U.S. District Judge Shira A. Scheindlin Provides Lessons on Electronic Evidence Spoliation

19 Sep 2013

Prejudice is Presumed When ESI Destruction is Willful

Who better to review a case regarding allegations of electronic evidence spoliation than U.S. District Court Judge Shira A. Scheindlin, author of the groundbreaking Zubulake decisions? In Sekisui American Corporation v. Hart, 12 Civ. 3479 (S.D.N.Y. August 15, 2013), the honorable district court judge reversed the memorandum and order of the magistrate judge.

The Players in Sekisui v. Hart:

Sekisui American Corporation (“Sekisui”): Plaintiff, purchased American Diagnostics, Inc. (“ADI”) from the Harts.

Richard Hart (“Hart”): Defendant along with Marie Louise Trudel-Hart, former owners of ADI.

Leigh Ayres (“Ayres”): Former ADI employee responsible for FDA compliance.

The Timeline Regarding the Deletion of Emails and ESI:

Late 2009: Sekisui acquires ADI; Hart makes certain warranties about FDA compliance.

November 2010: Sekisui sends out a Notice of Claim alleging misrepresentations about FDA compliance.

March 2011: Sekisui deletes Hart’s ADI emails.

October 2011: Sekisui deletes Ayres’ ADI emails.

January 2012: Sekisui issues a litigation hold regarding ADI electronic data, but does not notify its own IT vendor.

March 2012: Complaint filed alleging breach of contract regarding FDA compliance.

June 2012: IT vendor permanently deletes Hart’s email folder.

July 2012: Sekisui informs its IT vendor of the litigation hold.

February 2013: Counsel reveals that the emails had been deleted and that no back-up tapes exist.

Judge Scheindlin Reviews Sanctions for Spoliation of Electronic Evidence:

In a memorandum order dated June 10, 2013, the magistrate judge denied sanctions and found that despite Sekisui’s “gross negligence” in permanently deleting the emails and other ESI long after their duty to preserve evidence arose, the Harts failed to demonstrate prejudice or relevance.

1. Culpable State of Mind – Malevolence is Not the Standard

The magistrate judge found Sekisui’s actions to be grossly negligent, yet ruled that the Harts failed to show any “malevolent purpose.” Judge Scheindlin noted, however, that “malevolence” is not required: “There is no analytical distinction between destroying evidence in bad faith, i.e. with a malevolent purpose, and destroying it willfully.” Id. at 21, 22.

2. Relevance of Destroyed ESI

In finding that there was “no question” as to the relevancy of the emails, Judge Scheindlin made the following observation: “There can be no doubt that Hart’s and Ayres’ ESI is relevant based solely on whose data was destroyed.” Id. at 25. Judge Scheindlin noted that Hart was unable to testify due to developing a cognitive disorder, and Ayres was in charge of FDA compliance, the underlying issue giving rise to the breach of contract claim.

3. Prejudice to the Harts

Judge Scheindlin disagreed with the magistrate judge’s ruling that the burden was on the innocent party to demonstrate prejudice – “Because the destruction of evidence was intentional, I find that the imposition of such a burden on the innocent party is contrary to law.” Id. at 26.

In the Court’s order regarding an adverse inference instruction, Judge Scheindlin found as a matter of law that the destruction took place after the duty arose, but left as a question of fact for the jury to decide whether to presume the evidence was favorable to the Harts. If so, the jury would then consider whether Sekisui rebutted such presumption. Judge Scheindlin also entered monetary sanctions against Sekisui for reasonable costs and attorney fees.

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