The End of Sanctions - Chapter 4.

Part II:
Rule 37(e) in Practice

Summary: Breaking Down FRCP 37(e)

The 2015 changes to Rule 37(e) have led to a significant decline in the rate of spoliation sanctions. That's unquestionable. But plenty of outstanding issues surrounding the rule and its implementation remain.

  • Rule 37(e) requires that movants meet a minimum of five unique elements, each of which creates potential barriers to sanctions.
  • Some of the most challenging obstacles created by the new FRCP 37(e) include showing that ESI has been lost and can't be replaced, that there was an intent to deprive, and that prejudice resulted.

The trends are clear: Since Rule 37(e) was amended on December 1, 2015, the issuance of sanction has significantly declined. But that doesn’t mean the questions surrounding Rule 37(e)’s interpretation and application are settled. Below, we explore the workings of the revised Rule 37(e), outstanding issues regarding the imposition of sanctions under that rule, and survey key spoliation cases issued since its inception.

Until the latest set of eDiscovery-focused amendments to the Federal Rules of Civil Procedure became effective on December 1, 2015, sanctions in eDiscovery under FRCP 37(e) could be imposed for a wide range of standards for a variety of misconduct. To put it simply, it didn’t work.

The New Rule 37(e): An Introduction

The 2015 amendments replaced these different standards with a single workflow, whereby severe sanctions could only be granted by judges after a finding that the guilty party “acted with the intent to deprive.”

(e) 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.

As some judges have noticed “the 2015 amendment changed the focus of the Rule from one precluding sanctions in designated situations to one authorizing specific measures that a court may take -- but restricting the most severe sanctions to scenarios involving bad faith.”

In fact, “Rule 37(e) essentially functions as a decision tree."

Rule 37 (e) flowchart
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The above flowchart shows that for a court to enter any of the severe, potentially case-terminating sanctions under subsection (e)(2) there must be a clear finding of a specific intent to deprive—otherwise, “measures no greater than necessary to cure the prejudice” can be entered pursuant to subsection (e)(1).

"Specific intent to deprive' under (e)(2) is not an easy standard to meet and many sanctions motions that may have once easily prevailed earlier are being denied as a result."

Indeed, in many ways the question of “intent” supersedes the quest of prejudice. First, parties aggrieved by discovery violations, both real and imagined, nearly always ask for severe sanctions. Between 2016 and 2018, the severest sanctions were sought in 77 percent of all spoliation cases. Second, prejudice is not an issue if specific intent to deprive can be found, as the Advisory Committee Notes make abundantly, and perhaps even redundantly, clear:

“Subdivision (e)(2) does not include a requirement that the court find prejudice to the party deprived of the information... Subdivision (e)(2) does not require any further finding of prejudice.”

Thus, as it was prior to the recent amendments, if bad faith can be proven then the difficult issue of prejudice can be presumed. But where intent has not been found, proving prejudice over ESI that has been lost often remains a difficult hurdle to leap over, as explained below. Further, “specific intent to deprive” under (e)(2) is not an easy standard to meet either, particularly in the earlier stages of litigation, and many sanctions motions that may have once easily prevailed earlier are being denied as a result. Even some of the seemingly easier tests within the Rule, including determining whether ESI has actually been “lost” and if it could be “restored or replaced” have seemingly become tougher to meet, as well.

"Where intent has not been found, proving prejudice over ESI that has been lost often remains a difficult hurdle to leap over."

16. Sosa v. Carnival Corp., No. 18-cv-20957 (S.D. Fla. Dec. 4, 2018).

17. Oracle America, Inc. v. Hewlett Packard Enterprise Co., No. 16-cv-01393 (N.D. Cal. Aug. 17, 2018)

18. See Robert P. Burns, The Death of the American Trial, Northwestern University School of Law Scholarly Commons (2009).

Indeed, though the amendments still speak of sanctions, the new rule is, in fact, more focused on remedies. Aside from the four measures enumerated in subsection 2 of Rule 37(e)—adverse inferences, adverse jury instructions, and dismissal or default judgement—courts are otherwise instructed to impose no sanctions beyond those “no greater than necessary to cure the prejudice” resulting from spoliation.

Calling the available measures under Rule 37(e) sanctions at all may be a misnomer in most cases. They are explicitly focused on remediating wrong, rather than punishing it.

Even the most severe sanctions may not be that severe — after all, how punishing are adverse inference jury instructions when 98 percent of cases never go before a jury? (28)

Chapter 5

Part II: Rule 37(e) Case Law:
Proving ESI Loss & Prejudice

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