What Does It Mean When ESI is “Lost”?

What Does It Mean When ESI is “Lost”?

Legal consequences abound at every corner in healthcare. Each month this blog discusses examples of what those consequences can be.

“Remedial measures,” also known as “sanctions,” can be imposed under Federal Rule of Civil Procedure 37(e) when electronically stored information is lost. The word “lost” has a specialized meaning in this context—a meaning that was addressed in Envy Hawaii LLC v. Volvo Car USA LLC, Civ. No. 17-00040 HG-RT (D. Hawaii Mar. 20, 2019).

This litigation arose out of a contract dispute and allegations of improper business practices dispute between a Hawaiian car dealership and the national distributor of Volvos. After two years of litigation, which included document production and depositions, the defendants moved for sanctions against the plaintiffs for their failure to preserve “Google e-mail accounts and electronic dealer management system records.” The court denied the motion, finding that that ESI had not been lost.

The court began with a review of Rule 37(e):

The text of Federal Rule of Civil Procedure 37(e) provides that evidence is ‘lost’ and subject to spoliation sanctions when a party failed to take reasonable steps to preserve it, and ‘it cannot be restored or replaced through additional discovery.’ Fed. R. Civ. P. 37(e)

It’s worth emphasizing that the evidence can only be considered lost if “it cannot be restored or replaced through additional discovery.” The court then focused on the meaning of “lost” under the rule:

Information is ‘lost’ for purposes of Rule 37(e) only if it is irretrievable from another source, including other custodians. Oracle Am. Inc. v. Hewlett Packard Enterprise, Co., 328 F.R.D. 543, 552 (N.D. Cal. 2018).

Cases decided after the implementation of the 2015 amendment to Fed. R. Civ. P. 37(e) have highlighted the 2015 Advisory Committee Notes to the Rule. The 2015 Advisory Committee stated that “because electronically stored information often exists in multiple locations, loss from one source may often be harmless when substitute information can be found elsewhere.” Fed. R. Civ. P. 37(e), 2015 Advisor Committee Notes.

With this focus, the court turned to the facts before it, and found that the defendants (the moving parties) had not met their burden to show that the ESI had been lost. Though plaintiffs might not have preserved the ESI, it was also possible that the ESI might be stored with third parties which maintained the ESI on behalf of the plaintiffs. Moreover, the court observed that the defendants had not subpoenaed the third parties for the ESI or attempted to retrieve it from a system that they had access to. Under these circumstances, the court concluded that the ESI had not been “lost” and left the defendants to serve subpoenas.

There could have been a different result. The court could have ordered the plaintiffs to reach out to the third parties and make the ESI available to the plaintiffs, who would in turn make it available to the defendants. (This assumes that the plaintiffs had “possession, custody, or control” of the ESI. For more discussion on possession, custody, and control, click here.) This order would have avoided the burden of serving subpoenas to the third parties, who might have asserted that the subpoenas were barred by federal law.

What lessons might be learned from this case? It is important to understand the nature and location of ESI relevant to a particular litigation, regardless of which party stores it. Is relevant data maintained by a third party? Does the data “reside” with a third party? With that knowledge, a party seeking the data can ask for it from an adversary or, if appropriate, from a third party through a subpoena. And perhaps most of all, it’s always best to have your facts in order before you seek relief from a court.



**Editor’s Note: The views expressed in this column are those of the author alone and should not be interpreted otherwise or as legal advice.

Ron Hedges, JD, is a former US Magistrate Judge in the District of New Jersey and is a writer, lecturer, and consultant on topics related to, among other things, electronic information. He is a Senior Counsel with Dentons US LLP.
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