Is eDiscovery Existing in a Post-Sanctions World?
The short (and obvious) answer is no. Rule 37(e) isn’t going anywhere. But recent case law indicates a trend where sanctions seem to be harder to come by, which may play into what concerns in-house legal teams as they consider the technologies they may need.
A recent infographic, General Counsel: From Lawyers to Strategic Partners (released by Raconteur with data from Walters Kluwer) showed 66% of corporate legal teams saying “Data Breaches and Protection of corporate data” was a top issue keeping them up at night. Sanctions didn’t even make the list.
Recent case law from 2019 supports the lack of sanction fear, as several cases showed that even when evidence was deleted (sometimes knowingly), courts aren’t doling out sanctions in the same way since the 2015 amendments to the Federal Rules of Civil Procedure (FRCP) went into effect.
As a refresher, Rule 37(e) of the FRCP lays out the threshold for sanctions as follows:
If Electronically Stored Information (ESI) was lost because:
A party didn’t take reasonable steps to preserve it when they should have (i.e. because they knew litigation was imminent)
- and if the lost ESI can’t be restored or replaced by simply doing discovery again
- and if there was an intent to deprive the party of information by the loss of the ESI
- and if the lost ESI actually affects the outcome of the case
…then the court may consider sanctions.
The following examples show that consider is a key word, even when they find the threshold has been met, as in case 3.
United States et al. v. Supervalu, Inc. et al. Nov. 18, 2019 (C.D. Ill. 2019)
Three days after a subpoena, a district pharmacy manager for the defendant sent out an email stating, “Throw away all your competitor’s price matching lists and get rid of all signs that say we match prices.”
The plaintiff alleges there are inconsistencies in both the number and timing of the subsequent litigation holds and accordingly asked the Court for an in-camera review of the three litigation holds which were eventually sent. The plaintiff also believes that the defendant failed to preserve price matching materials responsive to the government subpoena from approximately 80% of their pharmacies nationwide.
But the Court denied sanctions, stating, “Upon reviewing the record, the Court is unable to conclude that Defendants acted in bad faith. If the evidence at trial shows otherwise and bad faith on the part of the Defendants is established, the Court can revisit the issue and consider one or both of the sanctions requested by the Relators or another appropriate sanction.”
Mafille v. Kaiser-Francis Oil Co. May 21, 2019 (N.D. Okla. 2019)
In this case, the plaintiff’s computer was wiped after her termination as part of standard retention policy. When the plaintiff filed for spoliation sanctions, the Court found that the plaintiff’s computer contents were uploaded daily onto the defendant’s LAN server as part of a company policy. So even if her computer were destroyed, the contents could potentially be retrieved if discovery were done on the LAN server. Also, the defendant requested which documents were vital for the plaintiff’s case so they could attempt to retrieve them from the LAN server, but the plaintiff never identified any such items.
Univ. Accounting Serv., LLC v. Schulton. June 7, 2019 (D. Or. 2019)
In this case, the defendant admitted, “I recognize fully that was in violation of the subpoena,” and later said of one particular piece of data, “I deleted the file as fast as I could, because I was petrified at its existence, because it’s exactly the type of damning information that UAS wants to catch me with.”
In US District Judge Michael H. Simon’s Ruling, he states that the Rule 37(e) sanction thresholds “have been satisfied.” Yet, even after meeting the threshold conditions, the judge didn’t order case termination sanctions, but instead chose a permissive inference spoliation instruction against the defendant.
No Sanctions, Why Worry?
Without the specter of sanctions haunting the dreams of in-house legal, does this mean they’ll finally get a good night’s sleep?
Only if they have the processes and technology to manage the exponential growth of data sizes and new file types, which continues to be one of the biggest challenges for corporations, particularly for in-house legal teams who are tasked with mitigating risk involved with enterprise data. To do this, the ability to manage data in a flexible and scalable manner is vital.
Sending a legal hold notice is pretty straightforward. Gaining meaningful and speedy insight into petabytes of data from multiple file types for investigations and subpoenas is much more complex, and forward-looking legal teams are putting their technology to work doing just that.