Update of Proposed Rule Changes: A Universal Federal Sanctions Standard for the Failure to Preserve ESI Could be a Reality
The United States Courts’ Advisory Committee on Civil Rules (“the Committee”) has proposed various amendments to the Federal Rules of Civil Procedure that, if adopted, will profoundly affect the range and scope of sanctions a court may impose for failures to preserve electronically stored information (“ESI”). F.R.C.P. 37(e), which currently addresses sanctions in those instances, is one of several rules slated for amendment.
The current rule prohibits a court from imposing sanctions on a party that fails to provide ESI that was lost as a result of the “routine, good-faith operation of an electronic information system” absent exceptional circumstances. The federal courts have applied the rule differently with prevailing culpability standards currently ranging from negligence to willfulness or bad faith (this blog has commented on such disparate cases including New York, New Jersey, and Arizona.) The Committee seeks to address these discrepancies by adopting a single standard.
The proposed rule states that sanctions may be ordered in two limited instances -- when the failure to preserve: 1) “was willful or in bad faith and caused substantial prejudice in the litigation” or 2) “irreparably deprived a party of any meaningful opportunity to present a claim or defense.” Thus, the proposed rule rejects case law precedent in some jurisdictions that mere negligence constitutes a sufficient culpability to support sanctions. The proposed rule adds an adverse-inference charge to the jury to the list of sanctions already available -- like issue preclusion and outright dismissal -- under referenced F.R.C.P. 37(b)(2)(A).
The proposed rule also identifies factors a court may examine to determine whether the party failing to preserve ESI acted with the requisite culpability, including the extent to which a party was on notice that litigation was likely, the reasonableness of a party’s preservation efforts, the issuance of litigation holds, the proportionality of the preservation efforts to any anticipated or ongoing litigation, and whether the party sought guidance from the court regarding unresolved disputes concerning ESI preservation.
According to the minutes from the Committee meeting held this past January, “the proposed amendment is designed to provide more significant protection against inappropriate sanctions, and also to reassure those who might in its absence be inclined to overpreserve to guard against the risk that they would confront serious sanctions.”
Indeed, parties may find some relief in the fact that, under the proposed rule, negligent behavior would no longer be punishable. However, practitioners must be mindful of the interpretation of “willfulness” and “bad faith” in their jurisdiction because the proposed rule does not clarify those terms. According to the Committee Notes “courts have considerable experience dealing with these concepts, and efforts to capture that experience in Note language seemed more likely to produce problems than provide help.”
Furthermore, application of the proposed factors, particularly factors such as “reasonableness,” will vary from jurisdiction to jurisdiction. Thus, although the level culpability may be standardized, the rule will undoubtedly be interpreted and applied differently among the federal courts.
Publication of the proposed amendments is expected late this year providing they are approved by the Standing Committee at their June meeting. Stay tuned to this blog for updates on these critical developments.
Sandro G. Ocasio is an Associate in the Gibbons Real Property & Environmental Department and a member of the Gibbons E-Discovery Task Force.