When Rule 37(e), which outlines penalties for spoliating ESI, was amended last year, it was for the purpose of implementing a national standard intended to give some clarity as to how and under what circumstances sanctions can be imposed. A key motivation behind the amendment was to reduce the expensive corporate habit of excessive preservation that resulted from uncertainty over how unintentional failures to preserve relevant evidence would be treated in different courtrooms.
In particular, the authors of the rules explicitly attempted to discredit "cases... that authorize the giving of adverse inference instructions (and other severe penalties) on a finding of negligence or gross negligence." The upshot of the amendment, it was thought, was a substantial reduction of risk to producing parties (e.g. large corporations) who fail to thoroughly produce relevant records.
So some serious pause may be given at the recent ruling of a Valdosta, Georgia federal court, which has imposed an adverse inference instruction -- a severe penalty that a subsection of Rule 37(e) invokes only upon a showing of intent -- for what the court itself described merely as "irresponsible and shiftless behavior." The victim of that sanction is Archers Daniel Midlands (ADM), which was sued over a trucking accident one of its drivers allegedly caused. The ruling in O'Berry v. Turner, Archer Daniels Midland et al., which is available here, punishes the defendants for failing to preserve a driver's log and accident report that may have been favorable to the plaintiffs.
According to Google Scholar, less than 20 federal courts have considered the question of sanctions under the new Rule 37(e). Already there appears to be a fly in the ointment.
Intent versus negligence
As of December 1, Rule 37(e) states that if ESI that should have been preserved is lost due to failures to take reasonable steps to preserve it, and that ESI can't be replace 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.
The O'Berry court's decision hinged, as all determinations of whether to impose the severe sanctions in subsection (2) now should, on whether ADM acted with the "intent to deprive."
As the Rules Committee has said, subsection (e)(2) rejects the idea that a showing of behavior that is merely "negligent" or "grossly negligent" is enough to presume bad intent. Specifically, the note to Rule 37 states that "negligent or even grossly negligent behavior does not logically support th(e) inference" that evidence lost was unfavorable to the party responsible for losing it. "Not even [a] reckless loss will support those measures," a committee member flatly stated in an April 2014 meeting.
"The better rule for the negligent or grossly negligent loss of electronically stored information is to preserve a broad range of measures to cure prejudice caused by its loss, but to limit the most severe measures to instances of intentional loss or destruction," the note states. me
Irresponsible and shiftless behavior
Much of the commentary of how the rules should be applied, including that of the rulemakers themselves, agreed that, as Thomas Allman wrote in his synopsis, "a showing of proof of intent to deprive requires evidence of purposeful conduct to deprive the other party of relevant and discoverable evidence."
If there was such a showing -- and if the burden to make that finding fell on the allegedly harmed party -- little evidence of this exists in the O'Berry case. Instead, the court has inferred intent based on testimony from a former loss control manager at ADM:
- The folder in which he kept a paper copy of the accident report and driver log was lost in an office move performed by a maintenance crew while he was on medical leave.
- Any policies ADM may have related to preservation, collection and storage of accident files are not known to him; it was simply a part of his job to print and store a single paper copy of these documents.
- He unsuccessfully attempted to secure a backup copy of the driver log from PeopleNet, the provider ADM uses to generate those reports.
- Electronic copies of the accident report had been overwritten according to PeopleNet's standard procedures.
(It is also unclear whether the original electronic version of the accident report actually existed when ADM first received a preservation notice, which was two month after the accident had occurred, or whether it had already been deleted according to routine practices.)
Judge Hugh Lawson concluded:
"All of these facts, when considered together, lead the Court to conclude that the loss of the at-issue ESI was beyond the result of mere negligence. Such irresponsible and shiftless behavior can only lead to one conclusion—that ADM... acted with the intent to deprive Plaintiff of the use of this information at trial."
Do the facts of this case and the supporting testimony amount to the heightened showing of intentional conduct that Rule 37 now demands? Certainly there is ample case law detailing instances where more reckless behavior did not result in such severe sanctions. There is also, of course, case law showing the opposite -- harsher sanctions for less flagrant conduct. But the whole point of the amendment in the first place was to square these conflicts.
What this ruling perhaps shows is that, despite assumptions that the amendments would minimize risk arising from discovery failures and be more forgiving to offending parties, sanctions rulings are still, and may always be, intensely case-specific and highly dependent on the interpretation of the presiding judge. In that sense, uncertainty still lingers.
To learn more about the uncertainty around how sanctions should be imposed under new e-discovery rules, and to keep tabs on all the spoliation rulings that have come down since those rule came into effect, download the handy Rule 37(e) cheat sheet below.