According to U.S. Magistrate Judge James C. Francis IV, companies have overstated the burden of preservation. Although he admits the volume of data is substantial, he believes “much of that information is retained—and associated costs incurred—for reasons that have nothing to do with litigation. In part, it is because business needs or regulatory obligations require entities to retain information. In part, it is because entities do not have rational information disposition policies.”
To the contrary, the Association of Corporate Counsel (ACC) posits “that there are severe costs caused by unnecessary discovery . . . is simply not debatable.” Citing a recent survey from Institute for the Advancement of the American Legal System, the ACC noted that “80 percent [of chief legal officers] disagreed with the statement that ‘outcomes are driven more by the merits of the case than by litigation costs.’” As Patrick Oot, Co-Founder of the Electronic Discovery Institute, observed, one quandary that arises is the direct result of the lack of clarity about the duty to preserve: “either protect against sanction risk by extending preservation to large swaths of tangentially relevant data while incurring massive discovery expenses; or maintain tight destruction schedules and more precise litigation holds to decrease discovery costs but risk potential sanctions for failure to preserve data.” The problem goes even deeper: as the ACC noted, the current rules require in-house counsel to make “difficult tradeoffs” that require them to use resources for preservation instead of “devoting additional resources to compliance and reporting systems that will enhance fidelity to the law.”
For many companies, the “unpredictable and highly risky litigation environment” caused by disparate decisions about the standard for imposing sanctions for the destruction of evidence has necessitated a bright-line rule for triggering the duty to preserve. In particular, corporate commenters lamented the extreme costs of preserving data in asymmetrical litigation. As one pharmaceutical giant put it, “almost all discovery in large cases turns out to have been wasted effort and expense.” The company reported that in a recent trial, only 0.04% of its document production was admitted at trial. A tech giant graphically depicted discovery in its cases: it preserved the equivalent of 2,600 miles of paper stacked, spanning from San Francisco to New York City. Of that, it collected 232 miles of documents, reviewed 11 miles, produced 3 miles, and used 3 feet at trial.
In addition, the majority of commenters—on both sides of the litigation fence—agreed with the goal of setting a national standard for the level of culpability required to impose sanctions, but the devil is in the details. The proposed rule permits sanctions for spoliation where a party’s actions were “willful or in bad faith.” Some have asked the Committee to remove the term “willful” or to define it as requiring a culpable state of mind rather than as simply intentional conduct. U.S. District Judge Shira Scheindlin believes bad faith sets the bar too high; if this were the standard, it “would encourage sloppiness and disregard for the duty to preserve.” Instead, she recommends that the rule include a broader standard of culpability to include parties that are grossly negligent or reckless.
Whatever culpability language appears in the final rule, the Committee must not undermine its goal of creating a national standard. Currently, it has done so by outlining nonexclusive factors in Rule 37(e)(2) for courts to consider in whether parties failed to preserve information that they should have preserved and whether they did so willfully or in bad faith. The Committee’s notion that these factors will give “potential litigants who make reasonable efforts to satisfy their preservation responsibilities” the “confidence that they will not be subjected to serious sanctions” is misguided; rather, these factors open the door for courts to punish good-faith efforts. Only by ensuring consistent application can the Committee give parties the confidence required to avoid the need to overpreserve.