Sweet Seventeen?: The Latest Cases on Rule 37(e)

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Thomas Y. Allman discusses 17 opinions that explore amended Federal Rules of Civil Procedure 37(e), and its significance in eDiscovery practice.

Thomas Y. Allman

By Thomas Y. Allman

Thomas Allman is a retired General Counsel and Chair emeritus of Working Group 1 of the Sedona Conference®. He is also an adjunct professor at University of Cincinnati College of Law.

The 2016-2017 holiday season brought us the gift of 17 remarkable decisions by district and appellate courts that have illuminated the actual workings of Rule 37(e), including problematic examples of cases where the court should have, but did not, mention the Rule. Of the decisions citing the rule, two opinions involved circuit courts.

This article summarizes the holdings and explains the significance of each, including lessons to be learned.

For those cases that ignore the rule, the likely outcome had the rule been applied is also suggested.

Archer v. York City School District, 2016 BL 432102 (M.D. Pa. 2016).

In granting summary judgment to School District thatrefused to renew a charter school authority to operate, the court refused to sanction deletion of e-mail because there was no duty to preserve at the time and there was no evidence that the party acted intentionally. There was no mention of Rule 37(e).

The court explained in a footnote (20) that determining whether “spoliation” occurred was separate and distinct from the elements for selection of spoliation sanctions under Bull v. United Parcel, 2012 BL 1096 (3d Cir. 2012).

Applying Rule 37(e) probably would have made no difference, given that the Third Circuit does not follow Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 105 (2d Cir. 2002).

Bagley v. Yale, 2016 BL 427714 (D. Conn. 2016)

In a follow-up to its earlier decision [315 F.R.D. 131, 153] (D. Conn. June 14, 2016) ordering production of lists of individuals to whom litigation holds were delivered and from whom information was requested, the court ordered their production (and survey results from recipients) over objections based on attorney client privilege and an inadequate predicate showing of possible spoliation.

The court noted that the material was issued in batches and implied that the delays in doing so might be deemed culpable “or even negligent” and that the recent court opinion Stinson v. City of New York, 2016 BL 1650 (S.D.N.Y. 2016) had implied that a sufficient indefensible failure to issue a litigation hold might justify an adverse inference.

This emphasizes that prompt and documented use of litigation holds remains crucial under Rule 37(e), which the court specifically acknowledged overruled Resident Funding.

Bordegaray v. County of Santa Barbara , 2016 BL 417844 (C.D. Cal. 2016)

Court resolved allegations of spoliation of Power Control Module (“PCM”) data in police car and a diagram about the incident involving allegations of excessive force by applying Ninth Circuit case law without explaining why Rule 37(e) was not applicable.

The court stated it would give an adverse inference as to the missing contents to deter spoliation without examining the intent of the defendants since under Ninth Circuit case law based on Apple v. Samsung, 888 F. Supp.2d. 987, 993 (N.D. Cal. 2012) the fact that there was a “failure to preserve” constitutes spoliation.

Rule 37(e) should have been applied and would have made a difference, since the Ninth Circuit often follows the per se logic of Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003).

Cahill v. Dart , 2016 BL 401791 (N.D. Ill. 2016)

The District Judge, acting in a de novo review of a Magistrate Judge's Report (that ignored Rule 37(e)), determined that the jury should make the decision as to whether prison officials had intentionally allowed a crucial part of a videotape to be overwritten in violation of Rule 37(e)(2) requirements (a “close call”), since it was also an element of a malicious prosecution claim. If the jury found it was, it must presume that the lost evidence would have been unfavorable to the prison authorities in light of the prejudice involved.

This is the only reported decision to date that has allowed the jury to decide if “intent to deprive” existed. Note that if they decided it did not, they still would have heard evidence and argument that otherwise would have been denied to them if the court had decided the issue.

Champion Pro Consulting v. Impact Sports, 2016 BL 427349 (4th Cir. 2016)

In appeal from summary judgment where lower court did not rule on motion for spoliation based on lost or deleted text messages, the court found the appeal to be moot because summary judgment was properly granted without mention of Rule 37(e).

It is unfortunate that the Fourth Circuit missed the opportunity to reference the new Rule.

Cohn v. Guaranteed Rate Inc., 2016 BL 408763 (N. D. Ill. 2016)

The court characterized Rule 37(e) as describing “some” of the remedies available if ESI is destroyed, and noted that a court also has “broad, inherent power to impose sanctions” which are “over and above the provisions of the Federal Rules.”

The court then proceeded to analyze and resolve the spoliation motion entirely relying on pre-rule decisions without again mentioning Rule 37(e). It did not analyze whether “reasonable steps” were taken and implies that it was irrelevant that the missing e-mails were recovered from other parties.

The court found “bad faith” conduct intended to hide adverse information, thus implying that the information would have been unfavorable, but refused an adverse inference since additional discovery might obviate the need to do so.

This is the most lucid case arguing (wrongly, in my view) that there is a choice between using Rule 37(e) and inherent authority (i.e., using Residential Funding logic).

Edelson v. Cheung , 2017 BL 10510 (D.N.J. 2017)

In determining if there had been “spoliation of electronic evidence” from deletion of e-mails, the court quoted Rule 37(e), acknowledging it to be a uniform standard, but applied pre-Circuit case law to determine whether to “impose spoliation sanctions under Rule 37.”

A Special Master had been involved and had issued oral orders. The court concluded that the conduct at issue was intended to deprive the other party of the information in question but determined that there had not been sufficient prejudice to impose a default judgment.

No reference was made to any of the threshold conditions of the Rule, but the court used the fact that the party could subpoena some of the missing e-mails to justify instructing the jury that “it may presume the information was unfavorable” citing Rule 37(e)(2)(B) [sic]rather than entering a default. The court probably mean to cite Rule 37(b)(2)(A).

This opinion appears to suggest that existing case law should be used to interpret Rule 37(e) but the logic is muddled and it is unclear if this had an impact.

FTC v. DirecTV Inc., 2016 BL 426139 (N.D. Cal. 2016)

The court refused to sanction a party that had preserved screen shots, but not the fully interactive website, relating to customers who subscribed to DirectTV services by navigating a live interactive website on the internet.

The FTC argued that the party had failed to take ‘reasonable steps' and was entitled under subdivision (e)(1) of Rule 37(e) to an order precluding use of an expert report.

The court held that while DirectTV could have been more transparent, the FTC “should have been proactive in its efforts to obtain discovery” (*4). It also noted that “after the 2015 amendments to Rule 26(b)(1), the FTC is only entitled “to discover information that is relevant and proportional to the needs of the case” and DirectTV could not be sanctioned under Rule 37(e) for failing to preserve ESI “solely because” the FTC asserts that “potentially relevant” other ESI may have existed (at *5).

This is the first case that explicitly links the scope of the duty to preserve under Rule 37(e) to the amended version of Rule 26(b)(1), an issue that the Rules Committee “ducked” in its 2015 Committee Note.

Helget v. City of Hays , 2017 BL 1082 (10th Cir. 2017)

In a decision finding that a party had waived the right to challenge the failure to resolve a spoliation motion, the Tenth Circuit acknowledged Rule 37(e) in a footnote but applied Circuit principles on review of what apparently involved “internet-usage and email history.”

It is unclear why the Circuit Court failed to apply Rule 37(e).

Keim v. ADF Midatlantic LLC, 9:12-cv-80577 (S.D. Fla. 12/05/2016)

In a putative class action under the TCPA, the plaintiff was unable to produce text messages relevant to his claim and sanctions were sought under Rule 37(e)(1).

The court ultimately refused to apply the rule because it could not be certain that the deletions at issue had not occurred prior to attachment of the duty. It noted, therefore, that the “better practice” would have been for the plaintiff's counsel to “sequester and copy the contents of a plaintiff's cell phone at the time that litigation is anticipated” so that a court can later determine which preserved portions must be produced,” saving costly and time-consuming motions that use significant court and attorney resources (n.4).

This can be seen as a case which “updates” [to the world of text messaging] the duties of counsel under Zubulake V to supervise client preservation conduct involving e-mail, especially in individual plaintiff context.

McQueen v. Aramark Corp. , 2016 BL 396068 (D. Utah 2016)

In a case involving loss of both ESI and documents, the court applied Rule 37(e) and found that reasonable steps had not been taken to preserve due to a delay in use of a litigation hold and that the information could not be restored or replaced through additional discovery. It found that prejudice existed because loss “may well have an effect on Plaintiffs' ability to pursue their claims.”

The court did not find that the party acted with “intent to deprive” under (e)(2) because it could not find that the “actions were intentional or that its conduct establishes bad faith.”

As a “lesser sanction,” it ordered that the parties be permitted to present evidence of spoliation of the work orders and ESI and “argue any inferences they want the jury to draw.”

The court also awarded reasonable expenses for bringing the motion under Rule 37(a), interpreting it to apply to all motions “seeking discovery” because the “failure to preserve records was not substantially justified” and court intervention was necessitated.

This decision is an excellent example of courts construing the language of Rule 37(a) to apply to successful motions under any subdivision of Rule 37. No attempt was made to argue that such an award would reduce or mitigate the prejudice of the loss of ESI at trial.

Romain v. City of Grosse Pointe Farms , 2017 BL 3280 (E.D. Mich. 2017)

Plaintiff in some type of unspecified civil litigation was sanctioned for having a private investigator fail to retain copies of a downloaded Google search of images used in interviewing a witness, which may have been viewed on an electronic device.

The Magistrate Judge recommended and the District court ordered that the plaintiff be barred from using the witness testimony and ordered payment of expenses and fees.

Neither Judge mentioned or considered the standards of Rule 37(e) nor explained why the rule was ignored. Had Rule 37(e) been applied, there would have been no basis for any sanctions, given the lack of prejudice and lack of intent to deprive.

Security Alarm Financing v. Alarm Protection Technology, 2016 BL 405515 (D. Alaska 2016)

In a commercial dispute alleging poaching of customers, the court found that the loss of customer recordings was the result of a failure to take reasonable steps and could not be replaced under Rule 37(e).

When the court could not conclude that the party had acted with intent to deprive, it determined to admit evidence of the spoliation so that the jury could assess it, and indicated it would instruct the jury that the party had failed to preserve.

The result illustrates that some courts view admission of evidence of spoliation as virtually automatic under subdivision (e)(1) when “intent to deprive” is not shown since that sanction is “no greater than necessary to cure the prejudice” to the moving party.”

Shaffer v. Gaither , 2016 BL 421370 (W.D.N.C. 2016)

In an employment action by a former ADA, the court denied, on proportionality grounds, a motion to dismiss for the second time.

In the second opinion, dismissal was sought because of alteration of the name of the defendant in the cell phone and a misstatement in “a relevant filing to the court.”

The court refused to dismiss because the alteration did not “rise to the level” necessitating action under the inherent authority of the court under Sun Trust Mortgage, 508 Fed. App'x 243 (4th Cir. 2013), which it quoted at length.

The court did not rule out giving a spoliation or modified spoliation instruction at trial and allowed the moving party to “explore” in front of the jury circumstances surrounding the destructions of the texts.

Rule 37(e)(2)’s intent requirement was not cited, raising the possibility that inherent authority was seen as available despite the inapplicability of harsh measures under that rule. (See also the Cohn decision, above).

Simon v. City of New York, 2017 BL 2441 (S.D.N.Y. 2017)

The court refused to impose measures under Rule 37(e)(1) in favor of police officer defendants for failure of plaintiff to retain cell phone video of events at the time of alleged false arrest.

The court applied Rule 37(e) because it was neither “infeasible nor [would it] work injustice” to do so and held that there was no showing of prejudice under (e)(1) because it was “pure speculation” as to the contents of the video or whether it would be helpful to the defense.

Moreover, even if the video showed location of a weapon, it would be “largely irrelevant” to the issue of probably cause, citing Mazzei v. Money Store [656 Fed. Appx. 558 (2nd Cir. July 15, 2016)] to the effect that no measures are available if the ESI would “not have made any difference” at the trial.

The result contrasts with the holding in Stinson v. City of New York, 2016 BL 1650 (S.D.N.Y. 2016), where Rule 37(e) was not applied as it was deemed unjust to do so and the court awarded an adverse inference against the City without proof of prejudice under Residential Funding standards.

Van Buren v. Crawford County, 2017 BL 12463 (E.D. Mich. 2017)

District Court hearing an excessive force case involving killing of a resident in his apartment when officers alleged he pulled a knife resolved two related spoliation claims involving handling of audio recordings without mention of Rule 37(e).

After an evidentiary hearing, the court decided to deny summary judgments to defendants and let the case go to trial, while instructing the jury that a rebuttable presumption that the missing ESI was unfavorable to the officers' version of what happened in the apartment. The court concluded that the “actions exceed mere negligence” and at best were “remarkably reckless.” (*16-17).

Applying Rule 37(e) could have made a difference, but this may be a case where a court might have exercised its inherent authority and disregarded the “intent to deprive” element.

Wal-Mart Stores, Inc. v. Cuker Interactive, LLC, 2017 BL 15084 (W.D. Ark., 20017).

In a commercial dispute, sanctions were sought because a company-furnished laptop of a key employee was wiped shortly after Wal-Mart arguably prepared for litigation.

Rule 37(e) was not applied because of a failure to demonstrate the level of intent or any prejudice, in part because the movant declined the opportunity to review, at its expense, backup tapes containing the employee’s e-mails.

The court relied on Eight Circuit authority requiring a showing of prejudice for an adverse inference. The court denied Wal-Mart’s request for its expenses in responding to the Motion under Rule 37(a)(5)(B) because it applies to motions to compel disclosure or discovery not denial of motions seeking sanctions for spoliation.

This opinion illustrates that subdivision (e)(1) does not abolish the need to show prejudice (i.e., the “incompent spoliator” is not sanctionable for intent alone) and clarifies the misuse of Rule 37(a) by some courts.

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