Several changes to the Federal Rules of Civil Procedure (FRCP) may have a huge impact on how you practice law if you are involved in litigation. Litigators who ignore these changes risk being sanctioned by the court.
As we discussed in a prior column, recent changes to FRCP 34 have spelled the end of boilerplate objections. This E-Discovery column will address the second major rule change, the changes to Rule 37 regarding sanctions, which have somewhat lessened the fear of spoliation sanctions for normal business data deletion, and lessened the over-preservation that was rampant in litigation in years past.
The third major rule change, involving changing the scope of discovery under Rule 26, will be addressed in the next column. As mentioned previously, each of these rule changes went into effect in December 2015, but as recent case law indicates, many counsel remain unaware of these important changes.
SPOLIATION SANCTIONS CURTAILED
Under both common law and the federal rules, a party has a duty to preserve potentially relevant evidence whenever litigation is reasonably foreseeable. Any party that fails to preserve potentially relevant evidence runs the risk of being justly accused of spoliation — which is the destruction or material alteration of evidence, or the failure to preserve an item for another’s use as evidence. It is important to remember that both the party and his or her attorney may be subject to sanction for spoliation. These preservation obligations apply to physical items, such as the car involved in a crash, for example, as well as to electronic data, such as email or text messages.
Rule 37 was amended, effective 12/1/2015, to require that a person seeking sanctions show as a preliminary matter that: (1) the lost evidence is relevant to the matter and therefore should have been preserved; and (2) it cannot be restored or replaced through backups or other sources. Then, the analysis can turn to the extent of the prejudice to the deprived party, and the intent of the depriving party, to determine the proper sanction. The rule currently reads:
(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 it, and it cannot be restored or replaced through additional discovery, the court:
(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:
(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.
COURT INTERPRETATION OF THE NEW RULE
The cases interpreting the new rule have been somewhat scattershot – as judges try to apply the sanction matrix to broadly diverging facts and levels of culpability. Some courts have stated that the court still has inherent authority to sanction for discovery abuses, despite the strict proof required by this new rule. The majority of courts are finding that the routine deletion of data will not result in sanctions, but intentional bad conduct will.
Shortly after the Rule 37(e) amendments went into effect, U.S. Magistrate Judge Jim Francis (SDNY) issued an opinion in CAT3 v. Black Lineage where he asserted that courts’ inherent authority to bring sanctions for spoliation of evidence survived, despite the Advisory Committee’s apparent indication. One year later, the U.S. Supreme Court addressed spoliation sanctions issued under a court’s inherent authority, in Goodyear Tire & Rubber Co. v. Haeger, ruling that such sanctions can be issued, but only upon a showing the fees were incurred because of a party’s misconduct.
When interviewed about the CAT3 case, Judge Francis indicated a belief that instances will arise where there will be a gap in the rule, and for at least those instances, inherent authority to sanction still exists. For example, consider a situation in which a party intentionally destroys information, but it destroys it in the context of a possible imminent government investigation, rather than litigation.
In this instance, no litigation is anticipated at the time of the destruction, so that prong of the test fails. In any subsequent litigation, the spoliator may not be subject to sanctions under the literal language of 37(e); however, some judges feel that there should be an opportunity to sanction them under the court’s inherent authority.
In another notable Rule 37(e) sanctions case, pop star Taylor Swift learned just how difficult it can be to get e-discovery sanctions after the 2015 e-discovery amendments in Mueller v. Swift, 2017 WL 3058027 (D. Colo. 2017). This case relates to an incident that occurred in the summer of 2013, when Taylor Swift gave a concert in Denver. Swift had a meet and greet after the concert, and Denver radio personality David Mueller attended the event. During a photo shoot, Swift alleged that Mueller touched her inappropriately just as a photo was being taken.
Mueller denied the accusations and sued Swift after being fired from his DJ job due to Swift ’s accusations, which Mueller argued constituted tortious interference with his employment contract. Swift counterclaimed for assault and battery.
After the alleged incident, Mueller had a meeting with his bosses at the radio station, and he recorded the entire conversation. The defendants, learning of the existence of this recording that related to whether Mueller had indeed grabbed Swift, sought the audio recording during discovery.
However, when Mueller sent the audio recording, he didn’t send them the entire file. Instead, he sent them clips he made from the recording, because the entire recording was over two hours long. Then, when asked to provide the entire original recording, he said he could not because: (1) he had spilled coffee on his laptop; (2) his backup drive malfunctioned; and (3) he “threw out” his cell phone months aft er this litigation was filed.
The court found it “troubling” that he threw away the phone, noting that it was a device Plaintiff had used during the time relevant to his claims, and it may have been the device he originally used to record the June 3, 2013, conversation. Thus, in the same case we not only have coffee spilled on a laptop, but a mysteriously malfunctioning external hard drive—and still they couldn’t get an adverse inference instruction. The court found that the adverse inference instruction would be too severe.
However, defense counsel did get to tell the jury about, and cross-examine Mueller about, the circumstances of the lost audio recording – the three separate alleged mishaps leading to the destruction of this crucial data. Ultimately, the jury sided with Swift in this case.
The courts are still wrestling with interpreting the Rule 37(e) changes; however, litigation counsel can advise their clients that truly innocent data loss should not result in game-changing sanctions.