United States: Committee Issued Updated Proposed Rule 37(e) On E-Discovery

In April, the Advisory Committee on Civil Rules publicly released the updated version of proposed Federal Rule of Civil Procedure 37(e), which concerns sanctions for failure to preserve electronically stored information ("ESI"). The new version of proposed Rule 37(e) is a substantial rewrite of the version published in August 2013, and will provide courts more flexibility in determining sanctions or curative measures if a litigant fails to properly preserve ESI.

The continual expansion of ESI affecting all aspects of civil litigation and the lack of uniformity in the various circuits on how to deal with the loss of ESI1 convinced the Discovery Subcommittee (the "Committee") that a rule addressing the loss of ESI in civil litigation was greatly needed. The Committee previously recommended that sanctions associated with the loss of ESI required a showing of substantial prejudice and willfulness or bad faith. However, since publishing the proposal last summer, the Committee received public comments and concluded that the showing of substantial prejudice and willfulness or bad faith is too restrictive, and did not afford trial courts the flexibility they need to deal with the wide range of ESI issues they will confront in the future. The Committee noted two goals in addressing newly proposed Rule 37(e): (1) "to establish greater uniformity in the ways in which federal courts respond to a loss of ESI," and (2) "to relieve the pressures that have led many potential litigants to engage in what they describe as massive and costly over-preservation." In its proposal, the Committee made clear that the proposed Rule 37(e) does not affect any common-law tort remedy for spoliation that may be established by State law.

The proposed Rule 37(e) provides:

FAILURE TO PRESERVE ELECTRONICALLY STORED INFORMATION. If a party failed to preserve electronically stored information that should have been preserved in the anticipation or conduct of litigation, the court may:

  1. Order measures no greater than necessary to cure the loss of information, including permitting additional discovery; requiring the party to produce information that would otherwise not be reasonably accessible; and ordering the party to pay the reasonable expenses caused by the loss, including attorney's fees.
  2. Upon a finding of prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice.
  3. Only upon a finding that the party acted with the intent to deprive another party of the information's use in the litigation:

    1. presume that the lost information was unfavorable to the party;
    2. instruct the jury that it may or must presume the information was unfavorable to the party; or
    3. dismiss the action or enter a default judgment.
  4. [In applying Rule 37(e), the court should consider all relevant factors, including:

    1. the extent to which the party was on notice that litigation was likely and that the information would be relevant;
    2. the reasonableness of the party's efforts to preserve the information;
    3. the proportionality of the preservation efforts to any anticipated or ongoing litigation; and
    4. whether, after commencement of the action, the party timely sought the court's guidance on any unresolved disputes about preserving discoverable information.]

One of the key revisions to Rule 37(e) is the removal of the word "sanctions." This is significant, and demonstrates the Committee's focus has turned away from punishment and primarily to the concern of how to cure the loss of ESI that should have been preserved. In addition, the rule leaves it to the courts to develop the tests to determine whether ESI should have been preserved in the anticipation or conduct of litigation.

The proposed Rule 37(e) does not itself create a duty to preserve; rather, the duty to preserve is well established by case law.

The overarching theme of the proposal is to preserve flexibility in the rule. The Committee notes that the "preservation of ESI remains a very complex subject, and one that continues to evolve" and recognized that "complex organizational structures and information systems often thwart perfect preservation, even when every reasonable effort is made."2 Subsection (e)(1) provides what the Committee states is "the court's first concern," which is "to cure the loss of the ESI that should have been preserved." The court is permitted only "measures no greater than necessary to cure the loss of information." Subsection e(2) permits, upon a finding of prejudice due to the loss of information, "measures no greater than necessary to cure the prejudice." The Committee notes explain that this subsection" preserves the trial court's ability to use some of Rule 37(b)(2)(A) measures to cure any prejudice for failure to preserve ESI."3 Subsection (e)(3) limits the court's ability to issue more severe sanctions of dismissal, entering a default judgment, and issuing an adverse inference jury instruction to situations in which a court has found that a party "acted with the intent to deprive another party of the information's use in the litigation."4 The Committee has not adopted existing case law that permits the giving of adverse-inference instructions on a finding of negligence or gross negligence.

Lastly, the Committee vigorously debated the benefit of providing a list of factors in the rule – subpart (4) in the proposal. Some Committee members believed the list should be moved to the Committee Notes. Other members argued that the list may help potential litigants make reasonable preservation decisions, may help counsel frame effective arguments, and may help courts to understand and respond to arguments. For this reason subpart (4) has brackets around the rule. These factors will be the subject of further debate and may, after further consideration, be moved to the Committee Notes.

Footnotes

1. The Committee noted that the Second Circuit has held that adverse inference jury instructions can be imposed for negligence or grossly negligent loss of ESI. Whereas, other circuits, like the Tenth Circuit, require a showing of bad faith before an adverse inference instruction can be given.

2. See Discovery Subcommittee Report Rule 37(e) at 4 (April 10-11, 2014).

3. Id. at 4.

4. Id. at 17.

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