Member Article

Why Proportionality Should Be Considered As Part of the Preservation 

Parties have a general duty to preserve and produce relevant electronically stored information (ESI). This duty, however, is bounded by a proportionality requirement because e-discovery should not be allowed to be the tail that wags the dog. Courts and parties have been adept at applying proportionality requirements to the production of ESI, but they have struggled to apply proportionality to the preservation of ESI. In an attempt to provide guidance to courts and reduce risk to parties, the proposed revision to Federal Rule of Civil Procedure 26(b)(1) formalizes the proper proportionality analysis. However, lawyers, even without the protection of the revised rule, should provide their clients with information so that a risk analysis can be performed as part of the crafting of a preservation plan.

I. CURRENTLY THE DUTY TO PRESERVE IS BROADER THAN THE DUTY TO PRODUCE

When a party reasonably anticipates litigation, it is required to put in place a litigation hold to preserve all potentially relevant ESI and other documents.1 Parties must be mindful that the exemptions stated in Federal Rule of Civil Procedure 34, excusing the production of certain kinds of ESI due to expense and burden, do not generally excuse the duty to preserve. The duty to preserve is broader than the duty to produce. FED. R. CIV. P. 26, Committee Note, Subdivision (b)(2) (“[a] party’s identification of sources of ESI as not reasonably accessible does not relieve the party of its common-law or statutory duties to preserve evidence”). Accordingly, even where a party reasonably believes that ESI is not reasonably accessible due to undue burden or expense, the current state of the law requires preservation.

II. APPLICATION OF PROPORTIONALITY TO PRESERVATION

Like with all other parts of their business, clients must be willing to perform a risk analysis when implementing a legal hold. This risk analysis should rely upon the proportionality principles so as to minimize the scope of the litigation hold. Rule 26(b)(2)(C)(iii) allows a court, to limit the frequency or extent of discovery otherwise allowed if it determines that the burden or expense of the proposed discovery outweighs its likely benefit.2 Various district courts have counseled parties about the importance of proportionality in both document preservation and discovery conduct. For example, the Southern District of Texas held, “Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done — or not done — was proportional to that case and consistent with clearly established applicable standards.”3 Thus, if the burden or expense is disproportional to the benefit, a court will not require preservation of certain ESI. 

The duty to preserve, however, may arise before any lawsuit is filed. In such instances a party can reach out to the party it anticipates will bring a claim to negotiate the scope of preservation. However, in the not so unlikely event that cooperative efforts fail, the preserving party will have to decide what it will preserve without the guidance of the court or the opposing party. 

Even outside the safe harbor of a court order or agreement of the parties, a lawyer should help the client undertake a risk analysis when implementing its preservation strategy. It is well established that, in order for a party to be sanctioned, three requirements must be met: (1) the party must have had an obligation to preserve the ESI at the time it was destroyed; (2) the party must have destroyed the ESI with a “culpable” state of mind (beyond mere negligence); and (3) the ESI must have been relevant to supporting the opposing party’s claim or defense.4 Thus, if a party chooses not to preserve a certain type of ESI—particularly a type with a high cost to preserve but little to no chance of relevance—there is only a small risk that discovery sanctions will be ordered, but a certainty that great expense will be avoided.

III. PROPOSED CHANGE TO RULE 26(b)(1)

In light of the preservation obligations that are in conflict with Rule 1, which provides for the rules to be applied to secure the “just, speedy, and inexpensive determination of every action and proceeding,” changes have been proposed to Rule 26 that would lessen not only production obligations but also preservation obligations. The amendment provides that parties may obtain discovery only if it is “proportional to the needs of the case considering the amount in controversy, the importance of the issues at stake in action, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”5 This proportionality requirement has the potential, if properly utilized, to transform the e-discovery behemoth into something much more manageable.

 

Footnotes: 1 Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003) (“Zubulake IV”). 2 FED. R. CIV. P. 26(b)(2)(C)(iii). 3 Rimkus Consulting Grp., Inc. v. Cammarata, 688 F. Supp. 2d 598, 613 (S.D. Tex. 2010); see also Pippins v. KPMG LLP, 279 F.R.D. 245, 255 (S.D.N.Y. 2012) (“[P]roportionality is necessarily a factor in determining a party’s preservation obligations.”); Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 523 (D. Md. 2010) (“[A]ssessment of reasonableness and proportionality should be at the forefront of all inquiries into whether a party has fulfilled its duty to preserve relevant evidence.”). 4 Zubulake IV, 220 F.R.D. at 220. 5 COMM. ON RULES OF PRACTICE & PROC. OF THE JUDICIAL CONFERENCE OF THE U.S., PRELIMINARY DRAFT OF PROPOSED AMENDMENTS TO THE FEDERAL RULES OF BANKRUPTCY AND CIVIL PROCEDURE 265 (Aug. 2013), available at http://www.uscourts.gov/uscourts/rules/preliminary-draft-proposed-amendments.pdf.