Avoiding the hammer: defensible strategies for FRCP proposed Rule 37(e).

• Author: Aversano, Katherine
• Position: Federal Rules of Civil Procedure

Following these four principles for developing and implementing a preservation program for electronically stored information will help your organization be prepared for e-discovery and avoid adverse inferences, default judgments, and whatever other steps a court may take to restore "evidentiary balance" under the FRCP proposed rule 37(e). As a bonus, it will also aid with satisfying public disclosure requirements and accessing historical organizational records

The Supreme Court is considering changes to the Federal Rules of Civil Procedure (FRCP) that could significantly impact the consequences for not properly preserving electronically stored information (ESI). As early as December 1, 2015, courts could be empowered to take a number of corrective actions, including entering default judgment, to address lost ESI.

To avoid the most damaging findings or inferences for lost ESI, records and information management (RIM) professionals and counsel need to develop and implement a defensible ESI preservation program, which should include these four principles:

1. Distribute litigation holds.

2. Track custodians.

3. Maintain documentation.

4. Collect information.

These principles should be the cornerstones of an ESI preservation program that is consistently implemented and regularly updated.

The Proposed Rule

Proposed Rule 37(e), "Failure to Preserve Electronically Stored Information," states:

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.

Intent of the Changes

The proposed rule is intended to mitigate the over-preservation of ESI, which can pose a substantial financial liability, and to resolve a conflict between circuit courts as to making adverse inferences for lost ESI.

The circuit courts have split on whether negligence (or gross negligence) or acting in bad faith were the standards for applying adverse inferences.

For example, the 2nd Circuit Court in Residential Funding Corp. v. DeGeorge Finan. Corp. (306 F.3d 99 (2d Cir.) (2002)) used a showing of negligence to equitably restore the "evidentiary balance" and place the risk on the party that lost the information.

This is compared with the 10th Circuit Court which has held that an adverse inference must be predicated on bad faith and that "when a party destroys evidence for the purpose of preventing another party from using it in litigation, one reasonably can infer that the evidence was unfavorable to the destroying party." The proposed subdivision (e)(2) would resolve the split by requiring intent.

The proposed Rule 37(e) is limited to ESI and is based on the common law duty to preserve evidence. The Committee Note expressly stated that the rule "does not attempt to create a new duty to preserve." And hard copy or tangible evidence is not affected and would still be subject to current law.

Subdivision (e)(1)

Subdivision (e)(1) is applicable where information should have been preserved; reasonable measures to preserve the information were not taken; information was lost as a result of not taking reasonable measures; and the information is not available through additional discovery.

The rule does not assign a burden to either party, and courts have discretion about how best to determine prejudice in a particular matter. If the court finds that a party has been prejudiced, it may take such steps that are "no greater than necessary to cure the prejudice." While the court has wide...