The Importance Of Litigation Readiness Plans Under The New Federal Rules

The Importance Of Litigation Readiness Plans Under The New Federal Rules

October 13, 2016

The new Federal Rule 37(e) governing the imposition of “spoliation sanctions” (i.e., remedial measures that judges may impose against a party for failing to preserve potentially relevant evidence) became effective December 15, 2015.  The rule change was intended to:

  1. Harmonize the federal standards governing spoliation sanctions
  2. Raise the bar for obtaining the more extreme forms of sanctions when the loss of electronically-stored information (ESI) is at issue. Such heightened standards were needed because, in this era of Big Data, the “explosion of ESI” causes many entities to spend “millions of dollars preserving ESI for litigation that may never be filed.” Higher standards for obtaining extreme spoliation sanctions should dis-incentivize over-preservation.

The impact of the recent rule change depends upon how the judiciary interprets and applies them in pending cases. Last month, a federal judge in Georgia provided insight in O’Berry v. Archer Daniels Midland.

The O’Berry Decision
Plaintiffs sued two trucking companies after being injured in an accident. During discovery, plaintiffs sought the truck driver logs from PeopleNet software, which tracks and stores drivers’ miles, GPS coordinates, speeds of travel, and hours worked to ensure they do not exceed company policies.

After defendants reported that such ESI had been “inadvertently destroyed” (and that PeopleNet no longer maintained the records under its document retention policy), plaintiffs sought spoliation sanctions. 

The court’s analysis under Rule 37(e) is notable. The court held that the defendants’ preservation failure was “unreasonable” because they only attempted to maintain hardcopy printouts from PeopleNet, not the data itself. Such printouts were misplaced in the years between the accident and litigation.

Moreover, the court found that such shortcomings were not only unreasonable, but also “intentional,” thus triggering the more extreme spoliation sanctions. The court characterized the practice of relying on hardcopy printouts as “irresponsible and shiftless behavior” and chastised defendants for lacking a “written policy on the proper procedure for preserving” ESI. The court held that such conduct “can only lead to one conclusion—[defendants] acted with the intent to deprive Plaintiff of the use of this information at trial.”

Thus, the judge imposed a mandatory adverse inference instruction against defendants (i.e., a direction to the jury “that it must presume that the lost information” would have been unfavorable to the defendants’ case). As aptly described by Judge Shira Schiendlin, one of the trailblazers of the modern e-discovery era, the impacts of such instructions are significant:

The in terrorem effect of an adverse inference is obvious. When a jury is instructed that it may infer that the party who destroyed potentially relevant evidence did so out of a realization that the evidence was unfavorable, the party suffering this instruction will be hard-pressed to prevail on the merits. Accordingly, the adverse inference instruction is an extreme sanction and should not be given lightly. Zubulake v. UBS Warbarg, 220 F.R.D. at 219-20.

Lessons Learned
The most important takeaway from the O’Berry decision is the importance of a formal ESI preservation and litigation readiness policy. Modern businesses and their employees use a panoply of electronic data sources, many of which are designed to be ephemeral. Without an intelligent and comprehensive preservation policy, the ESI within such data sources is almost certain to be lost over time. The small investment of resources required to design and implement such policies pales in comparison to the in terrorem consequences of failing to be litigation-ready.

Blog Info
Dan Meyers, President, Consulting & Information Governance, TLS