You have heard this one before. Changes to the Federal Rules of Civil Procedure are in the works that could alleviate the e-discovery burdens of organizations. Greeting this news with skepticism would probably be justified. After all, many feel that the last set of amendments failed to meet the hype of streamlining the discovery process to make litigation costs more reasonable. Others, while not declaring the revised rules a failure, nonetheless believe that the amendments have been doomed by the lack of adherence among counsel and the courts. Regardless of the differing perspectives, there seems to be agreement on both sides that the rules have spawned more collateral disputes than ever before about the preservation and collection of electronically stored information (ESI).
What is different this time is that the latest set of proposed amendments could offer a genuine opportunity for companies to slash the costs of ESI preservation and collection. Chief among these changes would be a revised Rule 37(e). The current iteration of this rule is designed to protect organizations from court sanctions when the programmed operation of their computer systems automatically destroys ESI. Nevertheless, the rule has largely proved ineffective as a national standard because it does not apply to pre-litigation information destruction activities. As a result, courts often bypass the rule’s protections to punish companies who negligently, though not nefariously, eliminate documents before a lawsuit was filed.
The Proposal to Amend Rule 37(e)
The current proposal to amend Rule 37(e) is designed to substantially broaden the existing protection against sanctions. Among other things, the proposal would shield an organization’s pre-litigation destruction of information from sanctions except where that destruction “caused substantial prejudice in the litigation and was willful or in bad faith” or “irreparably deprived a party of any meaningful opportunity to present or defend a claim in the action and was negligent or grossly negligent.”
In making a determination on this issue, courts would employ a multifaceted analysis to examine the nature and motives underlying a company’s information retention decisions. Such factors include:
- The extent to which the party was on notice that litigation was likely
- The reasonableness and proportionality of the party’s efforts to preserve the information
- The nature and scope of any request received to preserve information
- Whether the party sought timely judicial guidance regarding any preservation disputes
By ensuring that the analysis includes a broad range of considerations, the proposed rule appears to delineate a balanced approach to the preservation question. Such an approach could very well benefit companies, which could justify a reasonable document destruction strategy on best corporate practices for defensible deletion.
While the draft amendments to Rule 37(e) provide some key protections to corporate America, the proposed rule also addresses some of the lingering concerns from the plaintiffs’ bar. For example, the rule specifically empowers the court to order “additional discovery” and other “curative measures” when a litigant has eliminated information that it should have retained for litigation. Under these provisions, an aggrieved party can ferret out the circumstances surrounding the destruction of that data. If the party uncovers evidence suggesting the destruction was sufficiently grievous, it could ultimately justify the imposition of sanctions under the above referenced “substantial prejudice” or the “irreparably deprived” tests.
Opening or Closing Loopholes?
One of the areas of concern for the Civil Rules Advisory Committee that remains an open question is protecting organizations from sanctions when their information was destroyed by a so-called “Act of God.” To address this issue, the committee inserted the “negligent or grossly negligent” conditioning language into the “irreparably deprived” provision. This way, a party whose information was inadvertently destroyed in connection with a “Superstorm Sandy” type of event would not be sanctioned given its lack of culpability.
Nevertheless, the “negligent or grossly negligent” wording could end up diluting the “irreparably deprived” provision. Indeed, the committee recognized that the wording could invite jurists to re-introduce a lower standard of fault into the preservation analysis that the draft is specifically designed to eliminate. To address this potential pitfall, the committee has inserted several clarifying statements into the draft committee note to establish its application, including the following:
“The rule focuses on whether the loss of information was so severe that it deprived a party of any meaningful ability to present or defend against ‘the claims in the action.’”
While this and other conditioning explanations clarify the nature of the “irreparably deprived” language, it remains to be seen whether they will be effective in preventing counsel and the courts from extrapolating a different meaning from this provision.
The Proposal Remains a Draft for Now
These issues and others confirm the difficulty of establishing national standards to address the factual complexities of many discovery issues. They also point to the challenging path that the Civil Rules Advisory Committee still must travel before enacting an amendment to Rule 37(e). With a draft of the amendment set to be released for public comment later this year, additional changes could still be forthcoming to address the concerns of other constituencies. Indeed, the committee expressed its desire for public feedback on multiple topics and will even go so far as to publish an alternative version of the draft rule for public comment. All of which suggests that the debate over the revisions to Rule 37(e) and its impact on organizations’ defensible deletion efforts is far from over.