Is It Time to Purge? Corporations Pushing for New Evidence Rules for Electronically Stored Records

Is It Time to Purge? Corporations Pushing for New Evidence Rules for Electronically Stored Records

Failing to preserve documents can lead to costly sanctions in the event of litigation. However, the amount of data many businesses must track and store is reaching epic proportions.

To help lessen the load, several of the country’s largest corporations are lobbying for changes to the federal rules governing record retention. The proposed amendments to the Federal Rules of Civil Procedure would specifically amend the standard for preserving electronically stored evidence.

While storing electronic records can be a hassle, the failure to produce requested documents during litigation can seriously impact your case. When a party causes “the destruction or significant alteration of evidence, or [] fail[s] to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation,” they can be found guilty of spoliation. Reilly v. Natwest Mkts. Group, Inc., 181 F.3d 253, 267 (2d Cir. 1999).

In addition to imposing financial penalties for improper document retention or destruction, courts may also instruct the jury that because you failed to produce requested documents, the jury can infer that those documents could have been harmful to your case, which is commonly known as an “adverse inference.” However, not all federal circuits follow the same legal standard for assessing the level of culpability needed to impose sanctions.

In testimony before the Judicial Conference Advisory Committee on the Civil Rules, companies like Exxon Mobil Corp. and Microsoft Inc. argued that the lack of uniformity and predictability forces them to hoard thousands of documents. They further highlighted that the preservation of electronically stored information costs tens of millions of dollars and countless hours in employee labor.

The proposed amendments to F.R.C.P. 37 (e) could help bring greater clarity. Under the proposed rule changes, a court could only issue sanctions if it finds that the failure to preserve electronically-stored information “(i) caused substantial prejudice in the litigation and w[as] willful or in bad faith; or (ii) irreparably deprived a party of any meaningful opportunity to present or defend against the claims in the litigation.” Thus, sanctions would generally not be imposed based on a company’s negligence alone.

Additional hearings are scheduled over the next several months, and the public comment period expires in February 2014. We will be closely tracking the status of the federal rule amendment and will provide updates as soon as new information becomes available.

If you have any questions about the proposed changes to the Federal Rules of Civil Procedure or would like to discuss how they may impact your New york or New Jersey litigation, please contact me, Robert Levy, or the Scarinci Hollenbeck attorney with whom you work.