Judge Shira Scheindlin’s latest opinion, Sekisui v. Hart, marks a major development for the latest footprint in spoliation case law and is sure raise eyebrows among federal rule makers tasked with reworking Federal Rule 37. The breach of contract claim in Sekisui stemmed from the plaintiff’s acquisition of the defendants’ company. Notably, the plaintiff sent a notice of potential claims to the defendants in October 2010, but did not file suit until May 2012. During this time frame, the plaintiff directed its vendor to permanently destroy the emails of Hart, the acquired company’s former president, and another former employee. Additionally, the plaintiff revealed that it had not put in place a litigation hold until January 2012, nearly fifteen months after sending a Notice of Claim to the defendants. It did not notify the vendor managing its ESI of the lawsuit until July 2012, three months after the claim was filed. While a former HR executive did print (and the company later produced) hard copies of any emails “deemed pertinent to the company,” the plaintiff lost an undeterminable amount of ESI associated with Hart and the other former employee. Crucial to the court’s spoliation analysis was that the destruction stemmed from the plaintiff’s business-level decision to streamline business operations.
Judge Scheindlin cited Residential Funding Corp. v. DeGeorge Financial Corp. to begin her analysis. To warrant an adverse inference instruction, a party must establish three things:
Control and a duty to preserve (not disputed here)
Culpability by the destroying party
That the destroyed evidence was relevant
Prominent ediscovery Magistrate Judge Frank Maas, wrote the underlying opinion denying sanctions. While he reasoned that the conduct may have risen to the level of gross negligence, he found that sanctions were not warranted because the defendants failed to show that they had been prejudiced by the destruction of ESI.
Judge Scheindlin departed from the Magistrate Judge’s analysis at several points of the opinion. Chastising recent proposed amendments to FRCP 37(e), the court again cited the Residential Funding decision to state that the state of mind factor is established when the destruction was intentional or even negligent. Because the plaintiff’s employee directly requested the deletion of ESI, Scheindlin found the destruction of the emails of the two key custodians “willful” and “intentional.” As such, Sekisui’s good faith excuse—to save space on its servers—was irrelevant.
Turning to the relevancy of the missing ESI, the court quickly found that “it is not difficult to envision” many ways in which the destroyed emails “might be relevant.” While Magistrate Judge Maas also came to this conclusion, he ultimately declined to impose sanctions because the defendants could not show that any emails were, in fact, missing. Judge Scheindlin took issue with this analysis and centered her discussion on the risk of loss rationale lying at the heart of spoliation case law. The fact that potentially relevant information was willfully destroyed is enough to presume prejudice to the innocent party (for the limited purpose of determining whether an instruction will be given)—flipping the burden the other way “would allow parties who have destroyed evidence to profit from that destruction.” As Judge Scheindlin noted, the defendants can no longer use the emails to show compliance with the terms of the contract that was allegedly breached. Because the plaintiff “willfully and permanently destroyed the ESI of at least two key players,” failed to impose a timely litigation hold, and waited too long to inform its vendor of its obligations, the court granted the defendants’ request for an adverse inference instruction. Stay tuned for Part II of this blog: The Implications.