ESI Spoliation Sanctions: Assessing the Impact of the 2015 Federal Discovery Amendments

9 Min Read By: Robert J. Witte, Tate L. Hemingson


  • How has the duty to preserve ESI under Rule 37(e) of the Federal Rules of Civil Procedure been applied since its introduction two years ago?
  • Recent cases tell us that an adverse inference is only warranted if there is sufficient proof the evidence was lost or deleted in bad faith, and that “lost” ESI despite an agreement between parties expressly providing access to information for litigation purposes constitutes such bad faith.
  • Rule 37(e) thus encourages early cooperation with opposing counsel to define the scope of discovery for the case, given that courts do not hesitate to dole out spoliation sanctions.

Two years ago this past December, substantive amendments to the Federal Rules of Civil Procedure took effect. The most significant of these changes were to address the behemoth that is e-discovery. This included the new Rule 26 “proportionality” standard designed to balance ever increasingly complex e-discovery with the needs of each particular case. Another key revision was to require discovery objections to be made “with specificity,” thus effectively killing off boilerplate objections.

Another significant change was the retooling of Rule 37(e) to define the affirmative duty to preserve electronically store information (ESI) and to establish a framework for when it is appropriate to impose sanctions for the spoliation of ESI. This article explores the amended Rule 37(e) and its application since its introduction two years ago.

Background of the Rule 37(e) Amendment

The duty to preserve relevant documents and information is not new but arises from a long-recognized, common-law duty to preserve potentially relevant information for trial, subject to the court’s inherent sanction power. In adapting this common-law duty to the rising influx of ESI, some courts, however, had imposed rather harsh sanctions for even negligent conduct that resulted in lost ESI. Because a party could potentially “lose” vast amounts of ESI with surprising ease due to the nature of ESI, practitioners were rightfully terrified of being hit with spoliation sanctions.

In response to these decisions, the Advisory Committee on Civil Rules crafted Rule 37(e) in an effort to create a uniform framework for courts to evaluate the duty to preserve ESI and determine whether and what sanctions might be appropriate. But, as the Advisory Committees recognizes, Rule 37(e) is not intended to supplant the inherent powers of the court to sanction bad behavior.

When Does the Rule 37(e) Duty to Preserve Apply?

Rule 37(e) codifies the affirmative duty to preserve ESI that “should have been preserved in the anticipation or conduct of litigation.” Thus, Rule 37(e)’s duty to preserve ESI requires several “trigger” elements before a court can consider spoliation sanctions:

  • the relevant ESI that “should have been preserved” must have been “lost”;
  • the loss must have occurred after the duty to preserve arose (i.e., when litigation was “reasonably foreseeable”);
  • the loss must have occurred because the party failed to take “reasonable steps” to preserve the ESI; and
  • the ESI cannot be “replaced or restored” through additional discovery such that the loss prejudices the party seeking the ESI.

Each of these individual triggers deserves a little more discussion.

The ESI Must Be “Lost”

ESI may often exist in multiple forms in multiple places. Thus, ESI that can be restored or replaced is not “lost” under Rule 37(e). A question that is still open is whether “lost” ESI can be supplanted by other forms of discovery. Some courts have declined to allow this, but others have permitted narrowed additional discovery to allow parties to pursue additional discovery to uncover “lost” ESI.

Another potential question is what does “lost” mean? In Hsueh v. N.Y. State Dep’t of Fin. Servs., 2017 WL 1194706 (S.D.N.Y., Mar. 31, 2017), the court agreed with the defendant’s argument that Rule 37(e) does not apply when ESI is intentionally deleted, rather than “lost.” Although the court found that the language of Rule 37(e) did not cover intentional deletion, the court still imposed sanctions under its inherent authority. Arguably, intentional deletion still falls under Rule 37(e)—especially considering the “intent to deprive” factor discussed below—but in cases of evident bad faith, regardless of whether Rule 37(e) applies, the court has the power to sanction such egregious conduct and most likely will.

The Duty to Preserve Must Have Been “Reasonably Foreseeable”

Typically, the initiation of litigation—whether formally by a lawsuit or informally by a preceding demand letter—will be the obvious trigger of a party’s duty to preserve ESI. Other events, however, such as governmental investigations or industry events or knowledge, may make such litigation “reasonably foreseeable” such that a court will consider the duty to preserve to have been triggered. Obviously, these situations are case-specific, but practitioners must proceed with caution when disputes begin to arise. The second case discussed below provides a good example.

A Party Must Take “Reasonable Steps” to Preserve ESI

Once the duty to preserve has been triggered, Rule 37(e) requires the party to take “reasonable steps” to preserve ESI. A sound litigation hold practice and procedure that identifies all the relevant custodians and document storage systems will generally be sufficient to qualify. Courts and the Advisory Committee understand that “reasonable steps” does not mean perfection, and ESI may get lost. However, failure to turn off auto-deletion systems is generally not going to be easily forgiven.

The Lost ESI Must Be “Relevant”

Relevance, of course, is a touchstone for all the triggers. The courts will evaluate the relevance of the lost ESI in applying the Rule 37(e) triggers. The moving party bears the burden to show relevancy, but a party requesting extensive relief under the Rule should be prepared to answer questions as to how relevant it believes the lost ESI is. This will also go toward proving prejudice, as discussed below, and when looking at the prejudice suffered from the lost ESI, courts may sometimes shift the burden to the nonmoving party to prove that the ESI was not relevant.

Steps for Imposing Sanctions for Failure to Preserve ESI

If a party can establish the elements above, Rule 37(e) then separates possible sanctions for spoliation into two categories. Both categories require an initial finding that the loss of the ESI prejudices the other party. As noted above, proving prejudice will often require evaluating the relevance of the lost ESI. This will, of course, be factually intensive. Generally, however, if the lost ESI would have made a difference in the pursuit of claims or defenses, its loss will be considered prejudicial.

Once prejudice is proven, the court looks to whether there was an “intent to deprive” the other party of the lost ESI.

If there were no “intent to deprive,” then the court may “order measures no greater than necessary to cure the prejudice.” This will generally constitute, but is not limited to, monetary fines or, more likely, the award of the other side’s attorney’s fees. However, a court may also order, for instance, a forensic examination of a hard drive at the nonmoving party’s expense to attempt to lessen the burden of the spoliation, or other similar measures.

Harsher sanctions are only applicable upon a finding of an “intent to deprive.” These sanctions include a jury instruction (or court presumption) that the lost information was likely unfavorable to the party and, for egregious cases, “death penalty” sanctions of dismissal or a default judgment.

Recent Decisions

Courts continue to apply and interpret Rule 37(e). The following decisions are illustrative of some of the principles behind the Rule and its mechanical application.

In Mueller v. Swift, 2017 U.S. Dist. LEXIS 112276 (D. Colo., July 19, 2017), a radio DJ claimed pop star Taylor Swift falsely accused him of sexual misconduct, resulting in his firing. At the time of his termination, he recorded his calls with his employer. Swift requested them in discovery. The DJ turned over the files to his attorney, but not before editing them to delete everything that was “not important.” He also claimed the original files were lost due to a spilled-coffee incident.

Consequently, Swift claimed spoliation under Rule 37(e) and requested an adverse inference against the DJ that the missing information was favorable to her. Applying Tenth Circuit precedent and Rule 37(e), the court held that such an inference is only warranted if there is sufficient proof the evidence was lost or deleted in bad faith. The court was unable “to draw conclusions about disputed facts bearing on the merits of an action as the result of spilled coffee.” The court thus denied Swift’s request for an adverse inference, but allowed her to cross-examine plaintiff about the record of spoliation in front of the jury.

In ILWU-PMA Welfare Plan Bd. of Trs. v. Connecticut Gen. Life. Ins. Co., 2017 WL 345988 (N.D. Cal., Jan. 24, 2017), an ERISA plaintiff sought spoliation sanctions against the defendant, stemming in part from a tolling agreement the parties signed in 2011 due to previous litigation. In 2012, defendant’s parent company sold one of its three subsidiaries to a third party. Included in the transferred assets were e-mail accounts and other ESI belonging to defendant. Importantly, the purchase agreement obligated the buyer to “provide [the seller] reasonable access to business information of both parties as reasonably required for, among other things, litigation purposes.” The agreement also stipulated that each party would preserve defendant’s information, and that for the first six years, neither party would destroy any of the subsidiary’s information without first providing the other party an opportunity to obtain a copy.

In February 2016, as part of the present dispute, plaintiff requested ESI that included records included in the sale. Despite the purchase agreement’s terms, the third party was unable to produce any of defendant’s records dated before 2009. Defendant argued that sanctions were not warranted, as it could not have reasonably foreseen this action. Further, defendant argued that even if it could have foreseen litigation, the purchase agreement established that defendant took reasonable steps to preserve the ESI.

Turning to FRCP 37(e), the court found that defendant was on notice of potential litigation in 2011 based upon the tolling agreement’s terms and the fact that the issues in the present suit related to the 2011 litigation. Additionally, the purchase agreement expressly stated that defendant would have access to the transferred records “for litigation purposes.” The court was also troubled that the subsidiary sold by the parent company had records of a completely separate subsidiary, and that the company did not bother to make copies of the records before transfer. The court held that even though the discovery process was still ongoing, “at least some prejudice” occurred, and that sanctions against the defendant were appropriate. The court ordered discovery reopened and required defendant to pay the reasonable costs for discovery, as well as plaintiff’s costs for bringing its sanctions motion.

Spoliation Sanctions for Failing to Preserve ESI Are Scary but Manageable

As fitting with the overarching theme of the 2015 Amendments, the preservation duty imposed by Rule 37(e) and its related threat of spoliation sanctions encourage early cooperation with opposing counsel to define the scope of discovery for the case. If parties can do so—or at least understand how each side views proportionality in the context of the case, especially as to ESI—then they can greatly reduce the risk that the other side will claim spoliation of ESI so long as they are taking other reasonable steps to preserve ESI. Parties should not take the duty to preserve ESI lightly, given that courts have not hesitated to dole out spoliation sanctions under Rule 37(e) and their inherent power where appropriate.

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By: Robert J. Witte, Tate L. Hemingson

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