Information Governance: Upcoming 2015 FRCP Amendments (Part 3) - Rule 37 and Records Retention

Of the coming changes to the Federal Rules of Civil Procedure (FRCP), those amendments proposed to Rule 37 are perhaps the most controversial, and farthest reaching. Rule 37 provides guidance to attorneys on how to manage the process of discovering evidence in the possession of another and responding to requests for such discovery by opposing counsel.

 

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The initial proposal for a replacement to Rule 37(e) would have authorized sanctions for failures to preserve only if they caused substantial prejudice in the litigation and were the result of “willful or bad faith” conduct or if they involve failures to preserve which have ‘irreparably deprived” a party of a “meaningful” ability to present or defend against claims in the litigation.  

 

What does this mean to you?
This certainly is an awful lot of high-falutin’ words that aren’t exactly transparent to the average person.  What this translates into is if you had information (emails, text messages, etc.) that was relevant to a lawsuit and you delete it when you should have kept it, the court would view this as intentional destruction of evidence and would hold you accountable. 

Over the past several years, being held accountable has included:

  • Summary judgment (translation: You lose)
  • Court-ordered sanctions (translation: Pay up, buddy)
  • Lots of negative press and publicity (translation: 15 minutes of unwanted fame).

Two or Three Letters Make All the Difference 

The use of “willfulness” as a standard for sanctions has been very controversial, given that some courts define “willful” as acting with intent.  You may recall the old Bill Clinton quote, “Depends on what you mean by the word ‘is’.” I was always struck that the import placed upon this statement was extremely over-blown, as the meaning of one simple word could not possibly be so dramatic.  However, looking at this amendment language the statement “willful AND bad faith” is dramatically different from “willful OR bad faith.”  

 

Let’s say that you have a corporate policy for deleting old electronic files.  Let’s further imagine that you follow that policy and you delete some emails according to that policy that later prove to be relevant to a lawsuit.  Under “willful AND bad faith,” you would have intentionally deleted the files, according to your policy, but it would NOT have been in bad faith; you were just doing what your policy required.  Under “willful OR bad faith,” the fact that you followed a delete policy represents culpable conduct, and you’d be coughing up some dough the next time you stood before the judge.

 

I speak with many customers who, according to their legal counsel, maintain a retention policy of “retain everything, forever.”  The ambiguity caused by this willfulness standard is a key reason for such policies. Attorneys are never sure if they will be held to the “AND” standard or the “OR” standard.  In the absence of such clarity, the best policy is to keep it all and hope for the best.  This approach seemed reasonable in 2006, where a billion emails in an archive was almost unthinkable.  However, in 2014, where a trillion-email-archive is considered somewhat routine (and extremely expensive to maintain), the approach to retain everything is no longer sustainable.

 

New Guidance, New Rationality

Instead, the FRCP Amendments Subcommittee now recommends adoption of a Proposed Rule 37 which authorizes the issuance of “measures” to “cure” the loss of information or its prejudicial impact where:

 

“a party failed to preserve [electronically stored information] that should have been preserved in the anticipation or conduct of litigation.”  This “preservation obligation [is] recognized by many court decisions” and the rule “does not attempt to create a new duty to preserve.”

 

It would appear, however, that a finding that a party “should have” preserved implies a finding of some degree of fault on the part of the party whose conduct is being challenged.  It may also require some showing of prejudice, or, “something to be cured,” in the case of curative measures.  

 

The dramatic difference from this finding is that the amendment committee is effectively creating a “willful AND bad faith” standard.  A defendant can delete old information that was not under a legal hold (or likely to be so) and this will not be viewed as culpable conduct.  To be held liable for such deletion, opposing counsel would have to prove either bad intent, or that the loss of those files materially affects their ability to make their case.

 

This is an enormous change to Rule 37, and the impacts of this change are profound.  Let’s review what those impacts might look like.

 

Implications

  1. Have a POLICY to delete as much as possible - In the future, the FRCP will no longer punish, and instead will encourage, the deletion of old, irrelevant data.  For companies experiencing a doubling of their data every 12-18 months, this change may lead to dramatic cost reductions in both data retention and eDiscovery.  Your goal should simply be delete when you can, retain only when you must.
  2. Follow the policy - It is not enough to have a reasonable deletion policy, you must follow it.  Through Proactive Information  Governance (PIG), you can automatically apply your policies to your organization’s data, which ensures compliance.  With this rule change the historic approach of having custodians self-police is not only irrational, it’s arguably negligent.
  3. Be able to PROVE that you followed the policy - The new language of Rule 37 leads to not just the expectation of good information management, you have to be able to prove that you’re doing it effectively.  With PIG, those same tools which automate the disposition of data provide the robust process data necessary to prove that your processes work and are consistently applied.  This allows counsel to argue with confidence.
  4. Be able to identify when and if there is destruction OUTSIDE of policy - Since spoliation is still possible and punishable, being able to identify when inappropriate deletion is occurring is still critical to your business. Through PIG, such policy violations can be quickly and automatically identified, protecting your organization from potential harm.
  5. Proactively monitor and prevent violations - It’s not enough to know that inappropriate destruction is occurring, you need to prevent it.  Once a violation is detected by PIG, the event can be escalated, evaluated automatically, semi-automatically or manually, and ultimately reversed.  Such proactive policing of your data environment means that litigation can be potentially avoided, and also represents a deterrence against inappropriate acts by members of your organization.

Key Take-Away

It’s clear that with this pending amendment, information governance will be more important than ever.  If you find yourself in federal court after 2015, your best defense will be having rigorous data deletion policies, systems and procedures, following them to the letter, and being able to prove that you did so upon demand.  Those who can meet this standard will have a dramatic advantage in terms of operational costs and the appearance of responsibility before the court.  Those who do NOT meet this standard will continue to see their IT support costs skyrocket, and their appearance of negligence, or even willful misconduct, dramatically hurt their ability to litigate in Federal Court.

 

Today’s top companies rely on HP’s proactive information governance solutions to help reduce their total information management costs and significantly improve efficiencies in data retention and eDiscovery practices. Contact us today to learn more.  

 

#HPIGB

 

Read more on the FRCP amendments:
Information Governance: Upcoming 2015 FRCP Amendments: Strategic Advantage of Information Governance
Information Governance: Upcoming 2015 FRCP Amendments (Part 2) - Rule 26 and Cost Allocation

 

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About the Author
Chris Surdak is a Subject Matter Expert on Information Governance, analytics and eDiscovery for HP Autonomy. He has over 20 years of consul...
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