Crafting the Winning Argument in Spoliation Cases: And the Dog Ate Our Documents Isn t It Janelle L. Davis Thompson & Knight LLP 1722 Routh Street, Suite 1500 Dallas, Texas 75201 (214) 969-1677 Janelle.Davis@tklaw.com Janelle is an active member of DRI. She is a member of the Aviation, Products Liability, and Drug & Medical Device Committees. She served as a young lawyer liaison to the Drug & Medical Device Committee from 2013-2014, and she is currently a member of the Drug & Medical Device New Member Orientation and Community Subcommittees. She focuses her practice on mass tort, products liability, aviation, advertising, and antitrust litigation. She represents commercial airlines in litigation arising from passenger claims and product manufacturers in products liability litigation. She has also represented companies in class action litigation over the validity of claims made on product labeling and in advertising materials. - 1 -
Crafting the Winning Argument in Spoliation Cases: And the Dog Ate Our Documents Isn t It I. Introduction At its November 2, 2012, meeting, the Judicial Conference of the United States Advisory Committee on Rules of Civil Procedure voted to recommend approving amendments to Federal Rule of Civil Procedure 37(e). In the more than two years since that time, both the Advisory Committee on Rules of Civil Procedure and the Committee on Rules of Practice and Procedure, referred to as the Standing Committee, considered over 2,300 comments and held 3 public hearings where more than 120 witnesses testified. The proposed new rule has changed several times, but is now in final form and will be considered by the United State Supreme Court, along with a number of other amendments to the Federal Rules. If adopted, the rule will go into effect on December 1, 2015. This article will briefly address (1) the current version of Federal Rule of Civil Procedure 37(e); (2) issues created by the varying interpretations and applications of the rule; and (3) the proposed change recommended by the Advisory Committee on Rules of Civil Procedure. This article will also provide practical tips for dealing with claims of spoliation and motions for sanctions. II. Federal Rule of Civil Procedure 37(e) The development of technology, particularly over the last decade, has led to increased concerns and discovery obligations for both plaintiffs and defendants. In the face of increased technological capabilities and the sheer volume of electronically stored information, companies have adopted document retention policies that routinely delete electronically stored information after a certain period of time. Of course, these retention policies and the automatic deletion of information sometimes led to spoliation claims when destroyed information potentially was relevant to a pending or future dispute. Before the 2006 amendments to the Federal Rules of Civil Procedure, courts often struggled to find a balance between the duty to preserve and the complexities of managing electronically stored information. Some courts recognized the arduous burden that keeping all electronically stored information would place on litigants and adopted a less stringent approach to the duty to preserve. See Concord Boat Corp. v. Brunswick Corp., No. LR-C-95-781, 1997 U.S. Dist. Lexis 24068, at *15 17 (E.D. Ark. Aug. 29, 1997) (denying the plaintiffs request for a spoliation instruction and for costs and fees because the court found that the deletion of the defendant s e-mail was not due to bad faith). Other courts, however, took a more stringent approach, holding that the duty to preserve required affirmative action to prevent the automatic deletion of material that would be reasonably likely to be the subject of a discovery request even before a request is actually received. See Wiginton v. Ellis, No. 02 C 6832, 2003-2 -
U.S. Dist. Lexis 19128, at *12 18 (N.D. Ill. Oct. 27, 2003) (finding that a defendant that followed its normal document retention and destruction policies had acted in bad faith by failing to preserve evidence and that it should have changed its normal retention policy). One case even held that bad faith or gross negligence need not be proved in order to impose discovery sanctions, and that courts should view the efforts that a litigant undertook to avoid destroying evidence as central to whether it could appropriately sanction the litigant. Residential Funding Corp. v. DeGeorge Financial Corp. 306 F.3d 99 (2nd Cir. 2002). As parties continued to struggle with the complex responsibilities that accompany discovery of electronically stored information, disparate approaches by the courts ultimately prompted a change to the Federal Rules of Civil Procedure to provide uniformity and clarity. In 2006, the rule was revised in an effort to provide a consistent and clear standard for courts to apply when deciding whether to impose sanctions resulting from spoliation. But while the drafters of the rule wanted to provide a clear standard for sanctions, they also intended for the rule to provide only limited protection against sanctions arising from the destruction of electronically stored information through routine systems. Advisory Comm. on Rules of Civil Procedure, Report of the Civil Rules Advisory Comm. 83 (May 27, 2005). In other words, the drafters wanted to protect parties with routine electronic systems that automatically discarded information. Id. With these considerations in mind, the drafters attempted to create a safe harbor for parties that inadvertently destroyed documents in connection with the use of an electronic information system. Under the language of the current rule, and unless exceptional circumstances exist, a court may not impose sanctions 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. Fed. R. Civ. P. 37(e). III. Inconsistencies in the Interpretation of the Rule Although the goal of the Federal Rule of Civil Procedure 37(e) was to provide consistency and clarity, it has done little to achieve this goal. Despite the language of the rule, courts continue to rule inconsistently. For example, some apply the plain language of the rule to determine that they cannot impose sanctions for the failure to preserve electronic evidence without bad faith. Escobar v. City of Houston, CV-04-1945, 2007 WL 2900581 (S.D. Tex. Sept. 29. 2007) (refusing to sanction the City of Houston, finding that the documents were destroyed under the routine operation of a document destruction policy and there was no evidence of bad faith); Se. Mech. Services, Inc. v. Brody, No. 8:08-CV- 1151-T-30EAJ, 2009 WL 2242395 (M.D. Fla. July 24. 2009) (finding that sanctions were inappropriate because the documents were lost during the routine operation of the plaintiff s computer system and nothing indicated that the plaintiff operated the system in bad faith); Denim North America Holdings v. Swift Textiles, 816 F. Supp. 2d 1308 (M.D. Ga. 2011) (denying sanctions because - 3 -
bad faith was not apparent, and Federal Rule of Civil Procedure 37(e) prevents imposing sanctions without such a finding). On the other hand, some courts hold that sanctions are permissible based on the inherent power of the court or based on a party s failure to preserve materials once the party reasonably anticipated litigation. See Disability Rights Council of Greater Washington v. Washington Metro. Transit Auth., 242 F.R.D. 139 (D. D.C. 2007); Arista Records v. Usenet.com, 608 F. Supp. 2d 409 (S.D. N.Y. 2009); Domanus v. Lewicki, 284 F.R.D. 379 (N.D. Ill. 2012) (objections sustained by 2012 WL 3307364 (N.D. Ill. Aug. 13, 2012); Nucor Corp. v. Bell, 251 F.R.D. 191 (D. S.C. 2008). Each of these courts held that the standards under Rule 37(e) do not apply where a party is already under a duty to preserve information). With this rationale, courts are not limited by the provisions of Federal Rule of Civil Procedure 37(e) when they determine whether they may sanction discovery conduct, and a party cannot rely on good faith as offering certain protection when the party has been accused of destroying evidence. When applying this logic, courts hold that parties are obligated to intervene before destruction of electronic information occurs or suffer consequences based on their failure to do so. In each of the cases above, the courts found that the offending party had breached its existing duty to preserve information by failing to stop routine destruction mechanisms even without a showing of bad faith. Thus, while the 2006 amendment sought to clarify the circumstances under which sanctions would be an appropriate remedy for the loss or destruction of evidence, courts have not necessarily strictly adhered to the rule in their decisions. As these cases demonstrate, some courts have imposed discovery sanctions on a party despite the rule even when another party has neither alleged nor demonstrated bad faith by the potentially offending party in the strictest sense. A court may resort to its inherent power to sanction a party, or it may determine that failure to act to interrupt the routine destruction of information suffices as evidence of bad faith given a party s duty to preserve information once the party reasonably anticipates litigation. The rule in its current form has not therefore consistently provided protection to a party when the routine operation of computer systems destroys documents, at least not when that party should anticipate that a system that routinely destroys documents might lose documents relevant to anticipated or pending litigation. These decisions suggest that a litigant needs to undertake affirmative efforts to demonstrate compliance with its preservation obligations to protect the litigant fully from discovery sanctions down the road, irrespective of intentions. IV. The Proposed Rule Change The continued inconsistency among the federal courts and the increasing costs of over-preservation out of fear of being sanctioned has prompted yet another proposed change to Federal Rule of Civil Procedure 37. If adopted, the new Federal Rule of Civil Procedure 37(e) will more precisely set forth the - 4 -
standard for courts to apply when deciding whether to impose sanctions for the destruction of electronically stored information. Following many revisions, the proposed new Federal Rule 37(e) currently reads as follows: (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 a finding that the party acted with the intent to deprive another party of the information s use in the litigation, (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. Summary of the Report of the Judicial Conf. Cmte. On Rules of Prac. and Proc. (Sept. 2014) at p. B-56-B-58, available at http://www.uscourts.gov/uscourts/rulesandpolicies/rules/reports/st09-2014.pdf. Practitioners will want to note several important things about the proposed new rule. First, the final version of the rule applies only to electronically stored information. Earlier versions of the rule applied its standards to all discoverable information but the drafters ultimately decided to keep the rule s application limited in scope. Second, the proposed rule is designed to give litigants who make reasonable steps to satisfy their preservation responsibilities the confidence that they will not suffer serious sanctions should they lose information despite those efforts. Thus, under the proposed rule, a court may impose serious sanctions only if the court finds that the party acted with intent to deprive. In other words, mere negligence or gross negligence is not sufficient to support significant sanctions. This proposed change provides a clear and consistent standard for courts to look to when deciding sanctions motions. Finally, the proposed rule gives courts rule-based authority to impose sanctions, eliminating the need for courts to resort to their inherent authority as so many have in the past. - 5 -
V. Tips for Fighting Spoliation Claims/Motions for Sanctions Spoliation is becoming a tactic increasingly used by plaintiffs counsel, particularly in mass tort litigation. If successful, claims of spoliation can have devastating consequences for defendants. Spoliation clams and the resulting motions for sanctions can be extremely costly and time-consuming to fight. If lost, they can result in any number of negative consequences ranging from monetary penalties to adverse inferences or instructions read to the jury, to default judgments. Thus, it is critically important for companies and their counsel to both know how to prevent claims of spoliation and how to fight them once they are made. Any company that has a reasonable anticipation of litigation should involve counsel as soon as possible, even before a lawsuit has been filed. Counsel whether in-house or outside can advise on the steps that should be taken to preserve any documents or other evidence that may relate to the anticipated litigation. For example, counsel can prepare a litigation hold letter advising custodians of documents and electronically stored information to preserve potentially relevant evidence. Counsel can also work with appropriate individuals within the company to determine all relevant custodians who should receive and abide by the litigation hold. Companies and their counsel should also review any policies pertaining to the automatic deletion or purging of documents, emails or other materials. If there are materials relevant to anticipated litigation that may be destroyed pursuant to an automatic deletion policy, thought should be given to whether suspension of that automatic deletion policy is appropriate. The committee notes to the Rule 37(e) proposed rule change specifically note that this is one factor that courts should take into account when determining whether sanctions are appropriate. If a motion for a spoliation finding or sanctions is ultimately filed, there are several steps that should immediately be taken. First, counsel and the client should determine exactly what was destroyed, how, and when so that they can present a clear picture to the court when responding to the motion. Second, they should make sure that nothing else gets destroyed during the pendency of the litigation. Third, they should be intimately familiar with the law in their jurisdiction as it relates to the duty to preserve evidence and the showing that must be made for a finding of spoliation or an award of sanctions. Finally, in responding to any motion, counsel and the client should determine what evidence is needed to appropriately and thoroughly respond. This could mean that individuals from the company need to be deposed, or it could be as simple as having them prepare a detailed affidavit in support of the company s opposition to any motion. VI. Conclusion Practitioners should be aware that of the upcoming changes to Federal - 6 -
Rule of Civil Procedure 37(e), which should take effect later this year. In addition, while companies cannot guarantee that they will never face a motion for sanctions based on spoliation of evidence, they can protect themselves from an ultimate finding of sanctions. The best way to do this is to take the necessary steps before litigation is pending to ensure the preservation of relevant evidence. - 7 -