Preserving ESI in 2016 and Beyond: FRCP 37(e)

June 14, 2016

The December 1, 2015 Federal Rules of Civil Procedure amendments made sweeping changes to Rule 37(e) regarding preservation of electronically stored information (ESI). Rule 37(e) has substantial business implications and more clearly defines the responsibilities of a party to preserve ESI.  Every business creates and stores more and more data every second.  Every business needs to know what data must be preserved once litigation is anticipated.  Rule 37(e) now provides more concrete guidance for attorneys, businesses, and any party to federal litigation.

The Old Rule 37(e): Failure to Provide Electronically Stored Information.  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 New Rule 37(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 it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(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.

The Changes:  This rule was completely rewritten.  Before the 2015 amendments, the standard was that a party could generally not be sanctioned for data loss as a result of the routine, good faith operation of its system.  That rule didn’t really capture the reality of all of the potential scenarios related to data volume, preservation efforts, and loss of data.  It didn’t really give the party or attorney any real guidance on the extent of preservation and didn’t provide a roadmap of what the court should do in the event of loss of data. The new rule adds a dimension of reasonableness to preservation and it creates guideposts for analysis.  The first guidepost is whether the information should have been preserved.  This rule is based upon the common law duty to preserve when litigation is likely.  The next guidepost is whether the data is lost because of that failure to take reasonable steps to preserve. The final guidepost is whether or not it can be restored or replaced through additional discovery.  If there is data that should have been preserved, that was lost because of failure to preserve, and that can’t be replicated, then the court has two additional decisions to make:  (1) was there prejudice to another party from the loss OR (2) was there an intent to deprive another party of the information.  If the former, the court may only impose measures “no greater than necessary” to cure the prejudice.  If the latter, the court may take a variety of extreme measures, including dismissal of the action.  An important distinction was created in the rule between negligence and intention.  The Advisory Committee Notes advise that this distinction was created to reject cases such as Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002) that allowed an adverse-inference instruction on a finding of negligence or gross negligence.

When facing federal litigation, your case will involve electronically stored information. Strassburger McKenna Gutnick & Gefsky has teamed with Kroll Ontrack as their preferred eDiscovery vendor.  SMGG leverages Kroll Ontrack’s portfolio of eDiscovery solutions and consultative expertise to provide clients with innovative technologies and best-in-class data security practices.  We can work with you to ensure you have a plan to identify and preserve data, issue and enforce litigation holds, and collect and process data.  Call the litigation attorneys of Strassburger McKenna Gutnick & Gefsky to assist you with your federal litigation needs.  Gretchen Moore and Harry Kunselman co-chair Strassburger McKenna Gutnick & Gefsky’s Litigation Practice Group.  Gretchen Moore chairs the firm’s eDiscovery Committee.  She can be reached at gmoore@smgglaw.com or 412-281-5423.