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March 31, 2016 Practice Points

Act Early to Avoid Sanctions under Rule 37(e)

An ounce of prevention will build a strong record down the road.

By Greg S. Hearing

The recent amendments to the Federal Rules of Civil Procedure expressly address the failure of litigants to preserve electronically stored information and the potential remedies as a result of the same. As amended, Fed. R. Civ. P. 37(e) provides:

(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.

The rule provides for two levels of remedial measures depending upon the culpability of the spoliating party including cost-shifting and awards of attorney fees. While the obligation to preserve is not new, the comments to the rule make it abundantly clear that “reasonable steps” must be taken at the outset of litigation or when the threat of litigation becomes imminently clear. Fortunately, such efforts are measured in proportion to the claims and amount at issue. For in-house and outside corporate counsel, an ounce of prevention will build a strong record down the road. This includes taking affirmative steps to preserve potentially relevant information as soon as practicable. Practitioners must be aware of internal document-retention policies, automated deletion schedules, and other factors that may affect the ability to retrieve relevant documents including employee turnover and inadvertent destruction by parties unfamiliar with the litigation. For corporate practitioners, preservation letters, litigation holds, and instructions on how to preserve file materials should be distributed as soon as possible and, when appropriate, automatic document-retention policies should be altered. Taking these steps early will help to dispel and mitigate claims from opposing parties that reasonable steps were not taken to prevent inadvertent destruction.

Greg S. Hearing, Gordon & Rees LLP, Denver, CO

Copyright © 2016, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).