United States: Electronic Discovery & Information Governance - Tip Of The Month: Let's Be Reasonable: Amended FRCP 37(E) Does Not Require Perfection

A nationwide company has been served with a wrongful termination suit brought individually by a former employee. The former employee had been assigned to one of the company's largest departments. This individual's responsibilities within that department were limited in location, scope and duration. Nevertheless, the company's electronically stored information (ESI) is generated and stored in offices across the country and hundreds of employees work within that department. The corporation's general counsel intends to ensure that the company fully complies with its preservation obligations but wants to avoid the costs and disruption of an overbroad ESI preservation plan.

Proportional Preservation

Important amendments were made to the Federal Rules of Civil Procedure (FRCP) in December 2015 that refined the scope of ESI discovery in federal litigation. Included in these amendments were changes to a party's obligation to preserve ESI once litigation is reasonably foreseeable. Under the amended Rule 37(e)—the primary rule that addresses a party's ESI preservation obligations—a party must take "reasonable steps" to preserve ESI relevant to the litigation. The rule's "reasonable steps" requirement is intended to protect parties from incurring the high costs of implementing overbroad litigation holds that often result in the preservation of irrelevant or duplicative ESI.

Amended Rule 37(e) provides no definition for what constitutes "reasonable steps" taken to preserve ESI. However, the rule's official commentary explains that "perfection in preserving relevant electronically stored information is often impossible" and so the rule "does not call for perfection." Rather, so long as a party's preservation efforts are "proportional to the needs of the case," such efforts are likely to satisfy the "reasonable steps" preservation requirement. Using this proportionality analysis, parties may be able to avoid collecting and preserving ESI from custodians with an insubstantial involvement to the events at issue in the litigation or to exclude preserving inaccessible or duplicative ESI.

The preserving party's resources and sophistication can also be considered when determining whether "reasonable steps" were taken to preserve ESI. The rule's commentary acknowledges that "aggressive preservation efforts can be extremely costly, and parties (including governmental parties) may have limited staff and resources to devote to those efforts." Companies may be permitted to rely on less costly forms of ESI preservation methods so long as those methods provide a sufficiently effective means for preserving the ESI—for instance, copying files out of a custodian's email folders rather than suspending the company's automatic deletion system.

What's Reasonable?

Determining whether a party has taken "reasonable steps" to preserve ESI is a fact-intensive inquiry that must be decided on a case-by-case basis. However, with an increased emphasis on proportionality, many preservation practices used prior to the 2015 amendments to the Federal Rules may be ripe for recalibration. For instance:

• Dispense with the disasters. Duplicative ESI preservation is not required to satisfy the "reasonable steps" analysis. This is of particular significance for companies that use disaster recovery systems. If a custodian's ESI has already been preserved, a party is unlikely to be required to also preserve the company's backup tapes containing that same information.
• Exclude the extraordinary. For routine litigation, extraordinary data sources such as unallocated, slack or fragmented data are unlikely to contain ESI relevant to the litigation and may not need to be preserved.
• No need to reinvent the wheel. The "reasonable steps" analysis does not require that ESI preservation protocols be made from scratch. Companies with existing document retention procedures may be able to rely upon those procedures to show that the party took "reasonable steps" to preserve ESI.
• Defendable database preservation. Preserving ESI maintained within a database can be a challenge given the dynamic nature of the system. Often, proportional preservation can be achieved through making a point-in-time copy of the database rather than storing, and retaining, all of its raw data.
• Keep it in the cloud. Maintaining information by third-parties such as cloud-based data storage companies or social media platforms presents unique preservation challenges that may be avoidable. Early case assessment may be critical to determine whether "reasonable steps" would include efforts to preserve such information.

What Hasn't Changed

While Rule 37(e) introduced a uniform standard for determining a party's ESI preservation obligations, other aspects concerning ESI preservation were unchanged by the amendment. For instance, the rule has not altered a party's duty to preserve ESI when litigation is pending or reasonably foreseeable. Nor does the rule do away with the need for issuing a litigation hold. The amended Rule 37(e) only addresses preservation obligations concerning ESI and does not address the obligations to preserve tangible evidence.

Conclusion

The amended Rule 37(e) allows parties to take reasonable steps to preserve ESI in a manner that is proportional to the needs of the case, rather than requiring parties to maintain all of their ESI intact for the duration of a litigation hold. As a result, the rule's "reasonable steps" standard has the potential to conserve e-discovery resources for parties who rely on this uniform standard. However, to fully take advantage of the rule's potential, a party should be well versed in its company's existing data retention protocols, conduct an early case assessment and in some cases, open an early dialogue with all opposing parties.

Originally published August 2016

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