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Duty to Preserve Evidence: Severe Sanctions for Spoliation of Electronic Data

Parties involved in litigation have a duty to preserve evidence, including electronic data. The U.S. District Court for the Eastern District of Michigan recently ruled that, if electronic data is deleted or destroyed in bad faith, monetary sanctions may be imposed along with an irrefutable adverse inference at trial that the destroyed data contained information that is unfavorable to the culpable party. The irrefutable inference may be immensely damaging to a party's chances at trial because it gives the jury free rein to assume the worst about the evidence that has been "covered up." The jury can use its imagination to assume which documents were destroyed, and the jury may come to the conclusion that a party who destroys evidence may be untrustworthy with respect to other issues in controversy.

In Barrette Outdoor Living, Inc. v. Michigan Resin Representatives, after a defendant received notice to preserve electronically stored information, the defendant returned his old cell phone to his mobile provider, potentially spoiling valuable evidence relevant to the case. To make matters worse, the defendant then deleted approximately 270,000 files from his laptop, following a motion to compel digital imaging of the defendant's laptop. Despite the defendant's claims that the files were personal and irrelevant to the claims in the case, a magistrate judge granted the plaintiff's spoliation motion and penalized the defendant with $25,000 to compensate the plaintiff for the fees and costs associated with bringing the motion and an additional $10,000 for the plaintiff's increased costs for obtaining discovery absent the destroyed evidence. The defendant in this case was an individual, so the monetary sanctions could be even higher for culpable corporations. The defendant was also burdened with the adverse inference, so the jury would receive an instruction at trial to assume that the cell phone and laptop contained information that was unfavorable to the defendant.

When it doubt, play it safe with electronic data and preserve everything once you know a lawsuit is under way. It may be far more difficult to overcome a negative inference at trial than it would be to simply explain the contents of an email or other form of electronic data.

Source: Litigation News, American Bar Association, "Spoliation of Electronic Data Results in Severe Sanctions," Caitlin Haney, November 5, 2013.

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