Electronic Discovery & Information Governance – Tip of the Month: Spoliation Sanctions for Electronic and Non-electronic Evidence

Other Authors     Noah Bloomberg

Scenario

An automobile manufacturer sues a car dealership chain in federal district court. The manufacturer alleges that the dealership intentionally damaged hundreds of engines purchased from the manufacturer as part of a scheme to fraudulently collect warranty funds.

The dealership reports that many of the damaged engines sought in discovery were either discarded on-site or sent to a scrap yard and are no longer recoverable. Additionally, many electronically stored reports that detailed defects in the engines have been deleted. There are no hard-copy versions of the reports. The manufacturer seeks sanctions for the spoliation of the engines and the digital reports.

Background

Federal courts impose sanctions under their inherent authority or pursuant to FRCP 37(e), the rule governing sanctions for spoliation of electronically stored information (ESI). The 2015 amendment to FRCP 37(e) provides a uniform standard for courts to follow when assessing sanctions for ESI spoliation after varying standards developed throughout the circuits.

FRCP 37(e) does not apply to spoliation of non-ESI evidence, i.e. tangible evidence. Sanctions for tangible evidence spoliation are imposed pursuant to a court’s inherent authority.

Prior to the 2015 amendment, courts typically used a the same standard to assess sanctions for spoliation of ESI and tangible evidence. Now courts assess spoliation of ESI in accordance with FRCP 37(e) and spoliation of tangible evidence in accordance with whichever standard existed in the circuit before the 2015 amendment.

Different Standards Are Applied in Different Circuits

Generally, courts require a threshold finding of culpability for any spoliation sanctions to be imposed. Whether a specific sanction can be granted depends on the facts surrounding the destruction of the evidence. Currently, widely varying standards are employed across the circuits for tangible evidence spoliation.

For example, in the Fourth Circuit, courts require that the spoliating party intentionally engaged in the conduct that resulted in the destruction of evidence. In other words, the destruction must not have been an accident. In such a circumstance, an adverse inference sanction is appropriate.

For a case-dispositive sanction, such as a dismissal or default judgment, the Fourth Circuit generally requires that the party destroyed the evidence in bad faith. However, a dismissal can be granted without a showing of bad faith if the spoliation resulted in extreme prejudice, with the non-spoliating party not being able to adequately prosecute its case or defend itself without the evidence.

The Seventh Circuit, on the other hand, requires a showing of bad faith for any sanctions to be imposed. However, it only applies this standard in federal question cases or when the spoliation occurred after the initiation of the lawsuit.

In diversity jurisdiction cases, if the spoliation of evidence occurred before the litigation formally commenced, a state-law standard is applied. Illinois, Wisconsin, and Indiana district courts do not generally require a showing of bad faith for sanctions in pre-suit spoliation scenarios.

In other circuits, the threshold requirements for imposing sanctions are not entirely settled. Most district courts in the Eighth Circuit, for instance, require that there be a showing of both prejudice and bad faith—a significant hurdle for the moving party. Others merely require intentional destruction of evidence and prejudice.

For severe sanctions, such as an adverse inference, a dismissal, or default judgment, all courts agree that there must be a finding of bad faith and prejudice.

Conclusion

While the standard for assessing sanctions remains consistent for ESI spoliation, a diversified set of standards exists across the circuits for tangible evidence spoliation. The Seventh Circuit sets a high bar where even when seeking modest sanctions, the moving party must show that the evidence was destroyed in bad faith. Other circuits allow sanctions if the destruction was merely intentional but, even then, generally reserve the most severe sanctions for cases involving bad faith.