Tuesday, December 18, 2012
Proposed Changes to Federal Rules on Preservation of Evidence
Not exactly a catchy title. And probably not enough to compete with all the other distractions of this time of year – wandering through a snow-covered field to chop down a Christmas tree, hand-dipping your own candles to give as gifts, delicately decorating gingerbread men baked from scratch. No wait – we really meant setting up the artificial snowing Christmas tree (nothing says happy holidays like millions of tiny pieces of Styrofoam floating through your home), waiting to see if Amazon is going to get you the complete second season of Shameless on DVD before the 25th, and popping a Mrs. Smith’s frozen apple pie in the oven. Whether your holidays are like the former, the latter or somewhere in between, you probably have something more pressing to attend to than reading this blog. So, we thought we’d give you something to think about for the future – a proposed change to Federal Rule of Civil Procedure 37 regarding when sanctions can be imposed for failure to preserve evidence. See Excerpt from Report of Civil Rules Advisory Committee here.
Honestly, we just happened upon this ourselves and haven’t had much time to fully digest all the implications. As with any rule change, the real ramifications won’t be known until the courts start to apply it. But since the proposed change looks to be slated for discussion early in the new year by the Civil Rules Advisory Committee, we thought we’d take a look.
Right now Rule 37(e) concerns the standard for sanctioning a party for the loss of electronically stored information – so in our products liability world, it mainly applies to defendants. The rule currently provides -- no sanctions, “absent exceptional circumstances,” if electronic data is “lost as a result of routine, good-faith operation of an electronic information system.” That already sounds like a good starting point. Despite that language, however, the Committee report indicates that application of the rule and the imposition of sanctions have varied widely by circuit. Eliminating that variance, as well as overturning Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99 (2d Cir. 2002), which authorized sanctions for negligent failure to preserve (and which apparently continues to be applied despite the language of the current rule), are the main goals of the proposed changes.
Here is the text of the proposed rule:
(e) FAILURE TO PRESERVE DISCOVERABLE INFORMATION. If a party failed to preserve discoverable information that reasonably should have been preserved in the anticipation or conduct of litigation,
(1) The court may permit additional discovery, order the party to undertake curative measures, or require the party to pay the reasonable expenses, including attorney’s fees, caused by the failure.
(2) The court may impose any of the sanctions listed in Rule 37(b)(2)(A) or give an adverse-inference jury instruction only if the court finds:
(A) that the failure was willful or in bad faith, and caused substantial prejudice in the litigation; or
(B) that the failure irreparably deprived a party of any meaningful opportunity to present a claim or defense.
(3) In determining whether a party failed to preserve discoverable information that reasonably should have been preserved, and whether the failure was willful or in bad faith, the court should consider all relevant factors, including:
(A) the extent to which the party was on notice that litigation was likely and that the information would be discoverable;
(B) the reasonableness of the party’s efforts to preserve the information;
(C) whether the party received a request that information be preserved, the clarity and reasonableness of the request, and whether the person who made the request and the party engaged in good-faith consultation regarding the scope of preservation;
(D) the proportionality of the preservation efforts to any anticipated or ongoing litigation; and
(E) whether the party sought timely guidance from the court regarding any unresolved disputes concerning the preservation of discoverable information.
While stricter guidelines requiring a showing of bad faith or willfulness before a court can sanction a corporate defendant for failing to preserve electronic data are a good thing in our book, the proposed Rule 37(e) broadens the scope of the rule to cover any unpreserved discoverable information. So that means it applies to plaintiffs as well, including plaintiffs who lose the very products that are the subject of their lawsuits. We are obviously opposed to any rule or ruling that allows a party to benefit from his/her own destruction of evidence – whether intentional or not. We’ve talked about this before.
A quick look at the proposed rule suggests that a plaintiff’s failure to preserve the product may fit under proposed 37(e)(2)(B) -- that the failure irreparably deprived a party of any meaningful opportunity to present a claim or defense -- that doesn’t appear to require bad faith. We think the intent of this subsection may well be to account for the type of evidence lost. If what was discarded or destroyed was of critical importance to the case – i.e. the product – something less than a showing of bad faith will be required. For instance, in a manufacturing defect case if the product was lost before it could be inspected and/or tested, the defendant is certainly stripped of its ability to defend by demonstrating that the particular product wasn’t defective. The new rule appears to leave open the possibility of sanctions or an adverse-inference in that situation. Or, where a plaintiff (or a defendant, for that matter) loses the product in question, (e)(2)(B) should allow the court to bar any pre-loss expert report without a showing of bad faith.
Like we said, this is still a proposal and subject to change. And if adopted, subject further to interpretation by the courts. So, after the gifts have been opened, the cookies eaten, the eggnog drunk and Auld Lang Syne sung – here’s something to think about for 2013.