ITC Advances Discovery Reform

Mark Michels

Law Technology News

11-21-2012

The International Trade Commission has taken a significant step on its path to reform by issuing a Notice of Proposed Rulemaking (hereinafter, Notice) addressing 1) discovery, including electronically stored information discovery and 2) privilege issues. See 77 Fed. Reg. 60952 (October 5, 2012). According to the Notice, the ITC is taking this action to address concerns about the scope of discovery in proceedings under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337). The ITC's stated objective in promulgating these rules is "to reduce expensive, inefficient, unjustified, or unnecessary discovery practices in agency proceedings while preserving the opportunity for fair and efficient discovery for all parties." 77 Fed. Reg. 60952. Comments on the proposed rule are due no later than December 4, 2012. The ITC's ordinary practice is to publish the final amendments 30 days prior to their effective date, which means that the final rules may come into effect, at the earliest, in early 2013.

In "The ITC's Long, Weary Road to E-Discovery Reform," in the July 6, 2012, issue of Law Technology News, described the effort the ITC has taken over the past several months to solicit information and input from the bench and bar on discovery reform.

In addition to the Notice, the ITC issued a press release, "E-Discovery — Commission Takes a Step Forward," detailing other actions "to mitigate unnecessary burdens and costs to the parties in section 337 investigations and to third parties, and to reduce motions practice before the ALJs." According to the press release, the ITC is also considering: 1) a pilot program where Administrative Law Judges will test discovery meet and confer processes, 2) a model protective order, including a source code provision, and 3) encouraging the ALJs to incorporate provisions regarding production of metadata into the ALJ's ground rules. (The ALJ's "ground rules" are similar to standing orders judges may issue to supplement local rules and federal or state rules.)

The ITC's discovery rules are codified at 19 C.F.R. Part 210, Subpart E and these rules currently have no provision similar to Federal Rules of Civil Procedure 26(b)(2)(B) or 26(b)(2)(C), which deal with limitations on discovery and 26(b)(5), which addresses privilege claims. The ITC's proposed rules add provisions similar to FRCP 26(b)(2)(B), 26(b)(2)(C), and 26(b)(5).

The proposed rules would amend section 210.27 by adding section 210.27(c) Specific Limitations on Electronically Stored Information. The proposed subsection (c) would state that a person need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost. Proposed 210.27(c) tracks fairly closely FRCP 26(b)(2)(B). According to the Notice's Background discussion, the ALJ may impose discovery conditions including, so called, "cost shifting" on the requesting party. Furthermore, the Notice states "that the case law developed under Federal Rule of Civil Procedure 26(b)(2)(B) would provide guidance for application of proposed subsection [210.27] (c)."

The proposed rules would also amend ITC discovery rules by adding section 210.27(d) General Limitations on Discovery. Section (d) is similar to FRCP 26(b)(2)(C), the so-called "proportionality" provision. The section (d)(1) and (d)(2) language almost identically tracks FRCP 26(b)(2)(C)(i) and (C)(ii), which empower the tribunal to limit discovery that is, among other things, unreasonable, cumulative, or duplicative, or if the requesting party had ample opportunity to obtain the requested information.

210.27(c)(4) departs from FRCP 26(b)(2)(C)(iii) in some material respects. Section (c)(4) provides that the ALJ must limit discovery if the ALJ determines that "the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the investigation, the importance of the discovery in resolving the issues to be decided by the Commission, and the public interest."

"The public interest" provision has no corresponding analog in the FRCP and has no explanation in the Notice. Without clarification, this provision could potentially inject some uncertainty into the rule because the ALJ typically does not have the authority to take public interest evidence unless specifically authorized by the Commission. See 19 C.F.R. § 210.50(b)(1). The ITC may decide to address this issue in the final rule.

FRCP 26(b)(2)(C)(iii) provides that the court must limit discovery if the court determines that the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues. Proposed section 210.27(c)(4) does not include the FRCP provision: "the amount in controversy, the parties' resources, the importance of the issues."

While the Notice states expressly that case law related to FRCP 26(b)(2)(B) would provide guidance for proposed section 210.27(c), the notice does not say that the case law developed under FRCP 26(b)(2)(B) would provide guidance to subsection 210.27(d). It is not clear whether this omission was intentional or not. This uncertainty may potentially be addressed in the final rule.

Finally, the Notice adds proposed rule 210.27(c)(3), which limits discovery when "the responding person has waived the legal position that justified the discovery or has stipulated to the facts."

PRIVILEGE

The proposed rule provides a procedure for claiming privilege in section 210.27(4)(e)(1). Currently, the ITC discovery rules do not have a provision regarding privilege log production. The proposal provides uniform privilege log elements and requires a party claiming privilege to produce the log within 10 days of a privilege claim. Given the pace of ITC litigation, it typically would be quite a challenge for a party to comply with this provision. This provision will likely be subject to several comments from the public. The proposed privilege provisions also include language similar to FRCP 26(b)(5)(B) which sets forth a procedure for dealing with situations where privileged material is produced in litigation. The proposed rule includes specific time periods for dealing with the produced privilege material, which the FRCP does not.

The ITC stated that it considered Federal Rule of Evidence 502 in crafting its proposed rules regarding privilege waiver, although some ALJs have held that the Federal Rules of Evidence are not binding on ITC proceedings, even though they may look to the rules for guidance. See, e.g., Certain Dynamic Random Access Memory and NAND Flash Memory Devices and Products Containing Same. Inv. No. 337-TA-803, Order No. 63 (May 14, 2012) (ALJ Gildea) [Inv. 803] and Certain Wiper Blades, Inv. No. 337-TA-816, Order No. 32 (July 12, 2012) (ALJ Bullock). In fact, one ALJ has even held that an ITC investigation is not a "federal proceeding" under FRE 502. See Inv. 803 at 6.

The ITC appears to reject the provisions of FRE 502 which permit parties to craft non-waiver agreements, such as a "claw-back" agreement allowing parties to recover privileged material produced to the opposing party without a costly privilege review procedure. The FRE 502 Advisory Committee Notes contemplate that a party could obtain an order that would provide "for return of documents without waiver irrespective of the care taken by the disclosing party." Instead, the ITC Notice states that administrative law judges should apply "federal and common law when determining the consequences of any allegedly inadvertent disclosure. That law would include consideration of whether the holder of the privilege or protection took reasonable steps to prevent disclosure of the information and other considerations found in Federal Rule of Evidence 502."

The ITC commentary begs the question regarding waiver scope. Courts are conflicted over whether an inadvertent disclosure of privileged data constitutes a waiver. The FRE 502 Advisory Committee recognized that the federal courts' approach to waiver has varied significantly. "A few courts find that a disclosure must be intentional to be a waiver. Most courts find a waiver only if the disclosing party acted carelessly in disclosing the communication or information and failed to request its return in a timely manner. And a few courts hold that any inadvertent disclosure of a communication or information protected under the attorney-client privilege or as work product constitutes a waiver without regard to the protections taken to avoid such a disclosure." See FRE 502 Advisory Committee Notes.

It is precisely this conflict among the various federal courts that was, in large part, the impetus behind FRE 502. According to the Advisory Committee "subject matter waiver is limited to situations in which a party intentionally puts protected information into the litigation in a selective, misleading and unfair manner. It follows that an inadvertent disclosure of protected information can never result in a subject matter waiver." Unfortunately, the proposed rules do not clarify the potential waiver scope.

With respect to determining waiver in the first place, the ITC states in the Notice that the ALJs should consider whether the holder of the privilege "took reasonable steps to prevent disclosure of the information and other considerations found in Federal Rule of Evidence 502." Presumably this language refers to FRE 502(b) which provides that there is no privilege waiver if "(1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error." Indeed, this is the approach taken in Certain Wiper Blades, Inv. No. 337-TA-816, Order No. 32 (July 12, 2012) (ALJ Bullock).

Interestingly, the FRE 502 Advisory Committee stated that "a party that uses advanced analytical software applications and linguistic tools in screening for privilege and work product may be found to have taken 'reasonable steps' to prevent inadvertent disclosure." It is an open question as to whether the ITC will find the Advisory Committee's statement persuasive. The ITC may wish to consider whether a party agreement or ALJ ground rules will permit parties to reach a prior agreement regarding "reasonable precautions." For example, "The Protective Order Toolkit: Protecting Privilege with Rule of Evidence 502," 10 Sedona Conf. J. 237 (2009), suggests that parties consider agreeing to language that provides the following:

The Producing Party will be deemed to have taken reasonable steps to prevent communications or information from inadvertent disclosure if that party utilized either attorney screening, keyword search term screening, advanced analytical software applications and/or linguistic tools in screening for privilege, work product or other protection.

At first blush, the proposed rule does appear to offer some potential relief from privileged data management costs. Proposed rule 210(e)(3) provides that:

Parties may enter into a written agreement to waive compliance with section (1) of this paragraph [relating to privilege claim/privilege log provisions] for documents, communications, and things created or communicated within a time period specified in the agreement. The administrative law judge may deny any motion to compel information claimed to be subject to the agreement. If information claimed to be subject to the agreement is produced in discovery then the administrative law judge may determine that the produced information is not entitled to privilege or protection.

This provision could potentially be considered substantially similar to the situation that arose in Certain Digital Models, Digital Data, and Treatment Plans for Use in Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making the Same, Inv. No. 337-TA-833, Order No. 7 (June 28, 2012) (ALJ Rogers) [Inv. 833]. In this investigation the parties stipulated that materials withheld from privilege created on or after a certain date were exempt from privilege log disclosure. The ALJ's ground rules provided that if this type of "agreement is in force, the Administrative Law Judge will not consider any motions involving privileged documents." In Inv. 883 the respondent produced a privileged document created after the date set forth in the agreement. The claimant filed a motion arguing the document was not privileged or, alternatively, if privileged that the respondent waived the privilege. The ALJ declined to consider the motion stating that the ground rules precluded the motion.

The privilege logging relief may prove to be ephemeral, however, because the proposed rule (e)(3) provides only that the ALJ may deny such a motion. The language may provide the ALJ with discretion to not enforce the written agreement. In Certain Dynamic Random Access Memory and NAND Flash Memory Devices and Products Containing Same, Inv. No. 337-TA-803, Order No. 63 (May 14, 2012) (ALJ Gildea), the ALJ, in fact, refused to enforce a claw-back provision in a discovery stipulation between the parties and proceeded to find that the producing party waived privilege.

While the final rule may be revised based upon the public comment, there is optimism among the ITC bar that these rules will provide some relief to the discovery expense and burden. Alexander Chinoy, of Covington & Burling and president of the International Trade Commission Trial Lawyers Association, says that he and other members of the bar with whom he has spoken "welcome the Commission's focus on e-discovery and its efforts to provide discovery limits." Dickstein Shapiro's Kimberly Parke, chair of the International Trade Commission Committee of the American Bar Association's Intellectual Property Law Section, is similarly optimistic, Parke notes that currently the ALJs have to rely on their inherent discretionary power to impose discovery limits and that the proposed rules would provide the ALJs "with a framework to support a decision to limit discovery."

Ed Lebow, the leader of Haynes and Boone's International Trade Practice Group, puts it this way: "under the current discovery regime an ALJ's decision to limit the record is subject to the Commission's scrutiny. Given the investigation time constraints there is no time to go back to supplement the record if the Commission disagrees with an ALJ's decision; so the current framework creates an environment that works to discourage the ALJs from limiting discovery."

CONCLUSION

Assuming that the ITC's final rule is not significantly different from the Notice, the proposed rules will likely encourage discovery motion practice before the ALJs. Whether, and to what extent, the ALJs actually limit discovery will very much be subject to each judge's discretion and it will remain to be seen whether the proposed rules would actually reduce expensive, inefficient, unjustified, or unnecessary discovery practices at the ITC.

Mark Michels is a director in Deloitte Discovery practice of Deloitte Financial Advisory Services. As a nonlegal service provider, Deloitte's services are provided under the direction and supervision of the client's legal counsel. Email: mmichels@deloitte.com.