Rule 37(f) Safe Harbor Requires Routines That Most Companies Lack

Not a Safe HarborNew Rule 37(f) creates a “safe harbor” for a company to destroy ESI as part of its routine electronic records management practices.  Unfortunately, this harbor is beyond the reach of most companies because they lack established routines for ESI retention and destruction.  The rule states:

(f) Electronically stored information. Absent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good faith operation of an electronic information system.

The routine good faith operation of an electronic records storage system can be proven by reference to a company’s written records retention policy.  That is the document, usually very long and complicated, that tells you when to save records, and for how long, and when to delete them.  If the deletion of ESI was in accordance with the company’s written manual on the subject, then you may be able to prove the loss of evidence was the result of routine and good faith operations.  This assumes, however, that: a) the company has such a manual; and, b) the book is routinely followed.  In reality, a company’s records retention policies are often ignored, and seldom enforced.  That makes the routine needed for Rule 37(f) safe harbor protection a difficult element for most companies to prove.

There are many reason for this, including that the records manual is usually too long and incomprehensible, and everyone finds this whole subject too boring and unimportant to deal with. So people just do what they want with the records they control.  This seems to be especially true of IT employees, who, it seems, frequently follow their own rules based on the “we know better principle.” For instance, the book may say to recycle backup tapes every three years, but in reality you may have tapes going back for decades.  The tapes are probably unlabeled, and no one has any real idea what is on them,  much less how to restore them.  Still, the company may have to produce these tapes someday, and pay experts a small fourtune to restore them to try to find missing evidence.

In the event a written records retention policy is not uniformly followed, a court will look to actual practices of a company to determine its “routine, good faith operation. ” Although a written manual will have consistent operation procedures specified, when you turn to actual practices by employees in a large company, consistency is rare. What is routine for one part of the IT department may be different from another part. It is worse when comparing individual employees, some of whom may be organized pack rats, and keep everything, and others may delete everything as soon as they read it. Playboy Enterprises, Inc. v. Welles, 60 F.Supp.2d 1050 (S.D.Ca. 1999) (Playmate explained that she had no emails to produce because she always deleted an email right after she read it.)

The result is that it is hard, if not difficult for most companies today to take advantage of the “safe harbor” provided by Rule 37(f). They cannot do so because they do not have routines. About the only thing that is likely to fall within the purview of the rule for most companies is the automatic “janitor”programs that delete things without need for any human intervention at all.  For instance, if a file is not used within a set time period, it will be automatically deleted. In fact, this is a common practice for ESI, but impossible for paper records. (Xerox has, however, recently invented a new kind of printer and paper wherein the document automatically erases itself after a few days.)

Even in the case of automatic ESI destruction, the defense will only work if the electronic janitor did its job before the human in IT was, or should have been, told by legal that there was a lawsuit brewing, and the auto-destruction routines should be placed on hold.  If a litigation hold was not implemented when it should have been, then the practice lacks the good faith needed for the safe harbor, even if it has the routine.

This is made clear by the rules commentary, which states:

The good faith requirement of Rule 37(f) means that a party is not permitted to exploit the routine operation of an information system to thwart discovery obligations by allowing that operation to continue in order to destroy specific stored information that it is required to preserve. When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, intervention in the routine operation of an information system is one aspect of
what is often called a “litigation hold.”

As mentioned, unlike paper records, ESI can automatically throw itself away. This distinction between paper and electronic records is the genesis behind Rule 37(f).  The commentary to the new rule, which is quoted in full in the above Blog Page on Rule 37, explains the difference between paper records and ESI this way:

The “routine operation” of computer systems includes the alteration and overwriting of information, often without the operator’s specific direction or awareness, a feature with no direct counterpart in hard-copy documents. Such features are essential to the operation of electronic information systems.

On the other hand, if paper evidence is destroyed, it is frequently evidence of culpable conduct.  For instance, one tech company apparently began preparing for patent litigation by getting rid of evidence that might make its cases more difficult. Rambus, Inc. v. Infineon Tech. AG, 220 F.R.D. 264, 284 (E.D. Va. 2004); Rambus, Inc. v. Infineon Techs. AG, 155 F.Supp.2d 668, 680-83 (E.D.Va.2001); Rambus, Inc. v. Infineon Techs. AG, 222 F.R.D. 280, 286 (E.D.Va.2004); Samsung Electronics Co., Ltd. v. Rambus, Inc., 439 F.Supp.2d 524 (E.D.Va., July 18, 2006).  The company began its records destruction campaign by establishing a new records “retention” policy.  It began to implement the new policy with what it called “Shred Days,” where, I kid you not, they gave every employee a burlap bag to fill up with papers to be shredded, followed by pizza parties. They managed to destroy 2.7 million pages of documents this way, but the strategy failed in the end, and resulted in spoliation sanctions instead.

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