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United States of America > New York > Litigation Dispute resolution > Advisory > Article > Sanctions Yes, Prejudice No: Spoliation is Spoliation

Article: Sanctions Yes, Prejudice No: Spoliation is Spoliation

Judge Shira Scheindlin of the Southern District of New York – the author of the landmark Zubulake decisions on electronic discovery a decade ago – recently addressed the sanctions awardable against a party that intentionally destroys electronically stored information (ESI) with knowledge of the imminence of the associated litigation.  In Sekisui America Corp. v. Hart, No. 12 Civ. 3479, 2013 WL 4116322 (S.D.N.Y. Aug. 15, 2013), Judge Scheindlin ruled that an adverse influence jury instruction may be entered against a party that destroys evidence knowingly or even negligently, and even in the absence of prejudice to the adverse party.

In Sekisui America, Sekisui America Corporation and Sekisui Medical Co. Ltd. asserted breach of contract claims against Richard Hart and Marie Louise Trudel-Hart arising from Sekisui America’s acquisition of America Diagnostica, Inc. (ADI), of which Richard Hart had served as president.  About a year and a half after Sekisui America acquired ADI from the Harts, Sekisui America fired Hart and sent the Harts a Notice of Claim evidencing its intent to initiate a lawsuit against them.  After Sekisui America filed suit against the Harts, Sekisui America revealed that it had permanently deleted the e-mail records of Richard Hart and Leigh Ayres, a former ADI employee, months after Sekisui America had sent the Notice of Claim.  After discovering that the e mail files had been deleted, the Harts requested that the Court impose an adverse inference jury instruction and other sanctions for spoliation.  The Magistrate Judge assigned to the case, however, declined to sanction Sekisui America on the grounds that the Harts had failed to prove that the destruction of the e-mail files had prejudiced them.  Judge Scheindlin reversed the Magistrate Judge’s Order.

Judge Scheindlin began her analysis by reviewing the law governing awards of sanctions for discovery abuses pursuant to Rule 37.  To impose an adverse inference jury instruction for spoliation, the court must find:

1.The party with control over the evidence must have had an obligation to preserve it at the time of the destruction;

2.The evidence must have been destroyed with a culpable state of mind; and

3.The destroyed evidence must have been relevant to the litigation.

As explained in Judge Scheindlin’s Zubulake decisions, a party’s obligation to preserve evidence arises once the party reasonably anticipates litigation.  The obligation to preserve is particularly difficult to dispute when the culpable party is the plaintiff, such as in Sekisui America, as the plaintiff is usually fully aware of the potential future litigation.  Because Sekisui America’s duty to preserve evidence was not in dispute, Judge Scheindlin focused on the Magistrate Judge’s findings regarding culpability and prejudice. 
According to Judge Scheindlin, a party is culpable for purposes of the adverse inference test if the party destroyed evidence, whether knowingly or negligently.  Judge Scheindlin ruled that Sekisui America’s destruction of Hart’s ESI satisfied the culpability requirement, so long as Sekisui America’s destruction of ESI was intentional.  The Judge stated, "[t]he law does not require a showing of malice to establish intentionality with respect to the spoliation of evidence." 

Judge Scheindlin reversed the Magistrate Judge's finding regarding the destruction of the Ayres ESI because the Magistrate Judge had failed to conduct a culpability analysis.  According to Judge Scheindlin, Sekisui America was culpable because it had intentionally destroyed Ayres's ESI.  Judge Scheindlin found that Sekisui America was also grossly negligent in failing to fulfill its document preservation obligations.  As the plaintiff, Sekisui America knew that litigation was imminent, yet failed to institute a litigation hold until fifteen months after sending the Notice of Claim to the Harts.  Moreover, Sekisui America waited another six months before informing the individuals responsible for retaining the e-mail files of their duty to preserve ESI.  According to Judge Scheindlin, this "failure to meet even the most basic document preservation obligations constitutes gross negligence."

She further held that missing evidence will be deemed relevant if it would have been helpful to the movant had it been preserved.  However, such a showing is not a necessary part of the sanctions analysis, as a finding that the evidence was destroyed intentionally or through gross negligence is usually sufficient to establish relevance.  Nevertheless, Judge Scheindlin found that the ESI at issue was relevant because Hart and Ayres were key individuals in the pending litigation.

Judge Scheindlin explained that, in determining whether to impose an adverse inference jury instruction, prejudice to the innocent party may be presumed whenever, as in Sekisui America, relevant evidence is destroyed, either intentionally or through gross negligence.  According to Judge Scheindlin, requiring the innocent party to prove prejudice in these instances would be "inappropriate," as it "incentivizes bad behavior on the part of would-be spoliators" and "would allow parties who have destroyed evidence to profit from that destruction."  In emphasizing her belief that innocent parties should not bear the burden of proving prejudice, Judge Scheindlin expressed her dissatisfaction with the proposed amendments to the Federal Rules of Civil Procedure, which the Committee on Rules of Practice and Procedure released for public comment the same day that Judge Scheindlin issued the Sekisui America opinion.  If adopted, the proposed amendments would permit sanctions awards only under very limited circumstances—a view that sharply conflicts with Judge Scheindlin’s views on electronic discovery. 

Sekisui America, which reaffirmed the importance of penalizing parties for the destruction of evidence, advanced bright-line rules and presumptions to make it easier for courts to sanction parties that intentionally destroy ESI after the duty to preserve has attached.  The decision has significant implications for litigants and counsel, as it is likely to result in an increase in the prevalence of harsh sanctions for the destruction of relevant ESI.

Sekisui America teaches that litigants must take all necessary measures to preserve relevant ESI as soon as litigation becomes a reasonable possibility.  Such measures include, but are not limited to, instituting a litigation hold and instructing the individuals responsible for retaining the documents of their preservation obligations.  In the wake of Sekisui America, companies, individuals, and attorneys that fail to implement these procedures in a timely manner are more likely than ever to face case-altering sanctions.

Last Update: 2013-Nov-30 Charles E. “Trip” Dorkey III - Dentons
The contents of this page do not constitute legal advice or create an attorney- client relationship with the contributor. Do not apply anything you read here without contacting a professional.
Author: Charles E. “Trip” Dorkey III
Law Firm: Dentons
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