Judge Lee H. Rosenthal, current Chair of the Federal Rules Advisory Committee's Committee on Rules of Practice and Procedure has just issued a sanctions opinion that provides an important counterpoint to Judge Scheidilin's Pension Committee opinion. Judge Rosenthal was at the helm of the Federal Rules Advisory Committee when the e-discovery amendments were developed and enacted in 2006. Her words on legal hold and e-discovery duties, therefore, carry weight. Because she certainly knows a thing or two about e-discovery, her opinion in Rimkus v. Cammarata, 07-cv-00405 (SDTX Feb. 19, 2010) is as important as Judge Scheindlin's Pension Committee opinon, although not as heavily footnooted. To download a copy of the opinion click here: Download Rimkus v Cammarata SDTX Feb 19 2010.
The facts are straightforward. A group of forensic engineers left Rimkus to set up their own competing business. These employees fired off a preemptive strike, filing suit initially in Louisiana state court seeking to nullify certain non-compete agreements. Rimkus countered in this action, alleging that the defecting employees breached the non-competition and non-solicitation covenants in their written employment agreements and that they used Rimkus's trade secrets and proprietary information in setting up and operating a competing business, US Forensics.
To be clear this is not a legal hold case involving the failure to implement a litigation hold due to a missed trigger event or the failure to properly implement a litigation hold. This case involves willful conduct characterized as "bad faith." The defecting employees attempted to cover their tracks and the court sanctions them for it. Costs and an adverse inference jury instruction are awarded. Judge Rosenthal declines, however, to go as far as Judge Scheindlin did in her Pension Committee opinion. Instead of telling the jury that defendants intentionally deleted e-mails, Judge Rosenthal leaves it to the jury to decide whether defendants actions constitute "bad faith." As you will read below, absent bad faith coupled with prejudice, Judge Rosenthal does not believe severe sanctions are appropriate. This is at odds with the Pension Committee opinion that sanctioned the parties for gross negligence in the preservation of ESI (aka failing to properly implement a written litigation hold). In Rimkus, Judge Rosenthal declined to tell the jury that defendants intentionally destroyed ESI, even though the destruction of e-mails looks willful.
This opinion is much like the Pension Committee opinion, because it uses one end of the spectrum of sanctionable conduct to discuss the current state of legal hold law in the United States. The Pension Committee uses the run-of-the-mill legal hold failures end of the spectrum. Rimkus uses the opposite willful conduct end of the spectrum to discuss the same set of legal duties. As a result, the two opinions provide important bookends covering the full spectrum of sanctionable conduct relating to the failure to preserve evidence in response to litigation or when litigation is reasonably anticipated.
Our focus is on the legal hold duties discussed in the case. In her opening sentences Judge Rosenthal touches upon an important trend:
Spoliation of evidence--particularly of electronically stored information--has assumed a level of importance in litigation that raises grave concerns. Spoliation allegations and sanctions motions distract from the merits of a case, add costs to discovery, and delay resolution. The frequency of spoliation allegations may lead to decisions about preservation based more on fear of potential future sanctions than on reasonable need for information. Much of the recent case law on sanctions for spoliation has focused on failures by litigants and their lawyers to take adequate steps to preserve and collect information in discovery.
She then explains in the remainder of the paragraph how this case is different from the Pension Committee:
The spoliation allegations in the present case are different. They are allegations of willful misconduct: the intentional destruction of emails and other electronic information at a time when they were known to be relevant to anticipated or pending litigation. The alleged spoliators are the plaintiffs in an earlier-filed, related case and the defendants in this case. The allegations include that these parties--referred to in this opinion as the defendants--concealed and delayed providing information in discovery that would have revealed their spoliation. The case law recognizes that such conduct is harmful in ways that extend beyond the parties' interests and can justify severe sanctions.
The judge adeptly summarizes her lengthy opinion and her ultimate award of an adverse inference jury instruction as a sanction, so no need to paraphrase:
Given the nature of the allegations, it is not surprising that the past year of discovery in this case has focused on spoliation. The extensive record includes evidence that the defendants intentionally deleted some emails and attachments after there was a duty to preserve them. That duty arose because the defendants were about to file the related law-suit in which they were the plaintiffs. The individuals who deleted the information testified that they did so for reasons unrelated to the litigation. But the individuals gave inconsistent testimony about these reasons and some of the testimony was not supported by other evidence. The record also includes evidence of efforts to conceal or delay revealing that emails and attachments had been deleted. There is sufficient evidence from which a reasonable jury could find that emails and attachments were intentionally deleted to prevent their use in anticipated or pending litigation.
The record also shows that much of what was deleted is no longer available. But some of the deleted emails were recovered from other sources. While some of the recovered deleted emails were adverse to the defendants' positions in this litigation, some were favorable to the defendants. The record also shows that despite the deletions of emails subject to a preservation duty, there is extensive evidence available to the plaintiff to prosecute its claims and respond to the defenses. These and other factors discussed in more detail below lead to the conclusion that the most severe sanctions of entering judgment, striking pleadings, or imposing issue preclusion are not warranted. Instead, the appropriate sanction is to allow the jury to hear evidence of the defendants' conduct--including deleting emails and attachments and provid-ing inaccurate or inconsistent testimony about them--and to give the jury a form of adverse inference instruction. The instruction will inform the jury that if it finds that the defendants intentionally deleted evidence to prevent its use in anticipated or pending litigation, the jury may, but is not required to, infer that the lost evidence would have been unfavorable to the defendants. In addition, the plaintiff will be awarded the fees and costs it reasonably incurred in identifying and revealing the spoliation and in litigating the consequences.
Getting right into the important points of the opinion, Judge Rosenthal begins her analysis of applicable preservation duties by summarizing the Pension Committee opinion:
In her recent opinion in Pension Committee of the University of Montreal Pension Plan v. Banc of America Securi-ties, LLC, No. 05 Civ. 9016, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010), Judge Scheindlin has again done the courts a great service by laying out a careful analysis of spoliation and sanctions issues in electronic discovery. The focus of Pension Committee was on when negligent failures to preserve, collect, and produce documents--including electronically stored information--in discovery may justify the severe sanction of a form of adverse inference instruction. Unlike Pension Committee, the present case does not involve allegations of negligence in electronic discovery. Instead, this case involves allegations of intentional destruction of electronically stored evidence. But there are some common ana-lytical issues between this case and Pension Committee that deserve brief discussion.
Judge Rosenthal next grounds us with a history lesson on the duty to preserve:
A. The Source of Authority to Impose Sanctions for Loss of Evidence
Allegations of spoliation, including the destruction of evidence in pending or reasonably foreseeable litigation, are addressed in federal courts through the inherent power to regulate the litigation process if the conduct occurs before a case is filed or if, for another reason, there is no statute or rule that adequately addresses the conduct. See Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991); Natural Gas Pipeline Co. of Am. v. Energy Gathering, Inc., 2 F.3d 1397, 1408 (5th Cir. 1993) (summary calendar). If an applicable statute or rule can adequately sanction the conduct, that statute or rule should ordinarily be applied, with its attendant limits, rather than a more flexible or expansive "inherent power." Chambers, 501 U.S. at 50; see Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d 98, 109 (3d Cir. 1999) ("[A] trial court should consider invoking its inherent sanctioning powers only where no sanction established by the Federal Rules or a pertinent statute is 'up to the task' of remedying the damage done by a litigant's malfeasance . . . ."); Natural Gas Pipeline Co. of Am., 2 F.3d at 1410 ("When parties or their attorneys engage in bad faith conduct, a court should ordinarily rely on the Federal Rules as the basis for sanctions.")
When inherent power does apply, it is "interpreted narrowly, and its reach is limited by its ultimate source--the court's need to orderly and expeditiously perform its duties." Newby v. Enron Corp., 302 F.3d 295, 302 (5th Cir. 2002) (footnote omitted) (citing Chambers, 501 U.S. at 43). In Chambers, the inherent power was linked to the bad-faith conduct that affected the litigation. See 501 U.S. at 49. If inherent power, rather than a specific rule or statute, provides the source of the sanctioning authority, under Chambers, it may be limited to a degree of culpability greater than negligence.
The court next reminds us of Rule 37(b)2(A) and its laundry list of available sanctions. The court also identifies the safe harbor of Rule 37(e) that attempts to provide some protection to a litigant that inadvertently destroys ESI, despite the good-faith operation of its electronic information system.
Judge Roshethal applies both the court's inherent power and Rule 37 to sanction the conduct of defendants. She next outlines the law that any reader of this blog has seen discussed here time and time again:
B. When Deletion Can Become Spoliation
Spoliation is the destruction or the significant and meaningful alteration of evidence. See generally The Sedona Conference, The Sedona Conference Glossary: E-DISCOVERY & DIGITAL INFORMATION MANAGEMENT (SECOND EDITION) 48 (2007) ("Spoliation is the destruction of records or properties, such as metadata, that may be relevant to ongoing or anticipated litigation, government investigation or audit."). Electronically stored information is routinely deleted or altered and affirmative steps are often required to preserve it. Such deletions, alterations, and losses cannot be spoliation unless there is a duty to preserve the information, a culpable breach of that duty, and resulting prejudice.
Generally, the duty to preserve arises when a party "'has notice that the evidence is relevant to litigation or . . . should have known that the evidence may be relevant to future litigation.'" Generally, the duty to preserve extends to documents or tangible things (defined by Federal Rule of Civil Procedure 34) by or to individuals "likely to have discoverable information that the disclosing party may use to support its claims or defenses." See, e.g., Zubulake IV, 220 F.R.D. at 217-18 (footnotes omitted).
These general rules are not controversial. But applying them to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances. It can be difficult to draw bright-line distinctions between acceptable and unacceptable conduct in preserving information and in conducting discovery, either prospectively or with the benefit (and distortion) of hindsight. Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done--or not done--was proportional to that case and consistent with clearly established applicable standards. As Judge Scheindlin pointed out in Pension Committee, that analysis depends heavily on the facts and circumstances of each case and cannot be reduced to a generalized checklist of what is acceptable or unacceptable.
If you are still following along, this next part is important. In her next paragraph Judge Rosenthal begins to depart from the Pension Committee holding. As we will discuss, the trend toward negligence as a basis for sanctions due to the failure to properly implement a litigation hold does not sit well with some litigants and some judges. Judge Rosenthal provides an important alternative view to the Pension Committee opinion:
Applying a categorical approach to sanctions issues is also difficult, for similar reasons. Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party's culpability and the level of prejudice to the party seeking discovery. Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court's response to the loss of evidence depends on both the degree of culpability and the extent of prejudice. Even if there is intentional destruction of potentially relevant evidence, if there is no prejudice to the opposing party, that influences the sanctions consequence. And even if there is an inadvertent loss of evidence but severe prejudice to the opposing party, that too will influence the appropriate response, recognizing that sanctions (as opposed to other remedial steps) require some degree of culpability.
It should be clear by now that Judge Rosenthal believes there must be evidence of "bad faith" before harsh sanctions can be awarded. In other words culpability is required before a federal court can hand out harsh sanctions (at least in her jurisdictions and others that follow similar case law). The applicable law is detailed next:
As a general rule, in this circuit, the severe sanctions of granting default judgment, striking pleadings, or giving adverse inference instructions may not be imposed unless there is evidence of "bad faith." [Citations omitted.]
Other circuits have also held negligence insufficient for an adverse inference instruction. The Eleventh Circuit has held that bad faith is required for an adverse inference instruction. The Seventh, Eighth, Tenth, and D.C. Circuits also appear to require bad faith. The First, Fourth, and Ninth Circuits hold that bad faith is not essential to imposing severe sanctions if there is severe prejudice, although the cases often emphasize the presence of bad faith. In the Third Cir-cuit, the courts balance the degree of fault and prejudice. [Footnote citations omitted.]
Still with us? Time for another sip of coffee and to refocus. Here Judge Rosenthal discusses application of the Pension Committee holding and questions its scope. Yes, we said it, the Rimkus opinion wonders out loud whether the Pension Committee opinion can be sustained in light of competing law from the Supreme Court and Circuit Courts outside the reach of the Second Circuit.
The court in Pension Committee imposed a form of adverse inference instruction based on a finding of gross negli-gence in preserving information and in collecting it in discovery. The court applied case law in the Second Circuit, including the language in Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 108 (2d Cir. 2002), stating that "[t]he sanction of an adverse inference may be appropriate in some cases involving the negligent destruction of evidence because each party should bear the risk of its own negligence." That language has been read to allow severe sanctions for negligent destruction of evidence. See, e.g., Rogers v. T.J. Samson Cmty. Hosp., 276 F.3d 228, 232 (6th Cir. 2002); Lewis v. Ryan, 261 F.R.D. 513, 521 (S.D. Cal. 2009) (noting that California district courts had followed the Second Circuit's approach in Residential Funding). In the Fifth Circuit and others, negligent as opposed to intentional, "bad faith" destruction of evidence is not sufficient to give an adverse inference instruction and may not relieve the party seeking discovery of the need to show that missing documents are relevant and their loss prejudicial. The circuit differences in the level of culpability necessary for an adverse inference instruction limit the applicability of the Pension Committee approach. And to the extent sanctions are based on inherent power, the Supreme Court's decision in Cham-bers may also require a degree of culpability greater than negligence.
Judge Rosenthal next tackles the absence of the allegedly destroyed evidence and how it affects the burden of proof. As a trend, recent case law has moved toward gross negligence (and in some circumstances negligence) as allowing harsh sanctions when ESI is lost or destroyed for failing to properly implement a litigation hold. Judge Rosenthal, as an important check on the Pension Committee holding reminds us that something more than mere negligence may be (and some would argue should be) required before a court can hand out a severe sanction:
D. Relevance and Prejudice: The Burden of Proof
It is well established that a party seeking the sanction of an adverse inference instruction based on spoliation of evi-dence must establish that: (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the evidence was destroyed with a culpable state of mind; and (3) 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. See Zubulake v. UBS Warburg LLC (Zubulake IV), 220 F.R.D. 212, 220 (S.D.N.Y. 2003). The "relevance" and "preju-dice" factors of the adverse inference analysis are often broken down into three subparts: "(1) whether the evidence is relevant to the lawsuit; (2) whether the evidence would have supported the inference sought; and (3) whether the nonde-stroying party has suffered prejudice from the destruction of the evidence." Consol. Aluminum Corp. v. Alcoa, Inc., 244 F.R.D. 335, 346 (M.D. La. 2006) (citing Concord Boat Corp. v. Brunswick Corp., No. LR-C-95-781, 1997 WL 33352759, at *7 (E.D. Ark. Aug. 29, 1997)). Courts recognize that "[t]he burden placed on the moving party to show that the lost evidence would have been favorable to it ought not be too onerous, lest the spoliator be permitted to profit from its destruction." Chan v. Triple 8 Palace, Inc., No. 03CIV6048(GEL)(JCF), 2005 WL 1925579, at *7 (S.D.N.Y. Aug. 11, 2005).
Pension Committee recognized the difficulty and potential for unfairness in requiring an innocent party seeking discovery to show that information lost through spoliation is relevant and prejudicial. Those concerns are acute when the party seeking discovery cannot replace or obtain extrinsic evidence of the content of deleted information. But in many cases--including the present case--there are sources from which at least some of the allegedly spoliated evidence can be obtained. And in many cases--including the present case--the party seeking discovery can also obtain extrinsic evidence of the content of at least some of the deleted information from other documents, deposition testimony, or circumstantial evidence.
Courts recognize that a showing that the lost information is relevant and prejudicial is an important check on spoliation allegations and sanctions motions. Courts have held that speculative or generalized assertions that the missing evidence would have been favorable to the party seeking sanctions are insufficient. By contrast, when the evidence in the case as a whole would allow a reasonable fact finder to conclude that the missing evidence would have helped the requesting party support its claims or defenses, that may be a sufficient showing of both relevance and prejudice to make an adverse inference instruction appropriate.
In Pension Committee, the court followed the approach that even for severe sanctions, relevance and prejudice may be presumed when the spoliating party acts in a grossly negligent manner. Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. §., LLC, No. 05 Civ. 9016, 2010 WL 184312, at *5 (S.D.N.Y. Jan. 15, 2010). The pre-sumption of relevance and prejudice is not mandatory. Id. at *5. The spoliating party may rebut the presumption by showing that the innocent party had access to the evidence allegedly destroyed or that the evidence would not have been helpful to the innocent party. Id. When the level of culpability is "mere" negligence, the presumption of relevance and prejudice is not available; the Pension Committee court imposed a limited burden on the innocent party to present some extrinsic evidence. Id.
Still with us? Time for another sip of coffee. Judge Rosenthal next focuses on the law applicable to Rimkus. To her there may be a need to prove relevance, even when the destruction is done in "bad faith." But, in the context of Rimkus, there is evidence of relevance so beyond noting the requirement of relevance, there is no need to explore this point further.
The Fifth Circuit has not explicitly addressed whether even bad-faith destruction of evidence allows a court to presume that the destroyed evidence was relevant or its loss prejudicial. Case law in the Fifth Circuit indicates that an adverse inference instruction is not proper unless there is a showing that the spoliated evidence would have been relevant. [Citations omitted.] One opinion states that bad-faith destruction of evidence "alone is sufficient to demonstrate relevance." See Consol. Alumi-num Corp. v. Alcoa, Inc., 244 F.R.D. 335, 340 n.6 (M.D. La. 2006). But that opinion also went on to state that "before an adverse inference may be drawn, there must be some showing that there is in fact a nexus between the proposed inference and the information contained in the lost evidence" and that "some extrinsic evidence of the content of the emails is necessary for the trier of fact to be able to determine in what respect and to what extent the emails would have been detrimental." Id. at 346. In the present case, the party seeking sanctions for deleting emails after a duty to preserve had arisen presented evidence of their contents. The evidence included some recovered deleted emails and circumstan-tial evidence and deposition testimony relating to the unrecovered records. There is neither a factual nor legal basis, nor need, to rely on a presumption of relevance or prejudice.
Next the court discusses the application of an adverse inference jury instruction as a sanction for destruction of evidence. The cases cited are not controversial. The court summarizes the law as follows:
E. Remedies: Adverse Inference Instructions
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When a party is prejudiced, but not irreparably, from the loss of evidence that was destroyed with a high degree of culpability, a harsh but less extreme sanction than dismissal or default is to permit the fact finder to presume that the destroyed evidence was prejudicial. Such a sanction has been imposed for the intentional destruction of electronic evidence. Although adverse inference instructions can take varying forms that range in harshness, and although all such instructions are less harsh than so-called terminating sanctions, they are properly viewed as among the most severe sanctions a court can administer.
Turning again to the Pension Committee opinion, Judge Rosenthal details the case and explains that in Pension Committee grossly negligent conduct resulted in the court telling the jury evidence was destroyed. In Pension Committee it was important to the court to tell the jury evidence was destroyed, but left the determination of relevance and prejudice to the jury.
Judge Rosenthal, in the context of apparent willful acts of destruction, is not willing to go so far as holding, as a matter of law, that evidence was intentionally destroyed with bad faith:
As explained in more detail below, based on the record in this case, this court makes the preliminary findings nec-essary to submit the spoliation evidence and an adverse inference instruction to the jury. But the record also presents conflicting evidence about the reasons the defendants deleted the emails and attachments; evidence that some of the deleted emails and attachments were favorable to the defendants; and an extensive amount of other evidence for the plaintiff to use. As a result, the jury will not be instructed that the defendants engaged in intentional misconduct. In-stead, the instruction will ask the jury to decide whether the defendants intentionally deleted emails and attachments to prevent their use in litigation. If the jury finds such misconduct, the jury must then decide, considering all the evidence, whether to infer that the lost information would have been unfavorable to the defendants. Rather than instruct the jury on the rebuttable presumption steps, it is sufficient to present the ultimate issue: whether, if the jury has found bad-faith destruction, the jury will then decide to draw the inference that the lost information would have been unfavorable to the defendants.
The court next embarks on a lengthy and detailed analysis of the specific facts of the case. A blow-by-blow recitation of the facts does not add to our discussion, however, so you will have to read the opinion for the sorted details. The holding of the court, however, based on these facts is important:
2. The Duty to Preserve
The record shows that no later than November 11, 2006, when the defendants were about to "preemptively" sue Rimkus, they had an obligation to preserve documents and information--including electronically stored information--relevant to these disputes. The disputes included whether Bell breached the fiduciary duty he owed Rimkus as an officer, whether Bell or Cammarata breached enforceable obligations under the noncompete and nonsolicitation provisions in the parties' contracts, and whether Bell or Cammarata breached contractual or common-law duties not to take or use Rimkus's confidential and proprietary information.
Bell sought the advice of counsel before leaving Rimkus. The November 11, 2006 email from Bell to Cammarata, DeHarde, and Janowsky discussing the final steps of the plan to sue Rimkus in Louisiana to challenge the noncompete and nonsolicitation provisions shows that the defendants knew that they would be suing Rimkus within days. The duty to preserve electronically stored information and documents relevant to that suit and reasonably anticipated related liti-gation was triggered no later than November 11, 2006.
The defendants' argument that their preservation obligation was limited to documents or emails related to breach of fiduciary obligation claims against Bell is unpersuasive. Bell, Cammarata, and DeHarde sued Rimkus in Louisiana seeking a declaratory judgment that the noncompetition and nonsolicitation clauses were unenforceable so that they could operate U.S. Forensic to compete with Rimkus. It was reasonable for Bell and Cammarata to anticipate that Rim-kus would seek to enforce those contractual provisions as to all the U.S. Forensic employees who left Rimkus, as well as the contractual and common-law duty not to disclose Rimkus's confidential and proprietary information. Emails and attachments and other documents relating to U.S. Forensic and its related company, to soliciting Rimkus clients or em-ployees, and to obtaining or using Rimkus information were subject to a preservation obligation. Such records were relevant to the claims involved in the Louisiana state court action that Cammarata, Bell, and DeHarde filed and to the reasonably anticipated claims that Rimkus would file, and involved the key players in the parties' litigation.
Rule 37(e), which precludes sanctions if the loss of the information arises from the routine operation of the party's computer system, operated in good faith, does not apply here. The evidence in the record shows that the defendants and other U.S. Forensic founders did not have emails deleted through the routine, good-faith operation of the U.S. Forensic computer system. DeHarde testified that he, Bell, Cammarata, and Janowsky decided on a "policy" of deleting emails more than two weeks old. Putting aside for the moment other evidence in the record inconsistent with this testimony, a policy put into place after a duty to preserve had arisen, that applies almost exclusively to emails subject to that duty to preserve, is not a routine, good-faith operation of a computer system. Moreover, the evidence shows that the founders of U.S. Forensic manually and selectively deleted emails, after the duty to preserve arose. The selective, manual deletions continued well after Rimkus filed suit in January and February 2007.
Despite the fact that the founders of U.S. Forensic had sought and obtained legal advice on many aspects of their departure from Rimkus and their formation and operation of the competing business, they made no effort to preserve relevant documents, even after the Louisiana and Texas suits had been filed. To the contrary, the evidence shows af-firmative steps to delete potentially relevant documents. Even assuming that there was an email destruction policy as DeHarde testified, it was selectively implemented. The deleted documents included emails and attachments relevant to the disputes with Rimkus--the emails and attachments showing what information U.S. Forensic's founders took from Rimkus to use in the competing business, including to solicit business from Rimkus clients, and how they solicited those clients.
The record shows that the electronically stored information that the defendants deleted or destroyed after the duty to preserve arose was relevant to the issues involving both Bell and Cammarata, not limited to a breach of fiduciary claim against Bell. The deleted emails and attachments related not only to setting up U.S. Forensic but also to obtaining information from Rimkus, including copyrighted materials, financial documents, and customer lists; using at least some of that information to operate U.S. Forensic in competition with Rimkus; and soliciting business for U.S. Forensic. The evidence shows that by deleting emails relating to forming U.S. Forensic and to using information from Rimkus for U.S. Forensic, by failing to preserve such emails, and by giving away or destroying laptops with such emails, the defen-dants destroyed potentially relevant evidence.
Judge Rosenthal next tackles the need for "bad faith" and prejudice before a harsh sanction like an adverse inference instruction can be handed out.
3. The Degree of Culpability
Destruction or deletion of information subject to a preservation obligation is not sufficient for sanctions. Bad faith is required. A severe sanction such as a default judgment or an adverse inference instruction requires bad faith and prejudice. See Condrey v. SunTrust Bank of Ga., 431 F.3d 191, 203 (5th Cir. 2005); see also Whitt v. Stephens County, 529 F.3d 278, 284 (5th Cir. 2008) ("[A] jury may draw an adverse inference 'that party who intentionally destroys im-portant evidence in bad faith did so because the contents of those documents were unfavorable to that party.'" (quoting Russell v. Univ. of Tex. of the Permian Basin, 234 F. App'x 195, 207 (5th Cir.2007) (unpublished)).
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4. Relevance and Prejudice
Despite the evidence of spoliation and efforts to conceal it, the record also shows that Rimkus was able to obtain a significant amount of evidence. Rimkus had the laptop Bell used during his employment, although Rimkus delayed in examining it. That laptop revealed useful information about records Bell took from Rimkus. Although they deleted or destroyed the relevant emails, attachments, and documents on other computers, the defendants also produced numerous documents and emails relating to their communications and preparations to form U.S. Forensic. Rimkus was also able to obtain numerous emails from Homestead, which hosted all U.S. Forensic's emails between November 15, 2006 and December 19, 2006. And the defendants have subsequently, if belatedly, produced numerous responsive emails and documents relating to the formation of U.S. Forensic and the solicitation of Rimkus clients.
Between the records the defendants did produce, the deleted records Rimkus obtained from other sources, and other evidence of the contents of deleted lost records, Rimkus has extensive evidence it can present. The evidence of the con-tents of the lost records shows that some would have been favorable to Rimkus. There is prejudice to Rimkus, but it is far from irreparable. Rimkus's demand that this court strike the defendants' pleadings and enter a default judgment is not appropriate. The sanction of dismissal or default judgment is appropriate only if the spoliation or destruction of evi-dence resulted in "irreparable prejudice" and no lesser sanction would suffice. See Silvestri v. Gen. Motors Corp., 271 F.3d 583, 593-94 (4th Cir. 2001) (affirming dismissal as a sanction when the alterations to the plaintiff's vehicle were tantamount to destroying the central piece of evidence in the case, which denied the defendant "access to the only evi-dence from which it could develop its defenses adequately," causing "irreparable prejudice").
Although a terminating sanction is not appropriate, a lesser sanction of a form of adverse inference instruction is warranted to level the evidentiary playing field and sanction the improper conduct. See Russell v. Univ. of Tex. of the Permian Basin, 234 F. App'x 195, 207 (5th Cir. 2007) (unpublished) ("A spoliation instruction entitles the jury to draw an inference that a party who intentionally destroys important documents did so because the contents of those docu-ments were unfavorable to that party."); Turner v. Pub. Serv. Co. of Colo., 563 F.3d 1136, 1149 (10th Cir. 2009) (inten-tional destruction of records may "support an inference of consciousness of a weak case" (quoting Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997)).
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At the same time, it is important that Rimkus has extensive evidence to use in this case. And some of the emails that the defendants deleted and that were later recovered are consistent with their positions in this lawsuit and helpful to their defense.
And now for the significant holdings:
Given this record, it is appropriate to allow the jury to hear the evidence about the deletion of emails and attach-ments and about discovery responses that concealed and delayed revealing the deletions. The jury will receive an in-struction that in and after November 2006, the defendants had a duty to preserve emails and other information they knew to be relevant to anticipated and pending litigation. If the jury finds that the defendants deleted emails to prevent their use in litigation with Rimkus, the jury will be instructed that it may, but is not required to, infer that the content of the deleted lost emails would have been unfavorable to the defendants. 34 In making this determination, the jury is to consider the evidence about the conduct of the defendants in deleting emails after the duty to preserve had arisen and the evidence about the content of the deleted emails that cannot be recovered.
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The record also supports the sanction of requiring the defendants to pay Rimkus the reasonable costs and attorneys' fees required to identify and respond to the spoliation. The defendants agree that this sanction is appropriate. (Docket Entry No. 408 at 26). Rimkus has spent considerable time and money attempting to determine the existence and extent of the spoliation, hampered by the defendants' inconsistent and untruthful answers to questions about internet accounts and retention and destruction practices. The defendants failed to produce documents in compliance with court orders. Rimkus also expended significant time and effort to obtain some of the deleted emails and attachments.
In addition the court held that allegations of perjury were not supported by the record.
Lastly, regarding the failures to adhere to court orders and other discovery violations the court deferred to its early opinions in this case as sufficiently addressing the issues raised by defendants -- not included in the rulings above.
Judge Rosenthal completes her discussion of the destruction of evidence issues as follows:
There is evidence in the record showing that the defendants intentionally deleted emails after a duty to preserve had clearly arisen. There is evidence in the record showing that at least some of this lost evidence would have been relevant and favorable to Rimkus's case. The loss of the evidence prejudiced Rimkus, though not irreparably. These failures have imposed significant costs on the parties and the court. Sanctions are appropriate. Accordingly, the court will allow the jury to hear the evidence of the defendants' deletion of emails and attachments, and inconsistent testimony about the emails, the concealment of email accounts, and the delays in producing records and information sought in discovery. The jury will be instructed that if it decides that the defendants intentionally deleted emails to prevent their use in litigation against Rimkus, the jury may, but need not, infer that the deleted emails that cannot be produced would have been adverse to the defendants. Rimkus is also entitled to an award of attorneys' fees and costs reasonably incurred in inves-tigating the spoliation, obtaining emails from third-party subpoenas, taking additional depositions of Cammarata and Bell, and moving for sanctions based on the deleted emails and on Bell's false testimony.
The remainder of the opinion is devoted to the parties' summary judgment motions. We will not analyze this portion of the opinion as it is clearly beyond the scope of our analysis. If you are still reading, by now you probably need another cup of coffee. Take a break and contemplate Judge Rosenthal's counterpoint to the Pension Committee opinion.