By Jason R. Baron, Legaltech News

How do the new FRCP amendments affect info gov best practices?

As of Dec. 1, 2015 , changes in the Federal Rules of Civil Procedure (FRCP) are going into effect that not only change how e-discovery in federal litigation will be conducted, but also should be seen as potentially having an important bearing on corporate information governance policies.

Most of the buzz in e-discovery circles in the run-up to finalizing these amendments has been about Rule 37(e), providing a national standard for how courts should approach the failure by a party to preserve electronically stored information (ESI), and about Rule 26, expressly incorporating the notion of “proportionality.”

Here, in the first of a two-part column, are some observations about the potential IG impacts of Rule 37(e), with remarks on Rule 26 following next month.

First off, counsel would be well-advised to spend time absorbing not only the Advisory Committee notes to the new Rules, but also the entirety of the discussion set out by the Committee on Rules of Practice and Procedure in their May 2014 submission to the Standing Committee. In these comments, there appear to be important clues left by the drafters —crumbs forming an IG trail—as to how the newly amended rules should influence best-of-breed thinking about constructing an IG foundation to better defend corporate interests in litigation.

As a backdrop to their new thinking on curative measures and sanctions, the rules’ drafters clearly understood the terrain constituting the inflationary universe of ESI that we all increasingly confront on a daily basis in our professional lives, noting: “Significant amounts of ESI will be created and stored not only by sophisticated entities with large IT departments, but also by unsophisticated persons whose lives are recorded on their phones, tablets, eye glasses, cars, social media pages, and tools not even presently foreseen. Most of this information will be stored somewhere in the ‘cloud,’ complicating the preservation task. In other words, the litigation challenges created by ESI and its loss will increase, not decrease, and will affect unsophisticated as well as sophisticated litigants.”

Rule 37(e) (see box) sets a national standard for how courts act in the face of loss of ESI, stating that upon finding prejudice to another party from loss of information, a court may order measures “no greater than necessary to cure the prejudice.” Under a separate provision, the rule provides for more draconian actions by a court upon finding that a party “acted with the intent to deprive another party of the information’s use in the litigation,” including the use of adverse inferences in jury instructions and even dismissal of the action.

It should be noted that prior to these amendments, the U.S. Circuit Courts had been split on the standard for when sanctions were appropriate, and in particular the 2nd Circuit in the case of Residential Funding had allowed for a finding of mere “negligence” being sufficient as a trigger for possible sanctions under former Rule 37. Other courts had adopted standards incorporating a requirement of “intentionality” and/or “bad faith” as the similar triggers. The resulting uncertainty over the predicate standard legitimately contributed to over-preservation of ESI, which in turn led many corporate parties to advocate for a uniform national rule.

As a threshold matter, the curative measures allowed for by the rule apply only where information is lost, the lost information “should have been preserved,” a party failed to take “reasonable steps” to preserve the information, and the lost information cannot be restored or replaced. The Advisory Committee Note to Rule 37(e) makes clear that: “Although the rule focuses on the common-law obligation to preserve in the anticipation or conduct of litigation, courts may sometimes consider whether there was an independent requirement that the lost information be preserved. Such requirements arise from many sources—statutes, administrative regulations, an order in another case, or a party’s own information-retention protocols. The court should be sensitive, however, to the fact that such independent preservation requirements may be addressed to a wide variety of concerns unrelated to the current litigation and the fact that the party failed to observe some preservation obligation does not itself prove that its efforts to preserve were not reasonable with respect to the particular case.”

With respect to what constitutes a party taking “reasonable steps,” the Committee Note emphasizes that “due to the ever-increasing volume of electronically stored information and the multitude of devices that generate such information, perfection in preserving all relevant electronically stored information is often impossible” and that the amended rule “does not call for perfection.”

Some concrete examples of where information may be lost despite reasonable steps to preserve are events outside of a party’s control, including a cloud service failing, a malign software attack disrupting a storage system, “and so on.”

The Note goes on to add that another factor entering into the threshold “reasonable steps” calculation is proportionality, namely, that a court “should be sensitive to party resources…” and a party “may act reasonably by choosing a less costly form of information preservation, if it is substantially as effective as most costly forms.” From an IG standpoint, what follows in the Note is key: “It is important that counsel become familiar with their clients’ information systems and digital data—including social media —to address these issues.”

Taken all together, the above selected excerpts from the Rule 37 Advisory Committee Note help to illuminate the path ahead for counsel and for parties in a straightforward way. Even before getting to the issues involving whether there has been prejudice to a party in the litigation or whether there have been intentional acts of deletion of ESI, courts will be fairly compelled by the rule to find occasions to evaluate what constitutes reasonable steps taken to guard against data loss. Thus, failure on the part of more sophisticated litigants to adopt even rudimentary forms of information governance, in the form of, for example, 1) records schedules governing routine preservation and disposition of ESI absent litigation; 2) electronic archiving; 3) a litigation hold protocol; 4) contractual policies surrounding retention of data in the cloud; and 5) BYOD and other policies governing social media, may all end up factoring into what constitutes a failure to take “reasonable steps.”

A strong evidentiary showing that a party has policies and procedures in place, along with some measure of preservation technology, may go a long way in convincing the court that a party has performed “reasonably” (even if not perfectly) in preserving information in anticipation of litigation – cutting off further sanctions analysis. One might therefore expect to see a body of evolving case law developing over time on what constitutes reasonable IG practices and protocols.

For more on this story go to: http://www.legaltechnews.com/id=1202744155359/IG-And-The-New-FRCP-Rules#ixzz3tlUYNFI7