Last-Minute Revision Brings Forth Streamlined Proposal for Rule 37(e) at Advisory Committee Meeting

On April 10-11 2014,  the Advisory Committee on Civil Rules chaired by U.S. District Judge David Campbell (D. Ariz.) convened at Lewis & Clark College in Portland, Ore., to consider final proposals to amend the Federal Rules of Civil Procedure. While not final, this was the culmination of an effort that kicked off in 2009 and aims to become part of the Federal Rules in December 2015.

Streamlined Rule 37(e)

The most controversial component of the proposed changes being considered by the Advisory Committee has been revisions to Rule 37(e), the so-called “safe harbor” provision for protection against failing to provide ESI.  Over the past three years, the sub-committee responsible for this daunting task has considered a wide range of proposals aimed at addressing a lack of uniformity across the Circuits and the notion that litigants were over-preserving out of fear of sanctions.

Coming into last week’s meeting, the proposed amendment to 37(e) had sought to limit the use of case-ending sanctions to only the most severe situations (cases involving severe prejudice caused by willful or bad faith on the part of the spoliator), relying instead on remedial measures meant to cure the prejudice.  The proposal went on to include a list of factors to be considered in assessing a party’s conduct, including reasonableness and proportionality of preservation efforts.  These proposals yielded thousands of comments, which the sub-committee led by U.S. District Judge Paul Grimm (D. Md.) subsequently sought to address.

Following the public comment period, the Rule 37(e) sub-committee made a number of revisions to the proposed amendments, adding detail in an attempt to clarify when curative measures could be applied and to limit the Court’s discretion when ordering measures to cure loss of information.  As a result, the published version going into the Portland meeting was, it is fair to say, verbose.

Upon convening the meeting, Chairman Campbell explained that the agenda was being reorganized. All other Committee business would be considered on the first day and the second day would be reserved solely for discussion of 37(e). The rule was being re-drafted and the Subcommittee needed more time to complete its work.

On the second day, the new proposed language had been distributed and it read as follows:

(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 the information, and the information cannot be restored or replaced through additional discovery, the court may:

(1) Upon a finding of prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice;

(2) Only upon a finding that the party acted with the intent to deprive another party of the information’s use in the litigation,

(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.

After hearing from Judge Grimm and members of his sub-committee, the proposed changes were unanimously approved by the Advisory Committee.

Judge Grimm explained that the rule remains focused on the loss of ESI as opposed to tangible evidence.  The rule is predicated as only applying when ESI is lost that “should have been preserved,” that the loss was due to a failure “to take reasonable steps,” and where the information cannot be otherwise restored or replaced.

Upon a finding of prejudice, the court may pursue measures “no greater than necessary” to cure the prejudice. Only in cases where a party acted “with the intent to deprive” can the court can go further, including presuming the lost information was unfavorable, giving a jury instruction or dismissing the action.

The new streamlined version introduced in Portland eliminates the notion of curative versus punitive measures, and avoids terms such “substantial prejudice” as “willful or in bad faith” to eliminate ambiguity introduced with such labels.  It also removed the list of factors to be considered from the rule itself.  It was expected that revisions to the notes would provide a detailed commentary in order to outline the rationale and guidance underlying 37(e).

Commentary during the meeting in favor of the revised 136-word rule included Judge Campbell’s conclusion of the difficulty in drafting a rule that that was more prescriptive while maintaining the discretion of the trial courts.  Hon. Paul S. Diamond (E.D. Pa.) deemed it, “Brilliant in its simplicity.” Others, including Parker Folse (Sussman Godfrey), lamented that it does not address the challenge of over-preservation.

It will be interesting to see what, if any, resistance arises with the new proposal for Rule 37(e). For those who question if this was worth the effort, one could argue it was. The intense debate around this topic illuminated this area of the law that continues to evolve. The Committee recognized this challenge, noting that should it go into effect, 37(e) will continue to be closely monitored with further adjustments coming in future rule-amending cycles.

Next stop as per the Rules Enabling Act is review by the Standing Committee at the end of May, which will vote on forwarding it to the Supreme Court and the U.S. Congress for final adoption. Implementation would be no earlier than December 2015.

Duke Proposals

As previously noted, Rule 37(e) was not the only change under consideration. On the first day of the Advisory Committee meeting the members adopted what had become known as the “Duke Conference Proposals,” owing to their origin at the 2010 Conference on Civil Procedure held at Duke University.

The sub-committee reviewing these proposals was chaired by U.S. District Judge John G. Koeltl (S.D.N.Y.). They proved much less controversial and were discussed and approved efficiently. This group of changes sought to address proportionality (Rules 26 and 34), case management (Rules 4 and 16), and cooperation (including Rule 1).  These were the three themes of the Duke Conference: “Proportionality, cooperation, and early and active case management,” said Judge Koeltl.

Of this group of changes, two prompted the most attention. The first was amending Rule 26(b)(1) to include the word “proportionality” when determining scope as a way to acknowledge this factor in weighing litigants’ efforts during the discovery process.

The other focus area was on the lowering of the presumptive limits in Rules 30, 31 and 33. The earlier draft had proposed lowering the length of a deposition, reducing the number of interrogatories and limiting the number of requests to admit. Despite an intent of promoting more efficiency in the disposition of civil actions, the reduction in the limits drew strong criticism from both sides of the organized bar. For that the reason, the sub-committee chose to withdraw them from consideration.