Spoliation, Inherent Power and Rule 37

From Gateway Senior Housing, Ltd. v. MMA Financial, Inc., 2008 U.S. Dist. LEXIS 98770 (E.D. Tex. Dec. 4, 2008):

While Rule 37 represents a significant enforcement power to punish discovery misconduct, it does not represent the "universe of potential discovery abuse." Gregory P. Joseph, Sanctions: The Federal Law of Litigation Abuse § 26(E)(3) (4th ed. 2008). "Wrongful destruction or loss of documents or other evidence is conduct of a kind that ordinarily falls outside the scope of Rule . . . 37, but is sanctionable under the court's inherent power." Id.; see Unigard Sec. Ins. Co. v. Lakewood Engineering & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992).

"Spoliation is 'the destruction of evidence . . . or the significant and meaningful alteration of a document or instrument.'" Escobar v. City of Houston, 2007 U.S. Dist. LEXIS 72706, 2007 WL 2900581, No. 04-1945, at *17 (S.D. Tex. Sept. 29, 2007) (quoting Andrade Garcia v. Columbia Med. Ctr., 996 F. Supp. 605, 615 (E.D. Tex. 1998)). When a party with an obligation to retain or preserve evidence fails to do so, and acts with culpability, a district court may impose sanctions. Escobar v. City of Houston, 2007 U.S. Dist. LEXIS 72706, 2007 WL 2900581, No. 04-1945, at *17 (S.D. Tex. Sept. 29, 2007); see generally Zubulake v. UBS Warburg, LLC, 220 F.R.D. 212 (providing a detailed discussion of a party's duty to preserve evidence and the district court's authority to sanction a party for willful spoliation of evidence) (S.D.N.Y. 2003)). "'The obligation to preserve evidence arises when the party has notice that the evidence is relevant to the litigation or when a party should have known that the evidence may be relevant to future litigation.'" Escobar v. City of Houston, 2007 U.S. Dist. LEXIS 72706, 2007 WL 2900581, No. 04-1945, at *17 (S.D. Tex. Sept. 29, 2007) (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. at 216)).

A discretionary adverse inference instruction is the classic sanction for spoliation of evidence. Such instruction "is proper when a party has deliberately destroyed evidence or has failed to either produce relevant evidence or explain its non-production." McMillin v. State Farm Lloyds, 180 S.W.3d 183, 199 (Tex. App.-- Austin 2005) (citing Wal-Mart Stores, Inc. v. Johnson, 106 S.W.3d 718, 721 (Tex. 2003)). A party seeking an adverse inference instruction or other sanction in connection with the destruction of relevant evidence must establish that the party with control over the evidence had a duty to preserve the evidence and that it was destroyed in "bad faith." King v. Ill. Cent. RR. , 337 F.3d 550, 556 (5th Cir. 2003) (citing United States v. Wise, 221 F.3d 140, 156 (5th Cir. 2000)); Zubulake v. UBS Warburg, LLC, 229 F.R.D. 422, 430 (S.D.N.Y. 2004).

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