{"id":2666,"date":"2015-03-20T01:54:01","date_gmt":"2015-03-20T01:54:01","guid":{"rendered":"http:\/\/jolt.richmond.edu\/?p=2666"},"modified":"2019-03-08T19:52:24","modified_gmt":"2019-03-09T00:52:24","slug":"the-new-esi-sanctions-framework-under-the-proposed-rule-37e-amendments","status":"publish","type":"post","link":"https:\/\/blog.richmond.edu\/jolt\/2015\/03\/20\/the-new-esi-sanctions-framework-under-the-proposed-rule-37e-amendments\/","title":{"rendered":"The New ESI Sanctions Framework Under the Proposed Rule 37(e) Amendments"},"content":{"rendered":"

\"pdf_icon\"DownloadPDF<\/a><\/p>\n

Cite as: Philip J. Favro, The New ESI Sanctions Framework under the Proposed Rule 37(e) Amendments, 21 Rich. J.L. & Tech. 8 (2015), http:\/\/jolt.richmond.edu\/v21i3\/article8.pdf.<\/p>\n

\u00a0by Philip J. Favro*<\/p>\n

I.\u00a0 Introduction<\/strong><\/p>\n

[1] \u00a0 \u00a0 \u00a0 The debate over the necessity, substance, and form of the proposed e-Discovery amendments to the Federal Rules of Civil Procedure (Rules) has been ongoing for over four years.[1]\u00a0 Since the Duke Conference convened in May 2010, the Judicial Conference Advisory Committee on the Civil Rules (Committee) has been working to address many of the perceived shortcomings in the current Rules regime.[2]\u00a0 Their efforts have not been conducted in a vacuum. \u00a0Interest groups representing parties on either side of the \u201cv\u201d in litigation, the U.S. Department of Justice, and even individual federal judges have lobbied the Committee in an effort to shape the final form of the proposed amendments.[3]\u00a0 This process, while both lengthy and necessary, may be reaching its closing stages.\u00a0 With the Judicial Conference of the United States having approved the Rules amendment package in September 2014, the proposed changes appear to be on track for implementation by December 1, 2015.[4]<\/p>\n

[2]\u00a0 \u00a0 \u00a0\u00a0Viewed holistically, the proposed changes are designed to usher in a new era of proportional discovery, increased cooperation, reduced gamesmanship, and more active judicial case management.[5]\u00a0 For many litigants the amendments of greatest significance are those affecting Rule 37(e).[6]\u00a0 If enacted, the changes to Rule 37(e) would provide a uniform national standard regarding the issuance of severe sanctions to address spoliation of electronically stored information (ESI).[7]\u00a0 They would also introduce a new framework for determining whether sanctions of any nature should be imposed for ESI preservation shortcomings.[8]\u00a0 Counsel, clients, and the courts should all be aware of the impact these changes could have in litigation and on client information governance programs.[9]<\/p>\n

[3] \u00a0 \u00a0 \u00a0In this article, I will analyze these issues.\u00a0 After covering the deficiencies with the current version of Rule 37(e) in Part II, I consider in Part III the new sanctions framework under the proposed amendments.\u00a0 This includes an analysis of the factors parties would be required to satisfy in order to justify the imposition of sanctions.\u00a0 I also describe the severe measures calculated to remediate the most harmful ESI preservation failures, along with lesser sanctions designed to cure prejudice stemming from less egregious forms of spoliation.\u00a0 In Part IV, I focus on some key questions about the Rule 37(e) revisions that remain unanswered and that will likely be resolved only by motion practice.\u00a0 This includes, among other things, a discussion of how a revised Rule 37(e) might apply to failures to preserve ESI stored with cloud computing providers.<\/p>\n

II.\u00a0 The Need for Revisions to Rule 37(e)<\/strong><\/p>\n

[4] \u00a0 \u00a0 \u00a0The Committee has spent countless hours considering the over-preservation of ESI and the appropriate standard of culpability required to impose sanctions for its spoliation.[10]\u00a0 Even though the current iteration of Rule 37(e) is supposed to provide guidance on these issues, amendments were deemed necessary given the inherent limitations with the rule.[11]<\/p>\n

[5] \u00a0 \u00a0 \u00a0As it stands, Rule 37(e) safeguards litigants from discovery sanctions when the good faith, programmed operation of their computer systems automatically eliminates ESI.[12]\u00a0 Nevertheless, the rule has largely proved ineffective as a national standard.[13]\u00a0 While there are many reasons that could explain its futility, three problems predominate in the present version of the rule.<\/p>\n

[6] \u00a0 \u00a0 \u00a0First, Rule 37(e) did not expressly abrogate the negligence standard that the U.S. Court of Appeals for the Second Circuit implemented for severe sanctions involving preservation failures under Residential Funding Corp. v. DeGeorge Financial Corp.[14]\u00a0 By allowing Residential Funding to remain in effect, courts in the Second Circuit and beyond are free to impose adverse inference instructions or order other doomsday sanctions for negligent spoliation of ESI.[15] \u00a0With the Second Circuit\u2014one of the epicenters of U.S. litigation\u2014following a sanctions touchstone that generally varies from the rest of the country, the rule has failed to become a uniform national standard for ESI sanctions.[16]<\/p>\n

[7] \u00a0 \u00a0 \u00a0The second reason Rule 37(e) has failed as a so-called \u201csafe harbor\u201d from sanctions is the emphasis the 2006 Committee note placed on requiring litigants to stop the routine destruction of ESI once a preservation duty attached.[17]\u00a0 While litigants may be required to suspend particular aspects of their electronic information systems once a preservation duty is triggered, this is not the exclusive or the determinative factor in every sanctions analysis.[18]\u00a0 For instance\u2014as U.S. District Judge Paul Grimm emphasized in Victor Stanley, Inc. v. Creative Pipe, Inc.\u2014a court should also consider as part of that analysis the \u201creasonableness and proportionality\u201d of a party\u2019s efforts to preserve relevant ESI.[19]\u00a0 Nevertheless, most courts applying Rule 37(e) have instead generally focused on whether and when a party suspended particular aspects of its computer systems after a preservation duty attached.[20]\u00a0 This has led to sanctions rulings that are out of step with mainline ESI preservation jurisprudence.[21]<\/p>\n

[8] \u00a0 \u00a0 \u00a0The third factor contributing to the futility of Rule 37(e) is that courts have frequently used their inherent authority to bypass the rule\u2019s protections.[22]\u00a0 This is because Rule 37(e) only applies to conduct that occurred during the litigation.[23]\u00a0 It does not govern pre-litigation activities such as the destruction of ESI that occurred before the commencement of litigation.[24]\u00a0 As a result, courts have often wielded their inherent powers to fashion remedies for ESI destruction free from the rule\u2019s present constraints.[25]<\/p>\n

[9] \u00a0 \u00a0 \u00a0With varying preservation standards, the inordinate focus on one factor in the preservation analysis, and the ease with which the rule\u2019s protections can be bypassed, there can be little doubt as to why a revised version of Rule 37(e) is needed.<\/p>\n

III.\u00a0 The Proposed Rule 37(e) Amendments<\/strong><\/p>\n

[10] \u00a0 \u00a0 \u00a0The proposed amendments to Rule 37(e) are designed to address these issues by providing a straightforward framework for the issuance of any sanctions stemming from failures to preserve relevant ESI.[26]\u00a0 They also encourage courts to draw on a wide range of factors to fashion sanctions awards that cure prejudice caused by less harmful forms of ESI spoliation.[27]\u00a0 In addition, the proposed changes establish \u201ca uniform standard in federal court\u201d for the imposition of severe remedial measures resulting from ESI preservation failures.[28]<\/p>\n

A.\u00a0 The New Sanctions Framework<\/strong><\/p>\n

[11]\u00a0\u00a0\u00a0\u00a0\u00a0 The Committee has established a set of requirements in the proposed rule that must be satisfied before a court could impose sanctions on a litigant for failing to preserve ESI.[29]\u00a0 The reason for doing so is to ensure sanctions for preservation failures are based on the designated criteria and not the potentially arbitrary use of a court\u2019s inherent powers:<\/p>\n

New Rule 37(e) . . . . authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures.\u00a0 It therefore forecloses reliance on inherent authority or state law to determine whether measures should be used.[30]<\/p>\n

[12]\u00a0\u00a0\u00a0\u00a0\u00a0 The prerequisites a party must satisfy when moving for sanctions under the amended Rule 37(e) proposal are as follows:<\/p>\n

1. Relevant ESI \u201cshould have been preserved in the anticipation or conduct of litigation,\u201d<\/p>\n

2. Relevant ESI was \u201clost,\u201d<\/p>\n

3. The party charged with safeguarding the lost ESI \u201cfailed to take reasonable steps to preserve\u201d the information, and<\/p>\n

4. The lost ESI \u201ccannot be restored or replaced through additional discovery.\u201d[31]<\/p>\n

[13]\u00a0\u00a0\u00a0\u00a0\u00a0 While the first two steps essentially reflect existing common law requirements,[32] the third step includes a key notion memorialized in Victor Stanley II and Rimkus Consulting Group, Inc. v. Cammarata: preservation efforts must be analyzed through the lens of reasonableness.[33]\u00a0 This is a significant step since it would oblige courts to examine preservation issues with a broader perspective and not focus exclusively on whether and when the party modified aspects of its electronic information systems.[34]\u00a0 Moreover, it would direct preservation questions away from a mythical standard of perfection that has unwittingly crept into discovery jurisprudence over the past several years.[35]\u00a0 Instead of punishing parties that somehow failed to preserve every last e-mail that could conceivably be relevant, the rule would essentially require a common sense determination of the issues based on a benchmark\u2014reasonableness\u2014with which courts and counsel are familiar.[36]<\/p>\n

[14]\u00a0\u00a0\u00a0\u00a0\u00a0 The fourth and final provision is significant since it would prevent the imposition of sanctions where there is essentially no harm to the moving party given the availability of replacement evidence.[37]<\/p>\n

B.\u00a0 Severe Sanctions vs. Curative Measures<\/strong><\/p>\n

[15]\u00a0\u00a0\u00a0\u00a0\u00a0 To obtain the most severe measures under Rule 37(e)(2), the moving party must additionally demonstrate that the alleged spoliator \u201cacted with the intent to deprive another party of the information\u2019s use in the litigation.\u201d[38]\u00a0 This specific intent requirement is designed to create a uniform national standard by ensuring severe sanctions are imposed only for the most flagrant violations of ESI preservation duties.[39]\u00a0 These violations appear to include bad faith destructions of ESI that occur in connection with the instant lawsuit.[40]\u00a0 They do not, however, include negligent or grossly negligent conduct.[41]\u00a0 The draft Committee note makes clear that the Rule 37(e) amendments \u201creject[] cases such as Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2nd Cir. 2002), that authorize the giving of adverse-inference instructions on a finding of negligence or gross negligence.\u201d[42]<\/p>\n

[16]\u00a0\u00a0\u00a0\u00a0\u00a0 The severe sanctions a court could issue under Rule 37(e)(2) are limited to dismissing the case, entering default judgment, or \u201cinstruct[ing] the jury that it may or must presume the information was unfavorable to the party.\u201d[43]\u00a0 Alternatively, a court could presume that the lost ESI was unfavorable to the alleged spoliator.[44]\u00a0 Nevertheless, a court is under no obligation to order any of these measures even if the specific intent requirement is satisfied.[45]\u00a0 As the Committee cautions in the draft note, \u201c[t]he remedy should fit the wrong, and the severe measures authorized . . . should not be used when the information lost was relatively unimportant or lesser measures . . . would be sufficient to redress the loss.\u201d[46]<\/p>\n

[17]\u00a0\u00a0\u00a0\u00a0\u00a0 If the moving party cannot satisfy the specific \u201cintent to deprive\u201d requirement, the court could then resort to curative measures under Rule 37(e)(1) to address prejudice resulting from the loss of the ESI.[47]\u00a0 The sanctions a court could order pursuant to that provision would be \u201cno greater than necessary to cure the prejudice\u201d to the aggrieved party.[48]\u00a0 That wording was drafted broadly to ensure that jurists would have sufficient discretion to craft remedies that could ameliorate the prejudice.[49]\u00a0 While the precise range of these remedies is not delineated in the rule, a Committee report and the draft Committee note suggest the remedies could include the following:<\/p>\n

\u2022\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201c[P]reclude a party from presenting evidence,\u201d[50]<\/p>\n

\u2022\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201c[D]eem some facts as having been established,\u201d [51]<\/p>\n

\u2022\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201c[P]ermit the parties to present evidence and argument to the jury regarding the loss of information,\u201d[52]<\/p>\n

\u2022\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201c[G]ive the jury instructions to assist in its \u00a0evaluation of such evidence or argument, other than instructions to which subdivision (e)(2) applies,\u201d[53] or<\/p>\n

\u2022\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201c[E]xclude a specific item of evidence to offset prejudice caused by failure to preserve other evidence that might contradict the excluded item of evidence.\u201d[54]<\/p>\n

[18]\u00a0\u00a0\u00a0\u00a0\u00a0 Thus, a moving party could very well obtain weighty penalties against an alleged spoliator even if it is unable to establish the specific intent to deprive.[55]\u00a0 Nevertheless, the draft Committee note establishes that any such sanctions must be tailored so they do not equal or exceed the severe measures of Rule 37(e)(2).[56]<\/p>\n

IV. \u00a0Key Issues for Motion Practice under the New Rule 37(e)<\/strong><\/p>\n

[19]\u00a0\u00a0\u00a0\u00a0\u00a0 While the new Rule 37(e) proposal addresses the main problems associated with the current rule, there are several questions about the revised rule that remain unanswered and will likely be the subject of vigorous motion practice.\u00a0 I will consider three of those questions in this section.<\/p>\n

A.\u00a0 What Are \u201cReasonable Steps to Preserve\u201d ESI?<\/strong><\/p>\n

[20]\u00a0\u00a0\u00a0\u00a0\u00a0 One of the principal battlegrounds under the revised version of Rule 37(e) will certainly involve deciphering the meaning of \u201creasonable steps to preserve\u201d ESI.[57]\u00a0 This is because the \u201creasonable steps\u201d provision is an express\u2014though undefined\u2014prerequisite for obtaining sanctions.[58]\u00a0 This is confirmed by the wording of the draft Committee note: \u201cBecause the rule calls only for reasonable steps to preserve, it is inapplicable when the loss of information occurs despite the party\u2019s reasonable steps to preserve.\u201d[59]\u00a0 Thus, a party who employs \u201creasonable steps\u201d to keep relevant ESI cannot be sanctioned for its loss.[60]<\/p>\n

[21]\u00a0\u00a0\u00a0\u00a0\u00a0 However, as to the precise meaning of \u201creasonable steps,\u201d the Committee provides only general guidance.\u00a0 For example, the draft note suggests sanctions may not be appropriate if the destroyed ESI is either outside of a preserving party\u2019s control or has been wiped out by circumstances (e.g., flood, fire, hackers, viruses, etc.) beyond the party\u2019s control.[61]\u00a0 Nevertheless, the note does not suggest these force majeure circumstances are an absolute defense to a sanctions request.[62]\u00a0 Instead, it advises courts to view the context of the destruction and what steps the preserving party could reasonably have taken to prepare for the problem before it occurred.[63]\u00a0 However, the Committee acknowledges that engaging in this type of hindsight analysis has its limitations.[64]<\/p>\n

[22]\u00a0\u00a0\u00a0\u00a0\u00a0 The note also suggests that the range of a party\u2019s preservation efforts should be tempered by proportionality standards.[65]\u00a0 However, as U.S. Magistrate Judge James Francis observed in Orbit One Communications, Inc. v. Numerex Corp., proportionality is an \u201camorphous\u201d and \u201chighly elastic\u201d concept that may not \u201ccreate a safe harbor for a party that is obligated to preserve evidence.\u201d[66]\u00a0 Therefore, while notions of proportionality may factor into the preservation analysis, it is unlikely they alone will determine the issue of \u201creasonable steps to preserve.\u201d[67]<\/p>\n

[23]\u00a0\u00a0\u00a0\u00a0\u00a0 In the absence of meaningful direction on this issue, courts will likely turn to existing case law to help guide their decision on whether a party has taken \u201creasonable steps\u201d to retain ESI.[68]\u00a0 To be sure, the jurisprudence on this issue is far from uniform.[69]\u00a0 Nevertheless, there are many cases that delineate the acceptable boundaries of preservation conduct.[70]\u00a0 How those cases are applied under the revised Rule 37(e) will turn\u2014as they always have\u2014on the facts of the case,[71] the quality of counsel\u2019s advocacy,[72] and the court\u2019s perception of the issues.[73]<\/p>\n

B.\u00a0 What Does \u201cIntent to Deprive\u201d Mean?<\/strong><\/p>\n

[24]\u00a0\u00a0\u00a0\u00a0\u00a0 Another likely area of dispute between litigants will be on the meaning of the \u201cintent to deprive\u201d requirement of revised Rule 37(e)(2).[74]\u00a0 While the draft Committee note makes clear that this specific intent requirement does not include negligent or grossly negligent conduct,[75] the question confronting clients, counsel, and the courts is what conduct does it refer to?<\/p>\n

[25]\u00a0\u00a0\u00a0\u00a0\u00a0 The Committee report issued in connection with the Rule 37(e) proposed amendments explains that the \u201cintent requirement is akin to bad faith.\u201d[76]\u00a0 Despite this straightforward explanation, the draft Committee note does not take such a restrictive view.[77]\u00a0 Instead, the note indicates that sanctions under Rule 37(e)(2) are limited \u201cto instances of intentional loss or destruction.\u201d[78]\u00a0 Conduct that is \u201cintentional\u201d and which results in the spoliation of ESI is not necessarily tantamount to bad faith.[79]\u00a0 Indeed, that intentional conduct is a lesser standard than bad faith was confirmed by the United States Court of Appeals for the Seventh Circuit many years ago.[80]\u00a0 In addressing a document spoliation question, the Seventh Circuit noted the distinction between bad faith and intentional conduct: \u201c[t]hat the documents were destroyed intentionally no one can doubt, but \u2018bad faith\u2019 means destruction for the purpose of hiding adverse information.\u201d[81]<\/p>\n

[26]\u00a0\u00a0\u00a0\u00a0\u00a0 If the \u201cintent to deprive\u201d requirement does encompass lesser forms of ESI spoliation than bad faith, the question then becomes what is the level of conduct punishable under Rule 37(e)(2)?\u00a0 The answer is that \u201cintentional\u201d spoliations may very well include instances where parties have been reckless or willful in their destructions of ESI.[82]\u00a0 Whether that conduct is sufficient to justify the severe measures that a revised Rule 37(e) authorizes will once again turn on the nature and circumstances surrounding the spoliation.[83]\u00a0 In other words, the courts will again be left to sort out the meaning of a key provision from the rule.[84]<\/p>\n

C.\u00a0 How Would Rule 37(e) Apply to Cloud Computing Preservation Failures?<\/strong><\/p>\n

[27]\u00a0\u00a0\u00a0\u00a0\u00a0 A third unanswered question is how the revised Rule 37(e) might apply in the context of cloud computing.\u00a0 This is a particularly significant issue given that many organizations and individuals have moved or will move their data to cloud-based storage platforms.[85]\u00a0 Even though petabytes of data are now being stored in the cloud, there are few lawyers who possess the expertise or understanding required to preserve and produce that data in discovery.[86]\u00a0 These factors suggest cloud-related ESI preservation breakdowns should be expected in the coming years.[87]\u00a0 Given these circumstances, how should courts address cloud preservation breakdowns under the amended Rule?<\/p>\n

[28]\u00a0\u00a0\u00a0\u00a0\u00a0 One recent case that provides some insight into the issues is Brown v. Tellermate Holdings.[88]\u00a0 In Brown, the court imposed an issue preclusion sanction on the defendant employer for failing to preserve relevant information stored in the cloud.[89]\u00a0 The plaintiffs had sought various categories of data from their former employer in order to substantiate their age discrimination claims.[90]\u00a0 In particular, the plaintiffs\u2014who previously worked as sales representatives at the company\u2014requested their former employer produce sales records maintained by the employer on cloud provider Salesforce.com to establish that they either met or exceeded their sales quotas in comparison to younger employees.[91]<\/p>\n

[29]\u00a0\u00a0\u00a0\u00a0\u00a0 While the employer\u2019s counsel issued a \u201cgeneral directive\u201d that relevant documents be kept for litigation, neither the employer nor its lawyers took meaningful follow-up steps to ensure the responsive cloud-stored data was preserved.[92]\u00a0 For example, the employer did not export the requested data from Salesforce.com and neglected to back up that information.[93]\u00a0 Nor did the employer keep the plaintiffs\u2019 Salesforce.com account information.[94]\u00a0 Instead, it repurposed these accounts, thereby enabling other employees to modify or revise the data.[95]\u00a0 Finally, the employer did not ask Salesforce.com for a back-up of the requested account data until after the cloud provider recycled the data pursuant to its own retention schedule.[96]\u00a0 All of which compromised and spoliated the requested information that ultimately could have established (or negated) the plaintiffs\u2019 claims.[97]<\/p>\n

[30]\u00a0\u00a0\u00a0\u00a0\u00a0 Would a revised Rule 37(e) change the outcome in Brown?\u00a0 The employer almost certainly would not have escaped sanctions under the amended Rule since it \u201cfailed to take reasonable steps to preserve\u201d [98] the relevant Salesforce.com ESI and due to the lack of replacement evidence.[99]\u00a0 Given the importance of the spoliated evidence to the plaintiffs\u2019 claims and the court\u2019s other findings on the issues,[100] the issue preclusion sanction would likely be an appropriate curative measure under the updated version of Rule 37(e)(1).[101]<\/p>\n

[31]\u00a0\u00a0\u00a0\u00a0\u00a0 Indeed, the new sanctions framework suggests the only change in Brown might be in the gravity of the sanction issued against the employer.<\/p>\n

Was the employer\u2019s preservation failure tantamount to an \u201cintent to deprive\u201d[102] the plaintiffs of the Salesforce.com ESI under amended Rule 37(e)(2)?\u00a0 While the employer unquestionably allowed the ESI to be destroyed, its conduct seems more akin to recklessness than bad faith,[103] i.e., the purposeful concealment of adverse information.[104]\u00a0 And yet, given the ambiguity created by the draft committee note, such reckless conduct arguably could satisfy the \u201cintentional loss or destruction\u201d language.[105]<\/p>\n

[32]\u00a0\u00a0\u00a0\u00a0\u00a0 Though impossible to predict how a court would precisely rule in this instance, it is clear that the new sanctions framework would not dramatically change the analysis of the matter. \u00a0In essence, courts will continue to adjudicate ESI preservation failures\u2014regardless of whether they occur in the cloud or in more conventional storage locations\u2014based on the traditional notions of reasonableness and proportionality.[106]<\/p>\n

V.\u00a0 Conclusion<\/p>\n

[33]\u00a0\u00a0\u00a0\u00a0\u00a0 While not every issue associated with ESI preservation failures has been addressed by the Rule 37(e) proposal, it is unrealistic to expect that any rule could do so.\u00a0 Moreover, the revised rule appears to have resolved many of the shortcomings with the current version.\u00a0 By creating a basic analytical framework, widening the analysis to ensure a broad set of factors are considered in connection with preservation conduct, and establishing a uniform standard for severe sanctions, lawyers may finally have a workable paradigm to provide straightforward advice to clients on ESI preservation questions.<\/p>\n

\n

* Philip Favro is Senior Discovery Counsel, Recommind, Inc.; J.D., Santa Clara University School of Law, 1999; B.A., Political Science, Brigham Young University, 1994.\u00a0 An earlier version of this article was first published by the Electronic Discovery & Digital Evidence Journal of the American Bar Association.\u00a0 Philip Favro, The New ESI Sanctions Framework Under The Proposed Rule 37(e) Amendments, EDDE J., Summer 2014, at 12\u201319, available at http:\/\/www.google.com\/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CCAQFjAA&url=http%3A%2F%2Fapps.americanbar.org%2Fdch%2Fthedl.cfm%3Ffilename%3D%2FST203001%2Frelatedresources%2FEDDE_JOURNAL-volume5_issue3.pdf&ei=pzKPVPeVA9KpogTR9oCoDA&usg=AFQjCNHpsxbsPwzvNEQ7Ku–x8m3x3oydw&sig2=gSNo1bbZeqtfCyHf2A2j0g&bvm=bv.81828268,d.cGU, archived at http:\/\/perma.cc\/JKJ9-R6RY.<\/p>\n

[1] See Judicial Conference Comm. on Rules of Practice & Procedure, Report of the Judicial Conference Committee on Rules of Practice and Procedure 13\u201314, app. B-1 to B-2 (Sept. 2014) [hereinafter Sept. \u201814 Report], available at http:\/\/www.uscourts.gov\/uscourts\/RulesAndPolicies\/rules\/Reports\/ST09-2014.pdf, archived at http:\/\/perma.cc\/S4YH-RF9T.<\/p>\n

[2] Id. at 13\u201314, app. B-2.<\/p>\n

[3] See generally Judicial Conference Advisory Comm. on Civil Rules, Report of Advisory Committee on Civil Rules 95-305, 331-411 (May 2, 2014) [hereinafter May \u201914 Report], available at http:\/\/www.uscourts.gov\/uscourts\/RulesAndPolicies\/rules\/Agenda%20Books\/Standing\/ST2014-05.pdf, archived at http:\/\/perma.cc\/6UFS-XLFQ (summarizing the nature of the comments the Committee received on the published versions of the proposed Rules amendments).<\/p>\n

[4] See Thomas Y. Allman, The Civil Rules Package as Approved by the Judicial Conference (Sept. 18, 2014), available at http:\/\/www.theediscoveryblog.com\/wp-content\/uploads\/2014\/10\/2014CommentsonRulePackage.pdf, archived at http:\/\/perma.cc\/QVF2-GPD4 (discussing the timetable for approving and enacting the Rule amendments).<\/p>\n

[5] See Philip J. Favro, A Comprehensive Look at the Newly Proposed Amendments to the Federal Rules of Civil Procedure, 26 Utah Bar J. 38, 38\u201341 (2013).<\/p>\n

[6] See Raymond M. Ripple & Krystle Guillory Tadesse, Proposed Amendment to FRCP Rule 37 Addresses Sanctions for Failure to Preserve ESI, Inside Counsel (May 21, 2014), http:\/\/www.insidecounsel.com\/2014\/05\/21\/proposed-amendment-to-frcp-rule-37-addresses-sanct, archived at http:\/\/perma.cc\/8BA6-BCY9.<\/p>\n

[7] See Favro, supra note 5, at 42.<\/p>\n

[8] See Sept. \u201814 Report, supra note 1, at app. B-59 to B-62.<\/p>\n

[9] See Philip J. Favro, Getting Serious: Why Companies Must Adopt Information Governance Measures to Prepare for the Upcoming Changes to the Federal Rules of Civil Procedure, 20 Rich. J. L. & Tech. 5, \u00b6\u00b6 32\u201336 (2014) [hereinafter Getting Serious], http:\/\/jolt.richmond.edu\/v20i2\/article5.pdf, archived at http:\/\/perma.cc\/LUN9-T76D.<\/p>\n

[10] See Sept. \u201814 Report, supra note 1, at app. B-14 to B-15.<\/p>\n

[11] Id. at app. B-58.<\/p>\n

[12] Getting Serious, supra note 9, at \u00b6 27.<\/p>\n

[13] See Sept. \u201814 Report, supra note 1, at app. B-58; see also Hawley v. Mphasis Corp., 302 F.R.D. 37, 47, n.4 (S.D.N.Y. 2014) (describing that the purpose of the amendments is \u201cto replace the disparate treatment of preservation\/sanctions issues in different circuits by adopting a single standard\u201d).<\/p>\n

[14] Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 113 (2d Cir. 2002); see also Sept. \u201814 Report, supra note 1, at app. B-17 to B-18, B-65.<\/p>\n

[15] See, e.g., Sekisui Am. Corp. v. Hart, 945 F. Supp. 2d 494, 502\u201303 (S.D.N.Y. 2013) (relying on Residential Funding to impose an adverse inference instruction as a sanction for the plaintiffs\u2019 grossly negligent spoliation of ESI).<\/p>\n

[16] See Philip J. Favro, Sea Change or Status Quo: Has the Rule 37(e) Safe Harbor Advanced Best Practices for Information Management?, 11 Minn. J.L. Sci. & Tech. 317, 328\u201329, 332 (2010) [hereinafter Sea Change] (discussing the Committee\u2019s intent to establish the present version of Rule 37(e) as a national standard when it was implemented in 2006). \u00a0The Second Circuit\u2019s negligence standard is increasingly viewed as an anachronistic rule given the current challenges associated with ESI preservation.\u00a0 See Sept. \u201814 Report, supra note 1, at app. B-18 (observing, among other things, that because \u201cESI is more easily lost than tangible evidence, . . . the sanction of an adverse inference instruction imposes a heavy penalty for losses that are likely to become increasingly frequent as ESI multiplies\u201d).<\/p>\n

[17] See Sea Change, supra note 16, at 327\u201328.<\/p>\n

[18] Victor Stanley, Inc. v. Creative Pipe, Inc. (Victor Stanley II), 269 F.R.D. 497, 523 (D. Md. 2010).<\/p>\n

[19] Id. (observing that an \u201cassessment of reasonableness and proportionality should be at the forefront of all inquiries into whether a party has fulfilled its duty to preserve relevant evidence\u201d).<\/p>\n

[20] See Sea Change, supra note 16, at 327\u201328.<\/p>\n

[21] See, e.g., In re Actos (Pioglitazone) Prods. Liab. Litig., No. 6:11-md-2299, 2014 U.S. Dist. LEXIS 86101, at *219\u201320 (W.D. La. June 23, 2014) (issuing an adverse inference instruction against one of the defendants for its failure to preserve relevant ESI and holding that a general litigation hold issued in an unrelated products liability suit filed nine years earlier had given rise to a duty to preserve relevant ESI in the instant litigation); Phillip M. Adams & Assocs., L.L.C. v. Dell, Inc., 621 F. Supp. 2d 1173, 1191 (D. Utah 2009) (finding that industry-related litigation that was initiated years before the lawsuit was filed against the defendant should have \u201csensitized\u201d the defendant to the reasonable anticipation of litigation and that its subsequent failure to preserve relevant ESI merited sanctions).<\/p>\n

[22] Thomas Y. Allman, Dealing with Spoliation in the Federal Rules (Again): The Proposed Amendment to Rule 37(e) at 5, IAALS\/NJC E-Discovery Summit 2013 (Sept. 19\u201320, 2013), available at http:\/\/iaals.du.edu\/images\/wygwam\/documents\/publications\/E-Discovery_Panel_2_Preservation.pdf, archived at http:\/\/perma.cc\/72GB-U82V.<\/p>\n

[23] Nucor Corp. v. Bell, 251 F.R.D. 191, 196, n.3 (D.S.C. 2008); see also Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 611\u201312 (S.D. Tex. 2010) (delineating the nature and scope of the court\u2019s inherent authority to issue sanctions and its interplay with Rule 37(e)).<\/p>\n

[24] Nucor, 251 F.R.D. at 196, n.3 (\u201cRule 37(e)\u2019s plain language states that it only applies to sanctions imposed under the Federal Rules of Civil Procedure (e.g., a sanction made under Rule 37(b) for failing to obey a court order).\u00a0 Thus, the rule is not applicable when the court sanctions a party pursuant to its inherent powers.\u201d).<\/p>\n

[25] See, e.g., id.; see also Escobar v. Houston, No. 04-1945, 2007 U.S. Dist. LEXIS 72706, at *51\u201352, n.5 (S.D. Tex. Sept. 29, 2007) (describing the circumstances under which courts may exercise their inherent authority).<\/p>\n

[26] See Sept. \u201814 Report, supra note 1, at app. B-56 to B-57.<\/p>\n

[27] See id. at app. B-63 to B-64.<\/p>\n

[28] Id. at app. B-65.<\/p>\n

[29] See id. at app. B-56 to B-57, B-61 to B-62.<\/p>\n

[30] Id. at app. B-58 (emphasis added).<\/p>\n

[31] Id. at app. B-56.<\/p>\n

[32] See Sept. \u201814 Report, supra note 1, at app. B-59.<\/p>\n

[33] Victor Stanley II, 269 F.R.D. 497, 523 (D. Md. 2010); Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010) (observing that reasonableness is the touchstone of the preservation analysis); see also Sept. \u201814 Report, supra note 1, at app. B-59 to B-62.<\/p>\n

[34] See Sept. \u201814 Report, supra note 1, at app. B-59 to B-62.<\/p>\n

[35] See id. at app. B-61 (\u201cThis rule recognizes that \u2018reasonable steps\u2019 to preserve suffice; it does not call for perfection.\u201d); Reinsdorf v. Skechers U.S.A., Inc., 296 F.R.D. 604, 615, 631 (C.D. Cal. 2013) (holding that the Rules \u201cdo not require perfection\u201d and discussing related authorities).<\/p>\n

[36] Rimkus, 688 F. Supp. 2d at 613.<\/p>\n

[37] See Sept. \u201814 Report, supra note 1, at app. B-62 (\u201c[i]f the information is restored or replaced, no further measures should be taken.\u201d).<\/p>\n

[38] Id. at app. B-56 to B-57.<\/p>\n

[39] See id. at app. B-64 to B-65.<\/p>\n

[40] See id. app. B-17 (\u201cThis intent requirement is akin to bad faith.\u201d).<\/p>\n

[41] See id. at app. B-65.<\/p>\n

[42] Id.<\/p>\n

[43] Sept. \u201814 Report, supra note 1, at app. B-56 to B-57.<\/p>\n

[44] See id.<\/p>\n

[45] See id. at app. B-67.<\/p>\n

[46] Id.<\/p>\n

[47] Id., at app. B-55 to B-57.<\/p>\n

[48] Id.<\/p>\n

[49] See Sept. \u201814 Report, supra note 1, at app. B-63 to B-64 (\u201cThe range of such measures is quite broad . . . [; m]uch is entrusted to the court\u2019s discretion.\u201d).<\/p>\n

[50] May \u201814 Report, supra note 3, at 312.<\/p>\n

[51] Id.<\/p>\n

[52] Sept. \u201814 Report, supra note 1, at app. B-64.<\/p>\n

[53] Id.<\/p>\n

[54] Id.<\/p>\n

[55] Id. at app. B-63 to B-64; see also May \u201814 Report, supra note 3, at 312.<\/p>\n

[56] See Sept. \u201814 Report, supra note 1, at app. B-64 (\u201cCare must be taken, however, to ensure that curative measures under subdivision (e)(1) do not have the effect of measures that are permitted under subdivision (e)(2) only on a finding of intent to deprive another party of the lost information\u2019s use in the litigation.\u201d).<\/p>\n

[57] Id. at app. B-56.<\/p>\n

[58] Id. at app. B-56, B-61.<\/p>\n

[59] Id. at app. B-61.<\/p>\n

[60] See id. (\u201cBecause the rule calls only for reasonable steps to preserve, it is inapplicable when the loss of information occurs despite the party\u2019s reasonable steps to preserve.\u201d).<\/p>\n

[61] See id.<\/p>\n

[62] See Sept. \u201814 Report, supra note 1, at app. B-61.<\/p>\n

[63] See id. at app. B-61 to B-62 (\u201cCourts may, however, need to assess the extent to which a party knew of and protected against such risks.\u201d).<\/p>\n

[64] See id. at app. B-59 (cautioning generally about the limited perspective that hindsight provides into the nature of a party\u2019s conduct).<\/p>\n

[65] See id. at app. B-61 to B-62; see also Philip J. Favro & Derek P. Pullan, New Utah Rule 26: A Blueprint for Proportionality Under the Federal Rules of Civil Procedure, 2012 Mich. St. L. Rev. 933, 952 (2012) (citing authorities holding that preservation efforts \u201cmust be viewed through the lens of proportionality\u201d and not just the \u201ckaleidoscope of relevance\u201d).<\/p>\n

[66] Orbit One Commc\u2019ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 436, n.10 (S.D.N.Y. 2010).<\/p>\n

[67] See Pippins v. KPMG L.L.P., No. 11 Civ. 0377(CM)(JLC), 2011 U.S. Dist. LEXIS 116427 (S.D.N.Y. Oct. 7, 2011), aff\u2019d, 279 F.R.D. 245, 255\u201356 (S.D.N.Y. 2012) (rejecting the defendant\u2019s proportionality-based argument because it failed to consider reasonable conditions upon its request to retain only excerpts of its preserved ESI).<\/p>\n

[68] See Sea Change, supra note 16, at 334\u201339 (discussing various cases).<\/p>\n

[69] Compare Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 746\u201348 (8th Cir. 2004) (holding an adverse inference instruction was appropriate given the defendant\u2019s failure to suspend its 90-day audio recording retention policy, which resulted in the destruction of relevant evidence), with Morris v. Union Pac. R.R., 373 F.3d 896, 899\u2013902 (8th Cir. 2004) (holding an adverse inference instruction was not proper despite the defendant\u2019s failure to suspend its 90-day audio recording retention policy, which could have resulted in the destruction of relevant evidence). \u00a0See also Victor Stanley II, 269 F.R.D. 497, 523 (D. Md. 2010) (observing \u201cin terms of what a party must do to preserve potentially relevant evidence, case law is not consistent across the circuits, or even within individual districts.\u201d).<\/p>\n

[70] See, e.g., Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1322 (Fed. Cir. 2011) (approving information retention policies that eliminate documents for \u201cgood housekeeping\u201d purposes); Brigham Young Univ. v. Pfizer, Inc., 282 F.R.D. 566, 572\u201373 (D. Utah 2012) (denying plaintiffs\u2019 motion for sanctions since the evidence at issue was destroyed pursuant to defendants\u2019 \u201cgood faith business procedures\u201d).<\/p>\n

[71] See, e.g., Rimkus Consulting Grp., Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010) (explaining a preservation \u201canalysis depends heavily on the facts and circumstances of each case and cannot be reduced to a generalized checklist of what is acceptable or unacceptable.\u201d); see also Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir. 2012) (reasoning that a \u201ccase-by-case approach\u201d is the preferred method for determining the appropriate remedial measures for failures to preserve relevant information).<\/p>\n

[72] See, e.g., Mathis v. John Morden Buick, Inc., 136 F.3d 1153, 1155 (7th Cir. 1998) (affirming an order of judgment against the plaintiff despite the defendant\u2019s destruction of relevant evidence and expressing \u201csurprise\u201d at the \u201cperplexing failure\u201d of the plaintiff\u2019s counsel to formally move for discovery sanctions).<\/p>\n

[73] See Sept. \u201814 Report, supra note 1, at app. B-59 to B-60.<\/p>\n

[74] Id. at app. B-56 to B-57.<\/p>\n

[75] Id. at app. B-65.<\/p>\n

[76] Id. at app. B-17.<\/p>\n

[77] See id. at app. B-65.<\/p>\n

[78] \u00a0Id.<\/p>\n

[79] See Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1327 (Fed. Cir. 2011) (\u201cIn determining that a spoliator acted in bad faith, a district court must do more than state the conclusion of spoliation and note that the document destruction was intentional.\u201d).<\/p>\n

[80] See Mathis v. John Morden Buick, Inc., 136 F.3d 1153, 1155 (7th Cir. 1998) (explaining the differences between bad faith and intentional conduct in connection with a defendant\u2019s destruction of relevant information).<\/p>\n

[81] Id.<\/p>\n

[82] See generally Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 463\u201365 (S.D.N.Y. 2010) (\u201cwillfulness involves intentional or reckless conduct that is so unreasonable that harm is highly likely to occur\u201d).<\/p>\n

[83] See Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir. 2012); see also Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010).<\/p>\n

[84] See generally Victor Stanley II, 269 F.R.D. 497 (D. Md. 2010) (discussing cases and the challenges associated with evidence preservation confronting courts and organizational litigants).<\/p>\n

[85] See Ned Smith, Why More Businesses Are Using Cloud Computing, CNBC (July 25, 2012, 1:00 PM), http:\/\/www.cnbc.com\/id\/48319526\/Why_More_Businesses_Are_Using_Cloud_Computing, archived at http:\/\/perma.cc\/JB7Q-D2ES (\u201cMore than eight in 10 companies currently use some form of cloud solution, and more than half plan to increase cloud investments by 10 percent or more this year . . . [and] more than half of micro (one to nine employees) and small (10 to 99 employees) businesses use cloud-based business productivity applications.\u201d); see also Nicole Black, Introduction, Global Cloud Survey Report 2012, Legal IT Professionals 4, 7, available at http:\/\/www.legalitprofessionals.com\/wpcs\/cloudsurvey2012.pdf, archived at http:\/\/perma.cc\/HXK7-ZS2H (\u201c[N]early all respondents acknowledged that cloud computing would ultimately overtake on-premise computing in the legal industry.\u201d); Sept. \u201814 Report, supra note 1, at app. B-15.<\/p>\n

[86] See Philip Favro, \u2018Mind Over Matters: Q & A with eDiscovery and Litigation Guru Craig Ball, Recommind (Aug. 7, 2014), http:\/\/www.recommind.com\/blog\/q-ediscovery-litigation-guru-craig-ball, archived at http:\/\/perma.cc\/4D7H-7ZTF (observing that most lawyers generally lack the training and are unprepared to \u201cpreserve and produce data stored with cloud providers, maintained on mobile devices, or exchanged on social networking sites\u201d).<\/p>\n

[87] See id.<\/p>\n

[88] Brown v. Tellermate Holdings Ltd., No. 2:11-cv-1122, 2014 U.S. Dist. LEXIS 90123, *4\u20136, *27 (S.D. Ohio July 1, 2014).<\/p>\n

[89] Id. at *72\u201374.<\/p>\n

[90] Id. at *9\u201310, *70\u201371.<\/p>\n

[91] Id.<\/p>\n

[92] Id. at *56\u201358.<\/p>\n

[93] Id. at *24\u201326.<\/p>\n

[94] Brown, 2014 U.S. Dis. LEXIS 90123 at *21\u201323.<\/p>\n

[95] Id.<\/p>\n

[96] Id. at *57\u201358.<\/p>\n

[97] See id. at *72\u201374.<\/p>\n

[98] Sept. \u201814 Report, supra note 1, at app. B-56, B-60 to B-62.<\/p>\n

[99] See Brown, 2014 U.S. Dist. LEXIS 90123, at *72\u201374.<\/p>\n

[100] See id. at 66\u201374.<\/p>\n

[101] See Sept. \u201814 Report, supra note 1, at app. B-55 to B-57, B-63 to B-64.<\/p>\n

[102] Id. at app. B-55 to -57, B-64 to B-67.<\/p>\n

[103] See Brown, 2014 U.S. Dist. LEXIS 90123, at *69\u201370.<\/p>\n

[104] See Mathis v. John Morden Buick, Inc., 136 F.3d 1153, 1155 (7th Cir. 1998).<\/p>\n

[105] See Sept. \u201814 Report, supra note 1, at app. B-65.<\/p>\n

[106] This line of reasoning appears to be equally applicable to ESI preservation failures on mobile devices.\u00a0 See Philip Favro, The Impact of Cloud Computing and Mobile Devices on Litigation Holds, Law Journal Newsletters (Jan. 2015), available at http:\/\/www.lawjournalnewsletters.com\/issues\/ljn_legaltech\/31_9a\/news\/the_impact_of_cloud_computing_and_mobile_devices_on_litigation_holds160645-1.html, archived at http:\/\/perma.cc\/MB8Z-FAQ8 (describing the preservation challenges associated with data stored on mobile devices).<\/p>\n

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