Committee Proposes To Narrow Spoliation Sanctions Under Federal Rule Of Civil Procedure 37(e)

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On May 8, 2013, the Civil Rules Advocacy Committee (“Committee”) proposed several changes to the Federal Rules of Civil Procedure. The proposal includes amendments to the following rules: 1, 4, 16, 26, 30, 31, 33, 34, 36, and 37.  To see the proposed changes to the Proportionality Amendments, Rule 26(b)(1) or Rule 34, please click here.

In order to provide a uniform national standard in the application of severe sanctions for spoliation, the Committee has proposed to amend Federal Rule of Civil Procedure (“Rule”) 37(e). This rule currently states:

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.

The revised Committee Note discusses the inconsistent application of sanctions for spoliation under this rule and the rising costs associated with sanctions, especially for corporate litigants. Particularly, the Committee has observed these severe sanctions being imposed on the very types of litigants the rule had been designed to protect. In revising the rule, the Committee hopes “to ensure that potential litigants who make reasonable efforts to satisfy their preservation responsibilities may do so with confidence that they will not be subjected to serious sanctions should information be lost despite those efforts.” This will now be achieved by adding the “irreparable harm” requirement to Rule 37(e).

The Committee expressed concern that in cases where there is an absence of bad faith or willfulness, the courts might impose sanctions against the party for the loss of insignificant documents. In order to ensure that this does not happen, the Committee stated that revised Rule will incorporate a new subsection, Rule 37(e)(1)(B)(ii). This subsection will be amended and require courts to impose sanctions only if the court finds the  party’s actions:

irreparably deprived a party of any meaningful opportunity to present or defend against the a claims or defense in the litigation.

The proposed revision provides that a party’s failure to produce will be sanctioned only if there is a finding that the producing party’s failure would result in an “irreparable harm” to the requesting party. Accordingly, under the amended rule, a party seeking sanctions must make a showing that the unproduced material will “disable” the party’s ability to put on their case or defend themselves. In other words, the requesting party cannot continue to litigate without the unproduced material. This harm can be established even if the requesting party has received all other requested material. The “irreparable harm” standard is a difficult standard to meet and will lead to an extremely narrow application of this rule.

The Committee has also proposed revisions to the notes of Rule 37 to further emphasize the rule’s limited scope and narrow application. The proposed Committee Note explains that the “irreparably deprived” test will require a greater showing of harm than the “substantial burden” test under the revised Rule 37(e)(1)(B)(i) which requires a showing of bad faith or willfulness.  The Committee also proposes to remove from Rule 37 the original requirement which permitted the imposition of  sanctions against the nonproducing party if the court finds that the lost information “reasonably should have been preserved by the party.”

The impact of the proposed revision to Rule 37 will lead to lower costs for larger companies in litigation because they will be unburdened from the risk of sanctions for failure to produce as long the conduct was not a result of bad faith willfulness and does not irreparably deprive the other party of the opportunity to present its case.

The Committee met in the beginning of June 2013 to discuss the proposed changes to the Federal Rules. A six-month public comment period will begin on August 15, 2013.  The amendments, if adopted, are expected to be finalized no later than December 2015. Please stay tuned to this blog for future updates regarding these proposed changes.

A special thanks to Melissa Cefalu a law clerk at Cullen and Dykman LLP, for help with this post.

 

Topics:  Federal Rules of Civil Procedure, FRCP 37(e), Sanctions, Spoliation

Published In: Civil Procedure Updates, Electronic Discovery Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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