The Judicial Conference recently approved a proposed amendment to Rule 37(e) intended to establish greater uniformity in the ways federal courts respond to the loss of electronically stored information (ESI) and to address reports of costly over-preservation of ESI undertaken for fear of sanctions. The proposed amended rule provides:
(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.
Under the proposed amended rule, when addressing a lost ESI dispute, a court first determines whether reasonable steps were taken to preserve the lost ESI. This includes consideration of the resources that were available and the proportionality of the efforts to preserve the ESI, as well as a party’s litigation sophistication.
If ESI is lost because a party failed to take reasonable steps to preserve it, then the focus shifts to whether the ESI can be restored through additional discovery. If it cannot, and if a court finds a party is prejudiced by the loss, then pursuant to subsection (e)(1), the court may order measures no greater than necessary to cure the prejudice. If a court finds that the party that lost the ESI acted with the intent to deprive another party of the information’s use in the litigation, however, then pursuant to subsection (e)(2), the court may presume the lost information was unfavorable to the party, instruct the jury accordingly, or dismiss the action or enter a default judgment.
Subsection (e)(2)’s “intent to deprive” requirement is similar to a bad-faith standard, which, as the advisory committee noted, is more appropriate, in part, because negligently lost ESI may be favorable or unfavorable to the party that lost it. The advisory committee further noted that permitting an adverse inference for negligence creates incentives to over-preserve, often at great cost, the avoidance of which was one of the goals for amending the rule. In addition, subsection (e)(2) resolves a circuit split on when a court may give an adverse-inference instruction for the loss of ESI, which some circuits permit on a showing of negligence or gross negligence, while others require a showing of bad faith.
The proposed amendment is now pending Supreme Court review. If it is adopted and submitted to Congress before May 2015, the proposed amendment should become effective in December 2015.