January 15, 2016

Authors:

Stephen Ram
(949) 725-4102
Sram@sycr.com

Katie Beaudin
(949) 725-4074
Kbeaudin@sycr.com

sycr.com

Preserving ESI After The December 2015

Amendments To The Federal Rules
Electronic documents or Electronically stored information (ESI)
has become one of the more common forms of business records used in
business and in litigation. Because of this, courts have become
increasingly unforgiving of parties who do not properly preserve ESI.
The Federal Rules of Civil Procedure define ESI to include writings,
drawings, graphs, charts, photographs, sound recordings, images, and
other data or data compilations. 1 This encompasses everything from
emails, letters and memoranda, text messages, voicemails, and even
social media posts.
The failure to properly preserve or produce evidence is known
as spoliation of evidence. Until recent changes to the Federal Rules
came into effect, courts were split on what level of intent was necessary
to find a party had not properly preserved ESI, and what sanctions
were proper if spoliation occurred. Because of this variance, overpreservation of ESI has been common, and companies often expend
significant effort and money on preservation to avoid the risk of severe
sanctions for loss of ESI. Over-preservation can include frequent backups of computer systems, retaining multiple copies of the same
document, saving inconsequential emails, and saving legacy data.

In the past, courts have varied in their enforcement of ESI

preservation and the sanctions handed down when ESI was not
properly handled. In the Ninth Circuit, once a potential claim arises,
courts have found that a party has a duty to preserve potentially
relevant evidence in a partys possession. 2
Sanctions were only
handed down if parties had some notice that the documents were
potentially relevant. 3 On the other hand, the Fifth Circuit required
parties to preserve unique, relevant evidence that might be useful to an
1

Fed. R. Civ. P. 34(a)(1)(A).

See Leon v. IDX Sys. Corp., 464 F.3d 951, 956 (9th Cir. 2006).
3
United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002).
2

adversary. 4 When determining whether sanctions are warranted,

courts considered whether the party intended to destroy the evidence
or merely lost information through inadvertence or mistake. 5 These
differences in standards have left companies without clear guidance for
implementing best practices for ESI preservation.

On December 1, 2015, the Amendments to the Federal Rules of Civil Procedure came into effect and
created a uniform preservation requirement for parties, as well as a sanctions system. The Committee
Notes make clear that these amendments are designed to reduce over-preservation and provide
predictable, clear standards for companies.
Reasonable Preservation of ESI

The amendment to Rule 37(e) sets a uniform standard for spoliation sanctions. Now, a party seeking
any remedy for lost ESI must demonstrate the following:
1.
A duty to preserve ESI existed before litigation was anticipated;
2.
The party failed to take reasonable steps to preserve ESI; and
3.
The information subject to preservation was lost or destroyed, and cannot be restored or
replaced through additional discovery. 6
The amendment establishes reasonableness as the uniform standard. The Rules do not provide a
definition of reasonableness, and courts have yet to rule on it. However, the Committee Notes indicate that
courts should consider: (1) the partys conduct at the time the preservation efforts were executed; (2) the
extent to which third parties had effective control of the lost ESI; and (3) whether preservation efforts were
proportional to the partys resources. 7 Moreover, the routine, good-faith operation of an electronic
information system is a relevant factor for the court to consider. Therefore, if the party has proper
protection procedures in place, the rule should protect against sanctions.

Oftentimes, companies use a third party for data preservation, so ESI is not in the partys control. The
rule as amended does not apply when the loss of ESI occurs despite the partys reasonable steps to
preserve. Thus, a company should choose reliable third party data services, and monitor those services.

As to proportionality, the court will take into account the staff and resources that a party can devote
to preservation. ESI protection can be a costly endeavor and it would be wrong for courts to assume that all
4

Ashton v. Knight Transp., Inc., 772 F. Supp. 2d 772, 800 (N.D. Tex. 2011).
Rimkus Consulting Grp., Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex.
2010).
6
Fed. R. Civ. P. 37(e)(1).
7
2015 Advisory Committee Notes to Rule 37.
5

parties have access to the high levels of protection. Companies with limited resources can take comfort that
they will not be penalized for not having access to the higher end data preservation techniques available.
For example, if litigation involves a small business versus a large corporation with an in-house IT
department, the court will take into account the different means available to each party. The small business
will not be penalized or prejudiced for not having the larger means of ESI preservation. The key is for
companies to take reasonable steps within their means to comply with these requirements and avoid
spoliation claims.
Sanctions

If a party satisfies the elements under Rule 37(e), a court may grant relief that is no greater than
necessary to cure the prejudice suffered by the other party. 8 A court will evaluate the informations
importance in the litigation to determine the relief. 9 If a court finds that a party intentionally deprived
another party of the information, that court may impose a variable for serious sanctions. 10 For example, a
court may presume that the lost information was unfavorable to the party. 11 Accordingly, a court may also
instruct the jury that it may or must presume the information was unfavorable to the party. 12 The rules no
longer authorize adverse inference instructions upon a finding of negligent loss of ESI. Lastly, the court
could dismiss the action or enter a default judgment. 13
How Companies Should Respond
1.

Create A Document Retention Policy That Addresses ESI.

It is now more important than ever to have document retention and ESI policies in place before
litigation because spoliation sanctions are less likely if companies take reasonable steps from the outset. If
companies create comprehensive data retention and deletion policies, and continuously follow them, any
data disputes arising in litigation will be easier to defend. By having policies in place and consistently
applying those policies, companies will be positioned to defend against assertions by adverse parties that
ESI was mismanaged or unavailable.

A well-rounded ESI policy should address all types of ESI. As social media use becomes more
frequent, companies should be sure to address how it is used and how employees should act on social
media. Social media posts can be admissible in discovery. Companies should limit what employees can and
cannot discuss on social media, as it can be damaging in later litigation. Policies should also address
8

Fed. R. Civ. P. 37(e)(1).

2015 Advisory Committee Notes to Rule 37.
10
Fed. R. Civ. P. 37(e)(2).
11
Id.
12
Id.
13
Id.
9

employees use of their own phones for work purposes. Companies with a bring your own device culture
need to be especially careful when it comes to document preservation. If an employee uses their
smartphones for work, the information on that smart phone, including text messages and voicemails, is
considered ESI and should be addressed in a company policy, and applicable employee handbooks and
related policies.
2.

Designate An Executive To Oversee ESI Preservation

It is important for companies to designate someone at the executive level or C-suite to oversee the
implementation of ESI policies, and regularly report the compliance and any material issues to the board of
directors. Having a high level executive focusing on ESI conveys its importance and emphasizes that ESI
preservation is not just an IT or administrative issue. Mishandling of ESI can have adverse effects on an
entire company. Designating someone to oversee ESI policies will ensure that companies are monitoring
ESI at all levels and stress the importance of document retention policies for all employees. Companies
should consider creating annual reports on ESI management and use to ensure that preservation tactics are
up to date. These reports should take into account how preservation of ESI is affected by data security
issues, IT management concerns, and external threats.

3.

Implement Holds in Anticipation of Litigation

More important than having reasonable preservation policies in place is implementing those
policies in the wake of litigation. Any actions taken contrary to ESI policies when litigation is looming can
easily be considered unreasonable. Companies should implement litigation holds immediately upon
learning of any grievances, whether it is a demand letter, a complaint, or a litigation hold letter. If a
company becomes aware of any possible litigation, ESI deletion after the fact could prove intent to deprive
the other party of information.
4.

Do Not Over-Preserve for Fear of Sanctions

The only way that drastic sanctions will be handed down is if the court finds that a party intended to
deprive the other party of that information. This means that ESI loss at the hands of third parties will not
automatically lead to a case dismissal. Furthermore, negligent conduct will lead only to sanctions
considered no greater than necessary to cure whatever prejudice results. This should give comfort to
companies who have been over-preserving data for fear of losing a lawsuit because of ESI loss.

***

The Amendments have a clear focus on proportionality. This means that courts will look at whether the
amount of data preservation is proportional given the means of the party. Smaller companies will not be
penalized for being unable to retain massive amounts of ESI. If companies have reasonable policies in place
for data deletion and follow those policies, courts will likely not hand down sanctions for routine ESI
deletion.
Authors:

Stephen Ram
(949) 725-4102
Sram@sycr.com

Katie Beaudin
(949) 725-4074
Kbeaudin@sycr.com

This publication is provided for your convenience and does not constitute legal advice. It is prepared for the general information of
our clients and other interested persons. This publication should not be acted upon in any specific situation without appropriate
legal advice.

COPYRIGHT 2014 STRADLING YOCCA CARLSON & RAUTH, P.C.