Court Rejects Motion for Spoliation Sanctions Due to Lack of Evidence Showing Bad Faith

9 Oct 2017

Follow our blog for ESI case lawIn New Mexico Oncology and Hematology Consultants, Ltd. v. Presbyterian Healthcare Services, No. 1:12‐cv‐00526, (D. N.M., Aug. 2017), the court rejected a motion for spoliation sanctions where the moving party did not provide enough evidence to show bad faith or prejudice.

Under Rule 37 of the FRCP, the Court may sanction a party if electronically stored information (“ESI”) that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery. Parties to a lawsuit are under obligation to preserve evidence when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation. Spoliation includes the intentional or negligent destruction or loss of tangible and relevant evidence which impairs a party’s ability to prove or defend a claim. A party may be sanctioned for spoliation when a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and the adverse party was prejudiced by the destruction of the evidence. In order for a court to sanction a party for spoliation, the moving party must show by preponderance of evidence that the other party destroyed evidence.

Plaintiff asked the Court to sanction Defendants by ordering default judgment against them.  Under Rule 37, the Court may enter a default judgment upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation. In considering sanctions, the Court should look at the degree of actual prejudice to the other party; the amount of interference with the judicial process; the culpability of the litigant; whether the Court warned the party in advance that dismissal of the action would be a likely sanction for noncompliance; and the efficacy of lesser sanctions.

Plaintiff alleged that Defendants should be sanctioned for failure to implement a proper litigation hold.  On May 22, 2012, Defendants issued a legal hold directive to thirty‐five employees most likely to have relevant information based on Plaintiff’s Complaint.  Employees were also directed to send to Defendants’ counsel a list of additional employees not on the original list who may have relevant documents, data, or information.  Several more individuals were then issued the legal hold directive.

Plaintiff asserted that, among other things, the litigation hold impermissibly gave discretion to employees to determine what documents, email, and other information might be relevant to the lawsuit and thus subject to the hold and also did not include certain key witnesses and did not properly prevent email deletion through archiving.

The court agreed that Plaintiff identified some imperfections with the litigation hold and its implementation.  First, parties have less and less justification to permit key employees to utilize discretion in the retention of ESI.  Certainly, the best approach is to implement a server‐side hold on all digital data utilized by key employees and to later use search algorithms to determine relevance.  Second, in the light most favorable to Defendants, they failed to timely implement a server‐side litigation hold.  However, Plaintiff failed to establish that these imperfections were a result of bad faith or that they resulted in the spoliation of evidence.

The discretion afforded employees under the hold and the delay in implementing the expanded hold created the possibility that an employee could have deleted a relevant email.  However, even if an individual employee were to delete an email that might be relevant to the case, it is extremely likely that such an email would be preserved by another employee due to the overlapping nature of emails.   Therefore, the Court held the Plaintiff did not show any prejudice from the litigation hold that was put into place by Defendants.

The court concluded that the harsh sanctions of default judgment or an adverse jury instruction are not warranted.  While Defendants made mistakes and were uncooperative in attempting to resolve issues raised by Plaintiff, they did not act in bad faith.  The court denies Plaintiff its requested sanctions of default judgment or an adverse jury instruction.

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