e-Lessons Learned

Defendant Maxxam was accused of willfully destroying evidence that the government claimed would have aided its case.  The government alleged that Maxxam, a lumber company, fraudulently prepared a report that overstated the minimum amount of trees it could safely cut down while remaining economically viable.  The government further alleged that VESTRA, a consultant retained by Maxxam’s law firm, willful destroyed key data used in this report.

A litigant can be sanctioned for destroying evidence that it knew or should have known could be relevant to pending or potential litigation. Thus, the duty to preserve relevant evidence can arise even before the commencement of litigation. Furthermore, such destruction need not be in bad faith in order for sanctions to be appropriate.  There simply must be a finding of fault.

Additionally, a party that engages in the “willful spoliation” of evidence can be sanctioned if that evidence would have been relevant to litigation or potential litigation, or was reasonably calculated to lead to the discovery of admissible evidence.

A party liable for spoliation is subject to an array of sanctions.  First, a court can give an adverse inference jury instruction that allows the jury to infer that the evidence destroyed would have been unfavorable to the liable party.  Second, “a court can exclude witness testimony based upon the spoliated evidence.”  Third, a court can impose the ultimate sanction by dismissing the claim of the party that spoliated the evidence.

When deciding on which sanction is most appropriate, a court should attempt to accomplish the following objectives: “1) penalize those whose conduct may be deemed to warrant such a sanction; 2) deter parties from engaging in the sanctioned conduct; 3) place the risk of an erroneous judgment on the party who wrongfully created the risk; and 4) restore the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party.”

In this case, the court began its analysis by determining that the defendant, Maxxam, could be liable for spoliation even though it wasn’t the party that actually destroyed the evidence.  The court found it to be irrelevant that VESTRA was the party guilty of spoliation in light of the fact that VESTRA was a consultant retained by the law firm that Maxxam had hired to represent it.

Next, the court found that while VESTA had destroyed some potentially relevant evidence, it did so unintentionally.  The court noted that the government failed to present any evidence showing that evidence was intentionally destroyed.  Rather, it found that VESTA had destroyed the evidence in question during its normal course of business while moving to a new office.

The court ultimately declined to issue any sanctions against Maxxam because the government failed to carry its burden in showing that evidence was destroyed after a duty to preserve arose.   Thus, because Maxxam was not under any duty to preserve evidence at the time the VESTA destroyed the documents in question, sanctions were not warranted.

Evan Harris is a third-year law student at Seton Hall University School of Law.  Upon graduation, Evan will serve as a Judicial Law Clark in the Chancery Division-General Equity in Essex County, New Jersey.

Article posted on July 15, 2009 at 12:15 AM |              More... 
Tagged as: Good Faith, Legal Hold/Preservation, Sanctions, Spoliation.
View more articles implicating: Document Custodians, In-House Counsel, Outside Counsel, Owners/Executives
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