Two Recent Cases Highlight the Spoliation Thresholds in Rule 37(e)

With the 2015 FRCP amendments quickly nearing a half-decade in existence, case-law continues to define how these rules are upheld in court, especially when it comes to the handing out of sanctions. Two recent cases show how strictly judges are adhering to the thresholds laid out in Rule 37(e). As a reminder, here they are those thresholds in plain language:

If Electronically Stored Information (ESI) was lost because a party didn’t take reasonable steps to preserve it when they should have (i.e. because they knew litigation was imminent); and if the lost ESI can’t be restored or replaced by simply doing discovery again; and if there was an intent to deprive the party of information by the loss of the ESI; and if the lost ESI actually affects the outcome of the case, then the court may consider sanctions.

In other words, sanctions are not given just for spoliation of ESI.

Mafille v. Kaiser-Francis Oil Co. May 21, 2019 (N.D. Okla. 2019)

“Lecturing Plaintiffs about their obligation to preserve electronically stored evidence is exceedingly poor form.”

In this case, the Plaintiff, Marlana Mafille, was terminated in part because of alleged performance issues. As part of a standard retention policy, Ms. Mafille’s company computer was given to a charitable organization with other retired computers and the data was presumably destroyed, even though the plaintiff had submitted an EEOC charge of discrimination three months earlier.

After the defendant tried to blame the plaintiff for not requesting the computer be saved, US Magistrate Judge Frank H. McCarthy stated in his ruling, “…lecturing Plaintiffs about their obligation to preserve electronically stored evidence…is exceedingly poor form and beyond zealous advocacy.” He continues, “The court finds that Mrs. Mafille’s work computer should have been preserved and further that Defendant is solely and entirely at fault for failing to take reasonable steps to preserve the computer. However, that finding does not necessarily equate to an award of the sanctions Plaintiffs have requested.”

Why were sanctions denied? The plaintiff’s computer contents were uploaded daily onto the defendant’s LAN server as part of a company policy. So even if her computer were destroyed, the contents could potentially be retrieved if discovery were done on the LAN server. Also, the defendant requested which documents were vital for the plaintiff’s case so they could attempt to retrieve them from the LAN server, but the Plaintiffs never identified any such items. Or as Judge McCarthy ruled, “In the absence of such a showing the court must find that Plaintiffs have not suffered any prejudice as a result of the destruction of Mrs. Mafille’s work computer.”

Univ. Accounting Serv., LLC v. Schulton. June 7, 2019 (D. Or. 2019)

“I deleted the file as fast as I could, because it’s exactly the type of damning information they want to catch me with.”

Ethan Schulton was a lead software developer for ScholarChip and decided to leave the company and start his own endeavor to compete directly with his former employer. He also took his entire email file, ScholarChip’s client list, and some client webinars. Litigation began on March 7, 2018 and four days later, Schulton started deleting files. He did so again on April 9. And then again in August. During his deposition, Schulton admitted, “I recognize fully that I was in violation of the subpoena,” and later said of one particular piece of data, “I deleted the file as fast as I could, because I was petrified at its existence, because it’s exactly the type of damning information that UAS wants to catch me with.”

In US District Judge Michael H. Simon’s Ruling, he states that the Rule 37(e) sanction thresholds “have been satisfied.” It was clear that ESI which should have been preserved was deleted after litigation had begun. Judge Simon continued, “Schulton has admitted facts sufficient to support the conclusion that he acted with the intent to deprive UAS of the information’s use in the litigation, at least to the extent of depriving UAS of the ability to prove precisely what Schulton took with him when he left ScholarChip’s employment at the end of 2017. Finally, UAS has attempted to restore or replace through additional discovery the deleted information but has been unsuccessful. Thus, UAS has satisfied the four threshold elements under Rule 37(e).”

Yet, even after meeting the threshold conditions, the judge didn’t order case termination sanctions, but instead chose a permissive inference spoliation instruction against the defendant.

Conclusion:

Just because spoliation sanctions require proof that the stringent Rule 37 thresholds were met, doesn’t mean you should be lax when it comes to your eDiscovery processes or technology. In fact, quite the opposite. The key element of the rule is showing that “reasonable steps” were taken, and the best way to ensure that is by having a defensible and repeatable eDiscovery process in place.

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