3 Remedies and Sanctions for Spoliation in Pending Litigation

• Library: Spoliation of Evidence: Sanctions & Remedies for Destruction of Evidence in Civil Litigation (ABA) (2013 Ed.)

"Judges must be careful to tailor the remedy to the problem, and to 'take pains neither to use an elephant gun to slay a mouse nor to wield a cardboard sword if a dragon looms.'"¹

Courts generally have relied upon two methods to remedy spoliation: (1) recognizing an independent cause of action for intentional and/or negligent spoliation² and (2) civil discovery or evidentiary sanctions in pending litigation.³ Although different remedies are appropriate based on the facts and circumstances of a particular case, courts agree that they should impose the least severe sanction necessary to remedy prejudice to the non-spoliating party.⁴

OURCES OF AUTHORITY FOR SANCTIONS

Rules of Civil Procedure

Under the federal and state rules of civil procedure that regulate discovery procedures,⁵ courts have broad discretion to impose a variety of sanctions against a party that fails to produce evidence in violation of the discovery rules.⁶ Federal Rule of Civil Procedure 37 provides courts with the authority to sanction spoliation in pending litigation.⁷ Courts relying on Rule 37 to impose spoliation sanctions have found that it does not require a showing of bad faith.⁸ However, Rule 37 is not without limitations. Rule 37(e) guards against sanction awards for spoliation of electronically stored information when the spoliating party acts in good faith.⁹

A court's exercise of this broad discretion will "not be reversed on appeal absent a clear abuse of discretion."¹⁰ Explaining the abuse of discretion standard, one court stated,

We cannot understate the difficulty of the task litigants face when challenging a district court's choice of sanction. They must convince us that the district court abused its discretion in sanctioning them—a burden which is met only when it is clear that no reasonable person would agree [with] the trial court's assessments of what sanctions are appropriate.¹¹

The primary limitation on this authority to impose sanctions for spoliation is that the discovery rules only reach acts of spoliation that occur during the pendency of a lawsuit, or following a court order.¹² Paradoxically, this could encourage parties to destroy evidence before commencement of a lawsuit or discovery proceedings.¹³ Therefore, courts also rely on other sources of authority to sanction spoliation, such as a court's inherent power to control the administration of justice.

Court's Inherent Authority

A court's use of its inherent authority is particularly appropriate where litigation has not been commenced, or a specific court order has not been violated, because, under those circumstances, discovery rules generally do not provide for sanctions.¹⁴ One commentator has concluded that, in cases of pre-litigation destruction of evidence, "a federal court's inherent authority will generally provide a more efficient method for a court to impose the appropriate remedy."¹⁵

The U.S. Supreme Court has cautioned that this inherent power, although necessary to control parties involved in litigation, must be exercised with restraint.¹⁶ In Roadway Express, Inc. v. Piper,¹⁷ Justice Powell observed that "[b]ecause inherent powers are shielded from direct democratic controls, they must be exercised with restraint and discretion."¹⁸

Several state courts also recognize the inherent power of a trial court to sanction a party for abuse of the judicial process.¹⁹ These states acknowledge that trial courts have the power to take action to aid in the administration of justice and to preserve their independence and integrity.²⁰ The destruction of evidence inhibits a court's ability to hear evidence and accurately determine the facts. Therefore, the inherent power to protect against destruction of evidence is necessary to ensure the proper administration of justice.²¹

Absent violation of a court order, courts generally hold that discovery sanctions are inapplicable to spoliation. For example, in Uniguard Security Insurance v. Lakewood Engineering and Manufacturing Corporation,²² the appellate court concluded that the trial court erred in declining to exclude expert testimony as a sanction because the allegedly offending party had not violated any court order. Instead, the trial court should have relied upon its inherent power to make discovery and evidentiary rulings conducive to the conduct of a fair and orderly trial.²³

Likewise, several federal courts have held that Rule 37 sanctions are inapplicable to pre-litigation destruction of evidence. For instance, in Beil v. Lakewood Engineering and Manufacturing Company,²⁴ an insurer paid a fire claim filed by an estate and acquired subrogation rights. Thereafter, the insurer contacted an independent adjusting firm, which hired an investigator to determine the origin of the fire. The insurer's investigator examined the scene and took possession of several items, including a heater and certain electrical cords. The investigator also photographed the heater and electric cords.

The insurer's investigator concluded that the heater had caused the fire because the only heat sources in the area of origin were the heater and its electrical cords. But the state fire investigator concluded the fire was caused by a defective extension cord, based on an examination of the fire scene and the extension cord.

Approximately three months after the insurer's fire investigator submitted his report, he discarded the heater and electrical cords. The fire investigator never received permission from the insurer to discard the items. Six months later, the insurer filed a lawsuit against the heater's manufacturer. After the manufacturer learned the heater had been discarded, it filed a motion for summary judgment, requesting that the case be dismissed pursuant to Rule 37 because of the "intentional, pre-litigation destruction by an agent" of the insurer.²⁵ The district court granted the manufacturer's request, under Fed. R. Civ. P. 37, and the insurer appealed.

The court of appeals reversed, noting dismissal is a sanction of last resort that should be imposed only if the court concludes the parties' failure to cooperate in discovery was willful, in bad faith, or due to its own fault.²⁶ It found that the district court had abused its discretion because, in dismissing the case, it erroneously had applied Rule 37. As the court observed, the heater and electrical cords were not in the insurer's possession or control during the lawsuit. Instead, the investigator discarded these items at least six months prior to litigation. Therefore, had an appropriate Rule 34 request been made, the insurer could have complied with that request and Rule 37 by responding that it could not produce the evidence because it had been destroyed and was not, therefore, in its possession, custody or control.²⁷

The Sixth Circuit further observed that its decision was not meant to condone pre-litigation destruction of evidence, but simply to recognize that Rule 37 is a procedural rule and, like similar rules, it governs conduct during the pendency of a lawsuit as opposed to actions that occur before commencement of a lawsuit. In that latter case, the court remarked, a remedy must be found in the substantive law of the state.²⁸

FACTORS COURTS CONSIDER TO REMEDY SPOLIATION

Courts have long relied upon discovery and evidentiary sanctions to remedy spoliation that occurs during, or before, litigation. The primary purpose of discovery sanctions is to enforce compliance with discovery rules rather than to punish the wrongdoer.²⁹ Yet, sanctions serve several other purposes, including penalizing conduct that warrants sanctions and deterring those who might be "tempted to such conduct in the absence of such a deterrent."³⁰ Sanctions also function to compensate victims of spoliation and to promote the accuracy of the fact-finding process. As the Hawaii Supreme Court explained, unintentional spoliation may not implicate the punitive and deterrent purposes of sanctions, but it does "create an unfair disadvantage with respect to the lost evidence."³¹ Sanctions, like an adverse inference, provide the necessary mechanism for restoring evidentiary balance and also serve to assist the court in the "management of cases on a crowded docket."³²

Courts have significant latitude in deciding which discovery sanction is appropriate.³³ "There is no rigid rule mandating a particular sanction upon a finding of improper destruction of loss of evidence."³⁴ As one district court explained, "the choice of sanctions should be guided by the 'concept of proportionality' between offense and sanction."³⁵ Typically, courts enumerate and attempt to balance a number of factors to ascertain an appropriate sanction for spoliation that occurs during pending litigation.³⁶ These factors include:

(1) the culpability of the spoliating party;
(2) the prejudice to the non-offending party; ³⁷
(3) the degree of interference with the judicial process;
(4) whether lesser sanctions will remedy any harm and deter future acts of spoliation;
(5) whether evidence has been irretrievably lost;
(6) whether there was an obligation to preserve the evidence;
(7) the practical importance of the evidence;
(8) the potential for abuse;
(9) whether the evidence is relevant; and
(10) whether sanctions will unfairly punish a party for misconduct by the attorney.³⁸

Of course, "these factors do not constitute a rigid test; rather, they represent criteria for the . . . court to consider prior to imposing . . . a sanction."³⁹ Accordingly, courts will balance a number of factors in attempting to determine whether spoliation should be sanctioned and, if so, what sanction is appropriate in a given case. Courts generally agree that, in imposing spoliation sanctions, courts should select "the least onerous sanction corresponding to the willfulness of the destructive act and the prejudice suffered by the victim."⁴⁰

Courts generally agree that two factors are most important in assessing whether to impose sanctions and the type of sanction to impose...