Proposed eDiscovery Rule Would Bring Relief from Specter of Sanctions

by Ballard Spahr LLP

The Rules Advisory Committee has recommended proposed amendments to the Federal Rules of Civil Procedure that would set guidelines for courts to follow when evaluating a request for sanctions for spoliation of discovery information, both paper and electronic documents. If enacted, the proposed amendments to Federal Rule of Civil Procedure 37(e) (FRCP 37(e)) would become the most significant rule governing eDiscovery to have been enacted since the Zubulake line of cases. Issued amid a flurry of recent eDiscovery rulings, the proposed amendments may have particular importance for corporate defendants in litigation. 

Under the proposed amendments to FRCP 37(e), courts would weigh the following factors when considering sanctions:

  • If, and to what extent, the potential litigant had notice that litigation was likely and that the information at issue would be discoverable
  • The reasonableness of the party’s efforts to preserve the information
  • Whether the requesting party properly communicated its request to preserve and produce the information to the responding party
  • Whether the responding party’s preservation efforts were in proportion to the requests made by the requesting party
  • Whether the requesting party pursued the court’s guidance on unresolved disputes regarding the preservation of information

The issue of preservation and sanctions has been a “hot-button” issue for litigants since the last round of amendments to the Federal Rules of Civil Procedure in December 2006. The proposed amendments to FRCP 37(e) should be well received by litigants, particularly corporate defendants, for a number of reasons.

First, the amendments would provide a much-needed national standard for the imposition of sanctions. This issue has bedeviled defendants who currently grapple with an array of different and often conflicting standards of spoliation in federal courts.

Second, under FRCP 37(e)(1)(B)(i), sanctions would be available solely in instances where the offending party has acted “willfully” or in “bad faith,” and only “if the affected claim or defense was central to the litigation.” Sanctions are only deemed appropriate when the loss of discoverable information caused “substantial prejudice” to the requesting party by irreparably depriving the party of any meaningful opportunity to present or defend against claims in the litigation. Even if the court determines a party has been substantially prejudiced by the failure to preserve discoverable information, the proposed amendments provide leeway for the court not to impose sanctions as long as the court believes curative measures would sufficiently reduce the prejudice caused by the failure to preserve documents.

This is the key provision in the proposed amendments, and it would theoretically protect the “innocent spoliator” who loses or destroys discoverable information by mistake. Indeed, the availability of significant sanctions against parties for mere negligence in preserving data has long been a point of criticism for corporate defendants. To that end, the proposed revisions to FRCP 37(e) suggest an implicit rejection of a 2002 decision by the U.S. Court of Appeals for the Second Circuit in Residential Funding Corp. v. DeGeorge Fin. Corp., permitting sanctions for negligent failure to preserve, in favor of the less stringent standards in the Fourth and Eleventh Circuits, which require a showing of “willfulness” or “bad faith” to support sanctions for spoliation.

Third, the proposed amendments to FRCP 37(e) reiterate that a party’s preservation obligations are limited in scope and in proportion to the circumstances of the case, rejecting the black and white approach toward preservation that many federal courts have imposed since the 2006 rule changes.

The proposed amendments have already come under fire. In Sekisui American Corporation v. Hart, Judge Shira Scheindlin, a well-respected judge in the Southern District of New York and author of the seminal Zubulake cases, criticized the proposed amendments to FRCP 37(e) on the grounds that it will encourage litigants to take the duty to preserve less seriously and inevitably lead to sloppier preservation practices. Judge Scheindlin also criticized the Advisory Committee Note to the proposed amendments for requiring the innocent party to prove that “it has been substantially prejudiced by the loss of relevant information, even where the spoliating party destroyed information willfully or in bad faith.”

Despite its limitation on the imposition of sanctions for the loss of discoverable information, the proposed amendments to FRCP 37(e) provide that courts may impose a variety of remedies short of sanctions that can be severe in their own right. For example, a court would be able to order:

  • Additional discovery normally precluded under the proportionality analysis of FRCP 26(b)(1) and (2)(C)
  • Curative measures
  • Payment of the requesting party’s reasonable expenses incurred as a result of the offending party’s failure to preserve discoverable information

The six-month public comment period for the proposed amendments to FRCP 37(e) concludes on February 15, 2014. Before the proposed amendments can take effect, they must be approved by the U.S. Supreme Court and Congress. Congress has up to six months to reject, modify, or refuse to take action on the proposed amendments. If Congress does not take any action, the proposed amendments will become effective on December 1, 2015.

If enacted, FRCP 37(e) would be a significant benefit for litigants producing large volumes of electronically stored information, or ESI, particularly corporate defendants who routinely face asymmetrical discovery disputes and the constant threat of sanctions. Although the proposed amendments stop short of establishing a bright-line rule for assessing or determining sanctions, the proposed guidelines should nonetheless reduce the prevalence and severity of sanctions for the loss of discoverable information, which would be music to the ears for many in-house legal departments.

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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