Proposed Amendments to Federal Rules: Defining When the Failure to Preserve Documents Becomes Spoliation

There are significant changes to the Federal Rules of Civil Procedure in the works.  Among other things, the Advisory Committee on Civil Rules has proposed changes to promote proportionality in discovery and to provide clearer guidance on when a party may be sanctioned for failing to preserve documents.  This post addresses the latter; the December 23, 2013 post to this blog addressed revisions regarding proportionality in discovery.

These days, the consequences for failing to preserve documents that prove to be relevant in litigation are significant and even case-ending; they include not only huge monetary sanctions but adverse inferences on potentially dispositive facts against the party failing to preserve.  And as if that were not bad enough, the standards applied in the case law for when a party will be subject to such consequences is anything but clear, and the ways in which discoverable information is recorded and stored—and hence can be lost—are many.  This leaves litigants, and potential litigants, in a quandary about how much is enough when it comes to efforts to preserve.

Amendments under consideration include new Rule 37(e), which is intended to “replace the disparate treatment of preservation/sanctions issue in different circuits by adopting a single standard.”  The new rule would allow for sanctions for failure to preserve documents that “should have been preserved” only where (1) the party failed to preserve information willfully or in bad faith and (2) the loss of information caused “substantial prejudice” to the other party.

Under this standard, a failure to preserve unimportant material theoretically would not be enough, even if the party acted in bad faith; nor would a failure to preserve important material be enough if the party acted in good faith.  The rule would create an exception where the loss of information “irreparably deprived a party of any meaningful opportunity to present or defend against the claim in the litigation”—a high standard by the looks of it.

Arguably, the proposed standard would allow merely negligent spoliation to go unsanctioned—even where it caused substantial prejudice to the other party.[1]  But new Rule 37(e)(2) mitigates against this result by listing factors to consider in evaluating whether documents should have been preserved and whether failure to do so was willful or in bad faith.  Those factors include negligence-type considerations, such as whether the party was on notice that litigation was likely and that the information would be discoverable and the reasonableness of the party’s efforts to preserve the information (including the proportionality of the efforts to the litigation).  The factors also would have courts consider the parties’ conduct in trying to address the issue, such as whether there was a “clear and reasonable” request to preserve the information (as opposed to a boilerplate laundry list), whether the parties consulted in good faith about the scope of the preservation obligation, and whether the party to be sanctioned timely sought the court’s guidance.