Case Blurb: Lowry Development LLC; Producing Party’s destruction of evidence and untruthful testimony warrant sanctions

In the exercise of my discretion in this matter, I have determined that the destruction of this computer occurred at a time [Producing Party] knew or should have known that the computer and the data it contained were part of the evidence in this case. [Producing Party]’s decision to discard the computer was not the product of simple negligence, and [Producing Party]’s untruthful testimony concerning the manner in which this computer was handled is sufficient to infer the necessary element of bad faith in connection with his actions. I am of the opinion that [Requesting Party] should be allowed to introduce evidence concerning the disposition of this computer and concerning Groves’s untruthful testimony about this matter.

The existence of a mutual mistake of fact in connection with the formation of the [Requesting Party] insurance contract is an issue on which Great American would ordinarily bear an extraordinary burden of proof. The jury’s decision on this issue will depend in substantial part on the credibility of [Producing Party]’s testimony, and the parties have recognized that should [Requesting Party] prevail on the defense of mutual mistake [Producing Party], would be liable to the plaintiff for his wind-related losses. In these circumstances, I find that the appropriate sanction for [Producing Party]’s destruction of the data contained in his computer is to ameliorate the effect of this loss of evidence by reducing [Requesting Party]’s burden of proof to a preponderance of the evidence. See: McGuire v. Sigma Coatings, Inc., 48 F.3d 902 (5th Cir.1995). I will so instruct the jury at the appropriate time.

Accordingly, I will grant [Requesting Party]’s motion for sanctions, and I will permit [Requesting Party] to elicit testimony and introduce other evidence related to the destruction of this evidence. After I have heard the evidence in the case, I will fashion an appropriate jury instruction concerning the inferences or conclusions the jury may draw from [Producing Party]’s actions, and [Requesting Party]’s burden of proof on the issue of mutual mistake will be to prove the facts necessary to establish this defense by a preponderance of the evidence.

Great Am. Ins. Co. of N.Y. v. Lowry Dev., LLC, 2007 WL 4268776 (S.D. Miss. Nov. 30, 2007)

Case Blurb: Residential Funding Corp.; Finding that party acted with gross negligence or in bad faith sufficient that missing evidence harmful to movant

The district court’s finding that party acted with gross negligence or in bad faith with respect to discovery obligations is ordinarily sufficient to support finding that missing or destroyed evidence would have been harmful to the party. Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002).

Case Blurb: Residential Funding Corp.; Negligence sufficient to establish culpable state of mind element for adverse inference instruction, 2nd circuit

The “culpable state of mind” factor required for adverse inference instruction based on breach of discovery obligation may be satisfied by showing of negligence, rather than bad faith or gross negligence. Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002).

Case Blurb: Alcoa, Inc.; Elements to establish need for adverse inference instruction, 5th Circuit

A party seeking the sanction of an adverse inference instruction based upon spoliation of evidence must establish these elements:

• The party in control of the evidence had an obligation to preserve it at the time it was destroyed;
• The records were destroyed with a “culpable state of mind;”
• 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.

Additionally, the Fifth Circuit only permits an adverse inference sanction against a destroyer of evidence upon a showing of “bad faith” or “bad conduct.”
For the spoliator to have a culpable state of mind, it must act with fraudulent intent and a desire to suppress the truth. Such a state of mind is not present where the destruction is a matter of routine or where employees have simply deleted emails b/c they had no legitimate business reason. When evidence is destroyed in bad faith, that fact alone is sufficient to demonstrate relevance. However, when the destruction is negligent, relevance must be proven by the party seeking sanctions. Some jurisdictions outside of the 5th Cir. merely require a “gross negligence standard, rather than the “bad faith” standard. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La).

Case Blurb: Ed Donnelly Ents., Inc.; Relationship between adverse inference instruction and records practices examined

Plaintiff’s perception of the deficiencies of defendants’ electronic record-keeping is irrelevant to the request for an adverse inference instruction for the intentional loss or destruction of records after defendants received notice of this litigation and is not a basis for inferring that defendants intentionally lost or destroyed [the document] at issue. O’Brien v. Ed Donnelly Ents., Inc., 2006 WL 2583327 (S.D. Ohio).

Case Blurb: Ed Donnelly Ents., Inc.; Denying request for Adverse Inference Instruction

Plaintiffs request for an adverse inference instruction based on defendant’s failure to produce evidence was denied by the court because the destruction of evidence made before notice of litigation did not provide the court with any foundation to infer that the missing evidence was adverse to defendant. O’Brien v. Ed Donnelly Ents., Inc., 2006 WL 2583327 (S.D. Ohio) (citing Joostberns v. United Parcel Servs., Inc., 166 Fed. Appx. 783, 796 (6th Cir. 2006)).

Case Blurb: Alcoa, Inc.; Appropriate situations for issuance of an Adverse Inference Instruction

Typically, the giving of an adverse inference instruction has been upheld where the facts of the case are extreme, such as where the destroyed evidence was the very automobile that was the subject of the products liability action. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La) (citing Concord Boat Corp. V. Brunswick Corp., 1997 WL 33352759 (E.D.Ark. 1997) citing Dillon v. Nissan Motor Co., 986 F.2d 263 (8th Cir. 1993)).

Case Blurb: Alcoa, Inc.; Issuance of Adverse Inference Instruction often ends the litigation

The court in Zubulake pointed out that the giving of an adverse inference instruction often terminates the litigation in that it is “too difficult a hurdle” for the spoliating party to overcome. The court therefore concluded that the adverse inference instruction is an “extreme” sanction that should “not be given lightly.” Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La) (citing Morris v. Union Pacific R. R., 373 F.3d 896, 900 (8th Cir.2004)).

Case Blurb: Phoenix Four; Imposition of adverse inference discretionary

Even if the elements for imposition of an adverse inference instruction have been established, the court has the discretion to impose lighter sanctions. See Phoenix Four, Inc. v. Strategic Resources Corp., 2006 WL 1409413 (S.D.N.Y 2006).

Case Blurb: Alcoa, Inc.; Effect of an adverse inference instruction

Imposition of an adverse inference instruction has been recognized as a powerful tool in a jury trial since, when imposed, it basically brands one party as a bad actor, guilty of destroying evidence that it should have retained for use by the jury. Consolidated Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D.La) (citing Morris v. Union Pacific R. R., 373 F.3d 896, 900 (8th Cir.2004)).