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Spoliation — Definition and Bad Faith Requirement in the Third Circuit

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Peterson v. Att’y Gen. Penn., 2014 U.S. App. LEXIS 245 (3d Cir. Jan. 7, 2014):

Anita Peterson ("Appellant" or "Plaintiff") brought an action against Pennsylvania state officials ("Appellees" or "Defendants") alleging violation of her constitutional rights. ***

An investigation by the Monroe County District Attorney's Office of potential mortgage fraud resulted in a subpoena being issued to Peterson and her business, Mountain Valley Abstract, Inc. ("Mountain Valley"). During the investigation, Special Agent Kevin Colgan learned that figures listed on the HUD-1 settlement statements did not match the check issued at the closing. Peterson stated during her grand jury testimony that she never received payment from P&K Developers, but further investigation established that a check issued by P&K Developers was paid to the order of Mountain Valley.

Peterson was initially charged in a Pennsylvania state court with nineteen criminal counts including perjury, false swearing, tampering with public information or records, and hindering apprehension or prosecution. Eleven counts were dismissed by the presiding judge at trial. A jury acquitted Peterson on two counts, and was unable to reach a verdict as to the remaining six counts. Defendants again prosecuted Peterson on three of the remaining counts, none of which resulted in a conviction.

Following her acquittal, Peterson commenced the present action against several Commonwealth of Pennsylvania employees and a private citizen. ***

A. Spoliation

Peterson contends that the District Court erred in denying her Motion for Sanctions. Peterson alleges spoliation by documenting the litany of failed attempts to obtain a transcript of Agent Colgan's grand jury testimony. Sanctions for spoliation of evidence are reviewed for an abuse of discretion. See In re Hechinger Inv. Co. of Delaware, Inc., 489 F.3d 568, 574 (3d Cir. 2007).

Spoliation occurs where "the evidence was in the party's control; the evidence is relevant to the claims or defenses in the case; there has been actual suppression or withholding of evidence; and, the duty to preserve the evidence was reasonably foreseeable to the party." Bull v. United Parcel Serv., Inc., 665 F.3d 68, 73 (3d Cir. 2012).< While Peterson has demonstrated to our satisfaction that the relevant evidence was not produced, she does not come close to showing the bad faith necessary to support a claim for spoliation. Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326 (3d Cir. 1995), and Bull v. United Parcel Serv., Inc., 665 F.3d 68 (3d Cir. 2012), are instructive here. In Brewer, we determined that "[n]o unfavorable inference arises when the circumstances indicate that the document or article in question has been lost or accidentally destroyed . . . ." Brewer, 72 F.3d at 334. In Bull, we further observed that "a finding of bad faith is pivotal to a spoliation determination." 665 F.3d at 79. "This only makes sense, since spoliation of documents that are merely withheld, but not destroyed,  requires evidence that the documents are actually withheld, rather than--for instance--misplaced." Id.

Therefore, we find no abuse of discretion in the District Court's conclusion that Defendants could not be sanctioned for spoliation.

 

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Criminal Spoliation Can Be A Due Process Violation — Defendant Must Show That (1) The Evidence Had Exculpatory Value Before It Was Destroyed, (2) Defendant Is Unable to Obtain Comparable Evidence by Reasonable Means, and (3) Bad Faith Failure to Preserve

1) Rule 11 Sanctions: “No First Amendment Exception to a Rule 11 Violation” — “[T]he First Amendment Covers Novel, Nonfrivolous Arguments, But Many Frivolous Arguments Are Also Novel” (Good Quotes) — Frivolous To Continue To Make Rejected Novel Arguments; (2) FRAP 38 Sanctions: District Court In Best Position to Set Sanctions, Attorney’s Fees and Costs

3 Prerequisites for Inherent Power and § 1927 Sanctions in Second Circuit: (1) Bad Faith, (2) Conduct That Is Entirely Without Color [Thus, An Ill-Motivated Colorable Position Appears to Be Protected in the Second Circuit], and (3) Improper Purpose— “To Gain A Strategic Advantage” Is An Improper Purpose — Due Process Satisfied by Opponent’s Motion and Multiple Court Conferences, After Which Target Was Allowed to Submit Additional Letters

Inherent Power Sanctions — Untimeliness as Laches — Laches Properly Applied to Deny Sanctions Motion — Note Waived Defenses to Laches

Rule 37(c)(1) Sanctions: Substantial Justification or Harmless Error (Ninth Circuit Factors) — Erie: When State Supreme Court Has Not Squarely Addressed an Issue, Circuit Must Predict How It Would Rule, Using Intermediate Appellate Decisions, Decisions from Other Jurisdictions, Statutes, Treatises And Restatements for Guidance

(1) Appellate Review of Inherent Power Sanctions (7th Circuit): Factual Findings Reviewed for Clear Error, Choice of Sanction for Abuse of Discretion — 4-Element Test for Reversal; (2) Sanctions and Class Actions: Monetary Sanctions Properly Imposed on Defendants for Improper Communications with Class Members (Represented Parties) — “[I]f The Class And The Class Opponent Are Involved In An Ongoing Business Relationship, Communications From The Class Opponent To The Class May Be Coercive” (Good Quote); (3) Monetary Sanctions under Goodyear v. Haeger: If Same Fact-Gathering Would Have Been Conducted Absent The Misconduct, No But-For Causation — But Only “Rough Justice” Required, “Not Accountant-Like Precision” (Good Quote) — Once Misconduct Is Clear, Time Spent Ferreting It Out Compensable under Goodyear; (4) Goodyear Did Not Overrule Long-Standing Rule That Courts May Impose Modest Civil Monetary Sanctions to Curb Litigation Abuse; (5) Appellate Jurisdiction Lacking Where Sanctioned Attorney Fails to File Notice of Appeal and Lawyer’s Intent to Appeal Not Apparent from Client’s Notice; (5) Rule 11 Improper Purpose — Party May Have Many Purposes for Pursuing Claim — As Long As Claim Is Supported by Good Faith Belief in the Merits, “A Parallel Reason Does Not Violate Rule 11” — To Deny A Motion for Sanctions, The District Court Need Not Address Every Argument: “Arguments Clearly Without Merit Can, And For The Sake Of Judicial Economy Should, Be Passed Over In Silence” (Good Quote); Non-Monetary Sanction on Counsel: Complete Twice The Required Amount Of Professional Responsibility Hours For Her Next Continuing Legal Education Cycle Imposed By The State Bar

(1) Spoliation: Sanctions Are Warranted Only If the Movant Establishes That A Reasonable Trier of Fact Could Find That The Destroyed Evidence Would Support A Claim Or Defense — § 1927 Sanctions: “Courts Often Refuse to Award Sanctions When Both Parties Contributed to the Waste of Judicial Resources” (Good Quote)

No Sanctions Imposed on Counsel Who Submitted A.I.-Generated Phony Cases Without Checking Them in Good Faith on The Mistaken Assumption They Had Been Provided by Highly Respected Co-Counsel Rather Than His Criminally-Convicted, Disbarred Client — No Sanctions on Client Who Had No Access to LEXIS or Westlaw to Check the Phony Cases and Submitted Them in Good Faith: “It Would Have Been Downright Irrational For Him To Provide Fake Cases For [His Lawyer] To Include In The Motion Knowing They Were Fake —

(1) Electronic Spoliation — Rule 37(e)(2) Dismissal Sanction — Temporal Proximity of Spoliation to Production Due Date = Circumstantial Evidence of Intent; (2) While Discovery Sanctions Are Reviewed For Abuse Of Discretion, Findings Of Fact Related To Discovery Sanctions Are Reviewed For Clear Error; (3) Dismissal under Rule 37(e)(2) Plus Attorney’s Fees under Inherent Power Appropriately Combined [But see 2015 Advisory Committee Note: “New Rule 37(e) … authorizes and specifies measures a court may employ if information that should have been preserved is lost, and specifies the findings necessary to justify these measures. forecloses reliance on inherent authority or state law to determine when certain measures should be used.”]; (4) Compensatory Sanctions under Goodyear v. Haeger Appropriately Include Fees and Costs Resulting from Attempts to Settle Spoliation Motion

(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

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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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