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Federal Rule Amendments Coming on December 1

By Swati S. Desai, Litigation News Associate Editor – July 20, 2011

Sixteen amendments to—and three entirely new—Federal Rules coming on December 1, 2011, will impact appellate, bankruptcy, and criminal practices. Two Federal Rules of Appellate Procedure (4 and 40), nine Federal Rules of Criminal Procedure (1, 3, 4, 6, 9, 40, 41, 43, and 49), and five Federal Rules of Bankruptcy Procedure (2003(e), 2019, 3001, 4004, and 6003) will get a facelift. Two new Bankruptcy Rules (1004.2 and 3002.1) and one Criminal Rule (4.1) will also go into effect.

The amendments are all from the Committee on Rules of Practice and Procedure [PDF] of the Judicial Conference of the United States (the Rules Committee). The Rules Committee summarized the changes in a December 16, 2010, memo [PDF] to Chief Justice John G. Roberts.

On April 26, the Supreme Court approved the rules and transmitted them to Congress before May 1, as is required under the Rules Enabling Act. They will go into effect on December 1, 2011.

The “controversial report [PDF]” by the Rules Committee—an undated, seven-page document captioned “Proposed Rule Amendments of Significant Interest”—presents the arguments in favor and against six of the rules “that raised significant interest.” This report discusses the Rules Committee’s recommendations for the six rules garnering “significant interest,” specifically: Appellate Rule 4, Criminal Rules 6 and 43, and Bankruptcy Rules 2003 (c), 2019, and 3001.

Consistent with past practices, the Rules Committee has prepared a redline of the changes. Separate files are available for the appellate rule changes [PDF], the criminal rule changes [PDF], and the bankruptcy rule changes [PDF].

Expanded Disclosure of Equity Interests under Bankruptcy Rule 2019 May Impact Litigation Strategy
One of the most significant rule changes is to Bankruptcy Rule 2019. The new rule broadens what economic interests creditors most disclose.

“The old Rule 2019 was used not so much as a disclosure tool but as a litigation strategy to compel bondholders and distressed traders to disclose their position in the bankruptcy case. This was used to make distressed traders withdraw from the case,” says Michael St. Patrick Baxter, Washington, DC, a member of the Judicial Conference of the U.S. Advisory Committee on Bankruptcy Rules. “Bankruptcy courts divided on the issue and there was not a consistent approach taken by courts across the country,” he adds.

“The proposed rule recognizes that what you have to disclose should be broader than what the old Rule 2019 required,” explains Baxter. “There is no need to disclose when something was bought and at what price, but it [the rule change] is more onerous because ‘disclosable economic interests’ includes more than shares and debt—it also includes things like swaps and short positions and financial contracts or securities that do not fall within the generally accepted definition of ‘claim of interest.’”

“This rule might be a compromise for people using Rule 2019 as a sword to defeat a party,” agrees Deborah D. Williamson, San Antonio, TX, cochair of the ABA Section of Litigation’s Bankruptcy and Insolvency Litigation Committee. Williamson does not appear optimistic about the reception awaiting this amendment, adding, “No one is happy.”

Appellate Procedure Rules 4 and 40—Giving the Government 30 More Days
The amendments to Rules 4 and 40 of the Federal Rules of Appellate Procedure give the government 60 days, instead of 30 days, to decide whether or not to appeal on behalf of their officers who are sued in their individual capacity. The Rules Committee is also asking Congress to change 28 U.S.C. § 2007 to be consistent with the changes to Rules 4 and 40.

“The change is really a clarification for a small subset of cases where an action is being brought against a U.S. government officer in their individual capacity instead of their professional capacity,” offers Thomas J. Donlon, Stamford, CT, cochair of the Section of Litigation’s Appellate Practice Committee.

The U.S. Supreme Court, “in the Bowles [PDF]decision as well as the Eisenstein [PDF] decision, which came out last term, seems to make clear that the time deadlines for appeals will be treated jurisdictionally,” notes Larry A. Kasten, Phoenix, chair of the Section’s Appellate Practice Committee’s Subcommittee on Appellate Rules and Statutes. “You don’t want appellate deadline questions to be ambiguous,” Kasten continues. “The consequences of guessing wrong can be pretty harsh.”

Criminal Procedure Rule 41—Abbreviated Record
The two amendments to the Federal Rules of Criminal Procedure discussed in most detail in the “controversial report” are the changes to Rule 6(f) and 43. Each deals with using video teleconferences.

Rule 6 now permits an indictment to be returned to a magistrate by video teleconference to “avoid unnecessary delay.” Rule 43 allows a judge to permit a defendant to participate in arraignment, plea, trial, and sentencing by video teleconference. (A defendant may already consent to not be physically present during a misdemeanor or petty offense proceeding, including at trial and sentencing.)

Nonetheless, the addition of the new Rule 41 has drawn the attention of litigators. “In the comment, [and] not the rule itself, [Rule 41] would allow an abbreviated record of the oath that the affiant would call in to swear to on the circumstances of the warrant,” begins Stacey F. Gottlieb, Phoenix, cochair of the Section’s Criminal Litigation Committee. Gottlieb considers this the most worrisome change to the Criminal Rules.

“Especially in this day and age when there is no inconvenience or impediment to having every call recorded verbatim, [and] with the low cost and high efficiency of technology, there really does not seem to be any excuse for not having a verbatim transcript available,” she continues. “This is [the] information that causes someone to be arrested, their home or business searched, their property seized.” Gottlieb sees little reason to take any such risk.

Rule 41 also impacts Franks hearings. “A Franks hearing is held where a defendant is challenging the truth or veracity of the sworn statements made to obtain a warrant, like a search warrant,” explains Gottlieb. “Practitioners may find themselves in a situation where oral information has been sworn to, but may not have been recorded or transcribed verbatim, so they may have a more difficult time knowing what information was actually provided. As most lawyers know, the devil is often in the details.”

Keywords: litigation, Federal Rules of Bankruptcy Procedure, Federal Rules of Appellate Procedure, Federal Rules of Criminal Procedure

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