Electronic Discovery and Digital Evidence in a Nutshell - Chapter VIII Outline

Here's another installment of my outline of Electronic Discovery and Digital Evidence in a Nutshell, the second edition of the West Academic guide to electronic discovery law in the United States authored by Judge Shira Scheindlin (the judge in the Zubulake v. UBS Warburg) and members of the Sedona Conference. An outline of the previous chapter was posted on February 12, 2017.

CHAPTER VIII SPOLIATION AND SANCTIONS

A. Power of the Court to Sanction a. Rule 37 in General i. 37(a) – power to issue orders to compel ii. 37(b) – power to sanction a party for failure to comply with an order. 1. Certain matters taken as established. 2. Prevent claims or defenses 3. Striking pleadings in whole or in part. 4. Stay proceedings until order is obeyed 5. Dismissing action in whole or in part. 6. Default judgment 7. Contempt of court. iii. 37(b)(2)(c) party must pay reasonable expenses caused by failure. iv. Rule 26(g) sanction – attorney must certify that disclosures are complete and correct and discovery request not for any improper purpose, and not unreasonable or unduly burdensome or expensive.

b. Inherent Authority i. Court can impose sanctions for misconduct in discovery under its inherent power to manage its own affairs. Chambers v. NASCO (U.S. 1991)

B. Spoliation a. Definition and Elements i. Wrongful destruction of evidence.

b. Degree of Culpability i. Loss or alteration of ESI from mere negligence, gross negligence, recklessness, bad faith or intentional misconduct. ii. Residential Funding v. DeGeorge (2d Cir. 2002) – discovery sanctions, including adverse inference instruction may be imposed where party has breached discovery obligation not only through bad faith or negligence but also ordinary negligence. iii. Stevenson v. Union Pacific (8TH Cir. 2004) – There must be some indication of intent to destroy the evidence for the purpose of obstructing the truth in order to impose the sanction of an adverse inference instruction. iv. Circuit Court Culpability Line-up 1. 5th; 7th; 8th; 10th Circuits require bad faith. 2. 2nd; 3rd; D.C.; Fed. Circuits negligence is sufficient. 3. 4th; 6th Circuits ‘willfulness’ standard 4. 1st Circuit – question of spoliation left to the fact finder and no required finding of degree of culpability. v. Culpability is not a factor under FRCP as amended in December 2015.

c. Degree of Prejudice i. Proof of prejudice still required under FRCP. ii. Requesting party unable to obtain production of relevant information that would have helped its case because evidence was destroyed in violation of an obligation to preserve. iii. Circumstantial evidence is often required to establish relevance of altered or destroyed evidence. iv. Prejudice as a necessary element of spoliation 1. Greyhound v. Wade (8th Cir. 2007) – must be a finding of prejudice before imposing sanction for the destruction of evidence. 2. Under the new Rule 37( e), as discussed below, when a party acts “with the intent to deprive another part of the information’s use in litigation” the court need not make a finding of prejudice in deciding whether to impose the harsh 306sanctions of adverse inference or dismissal/ default. This may be because when information is intentionally destroyed, prejudice is presumed. v. Circumstantial Evidence of Prejudice 1. Complete destruction of evidence automatically justifies a finding of prejudice. 2. In Zubulake plaintiff was able to show relevance of missing emails because she kept printouts of 450 emails on relevant issues. vi. Standard of Proof Needed to Establish Prejudice 1. Microtech v. Rambus (D. Del. 2009) – clear and convincing evidence is required. Balance standard of proof to establish intent with standard of proof to establish prejudice. vii. Presumption of prejudice based on Intentional Misconduct 1. Where the prejudice is very great, assessment of spoliator’s culpability becomes less important.

d. Rule 37(e) – General i. Applies only to ESI. ii. If ESI that should have been preserved in anticipation or conduct of litigation is lost because party failed to take steps to preserve it, and it cannot be restored or replaced, court 1. Upon finding of prejudice may order measures no greater than necessary to cure the prejudice. 2. Only upon finding of intent to deprive a. Presume that lost information was unfavorable. b. Instruct jury that it should presume information was unfavorable. c. Dismiss the action or enter a default judgment. iii. ‘Should have been preserved in anticipation of litigation’ 1. Note states that Rule 37(e) does not apply when information is lost before duty to preserve arises. 2. Note recognizes that there may be requirements to preserve imposed by statutes; administrative regulations; court orders; or party’s own document retention protocols, but failure to meet these requirements does not prove preservation efforts were not reasonable. iv. Reasonable Steps to Preserve 1. Committee Note – a. perfection in preserving all relevant ESI is often impossible. b. Routine, good faith operation of an electronic information system is a factor to consider. c. Consider a party’s sophistication. d. Is information lost by events outside of a party’s control? e. Consider principle of proportionality. v. Restored or replaced through additional discovery 1. Committee Note – efforts to restore or replace must be proportional to the importance of the lost information to claims or defenses.

e. Rule 37(e)(1) i. No requirement of culpability, but prejudice is required. ii. Burden of proving prejudice is not placed on one party or another. iii. Measures 1. Measures no greater than to cure prejudice. 2. Speaks of ‘measures’ not sanctions. 3. Types a. Forbid putting on certain evidence. b. Exclude specific item of prejudice. c. Permit parties to present argument and evidence to the jury regarding the loss of information 4. Hogan v. Raymond (3d Cir. 2013) – monetary sanction does not require showing of bad faith. iv. ‘No Greater Than Necessary’ 1. Committee Note – ‘much is entrusted to the court’s discretion’.

f. Rule 37(e)(2) i. Requires finding that the spoliating party acted with prejudice to deprive another party of its use. ii. Court may, but is not required, to take one of three actions: 1. Presumption that lost information was unfavorable. 2. Provide jury with either permissive or mandatory adverse inference instruction. 3. Dismiss the action or enter a default judgment. iii. ‘Intent to Deprive Another Party of Information’s Use in Litigation’ 1. Rule is silent on the burden of proof. 2. Can’t use adverse inference instruction for negligent loss of information as in Residential Funding. 3. Committee Note – these measures should not be used when information was unimportant or lesser measures can be sufficient to redress the wrong. iv. Default Judgment or Dismissal 1. Rule 37( b)( 2), which authorizes a court to assess a sanction for violation of a discovery order, or pursuant to new Rule 37( e)( 2). v. Adverse Inference Jury Instruction 1. When party fails to produce relevant evidence within its control can issue adverse inference instruction. 2. Rule is silent with respect to proof on whether or not the information must be relevant. 3. A party seeking such a “spoliation” adverse inference must adduce sufficient evidence from which a reasonable juror could infer the unfavorable nature of the destroyed evidence. 4. In re Actos (W.D. La. 2014) – evidence of bad faith sent to the jury when unsure if defendant had demonstrated bad faith to support mandatory adverse inference instruction.