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Government’s “Reckless Disregard” of Preservation Duty Warrants Spoliation Sanctions

Posted in CASE SUMMARIES

United Med. Supply Co., Inc. v. United States, 77 Fed. Cl. 257 (2007)

In this decision, the United States Court of Federal Claims imposed sanctions against the United States based upon its “reckless disregard of its duty to preserve relevant evidence.”  The court opened its lengthy opinion and order with the following passage:

“One man’s trash is another man’s treasure.”

Aside perhaps from perjury, no act serves to threaten the integrity of the judicial process more than the spoliation of evidence.  Our adversarial process is designed to tolerate human failings – erring judges can be reversed, uncooperative counsel can be shepherded, and recalcitrant witnesses compelled to testify.  But, when critical documents go missing, judges and litigants alike descend into a world of ad hocery and half measures – and our civil justice system suffers.

To guard against this, each party in litigation is solemnly bound to preserve potentially relevant evidence.  In this government contract case, defendant violated that duty not once or twice—but repeatedly, over many years, and in sundry ways, leading to the destruction of many admittedly relevant documents.  Most disturbingly, some of these documents were destroyed even after the court conducted its first spoliation hearing.  While defendant apologizes profusely for what it claims is the “negligence” of some of its employees and for making repeated misstatements to the court as to the steps that were being taken to prevent spoliation, it, nonetheless, asseverates that the court should not—indeed, cannot—impose spoliation sanctions because defendant did not proceed in bad faith.  While defendant may be wrong in asserting that it acted in good faith, it most certainly is wrong in thinking that it can recklessly disregard its obligations to preserve evidence without legal consequence.

(Footnote omitted.)  The court rejected the government’s argument that a showing of bad faith was required before spoliation sanctions could be imposed.  It explained:

Guided by logic and considerable and growing precedent, the court concludes that an injured party need not demonstrate bad faith in order for the court to impose, under its inherent authority, spoliation sanctions.  Several reasons lead to this conclusion.  For one thing, it makes little sense to talk of a general duty to preserve evidence if, in fact, the breach of that duty carries no real legal ramifications.  Requiring a showing of bad faith as a precondition to the imposition of spoliation sanctions means that evidence may be destroyed wilfully, or through gross negligence or even reckless disregard, without any true consequences. . . .  Second, imposing sanctions only when a spoliator can be proven to have acted in bad faith defenestrates three of the four purposes underlying such sanctions-to protect the integrity of the fact-finding process, to restore the adversarial balance between the spoliator and the prejudiced party, and to deter future misconduct—and severely frustrates the last, to punish.  These objectives are hardly served if the court, in effect, is constrained to say to the injured party—“sorry about that, but there is nothing I can do, except to let you present your case, such as it remains.”  Indeed, while some commentators have asserted otherwise, the history of the spoliation doctrine suggests that it was not designed solely to punish those who consciously destroy inculpatory documents, but also to address the manifest unfairness inherent in the loss of relevant evidence.  Even if such sanctions were once rooted in an inference of consciousness of a weak case, that is neither the controlling rationale nor the prevailing rule nowadays.  Finally, adopting a bad faith standard when the court is operating under its inherent authority creates an incongruity between the sanctions available for spoliation depending upon whether—or not—a discovery regime has been established that would trigger Rule 37.  This incongruity could be viewed as encouraging the earlier destruction of evidence—a race to the shredder, so to speak. . . .

(Footnotes and citations omitted.)  The court cited the new Fed. R. Civ. P. 37(e) as further support:

The gulf between Rule 37 and cases holding that sanctions may be applied only where the spoliator is conscious of a weak case has become more obvious with the recent adoption of new Fed.R.Civ.P. 37(f) [sic], which provides that “[a]bsent exceptional circumstances, a court may not impose sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system.”  According to the reporter notes, “[g]ood faith in the routine operation of an information system may involve a party’s intervention to modify or suspend certain features of that routine operation to prevent the loss of information,” adding that “[w]hen a party is under a duty to preserve information because of pending or reasonably anticipated litigation, intervention in the routine operation of an information system is one aspect of what is often called a “litigation hold.”  Advisory Comm. Notes to the 2006 Amendment. That the Advisory Committee would need to adopt a limited “good faith” faith exception to the imposition of sanctions belies the notion such sanctions should be imposed only upon a more traditional finding of “bad faith.”

The court set out a lengthy recital of events, and found that, over an extended period of time, during which it was regularly destroying documents, defendant mischaracterized the extent of its efforts to locate responsive documents and to prevent further spoliation.  The court found that the government’s failure to take effective steps to preserve documents and to prevent further spoliation transcended any form of negligence, and constituted, at the least, the reckless disregard of its duty to preserve relevant evidence.  The court found that the government’s counsel was “ill-served not only by staff both at the Department of Justice and the Department of Defense, but by document retention and preservation policies that were—and may still be—antiquated and inadequate.”  The court continued:

It is the duty of the United States, no less than any other party before this court, to ensure, through its agents, that documents relevant to a case are preserved.  Indeed, while not entering into the calculus here, a good argument can be made that, as the enforcer of the laws, the United States should take this duty more seriously than any other litigant.  Unfortunately, in the case sub judice, irrefutable evidence demonstrates that over an extended period of time, the United States, acting through at least some of its employees, recklessly disregarded that duty, thereby undoubtedly damaging plaintiff’s ability to present its case in this matter and disrupting the orderly administration of this proceeding.  Weighing the seriousness of the fault here, as well as its impact on plaintiff and the integrity of the judicial process, the court concludes that it must impose spoliation sanctions against the United States.

Turning to the issue of what would be a just and proportionate sanction, the court noted that there were no bright lines, at least in terms of mens rea, with the focus instead being on effectively addressing, overall, the spoliation conduct as well as the harm it engendered.  The court opined:  “Under this flexible standard, repeated acts of gross negligence, particularly if accompanied by inaccurate representations to the court that serve to mask and perpetuate the spoliation, can be met with the same or a more severe sanction than a single act of bad faith.”  The court discussed the relevant considerations and concluded that the appropriate sanction had two facets:  First, defendant would be prohibited from cross-examining plaintiff’s expert to the extent that the expert construes, to plaintiffs’ favor, the gaps in the record created by defendant’s spoliation and from adducing its own expert testimony construing the same gaps.  The court explained that limiting defendant’s ability in this regard served to prevent it from benefiting from the destruction of the records and from using its experts to wield the superior factual knowledge of the contents of the destroyed records likely possessed by its employees.  Second, the court ruled that defendant must reimburse plaintiff for any additional discovery-related costs, including attorney’s fees, that were incurred because of defendant’s malfeasance and misrepresentations, as well as all the costs, including attorney’s fees, that were incurred in specifically pursuing the spoliation matter.  The court explained that this second prong of the sanction served both punitive and remedial purposes, as it was intended to deter future spoliation and compensate plaintiff for the additional costs it incurred.