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New Cases Spotlight the Importance of Litigation Readiness in Avoiding FRCP 37(e) Sanctions

FRCP 37(e) Reasonable Steps

Litigation readiness is an essential step for parties who wish to be prepared for the electronic discovery process. While significant for the production phase of discovery, litigation readiness has proven indispensable for helping clients preserve relevant electronically stored information (ESI). This is particularly the case under Federal Rule of Civil Procedure 37(e), which generally safeguards parties from sanctions who have implemented and followed litigation readiness measures.

FRCP 37(e) provides a framework for determining whether sanctions of any nature should be imposed for ESI preservation failures. While FRCP 37(e) does not expressly mention litigation readiness or specify which measures can safeguard a preserving party from sanctions, it forbids sanctions if the preserving party can demonstrate that it took “reasonable steps to preserve” relevant ESI. The questions are what are “reasonable steps to preserve” and how can preserving parties best demonstrate that they have taken those steps. As discussed in an article Legaltech News recently published, the issue seems to turn on whether a party has implemented and followed litigation readiness measures.

FRCP 37(e) Case Law on “Reasonable Steps to Preserve”

A key step in litigation readiness is ensuring that counsel is familiar with a client’s information retention policies and practices. Neglecting to understand those policies or practices may lead to faulty preservation measures and a loss of relevant information, all of which will likely be deemed a failure to take “reasonable steps to preserve.” This was the case in Franklin v. Howard Brown Health Center where defendant’s inability to implement a proper legal hold resulted in a loss of relevant communications.[1]

The defendant in Franklin failed to take reasonable steps to preserve relevant information after confronted with allegations that it wrongfully discharged plaintiff. While there were several preservation breakdowns, the most critical involved a failure to keep relevant messages from the organization’s Microsoft Lync instant messaging service.

Defendant did not preserve the Lync instant messages because its general counsel did not have a sufficient understanding of how the organization’s retention system functioned for the messages. Counsel mistakenly believed the organization’s retention practice for instant messages was the same for email: ten years in the cloud. Instead, the Lync messages were kept in a temporary storage repository for a maximum of two years, after which they were destroyed. This critical misunderstanding led to the loss of relevant messages and resulted in a Rule 37(e)(1) curative measure that would allow plaintiff to present evidence and argument to the jury regarding defendant’s preservation failure.

Another instructive example on the importance of litigation readiness measures is the Culhane case, in which the court issued a mandatory adverse inference instruction under FRCP 37(e)(2) against defendant for failing to preserve relevant video footage of an accident involving plaintiff.[2] The court was particularly concerned by defendant’s failure to observe its extant litigation readiness measures. Defendant had implemented a “customer accident investigation” policy, which spotlighted the importance of preserving evidence (including video footage) relating to incidents such as the one involving plaintiff. In addition, defendant had a claim form that directed the preservation of “any and all information and evidence” relating to incidents such as the one involving plaintiff.

Despite those measures and plaintiff’s demand letter requesting preservation of relevant video footage, defendant’s employee charged with investigating the incident did not keep the video footage and could not explain why he neglected to do so. Deviating from an established litigation readiness process without a reasonable explanation ultimately led to the court’s finding that defendant failed to take “reasonable steps to preserve” and its Rule 37(e)(2) sanctions order.

Implementing and Following Litigation Readiness Measures

The Franklin and Culhane cases demonstrate the importance of both implementing and then following litigation readiness measures for purposes of FRCP 37(e). Neglecting to do either could be deemed a failure to take “reasonable steps to preserve” if relevant ESI is lost.

In contrast, consider those organizations that develop a litigation readiness program and whose employees, after appropriate training, follow the outlined steps regarding ESI preservation in that program. They generally avoid Rule 37(e) sanctions even if there is some data loss because their actions in observing delineated preservation steps typically demonstrate “reasonable steps to preserve.” This point is exemplified by the recent Courser v. Michigan House of Representatives case, in which the court refused to find that defendants failed to take reasonable steps to preserve after they demonstrated their compliance with an internal litigation hold policy.[3]

In summary, companies that implement a litigation readiness program, including a litigation hold policy with proper training to better ensure employee compliance, can more readily demonstrate “reasonable steps to preserve.” While not foolproof from rogue or noncompliant employees as Culhane shows, such a procedure should generally provide an effective bulwark against most efforts to obtain FRCP 37(e) sanctions.

 


[1] Franklin v. Howard Brown Health Center, 17-cv-8376, 2018 WL 4784668 (N.D. Ill. Oct. 4, 2018); report and recommendation adopted, 2018 WL 5831995 (N.D. Ill. Nov. 7, 2018).

[2] Culhane v. Wal-Mart Supercenter, d/b/a Wal-Mart Stores, Inc., 364 F. Supp. 3d 768 (E.D. Mich. 2019).

[3] Courser v. Michigan House of Representatives, No. 18-CV-0882, 2019 WL 3034905 (E.D. Mich. July 11, 2019).

Philip Favro
Philip Favro
Philip Favro acts as a trusted advisor to organizations and law firms on issues surrounding discovery and information governance. Phil provides guidance on data preservation practices, litigation holds, data collection strategies, and ESI search methodologies. In addition, he offers direction to organizations on records retention policies and the need to manage dynamic sources of information found on smartphones, cloud applications, and social networks. Phil is available to serve as a special master on issues related to electronic discovery. Phil is a nationally recognized thought leader and legal scholar on issues relating to the discovery process. His articles have been published in leading industry publications and academic journals and he is frequently in demand as a speaker for eDiscovery education programs. Phil is a member of the Utah and California bars. He actively contributes to Working Group 1 of The Sedona Conference where he leads drafting teams and serves as the Steering Committee project manager. Prior to joining Driven, Phil practiced law in Northern California where he advised a variety of clients regarding business disputes and complex discovery issues. He also served as a Judge Pro Tempore for the Santa Clara County Superior Court based in Santa Clara, California.
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