iAmong many changes to federal discovery practice, the 2015 Amendments to the Federal Rules of Civil Procedure curtailed courts’ power to impose adverse inferences and other harsh sanctions on parties who fail to preserve electronically stored information (“ESI”). Previously, many courts imposed onerous sanctions upon finding negligence or gross negligence in the preservation of discoverable information. See, e.g., Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002). The 2015 Amendments, however, provide that a court may only impose an adverse inference or dismiss the action when a party acts with specific intent to deprive another of the use of ESI in the litigation. Fed. R. Civ. P. 37(e)(2)(A-C).
In fact, the Advisory Committee explicitly intended to reject cases, like Residential Funding Corp., “that authorize the giving of adverse-inference instructions on a finding of negligence or gross negligence.” Advisory Committee Notes, 2015 Amendment, Fed. R. Civ. P. 37(e). Nevertheless, it appears that some courts have continued to impose adverse inferences and other harsh sanctions when only circumstantial evidence of intentional spoliation exists or when a party’s conduct is only grossly negligent, leaving lingering confusion about courts’ power to severely punish parties who fail to preserve ESI, except in the most clear-cut cases.
Clear-Cut Cases Lead to Little Confusion
As expected, courts have not hesitated to impose sanctions under amended Rule 37(e)(2) on parties who have intentionally altered or deleted ESI, especially when those parties are sophisticated users of technology.
For example, in CAT3, LLC v. Black Lineage, Inc., - F.Supp.3d - , 2016 WL 154116 (S.D.N.Y. Jan. 12, 2016), the court imposed sanctions under Rule 37(e)(2) upon finding that the plaintiff acted with intent to alter emails relevant to the litigation. In CAT3, a trademark case, whether the defendant had notice of the plaintiff’s use of the “SLAMHYPE” mark was a critical issue. During a deposition, the defendant realized that emails in the plaintiff’s production showed the plaintiff’s employees’ email addresses as having the “@slamhype.com” domain name, but, in the versions produced by the defendant, the plaintiff’s employees’ email addresses had the “@ecko.com” domain name. Realizing that two different versions of what should have been identical documents existed, the defendant retained a forensic expert, who found that the plaintiff had intentionally replaced the domain names prior to production. The court imposed sanctions precluding the plaintiff from relying on their version of the emails to demonstrate notice after finding that the plaintiff acted with specific intent.
Consistent with the 2015 Amendments, courts have also declined to infer intent to deprive with respect to parties who lost ESI for mere negligence due to their own failure to understand a given technology.
For example, in Moulton v. Bane, 2015 WL 7776892 (D.N.H. Dec. 2, 2015), the court held that a defendant who did not realize that his WhatsApp messages would not be transferred to his new smart phone did not act with specific intent to deprive. Crucial to the court’s finding was plaintiff’s failure to offer any evidence that the defendant specifically discarded and replaced his phone to get rid of the WhatsApp messages. Similarly, in Living Color Enterprises, Inc. v. New Era Aquaculture, Ltd., 2016 WL 1105297 (S.D. Fla. Mar. 22, 2016), the court declined to find that the defendant, a “relatively unsophisticated litigant,” had intentionally deprived the plaintiff of text messages by failing to turn off a setting on his phone that automatically deleted text messages after thirty days.
For the time being, courts are expected to keep acting consistently with amended Rule 37 and decline to impose harsh sanctions for mere negligence, especially in cases involving unsophisticated parties using new technologies. In the future, however, as parties become more familiar with smart phone applications and new technologies, courts may be less inclined to excuse ignorance when ESI is lost.
Does Gross Negligence Qualify as “Intent” under Amended Rule 37?
Not all recent cases applying the 2015 Amendments have been so clear cut as those cases in which a party’s intent to destroy ESI is apparent or in which a party merely acted negligently. Specifically, courts appear divided as to whether gross negligence may constitute “intent to deprive,” despite the advisory committee note’s specific proscription against imposing harsh sanctions under such circumstances.
On one side of the fence are courts that have recognized the high standard of “intent” under amended Rule 37. For example, in Orchestratehr, Inc. v. Trombetta, - F.Supp.3d - , 2016 WL 1555784 (N.D. Tex. Apr. 18, 2016), a Northern District of Texas court held that a defendant did not act with intent to deprive when he deleted relevant emails, even though the defendant admitted in his deposition that he may have deleted the emails to “cover his tracks.” The court found that, because the defendant later declared that he deleted the emails in the ordinary course of business, only “equivocal” evidence existed for the defendant’s state of mind when he deleted the emails. Id. The Court therefore declined to impose an adverse inference because it could not state with certainty that defendant had intentionally deleted the emails in question “in bad faith or with the requisite intent to deprive Plaintiffs of the use of them in this litigation.”
Similarly, in Nuvasive, Inc. v. Madsen Med., Inc., 2016 WL 305096 (S.D. Cal. Jan. 26, 2016), a court in the Southern District of California vacated an order granting an adverse inference instruction against the plaintiff because, in prior orders, the court made no finding that the plaintiff had intentionally failed to preserve text messages in order to deprive the defendants of their use in the litigation by failing to inform employees to preserve them. Thus, the court concluded that, under Rule 37, as amended, an adverse inference instruction would be improper.
On the other side of the fence are courts that have been willing to harshly sanction “intentional” losses of ESI based on evidence of gross negligence. For example, a court in the Middle District of Georgia found “intent to deprive” when a party was “lazy” and “irresponsible” in preserving ESI. In O’Berry v. Turner, 2016 WL 1700403 (M.D. Ga. Apr. 27, 2016), the defendant attempted to preserve electronic truck logs by printing a single copy the logs and placing the hard copies in a manila folder. Despite receiving a spoliation letter from plaintiff’s counsel, the defendant took no additional steps to preserve the data and, in fact, lost the manila folder during an office move. The court held that the defendant’s behavior was “simply irresponsible” and that “[s]uch irresponsible and shiftless behavior can only lead to one conclusion—that [defendant] acted with the intent to deprive Plaintiff of the use of this information at trial.” Thus, the court apparently used evidence of gross negligence to find intent, making an end-run around the Advisory Committee’s rejection of the Second Circuit line of cases permitting harsh sanctions for gross negligence.
Other courts have also found “intent” despite a lack of evidence of a party’s culpable state of mind. In DVComm, LLC v. Hotwire Communications, LLC, Civil Action No. 14-05543, Findings of Fact and Conclusions of Law (E.D. Pa. Feb. 3, 2016; unpublished), the court used the Tenth Circuit’s traditional five-factor test in deciding whether to impose an adverse inference, which requires only a finding of “bad faith.” Id. at ¶ 52. The court discussed new Rule 37’s requirement of a showing of “intent to deprive” but stated that a party need only show “intentional destruction” of the evidence and that “no further showing of state of mind is necessary.” Id. at ¶ 54. This interpretation of “intent” stands in contrast to that of other courts, such as Orchestratehr, which have focused on the intent of the party to deprive the opposing party of ESI, rather than the mere intent to destroy it. The DVComm court’s use of a relaxed state-of-mind standard may impact other cases decided in that district, despite the Advisory Committee’s clear directive.
Finally, in Internmatch, Inc. v. Nxtbigthing, LLC, 2016 WL 491483, (N.D. Cal. Feb. 8, 2016), a court in the Northern District of California found that the defendant had “willfully spoliated evidence” because (1) the defendant’s explanation that the relevant laptops were destroyed in a power surge was improbable and (2) the defendant made no effort to recover the data on the laptops prior to discarding them. Even though the plaintiff could not show with certainty that the defendant intentionally threw away the laptops in order to deprive it of relevant evidence, the court still found that the defendant’s failure to even inquire about whether the data could be recovered, in addition to the “extraordinary” measures defendant took to “mislead opposing counsel,” merited a finding of bad faith.
It remains to be seen whether courts will follow a strict or liberal interpretation of “intent” for cases on the margins, such as Orchestratehr and Internmatch. But one thing is clear: the amendments to Rule 37 have not led to increased consistency and predictability regarding spoliation sanctions that litigants had hoped for.
