As your company wrestles with how to manage the virtual mountains of electronically stored information (ESI) that are created in today’s workplace, you may continue to wonder what steps to take to preserve information when litigation is looming. Newly adopted amendments to the Federal Rules of Civil Procedure offer a safe harbor against sanctions for failing to adequately preserve this data. You no longer have to fear that an innocent misstep or a lack of sufficient information in the preservation process could lead to case-ending or financially prohibitive sanctions.

Rather, the changes to Rule 37(e), which went into effect December 1, 2015, provide a much stronger platform from which you can make sound — and more educated — business decisions regarding how to proceed with reasonable ESI preservation functions, without pressure from the unpredictable fear of sanctions.

Take These Steps Now to Preserve Your ESI

The most significant change to Rule 37(e) is the creation of a safe harbor for preserving ESI. Now, remedies can be imposed only when reasonable steps to preserve the information that should have been preservedwere not taken. The changes are intended to avoid “litigants expend[ing] excessive effort and money on preservation in order to avoid the risk of severe sanctions if a court finds they did not do enough.” (Advisory Committee Notes to Rule 37 Amendments) Here are five concrete steps you can take to develop an effective preservation plan:

  1. Take a Fresh Look at Your Litigation Hold Procedures and Notice Templates. Make sure you have an efficient and effective protocol in place before the need to preserve ESI arises. Identify record retention schedules, custodians, and data repositories that could become subject to a hold. Make sure that the notices comply with actual practices and do not require that recipients do something which your company is not capable of doing.
  2. Execute on Your Written Procedures. The best-written protocols are useless if they are not followed. Someone needs to be responsible and held accountable for executing the plan.
  3. Put It in Writing. Document your preservation decision-making. When? Why? What? How? Put in writing the answers to each of these basic questions once your company decides litigation is likely.
  4. Consider Effective, Less Costly Measures for Preserving ESI. The Rule 37 Advisory Committee notes acknowledge that lower-cost preservation formats may be appropriate, provided that they are substantially as effective as keeping all data on active servers and in its original format. Particularly for huge data compilations, arguably relevant to litigation that may never materialize, maintaining data in a backup format may present a cost-effective and lower-risk solution. You should understand, though, that your company will likely bear the cost of restoring such information to a reasonably useable format if and when the information is subject to production in discovery.
  5. Be Proactive and Ask Questions. Rule 37 does not itself eliminate questions and uncertainties about whether or how to preserve your data, but it provides methods for addressing them head on. Attorneys who deal with discovery issues routinely are a good source of advice and can help you establish a reasonable and defensible approach to ESI preservation.

Notes accompanying the rule address the question of when the duty to preserve arises: “Many court decisions hold that potential litigants have a duty to preserve relevant information when litigation is reasonably foreseeable. Rule 37(e) is based on this common law duty to preserve. The rule does not apply when information is lost before a duty to preserve arises.” The notes offer three factors that courts should consider:

  1. Whether a party was on notice that litigation was likely
  2. Whether a party was on notice that the information would be relevant
  3. Whether there was an independent requirement that the information be preserved

When exactly a party is expected to preserve ESI is a fact-specific inquiry. The filing of a lawsuit certainly puts a party on notice of impending litigation, but courts have found a variety of events before filing that may create reasonable anticipation and trigger the duty to preserve evidence. The notes urge a common sense approach, including that courts consider what is known at the time a duty to preserve might arise and not be “blinded to this reality by hindsight arising from familiarity with an action as it is actually filed.” The notes also caution that “the fact that a party failed to observe some other preservation obligation does not itself prove that its efforts to preserve were not reasonable with respect to a particular case.”

The new Rule 37(e) establishes a “reasonable steps” standard; “perfection in preserving all relevant electronically stored information is often impossible.” (Advisory Committee Notes) Among the factors to consider are the sophistication of the party; a party’s resources; and the costs of various preservation alternatives. Further, reasonableness also addresses the notion that “[a] party may act reasonably by choosing a less costly form of information preservation, if it is substantially as effective as more costly forms.” Id.

However, Rule 37(e) does not apply when information is lost despite reasonable steps taken to preserve it; rather, the rule applies only if the loss is because a party did not act reasonably. Even when such a loss occurs, the initial focus is now on whether the lost information can be restored or replaced through additional discovery.

Because the threshold question is whether reasonable measures were taken to preserve ESI, ensuring that your record retention policies and practices are reasonable establishes a solid foundation for avoiding sanctions if ESI is lost. The best practices for preserving ESI have not changed. Written legal hold notices sent to appropriate personnel — with periodic follow-up reminders — remain the standard.