Rimkus Consulting Group Inc. v. Cammarata - Ballard Spahr LLP

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Case 4:07-cv-00405 Document 450 Filed in TXSD on 02/19/10 Page 16 of 139 The court in Pension Committee imposed a form of adverse inference instruction based on a finding of gross negligence in preserving information and in collecting it in discovery. 14 The court applied case law in the Second Circuit, including the language in Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 108 (2d Cir. 2002), stating that “[t]he sanction of an adverse inference may be appropriate in some cases involving the negligent destruction of evidence because each party should bear the risk of its own negligence.” That language has been read to allow severe sanctions for negligent destruction of evidence. See, e.g., Rogers v. T.J. Samson Cmty. Hosp., 276 F.3d 228, 232 (6th Cir. 2002); Lewis v. Ryan, 261 F.R.D. 513, 521 (S.D. Cal. 2009) (noting that California district courts had followed the Second Circuit’s approach in Residential Funding). In the Fifth Circuit and others, negligent as opposed to intentional, “bad faith” destruction of evidence is not sufficient to give an adverse inference instruction and may not relieve the party seeking discovery of the need to show that missing documents are relevant and their loss prejudicial. The circuit differences in the level of culpability necessary for an adverse inference instruction limit the applicability of the Pension Committee approach. And to the extent sanctions are based on inherent power, the Supreme Court’s decision in Chambers may also require a degree of culpability greater than negligence. 14 The finding of gross negligence in Pension Committee was in part based on the finding that the spoliating party submitted declarations describing discovery efforts that were either lacking in detail or intentionally vague in ways the court characterized as misleading. Pension Committee, No. 05 Civ. 9016, 2010 WL 184312, at *10–11. Counsel’s misrepresentations to the court can result in severe sanctions. See, e.g., Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co., 20 So. 3d 952, 954 (Fla. Dist. Ct. App. 2009) (trial court entered a partial default judgment and deemed certain allegations as established facts based in part on misrepresentations by counsel to the court about when they learned that emails existed on backup tapes; on appeal, the judgment was set aside on other grounds). 16
Case 4:07-cv-00405 Document 450 Filed in TXSD on 02/19/10 Page 17 of 139 D. Relevance and Prejudice: The Burden of Proof It is well established that a party seeking the sanction of an adverse inference instruction based on spoliation of evidence must establish that: (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the evidence was 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. See Zubulake v. UBS Warburg LLC (Zubulake IV), 220 F.R.D. 212, 220 (S.D.N.Y. 2003). The “relevance” and “prejudice” factors of the adverse inference analysis are often broken down into three subparts: “(1) whether the evidence is relevant to the lawsuit; (2) whether the evidence would have supported the inference sought; and (3) whether the nondestroying party has suffered prejudice from the destruction of the evidence.” Consol. Aluminum Corp. v. Alcoa, Inc., 244 F.R.D. 335, 346 (M.D. La. 2006) (citing Concord Boat Corp. v. Brunswick Corp., No. LR-C-95-781, 1997 WL 33352759, at *7 (E.D. Ark. Aug. 29, 1997)). Courts recognize that “[t]he burden placed on the moving party to show that the lost evidence would have been favorable to it ought not be too onerous, lest the spoliator be permitted to profit from its destruction.” Chan v. Triple 8 Palace, Inc., No. 03CIV6048(GEL)(JCF), 2005 WL 1925579, at *7 (S.D.N.Y. Aug. 11, 2005). Pension Committee recognized the difficulty and potential for unfairness in requiring an innocent party seeking discovery to show that information lost through spoliation is relevant and prejudicial. Those concerns are acute when the party seeking discovery cannot replace or obtain extrinsic evidence of the content of deleted information. But in many 17
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