In a recent case, SJS Distribution Systems v. Sam’s Club (decided October 11, 2013), the Eastern District of New York discussed and applied the doctrine of “spoliation” as it relates to discovery in civil litigation.
There, plaintiff argued that it “discovered a discrepancy between the packaging of the diapers that it ordered and some of the diaper shipments defendant delivered” and that plaintiff was “unable to resell those diapers to the intended buyer and incurred damages as a result.”
Following plaintiff’s alleged discovery failures and its representation (e.g.) that it “did not anticipate litigation with defendant or the need to save all email communication with defendant,” defendant filed a motion for sanctions, on the ground that plaintiff was “responsible for the spoliation of electronically stored information.”
Spoliation is:
the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation. [A] district court may impose sanctions for spoliation, exercising its inherent power to control litigation. A party moving for sanctions based on spoliation of evidence must establish three elements: (1) the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the records were destroyed with a culpable state of mind; and (3) the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense. (Emphasis added.)
Preservation Obligation
The court elaborated on the “obligation to preserve” element:
A party seeking sanctions for destroyed evidence must first show that the party having control over the evidence … had an obligation to preserve it at the time it was destroyed. This obligation usually arises when a “party has notice that the evidence is relevant to litigation—most commonly when suit has already been filed … but also on occasion in other circumstances, as for example when a party should have known that the evidence may be relevant to future litigation.
The court disagreed with plaintiff’s argument that it did not anticipate litigation at the time it discovered the alleged packaging nonconformities:
When plaintiff discovered the alleged packaging discrepancies in mid-November, it certainly had notice that any electronic communications and information related to the purchase and sale of the goods from defendant might be relevant to future litigation. Thus, defendant has amply shown that plaintiff had notice that such records were relevant to litigation and that, as a result, it had an obligation to preserve them.
Culpability
As to the second element, culpability, the court observed that the spoliation doctrine is not limited to “outrageous” cases. Rather, “culpable” can mean “knowingly, even if without intent to breach a duty to preserve the evidence, or negligently.”
The court found that plaintiff acted with the requisite state of mind:
[P]laintiff had an obligation to preserve the relevant records, but failed to do so. SJS never issued a formal litigation hold to ensure preservation of electronic information, despite admitting familiarity with its obligation to preserve documents in the event that litigation seems likely for a particular matter. While the failure to timely institute a litigation hold does not constitute gross negligence per se, the facts here establish that SJS’s failure to take the most basic document preservation steps, even after it discovered the packaging nonconformities and filed this action, constitutes gross negligence. Such failure is particularly inexcusable given that SJS is the plaintiff in this action and, as such, had full knowledge of the possibility of future litigation.
Relevance
Finally, the court addressed the “relevance” element, which requires inquiry as to “whether there is any likelihood that the destroyed evidence would have been of the nature alleged by the party affected by its destruction.” The absence of evidence of bad faith meant that defendant, as the “prejudiced party”, had the burden to present evidence “suggesting that documents relevant to substantiating its claim would have been included among the destroyed records.”
The court elaborated on this standard:
Courts must take care not to hold[ ] the prejudiced party to too strict a standard of proof regarding the likely contents of the destroyed [or unavailable] evidence,” because doing so “would subvert the purposes of the adverse inference, and would allow parties who have … destroyed evidence to profit from that destruction. A moving party may obtain modest sanctions by showing only that the lost evidence was pertinent to its claims. However, where more severe sanctions are at issue, the movant must demonstrate that the lost information would have been favorable to it. [I]n the absence of sufficiently egregious conduct, the party seeking sanctions must demonstrate that a reasonable trier of fact could find that the missing [evidence] would support [its] claims. [A] showing of gross negligence in the destruction or untimely production of evidence will in some circumstances suffice, standing alone, to support a finding that the evidence was unfavorable to the grossly negligent party.
The court found that defendants established “relevance” and that sanctions were warranted:
While there is no extrinsic evidence that the destroyed records would have been favorable to defendant, defendant correctly notes that the destroyed records are relevant insofar as at least some of the emails referenced the business transaction between the parties that lies at the center of this dispute. Because the emails would certainly have aided defendant in gaining additional information about the circumstances surrounding the sale and attempted re-sale of the goods, it is appropriate to impose a sanction on plaintiff for its spoliation of the records.
Specific Sanction
An appropriate “sanction should be designed to: (1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore “the prejudiced party to the same position [it] would have been in absent the wrongful destruction of evidence by the opposing party.”
Citing the lack of plaintiff’s bad faith and other evidence available to defendant regarding the shipments and re-sale of the goods, the court found that a sanction of precluding evidence was not warranted.
It held that in this case an appropriate sanction was an “adverse inference against plaintiff that it negligently deleted emails … that would have been relevant and favorable to defendant” and an award of expenses incurred by defendant in pursuing a remedy.