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Before Receiving Spoliation Sanctions, a Party Must Demonstrate Prejudice

In a recent decision, Magistrate Judge Ivan D. Davis of the U.S. District Court for the Eastern District of Virginia denied a spoliation motion aimed at a corporate defendant using a new formulation of necessary legal elements.  In Professional Massage Training Center, Inc. v. Accreditation Alliance of Career Schools and Colleges, 1:12-cv-00911, the plaintiff argued that a telephone call from the plaintiff’s lawyer nine months prior to the filing of the Complaint triggered the defendant’s duty to suspend its regular document retention policy and institute a litigation hold.  After a full-day evidentiary hearing, including expert witness testimony, Judge Davis rejected this argument and instead noted that a mere “conditional threat of litigation” expressed over the telephone, coupled with the plaintiff’s failure to send a written litigation hold letter to the defendant, did not put the defendant on notice of potential litigation.

Judge Davis’s opinion is a useful reminder to practitioners:  Send a written litigation hold letter after any telephone conversation if you anticipate asserting a spoliation claim down the road.  While what is said during a telephone call can be disputed and is subject to the vagaries of memory, a written letter is definite and inexpensive.  (Of course, be careful that your own client has properly initiated its own litigation hold before you announce that “litigation is reasonably anticipated.”).

Judge Davis’s opinion is also noteworthy for his legal analysis.  In addition to finding that the defendant had no duty to initiate a litigation hold prior to receiving the complaint, Judge Davis made the alternate finding that the plaintiff suffered no prejudice from the operation of the defendant’s document retention policy.  While the opinion does not expressly say so, it appears that Judge Davis followed the reasoning of Judge Paul Grimm, a leading e-Discovery jurist from the Federal trial bench in Maryland, and his influential opinion in Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.d. 497 (D. Md. 2010).  In that case, Judge Grimm set forth three elements necessary to warrant spoliation sanctions: 1) a triggered duty to preserve documents or evidence, 2) destruction of relevant evidence accompanied by a “culpable state of mind,” and 3) prejudice resulting to the other party.

This is a subtle yet significant extension (or perhaps modification) of the Fourth Circuit’s controlling spoliation case law, Silvestri v. Gen. Motors Corp., 271 F.3d 583 (4th Cir. 2001).  Silvestri is nearly 13 years old, and the case did not involve the destruction of electronic or digital evidence.  Further, Silvestri states that spoliation sanctions could be ordered under two alternative situations: either that the spoliator’s conduct was sufficiently egregious or the effect of the spoliator’s conduct was sufficiently prejudicial.  Contrast that with Victor Stanley where a party must show all three elements (including prejudice) to warrant an order of spoliation sanctions.  In today’s modern e-Discovery era, Victor Stanley offers better guidance for practitioners than Silvestri, and it appears that Judge Davis finds Victor Stanley persuasive and useful in the e-discovery context.

Spoliation claims against institutional or corporate defendants are becoming more frequent, especially in high-stakes, aggressive litigation.  It is easy to see why:  a successful spoliation motion that leads to an adverse inference jury instruction can be a death knell for a corporate defendant.  It is critical for plaintiff’s counsel to adequately prepare for future spoliation claims through litigation hold letters and early Rule 30(b)(6) depositions of corporate representatives.  On the flip-side, defense counsel should argue the Victor Stanley three-element requirement when defending against spoliation claims.

A copy of Judge Davis’s opinion is available here.

Disclosure:  Redmon, Peyton & Braswell, LLP served as counsel of record for Defendant Accreditation Alliance of Career Schools and Colleges in this case.