The Duty to Preserve Evidence: Beyond Reasonable Anticipation

   The duty to preserve evidence in the face of impending litigation is a burden that befalls litigants and potential litigants.  We recently discussed the impact of the decision in Zubulake v UBS Warburg LLC 220 FRD 212 (S.D.N.Y. 2003) on the determination of when the duty to preserve attaches with respect to the preservation of electronic documents.  See my previous blog here addressing the reasonable anticipation standard established by Zubulake and as applied in state court in VOOM HD Holdings LLC v. EchoStar Satellite L.L.C., 2012 NY Slip Op 00658 (Jan. 31, 2012).  The duty to preserve evidence – electronic or in other forms – is a duty that carries with it severe consequences if not fulfilled.  While the adverse inference ruling we previously discussed is a severe sanction, the courts also have the authority to dismiss a case, or grant summary judgment, if the spoliation of evidence is egregious or prejudicial enough to warrant it.  Therefore, understanding further the boundaries of the duty and potential sanctions as set by the Fourth Circuit and federal courts of North Carolina will prove beneficial for businesses facing potential litigation in our courts.  Below, I address a few key points from several of these cases.

 1.     The duty does not end with your ownership or control over the evidence.

   It is not enough to say that you do not own or have control over the evidence that is relevant to current or anticipated litigation.  “If a party cannot fulfill this duty to preserve because he does not own or control the evidence, he still has an obligation to give the opposing party notice of access to the evidence or of the possible destruction of the evidence if the party anticipates litigation involving that evidence.” Silvestri v. General Motors, Corp., 271 F.3d 583 (4th Cir. 2001). 

   In Silvestri, the plaintiff sued claiming that a faulty air bag in the car he was driving had caused his injuries.  The car belonged to his landlady’s husband, who subsequently transferred title of the car to another third party and the car was eventually repaired.  The defendant was not notified until three years after the accident that it was being sued, even though the plaintiff had taken steps immediately after the accident to have the car inspected by experts and a lawyer in anticipation of litigation. 271 F.3d at 590-92.  The court found that plaintiff failed to fulfill his duty to preserve the evidence, suggesting that either of the following may have been sufficient: (1) giving defendant notice of the claim or an opportunity to inspect the car at the time of the accident, (2) attempting to purchase the damaged car, or (3) requesting that the car be maintained in its damaged condition until the defendant could inspect it.  Id. at 591-92.       

   The sanction: dismissal of plaintiff’s case due to deliberate or negligent conduct and defendant was “highly prejudiced”.  Id. at 594-95.

 2.     Bad faith is not necessary for a finding of spoliation.

   A finding of spoliation requires a “culpable state of mind”; however, spoliation can be knowing or intentional even if it is not done with bad faith.  Schumacher Immobilien Und Beteiligungs AD v. Prova, Inc., No. 1:09CV18 (M.D.N.C. July 21, 2010) (citing Buckley v. Mukasey, 538 F.3d 306, 323 (4th Cir. 2008)).  Once litigation is reasonably anticipated, knowingly or intentionally moving or removing evidence may be enough for a finding of spoliation. 

   In Schumacher, the parties disputed whether car parts located in a storage facility were the same as those that the defendant had depicted in photographs.  Plaintiff moved the car parts along with the car from the storage facility in Pittsburgh to Atlanta, and then some parts were subsequently shipped to Europe.  The court found that the duty to preserve was violated because the plaintiff should not have moved the parts or separated them once it was clear that there was a dispute about the parts.  Schumacher, No. 1:09CV18.

   The sanction: a jury instruction that an adverse inference may be drawn against plaintiff for failure to keep all of the spare parts intact, since plaintiff had not acted in bad faith and defendant was still able to make a defense based on other evidence.  Id.

 3.     The importance of the evidence, or lack thereof, as indicated by the opposing party’s behavior may alleviate sanctions for spoliation.

   While escaping sanctions altogether is not likely, the opposing party’s lack of interest in particular evidence may alleviate sanctions for its loss. See Indura SA v. Engineered Controls International, Inc, No. 1:10CV457 (M.D.N.C. Sept. 1, 2011).  In fashioning its sanction, the court will consider whether the spoliation was “so prejudicial that it substantially denied [the party] the ability to defend the [case]”  Indura, No. 1:10CV457 (citing Silvestri, 271 F.3d at 593).  Where the party’s conduct prior to the revelation of the spoliation of evidence indicates that it did not deem further use of the evidence important to the defense of its case, the prejudice to the party may be deemed minimal. Id

   In Indura, the plaintiff’s expert witness lost a valve during the course of the litigation.  Defendant made little effort to inspect the valve during the course of discovery, had made a plan that provided for the production of the valve only after the close of discovery, and it never signaled any intention to conduct further testing on the valve prior to learning that the valve had been lost.  Id.  Thus, the court found that defendant was not so prejudiced that it could not defend the case.

   The sanction: an adverse inference instruction or allowing defendant to solicit testimony from witnesses and to make arguments to the jury about the matter.  Id.

 Conclusion

   In the age of E-Discovery, the U.S. District Courts of North Carolina have looked to Zubulake in establishing that the preservation duty applies to electronic evidence and the corresponding “litigation hold” requirements that arise when litigation is anticipated.  It is also important to continue to be mindful of the principles established in the cases discussed above, to ensure that the preservation duty is being met through all of the stages of disputes and litigation.

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