Next Gen Rule 34

Next Gen Rule 34
Kevin Harvick breaks 65-race drought, wins Cup race at Michigan
Bubba Wallace laments runner-up finish at Michigan
Martin Truex Jr. slides out of playoff grid with three races left
Tuned In: NASCAR discusses Cole Custer’s tire fire at Michigan
Bubba Wallace: ‘I failed everybody’

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NASCAR officials released a more stringent penalty structure for the 2022 Cup Series season on Monday, introducing a list of deterrence options that includes revoking playoff eligibility for the most severe violations.
The three-tiered system – from L1 to L3 – was added to the Cup Series Rule Book on Monday. The format was put in place before the debut of the Next Gen car model, which hits the track in season-opening events next month.
The structure reserves its harshest L3 penalty options for the tampering and counterfeiting of Next Gen single-source vendor parts. Those infractions join testing policy violations with infractions in three significant off-limits areas – engine, tires, fuel – under the L3 umbrella. That heading includes the deduction of Cup Series points, playoff points, crewmember suspensions and postseason bans among the penalty options.
“To make sure that all of those things stay above board, there’s going to have to be a culture shift from the way that the teams and NASCAR, for that matter, have done business,” said Scott Miller, NASCAR senior vice president of competition. “So this deterrence model has more meat in it, more meaningful penalties, but I think we all thought that it was it was time for this with the introduction of the new car.”
Penalties for lesser violations found in pre-race inspection during a race weekend remain largely intact. For all other in-race and post-race infractions at the L1 level and up, NASCAR competition officials will disqualify the offending teams and consider the following options:
Steve O’Donnell, NASCAR executive vice president and chief racing development officer, had hinted during Next Gen testing last month at Charlotte Motor Speedway that tougher penalties — including postseason bans – were under consideration. “It used to be ‘let’s see what we can get away with and go racing.’ That’s not the case with this car,” O’Donnell said. “We’ve built this car to try and make it as fundamentally sound as possible in collaboration with the teams and then really put it on teams, and drivers and pit crews to go out there and win races.”
Miller reiterated that notion Monday, saying that teams and other industry partners had advocated for the change.
“If there aren’t penalties for altering parts and pieces on the new car, then the business model with new car won’t work,” Miller said. “So it was definitely something that was pressed for hard by the teams, and we’re doing our due diligence for establishing all the inspection procedures and all the different things. The rule book is a completely new rule book with lots more specifics than there were in the past.”
The last major update of the NASCAR deterrence system came before the 2017 season, when the L1-L2 structure replaced the P1-through-P6 penalty classification that dated to 2014. For 2019, competition officials added disqualification as a consequence for post-race L1- and L2-grade penalties. Disqualification remains in place as a penalty this season, with teams in violation relegated to last-place points, stripped of any stage points and playoff points accrued in that race.
Adding playoff points and postseason eligibility to the mix this year provides an extra layer of deterrence. Regular-season points penalties were not as effective a punishment, Miller says, under a postseason format that includes points resets and playoff berths for race winners, regardless of their points totals.
“If a regular-season violation has playoff ramifications to it,” Miller said, “obviously I think the teams will take that much more seriously than they ever did points with the current playoffs and playoff-point format that we have.”
With NASCAR shifting to a single, center-locking lug nut for the larger wheels of the Next Gen car, the rule book’s penalty language for unsecured lugs for the five lug-nut wheels has gone away. What remains is a penalty section for the loss of an improperly installed tire/wheel, which still carries a four-race suspension for the offending team’s crew chief and two additional crewmembers.
NASCAR® and its marks are trademarks of the National Association for Stock Car Auto Racing, LLC. All other trademarks are the property of their respective owners. Copyright © 2022 NASCAR Digital Media, LLC. All rights reserved.

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Next Gen eDiscovery Law & Tech Blog · Legal and tech perspectives on eDiscovery, virtualization and enterprise search

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Relativity and X1 have published an updated joint legal whitepaper addressing full-disk imaging as a disfavored collection practice in civil litigation, with Relativity eDiscovery attorney David Horrigan as the lead author. This paper is a substantive update from the original published a year ago, adding discussion of important and relevant new case law published in the past 12 months. The paper notes that “if the preliminary data from the first five months of 2022 are any indication, we may be seeing that the law of proportionality is becoming more settled — and that courts continue to disfavor full-disk imaging.”
The paper delves into all the legal reasons, including detailed analysis of case law, the Federal Rules of Civil Procedure, and the Sedona Principles establishing why forensic collection is not required in civil litigation. The paper primarily focuses on the principles of proportionality in its legal analysis as well as case law issued prior to the 2015 amendment to the Federal Rules of Civil Procedure, which gave greater prominence and clarification of the proportionality rules.
One of the recent updated cases included is Besman v. Stafford , where the appellate court reversed and remanded a trial court’s order of a forensic examination of a law firm computer, holding the trial court erred in failing to take precautions to protect the privileged and confidential information on the device. “Generally, courts are reluctant to compel forensic imaging, largely due to the risk that imaging will improperly expose privileged and confidential material contained on the hard drive,” Judge Anita Laster Mays wrote for the appellate court.
This is an important topic as a key problem in eDiscovery that drives inefficiencies and higher costs is that default collection methods often involve full-disk imaging—a forensic examination of an entire computer—when searching for responsive data. As the whitepaper notes, “it turns out full-disk imaging is not required for most eDiscovery collections. In fact, courts often disfavor the practice.”
A copy of the whitepaper can be found here .
Under Federal Rule of Civil Procedure 26(b)(1), parties may discover any non-privileged material that is relevant to any party’s claim or defense and proportional to the needs of the case. Lawyers that take full advantage of the proportionality rule can greatly reduce cost, time and risk associated with otherwise overbroad eDiscovery production. In a recent webinar, eDiscovery attorney Martin Tully of Redgrave LLP, addressed how to use processes and best practices to operationally attain this goal, particularly in the context of preservation and collection. In addition to being a partner at the Redgrave firm, Tully is currently the chair of the Steering Committee of the Sedona Conference Working Group on Electronic Document Retention and Production (WG1), providing additional import to his comments on the subject.
During the webinar, Tully noted that the “duty to preserve is directly aligned with what is within the scope of discovery….so if something is not within the scope of discovery – that is its either not relevant or its not proportional to the needs of the case — then there should not be an obligation to preserve it in the first place.” Tully discussed at length the recent case of Raine Grp. v. Reign Capital , (S.D.N.Y. Feb. 22, 2022), which holds that under FRC 26(a), parties “have an affirmative obligation to search for documents which they may use to support their claims or defenses.” In meeting these obligations, the court provided that a producing party may utilize search methodologies, specifically mentioning search terms. Tully explained that the court—in addressing the concept of reasonable, proportional discovery under the Rules – provides that producing parties are obligated to search custodians and locations it identifies on its own as sources for relevant information as part of its obligations under Rule 26, but that such identification and collection efforts should be proportional.
Further to these points, Tully weighed in on overbroad practice of full-disk imaging, noting that it should not be the default practice for eDiscovery collection: “Too often there is a knee jerk approach of ‘let’s just take a forensic image of everything – just because.’” According to Tully, alternative and more targeted search and collection methods were more appropriate for eDiscovery and can better effectuate proportional efforts: “Indexing in-place is key because it doesn’t just preserve in-place and reduce costs, but it can give you insight (into the data) to further justify your decision not to collect it in the first place, or if you need to, you are in much better shape to go back and collect the data in a tailored and focused way.”
Co-presenter Mandi Ross, CEO of Insight Optix also provided keen insight, outlining her typical workflow applying the aforementioned proportionality concepts through custodian and data source ranking and keyword searching performed in an iterative manner to identify key custodians, data sources, and the potentially relevant data itself. To effectuate this, Mandi noted that the enterprise eDiscovery collection and early data assessment process should enable a targeted, remote, and automated search capability, with immediate pre-collection visibility into custodial data.
In fact, both Tully and Ross emphasized in their comments that none of the cost-saving, targeted collection efforts permitted under the Federal Rules can be realized without an operational capability to effectuate them. Ideally, the producing party can employ a defensible, targeted, and iterative search and collection process in-place, prior to collection to effectuate the proportional discovery process approved by the court in this decision. However, without such a capability, the alternative is an expensive, over-collection effort, where the data is searched post collection. Enabling the search iteration and targeted collection upstream brings dramatic cost savings, risk reduction, and other process efficiencies.
A recording of the webinar on proportionality can be accessed here .
Legal Tech software CEOs often grapple with two competing challenges: Growing revenue in a manner that supports how customers buy their products for their individual cases, while at the same time maximizing shareholder value by recording recurring revenue, which the investor community typically favors. Recurring revenue generally comes in the form of fixed annual or monthly subscription licenses.
However, eDiscovery software providers are increasingly aligning their SaaS pricing strategy with the amount of product usage their customers consume. Instead of paying a fixed rate, the pricing is based upon actual usage. The benefits of this approach include a shorter and simpler purchasing process and increased customer satisfaction and retention.
In the eDiscovery space, customers often prefer to pay by “matter”, i.e., per lawsuit or legal case. Law firms and service providers typically utilize eDiscovery SaaS software specific to an individual case on a pass-through cost basis, where their end-client ultimately pays for the services. In the case of corporate law departments, oftentimes the organization prefers to purchase annual subscriptions for eDiscovery and apply the license over multiple matters in the course of the year. However, such buying decisions vary by organization, with corporate counsel sometimes deferring eDiscovery workflow and tech decisions to their law firms, which favors a usage-based pricing model.
While tech companies with recurring annual term revenue will typically garner higher valuations, eDiscovery software firms with usage-based pricing models are now seeing similarly elevated valuations . Investors are recognizing the very unique economics and buying dynamics specific to the eDiscovery software space. But it is incumbent on eDiscovery software execs, their investment bankers, and board members to educate the broader market on this dynamic unique to the eDiscovery space. In some situations, investors new to this space attempt to apply a steep discount to usage-based SaaS revenue, as it doesn’t fit in with their “paint by the numbers” ARR models. Rick Weber, Managing Director of Legal Tech investment banking firm Arbor Ridge Partners notes, “while the usage model is not annual recurring, it is ‘monthly re-occurring,’ and thus projections and modeling can be made based on company history and industry norms and should be treated like ARR contracts.”
In fact, usage-based pricing is now gaining wider acceptance in the broader SaaS software market beyond legal tech. Cloud infrastructure providers AWS and Microsoft Azure are obvious examples of successful usage-based pricing strategies, but many startups and medium sized companies have successfully implemented the model as well. While usage-based revenue may seem less predictable compared to other pricing models, companies using this model are often growing faster, retaining more revenue, and valued at high revenue multiples. But again, this realization requires a closer look by investors and an intelligent education effort by the companies and their advisors.
One caveat for investors is to confirm that the value of the SaaS usage offering is mostly based upon proprietary software tech versus services that are dressed up as SaaS. Some eDiscovery service providers attempt to position their services as SaaS, without a true standalone propriety software component. An analysis of the cost of sales/gross margins and assessment of the actual proprietary nature of the software is determinative. Gross margins should be at least 80 percent. And while some services are often provided in conjunction with a SaaS usage-based offering, a qualifying factor is whether the software is also separately offered purely as a traditional license to end users without any services required, which is how many customers will opt to buy.
But for true usage-based SaaS offerings, the flexibility, simplicity and supporting of legal customers purchasing dynamics are key to rapid growth and customer satisfaction. As summarized by Weber, “many of the PE firms and investors that have made big bets on such companies in recent years seem to understand the nuance and opportunity while many still lag behind and simply need to think outside of their box.”
A recent decision from the Southern District of New York provides that the parties’ have obligations to conduct reasonable searches during discovery, but such searches may be targeted. The court invoked the proportionality concepts within the Federal Rules of Civil Procedure, which govern the production of Electronically Stored Information (“ESI”). In Raine Grp. v. Reign Capital, (S.D.N.Y. Feb. 22, 2022), the plaintiff, “a merchant bank with over 100 employees,” sued defendant “Reign Capital LLC, a two-person real estate development and management firm, for trademark infringement and unfair competition based on Defendant’s” name. After unsuccessful meet and confer efforts to negotiate an ESI protocol, the Court ruled on two key issues in dispute—the scope of the plaintiff’s search and collection
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