8 The Developing Law of Spoliation in Federal Courts

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

8 The Developing Law of Spoliation in Federal Courts

This chapter surveys the available remedies and sanctions for spoliation in pending civil litigation in federal courts throughout the United States. Most federal courts sanction deliberate spoliation, and many courts impose sanctions for negligent or reckless spoliation.¹ No federal courts have yet recognized independent tort claims for spoliation under federal law, although some federal courts have held that the states in which they sit would recognize such a claim.

The following summary highlights the current law in all the federal circuits. It is not intended to be an exhaustive statement of the law and should not be relied upon as such.

FIRST CIRCUIT COURT OF APPEALS

The First Circuit Court of Appeals has addressed allegations of spoliation of evidence on numerous occasions and in a variety of contexts. Courts within this circuit sanction spoliation based upon the Federal Rules of Civil Procedure and the inherent authority of federal courts. Generally, bad faith or intentional conduct is not essential for the imposition of sanctions.² Instead, courts may impose sanctions for reckless or negligent destruction of evidence that prejudices the opposing party. Courts in this circuit consider fairness to the opposing party the primary consideration for determining the appropriate sanction.³

Potential spoliation sanctions in the First Circuit include dismissal, exclusion of expert or other testimony, and the imposition of an adverse inference jury instruction. In addition, before imposing an adverse inference, courts must find that the party who destroyed the evidence had prior notice of the potential claim and the evidence's potential relevance. After this finding, the adverse inference is permissive, not mandatory.⁴ Further, courts in this circuit hold that the spoliation doctrine is not applicable when a third party destroys the evidence at issue.⁵

The First Circuit routinely has relied upon its inherent authority to exclude evidence that has been improperly altered or damaged when necessary to prevent prejudice to the nonoffending party. For example, in Sacaramona v. Bridgestone/Firestone, Inc.⁶ the court upheld the grant of summary judgment in an action arising from a tire explosion. Three years after the accident, the wheel underwent a "somewhat destructive" examination, and the original tire and mounting machine disappeared. The testing precluded discovery of whether the tire was mismatched with its wheel. The district court excluded evidence of the wheel after finding that defendants' experts had no opportunity to inspect the evidence. The First Circuit affirmed, emphasizing bad faith is not essential to sanction spoliation of evidence.⁷

While sanctions for spoliation of evidence are typically based upon the court's inherent power to impose sanctions for such conduct, in Century ML-Cable Corporate v. Conjugal Partnership,⁸ the court relied upon Fed. R. Civ. P. 37(d) for the imposition of sanctions. There, it entered a default judgment, awarding attorneys' fees and costs for pursuing the issue of destroyed evidence.⁹ Plaintiffs established by clear and convincing evidence that defendant intentionally discarded his laptop computer and business records in an effort to destroy proof of his liability, which violated an existing restraining order. in addition to the default judgment, the attorneys' fees and costs awarded covered investigative fees incurred in documenting the party's actions and preparing the motion for default.

Although courts within the First Circuit will dismiss actions for egregious behavior, this sanction runs contrary to the general policy of favoring disposition of cases on the merits. For instance, in Collazo-Santiago v. Toyota Motor Corporation,¹⁰ the court upheld the denial of a motion to dismiss after plaintiff failed to preserve an automobile in a design defect action. There, plaintiff allowed her insurance company to sell the vehicle at a public auction prior to allowing the manufacturer's experts to inspect the vehicle. The court emphasized the allegation of design defect "as opposed to manufacturing defect" as relevant to the degree of prejudice suffered. The resulting prejudice from the spoliation was minimal because the defect claim could be refuted by evidence other than the vehicle. Moreover, the Collazo-Santiago court acknowledged plaintiff never attempted to preclude the manufacturer from accessing the vehicle.¹¹

Many district courts in this Circuit employ a five-factor test in reviewing a request to exclude evidence that include:

1) prejudice to the non-spoliating party;
2) whether the prejudice can be cured;
3) the practical importance of the evidence;
4) whether the spoliating party acted in good faith or bad faith; and
5) the potential for abuse.¹²

The First Circuit has not expressly adopted this test.

In Northern Assurance Company v. Ware,¹³ a case involving a subrogation claim by an insurance company, defendants moved to suppress the insurer's expert and applied this multi-factor test. There, a subrogated insurer allowed a burned house to be destroyed before the insurer initiated litigation. The destruction of the burned house and other relevant evidence prejudiced defendants by precluding a proper investigation. In excluding the insurer's expert testimony regarding the destroyed evidence, the court emphasized that, because an insurance company should be familiar with this kind of litigation, it should have made reasonable arrangements to prevent the destruction of the house and the wire installed in the house severely prejudiced defendants in developing and presenting a defense on causation.¹⁴

SECOND CIRCUIT COURT OF APPEALS

The Second Circuit has addressed spoliation of evidence in several contexts, sanctioning spoliation under both the Federal Rules of Civil Procedure and the inherent powers of federal courts. Courts in this circuit require spoliation sanctions to be tailored to accomplish three remedial goals: 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) place the prejudiced party in the same position it would have been in, absent the wrongful destruction of evidence.¹⁵

Sanctions imposed for spoliation of evidence can range from an imposition of attorneys' fees and litigation costs, to preclusion of evidence, to an adverse inference instruction, to a dispositive sanction.¹⁶ The requirements for imposing sanctions become more demanding as the severity of the sanction increases.¹⁷ This framework and discretion affords courts leeway to tailor appropriate sanctions to ensure that wrongdoers do not benefit from their actions and upholds the remedial purposes of the sanction. Despite the existence of this framework, courts assess spoliation sanctions on a case-by-case basis.¹⁸

Overall, a party seeking spoliation sanctions must establish: 1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; 2) that the records were destroyed "with a culpable state of mind;" 3) that 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.¹⁹

With respect to the first requirement, recent decisions in this circuit suggest courts generally find a broad duty to preserve evidence.²⁰ District courts in the Southern District of New York have held that an obligation to preserve evidence may exist prior to filing a lawsuit when a party knows that litigation is reasonably foreseeable.²¹ This duty does not continue indefinitely and may be extinguished where the opposing party has an "adequate and meaningful opportunity" to inspect the evidence at issue.²² In assessing compliance with the preservation obligations, courts will also consider "control." Control is typically broadly construed and therefore does not require that a party retain legal ownership or even actual physical possession.²³

The "culpable state of mind" required to impose spoliation sanctions is not intentional conduct or gross negligence, despite the suggestion in earlier decisions.²⁴ Instead, all that is required is a "showing that the evidence was destroyed 'knowingly, even if without intent to [breach a duty to preserve it], or negligently'.'"²⁵ Therefore, the Second Circuit allows spoliation sanctions based solely on a finding of negligent conduct by the spoliating party.²⁶ A party acts with negligence when he makes diligent efforts to document damage in anticipation of a lawsuit but fails to take reasonable precaution to preserve the evidence.²⁷

The spoliator's state of mind also becomes significant when considering the "relevance" of the spoliated evidence. Courts in this circuit have held that the term "relevant," for the purpose of this test, is narrower than the traditional definition of "relevance" under Fed. R. Evid. 401.²⁸ The party alleging spoliation ordinarily bears the burden of proof on the question of "relevance."²⁹ However, courts relieve a party of this obligation when "a party seeking an adverse inference adduces evidence that its opponent destroyed potential evidence . . . in bad faith or through gross negligence."³⁰ Specifically, evidence of bad faith or gross negligence may be used to show the destroyed evidence was favorable to the party.³¹

Dispositive sanctions may only be given if the spoliation was willful or in bad faith, and if no lesser sanction would remedy effectively the prejudice to the other party. In West v. Goodyear Tire & Rubber Company,"³² the court reversed a district court's dismissal of the plaintiff's claims because of spoliation of physical evidence. Plaintiff was injured when an over-inflated tire exploded. Plaintiff and his expert witnesses deflated another tire on the affected vehicle, and then sold the tire mounting machine and air compressor without notifying opposing...