How does a Court decide to issue sanctions when “lost” evidence has been recovered?

When Does Rule 37(E) Not Apply?

Author: Rachel Smith
Case Citation: Hsueh v. N.Y. State Dep’t of Fin. Servs., 2017 U.S. Dist. LEXIS 49568 (S.D.N.Y. Mar. 31,
2017)
Employee/Personnel/Employer Implicated: Employee
eLesson Learned: The Court does not recognize the protection of Rule 37(e) when a party acts with the intent to deprive its adversary of the use of evidence. When a party acts in bad faith with the intent to deprive, the Court has made it clear that an adverse inference will, in fact, be appropriate.

The Court does not recognize the protection of Rule 37(e) when a party acts with the intent to deprive its adversary of the use of evidence. When a party acts in bad faith with the intent to deprive, the Court has made it clear that an adverse inference will, in fact, be appropriate.

In this case, originally a case about sexual harassment at the workplace, the Court expressed its disfavor for a party’s intentional withholding, and destruction of evidence, and therefore found that an adverse inference was an appropriate remedy. The Plaintiff’s false statements and intentional deletion of a recorded conversation with a human resources employee resulted in sanctions, even though the deleted conversation was recovered. The Court found that Rule 37(e) did not apply to this case, because it only applies when ‘a party failed to take reasonable steps to preserve’ ESI; not to situations where, as here, a party intentionally deleted the recording”. The Court used this reasoning as the basis for issuing the spoliation sanctions upon the Plaintiff.

The Plaintiff’s story continually changed, specifically surrounding the conversations she had with an HR representative as the case progressed. It was not until the Plaintiff was deposed a second time that she admitted to possibly having recorded one of those conversations. Plaintiff stated that she had deleted the recording due to its poor quality, and therefore “not worth keeping”. Because of this, the Defendant requested spoliation sanctions to be imposed upon the Plaintiff. Miraculously, Plaintiff was able to locate the recorded conversation with the HR representative, stating her husband was able to recover it off of a hard drive. The Defendant continued to seek spoliation sanctions against Plaintiff, because there was no convincing evidence that the recording was fully intact.

The Defendant falsely claimed that the recording was not ESI, but the Court did not buy it. The Court did, however, agree with Defendant that Rule 37(e) did not apply to this case.

These considerations are not applicable here. It was not because Hsueh had improper systems in place to prevent the loss of the recording that the recording no longer existed on her computer; it was because she took specific action to delete it. The Court, therefore, concludes that Rule 37(e) does not apply.

Being that the Court could not rely on Rule 37(e), it stated that it could rely on its inherent power. While the Plaintiff argued that sanctions should not be imposed because the recording was restored, the Court rejected that argument stating several reasons sanctions were appropriate. These included that the recording cut off mid-sentence and that there was no way to be sure that the recording was in fact in its entirety.

The Plaintiff had the obligation to preserve any ESI in anticipation of trial, especially because she was the one to bring the trial, and therefore it could have easily been anticipated. This fact coupled with her failure to be truthful lead the Court to issue spoliation sanctions, along with an adverse inference. This is primarily because the Court found that the Plaintiff was intentionally depriving the Defendant of the recording. The Court subsequently ordered attorney’s fees to be paid by the Plaintiff along with the costs incurred in reopening discovery.

Rachel Smith, is a Seton Hall University School of Law student, Class of 2018. She received her B.A in Women’s and Gender Studies from Rutgers University in 2010.

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