Over-Preservation, “Willful” Activity, Proportionality: Amendments To The FRCP Address Many Issues

Editor: Please tell us about your professional background.

Vrecenak: I am an associate in the Complex Commercial Litigation Practice of Weil, Gotshal & Manges LLP based in New York. I received my law degree from Cornell University.

Editor: Please describe the service your company provides.

Vrecenak: Weil, Gotshal & Manges LLP is a full-service, international law firm that comprises 1,200 lawyers in 21 offices around the world. The firm advises on corporate and transactional matters, business finance & restructuring issues, tax, benefits and executive compensation matters, and the full spectrum of litigation and dispute resolution.

Editor: Is fear of sanctions a reason to preserve documents for an extended period or indefinitely?

Vrecenak: While it is crucial to be cognizant of the wide range of sanctions that can be imposed for spoliation, generally preserving documents for an extended period or indefinitely is rarely a good solution. Litigants rightly fear sanctions, but over-preservation can pose its own problems. The burden and costs associated with storing large quantities of documents and data, both for specific litigations and as a general business practice, can be extreme. In addition, if a company’s general business practice is to maintain large quantities of electronically stored information (“ESI”) for extended periods or indefinitely, that company then will be obligated to consider all this ESI when evaluating preservation and production obligations, which can involve enormous costs depending on the type of media storage.

It is important to establish clear policies regarding retention of business records, automatic email deletion, disaster recovery backup tape recycling, and any other deletion or recycling of data in the ordinary course of business. Many of these processes likely will need to be suspended upon the issuance of a litigation hold. After the hold is lifted, however, the data collected for purposes of that hold should be discarded (to the extent the data does not require preservation pursuant to another litigation hold, regulatory requirement, or company policy), and normal processes should resume as soon as practicable.

Editor: Under the proposed amendments, sanctions should be imposed (with one limited exception discussed below) only if a party acted willfully or in bad faith. Should the proposed rules include definitions of “willful” and “bad faith”?

Vrecenak: In the Note accompanying the proposed rule, the Civil Rules Advisory Committee (the “Committee”) indicated that it considered including definitions in the rule, but it declined to do so. The Committee explained its decision by noting that courts have considerable experience in dealing with these issues and stating the Committee’s opinion that “captur[ing] that experience seemed more likely to produce problems than provide help.” Report of the Advisory Committee on Civil Rules, Part B (May 8, 2013, as supplemented June 2013).[1] While the courts certainly have experience interpreting these standards, that experience has not produced any consistent interpretations. The present state of the law regarding what conduct falls within the different types of "culpable conduct" is difficult to navigate and varies widely based upon jurisdiction and even among judges within jurisdictions. As written, the proposed rule would implement a standard without defining that standard and, accordingly, it may not reduce the lack of predictability regarding what any particular court will consider bad faith or willful conduct. The Committee’s stated objective in amending Rule 37 is “to replace the disparate treatment of preservation/sanctions issues in different circuits by adopting a single standard.” Id. Without defining these terms, however, it may be hard to achieve that objective.

Editor: Does the service you provide make it possible to identify documents that can be disposed in good faith under a company’s document retention policies?

Vrecenak: Weil works with its clients to develop good practices and procedures to address the massive amounts of ESI and paper documents created in the ordinary course of business, particularly in the context of preservation obligations. Companies face a huge challenge in handling such large quantities of data, and we help our clients to enact policies and processes that appropriately identify data that must be preserved for a variety of reasons including, among other things, regulatory requirements and litigation hold requirements. Weil also helps its clients develop processes for safely disposing of data that is not subject to those requirements. Companies should seek to limit the amount of data that they retain consistent with their business needs as a matter of normal business operations, but they need to do so pursuant to well-documented policies and processes regarding recycling or deletion of data and the suspension of such activities when a duty to preserve arises. These policies and processes should be carefully developed and distributed to relevant company employees prior to engaging in routine disposal of data.

Editor: The proposed rules provide that e-discovery must be proportional to the needs of the case. What effect will this have on the discovery process?

Vrecenak: Proportionality rules have appeared in the rules for decades, but expressly including them within the scope of production will hopefully be an important step in helping to control the expanding costs of litigation, much of which can be attributed to discovery. In some instances, the amount in controversy can be dwarfed by the costs of unfettered discovery. The proposed rule hopefully will aid in controlling the costs of discovery by requiring a closer connection between the requested discovery and the claims or defenses in the action. Under the current formulation of the rules in which discovery only needs to be relevant to the subject matter involved in the action, discovery can often turn into a fishing expedition that has little meaningful relevance to the resolution of the actual claims in the case. The proposed rule provides courts with a greater ability to tailor discovery to the particular facts and circumstances of individual litigations, including facts about the parties themselves.

Increased focus by courts on proportionality also may encourage parties to be more reasonable in their attempts to negotiate the scope of discovery prior to and at the Rule 26(f) conference. Currently, many parties often default to insisting on expansive discovery because of the broad scope allowed under the rules. Narrowing the scope of permissible discovery and codifying the concept of proportionality in the rules will require parties to think more strategically about what discovery they really need and ways to work with their adversaries to undertake that discovery.

Editor: It is being contended that proposed rule 37(e) be further changed by the Rules Advisory Committee to eliminate the irreparable deprivation standard. Do you agree?

Vrecenak: The inclusion of the irreparable deprivation standard provides courts with discretion to impose sanctions when a party’s conduct was not willful or done in bad faith but when a court still finds it appropriate to deter a party’s behavior because of the effect it had on the litigation. The Committee notes indicate that the rule was drafted to allow for the imposition of sanctions in very narrow circumstances where “a crippling loss of evidence justified sanctions only if the affected claim or defense was central to the litigation” and when the loss of evidence was due to the party’s actions (even if those actions were not willful or done in bad faith). The inclusion of the irreparable deprivation standard in the proposed rule, however, could result in courts imposing sanctions where the rationales for spoliation sanctions may not be served. A court recently described these rationales as “prophylactic, punitive, and remedial.” Slovin v. Target Corp., No. 12 CV 863 (HB), 2013 WL 840865, *6 (S.D.N.Y. Mar. 7, 2013). Thus, if the irreparable deprivation standard is included in the enacted rule, the Committee should make clear that imposition of sanctions under this standard should be limited to only those situations when the sanctions will serve the prophylactic and punitive rationales.

Editor: Should state rules of civil procedure be reviewed to determine if the proposed federal rules should be substituted?

Vrecenak: Uniformity and predictability are desirable in electronic discovery. Uniformity in the laws of electronic discovery will ensure that companies can appropriately enact policies, protocol, and procedures for routine disposal and preservation of company data that are compliant with electronic discovery laws in general. While there always will be some variation in the application of these laws, uniformity in the standards is desirable. The proposed amendments to the Federal Rules of Civil Procedure were drafted after much discussion and public comment (and comments are continuing) and aim to address the issues facing litigants today with respect to electronic discovery. State rules should likewise be reviewed and consistency with the federal rules encouraged.