When the Bough Breaks, Spoliation Sanctions Part 1

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A multi-part series reviewing decisions related to spoliation of ESI since the December 2015 amendments to the Federal Rules of Civil Procedure

On December 1, 2015, the most significant amendments to the Federal Rules of Civil Procedure became effective since the 2006 amendments that made the eDiscovery era official.  Among the rules revised was Federal Rule of Civil Procedure 37, which governs discovery failures like spoliation and the associated sanctions.  Among the changes was made was the replacement of the 2006 version of FRCP 37(f) with the new 2015 version of FRCP 37(e).

The 2006 Version of FRCP 37(f)

In 2006, subdivision (f) was added to FRCP 37 in recognition of the new challenges being caused by the rapid expansion of ESI, the dynamic and complex nature of many ESI sources, and the widespread use of automated janitorial functions that delete old ESI to save storage space:

(f) Failure to Provide Electronically Stored Information.  Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.

This provision was intended to function as a kind of “safe harbor” to protect parties from sanctions for the inadvertent loss of ESI, under the right circumstances.  As the 2006 Committee Notes stated:

Many steps essential to computer operation may alter or destroy information, for reasons that have nothing to do with how that information might relate to litigation.  As a result, the ordinary operation of computer systems creates a risk that a party may lose potentially discoverable information without culpable conduct on its part.  [emphasis added]

The notes also made clear, however, that preservation duties might obligate parties to alter or suspend normal computer system operations to accomplish preservation.

In 2007, additional rules amendments renumbered subdivision (f) as subdivision (e) due to the prior abrogation of old subdivision (e).

A Decade of Costs and Conflicts

Unfortunately, in the years that followed, that safe harbor provision was interpreted so narrowly and inconsistently that it never really worked as intended, and ESI preservation costs and conflicts continued to grow.  Between 2006 and 2015, parties struggled with the preservation of ESI, and a circuit split developed over the level of culpability required for the application of severe spoliation sanctions like adverse inferences (i.e., negligence vs. intentionality):

Loss of electronically stored information has produced a significant split in the circuits.  Some circuits, like the Second, hold that adverse inference jury instructions (viewed by most as a serious sanction) can be imposed for the negligent or grossly negligent loss of ESI.  Other circuits, like the Tenth, require a showing of bad faith before adverse inference instructions can be given.  [emphasis added]

This, and other jurisdictional variations, led to great uncertainty for organizations as they struggled to strike a balance between avoiding severe sanctions for inadvertent losses and avoiding costly over-preservation:

The public comments credibly demonstrate that persons and entities over-preserve ESI out of fear that some might be lost, their actions with hindsight might be viewed as negligent, and they might be sued in a circuit that permits adverse inference instructions or other serious sanctions on the basis of negligence.  [emphasis added]

The Civil Rules Advisory Committee sought to amend FRCP 37(e) in a way that would provide “greater uniformity in the ways in which federal courts respond to a loss of ESI” and would, to the extent possible, “relieve the pressures that have led many potential litigants to engage in what they describe as massive and costly over-preservation.”

The 2015 Version of FRCP 37(e)

After a “strikingly, perhaps uniquely, comprehensive and vigorous” public comment period, subdivision (e) of FRCP 37 was amended to read:

(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

This amended version of the subdivision makes three primary changes from the version that preceded it:

  • First, it eliminates the language regarding the “good-faith operation” of a computer system (and the confusion that came with it), and instead focuses on the more straightforward question of whether ESI has been “lost because a party failed to take reasonable steps to preserve it” [emphasis added].
  • Second, it now requires a showing of irreplaceability and prejudice before the application of any consequences, and for unintentional losses, it limits those consequences to curative measures, thereby reducing the risks associated with minor ESI losses.

In the four years since this amendment became effective, the amendment has increased consistency and predictability to some extent, but it has also created new areas of ambiguity and conflict.  For example, what are “reasonable steps to preserve”?  What is a sufficient basis for a finding of “intent to deprive,” and who makes the call?  What curative measures and sanctions should be used when?  Can courts still act under their inherent authority as well?

Upcoming in this Series

In the next Part, we will continue our review of ESI spoliation with a discussion of reasonable steps to preserve.

About the Author

Matthew Verga

Director of Education

Matthew Verga is an electronic discovery expert proficient at leveraging his legal experience as an attorney, his technical knowledge as a practitioner, and his skills as a communicator to make complex eDiscovery topics accessible to diverse audiences. A fourteen-year industry veteran, Matthew has worked across every phase of the EDRM and at every level from the project trenches to enterprise program design. He leverages this background to produce engaging educational content to empower practitioners at all levels with knowledge they can use to improve their projects, their careers, and their organizations.

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