Wednesday, April 28, 2010

Spoliation of Evidence and Adverse Inference Instructions in Administrative Proceedings

A colleague recently posed the following question (paraphrased below) on a listserv that I subscribe to:

Where a party, under a state administrative investigation, is served with a subpoena by the state attorney general’s office, and that party then proceeds to destroy evidence notwithstanding the subpoena, is there any authority to support an order of civil remedies / penalties against that party, aside from the obvious potential for monetary sanctions – for example, an adverse inference instruction?

While I had already done some research on this issue in the past, the question piqued my curiosity enough that I decided to research the issue a little further. I first posed the above question to a respected friend and colleague. His off-the-cuff take on the issue was:

The spoliation doctrine stems from the violation of a common law duty owed TO THE COURT to preserve evidence needed to resolve a foreseeable legal dispute. It is a specific duty owed not to a litigant, but to the court, and the sanction of adverse inference (or any other sanction) is derived from the court’s inherent authority, or from procedural rules such as Fed. R. Civ. P. 37… [But], I do not recall any cases saying that an administrative tribunal has ‘inherent authority’ to sanction in connection with its proceedings. I also wonder whether, absent a statutory or administrative duty to preserve records (like the EEOC requirement for preserving employment records) there can be any legally enforceable ‘obligation to preserve’ evidence that might be relevant to a foreseeable admin proceeding.

I proceeded to consult my existing research on the issue, and to research the issue a bit further on my own.

In the context of traditional civil litigation, there are a slew of opinions to support the proposition that a court can order an adverse inference jury instruction and/or monetary sanctions against a party who orders or negligently allows spoliation of evidence, after that party has been put on reasonable notice of a potential legal dispute. See, e.g.:

Rimkus Consulting Group, Inc. v. Cammarata, 2010 U.S. Dist. LEXIS 14573 (S.D. Tex. Feb. 19, 2010) (ordering an adverse inference instruction where there was evidence substantiating that former employees intentionally deleted some relevant electronic communications after there was a duty to preserve them, even where the former employer was not significantly prejudiced because it had sufficient evidence to support its claims);
Southeastern Mech. Serv., Inc. v. Brody, 657 F. Supp. 2d 1293 (M.D. Fla. Aug. 31, 2009) (ordering an adverse inference instruction for spoliation of data on handheld devices);
KCH Serv., Inc. v. Vanaire, Inc., 2009 U.S. Cist. LEXIS 62993 (W.D. Ky July 22, 2009) (granting adverse inference instruction against party who failed to adequately preserve electronic and other evidence);
Arteria Prop. Pty Ltd. v. Universal Funding V.T.O., Inc., 2008 U.S. Dist. LEXIS 77199 (D.N.J. Oct. 1, 2008) (granting an adverse inference for failure to preserve a website, finding “no reason to treat websites differently than other electronic files”);
Optowave Co., Ltd. v. Nikitin, 2006 U.S. Dist. LEXIS 81345 (granting adverse inference jury instruction for destruction of internal e-mails prior to litigation);
In re Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060 (N.D. Cal. Oct. 25, 2006) (deletion of email evidence led to adverse inference instruction and monetary sanctions, but not default judgment).

And, there are just as many cases in the civil litigation context where courts have, for various reasons, denied motions requesting that such sanctions be imposed. See, e.g.:

Scalera v. Electrograph Sys., Inc., 262 F.R.D. 162 (E.D.N.Y. Sept. 29, 2009) (despite finding that the defendants had “unquestionably breached a duty to preserve emails”, denying plaintiff’s motion for an adverse inference instruction absent evidence that the destroyed emails would have been favorable to plaintiff’s position); and
ACORN v. County of Nassau, 2009 U.S. Dist. LEXIS 19459 (E.D.N.Y. Mar. 9, 2009) (despite finding that defendant was grossly negligent for failing to implement a litigation hold, denying plaintiff’s motion for an adverse inference instruction because plaintiff failed to establish the relevance of the information destroyed).

For over 100 various legal blog posts on this subject in general, see this search result from’s “Blawg Search” function. (And by the way, in case you have never used it, I have found “Blawg Search” to be an invaluable tool for supplementing my traditional legal research).

But more to the heart of the specific question at hand – my research also revealed a number of cases where adverse inference instructions and similar remedies have been imposed for spoliation of evidence leading up to or during the course of administrative proceedings. As my esteemed colleague had anticipated, most of these cases arose in a context where the relevant governing administrative statute explicitly allows for such remedies, but the cases I found are nevertheless instructive. See, e.g.:

In the Matter of Deutsche Bank Securities, Inc., Exchange Act Release No. 46,937, Administrative Proceeding File No. 3-10957 (Dec. 3, 2002) (SEC fined brokerage firms in an administrative proceeding, under the Securities Exchange Act of 1934, for failing to preserve internal e-mail communications);
Gennetten v. Navy, EEOC No. 01973098 (1999) (holding that adverse inference should have been drawn against the agency for its failure to maintain selection documents; and thus finding that the agency had discriminated against the complainant and ordering that complainant be retroactively placed in his position).

However, there have also been administrative cases where the ordinary spoliation rules have been held to not apply. See, e.g.:

Yao v. Board of Regents, 256 Wis. 2d 941 (Ct. App. 2002) (holding that the relevant state statute does not bind state administrative agencies to the “common law or statutory rules of evidence”, and therefore the doctrine of spoliation does not apply to state administrative proceedings).

As indicated above, I find this to be a fascinating topic. As such, if readers have any additional comments, case law, etc. on this subject, I would thoroughly welcome any such feedback.

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