This update addresses the following recent developments and court decisions involving e-discovery issues:
- A Texas Supreme Court decision announcing the procedures to apply in addressing spoliation claims and holding that a trial court abused its discretion in giving a spoliation instruction regarding the defendant’s alleged failure to preserve potentially relevant surveillance footage;
- A Southern District of New York ruling ordering an adverse inference instruction based on defendants’ negligent failure to issue a timely litigation hold and the subsequent destruction of documents that would have been favorable to the plaintiff’s case; and
- A Middle District of Florida order denying without prejudice plaintiff’s renewed motion to compel because the plaintiff failed to comply with the local rule’s meet and confer requirements prior to filing the renewed motion.
1. In Brookshire Bros., Ltd. v. Aldridge, 2014 WL 2994435 (Tex. July 3, 2014), the Texas Supreme Court used a “slip and fall” case to announce the procedures to apply in resolving spoliation claims and held that a trial court abused its discretion in giving a spoliation instruction regarding the defendant’s alleged failure to preserve potentially relevant surveillance footage, finding, inter alia, that the defendant did not act with the requisite intent to conceal such evidence.
The plaintiff in the underlying case was injured after slipping and falling at one of the defendant’s grocery stores. Id. at *2. After he informed the defendant of the incident five days later, the defendant retained and copied an 8-minute segment of the surveillance footage of the area where the fall occurred, starting “just before [the plaintiff] entered the store and concluding shortly after his fall.” Id. The following week, the plaintiff requested a copy of the footage of “the fall,” but the defendant denied his request. Id. at *3. The remaining footage on the two-and-a-half hour security tape was overwritten after 30 days in accordance with the defendant’s usual practice. Id. Nearly one year later, the defendant – who had not yet filed suit – again requested the footage, this time through his attorney, but the defendant was unable to comply with the request because the footage had been overwritten. Id. The plaintiff thereafter sued the defendant and argued that the defendant’s failure to preserve the full tape – which the plaintiff alleged “would have been helpful to the key issue of whether the spill was on the floor long enough to give [the defendant] a reasonable opportunity to discover it” – amounted to spoliation. Id. The trial court submitted the issue to the jury for determination, allowing the submission of evidence and providing a jury instruction on the issue, and the jury ultimately awarded the plaintiff more than $1 million in damages. Id. at *4. The Court of Appeals affirmed, holding that the trial court did not abuse its discretion in its handling of the spoliation issue. Id. The defendant appealed that decision to the Supreme Court of Texas. See Id.
Writing for the Court, Justice Debra H. Lehrmann reviewed the history of the development of spoliation sanctions under Texas law and stated:
“Because we have never crafted a complete analytical framework for determining whether an act of spoliation has occurred, we first focus on the elements that must be satisfied to warrant a finding of spoliation and the corresponding imposition of an appropriate remedy. As an initial matter, however, we address whether it is the responsibility of the trial court or the jury to make this determination.” Id. at *6.
The Court explained that a spoliation analysis under Texas law involves a “two-step judicial process.” Id. at *1. First, the “trial court must determine, as a question of law, whether a party spoliated evidence.” Id. To make that determination, the trial court must find that (i) “the spoliating party had a duty to preserve the evidence” and (ii) “the party intentionally or negligently breached that duty by failing to do so.” Id. The duty to preserve arises “only when a party knows or reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession or control will be material and relevant to that claim,” and the evidence must be “material and relevant.” Id. at *7 (internal quotations omitted). Second, “if spoliation occurred, the [trial] court must assess the appropriate remedy.” Id. at *1. Although trial courts have “wide discretion” in imposing sanctions for spoliation, the remedy must be proportionate such that it “relate[s] directly to the conduct giving rise to the sanction and may not be excessive.” Id. The “[k]ey considerations” in assessing potential sanctions are the spoliating party’s level of culpability and the prejudice to the nonspoliating party. Id. Additionally, to warrant the “harsh remedy” of a spoliation jury instruction, the trial court must find that the “spoliating party acted with the specific intent of concealing discoverable evidence, and that a less severe remedy would be insufficient to reduce the prejudice caused by the spoliation.” Id. at *2.
The Supreme Court of Texas ruled that the trial court had abused its discretion in (i) allowing the submission of evidence regarding the alleged spoliation and (ii) charging the jury with deciding the issue. Id. at *14. As spoliation is “an evidentiary concept” and not a “separate cause of action,” Justice Lehrmann explained that the trial court – not the jury – must determine whether spoliation occurred and, if so, the appropriate sanction. Id. at *7. The Court found that there was “no evidence that [the defendant overwrote the tape] with the requisite intent to conceal or destroy relevant evidence or that [the plaintiff] was irreparably deprived of any meaningful ability to present his claim.” Id. at *14. Specifically, Justice Lehrmann noted that the defendant had preserved what it believed was the relevant portion of the tape and did not anticipate a lawsuit. Id. Supporting those findings was the fact that the plaintiff’s initial request for the footage encompassed only video of “the fall,” which the plaintiff had preserved. Id. In short, the Court determined there was “simply no evidence that [the defendant] saved the amount of footage that it did in a purposeful effort to conceal relevant evidence.” Id. Finally, Justice Lehrmann noted that other evidence was available to the plaintiff to support his slip-and-fall claim and that the trial court’s error “probably caused the rendition of an improper judgment.” Id. at *14-*15. Accordingly, the Supreme Court of Texas reversed the judgment of the Court of Appeals and remanded the case for a new trial in accordance with its opinion. Id. at *2.
2. In Osberg v. Foot Locker, Inc., 2014 WL 3767033 (S.D.N.Y. July 25, 2014), U.S. District Judge Katherine B. Forrest ordered an adverse inference instruction based on defendants’ negligent failure to issue a timely litigation hold and the subsequent destruction of documents that would have been favorable to the plaintiff’s case.
Geoffrey Osberg initiated an action against his employer, Foot Locker, claiming that it had violated the Employee Retirement Income Security Act in converting its defined benefit plan for employees to a cash balance plan. Lawsuits raising similar issues relating to the pension plan conversion had been filed against Foot Locker by other plaintiffs in June and November 2006. Osberg brought his lawsuit in November 2006, voluntarily dismissed that complaint on February 12, 2007 and then filed the current suit on February 23, 2007. Id. at *1-*2. Despite these different actions alleging the same basic claims, Foot Locker did not issue a litigation hold until October 2009. The plaintiff brought a motion for spoliation, asserting that Foot Locker had destroyed documents in bad faith and that these documents would have assisted plaintiff. In the course of discovery, defendants were unable to locate certain materials relating to the pension plan changes, and plaintiffs claimed that 141 boxes of documents that may have contained relevant documents were destroyed, including, inter alia, boxes containing documents identified as “Cash Balance Plan Presentation,” “Pension Plan R[etirement] I[nvestment] C[ommittee],” and “Benefit Comparisons – 1999.” Id.
Discussing the relevant spoliation standards, Judge Forrest stated that a party seeking 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; and (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. Id. at *4 (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002)).
In this case, Judge Forrest held that a sanction against defendants was appropriate “[b]ecause defendants were under an obligation to preserve evidence, yet negligently failed to implement a litigation hold and negligently destroyed documents that likely were relevant to this litigation.” Osberg, 2014 WL 3767033, at *9. First, the court determined that Foot Locker was under an obligation to preserve the documents. The documents “related to the creation of Foot Locker’s new retirement plan, and thus to the question of whether defendants breached their fiduciary duties under ERISA.” Id. at *5. Thus, the court concluded, Foot Locker should have issued a litigation hold in June or July 2006 based on the original lawsuit filed at that time, Foot Locker’s own guidelines that required issuance of a litigation hold, and the advice of outside counsel that recommended a litigation hold.
Second, the court found that the destruction of evidence was not done in bad faith but that defendants were negligent. Judge Forrest determined that the failure to timely issue a litigation hold was inadvertent, as Foot Locker employees had mistakenly thought that others were responsible for the hold notice, and defendants sought in good faith to determine whether documents had been lost. Foot Locker knew, however, it had been sued, its own internal guidelines required the retention of documents, and it had been advised by outside counsel to preserve documents. Based on these facts, the court ruled that Foot Locker’s failure to issue a litigation hold in 2006 was negligent. Id. at *7.
Third, the court determined that the plaintiff had presented sufficient extrinsic evidence, such as other documents and deposition testimony, that a reasonable trier of fact could conclude that the missing documents would have been favorable to his claims. For example, portions of a “cabinet drawer” of documents belonging to a Foot Locker manager who helped create the challenged employee plan were missing, along with documents from the 141 destroyed boxes with document identifiers specifically related to the cash balance plan. Id. at *7-*8. The defendants pointed to spreadsheets and box ID slips to argue that the documents from the missing boxes were not relevant, but the court rejected this argument because these identifiers were based not on the “actual contents” of the boxes but on secondary sources and appear to have been prepared by personnel at the storage facility. Id. at *9.
Given the evidence presented, Judge Forrest ruled that the record indicated that the missing documents “‘would have been of the nature alleged by the party affected by its destruction.’” Id. (quoting Residential Funding Corp., 306 F.3d at 109). Judge Forrest concluded that an adverse inference instruction was appropriate because defendants’ destruction of documents was due to “simple negligence rather than gross negligence or bad faith,” and deferred consideration of the wording of the instruction until later in the case. Osberg, 2014 WL 3767033, at *10.
3. In American Registry, LLC v. Hanaw, 2014 U.S. Dist. LEXIS 68488 (M.D. Fla. May 19, 2014), U.S. Magistrate Judge Carol Mirando denied the plaintiff’s renewed motion to compel due to plaintiff’s failure to meet and confer with defendant with respect to the renewed motion as required by local rule.
In this trade secrets case, the plaintiff had complied with the local rule requiring a meet and confer conference prior to filing its first motion to compel, but not before filing the renewed motion seeking “full and complete responses” to various requests. Id. at *1 (citing renewed motion). In the interim, defendants’ counsel learned that defendants had produced more than 3,000 documents in prior, related litigation between the parties. Id. at *2. Defendants argued that, “[p]articularly in light of these circumstances,” plaintiff was required to confer again with defendants before filing its renewed motion. Id. at *2 (citing defendants’ response). Magistrate Judge Mirando noted that the plaintiff was required to comply with the local rule, but did not place any weight on the circumstances, holding simply that “[t]he rule does not except renewed motions.” Id. at *2-*3. Accordingly, Magistrate Judge Mirando denied plaintiff’s renewed motion to compel without prejudice.