By: Joseph Horowitz
Spoliation is the failure to preserve evidence. Parties to a lawsuit may not alter, destroy or conceal evidence. The penalties for spoliation can be harsh – such as striking a pleading, dismissal of an action, an adverse inference jury instruction or monetary penalties against the spoliator. This article will give an overview of the law of spoliation, with an emphasis on applicable Tennessee statutes and cases. Litigants are self-interested and accordingly, they have an incentive to destroy detrimental evidence.1 This is human nature. The laws governing spoliation of evidence – with the potential consequences a spoliator faces – are designed as a deterrent to the potential spoliator.
Duty to Preserve Evidence
Litigants owe an “uncompromising duty to preserve”2 what they know or reasonably should have known will be relevant evidence in a pending or probable lawsuit.3 “It is beyond question that a party to civil litigation has a duty to preserve relevant information, including electronically stored information [ESI], when that party has notice that the evidence is relevant to litigation or should have known that the evidence may be relevant to future litigation.” 4 There are two purposes served when a trial court imposes sanctions. First, the sanction is an attempt to place the non-spoliator in a position similar to where it would have been prior to the destruction of the evidence. Second, the sanction imposes a punitive effect on the spoliating party.5 Issuing a “litigation hold” is a critical step to avoid spoliation sanctions when litigation is anticipated. A “litigation hold” is a letter directing a party to segregate and protect from destruction physical evidence, documents and data that are, or may be, relevant to a threatened or pending litigation.
1 Nationwide Check Corp. v. Forest Hill Distribution, Inc., 692 F.2d 214, 217 (1st Cir. 1982) (where relevant evidence is destroyed or altered, the trier of fact may receive the fact of the destruction of that evidence as proof that the party which has prevented production did so out of the well-founded fear that the contents would harm him) 2 Kronisch v. United States, 150 F.3d 112, 120 (2nd Cir. 1998) (noting that the duty to preserve exists even if no discovery requests have been made and no order to preserve has been entered) 3 Kronisch (lawsuit “in the offing”); Silvestri v. General Motors Corp, 271 F.3d 583,591 (4th Cir. 2001) (lawsuit is anticipated); Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc. 244 F.R.D. 614, 621 (D. Co. 2007) (lawsuit is likely); In re Napster, Inc. Copyright Litig. 462 F.Supp.2d 1060, 1068 (N.D. Cal. 2006) (lawsuit is probable); Zubulake v. UBS Warburg, LLC 220 F.R.D. 212, 216 (S.D. N.Y. 2003) (lawsuit is “reasonably foreseeable”) 4 John B. v. Goetz, 531 F.3d 448 (6th Cir. 2008) 5 Flottman v. Hickman County, 2010 WL 4537911 (M.D. Tenn. 2010)
For example, a company may send a litigation hold to its own employees. They are also sent by attorneys to their clients as well as their adversaries. Counsel and claims professionals should be aware of the need for litigation holds and custodial interviews to ensure that pertinent evidence is preserved. Further, spoliation sanctions can be a powerful tool against our adversaries when they fail to preserve evidence Tennessee Rule of Civil Procedure 34A.02, adopted in 2006, confers explicit authority to sanction a party for spoliation of evidence. That Rule provides that: “sanctions may be imposed upon a party or an agent of a party who discards, destroys, mutilates, alters, or conceals evidence.” The rule left unanswered whether sanctions were warranted for intentional conduct only, or if non-intentional conduct would also merit sanctions.
Intentional Misconduct in not a Prerequisite for Sanctions under Tennessee Law
In 2015, the Tennessee Supreme Court in Tatham v. Bridgestone Americas Holding, Inc. 6 ruled that intentional misconduct is not a prerequisite for the trial court to impose sanctions for spoliation of evidence. That ruling established a flexible “totality of the circumstances” approach. Under the framework set forth in Tatham, trial court judges are now guided by the following four factors when determining the proper response to spoliated evidence: (1) The culpability of the spoliating party in causing the destruction of the evidence, including evidence of intentional misconduct or fraudulent intent; (2) the degree of prejudice suffered by the non-spoliating party as a result of the absence of the evidence; (3) whether, at the time the evidence was destroyed, the spoliating party knew or should have known that the evidence was relevant to pending or reasonably foreseeable litigation; and (4) the least severe sanction available to remedy any prejudice caused to the non-spoliating part. A key factor in analyzing spoliation sanctions is whether the spoliator’s conduct was so prejudicial that it substantially denied the party its ability to defend the case (for a defendant) or establish his case (for a plaintiff).7
Terminating sanctions, meaning the dismissal of a case, are the most severe form of sanction. The following two cases highlight when Tennessee courts will (and will not) impose terminating sanctions. In Tatham, the Court refused to sanction the plaintiff for destruction of a key piece of evidence. Ms. Tatham sustained injuries when a Bridgestone tire on her car failed, causing her car to strike a guardrail, flip and land in a ditch. After the accident, her car and the tire were destroyed by the towing company as part of its routine practice, all prior to Ms. Tatham’s hiring a lawyer. The defendant tire manufacturer moved to dismiss the lawsuit, arguing that the tire had been improperly destroyed.
6 473 S.W.3d 734 (Tenn. 2015) 7 McCarty v. Covol Fuels, 644 F.App’x 372, 380 (6th Cir. 2016) (spoliation sanctions not warranted where spoliator’s conduct did not prevent the defendant’s ability to defend the claim); Lee v. Horton, 2018 WL 4945242 (W.D. Tenn. 2018) (denying spoliation sanctions where the moving party was not prejudiced by the destruction of evidence, the destroyed evidence was available through other means)
In finding that sanctions were not warranted, the Court emphasized that the tire was destroyed as part of a routine practice, without intent to conceal evidence. Further, since neither party had an opportunity to examine the tire, there was no prejudice to the defendant tire manufacturer. By contrast, the Court in Gardner v. R&J Express, LLC8 imposed the sanction of dismissal for failure of plaintiff to preserve the primary piece of evidence. Plaintiff owned a tractor and brought a negligence action against the defendant – owner of the trailer. Plaintiff sustained injuries when the tandem axle on the defendant’s trailer came loose. Plaintiff conceded that within 19 days after the accident she intended to file suit. Nevertheless, plaintiff assigned title to her insurance carrier, and the tractor was soon thereafter destroyed. Finding that counsel and plaintiff should have known that the tractor was relevant to the foreseeable litigation, the Court dismissed the case, ruling that dismissal was the equitable remedy due to the severe prejudice suffered by the defendant trailer owner.
In cases where evidence has been lost or destroyed, but the court deems that striking of the spoliator’s pleading or dismissal is too harsh, courts frequently resort to ordering an adverse inference charge be given to the jury against the spoliator. The jury is instructed that the evidence that has been destroyed, concealed or altered would have been adverse to the spoliator.9 For example, in Clark Const. Croup v. City of Memphis, 10 defendant’s project manager destroyed several project documents that were relevant to ongoing litigation. Finding that an adverse inference was the proper sanction, the Court ruled that the jury should be instructed that: (a) the defendant negligently failed to preserve the documents; and (b) unless other evidence is provided to contradict this presumption, the jury may presume that the defendant “feared that the contents of the destroyed documents would have been adverse, or detrimental, to the City’s case against Clark.”
Spoliation Cases Involving Insurers
One of the harshest spoliation sanctions issued against an insurer is found in In Re September 11th Liability Insurance Coverage Cases, 11 where a $1.25 million dollar sanction was imposed upon an insurer and its lawyers. On September 11, 2001, the U.S. Chief Underwriter for Zurich Insurance requested a printout of the existing primary policy maintained in Zurich’s computer system regarding its insureds at the World Trade Center. She kept the printout in her files at Zurich’s offices. However, the document was erased electronically and Zurich failed to disclose the hard copy of the document in a timely fashion. Zurich, however, did create a modified primary policy deleting many of the net lessees in the World Trade Center Complex as named insureds under the policy. The Court justified the harsh monetary sanction pointing to “Zurich’s culpable state of mind” that it intended to delete, and deleted, the electronic version of the document, and by evidence that Zurich or its attorneys, or both, had possession of the printed version of the document, but failed to produce it.
8 559 S.W.3d 462 (Tenn. Ct. App. 2018) 9 Tennessee Pattern Jury Instruction, Civil 2.04 10 229 F.R.D. 131 (W.D. Tenn. 2005) 11 243 F.R.D. 114 (S.D. NY 2007)
Another example is R&R Sales, Inc. v. Insurance Company of the State of Pa., 12 where the carrier was sanctioned for failing to produce a privilege log. After certifying that the claim log did not exist, the claims adjuster located the log on his computer. The Court found that a monetary sanction in the amount of $39,000 was warranted for the carrier’s failure to make a reasonable inquiry whether it possessed discovery responsive to plaintiff’s requests.
Electronically Stored Information (ESI)
There are new and challenging areas with respect to spoliation given the wide range of locations were ESI is maintained – such as desktops, laptops, hard drives, cloud servers, messaging apps, etc. Courts grapple with questions concerning when the duty to preserve begins, what sort of evidence must be preserved and what sanctions are warranted for failing to preserve evidence. In 2015, Federal Rule of Civil Procedure 37 was amended to address failures to preserve electronic evidence. That rule allows courts to impose sanctions when ESI cannot be recovered due to a party’s intentional tampering with potentially relevant ESI. Subsection (e)(2) provides that the court can issue sanctions with a finding that the party acted with “the intent to deprive another party of the information’s use in the litigation.” In a recent Tennessee case, the defendant book publisher lost and deleted emails and inventory data. Concluding that the spoliator “knew what to do but chose not to do it here,” the Court awarded fees and a limiting jury instruction.13 Counsel and clients should tread gingerly when ESI is deleted. The consequences could be severe. Discovery of metadata – information describing the history, tracking or management of an electronic file – is also an emerging area that deserves special attention. The Local Rules of the Western District of Tennessee (L.R. 26.1) require the producing party to preserve metadata of documents and images that are disclosed in discovery. The other party is not entitled to the metadata unless they can demonstrate “a particularized need” for its production. The importance of metadata preservation is evident in Sekisui American Corp. v. Hart. 14 In that case, a corporation destroyed the ESI of its former chief executive officer after the duty to preserve evidence had attached. While some emails were printed and produced in discovery, those printed emails were of significantly less evidentiary value given that their metadata was no longer available. The Court found that monetary sanctions and an adverse inference instruction were appropriate. 15
12 251 F.R.D. 520 (S.D. Cal. 2008) 13 EPAC Technologies v. HarperCollins Christian Publishing, Inc., 2018 WL 1542040 (M.D. Tenn. 2018) (adverse jury instruction that defendant had a duty to preserve its data and that such data, now lost, would have shown essential elements of the claimed damages) 14 945 F. Supp. 2d 494 (S.D. N.Y. 2013) 15 See also, OmniGen Research v. Yongqiang Wang, 321 F.R.D. 367 (D. Or. 2017) (default against defendant as a punishment for spoliated evidence where, among other infractions, defendant intentionally deleted metadata)
There is no dispute that spoliation is an affront to the integrity of the judicial system. The discovery rules are designed for the exchange of all evidence – favorable and unfavorable. The accuracy of a jury verdict is compromised when all of the facts have not come to light. The above summary should provide some guidance when faced with a spoliation concern. Joseph Horowitz is an attorney at Glankler, Brown PLLC in Memphis, Tennessee. He is also of counsel to Rountree Losee, LLP. His practice is focused on insurance coverage and insurance defense. He has over 30 reported appellate decisions and is admitted in Tennessee and New York. He can be reached at firstname.lastname@example.org or 901- 576-1758.