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New Federal Framework for ESI Spoliation Claims

By Kristen L. Burge, Litigation News Contributing Editor – February 16, 2016


Amended Rule 37(e) resolves a circuit split over the level of culpability warranting sanctions for the failure to preserve Electronically Stored Information (ESI). The amended Rule, effective December 1, 2015, sets forth a federal standard for spoliation remedies. Amended Rule 37(e) provides a much-needed practical framework that seeks to ensure that the cost of ESI preservation is commensurate with the type of case or dispute.

Changes to Rule 37(e)
Before amended Rule 37(e), courts relied upon inherent authority to issue sanctions for losing ESI. “This discretion made it difficult to provide appropriate guidance for clients and practitioners as to what measures were required for ESI preservation,” explains Kenneth M. Klemm, New Orleans, LA, cochair of the ABA Section of Litigation’s Pretrial Practice & Discovery Committee. By removing “sanctions” from the text of the rule, “the revisions focus on the curative aspect of judicial authority rather than the punitive,” observes Michael P. Hindelang, Detroit, MI, cochair of the Section of Litigation’s Privacy and Data Security Committee.

The amended rule improves the situation “by allowing parties to anticipate the results for failing to preserve ESI and providing insight into the level of culpability required before action can be taken by the court,” notes Klemm. Under the amended rule, “courts no longer have the ability to look to state law remedies since the rule sets forth a national federal standard for what is required before adverse action is taken,” he says.

According to Klemm, “e(1) remedies are intentionally vague to give the judiciary the ability to fashion remedies in proportion to the type of evidence lost in such a way that accomplishes the equitable goal.” Typically lost data still exists in some form, which if recoverable, negates the need for further analysis under the rule, Klemm notes. “If the curative measures do not cross over into e(2)’s remedies for intentional spoliation, courts have much discretion to fashion a remedy,” says James A. King, Columbus, OH, cochair of the Section’s Trial Evidence Committee.

Courts may take action under e(2)’s more severe remedies only after a showing of an “intent to deprive,” explains Judge Nancy F. Atlas, Houston, TX, chair of the ABA Standing Committee on Federal Judicial Improvements. Judge Atlas notes e(2) does not require a showing of prejudice against the party requesting ESI. Even so, “[i]f there is no prejudice, I do not see courts issuing sanctions under e(2) as a practical matter even though the rule does not require prejudice,” comments Judge Atlas.

Advising Clients under the New Rule
A majority of courts already require intent before imposing severe sanctions, says King. In these cases, the amendment will not drastically change the practice for most litigators. Most sophisticated clients already implement ESI retention policies and procedures, Klemm adds. For the remaining clients, the amended rule codifies an expectation the company take reasonable measures (considering size, cost, and nature of litigation) to ensure ESI preservation. All the while, King recognizes “the rule requires a finding that the party failed to take ‘reasonable steps,’ leaving this area wide open for interpretation.”

With a reasonableness standard, attorneys should advise clients to “demonstrate they have an information purging program which was in fact regularly used and that the application of the destruction program in this instance was used in the ordinary course of ESI destruction protocol,” advises Judge Atlas. As noted by Hindelang, these situations tend not to arise from an affirmative decision to delete ESI, but rather from unintentional actions such as introducing a new custodian of records or inadvertently omitting an employee from a litigation hold. In any event, before erasing ESI, document the process and purpose for doing so—whether policy, personnel, or technology driven—advises Hindelang.

Litigating Amended Rule 37(e)
Section leadership agrees that the amendment leaves areas requiring additional clarification. “What do ‘reasonable measures’ really mean? Without a definition, it is unclear the amendment really improves life for us litigators in advising our clients,” observes Klemm. Measures taken by a client under one set of facts may not be considered reasonable under another set of facts, warns Klemm. Whether a party should have anticipated litigation and should have understood the relevance of the ESI will also factor into the “reasonableness” calculation, adds Judge Atlas.

Section leadership anticipates disputes over what constitutes “prejudice” and when such prejudice is considered sufficiently “cured.” “What happens if 95 percent of lost ESI is recovered and produced? How does a court remedy the remaining 5 percent? Is the party prejudiced or is the prejudice cured?” asks Hindelang. Whether courts find other ways to impose sanctions remains to be seen. For instance, violating a court order may provide a mechanism for courts to order sanctions not otherwise available under 37(e). It may be wise to seek an ESI order at the early stages of litigation to ensure relevant ESI is preserved and to leave open the possibility for the court to sanction a party for violating the order,” advises Klemm. Defining these boundaries is going to take time and issuance of opinions, concludes Hindelang.

Keywords: ESI preservation, e-discovery, spoliation, Amended Rule of Federal Civil Procedure 37(e)

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