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In 2019, many e-discovery decisions focused on when sanctions are appropriate. While case law still mandate parties are responsible for preserving all potentially relevant data in anticipation of future litigation, with new technology, a party's preservation obligations are constantly expanding and presented new challenges for the courts to tackle.

Select cases from 2019 highlight the trend of judges awarding sanctions only if a party acted inappropriately when handling electronically stored information (ESI), such as altering evidence or auto-destroying text messages. However, if a party took appropriate steps to protect relevant e-discovery data, the courts did not award sanctions. The level of sanctions depended on how serious the party's conduct was and whether the court used Rule 37(e) or inherent authority to reach a decision.

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Cases Awarding Sanctions

Rule 37(e) applies to the failure to preserve ESI. To satisfy a sanctions award under this rule, the moving party must show at least four prongs: (a) the party had a duty to preserve certain ESI, (b) party lost the ESI, (c) the lost ESI was a result of the party failing to take reasonable steps to preserve it, and (d) the ESI is irreplaceable. If the lost ESI prejudices the other party, curative measures proportional to the conduct are appropriate. However, an instance of intentional spoliation warrants harsher sanctions like dismissal or adverse inference.

In 2018, the courts inconsistently used both Rule 37(e) and inherent authority to justify awards. A 2015 committee note to the rule amendments states that the rule "forecloses reliance on inherent authority or state law to determine when certain measures should be used" in awarding sanctions. By 2019, judges closely followed the amended rule and most did not use inherent authority to justify a sanctions award.

One exception was Guarisco v. Boh Brothers Construction Co., LLC et al. (E.D. La.), where the court relied on inherent authority to award sanctions after the plaintiff altered/deleted photos and videos. The defense presented expert testimony and plaintiff's old Facebook post containing an original version of one of the accident photographs as evidence. The court noted that Rule 37(e) only applies to evidence that is permanently lost and the court has broad discretion to use inherent authority in other instances of bad faith. However, the court noted that it still should exercise inherent powers with restraint and issued the least severe sanction to act as a deterrence.

In contrast, the court in NuVasive, Inc. v. Kormanis (M.D.N.C.) stressed the importance of following the committee note about foreclosing inherent authority and relied on the text of Rule 37(e) to award sanctions when a party set text messages to auto-destruct after a certain period of time. The court reasoned that the amended rule displaced inherent authority as a mechanism for sanctioning ESI spoliation, and that allowing otherwise would conflict with the plain language of the rule's commentary. The court relied on older case law where the Supreme Court ruled to give weight to an advisory committee's construction of a federal rule because it provided insight into the meaning of the rule.

Also significant in the NuVasive decision is that the judge tabled the question of intentional spoliation and awarding harsher sanctions (like adverse inference) until trial, noting that resolution on whether the plaintiff took appropriate steps to save the text messages and/or intentionally got rid of them are factual issues for the jury. Paisley Park Enter., Inc. v. Boxill (D. Minn.) is another case where lost text messages led to monetary sanctions. The defendant turned the auto-delete function on its' devices and then wiped and discarded them without creating a backup. In this instance, the court also decided to defer a ruling on adverse inference sanctions, which may have a fighting chance due to the fact defendant destroyed the phones. Nevertheless, NuVasive and Paisley Park are examples of judges being hesitant to award sanctions for intentional spoliation.

However, egregious behavior will often push a judge to award sanctions for intentional spoliation. In Herzig v. Arkansas Foundation for Medical Care, Inc. (W.D. Ark.), the plaintiffs switched to using an ephemeral messaging application to conduct communications related to the case and programmed the application for automatic deletion of messages. Plaintiffs were aware of their preservation obligation and did not produce earlier communication until the court compelled them. The judge's findings in this case indicate that future courts will likely impose severe sanctions for this type of behavior, which could become more common due to the growing popularity of ephemeral messaging.

One of the harshest illustration of sanctions in 2019 was in Abbott Laboratories, et al. v. Adelphia Supply USA, et al., (E.D.N.Y.) where the court entered a default judgment against defendants for repeated discovery violations resulting in destruction of key evidence. The defendants committed several intentional bad faith acts to avoid producing discovery data that could hurt their case. The defendants omitted harmful documents from production and intentionally used incorrect search terms during data retrieval that would not find relevant documents. The ruling was significant because it shows that committing repeated fraud to the court can result in more extreme sanctions.

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Cases Without Sanctions

The cases from 2019 where judges chose not to award sanctions are instructive because it provides a list of actions that could save a party from receiving sanctions. For example, in Philmar Dairy, LLC v. Armstrong Farms, et al. (D. New Mexico), the fact that defendants failed to preserve photos on an old cell phone, which a fire destroyed, was not subject to sanctions because the defendants had no reason to believe that litigation was imminent. Plaintiffs never sent a demand letter or communicated with the defendant about the fire until they filed suit. The fact that there was a fire was not enough to invoke a duty to preserve the photos.

In Mafille v. Kaiser-Francis Oil Company (N.D. Oklahoma), a set of data retention policies saved a spoliating party from sanctions. The plaintiff sought evidence off a computer used while working for defendant. The company did not preserve the computer or any data on it and had a policy for uploading materials to a separate server on a daily basis. Assuming there was compliance with this policy, additional discoverable data that was not on the server should not have been on the computer. This is important because it closely follows Rule 37(e)'s mandate of proving prejudice to the moving party in order for sanctions to be appropriate. Theoretical prejudice is not enough.

DriveTime Car Sales Company, LLC v. Pettigrew (S.D. Ohio) stressed the importance of intent when awarding adverse inference sanctions. Defendant switched phones and did not preserve related text messages, even after receiving a litigation hold. While the court found prejudice to plaintiff and awarded curative sanctions, plaintiff only speculated that defendant's actions were intentional and did not provide evidence to support this contention. These actions reflect the higher burden required to find intentional spoliation.

The wrongful termination case of Wolff v. United Airlines, Inc. (D. Colo.) became an outlier because unlike Mafille where the parties took steps to avoid evidence spoliation, in this case, both parties failed to take reasonable steps to preserve evidence and still avoided any type of sanctions. The defendant in Wolff never made an effort to stop automated email deletion after receiving litigation notice, which the court did not excuse. However, the court did not find any basis for awarding the intentional spoliation sanctions that plaintiff sought due to lack of intent evidence. The court, surprisingly, did not find a basis for lesser sanctions because it believed other evidence could support plaintiff's claims, and therefore, there was no prejudice. The defendant also challenged the plaintiff for turning in his company cell phone for an upgrade even though it had potentially relevant ESI stored on it. The court found this troubling but still declined to award any type of sanctions. All of these actions directly conflict with decisions like DriveTime. A departure like this reminds litigators that courts can be unpredictable and will sometimes use their discretion and fact-based analyses to make rulings that go against current trends or precedent.

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Conclusion

These 2019 cases demonstrate several trends. First, they remind litigators that without proper notice that litigation is imminent, there is no preservation duty. Second, courts are moving away from inherent authority when dealing with sanctions for lost ESI. However, even the cases that carved out exceptions for inherent authority noted that courts should only use inherent authority in limited situations where Rule 37(e) does not cover the sanctionable conduct because it is inappropriate to use it as a backup reasoning for awarding sanctions. This distinction is probably the biggest change from 2018, where the federal courts seemed more willing to use inherent authority instead of the rule, as opposed to using it in a limited capacity. Lastly, sanctions are a sliding scale that depends on the facts and the judge's preferences.

Samantha Green, Esq. serves as the Manager of Thought Leadership for Epiq, in which capacity she serves as a subject matter expert on all aspects of electronic discovery and data privacy law, drawing on her more than fifteen years of litigation and consulting experience.