July 31, 2014 civil procedure

Less Is More: Proposed Rule 37(e) Strikes the Right Balance

By Charles S. Fax

In previous columns I reported on revisions to federal discovery rules proposed last year by the Advisory Committee on Federal Rules of Civil Procedure, the unprecedented backlash by the plaintiffs’ and defense bars, and the committee’s subsequent withdrawal or modification of key proposals. That was but a prelude to the committee’s recent further reconsideration and substantial rewriting of proposed Rule 37(e). Taking to heart the criticisms of its earlier proposals, the committee, at its April 11, 2014, meeting, produced a more concise rule that is as elegant in its simplicity as it promises to be equitable in its application. By the time this column is printed, the Standing Committee on Rules of Practice and Procedure will have considered the new and improved Rule 37(e) and, I predict, have approved it.

Currently, Rule 37(e) simply provides a “safe harbor” for failure “to provide electronically stored information [ESI] lost as a result of the routine, good-faith operation of an electronic information system.” The Advisory Committee’s laudable goal has been to convert that provision into a spoliation rule that reconciles the conflicting precedents among the circuits regarding the requisite degree of culpability—negligent destruction versus intentional spoliation—necessary for the imposition of sanctions along a spectrum.

The committee’s most recent proposal provided that a court could remedy the loss of information by permitting additional discovery, ordering curative measures, or ordering the party that lost the information to pay the reasonable costs and attorney fees caused by the loss. Sanctions could not be imposed unless the loss caused substantial prejudice and was willful or in bad faith. However, a court could impose sanctions absent a finding of culpability when the loss “irreparably deprived a party of any meaningful opportunity to be present or defend against the claims in the litigation.” The proposal included a list of factors to be used in determining whether the offending party should have retained the information, and if so, whether such failure was willful or in bad faith.

The final proposed rule dispenses with micromanagement by statutory fiat. It reads:

(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 may:

(1) upon finding prejudice to another party from loss of the information, 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: (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 Committee Note observes the rule does not create a new duty, but rather is based on the common law duty to preserve relevant information when litigation is reasonably foreseeable. Further, the rule applies only if the party failed to take reasonable steps to preserve the ESI. “Reasonable” is contextual and proportional to the circumstances, sophistication, and wherewithal of the party. If the court finds that the party did not take reasonable steps, the initial focus should be on whether the lost information can be restored. If so, then the issue is resolved. Only if the party cannot replace what was lost—and if the court finds prejudice due to the loss—should the court turn to subsection (1), which authorizes measures “no greater than necessary” to cure the prejudice. Subsection (2) sanctions are only available in cases of intentional spoliation.

The fairness of the rule is self-evident. A court can sanction a wrongdoer, but in most cases in which there is no proof of intent, the focus is on solving the problem, not punishing the malefactor. In a previous column I lauded the proposal of Professor Charles Adams to dispense with judicial sanctions and allow counsel simply to argue the facts to the jury in their summations (spoliation or not? relevant information or not?). There is ample room for that approach under subsection (e)(1), and it would be no surprise if that trend develops. The Advisory Committee has done well.


Charles S. Fax is an associate editor for Litigation News.

Keywords: Federal Rules of Civil Procedure, Rule 37(e), discovery, electronically stored information, ESI

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