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Magistrate Recommends Adverse Inference Instruction as Sanction for Defendant’s Negligent Failure to Institute Litigation Hold

Posted in CASE SUMMARIES

DaimlerChrysler Motors v. Bill Davis Racing, Inc., 2005 WL 3502172 (E.D. Mich. Dec. 22, 2005)

Plaintiff sought sanctions for defendant’s failure to preserve evidence, and the matter was referred to a magistrate for hearing and determination. Defendant asserted that email messages were lost by reason of a preexisting feature of its computer system. Defendant explained that its computer system was set up to delete both internal and external email messages automatically, unless affirmative efforts were taken to preserve them. It further showed that such messages, once deleted, were not subject to retrieval by the defendant or by its computer support company.

The magistrate stated that such normal procedures for destruction of documents must be suspended when a party is on notice that they may be relevant to litigation. He further stated that the failure to make an adequate search of such documents before their destruction may be evidence of bad faith. The magistrate was “particularly concerned” about the loss of messages to and from a key player who testified that he was never asked about certain relevant correspondence, even after the lawsuit. The key player also confirmed that no efforts had been made to preserve or retrieve emails deleted from defendant’s computer system. The magistrate stated he was also concerned that email exchanged internally by defendant’s employees and relating to the contract at issue were not preserved. He noted that defendant’s office manager had “substantial training and experience in data processing technology,” but that it appeared that no effort was made to retain computer data.

Although the magistrate was not persuaded that defendant’s failure to preserve electronic data was the result of bad faith, he concluded that a sanction was appropriate. “Even the negligent destruction of evidence is prejudicial to an opposing party, and undermines the legal process.” The magistrate found that an appropriate sanction would be: a) an order allowing plaintiff to present evidence of the defendant’s failure to preserve electronic data; b) an instruction to the jury that it may presume, based upon the spoliation, that the evidence destroyed would have been favorable to plaintiff; and c) an order permitting counsel for DaimlerChrysler Motors to argue in favor of the negative inference. The magistrate also recommended that plaintiff recover its reasonable attorneys’ fees and costs associated with the motion for sanctions.