Legal Tech: New Cases Provide Insights on the FRCP 37(e) 'Reasonable Steps to Preserve' Requirement

Nearly four years have transpired since the Civil Rules Advisory Committee enacted changes to Federal Rule of Civil Procedure 37(e) on Dec. 1, 2015. In so doing, the committee had two principal objectives in mind. The first was to provide a uniform national standard regarding the issuance of severe sanctions to address spoliation of electronically stored information (ESI). The second was to implement a clear framework for determining whether sanctions of any nature should be imposed for ESI preservation failures.

Given the passage of time, it is worth analyzing whether the 2015 amendments to FRCP 37(e) have satisfied the committee's objectives by effectively addressing ESI spoliation questions. Such a step is not extraordinary, particularly considering the committee's actions relating to the original iteration of FRCP 37(e). Three and one-half years after enacting the prior version of the rule in December 2006, the committee had already convened the "Duke Conference" in May 2010 to evaluate the limitations of the prior rule and begin the process of considering possible alternatives.

While the current iteration of FRCP 37(e) appears far more effective than its 2006 counterpart, the rule is not without its shortcomings or its detractors. To facilitate an evaluation of the rule, The Sedona Conference has organized a session to consider the issues at its upcoming annual meeting for Working Group 1 scheduled for October 24 and 25 in St. Louis, MO. In "Sanctions for Spoliation and Discovery Misconduct: Have the 2015 amendments to the Federal Rules of Civil Procedure changed the sanctions landscape?," I will explore with the Honorable Noelle Collins, Alison Grounds and David Kessler the effectiveness of FRCP 37(e) in remedying ESI spoliation.

An evaluation of FRCP 37(e) necessarily entails examining key motion practice flash points that have arisen since the implementation of the rule. One of the most significant of these flash points is what constitutes "reasonable steps to preserve" relevant ESI.

"Reasonable Steps to Preserve"

The issue of "reasonable steps to preserve" is memorialized in FRCP 37(e), which forbids the imposition of sanctions unless the party charged with preserving relevant ESI "failed to take reasonable steps to preserve it." The questions are what constitutes "reasonable steps to preserve" and how preserving parties can best demonstrate that they have taken those steps. Recent case law is instructive on this issue, often revealing what does not constitute "reasonable steps to preserve." The issue seems to turn on whether a party has implemented and followed litigation readiness measures.

For example, in Franklin v. Howard Brown Health Center (N.D. Ill. Oct. 4, 2018), defendant's inability to implement a proper legal hold resulted in a loss of relevant communications. The court in Franklin held that defendant, a non-profit community health facility, failed to take reasonable steps to preserve relevant information after confronted with allegations that it wrongfully discharged plaintiff. While there were several preservation breakdowns, one of the most critical involved a failure to keep relevant messages from the organization's Microsoft Lync instant messaging service.

Defendant did not preserve the Lync instant messages because its general counsel did not have a sufficient understanding of how the organization's retention system functioned for the messages. Counsel mistakenly believed the organization's retention practice for instant messages was the same as its email system: ten years in the cloud. Instead, the Lync messages were kept in a temporary storage repository for a maximum of two years, after which they were destroyed. This critical misunderstanding led to the loss of relevant messages, which eventually resulted in a Rule 37(e)(1) curative measure that would allow plaintiff to present evidence and argument to the jury regarding defendant's preservation failure.

Another instructive case is Culhane v. Wal-Mart Supercenter (E.D. Mich. 2019). In Culhane, the court issued a mandatory adverse inference instruction under FRCP 37(e)(2) against defendant for failing to preserve relevant video footage of an accident involving plaintiff. The court was particularly concerned by defendant's failure to observe its extant litigation readiness measures. Defendant had implemented a "customer accident investigation" policy, which spotlighted the importance of preserving evidence (including video footage) relating to incidents such as the one involving plaintiff. In addition, defendant had a claim form that directed the preservation of "any and all information and evidence" relating to incidents such as the one involving plaintiff.

Despite those measures and plaintiff's demand letter requesting preservation of relevant video footage, defendant's employee charged with investigating the incident did not keep all of the relevant footage and could not explain why he neglected to do so. Deviating from an established litigation readiness process without a reasonable explanation ultimately led to the conclusion that defendant failed to take "reasonable steps to preserve" and the court's Rule 37(e)(2) sanctions order.

Implement and Follow Litigation Readiness Measures

The Franklin and Culhane cases demonstrate the importance of both implementing and then following litigation readiness measures for purposes of FRCP 37(e). Neglecting to do either could be deemed a failure to take "reasonable steps to preserve" if relevant ESI is lost.

In contrast, consider those organizations that develop a litigation readiness program and whose employees, after appropriate training, follow the outlined steps regarding ESI preservation in that program. They generally avoid Rule 37(e) sanctions even if there is some data loss because their actions in observing delineated preservation steps demonstrate "reasonable steps to preserve." This point is exemplified by the recent Courser v. Michigan House of Representatives case (E.D. Mich. July 11, 2019), in which the court refused to find that defendants failed to take reasonable steps to preserve after they demonstrated their compliance with an internal litigation hold policy.

In summary, companies that implement a litigation readiness program (including a litigation hold policy) with proper training to better ensure employee compliance, can better demonstrate "reasonable steps to preserve." While not foolproof from rogue or noncompliant employees as Culhane shows, such a procedure should help prevent data loss and thereby provide an effective bulwark against an adversary's efforts to obtain FRCP 37(e) sanctions.

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Philip Favro is a consultant for Driven, Inc. where he advises organizations and their counsel on issues relating to the discovery process and information governance. He also serves as a member of The Sedona Conference WG1 Steering Committee.