A new proposed Rule 37(e) on the failure to preserve electronically stored information (“ESI”) was adopted by the Committee on Rules of Practice and Procedure at its meeting on May 29-30, 2014. The new rule differs from the proposed rule published for comment in August 2013, which generated 2,345 written comments. This article provides background on the new rule, sets forth its text, and discusses some of the highlights of the approved committee note.
The new rule focuses on curative measures, authorizing a court to employ measures “no greater than necessary to cure the prejudice” resulting from the lost information, and removes any reference to sanctions. It has two purposes: to establish greater uniformity in the ways in which federal courts respond to the loss of ESI, and to relieve the pressures that cause potential litigants to engage in massive and costly over-preservation, including for litigation that is never brought. If approved by the Supreme Court and not nullified or modified by Congress, the earliest the new rule could take effect is December 2015.
The new rule recognizes that the problem of preserving ESI is only going to get worse. One industry expert reported that there will be some 26 billion devices connected to the Internet in six years — more than three for every person on earth. And, for some people ESI will be created and recorded on their phones, tablets, eye glasses, cars, social media, and tools not even presently foreseen and stored somewhere in the “cloud” complicating the task of preservation.
The new rule also recognizes that negligently lost ESI may or may not have been favorable to the party that lost it, so that an adverse jury instruction may tip the balance in ways the lost evidence would never have. For example, someone turning in a smart phone for a newer model or events beyond the control of a party, such as a flooded computer room, failure of a “cloud” service, or a malign software attack, could cause a loss of ESI. Accordingly, the new rule expressly rejects the view of some circuits, like the Second, that hold adverse jury instructions can be imposed for negligent or even grossly negligent loss of ESI. And, the new rule does not place the burden of proof on a particular party, but allows the court to sort out who should prove that the lost information would have been unfavorable to the party who lost it. Finally, the new rule will not affect any common law tort for spoliation established by state law.
The text of new proposed Rule 37(e) differs slightly from that published in the Report to the Standing Committee dated May 2, 2014. The text of new Rule 37(e) is as follows:
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 committee note cautions that any remedy should fit the wrong, finding that an intent to deprive another party of the lost information’s use in the litigation does not require a court to adopt any of the measures listed in (e)(2), and the severe measures authorized by (e)(2) should not be used when the information lost was relatively unimportant or lesser measures as those specified in (e)(1) would be sufficient to redress the loss.
Finally, the text to the Committee Note was also slightly revised from that published in the Report to the Standing Committee dated May 2, 2014. Specifically, the reference to a prejudice requirement under (e)(2) was revised to make clear that “Subdivision (e)(2) does not include a requirement that the court find prejudice to the party deprived of the information. This is because the finding of intent required by the subdivision can support not only an inference that the lost information was unfavorable to the party that intentionally destroyed it, but also an inference that the opposing party was prejudiced by the loss of information that would have favored its position. Subdivision (e)(2) does not require any further finding of prejudice.”
In the end, the committee decided that a new rule was genuinely needed and the proposal struck the right balance. It will now be up to potential litigants to prepare to take advantage of the new rule so as to avoid massive and costly over-preservation and to engage in defendable data destruction.
This article was originally published by Law360 on June 9, 2014.
Update to original article: The Judicial Conference of the United States announced on Sept. 16, 2014, that the proposed amendments to the Federal Rules of Civil Procedure have been approved. The amendments have been forwarded to the Supreme Court with a recommendation that they be adopted. If the Supreme Court concurs, the revised rules will take effect on Dec. 1, 2015, unless Congress enacts legislation to reject, modify or defer the proposed amendments.