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Spoliation and the long-awaited federal e-discovery rule changes.

Byline: Jeff Lilly, Terence Ridley

The long-awaited federal e-discovery rule changes recently passed review by the United States Supreme Court, and unless Congress acts otherwise, the rules finally are poised to go into effect later this year. These rules are the culmination of years of work by many invested in improving process and results on this ever-changing and challenging subject. Inside and outside counsel must now keep the momentum going and continue to work for appropriate interpretation and implementation of these rules, so as to make sure the hard work translates into new and impactful results.

Unfortunately, while there appears to be some guarded optimism, there is even more outright skepticism that the amendments will alter current practices. A 2015 survey by Exterro showed that out of 22 federal judges who were asked whether the upcoming amendments will help solve today's e-discovery problems, only 14 percent completely agreed, 43 percent "somewhat agreed," and the rest did not agree or just did not know. Perhaps this is understandable given how entrenched "litigation about litigation" has become, where counsel look for any opportunity to make a case about imperfect preservation, rather than the merits of the underlying lawsuit, as detailed in the first two columns in this series.

The reality is while the new rules create an opportunity for a much more rational and predictable approach to e-discovery issues, those that prefer the old approach will be working to maintain the status quo. There remains significant room for interpretation in several important areas of the new rules, and how those areas are interpreted will dictate whether spoliation sanctions continue to be an ever-present and common threat to corporations.

The proposed Rule 37(e)(1), in essence, provides intermediate measures (additional discovery, order curative measures, etc.) before serious sanctions (such as an adverse inference instruction) are imposed, and only then if the court finds that the party's actions caused substantial prejudice in the litigation and were willful or in bad faith; irreparably deprived a party of any meaningful opportunity to present or defend against the claims in the litigation. Rule 37(e)(2) further identifies factors the courts should consider in assessing a party's conduct, which includes how reasonable the efforts were to preserve information and, importantly, the proportionality of the preservation efforts to any litigation (whether anticipated or ongoing).

What can corporate counsel do to educate and positively influence federal judges, such that they are receptive to the productive changes these rules are meant to effect? To start with, corporate counsel must strategize immediately with outside counsel on how to be prepared to address the predictable "battleground areas" so there is a coordinated effort.


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For example, even assuming the Federal Rules are impactful on federal litigation, such an outcome will have no impact on state courts unless efforts are made to initiate consistent rule changes on the state level. Otherwise, the changes can only be marginally impactful, as corporations will have no choice but to design policies that are defensible in all states, because many will still be using "old" rules.

The first battleground within the new rules themselves will regard the concept of prejudice. Parties will of course have diametrically opposed views as to what rises to the level of meaningful "prejudice." The party that feels aggrieved will argue that anything that is missing constitutes prejudice, as they cannot possible know what the missing information would have revealed. Meanwhile, the party that "lost" the information must somehow show that there is no prejudice resulting from missing, yet unknown, information.

A second battleground will be over what amounts to "reasonableness" of efforts such that sanctions are not warranted. Inside counsel would still be wise to interpret this as meaning the more thorough the effort to preserve, with an abundance of caution approach that uses back-up systems to protect against human error, the more likely those efforts are to be viewed as "reasonable." Developing case law that establishes precisely (or even generally) what constitutes "reasonableness" will be tremendously helpful in designing internal policies that can predictably be relied upon to defend against potential sanctions in court.

Finally, the opportunity to cure preservation errors is an important component of the new rules. Companies can take some comfort that sanctions should not be levied without first having an opportunity to correct for any alleged mistakes. Of course, this can be an expensive endeavor, as restoring back up tapes and similar processes comes with a high cost. So while it may help avoid sanctions, from a pure cost perspective, getting preservation right on the front end is still the most sensible goal.

There will be multiple other issues that arise as these rules take hold and begin to be interpreted, and some of them cannot be anticipated. But the more inside and outside counsel begin to do now to strategize for the new rules, the more prepared they will be to blunt the efforts of those who would prefer that the way of the "old" rules continues.
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Publication:Inside Counsel Breaking News
Date:May 21, 2015
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