Month: January 2016

Rule 37(e) Electronically Stored Information

There is a new provision of Rule 37. Rule 37(e), effective on December 1, 2015, provides in part that:

(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or

(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:

(A) presume that the lost information was unfavorable to the party;

(B) instruct the jury that it may or must presume the information was unfavorable to the party; or

(C) dismiss the action or enter a default judgment.

According to the Committee notes, the new rule was enacted to allow the district courts to address issues that arise when electronic information is lost.

The Advisory Committee notes discuss the new rule in detail:

“Subdivision (e)(1). This subdivision applies only if information should have been preserved in the anticipation or conduct of litigation, a party failed to take reasonable steps to preserve the information, information was lost as a result, and the information could not be restored or replaced by additional discovery. In addition, a court may resort to (e)(1) measures only “upon finding prejudice to another party from loss of the information.” An evaluation of prejudice from the loss of information necessarily includes an evaluation of the information’s importance in the litigation.

The rule does not place a burden of proving or disproving prejudice on one party or the other. Determining the content of lost information may be a difficult task in some cases, and placing the burden of proving prejudice on the party that did not lose the information may be unfair. In other situations, however, the content of the lost information may be fairly evident, the information may appear to be unimportant, or the abundance of preserved information may appear sufficient to meet the needs of all parties. Requiring the party seeking curative measures to prove prejudice may be reasonable in such situations. The rule leaves judges with discretion to determine how best to assess prejudice in particular cases.

Once a finding of prejudice is made, the court is authorized to employ measures “no greater than necessary to cure the prejudice.” The range of such measures is quite broad if they are necessary for this purpose. There is no all-purpose hierarchy of the severity of various measures; the severity of given measures must be calibrated in terms of their effect on the particular case. But authority to order measures no greater than necessary to cure prejudice does not require the court to adopt measures to cure every possible prejudicial effect. Much is entrusted to the court’s discretion.

In an appropriate case, it may be that serious measures are necessary to cure prejudice found by the court, such as forbidding the party that failed to preserve information from putting on certain evidence, permitting the parties to present evidence and argument to the jury regarding the loss of information, or giving the jury instructions to assist in its evaluation of such evidence or argument, other than instructions to which subdivision (e)(2) applies. Care must be taken, however, to ensure that curative measures under subdivision (e)(1) do not have the effect of measures that are permitted under subdivision (e)(2) only on a finding of intent to deprive another party of the lost information’s use in the litigation. An example of an inappropriate (e)(1) measure might be an order striking pleadings related to, or precluding a party from offering any evidence in support of, the central or only claim or defense in the case. On the other hand, it may be appropriate to exclude a specific item of evidence to offset prejudice caused by failure to preserve other evidence that might contradict the excluded item of evidence.

Subdivision (e)(2). This subdivision authorizes courts to use specified and very severe measures to address or deter failures to preserve electronically stored information, but only on finding that the party that lost the information acted with the intent to deprive another party of the information’s use in the litigation. It is designed to provide a uniform standard in federal court for use of these serious measures when addressing failure to preserve electronically stored information. It rejects cases such as Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002), that authorize the giving of adverse-inference instructions on a finding of negligence or gross negligence.

Adverse-inference instructions were developed on the premise that a party’s intentional loss or destruction of evidence to prevent its use in litigation gives rise to a reasonable inference that the evidence was unfavorable to the party responsible for loss or destruction of the evidence. Negligent or even grossly negligent behavior does not logically support that inference. Information lost through negligence may have been favorable to either party, including the party that lost it, and inferring that it was unfavorable to that party may tip the balance at trial in ways the lost information never would have. The better rule for the negligent or grossly negligent loss of electronically stored information is to preserve a broad range of measures to cure prejudice caused by its loss, but to limit the most severe measures to instances of intentional loss or destruction.

Similar reasons apply to limiting the court’s authority to presume or infer that the lost information was unfavorable to the party who lost it when ruling on a pretrial motion or presiding at a bench trial. Subdivision (e)(2) limits the ability of courts to draw adverse inferences based on the loss of information in these circumstances, permitting them only when a court finds that the information was lost with the intent to prevent its use in litigation.

Subdivision (e)(2) applies to jury instructions that permit or require the jury to presume or infer that lost information was unfavorable to the party that lost it. Thus, it covers any instruction that directs or permits the jury to infer from the loss of information that it was in fact unfavorable to the party that lost it. The subdivision does not apply to jury instructions that do not involve such an inference. For example, subdivision (e)(2) would not prohibit a court from allowing the parties to present evidence to the jury concerning the loss and likely relevance of information and instructing the jury that it may consider that evidence, along with all the other evidence in the case, in making its decision. These measures, which would not involve instructing a jury it may draw an adverse inference from loss of information, would be available under subdivision (e)(1) if no greater than necessary to cure prejudice. In addition, subdivision (e)(2) does not limit the discretion of courts to give traditional missing evidence instructions based on a party’s failure to present evidence it has in its possession at the time of trial.

Subdivision (e)(2) requires a finding that the party acted with the intent to deprive another party of the information’s use in the litigation. This finding may be made by the court when ruling on a pretrial motion, when presiding at a bench trial, or when deciding whether to give an adverse inference instruction at trial. If a court were to conclude that the intent finding should be made by a jury, the court’s instruction should make clear that the jury may infer from the loss of the information that it was unfavorable to the party that lost it only if the jury first finds that the party acted with the intent to deprive another party of the information’s use in the litigation. If the jury does not make this finding, it may not infer from the loss that the information was unfavorable to the party that lost it.

Subdivision (e)(2) does not include a requirement that the court find prejudice to the party deprived of the information. This is because the finding of intent required by the subdivision can support not only an inference that the lost information was unfavorable to the party that intentionally destroyed it, but also an inference that the opposing party was prejudiced by the loss of information that would have favored its position. Subdivision (e)(2) does not require any further finding of prejudice.

Courts should exercise caution, however, in using the measures specified in (e)(2). Finding an intent to deprive another party of the lost information’s use in the litigation does not require a court to adopt any of the measures listed in subdivision (e)(2). The remedy should fit the wrong, and the severe measures authorized by this subdivision should not be used when the information lost was relatively unimportant or lesser measures such as those specified in subdivision (e)(1) would be sufficient to redress the loss.”

This new provision of Rule 37(e) is important and should be reviewed by all practitioners. The most important part of the Rule is that it provides the district court with a series of escalating sanctions depending on the violation. Those who purposely delete stored information are subject to the most serious and severe sanctions.

Practitioners should also be aware that it is routine to obtain the services of a forensic computer consultant who can often locate and obtain information that was deleted. Where lawyers are involved in the deliberate deletion of documents, they can expect to receive professional discipline.

Edward X. Clinton, Jr.

District Court Sanctions Plaintiff for Insufficient Damages Calculations

The opinion below contains a decision of the district court to grant a motion for Rule 37 sanctions on the basis that plaintiff’s damages calculations were insufficiently detailed. It is important to note that the opinion is the second time the plaintiff was sanctioned for insufficient discovery responses pursuant to Rule 37.

The plaintiff is a medical doctor who was terminated by the Defendants from his teaching position. Plaintiff alleged that he was terminated in retaliation for raising issues concerning patient care. The Defendants denied that allegation.

Rule 26(a) requires a plaintiff to provide a calculation of each category of damages claimed. In this case the plaintiff’s counsel tendered a letter to the Defendants with a bullet point list of categories of damages. Plaintiff only produced the letter after the court granted a motion to compel which required him to produce a damages calculation. The opinion explains:

By an Opinion dated June 19, 2015, the Court granted the motion in part and denied it in part, precluding Thompson from introducing any new and unproduced documents as evidence of damages against the NYU Defendants and ordering him to “produce his computation of damages within two weeks, relying on the documents he has produced or acquired through discovery.” Thompson, 2015 WL 3824254, at *4.

In response to this order plaintiff provided a letter to the defendants as follows:

On July 4, 2015, counsel for the Plaintiff emailed Defendants a one-page letter stating the following:

Please accept this letter as a supplement to Plaintiff’s prior discovery responses and in compliance with Judge Sweet’s Order of June 19, 2015. In addition to the information previously provided in responses to interrogatories, document demands, and deposition testimony, Plaintiff provides the following damage calculation:

• $50,000 salary from NYU

• $250,000 salary from Jamaica Hospital

• $110,000 in malpractice premium per year

• Loss of 401k contribution of $17,500 per year

• Health insurance premium of $301.00 per month

• Dental insurance premium of $10.18 per month

• Loss of surplus bonus from NYU/JHMC based on 80% of collections generated above salary. Plaintiff is not in possession of sufficient information to calculate the exact loss but will provide same once sufficient information is produced by defendants.

• Statutory attorneys’ fees and expenses.

Thank you for your attention to this matter.

Defendants again moved for Rule 37 sanctions seeking the dismissal of the complaint. The court granted the motion, in part.

The July 4 letter from Thompson’s counsel falls well below what is required by Rule 26. The letter consists of eight bullet points indicating the total dollar amounts requested for some of the categories of damages Thompson claims, without any analysis of where those numbers came from or identification of the supporting documentation from which they could be derived. Thompson was on notice that this sort of quick list would be insufficient; the October 22, 2014 Order required him to provide “a computation of damages, including but not limited to a specific formula indicating how plaintiff’s theory of damages is supported, along with supporting documents,” while the June 19, 2015 Opinion, which granted the Defendants’ motion for sanctions, emphasized that Rule 26 requires “both a dollar amount sought and some analysis explaining how that figure was arrived at,” and explained that a “more detailed calculation” would be required given how far this case has progressed. Thompson, 2015 WL 3824254, at *3.

Having failed to comply with his Rule 26 obligations and the Orders of this Court, the Plaintiff will be precluded from presenting any evidence with respect to damages other than that produced so far in discovery and that which is produced in accordance with this Order.

This decision is measured in tone and does give the plaintiff an opportunity to correct the failure top produce detailed damages calculations. Detailed damages calculations are important because they can lead the defendant to settle the case. At least the defendant would know what is at stake in the litigation.

In sum, this opinion is well-reasoned and thoughtful and should remind all federal court practitioners to make sure that they do their work diligently and thoroughly. Grandstanding and blustering don’t work very well in the modern federal courthouse.

Source: Thompson v. THE JAMAICA HOSPITAL MEDICAL CENTER, Dist. Court, SD New York 2015 – Google Scholar