The Controversy of Federal Rule 37(e)

26 Feb 2014

Would the Proposed Amendment Harm Plaintiff eDiscovery?

As of February 18, 2014, the public comments to the proposed amendments to the Federal Rules of Civil Procedure are now closed (extended from the original deadline of the 15th). One particularity controversial proposed amendment is regarding Rule 37(e). Plaintiff trial attorneys and in-house corporate defense counsel are currently drawing lines in the sand on where they stand regarding this extremely important issue.

Rule 37(e) vs. Proposed Rule 37(e)

Here’s the text of the current Rule 37(e):

(e) Failure to Provide Electronically Stored Information. Absent exceptional circumstances, the 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.

Here’s the text of the proposed Rule 37(e):

(e) Failure to Preserve Discoverable Information.

(1) Curative measures; sanctions. If a party failed to preserve discoverable information that should have been preserved in the anticipation or conduct of litigation, the court may

(A) permit additional discovery, order curative measures, or order the party to pay the reasonable expenses, including attorney’s fees, caused by the failure; and

(B) impose any sanction listed in Rule 37(b)(2)(A) or give an adverse-inference jury instruction, but only if the court finds that the party’s actions:

(i) caused substantial prejudice in the litigation and were willful or in bad faith; or

(ii) irreparably deprived a party of any meaningful opportunity to present or defend against the claims in the litigation.

Prior to the proposed amendment, certain case law[1] held that negligently or recklessly destroyed evidence may provide a sufficient culpable mind to negate “good faith.” The proposed amendment adds additional burdens upon innocent parties seeking sanctions for lost or missing evidence. It is not easy to demonstrate culpability, relevancy and prejudice regarding evidence one does not have due to the other party’s conduct, in general, and this amendment only elevates such burden. In most class action lawsuits or multidistrict litigations against large corporations, this will raise the burden of proof for plaintiffs and allow negligent corporate defendants to stand silent in hopes such a difficult burden cannot be carried.

Sekisui and Judge Scheindlin’s Infamous “Footnote 51”

Plaintiffs have a strong ally in this debate: the Honorable Shira A. Scheindlin, federal district court judge in the Southern District of New York, scribe of the lauded Zubulake opinions, who wrote Footnote 51 in Sekisui American Corporation v. Hart, 12 Civ. 3479 (S.D.N.Y. Aug. 15, 2013). (Click here for our newsletter about the facts of this case.)

In Footnote 51, Judge Scheindlin explained that she is against the proposed amendment to Rule 37(e): “I do not agree that the burden to prove prejudice from missing evidence lost as a result of willful or intentional misconduct should fall on an innocent party. Furthermore, imposing sanctions only where evidence is destroyed willfully or in bad faith creates perverse incentives and encourages sloppy behavior. Under the proposed rule, parties who destroy evidence cannot be sanctioned (although they can be subject to “remedial curative measures”) even if they were negligent, grossly negligent, or reckless in doing so.” Id.

The Future of Rule 37(e)

Of course, many corporate defense attorneys argue for the amendment to be implemented, as they know it will make proving electronic discovery spoliation more difficult for plaintiff trial attorneys. There are also many who agree with Judge Scheindlin’s prediction that if passed, the new amendment might encourage negligent electronic data preservation policies and practices.

The public comments reached well over 2,000 submissions for the proposed amendments. Now it is up to the Advisory Committee to discard, revise, or transmit the amendments to the Standing Committee, who recommends changes to the Judicial Conference, who will then submit them to the Supreme Court. If the proposed amendment to Rule 37(e) passes, it would likely go into effect on December 1, 2015.

[1] See e.g., Residential Funding Corp. v. DeGeorge Financial Corp., 30 F.3d 99, 107 (2d Cir. 2002).