Electronic Discovery Institute Course - Class 15 - FRCP 37(e) and Sanctions

Here's a continuation of my postings about the Electronic Discovery Institute's online e-discovery certification program, that you can subscribe to for just $1. I last blogged about this program on December 2, 2017. Go to https://www.lawinstitute.org/ to sign up for it.

The course on Federal Rule of Civil Procedure 37(e) and Sanctions, is taught by Pamela Sargent, a magistrate judge for the Western District of Virginia; Frank Maas, a former magistrate judge for the Southern District of New York, and Thomas Allman, a former general counsel for the BASF Corporation, and Chair Emeritus of the Sedona Conference Working Group 1 on Electronic Document Retention and Production.

2015 Version of FRCP 37

The current version of FRCP 37(e) as amended in 2015, replaces the prior version amended in 2006. Judge Maas noted that the new rule as amended is intended to make it clear that mere negligence is not a sufficient basis on which to award to award sanctions. When prejudice does result, the court can engage in curative measures. If someone has acted with intent then there are a number of things the court can do such as issuing an adverse inference instruction to the jury. There is no requirement that the court take action.

Judge Sargent noted that a party has an obligation to take reasonable steps to preserve evidence in anticipation of litigation. If sanctions are to be imposed, there must be lost information that cannot be retrieved or replaced. If this is the case, the court should look to see if the party requesting the information has been prejudiced. Then the court can take action to cure this prejudice. The court should ask if the party who lost the information acted with the intent to deprive another party of the information. If so an adverse inference instruction can be entered.

2006 Version of FRCP 37

Under the prior version of FRCP 37, there was not a uniform national standard for imposing sanctions. Some courts held that a failure to preserve with less than purposeful intent could bring an adverse inference. Judge Sargent feels that there was only so much even a small business could do to preserve evidence. She likes that the amended version of FRCP 37 sets a standard but does not take complete discretion away from the judge.

Inherent Authority

Allman noted that there were was not a clear way to handle spoliation matters. Judge Sargent said that judges used to rely on their inherent authority because the 2006 version of the rule did not offer much guidance on when sanctions should be issued. Courts currently make a hybrid analysis, and look at the power to sanction under FRCP 37(e) and their inherent authority.

Safe Harbor

The old version of 37(e) provided a safe harbor when there was routine, good faith destruction of evidence. The 2015 amendment requires that good faith efforts be made for the preservation of evidence. Judge Maas noted that corporations did not feel comfortable destroying old data under the old version of 37(e) despite its provision for safe harbor. Allman asserted that Rule 37(e) was designed to avoid the use of inherent authority.

Curing Prejudice & Determining Intent to Deprive

Judge Sargent noted that courts always have the option of shifting the costs for discovery. With the new focus on proportionality, there should be renewed focus on the importance of the information and if it is necessary to prove a claim or defense. A court should go no further than is necessary to cure prejudice.

Spoliation turns on the culpability of the party and the impact of the lost information - only measures which alleviate the prejudice should be imposed where there is no intent to deprive another party of the use of the information.

To show intent to deprive may be difficult. According to Judge Sargent it may have to be shown through circumstantial evidence. Rarely will an email be found indicating that party deliberately got rid of relevant data. There must be a showing that a party knew of litigation and the importance of the data and did not act reasonably to preserve the data. There must a heightened awareness that what they are doing will have impact on the litigation.

37(e)(2) Remedies

There are two types of measures that are case dispositive - dismissals and defaults - which should only be imposed in extreme situations.

The court may impose a sanction that the jury must infer that the lost information was adverse to the party that lost it. Judge Sargent said that she thought that juries can be trusted to only consider that the information was adverse and was not sure that the Rule should require them to treat it as adverse.

Determining "Reasonable Steps" & Defensibility

Allman thinks that reasonable steps could have been taken, even if information was lost, contrary to Judge Scheindlin's view the loss of any information indicates that a party was not taking reasonable measures. It is clear to Allman that the mere fact that something has been lost does not preclude a finding that reasonable steps were taken.

Judge Sargent said that parties should ensure they have a litigation hold system in place that shows the reasonable steps they take to preserve information. If information was difficult to retain, and was held for a long period time it may show that discarding it was reasonable.

Issues Moving Forward

Magistrate judges cannot dismiss cases or enter default judgments. They can make reports and recommendations to issue the most serious sanctions.

Impact of 37(e)

The new rule 37(e) was intended to be a sea change. Judge Sargent said that many courts have seen a drop in civil litigation because many parties could not afford to pursue claims or defenses. The cost of litigation, including the cost of preservation, the retrieval of ESI, and its production was so high that few parties could afford it. Rule 37(e) will only have its desired effect with the party litigants are comfortable relying upon it. Many parties were afraid that courts would not regard their efforts to preserve data was reasonable. Parties must feel comfortable about when courts will regard their efforts as reasonable.

Judge Sargent thought it was not possible to fathom how information would be stored even as little as 10 years from now, and that the rules would have to be changed in order to account for changes in information storage. In the future the burden to preserve certain types of information may be greatly reduced.

Murphy v. Piper - test your search terms

Two days ago, in Murphy v. Piper, No. 16-2623, 2017 U.S. Dist. LEXIS 205750 (D. Minn.), the United States District Court for the District of Minnesota, reviewed a decision by Magistrate Judge Becky R. Thorson on search terms to be used for discovery, and the temporal scope of the search. The court concluded that the information was relevant and that responding to discovery in the date range would not be undue burden. Judge Donovan W. Frank noted that, "the demonstrated relevance of each of Plaintiffs' proposed search terms and Defendant's failure to adequately support her claimed burden in utilizing those search terms."

The court also upheld the Magistrate Judge's decision to refuse to approve a motion to premptively preclude the discovery of privileged documents. The opinion states that, "the Court agrees with the Magistrate Judge's conclusion that any claimed privilege with respect to particular discovery requests can be addressed through the parties' privilege logs and, if necessary, motion practice to resolve a dispute."

Johnston v. Vincent - Sanctions for failing to keep an iPhone?

Yesterday the Louisiana Court of Appeals upheld a lower court’s denial of a motion for sanctions for the failure of a defendant to preserve data on an iPhone 4, in Johnston v. Vincent, 2017 La. App. LEXIS 2336, No. 17-391 (La.App. 3 Cir. 12/13/17), a suit for defamation and unfair trade practices.

The preservation order required the parties to prevent the destruction or alteration of any data in their work and personal email accounts as well as on their smartphones. One of the defendants conceded in a deposition that he had failed to retain an iPhone 4 containing relevant data. He was however able to produce some text messages from the time period he used this phone from a backup on his computer with an iPhone 5 he purchased later.

The plaintiffs forensic expert testified that all text messages from iPhone are backed up, even deleted ones, and the user has no way of controlling what is backed up. A file on the iPhone indicates when the back-up occurred. Emails cannot be collected from an iPhone for security reasons.

Judge Ulysses Gene Thibodeaux's opinion emphasizes that the primary purpose of the preservation order was to prevent the destruction or alteration of text messages in the relevant time period. He notes that:

"all the text messages from August 2014 through October 2014 sought by the plaintiffs in their motion to compel and ordered to be produced by the trial court should have theoretically been preserved in the Kiersted image of the backup of Mr. Vincent's iPhone 5 taken in November 2015. As defense counsel explained during his closing arguments on October 31, 2016, the defendants are producing, in spreadsheet fashion, text messages from this time period and all the way back to October 2013,from that image, albeit in a less than timely or forthcoming manner."

The court also stressed the importance of the fact that the plaintiffs could not prove the iPhone 4 existed at the time the preservation order was issued. It agreed with the trial court that the evidence did not show that the defendants had not been forthcoming, efficient, or effective in their discovery. Judge Thibodeaux did however find good cause for the appointment of a special discovery master who would be allowed to inspect, copy and test the image databases of both parties.

Interestingly, a footnote in the opinion quoted the plaintiff's attorney as stating that AT&T had agreed to provide them with text messages, and that it had the ability produce things that had been deleted from the phone.