Spoliation: A Trap for the Unwary
“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.” West v. The Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999) (citing Black’s Law Dictionary 1401 (6th ed. 1990)). Issuing sanctions for spoliation of evidence relevant to the issues in pending litigation is not new to our civil justice system. However, the number of claims of spoliation in litigation has risen dramatically in recent years with the increased use of electronic data and emails in the ordinary course of business.
Technological advances have made it much easier to create, maintain, alter, and delete electronic documents and communications. Because of the inherent nature of electronic data, more documents and communications are created and maintained; yet, this also makes them subject to alteration and/or destruction with a single keystroke or even automatically from the routine operation of the system. Thus, the intent to alter or destroy electronic data is not required for spoliation to occur. See, e.g., Shira A. Scheindlin & Kanchana Wangkeo, Electronic Discovery Sanctions in the Twenty-First Century, 11 Mich. Telecomm. L. Rev. 71, 71 (Fall 2004) (stating that electronic data “is much more susceptible to unintentional destruction than hard copy documents”).
In addition to inadvertent destruction and failure to save, there are a number of ways to intentionally destroy evidence, including using software to defeat forensic review by the opposing party, or by changing file names and dates of creation. Further, the volumes of electronic records which exist and, thus, must be stored, present significant issues for businesses that could be handicapped if required to maintain all electronic records for long periods of time. Id. (“Electronic data is often recycled or overwritten as part of normal business practices because a business cannot or need not retain large volumes of outdated information.”). The challenge of managing enormous volumes of electronic data, coupled with the increased ease and opportunity to alter and to delete electronic data with advancing technology, has brought preservation and spoliation to the forefront of issues associated with litigation today. As United States District Judge Shira A. Scheindlin has noted “[n]ot surprisingly, spoliation has become a significant e-discovery problem. . . .” Id.
While there are numerous state and federal decisions that address spoliation in the context of electronic discovery, the seminal cases are Zubulake IV and Zubulake V. Zubulake v. UBS Warburg, LLC (“Zubulake IV”), 220 F.R.D. 212 (S.D.N.Y. 2003); Zubulake v. UBS Warburg, LLC (“Zubulake V”), 229 F.R.D. 422 (S.D.N.Y. 2004). Applying Second Circuit precedent, Judge Scheindlin held that the party seeking sanctions for spoliation with respect to electronic data must establish: 1) the party with control over the evidence had an obligation to preserve it at the time of destruction; 2) the evidence was destroyed with a “culpable state of mind”; and 3) the evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could find it would support that claim or defense. Zubulake IV, 220 F.R.D. at 220 (quoting Byrnie v. Town of Cromwell, Bd. of Educ., 243 F.3d 93, 107-12 (2d Cir. 2001)). The court also noted that when evidence is destroyed intentionally or willfully, it is presumed that the third prong of relevancy is satisfied. Id. However, if the evidence is destroyed negligently, although such ordinary negligence satisfies the second element of “culpable state of mind,” the party requesting sanctions must also establish that the destroyed evidence would have been relevant. Id.
In analyzing the argument that the backup tapes were “inadvertently recycled,” the court concluded that “[o]nce the duty to preserve attaches, any destruction of documents is, at a minimum, negligent.” Id. (noting that this conclusion would not apply to destruction outside of the party’s control). The court in Zubulake IV denied the request for an adverse inference instruction, but awarded costs associated with re-deposing certain UBS employees as to issues raised by the destruction of this evidence. Id. at 222. Subsequently, information obtained during these depositions revealed spoliation of a broader scope and led the court to conclude that UBS’s spoliation was willful; thus, the destroyed information was presumed relevant. Zubulake V, 229 F.R.D. at 436-40.
In determining what sanction would place Zubulake in the position she would have been in if the spoliation had not occurred, the court ordered that an adverse inference instruction against UBS be read to the jury and awarded costs to Zubulake of depositions, restoration, and attorneys’ fees incurred with her motion. Id. at 439.
As stated above, Zubulake IV recognized that a claim of spoliation can only arise if there is a duty to preserve the information destroyed. The duty to preserve arises when a party knows or should know that evidence may be relevant to litigation which it reasonably anticipates. See, e.g., Silvestri v. General Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001). While a party is not required to preserve “every shred of paper, every email or electronic document, and every backup tape,” a party is required to preserve what it “knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, or is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.” Zubulake IV, 220 F.R.D. at 217 (quoting Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y 1991)). However, preservation of electronic data is not as easy as it might sound. By its very nature, electronic data is easy to create and store. Yet, the volume of information created, coupled with rapid advancements in technology, allows for greater potential for spoliation since electronic data can be altered so easily.
Significant sanctions have been awarded for spoliation of electronic data based upon both intentional and negligent conduct. See, e.g., United States v. Philip Morris USA, Inc., 327 F.Supp.2d 21, 25-26 (D.D.C. 2004) (imposing fine of $2,750,000.00 and barring testimony of witnesses who violated court’s preservation order and company’s document retention policy); Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co., Inc., 2005 WL 679071 (Fla. Cir. Ct. March 1, 2005) (Granted adverse inference instruction noting “[t]he conclusion is inescapable that [the defendant] sought to thwart discovery” due to overwriting of email during discovery process and failure to produce email and attachments.); Heng Chan v. Triple 8 Palace, Inc., 2005 U.S. Dist. LEXIS 16520, *27-30 (S.D.N.Y. Aug. 11, 2005) (imposing adverse inference and attorneys’ fees based upon gross negligence in failing to interrupt routine document retention); MasterCard Int’l, Inc. v. Moulton, 2004 U.S. Dist. LEXIS 11376, *14-16 (S.D.N.Y. June 22, 2004) (allowing argument for negative inferences due to failure to cease normal document retention practices, despite absence of bad faith); Nartron Corp. v. General Motors Corp., 2003 Mich. App. LEXIS 1059, *3-4 (Mich. Ct. App. April 29, 2003) (affirming dismissal of plaintiff’s claims based upon intentional alteration of data). However, the severity of sanctions imposed increases when the court finds higher levels of culpability. In considering an appropriate sanction, courts attempt 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 he would have been in absent the wrongful destruction of evidence by the opposing party.’)” See Zubulake V, 229 F.R.D. at 437 n.98 (quoting West v. The Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)). The goals in selecting an appropriate remedy focus on deterrence and placing the prejudiced party in the position it would be in but for the spoliation. See, e.g., Trigon Ins. Co. v. United States, 204 F.R.D. 277, 287 (E.D. Va. 2001).
The most troubling aspect of spoliation in the electronic discovery context is that intentional acts or bad faith is not a prerequisite for sanctions and in certain circumstances, sanctions can be imposed for negligent conduct. The proposed amendment to Rule 37 of the Federal Rules of Civil Procedure will provide a “safe harbor” which prohibits sanctions for the loss of electronic information resulting from the routine, good-faith operation of an electronic information system. This amendment attempts to address a “distinctive and necessary feature of computer systems – the recycling, overwriting, and alteration of electronically stored information that attends normal use.” Summary of the Report of the Judicial Conference Committee on Rules of Practice and Procedure, available at: http://www.uscourts.gov/rules/Reports/ST09-2005.pdf. While this amendment recognizes a business’ practical need to manage and store massive amounts of electronic data efficiently and cost-effectively, it does not eliminate the possibility of sanctions for negligent or inadvertent spoliation.
Zubulake V outlines counsel’s obligations regarding document preservation, which include communicating effectively with the client, identifying sources of discoverable information, and implementing a litigation hold. The courts recognize that counsel’s best efforts may not keep employees, regardless of the size of their employer, from inadvertently deleting information or failing to follow preservation instructions. As Judge Scheindlin noted, if the party acts in a manner contrary to counsel’s instructions, “it acts at its own peril.” Zubulake V, 229 F.R.D. at 436. Counsel must be able to show she took reasonable and diligent steps to ensure preservation.
To avoid spoliation claims, it is imperative to start at the beginning of the process by ensuring your client has a complete and comprehensive document retention policy which is consistently enforced. Good faith destruction of data consistent with a valid document retention policy, and without knowledge of litigation, is not likely sanctionable under the decisions cited above. Additionally, a sound document retention policy that is implemented and followed will help counsel and your client know what is maintained, how long it is maintained, and where it is maintained. This information is important once a duty to preserve begins and your client is faced with a litigation hold. Further, giving instructions to employees on where to store data – online, offline, on a hard drive, or on a network – and ensuring they are followed will reduce client costs once a duty to preserve is triggered and the information has to be preserved and ultimately produced. Centralizing procedures and processes and periodic audits to confirm adherence to them will save your client time, money, and, hopefully, the agony of a spoliation claim once litigation begins.
Luanne Lambert Runge is a shareholder with Gallivan, White & Boyd, P.A., in Greenville, South Carolina. She concentrates her practice in the areas of commercial litigation, health law, and class actions.
“Spoliation: A Trap for the Unwary” E-Discovery Connection, DRI