How the proposed revisions to the federal rules might impact corporate conduct?
We are hearing unpleasant news about the way in which General Motors handled the issue of defective ignition switches, defects in gas tanks and the sundry other problems included in the millions of recalls issued by the car maker over the last few months.
There are also disturbing reports of what sounds much like conspiracies to withhold important information from both the government and consumers:
“But a review of internal documents, emails and interviews paint a different picture, showing that high-ranking officials, particularly in G.M.’s legal department, led by the general counsel Michael P. Millikin, acted with increasing urgency in the last 12 months to grapple with the spreading impact of the ignition problem.”
“…records showed conclusively that the ignition switch in G.M.’s small cars had been drastically improved in 2006 without a corresponding change in the part’s identification number.”
The fact that “internal documents”, emails and records apparently exist is a positive, but perhaps as surprising as the cover up itself. It seems clear GM was negligent in using the ignition switches — the subject of the Cobalt probe. Happily, GM seems to have been just as negligent in its cover up, but not because efforts were not made. In 2008 a lengthy list of words were circulated to GM employees and they were told NOT to use these particular words in any communications with each other. Employees were told a lawsuit was imminent and phrases such as “unbelievable engineering screw-up” and “this is a lawsuit waiting to happen” were not to be used; besides not using:
Also less illustrative words discouraged by GM were “safety,” “safety related,” “serious,” “failure,” and “defect”.
We have not heard about any “shredding parties”, “data dumps” or “accidental data deletion” – at least not so far and based upon the documents already seen by regulators, it is a good guess that may not have happened.
Did GM not try to rid itself of incriminating documents because it is a corporation of high morals? Clearly not. The problem with the ignition switches was hidden for years and it was only after a lawyer representing a family of an injured victim did the truth finally surface.
Perhaps GM was more afraid of the potential penalties it could face for even a negligent loss of records; even a destruction of documents in the normal course of business. In a subsequent lawsuit the court could have hit GM with many very serious sanctions: shifting of the burden of proof, adverse inference instructions to the jury or significant monetary sanctions including punitive damages.
Under current case law from the some of the most recognized eDiscovery jurisdictions, the penalties for “spoliation”; the intentional loss of records or data; could be worse than the jury verdicts if all the information came out into the light of day. Maybe that body of law kept GM on the straight and narrow path and prevented them from having digital shredding parties.
This “foot to the fire” for corporations may well go away if the proposed new federal rules for eDiscovery are passed by the Advisory Committee and ratified by congress. The Advisory Committee has recommended revisions to FRCP 37(e). Those revisions seek to emphasize judicial discretion for spoliation and rejects liability for spoliation be strict without some showing of culpability. The revised proposed rule sets forth:
(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 the information, and the information cannot be restored or replaced through additional discovery, the court may:
(1) Upon a finding of prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice;
(2) Only upon a 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.
Losing “electronically stored information” (ESI) under the new rule could result in a far weaker penalty than under current law. The party complaining of the loss, based on the proposed rule, would be required to demonstrate they were: 1.) Prejudiced; 2.) The spoiling party acted with the intent to deprive; and 3.) The lost data was favorable to the requesting party. Proving the actual nature of ESI once it is destroyed is an appeal to ignorance; you can not specify the destroyed data because it has been destroyed and will be hard pressed to demonstrate the ESI was favorable to you as the requesting party. Whether the spoiling party acted with “intent” is in many cases may be a matter of the IT manager testifying that “oops, we unintentionally continued our destruction policy that we have followed for the past five years”.
In effect, the revisions to the rules will require the requesting party to prove a negative.