Considerations of Spoliation of Evidence

CONSIDERATIONS OF SPOLIATION OF EVIDENCE IN THE CONTEXT OF CORPORATE ELECTRONIC DATA SYSTEMS

Outline of Remarks and Authorities Before the 17th Annual Institute for Corporate Counsel March 12, 1998

John W. Cochrane Law Offices of John W. Cochrane 5 Park Plaza, Suite 1500 Irvine, California

1 1. The World is Technically Different Now than it was Before...

The question, ultimately, is whether “business as usual” still works. While there are innumerable problems presented by what is in the computers and what can be pulled up even though believed “gone,” another and perhaps equally serious problem is presented by corporate failure to address the interaction between what is “piling up in the computers” and how one abides the longstanding obligation to avoid the destruction of evidence in litigation. The twenty- plus years of development of the tort of spoliation of evidence must be considered in connection with the practical headaches created by the ability of computers cheaply to store massive amounts of information. The interplay between these two principles creates a tension which cautions the attention of counsel; this article does not suggest that the two principles are mutually exclusive, but rather that they must fairly be addressed and that rational, non-malevolent compromises can and should be put in place to address the legitimate concerns of both the legal system and an effective business operation.

II. The Law is Relatively the Same — Destruction of Evidence can have Ramifications

A. California Penal Code §135: “ Every person who, knowing that any book, paper, record, instrument in writing, or other matter or thing, is about to be produced in evidence upon any trial, inquiry, or investigation whatever, authorized by law, willfully destroys or conceals the same, with intent thereby to prevent it from being produced, is guilty of a misdemeanor.” [Enacted 1872]

2. Tort Liability for Spoliation of Evidence: 1. "Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence, in pending or future litigation." Willard v. Caterpillar, Inc. (1995) 40 Cal.App.4th 892, 907. See, generally, Bandman & Du Nesme, Recent Developments in the Area of Spoliation of Evidence, in Civil Practice and Litigation in Federal and State Courts 463 (ALI-ABA July 1997). 2. The seminal case, Smith v. Superior Court (1984) 151 Cal.App.3d 491,

2 adopted the tort in the context of a car dealer who “lost” parts that the dealer had promised to save for litigation following an accident, thus impairing the plaintiff’s protected “opportunity to recover damages for her injuries.” Willard, 40 Cal.App.4th at 908. 3. California Jury Instructions (BAJI 7.95 and 7.96) provide:

INTENTIONAL SPOLIATION NEGLIGENT SPOLIATION “The plaintiff ______[also] seeks to recover “The plaintiff ______[also] seeks to recover damages based upon a claim of intentional damages based upon a claim of negligent spoliation of evidence. spoliation of evidence. The elements of such a claim are: The elements of such a claim are: 1. Plaintiff possessed a [potential defense to a] 1. Plaintiff possessed a [potential defense to a] claim for damages [against] [by] ______claim for damages [against] [by] ______(defendant, third party); (defendant, third party); 2. Defendant knew of the existence of this 2. Defendant knew or reasonably should have [defense to a] claim for damages [against] [by] known of this [potential defense to a] claim for ______(itself, third party) damages [against] [by] ______(itself, third 3. Defendant knew of the existence of party); ______(writing, record, physical object, 3. Defendant knew or reasonably should have etc.) and was aware that it might constitute known of the existence of ______(writing, evidence in [pending] [or] [potential] civil record, physical object, etc.) and knew or litigation involving plaintiff; reasonably should have known that it might 4. Defendant engaged in acts or conduct constitute evidence in [pending] [or] [potential] intended to cause the destruction, damage, loss or litigation involving plaintiff [or other persons]; concealment of the ______(writing, record, 4. Defendant knew or reasonably should have physical object, etc.); known that if [he] [she] [it] did not act with 5. Defendant's acts or conduct caused the reasonable care to preserve the ______destruction, damage, loss or concealment of the (writing, record, physical object, etc.), the potential evidence; and potential evidence could be destroyed, damaged, 6. As a result, plaintiff sustained damage, lost or concealed; namely plaintiff's opportunity to prove its [claim] 5. Defendant failed to act with reasonable care; [defense] was interfered with substantially.” 6. Defendant's failure to act with reasonable BAJI 7.95 care caused the destruction, damage to, loss or concealment of such evidence; 7. As a result, plaintiff sustained damage, namely plaintiff's opportunity to prove its [claim] [defense] was interfered with substantially.” BAJI 7.96

3 C. Evidentiary and Trial Considerations of Destruction of Evidence: 1. A Presumption that Materials were Favorable to Adversary. "Courts cannot reliably determine what documents would have proved when the documents themselves have been destroyed. Therefore, not to assume some prejudice would allow the spoliation to do double duty -- to destroy the evidence needed for trial and to short circuit the imposition of sanctions for the destruction." Gorelick, Marzen & Solum, Destruction of Evidence § 3.17 at 128 (Wiley Ed. 1989)[citations omitted].

2. California Jury Instructions (BAJI 2.03 and 2.02) provide:

“If you find that a party wilfully suppressed “If weaker and less satisfactory evidence is evidence to prevent its being presented in this offered by a party, when it was within his power trial, you may consider that fact in determining what inferences to be drawn from the evidence.” to produce stronger and more satisfactory BAJI 2.03 evidence, the evidence should be viewed with distrust.”[1] BAJI 2.02

4. The Potential Scope of Liability and its Potential Limitations: 1. The (Familiar) Absence of Definitive Standards of Liability. Liability is not unlimited but is, instead, evaluated “along a continuum of fault — ranging from innocent through the degrees of negligence to intentional misconduct.” Willard v. Caterpillar, Inc. (1995) 40 Cal.App.4th at 907. The Willard opinion explores the policy underpinnings of tort law and seeks to apply them to concepts of both intentional and negligent destruction of evidence, recognizing concepts such as the independent utility of the actor’s conduct, the impact of actual knowledge or foreseeability of the evidence’s use to somebody, the degree of harm caused, the actor’s conduct itself and the actor’s motives. In

1This assumes that such “lesser” evidence has been admitted. But see Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107 (S.D. Fla. 1987)(court applied Best Evidence Rule to preclude introduction of copies to rebut presumption of prejudice from destruction of originals, then entered defendant’s default).

4 short, Willard neither articulates a “bright line” test applicable in all circumstances, nor does it foreclose reasonable, if nonetheless subjective, defenses. Cases reflect this approach: 1. In Willard itself, the court ultimately held that Caterpillar’s act of destroying, in 1979, testing documentation pertaining to a 1955 model of tractor which was later (in 1990) involved in the subject accident, should not give rise to liability for intentional spoliation even though some proof was presented that the 1979 purge was in part to avoid uncertain and inchoate, but possible, liability claims. 2. In Gomez v. Acquistapace (1996) 50 Cal.App.4th 740, the court reversed a summary judgment and reinstated spoliation of evidence claims against an employer who had destroyed a post-hole digger involved in the death of an employee. The plaintiff widow’s claims against the manufacturer of the tool were thereby compromised, and the court held that (a) triable issues of fact existed with respect to the employer’s “intent” and (b) the tort of negligent spoliation is not preempted by the Workers Compensation laws. 3. The California Supreme Court is considering issues pertaining to tortious spoliation of evidence in Cedars- Sinai Med. Center v. Superior Court, S04896, argued February 11, 1998; see Mitchell, Justices Weigh Future of Spoliation Tort, The Recorder, Feb. 12, 1998.

2. The Element of “Intent” in Intentional Spoliation: “ The intent element of intentional spoliation of evidence is satisfied when the defendant destroys an object which might constitute evidence in a lawsuit, (1) with the purpose of harming

5 the lawsuit, or (2) when harm to the lawsuit is substantially certain to follow.” Gomez v. Acquistapace (1996) 50 Cal.App.4th 740, 747.

3. Degrees of Responsibility Do and Should Differ in Different Circumstances:

a. Litigants Destroying Evidence Face Greatest Risks: "Coca-Cola also urged, at oral argument, that as the owner of the truck it had an unfettered right to dispose of the truck without notice to anyone else and with total immunity from any liability for such disposal. This argument ignores the fact that Coca-Cola, as a complainant in intervention, was a party litigant, with a duty not to lose or destroy evidence relevant to the lawsuit." Coca Cola Bottling Co. v. Superior Court (1991) 233 Cal.App.3d 1273, 1293n.10.

2. Actual Agreement or Knowledge of Claims: Although the seminal case, Smith, involved facts of a specific agreement to preserve evidence, “[t]ort liability, of course, is nonconsensual. Any expectations created by such liability have no relationship to voluntary undertakings. Smith should not be limited to cases in which custodians of potentially relevant evidence agree to preserve the matter until trial.” Gorelick, Marzen & Solum, Destruction of Evidence §4.16 (Wiley Ed. 1989); see also, S. Nolte, The Spoliation Tort: An Approach to Underlying Principles, 26 St. Marys L.J. 351, 372n.100 (1995)(collecting cases recognizing duty upon litigant to preserve evidence once on notice or litigation is imminent).

6 3. No Case or Law Requires Omniscience: While it is well beyond the scope of this outline to address retention requirements under other principles or rules, it seems safe to say — as Willard confirms — that there is no “spoliation- related” requirement which compels all businesses to retain all records, whether computer-generated or otherwise, indefinitely.

III. Dealing with Spoliation Exposure in the Computerized World.

1. Electronic Data is Discoverable: 1. Both Federal Rule of Evidence 1001(1) and California Evidence Code §250 include electronic data in their definitions of “evidence”. Federal Rule of Civil Procedure 26 includes “data compilations” within those materials which must be disclosed in litigation and Rule 34 specifically authorizes document requests seeking “data compilations from which information can be obtained, translated, if necessary, by the respondent through detection devices into reasonably usable form;” Section 2031(f) (1) of the California Code of Civil Procedure similarly obligates production of electronic data in “reasonably usable form.” 2. There is precious little latitude to argue today that electronic data is somehow either “not evidence,” “not discoverable,” or is categorically “off limits.”

B. If it is “Evidence,” if it is “Discoverable,” and if There is a Tort Out There Called “Spoliation of Evidence,” There Will be Meetings in the Courtroom: 1. Shaw v. Hughes Aircraft Company. 2. Other cases and commentary involving such issues are legion and some is not particularly new. E.g., Pechette, Electronic Records are Discoverable in Litigation, National Law Journal C-8, col. 1 (June 27, 1994); Kashi, How to Conduct Electronic Media Discovery, The Practical Litigator (ALI-ABA, Nov.

7 1996); Leibowitz, E-Evidence Demands New Expert, National Law Journal A-1 (March 9, 1998); Wycliff, Discovery Problems in a Digital World, New Jersey Law Journal (Jan. 12, 1998).

3. The Apparent Key to Postulating Viable Solutions Lies in Understanding the Problems, for the Problems are Not Going to Just Go Away. 1. What if you were considering paper? 2. How does the Company’s data system(s) work? Do you know what happens to things on your network or even your employees’ computer workstations? 3. Is there a system for responding to demands for retention of evidence and is it applied to electronic data, too? Do you know whether electronic data is backed up and, if so, how? Who does? 4. If somebody sends a “notice to produce the Company’s person most knowledgeable concerning electronic data retention practices” (see Exhibit A hereto), do you understand it? 5. When able to answer these questions, then a Company and its counsel may be positioned to address the question of whether something should be produced in response to a discovery demand. 6. Nobody is obligated to simply save everything forever. Neither, however, does anybody have the right to presume that absolutely anything can simply be thrown out, regardless of the circumstances and without consideration of the rights of interested entities. Somewhere between these polar opposites, reasonable policies can — and indeed must — be attempted.