From Booker v. Mass. Dep’t of Public Health, 2010 U.S. App. LEXIS 14510 (1st Cir. July 15, 2010):

Where a proper evidentiary foundation has been laid, "a trier of fact may (but need not) infer from a party's obliteration of a document relevant to a litigated issue that the contents of the document were unfavorable to that party." Testa v. Wal-Mart Stores, Inc., 144 F.3d 173, 177 (1st Cir. 1998); see also Nation-Wide Check Corp., Inc. v. Forest Hills Distribs., Inc., 692 F.2d 214, 217-218 (1st Cir. 1982) (Breyer, J.). This adverse inference is based in part on the commonsense observation that a party who "destroys a document (or permits it to be destroyed) when facing litigation, knowing the document's relevancy to issues in the case, may well do so out of a sense that the document's contents hurt his position." Testa, 144 F.3d at 177; accord Nation-Wide Check, 692 F.2d at 218. The inference is also based on prophylactic and punitive rationales: it serves to deter litigants from destroying relevant evidence prior to trial and to penalize a party whose misconduct creates the risk of an erroneous judgment. Nation-Wide Check, 692 F.2d at 218.

Before an adverse inference can arise, the sponsor of the inference must lay an evidentiary foundation, proffering evidence sufficient to show that the party who destroyed the document "knew of (a) the claim (that is, the litigation or the potential for litigation), and (b) the document's potential relevance to that claim. Testa, 144 F.3d at 177; see also id. at 178 (noting that adequate foundation depends upon evidence of "institutional notice -- the aggregate knowledge possessed by a party and its agents, servants and employees"). A spoliation instruction is not warranted absent this threshold showing, because the trier of fact would have no basis for inferring that the destruction of documents stemmed from the party's consciousness that the documents would damage his case.

A "trial court's decision to give or refuse an adverse inference instruction is reviewed for an abuse of discretion." Gilbert v. Cosco, 989 F.2d 399, 406 (10th Cir. 1993); see also United States v. St. Michael's Credit Union, 880 F.2d 579, 597 (1st Cir. 1989) (stating that trial court's decision to give or refuse missing witness instruction is committed to its sound discretion).