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Spoliation, Inherent Power and Rule 37

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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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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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