant to the Rule 83(a) process for enacting local rules), it would have heard extensive and informed debate on both sides
`of this and many other issues that might have yielded a more-informed, better-tailored mechanism for evaluating the impact
`of early discovery on federal civil practice.
`
`What's next?
`
`If the Judicial Conference does in fact favor “radical rule change,” its authority to effectuate such change is embodied in the
`exacting, meticulous, multi-step process for amending the Rules.
`
`When a defendant is hauled into court, the scope and course of the litigation should not depend on a game of judicial roulette.
`It should not depend on whether the case is filed in a court that is participating in the Pilot Project.
`
`In the Northern District of Illinois, that game of chance is even more pronounced because whether the Pilot Project applies
`depends on the happenstance of whether the case is assigned to one of the 17 judges participating in the Pilot Project or one of
`the 15 judges who opted out. This is a far cry from the procedural consistency the Federal Rules seek to promote.
`
` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`In keeping with its duty to “carry on a continuous study of the operation and effect of the general rules of practice and procedure,”
`the Judicial Conference should rescind the Pilot Project. 24 If it suspects that robust initial discovery is the best way “to secure the
`just, speedy and inexpensive determination of every action,” 25 and wants to explore that possibility, there are several options.
`
`It may study statistics from state-court systems that employ a more aggressive discovery schedule. It may employ the statutorily
`authorized, meticulous, multi-step process to amend the Federal Rules, which would give the bench, bar, and public a chance
`to consider and weigh in on that proposal prior to its enactment.
`
`But what it may not do is make an end run around the requirements of the Federal Rules and the Rules Enabling Act to test its
`theory. And that is exactly what it appears to have done with the Pilot Project.
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`Footnotes
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`In re Mandatory Initial Discovery Pilot Program in the N.D. Ill. standing order regarding mandatory initial discovery
`pilot project (N.D. Ill.), https://bit.ly/2Drqcka.
`
`Fed. R. Civ. P. 1 (emphasis added).
`
`See 28 U.S.C.A. § § 2071-77.
`
`Overview for the Bench, Bar, and Public, United States Courts, https://bit.ly/2O411Iu .
`
`Id.
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`Mandatory Initial Discovery Users' Manual for the Northern District of Illinois at 1, https://bit.ly/2NBzkan.
`
`See In re Mandatory Initial Discovery Pilot Program., supra note 1, at 2-3.
`
`Id. at 4-5.
`
`Id. at 5-6.
`
`Civil Rules Advisory Committee of the Judicial Conference, Meeting Minutes 18 (Apr. 14, 2016), https://
`bit.ly/2pEEmot.
`
`Committee on Rules of Practice and Procedure of the Judicial Conference, Meeting Minutes 9 (June 6, 2016), https://
`bit.ly/2MYC4cW; Report of the Proceedings of the Judicial Conference of the United States 30 (Sept. 13, 2016), https://
`bit.ly/2MYyZJY.
`
`See ABS Entm't Inc. v. CBS Corp., No. 16-55917, 2018 WL 3966179, at *21 (9th Cir. Aug. 20, 2018) (underscoring
`that “local Rules cannot be incompatible with federal rules” and holding that the Central District of California's Local
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` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`Civil Rule 23-3, which required that motions for class certification be filed within 90 days of the filing of a complaint,
`failed that test of compatibility).
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`a1
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`See Fed. R. Civ. P. 83 Advisory Committee's note to 2000 amendment.
`
`See Fed. R. Civ. P. 12 Advisory Committee's note to 2009 amendment.
`
`See Fed. R. Civ. P. 26(a), 12(a)(4).
`
`Civil Rules Advisory Committee of the Judicial Conference, Meeting Minutes 42 (Apr. 9, 2015), https://bit.ly/2OKdazn
`(emphasis added).
`
`Civil Rules Advisory Committee of the Judicial Conference, Meeting Minutes 14 (Apr. 14, 2016).
`
`In re Mandatory Initial Discovery Pilot Program., supra note 1, at 1.
`
`See, e.g., Fed. R. Civ. P. 16(b)(1) (requiring that “the district judge” -- or, in certain circumstances, a magistrate judge
`-- must be the one to issue the scheduling order); id. (requiring that the district “receiv[e] the parties' report under Rule
`26(f)” or “consul[t] with the parties' attorneys and any unrepresented parties at a scheduling conference” prior to issuing
`the scheduling order); Fed. R. Civ. P. 16(b)(2) (requiring that “the judge must issue the scheduling order as soon as
`practicable” and providing default timelines that apply unless “the judge finds good cause for delay” (emphasis added)).
`
`Fed. R. Civ. P. 16(b)(1)(A)-(B); accord Fed. R. Civ. P. 16(b)(2) (providing that the scheduling order shall issue “within the
`earlier of 90 days after any defendant has been served with the complaint or 60 days after any defendant has appeared”).
`
`Civil Rules Advisory Committee of the Judicial Conference, Meeting Minutes 33 (Nov. 5, 2015), http://
`www.uscourts.gov/sites/default/files/201511-05-minutes_civil_rules_meeting_final_0.pdf.
`
`Am. Bank v. City of Menasha, 627 F.3d 261, 266 (7th Cir. 2010) (Posner, J.).
`
`See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558-59 (2007) (citing, inter alia, Associated Gen. Contractors of Cal. Inc.
`v. Carpenters, 459 U.S. 519, 528 n.17 (1983) (“[A] district court must retain the power to insist upon some specificity
`in pleading before allowing a potentially massive factual controversy to proceed.” (internal quotation marks omitted))).
`
`28 U.S.C.A. § 331.
`
`Fed. R. Civ. P. 1.
`
`Michael P. Daly is a partner at Drinker Biddle & Reath in Philadelphia. The vice chair of the firm's class-action team,
`Daly's practice centers on defending class actions and counseling clients regarding consumer protection laws. Mark
`D. Taticchi, an associate, focuses his practice on appellate litigation, class-action disputes, and complex commercial
`
` © 2022 Thomson Reuters. No claim to original U.S. Government Works.
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`litigation. The authors wish to thank their former associate, Marie Bussey-Garza, for her extensive assistance in the
`research and preparation of this article.
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`Copyright © 2018 Thomson Reuters
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`31 No. 15 COMLLN 19
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`End of Document
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`© 2022 Thomson Reuters. No claim to original U.S. Government Works.
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