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Spoliation Sanctions: Don’t Let Data Mismanagement Spoil the Outcome of Your Case 

Discovery Sanctions for ESI Spoliation

Written By

Michael Neher

On December 1, 2015, amendments to the FRCP went into effect, which helped to standardize what warrants ESI spoliation sanctions. Since the 2015 amendments, Judges have more tools at their disposal to address improper behavior with eDiscovery. Rather than requiring “exceptional circumstances” before a court can impose sanctions for a party’s failure to turn over electronically stored information lost due to the “routine, good-faith operation of an electronic information system,” Rule 37 now applies to a party’s failure to take “reasonable steps” to preserve electronically stored information in anticipation of or during litigation. So what determines the severity of a sanction? 

Sanctions, if they are appropriate, would either flow from the Court’s inherent power to sanction or pursuant to rule 37 of the Federal Rules of Civil Procedure. Rule 37 provides that “the court . . . only upon finding the party acted with the intent to deprive another party of the information’s use in the litigation may . . . dismiss the action or enter a default judgment.”  Often, these can be terminating sanctions (sanctions so significant they are deemed to be case-ending). In essence, if you intentionally deprive the opposing party of ESI, the court will likely assume the evidence was negative to your case.

Under Rule 37(e), the following framework determines the availability of terminating sanctions:

  1. Has ESI been lost?
  2. If yes, should the ESI have been preserved?
  3. If yes, did the party fail to take reasonable steps? 
  4. If yes, can the ESI be restored or replaced?
  5. If it can’t, was there a specific intent to deprive the other party of the information? 

If there was no specific intent to deprive and no prejudice to the opposing party, the spoliator can avoid sanctions. If there was no specific intent to deprive but there is prejudice to the opposing party, the court may order measures no greater than necessary to cure the prejudice. However, if there is a specific intent to deprive the opposing party, the court has the discretion to enter an order (1) presuming the information was unfavorable to the spoliating party, (2) instruct the jury to presume the information was unfavorable to the spoliating party, or (3) dismiss the action or enter a default judgment. While Judges are expecting attorneys to take reasonable steps to preserve relevant data, lawyers have an ethical obligation to be knowledgeable about the proper retention of evidence. Still, negligent spoliation does not lead to terminating sanctions; the so-called “happy accident” does occur from time to time. 

However, in cases where implied, circumstantial evidence of intent to deprive can be put forth, terminating sanctions can still be entered. The Rule, by its very terms, applies when a party has “failed to take reasonable steps to preserve” electronically stored information and “it cannot be restored.”  However, in circumstances in which ESI is intentionally manipulated to gain an advantage in litigation, the implications are much more serious. In these more egregious circumstances, the Court’s inherent power to sanction is a more appropriate response. See, e.g., Amerisource Corp. v. Rx USA Int’l Inc., 2010 WL 2730748, at *5 n.3 (E.D.N.Y. 2010), aff’d sub nom., New York Credit & Fin. Mgmt. Grp. v. Parson Ctr. Pharmacy, Inc., 432 F. App’x 25 (2d Cir. 2011) (finding it more appropriate to impose sanctions under the Court’s inherent power because “the misconduct at issue here is broader than a Rule 37 violation.”).  In Chambers v. NASCO, Inc., the Supreme Court held that federal courts have the inherent power to “fashion an appropriate sanction for conduct which abuses the judicial process,” 501 U.S. 32, 45 (1991), but cautioned that the power to sanction a party is limited to those cases where the party has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons…”  Id.

Evidence of spoliation may give rise to sanctions which include dismissal of a claim, suppression of evidence, an adverse inference, fines, and attorneys’ fees and costs.  See Mosaid Techs. Inc. v. Samsung Elecs. Co., 348 F. Supp.2d 332, 335 (D.N.J. 2004).  The burden of proof to demonstrate spoliation lies with the party asserting that spoliation has taken place.  Culler v. Shinseki, 2011 WL 3795009, at *3 (M.D. Pa. 2011).

Recently, Capsicum testified in a matter involving motions for chronic and deliberate discovery abuses, including spoliation ESI, lack of candor with the Court, failing to comply with discovery orders, and producing an unprepared representative at a deposition. With Capsicum’s investigation, testimony, and experience in data collection and management, a defendant was able to successfully explain why reasonable steps were taken, and that any missing data was not the fault of the defendant.