How Much Circumstantial Evidence is Enough for Spoliation Sanctions?

by Exterro, Inc.
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Exterro 2017 Summer Case Law Recap

We’ve all heard, “It’s not whether you win or lose, but how you play the game.” But how you play the game is often a big part of ending up on the winning side in e-discovery. In today’s world, it has almost become normal that people make speculative statements without any proof that the statement is true. One might get away with this on their Twitter feed, but in court, this practice will not be convincing to any judge, especially when making an argument for e-discovery sanctions based on new rule FRCP 37(e) – updated spoliation standard for electronically stored information (ESI).

But it seems that a lot of parties accusing their opposition of spoliation didn’t get this memo or have been misguided by forces outside the courtroom. Case in point, a rash of recent court rulings denying motions for spoliation sanctions under 37(e).

It’s relatively simple to decipher if you should take the time to file a spoliation motion or if it will just be a waste of your client’s time. Just ask yourself these three questions…

  1. Was there a legal duty to preserve the data at issue? (In other words, was a legal hold sent to the opposition? Would it be reasonable for the opposition to assume that litigation was foreseeable at the time of the spoliation activity? If yes, move onto step #2.
  2. Is the data at issue relevant to the case? (In other words, do you have evidence that proves that whatever was deleted would have been relevant to the case?) If yes, move onto step #3.
  3. Was your party prejudiced by the spoliation? (In other words, does not having the spoliated data hurt your case? If so, how was your party hurt? Give specifics.)

If you answered yes to all three of these questions, then make sure to support your arguments with facts and if you don’t have facts to back up each one of these answers don’t bother bringing the motion, especially if the opposition has a reasonable explanation for the spoliation.

Here are two recent cases to highlight this, one on the losing side, and one on the winning side.

Spoliation Only Occurs if There is Proof

First American Title Insurance Company v. Northwest Title Insurance Agency, LLC (D. Utah August 31, 2016)

Why This Case is Important

Just because it may seem like spoliation may have or should have occurred, doesn’t mean it did. Save everyone’s time and money, and don’t request spoliation sanctions if there isn’t direct proof that relevant data was deleted/modified.

Overview

Two employees for the plaintiff, First American Title Insurance, began working together to create a competing title insurance company. When the two employees resigned, they immediately began working for their own company, Northwest Title Insurance Agency (the named defendant in this case).

Subsequently, the plaintiff sought sanctions against the defendants for alleged spoliation of evidence, which included (1) issuing a verbal only legal hold, and (2) deleting documents from a company issued computer and iPad when defendants worked for plaintiff.

Ruling:

  • Speculation Doesn’t Warrant Sanctions. Aside from a thumb drive that went missing, the court rejected the plaintiff’s motion for spoliation sanctions due to the fact no evidence was presented that (1) responsive data was deleted and (2) that the plaintiff was prejudiced by any of the defendant’s actions.
  • Deleting Personal Files OK. The plaintiff offered no evidence that the deleted data from the defendant’s old company issued computer and iPad was responsive to this case. Also, the plaintiff failed to try to resolve this issue by researching alternative remedial measures.
  • Oral Legal Holds “May” Fail a Party’s Discovery Obligations. The plaintiff cites to old case law that showcases non-written legal holds were negligence per se without proving that plaintiff has been prejudiced by the oral legal hold.

Rule 37(e)’s Intent Standard Clarified in This Lost Cell Phone Case

Brown v. Certain Underwriters at Lloyds, London (E.D. P.A. June 9, 2017)

Why This Case is Important

Based on the court’s analysis, this ruling can help legal teams clarify what will amount to enough circumstantial evidence to prove intent to deprive under Rule 37(e).

Overview:

In this insurance fraud case, the defendants filed a motion for spoliation sanctions due to the plaintiff not producing his cell phone device during discovery.

Brought about by a fire at the plaintiff’s property, the defendants refused to pay an insurance claim issued by the plaintiff. During a non-judicial hearing, the defendants requested the plaintiff’s cell phone to recover data relating to the time of the fire due to a suspicion that the plaintiff set the property on fire himself.

The day before the plaintiff was scheduled to produce his cell phone in this case, the plaintiff filed an objection, because he no longer could produce the phone which he had lost months prior. As a result, the defendant filed a motion of spoliation sanctions.

Ruling:

  • Adverse Inference and Monetary Sanctions Awarded. The court ruled that the plaintiff had spoliated cell phone data, which was done so in bad faith leading to an adverse inference instruction and payment for the defendant’s fees and costs associated with filing the motion.
  • Intent Proven Based on Timing of Notice. The plaintiff waited to notify the defendant that the phone was missing until hours before the phone was due to be produced. Based on the defendant’s story, he would’ve known that his cell phone was lost for four months.
  • No Excuses Given by the Plaintiff. The plaintiff failed to offer a defense or reason for how he lost his phone, and evidence was produced (cell phone screen shots from a colleague) showing the plaintiff may have been colluding with this colleague to commit insurance fraud, creating a motive for the plaintiff to hide his cell phone. Based on these surrounding circumstances, the court reasoned that a bad faith intent was proven and issued spoliation sanctions.

Conclusion:

Whether you’re in e-discovery or not, relying on speculation is never a good practice. Knowledge of the facts is always vital, and recent case law is a good place to gain understanding of how the FRCP rules are being defined by various courts.

For more case rulings on this theme, check out Exterro’s latest case law white paper: Circumstantial Evidence vs. Speculation: What Warrants E-Discovery Sanctions

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