Amendments to the Federal rules of civil procedure : hearing before the Subcommittee on Intellectual Property and Judicial Administration of the Committee on the Judiciary, House of Representatives, One Hundred Third Congress, first session, June 16, 1993 online

(1975).

'" Bruno, The Disclosure Rule is a Mistake. Maricopa Lawyer, June 1992.



102

He says that when receiving written referral of defense of a new lawsuit with a

request to send out detailed interrogatories addressing all aspects of the claim, depose all

witnesses having knowledge of material facts and protect the clients' interest in the

litigation, he will need to send a letter similar to the following:

Thank you for referral of defense of this new case. I
note your request that I issue detailed interrogatories and
depose all material witnesses. Apparently, you are not aware of
the recent amendments to the Rules of Civil Procedure.

In lieu of proceeding with these traditional discovery
techniques, it is now the obligation of each party to disclose to
the other all facts which are material. Accordingly, we should
schedule a meeting at the earliest possible opportunity, at
which time you should be prepared to provide an outline, which
I will immediately provide to plaintiffs attorney, of all facts
which tend to support the claims for relief the plaintiff has set
forih in the complaint.

Furthermore, if the plaintiff has failed to pursue any
appropriate claims against your company, we should also
gather and pass on to plaintiffs counsel all facts which he
would want to know that he might amend his claim to pursue
any additional theories of relief against your company.

Additionally, if you or your employees are aware of any
facts which would support a claim for punitive damages, please
organize all that information in a format which will be easily
understandable to plaintiffs counsel. Although no theories
claiming punitive damages have been pled, the plaintiffs
attorney would assuredly be interested in learning any facts
which would justify a punitive claim, and I am certain he would
be anxious to amend the complaint to include such a prayer for
relief. It is our obligation to exercise our best efforts to collect
the appropriate data which the plaintiffs attorney would want
to learn about, and I am sure punitive damages would be high
on his list.



103



Finally, for me to establish to the court that I have
fulfilled my obligation of due diligence, I would like to arrange
for members of my firm to interview the employees of your
company scattered in your branch offices in all 50 states. It is
possible that your employees have knowledge which the
plaintifTs attorney would find helpful in asserting his claim
against your company and it is my obligation to exercise
reasonable diligence to collect that data.

I remain your zealous advocate, to the extent allowed by
the new rules.

Mr. Bruno's observations continue. The preamble to the Arizona Rules of
Professional Conduct states that: "As advocate, a attorney zealously asserts the clients'
position under the rules of the adversary system." The comment to Ethical Rule 3.4 of the
Arizona Rules of Professional Conduct indicates that: "The procedure of the adversary
system contemplates that the evidence in a case is to be marshalled competitively by the
contending parties."

How can you reconcile the adversary system, the competitive marshalling of evidence
and the zealous representation of clients, he says, with the requirements of the disclosure
rule?

He correctly observes that the requirements of the disclosure militate against good
lawyering. Clients, he says, will be reluctant to hire a attorney who has represented their
business before lest the attorney know too much that he or she is forced to disclose to the
other side.



104

We must ask ourselves today: When choosing between two attorneys equally good
in appearance and speaking ability, is there going to be a subtle motivation to hire the
attorney who has a more relaxed work ethic opposed to the attorney who is industrious and
will dig endlessly through the company's records uncovering facts and diligently turning
those facts over to the plaintiffs attorney? Is there a subtle motivation to hire the less
industrious attorney?

Mr. Bruno also expresses concern that he has not yet heard any satisfactory answers

to questions about what has happened to the protection of the attorney/client privilege and

the work product doctrine and to an attorney's role as an advocate for his or her clients.

As a result, he poses another hypothetical regarding the "continuing duty" to "seasonably"

make "new or different information" available to opposing counsel.

I am at a deposition. We take a break and, during the
break, my client says to me:

Bob, I thought of something while the other attorney was questioning
me. He has never addressed this issue, either in an interrogatory or earlier
in the deposition. However, his other questions reminded me that, several
years ago, we did have a claim similar to this one. I thought you should know
about it so you will not be caught off guard if opposing counsel does ask
about prior cases.

I respond to my client as follows:

Jack, thanks for confiding in me. We won't have to wait for the other
attorney to ask the question because, as soon as we go back into the
deposition room, I am going to make a reasonable disclosure of everything
you have just told me. Despite the fact that you and I maintain an
attorney/client relationship and despite the fact that the Rules of the Supreme
Court require me to "maintain inviolate," the confidences you place in me.



105



nonetheless, the new rules of disclosure require that I reasonably advise
opposing counsel of new or additional information "whenever new or different
information is discovered or revealed."

Therefore, having learned of this information during this deposition,
I had better tell the other attorney about it right now. If I fail to do so, a
judge could find that my disclosure is not "reasonable" and could sanction me
personally. I have to balance my ethical duty to maintain your confidences
against my ethical duty to follow the new disclosure rules. The judges seem
rather intent on enforcing these disclosure rules.

Frankly, I cannot afford to pay potential sanctions personally and,
therefore, I intend to disclose our conversation to opposing counsel.

UNANSWERED ETHICAL PROBLEMS

Is the client put in the ethical dilemma of making its own determinations as to the
material and relevant facts the attorney ought to know about? Is the attorney who disagrees
with his or her clients whether something is relevant or irrelevant to the case obliged to
withdraw from representation if the clients directs the attorney to assume the position that
the information is not relevant? Is the attorney who decides to remain in the case going
to be subjected to court-imposed sanctions that the attorney herself or himself must pay for
failing to make disclosure when the attorney is operating under the clients direction?

Little comfort is found in assurances that the ethical dilemmas of disclosure will be
resolved on a case-by-case basis in an even-handed manner by members of our federal
judiciary. Although we have great respect for our trial court judges, we are going to be
confronted with hundreds of different judges having hundreds of different opinions as to
what the ethics are of disclosure in one circumstances versus another.



106

It is not necessary to create ethical conflicts for every attorney to deal with those few
who abuse the prosecution system. Abusers of the current system can be dealt with by
enforcement of the rules which already exist.

CONCLUSION

Although the federal rulemaking process expressly contemplates some congressional
oversight, we are told by commentators that primary control over the process was vested in
the judicial branch in part so that the rules would benefit from the vastly greater experience
and insight into the litigation process that judges have over legislators. Congress has
historically become involved with the rulemaking process only when the process was not
responsive to public concerns. We are grateful for the work of the U.S. Judicial Conference
Committee on Rules and we have great respect for the integrity of the rulemaking process.
Unfortunately, however, the unanswered ethical dilemmas, alone, make implementation of
Rule 26 changes requiring non-adversarial disclosure a mistake at this time. We
respectfully urge their deletion from the currently proposed amendments to the Federal
Rules of Civil Procedure.

Thank you for the opportunity to presenting these views on the most radical changes
proposed to the Federal Rules of Civil Procedure since their implementation in 1938.



107

Mr. Hughes. Mr. Dunlap, welcome.

STATEMENT OF F. THOMAS DUNLAP, JR., VICE PRESffiENT,
GENERAL COUNSEL AND SECRETARY, INTEL CORP.

Mr. Dunlap. Thank you, Mr. Chairman, members of the
subcommittee.

As the general counsel for a high technology company, the main
concern for the Civil Justice Reform Act deals with the speed to get
to trial and the effect that has on competition in our industry, be-
cause in order to have the research and development expenses that
we need in this industry, which in 1993 will be around $900 mil-
lion for Intel, and to build these facilities to make these chips, we
will have to invest over a billion dollars in capital equipment each
year. It becomes very important that we can protect this research
and development with the intellectual property laws.

While we have the correct intellectual property laws in this coun-
try, and I believe the courts have generally been interpreting them
consistent with the ongoing technology, we are left with the prob-
lem: If we don't have timely enforcement, the laws will not be
effective.

In other words, if a typical product cycle is 2 to 4 years, and it
takes that long to get through the court system, we don't have an
adequate remedy. And the type of case that we are quite often in-
volved in is either patent or copyright, trade secret case, some type
of intellectual property case, very complex and very technical. But
the cost of the litigation or a nondecision out of the litigation is
very expensive to our industry: Not just the cost of litigation, the
cost of not having a decision is a significant problem.

That is the reason that I favor the current rules as they are pro-
posed here. I believe that they will help us get speedier decisions,
and particularly the rules that have specific limits, the most impor-
tant and the most measurable rules, for example, are the rules on
10 depositions. If we only have 10 depositions, that is helpful. The
limit on 25 interrogatories is also very helpful. Just by the nature
of those, they are going to reduce discovery.

Now, the most controversy that we have heard today is with re-
spect to rule 26(a)(1). But that is also one of the more important
rules because of the fact that document production does take the
most time and most expense in litigation. So these other rules
aren't quite enough.

And so far, with the CJFIA being in effect now for a number of
years, we haven't gone through a complete set of cases, because
they take longer than these rules have been in effect. But neverthe-
less, the experience that we have had so far in a number of dis-
tricts has been very positive, particularly in the Eastern District of
Texas and in the Northern District of California.

Now, both jurisdictions have slightly different rules from the pro-
posed 26(a)(1), but the concept is the same; that is, to require some
type of early mandatory disclosure. And our experience has been
exactly what Judge Pointer explained earlier.

To give you an example, in the Eastern District of Texas, the
judge made it very clear to us, there should be complete disclosure.
This is like a substitute for document production.



108

We went, each side went and had that disclosure, asked for some
document requests. The judge clearly said, "No, we are not doing
that; we are going to move this case along." We had then a con-
ference where there was some dispute as to what information
would be disclosed. Before we had to file any motions. We resolved
the matter. So in fact this exchange back and forth of requests was
eliminated in that case.

And in the Northern District of California, slightly different
rules, we had a similar experience and believed that the same
thing would happen.

Now, rule 26, like any rule, is not going to be perfect for all situ-
ations, but I think that the idea of mandatory disclosure plus con-
trol by the magistrate and the judges will be able to speed up the
litigation process, and particularly in these complicated intellectual
property cases.

Thank you.

Mr. Hughes. Thank you very much, Mr. Dunlap.

[The prepared statement of Mr. Dunlap follows:]

Prepared Statement of F. Thomas Dunlap, Jr., Vice President, General
Counsel and Secretary, Intel Corp.

overview

Intel wishes to express its support for the dedicated efforts of the Judicial Con-
ference, the Supreme Court and this Committee to streamline the present burden-
some and expensive litigation process. Intel believes the process can be streamlined
even further as we gain experience with the new rules without diminishing any fun-
damental rights or preventing zealous advocacy. There will always be debate on how
the process can be improved, but few can argue with the principles sought to be ad-
vanced by these present proposed rules: judicial economy, an acceleration of the
process, and decreased costs.

1. INTEL: INNOVATION

I am the General Counsel of Intel which is a high technology company based in
Santa Clara, California, with major manufacturing facilities in New Mexico, Arizona
and Oregon. Intel's product line is centered around the microprocessor which you
can think of as the brains of many of today's computers. In order to compete inter-
nationally in this business, in 1993 we have invested over nine hundred million dol-
lars in research and development and over 1.2 billion dollars in capital equipment.
Article I of the U.S. Constitution provides rewards to innovators who invest at this
type of rate. Today's intellectual property laws, that is patents, copyrights, trade-
marks, mask work laws, provide for the appropriate type of protection for innova-
tion. Congress has been able to adapt the statutes to properly protect the latest
technology and the courts have been able to interpret the law to provide appropriate

firotection. The issue before this committee is the speed at which the courts can en-
orce this protection.

2. COMPETITIVENESS REQUIRES "JUST IN TIME BUSINESS"

The one thing to which the courts have been unable to adapt, is the speed at
which business is conducted today. Throughout our industry, people talk about '^ust
in time business." This means getting information or product at the right place, at
the right time. Just as it is important for us to have just in time business, it is im-
portant that we have just in time justice.

In the semiconductor business, competitiveness requires the development of basic
technology, the design of excellent products, the capacity to build those products
and, finally, intellectual property protection to proviae a return on our substantial
investment. As an innovator, Intel needs speedy court decisions so that it can obtain
the reward which the various intellectual property statutes bestow on the innovator.
We are currently engaged in numerous lawsuits to enforce our intellectual property
rights. Speedy court decisions are important to maintain our competitiveness in a



109

fiercely competitive international market. Intel's product cycles are often 2-4 years
so we cannot afford litigation which takes much more than 1 year to resolve.

The obvious bottleneck in the judicial system is the discovery process. It is by far
the most expensive and time consuming part of litigation. The cost to business of
an uncertain competitive situation far outweighs the expense of litigation. So, speed
is the critical factor. Cases cannot reach a speedy conclusion unless discovery is efli-
ciently managed.

RULES 30, 32, 33, 34 AND 36

There should be no changes to the Proposed Rules 30, 32, 33, 34 and 36. Each
of these proposed rules, if enacted by Congress as presently drafted and if subse-
quently administered by the district courts as intended, will significantly reduce the
present burden and cost in our litigation process. Most cases do not need more than
ten depositions per party, or more than twenty-five interrogatories. These new pro-
posed rules rationally limit the number of such devices. If applied as intended, these
rules alone will greatly improve the process and significantly reduce costs.

However, the district courts must be given clear guidance that applying these
rules to presumptively limit discovery is the intent of the Supreme Court and Con-

fress. Without such clear direction, many courts may fear departure from the "open
iscovery" philosophical status quo will only generate appellate reversals and, as a
consequence, will not apply the new rules according to the principles underlying
their enactment.

RULE 26(aXl)

The most time consuming part of discovery is document production. Rule 26(aXl)
is a step towards streamlining document production by implementing a disclosure
system. I am currently involved in litigation in the Eastern District of Texas and
the Northern District of California which both have some form of required disclo-
sure. The Texas disclosure system is a total substitute for document requests. We
have a similar program in California but the initial disclosure is not as detailed.
However, some magistrates are requiring more detailed disclosure similar to Texas
to expedite discovery.

Proposed Rule 26, it is, admittedly, not perfect in all situations, but Intel believes
the proposed new rule may not go far enough but is superior to the present rule.
Most oi the disagreement with the new rule appears to be directed at its mandatory
disclosure requirements relating to documents. Intel supports the concept of manda-
tory disclosures.

The local rules of the Eastern District of Texas provide a workable model as to
the extent of the mandatory initial disclosures. There, status conferences are held
to determine the scope of the disclosures and no additional requests for production
can be served without prior court approval. Moreover, only documents that "bear
significantly on a claim or defense" initially need to be disclosed. These reasonable
limitations on such an intrusive and costly discovery device are warranted and over-
due. If properly applied at the district court level, proposed Rule 26 can achieve sig-
nificant reductions in the cost and delay inherent in the present litigation philoso-
phy.

Intel is involved in approximately ten major litigations at any one time. Typically,
we are involved with intellectual property lawsuits, but we have also been defend-
ants in seven frivolous shareholder lawsuits. In either situation, mandatory disclo-
sure would be helpful in streamlining litigation. Consequently, I urge passage of
these proposed rules.

No matter what rules are actually passed, we also need to send a very strong
message to the lawyers, judges and magistrates in this country. That message is
that the competitiveness of the United States industry requires just in time justice.
That means we need to have time to trial resulting in faster court decisions. Faster
decisions can only occur if discovery is streamlined and managed along the lines of
these proposed rules. While these rules are a positive first step, we will have to
learn how to work within the new system which provides judges and the mag-
istrates a framework to expedite discovery so that the cases can go to trial quickly.

MANAGED DISCOVERY

Intel believes that there must be an acceleration of the litigation for all cases and
especially in cases alleging violations of intellectual property rights. Intel supports
the present modifications of the rules as outlined in my testimony and asks this
Committee to consider an even more accelerated calendar for intellectual property
cases. At least, encourage the courts to manage intellectual property cases to obtain



110

a final decision in 12 to 18 months. Intel believes that all intellectual property cases
can, and must be, decided within 12 to 18 months from filing, as is presently done
in proceedings before the International Trade Commission. This expedited time
frame, which is warranted in these cases because of the significant potential impact
of their outcome on domestic and international markets and the rapidly advancing
technology involved, can be achieved if, over time, local rules implementing new
Rule 26 are adopted similar to those local rules utilized in the Eastern District of
Texas.

Mr. Hughes. Mr. Cortese, before we take your testimony — in fact
let's go, if we could — let's try to take your testimony. Then we are
going to have to break because we have two votes.

Mr. Cortese, welcome.

STATEMENT OF ALFRED W. CORTESE, JR., ATTORNEY, ON
BEHALF OF LAWYERS FOR CIVIL JUSTICE

Mr. Cortese. Thank you, Mr. Chairman, members of the
committee.

I want to commend the committee for having these hearings and
really for the open and candid way in which you have approached
this problem. I think these hearings so far have been very useful,
and I hope we can add to the committee's information.

I want to say first of all that my views represent the views of
the Business Roundtable Lawyers Committee, the Chamber of
Commerce of the United States, the National Association of Manu-
facturers, the Association of American Railroads, the American
Automobile Manufacturers Association, the American Bankers As-
sociation, the Product Liability Advisory Council, the Defense Re-
search Institute, the Federation of Insurance and Corporate Coun-
sel, International Association for Defense Counsel, and Lawyers for
Civil Justice.

Now that I have used up almost all my time, I had better get
to the merits of this.

I say that, Mr. Chairman, because I wanted to reflect to you the
tremendous feeling and controversy that surrounds 26(a)(1), and
my testimony will be devoted exclusively to 26(a)(1), and that has
been made known throughout the process of the adoption of these
rules, and in fact many, many, many companies, many individual
practitioners, many consumer groups, the plaintiff lawyers, defense
lawyers, all the litigants, basically, if you were to count them up,
are not buying disclosure.

Now, there are a few voices which I would refer to as voices in
the wilderness that say, "Well, let's give it a try." I think maybe
that is a reflection of what I would like to call the Brooks theorem.
That is not Jack Brooks; it is Mel Brooks. But basically that is that
"beauty is in the eye of William Holden." I would like to say there
are a lot more William Holdens on the side of opposing disclosure,
many, many thousands more, than there are those that support
disclosure, or even that support the experimentation with disclo-
sure.

And what we would like to submit to you. Your Honor, Mr,
Chairman, is that the committee craft a bill that would delete
26(a)(1) from the amendments. And I think that, in fact, probably
would be the least invasive that Congress could be with respect to
the Rules Enabling Act process.



Ill

Now, the organizations that I represent — and I know you will
hear this from Mr. Frazza and Mr. Higgins because they share
these views and join in the views of those organizations — that we
like the Rules Enabling Act process for the most part.

When it comes to a point where congressional oversight needs to
be exercised, then that is a most appropriate opportunity for the
exercise of that oversight, and that oversight should be and has
been in the past narrow and specific, and that is what we are ask-
ing to you do.

In fact, I was very interested by Judge Pointer's and Judge
Keeton's comments that they would prefer that disclosure at least
in this formulation be rejected than that it be deferred.

And I think that springs from a feeling that we share that that
perhaps would be the least invasive action that Congress could
take and would settle the issue, and we could get on with some of
these other very significant and very important reforms, so that
Mr. Dunlap and other litigants who want speedier justice can get
that.

And, in fact, you talk about the meet and confer, which has had
substantial exposure and experience, you talk about limits on dis-
covery, all of those things should be allowed to take effect. But as
far as disclosure is concerned, there is just too much opposition to
it as a concept, and too much concern that it will cause more prob-