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Are Spoliation Sanctions Warranted if Discovery is Ultimately Received?

Posted on June 13th, 2014

What is the proper ruling on sanctions when withheld evidence is eventually tendered in response to plaintiff electronic discovery requests? Further, could a spoliation ruling be maintained at that point? This is an issue that the court reviewed in Viking Industrial Security, Inc., et al., v. Liberty Mutual Insurance Co., et al. (N.J. Super. Ct. App. Div. January 8, 2014).

Spoliation has been defined as the willful destruction of evidence or a failure to properly preserve evidence for use in another’s pending or future litigation. Trigon Ins. Co. v. U.S., 204 F.R.D. 277(E.D.Va., 2001). In the case at hand, plaintiff provided worker’s compensation insurance to defendant. After an investigation into potential fraud by defendant, plaintiff commenced litigation. Defendant withheld payroll ESI, in the form of QuickBooks programs, for over a year before finally turning it over.

The trial court, in finding that spoliation had occurred, awarded counsel fees and costs to plaintiff. The judge also ordered a negative inference jury charge against the defendant for all damage claims, and barred defendant from offering proof of damages or loss pertaining to a former customer of the defendant.

The appeals court, in reversing and remanding the trial court’s decision, reasoned that spoliation can only occur when withholding or destroying evidence greatly impedes a party’s ability to maintain their action. Here, plaintiff eventually received the requested evidence, and while not without hardship, the withholding of evidence did not rise to the level of spoliation. The court stated that spoliation sanctions cannot be warranted if discovery is ultimately received, as dismissal is the ultimate sanction and can only be ordered when no lesser sanction will adequately erase the prejudice suffered by the non-offending party.

One might then ask, why were less harsh sanctions reversed? Here, the appeals court reasoned that the spoliation orders formed the linchpin for everything that followed, essentially tainting the entire ruling. However, the court the states: “To be sure, sanctions were appropriate due to defendants’ failure to timely provide the QuickBooks records.” As such, when disregarding spoliation, counsel fees and costs awarded to the plaintiff would constitute an appropriate sanction for defendants’ failure to timely provide evidence.

ILS – Plaintiff eDiscovery Experts

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