250 F.R.D. 251 (D. Md. 2008)
On its face, Rule 37(b)(2) permits sanctions for disobedience of "an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a)." (Emphasis added.) The rule does not define what is meant by "provide or permit" discovery, but the advisory committee's notes to Rule 37 reflect that subsection (b) was amended in 1970 to broaden the ability of a court to sanction for a violation of discovery. Fed. R. Civ. P. 37 advisory committee's note to the 1970 amendment to subdiv. (b). The Advisory Committee observed that "[v]arious rules authorize orders for discovery— e.g., Rule 35(b)(1), Rule 26(c) as revised, Rule 37(d). Rule 37(b)(2) should provide comprehensively for enforcement of all these orders." Id. The advisory committee's note following the 1980 amendment to Rule 37 refers to newly-enacted Rule 26(f), which governs discovery conferences, and states that Rule 26(f) requires "an order respecting the subsequent conduct of discovery" following such a meeting. Fed. R. Civ. P. 37 advisory committee's note to the 1980 amendment to subdiv. (b)(2). This reference is particularly important because, as amended in 2006, Rule 26(f) specifically contemplates that when the parties meet and confer to discuss discovery, they must, inter alia, "discuss any issues about preserving discoverable information." Thus, it cannot seriously be questioned that a court order to preserve information, including ESI, has as its core purpose the objective of ensuring that the ESI can be "provided" during discovery, and is intended to "permit" that discovery. It would clearly violate the purpose of Rule 37(b) if a court were unable to sanction a party for violating the court's order to preserve evidence simply because that order did not also order the production of the evidence. As will be discussed below, the duty to preserve relevant evidence is a common law duty, not a rule-based duty. It therefore is no surprise that Rule 37(b)(2) does not specifically refer to court orders to "preserve" evidence. The reference to Rule 26(f), however, which does specifically refer to preservation obligations, makes it clear that court orders issued to enforce discovery plans agreed to by the parties, which include preservation obligations, would be enforceable by Rule 37(b)(2) sanctions. If so, then it is equally compelling that a preservation order issued by the court sua sponte, and designed to govern the discovery process by ensuring that the evidence to be preserved, if within the scope of discoverable information, may be provided in response to an appropriate discovery request, also is an order to "permit discovery." To reach a contrary conclusion would be to exalt form over substance.
Moreover, it is clear that courts have broadly interpreted the authority granted by Rule 37(b)(2) to permit sanctions for failures to obey a wide variety of orders intended to "permit discovery." See, e.g., Hathcock v. Navistar Int'l Transp. Co., 53 F.3d 36, 40 (4th Cir. 1995) (holding that a trial court had the authority to impose a default judgment as a sanction for violating a Rule 16 scheduling order, pursuant to Rule 37(b)(2); stating "we agree with the basic premise that a default sanction can, under certain circumstances, be an appropriate response to a violation of a Rule 16 order. After all, the express terms of Rule 37 permit a trial court to impose sanctions when a party fails to obey an order to provide or permit discovery"); Quela v. Payco-Gen. Am. Creditas, Inc., No. 99-C-1904, 2000 WL 656681, at *6 (N.D. Ill. May 18, 2000) ("Although the language of Rule 37 requires violation of a judicial order in order to impose sanctions, a formal, written order to comply with discovery is not required. Courts can broadly interpret what constitutes an order for purposes of imposing sanctions.") (citing Brandt v. Vulcan, Inc., 30 F.3d 752, 756 n.7 (7th Cir. 1994) ("While courts have only applied Rule 37(b)(2) where parties have violated a court order, courts have broadly interpreted what constitutes an 'order' for purposes of imposing sanctions.")); REP MCR Realty, L.L.C. v. Lynch, 363 F. Supp. 2d 984, 998 (N.D. Ill. 2005) (quoting Quela, 2000 WL 656681, at *6), aff'd, 200 Fed. App'x 592 (7th Cir. 2006). Indeed, courts have stated summarily that Rule 37(b)(2) sanctions may stem from failure to comply with a preservation order, or operated under that assumption. See Pitney Bowes Gov't Solutions, Inc. v. United States, 93 Fed. Cl. 327, 336 (2010) ("Spoliation may result in sanctions . . . grounded in contravention of specific discovery or document-preservation orders.") (emphasis added); United Med. Supply Co. v. United States, 77 Fed. Cl. 257, 271 (2007) (ordering sanctions for spoliation pursuant to court's inherent authority, for spoliation predating court's first preservation order, and Rule 37(b), for spoliation following the date on which "the court ordered defendant to be prepared to specify the steps that would be taken to prevent further spoliation, or, at the latest, December 5, 2005, when, as described in greater detail below, the court warned defendant that any further document destruction would lead to sanctions"); Treppel v. Biovail Corp., 249 F.R.D. 111, 119-20 (S.D.N.Y. 2008) ("`Where a party violates an order to preserve evidence or fails to comply with an order compelling discovery because it has destroyed the evidence in question, it is subject to sanctions under Rule 37(b) of the Federal Rules of Civil Procedure for failure to comply with a court order.'") (quoting In re WRT Energy Sec. Litig., 246 F.R.D. 185, 194 (S.D.N.Y. 2007)); Wm. T. Thompson Co. v. Gen. Nutrition Corp., 104 F.R.D. 119, 121 (C.D. Cal. 1985) (concluding that "oral document preservation order" that later "was reduced to writing and filed" was an order "to provide or permit discovery . . . upon which monetary sanctions may be awarded under Rule 37(b)"). For these reasons, I conclude that this Court has the authority to impose Rule 37(b)(2) sanctions, if otherwise appropriate, for violations of a Court-issued preservation order, even if that order does not actually order the actual production of the evidence to be preserved. Additionally, of course, the Court's authority to impose Rule 37(b)(2) sanctions for violation of its serial orders to actually produce ESI, is equally clear.
In the Fourth Circuit, to prove spoliation that warrants a sanction, a party must show:
"(1) [T]he party having control over the evidence had an obligation to preserve it when it was destroyed or altered; (2) the destruction or loss was accompanied by a 'culpable state of mind;' and (3) the evidence that was destroyed or altered was 'relevant' to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reasonable factfinder could conclude that the lost evidence would have supported the claims or defenses of the party that sought it."
Goodman, 632 F. Supp. 2d at 509 (quoting Thompson, 219 F.R.D. at 101). District courts in the Second, Fifth, Sixth, Seventh, and Ninth Circuits have identified the same factors for sanction-worthy spoliation.1 See Jones v. Bremen High Sch. Dist. 228, No. 08-C-3548, 2010 WL 2106640, at *5 (N.D. Ill. May 25, 2010); In re Global Technovations, Inc., 431 B.R. 739, 778 (Bankr. E.D. Mich. 2010); Pension Comm., 685 F. Supp. 2d at 467; Rimkus, 688 F. Supp. 2d at 615-16; Melendres v. Arpaio, No. CV-07-2513-PHX-GMS, 2010 WL 582189, at *4 (D. Ariz. Feb. 12, 2010). The first element involves both the duty to preserve and the breach of that duty through the destruction or alteration of the evidence. See Jones, 2010 WL 2106640, at *5 ("To find that sanctions for spoliation are appropriate, the Court must find the following: 1) that there was a duty to preserve the specific documents and/or evidence, 2) that the duty was breached, 3) that the other party was harmed by the breach, and 4) that the breach was caused by the breaching party's wilfulness, bad faith, or fault.") (emphasis added).
The first consideration is whether the alleged spoliator had a duty to preserve the lost evidence and breached that duty. "Absent some countervailing factor, there is no general duty to preserve documents, things, or information, whether electronically stored or otherwise." Paul W. Grimm, Michael D. Berman, Conor R. Crowley, Leslie Wharton, Proportionality in the Post-Hoc Analysis of Pre-Litigation Preservation Decisions, 37 U. BALT. L. REV. 381, 388 (2008). Yet, it is well established that "[a] formal discovery request is not necessary to trigger the duty to preserve evidence." Krumwiede v. Brighton Assocs., L.L.C., No. 05-C-3003, 2006 WL 1308629, at *8 (N.D. Ill. May 8, 2006). Rather, the duty "may arise from statutes, regulations, ethical rules, court orders, or the common law. . . ., a contract, or another special circumstance." Grimm, 37 U. BALT. L. REV. at 390. Thus, any preservation order that the Court may issue obligates the parties to preserve evidence, and the Court has the authority to enforce that obligation under Rule 37, as discussed supra. But, the obligation existed prior to the order; only its mechanism of enforcement changes with the Court order.
The common law imposes the obligation to preserve evidence from the moment that litigation is reasonably anticipated. See Silvestri, 271 F.3d at 591 ("The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation."); Goodman, 632 F. Supp. 2d at 509 (same); Pension Comm., 685 F. Supp. 2d at 466 (same); Grimm, U. BALT. L. REV. at 390 n.38 ("All circuits recognize the duty to preserve information relevant to anticipated or existing litigation.'") (citation omitted); see also *Leon v. IDX Sys. Corp.*, 464 F.3d 951, 959 (9th Cir. 2006) (duty to preserve exists when party had "some notice that the documents were potentially relevant to the litigation before they were destroyed'") (citation omitted). Moreover, "this duty arises at the point in time when litigation is reasonably anticipated whether the organization is the initiator or the target of litigation." THE SEDONA CONFERENCE, THE SEDONA CONFERENCE COMMENTARY ON LEGAL HOLDS: THE TRIGGER AND THE PROCESS 3 (public cmt. ed. Aug. 2007), available at http://www.thesedonaconference.org/content/miscFiles/Legal_holds.pdf ("Legal Holds"). For example, in Sampson, 251 F.R.D. at 181, the defendant's duty arose no later than the date when plaintiff's counsel, prior to filing the complaint, asked the defendant by letter to preserve relevant evidence. However, a future litigant is not required to make such a request, "and a failure to do so does not vitiate the independent obligation of an adverse party to preserve such information" if the adverse party knows or should know of impending litigation. Thompson, 219 F.R.D. at 100. Thus, the duty exists, for a defendant, at the latest, when the defendant is served with the complaint. See Nucor Corp. v. Bell, 251 F.R.D. 191, 197 (D.S.C. 2009) (stating that "defendants each had a duty to preserve the data beginning no later than those dates" on which plaintiff served the complaint on each defendant); see also Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 621 (D. Colo. 2007) ("In most cases, the duty to preserve evidence is triggered by the filing of a lawsuit."); Krumwiede, 2006 WL 1308629, at *8 ("The filing of a complaint may alert a party that certain information is relevant and likely to be sought in discovery."). The duty to preserve evidence "includes an obligation to identify, locate, and maintain, information that is relevant to specific, predictable, and identifiable litigation." Legal Holds, supra, at 3. It is well established that the duty pertains only to relevant documents. See Pension Comm., 685 F. Supp. 2d at 464. Relevant documents include:
[A]ny documents or tangible things (as defined by [Fed. R. Civ. P. 34(a)]) made by individuals "likely to have discoverable information that the disclosing party may use to support its claims or defenses." The duty also includes documents prepared for those individuals, to the extent those documents can be readily identified (e.g., from the "to" field in e-mails). The duty also extends to information that is relevant to the claims or defenses of any party, or which is "relevant to the subject matter involved in the action." Thus, the duty to preserve extends to those employees likely to have relevant information-the "key players" in the case.
Zubulake v. UBS Warburg LLC (Zubulake IV), 220 F.R.D. 212, 217-18 (S.D.N.Y. 2003) (footnotes omitted); see Broccoli, 229 F.R.D. at 510 ("The duty to preserve encompasses any documents or tangible items authored or made by individuals likely to have discoverable information that the disclosing party may use to support its claim or defenses.").
Beyond these basics, the duty to preserve evidence should not be analyzed in absolute terms; it requires nuance, because the duty "cannot be defined with precision.'" Grimm, 37 U. BALT. L. REV. at 393 (quoting SHIRA A. SCHEINDLIN, MOORE'S FEDERAL PRACTICE E-DISCOVERY: THE NEWLY AMENDED FEDERAL RULES OF CIVIL PROCEDURE 7 n.28 (2006)). Proper analysis requires the Court to determine reasonableness under the circumstances— "reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation." THE SEDONA CONFERENCE, THE SEDONA PRINCIPLES: BEST PRACTICES RECOMMENDATIONS & PRINCIPLES FOR ADDRESSING ELECTRONIC DOCUMENT PRODUCTION ii (2d ed. 2007), available at http://www.thesedonaconference.org/content/miscFiles/ (follow link); see *Jones*, 2010 WL 2106640, at *5. It "is neither absolute, nor intended to cripple organizations." Grimm, 37 U. BALT. L. REV. at 385. Thus, "[w]hether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done—or not done—was proportional to that case and consistent with clearly established applicable standards." *Rimkus*, 688 F. Supp. 2d at 613 (emphasis in *Rimkus*); see Legal Holds, supra, at 3 ("In determining the scope of information that should be preserved, the nature of the issues raised in the matter, experience in similar circumstances and the amount in controversy are factors that may be considered."). Put another way, "the scope of preservation should somehow be proportional to the amount in controversy and the costs and burdens of preservation." Grimm, 37 U. BALT. L. REV. at 405. Although, with few exceptions, such as the recent and highly instructive *Rimkus* decision,<sup class="case-endnote-sup"><a id="endnote-ref-2" href="#endnote-2" class="case-endnote-ref scroll-mt-24 rounded px-0.5 font-semibold !text-rose-700 !no-underline hover:bg-rose-100 dark:!text-rose-300 dark:hover:bg-rose-900/40" data-endnote-id="2">2</a></sup> courts have tended to overlook the importance of proportionality in determining whether a party has complied with its duty to preserve evidence in a particular case, this should not be the case because Fed. R. Civ. P. 26(b)(2)(C) cautions that all permissible discovery must be measured against the yardstick of proportionality. See *Procter & Gamble Co. v. Haugen*, 427 F.3d 727, 739 n.8 (10th Cir. 2005) (requiring district court to consider Rule 26(b)(2)(C)(iii) before ordering spoliation sanctions to ensure against "the burden or expense of the proposed discovery outweigh[ing] its likely benefit'") (quoting Rule). Moreover, the permissible scope of discovery as set forth in Rule 26(b) includes a proportionality component of sorts with respect to discovery of ESI, because Rule 26(b)(2)(B) permits a party to refuse to produce ESI if it is not reasonably accessible without undue burden and expense. Similarly, Rule 26(g)(1)(B)(iii) requires all parties seeking discovery to certify that the request is "neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, the amount in controversy, and the importance of the issues at stake in the action." Thus, assessment of reasonableness and proportionality should be at the forefront of all inquiries into whether a party has fulfilled its duty to preserve relevant evidence. Jones, 2010 WL 2106640, at *6-7 ("[R]easonableness is the key to determining whether or not a party breached its duty to preserve evidence.").
Case law has developed guidelines for what the preservation duty entails. Unfortunately, in terms of what a party must do to preserve potentially relevant evidence, case law is not consistent across the circuits, or even within individual districts. This is what causes such concern and anxiety, particularly to institutional clients such as corporations, businesses or governments, because their activities—and vulnerability to being sued—often extend to multiple jurisdictions, yet they cannot look to any single standard to measure the appropriateness of their preservation activities, or their exposure or potential liability for failure to fulfill their preservation duties. A national corporation cannot have a different preservation policy for each federal circuit and state in which it operates. How then do such corporations develop preservation policies? The only "safe" way to do so is to design one that complies with the most demanding requirements of the toughest court to have spoken on the issue, despite the fact that the highest standard may impose burdens and expenses that are far greater than what is required in most other jurisdictions in which they do business or conduct activities.
For example, as noted, parties must preserve potentially relevant evidence under their "control," and in the Fourth Circuit and the Second Circuit, "`documents are considered to be under a party's control when that party has the right, authority, or practical ability to obtain the documents from a non-party to the action.'" Goodman, 632 F. Supp. 2d at 515 (quoting In re NTL, Inc. Sec. Litig., 244 F.R.D. 179, 195 (S.D.N.Y. 2007)). And, in this circuit, as well as the First and Sixth Circuits, the preservation duty applies not only when the evidence is in the party's control; there is also a duty to notify the opposing party of evidence in the hands of third parties. See Silvestri, 271 F.3d at 590; Velez v. Marriott PR Mgmt., Inc., 590 F. Supp. 2d 235, 258 (D.P.R. 2008); Jain v. Memphis Shelby Airport Auth., No. 08-2119-STA-dkv, 2010 WL 711328, at *2 (W.D. Tenn. Feb. 25, 2010). In contrast, district courts in the Third, Fifth, and Ninth Circuits have held that the preservation duty exists only when the party controls the evidence, without extending that duty to evidence controlled by third parties. Bensel v. Allied Pilots Ass'n, 263 F.R.D. 150, 152 (D.N.J. 2009); Rimkus, 688 F. Supp. 2d at 615-16; Melendres, 2010 WL 582189, at *4. So, what should a company that conducts business in the First, Second, Third, Fourth, Fifth, Sixth, and Ninth Circuits do to develop a preservation policy that complies with the inconsistent obligations imposed by these circuits? This is the question for which a suitable answer has proven elusive.
It generally is recognized that when a company or organization has a document retention or destruction policy, it "is obligated to suspend" that policy and "implement a `litigation hold' to ensure the preservation of relevant documents" once the preservation duty has been triggered. Goodman, 632 F. Supp. 2d at 511 (quoting Thompson, 219 F.R.D. at 100 (quoting Zubulake IV, 220 F.R.D. at 218)); see Pension Comm., 685 F. Supp. 2d at 466 (same); School-Link Tech., Inc. v. Applied Res., Inc., No. 05-2088-JWL, 2007 WL 677647, at *3 (D. Kan. Feb. 28, 2007) (same). But, a litigation hold might not be necessary under certain circumstances, and reasonableness is still a consideration. Jones, 2010 WL 2106640, at *7; see Thomas Y. Allman, Amending the Federal Rules: The Path to an Effective Duty To Preserve 5 (2010 Conf. on Civil Litig., June 15, 2010), http://civilconference.uscourts.gov/LotusQuickr/dcc/Main.nsf/h_Toc/47B91A2AC603 E0340525670800167201/?OpenDocument ("Allman, Amending the Rules") (suggesting that "if a litigation hold process is employed, that fact should be treated as prima facie evidence that reasonable steps were undertaken to notify relevant custodians of preservation obligations" and that "intervention in routine operations [should be] unnecessary unless the failure to do so [was] intended to deprive another of the use of relevant evidence") (emphasis added); Legal Holds, supra, Guidelines 2-3 (stating that conduct that "demonstrates reasonableness and good faith in meeting preservation obligations" includes "adoption and consistent implementation of a policy defining a document retention decision-making process" and the "use of established procedures for the reporting of information relating to a potential threat of litigation to a responsible decision maker"). However, as discussed in detail below, courts differ in the fault they assign when a party fails to implement a litigation hold. Compare Pension Comm., 685 F. Supp. 2d at 466 (stating that failure to implement a written litigation hold is gross negligence per se) with Haynes v. Dart, No. 08 C 4834, 2010 WL 140387, at *4 (N.D. Ill. Jan. 11, 2010) ("The failure to institute a document retention policy, in the form of a litigation hold, is relevant to the court's consideration, but it is not per se evidence of sanctionable conduct.") (citation omitted).
Although it is well established that there is no obligation to "`preserve every shred of paper, every e-mail or electronic document, and every backup tape,'" Consol. Edison Co. of N.Y., Inc. v. United States, 90 Fed. Cl. 228, 256 (Fed. Cl. 2009) (quoting Zubulake IV, 220 F.R.D. at 217), in some circumstances, "[t]he general duty to preserve may also include deleted data, data in slack spaces, backup tapes, legacy systems, and metadata." Grimm, 37 U. BALT. L. REV. at 410 (emphasis added). Unlike most courts, which have not addressed directly retention requirements for multiple copies or backup tapes specifically, the United States District Court for the Southern District of New York has provided an in-depth discussion of the topic. See Zubulake IV, 220 F.R.D. 220. In Zubulake IV, the court explained that the duty is to preserve "unique, relevant evidence that might be useful to an adversary." Id. at 217. It stated that although "[a] party or anticipated party must retain all relevant documents," it need not "preserve all backup tapes even when it reasonably anticipates litigation" or retain "multiple identical copies." Id. at 217-18. The parties may decide how to select among multiple identical copies, id. at 218:
[A] litigant could choose to retain all then-existing backup tapes for the relevant personnel (if such tapes store data by individual or the contents can be identified in good faith and through reasonable effort), and to catalog any later-created documents in a separate electronic file. That, along with a mirror-image of the computer system taken at the time the duty to preserve attaches (to preserve documents in the state they existed at that time), creates a complete set of relevant documents.
District courts in the Fifth and Sixth Circuits have relied on Zubulake IV's discussion of backup tape preservation. See Maggette v. BL Devel. Corp., Nos. 2:07CV181-M-A, 2:07CV182-M-A, 2009 WL 4346062, at *2 (N.D. Miss. Nov. 24, 2009); Forest Labs., Inc. v. Caraco Pharm., No. 06-CV-13143, 2009 WL 998402, at *4-5 (E.D. Mich. April 14, 2009); Toth v. Calcasieu Parish, No. 06-998, 2009 WL 528245, at *2 (W.D. La. Mar. 2, 2009). However, because such discrepancies exist among circuits on other topics, it is not clear for litigants how uniformly the Zubulake IV opinion will be applied.
Breach of the preservation duty, also, is premised on reasonableness: A party breaches its duty to preserve relevant evidence if it fails to act reasonably by taking "positive action to preserve material evidence." See Jones, 2010 WL 2106640, at *6. The action must be "`reasonably calculated to ensure that relevant materials will be preserved,' such as giving out specific criteria on what should or should not be saved for litigation." Id. (quoting Danis v. USN Commc'ns, Inc., No. 98 C 7482, 2000 WL 1694325, at *38 (N.D. Ill. 2000)).
Before turning to the remaining elements of a spoliation claim, it is helpful in analyzing the existence of the duty to preserve evidence and its breach to keep in mind the entity to whom that duty is owed, because this is important in determining an appropriate sanction when spoliation is found. What heretofore usually has been implicit—but seldom stated—in opinions concerning spoliation is that, with the exception of a few jurisdictions that consider spoliation to be an actionable tort,3 the duty to preserve evidence relevant to litigation of a claim is a duty owed to the court, not to a party's adversary. E.g., Nat'l Ass'n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 556 (N.D. Cal. 1987) (ordering, in addition to costs and fees, defendant's payment of "$15,000.00 to the clerk of this court for the unnecessary consumption of the court's time and resources," after noting that "the defendant employed an unconscionably careless procedure to handle discovery matters, suggesting a callous disregard for its obligations as a litigant" and that defendant had a "profound disrespect for its responsibilities in this litigation") (emphasis added); see also, e.g., Metro. Opera Ass'n v. Local 100, Hotel Employees & Rest. Employees Int'l Union, 212 F.R.D. 178, 228 (S.D.N.Y. 2003) (quoting Turnage, 115 F.R.D. at 556); Krumwiede, 2006 WL 1308629, at *11 (concluding that default judgment on defendant's counterclaims was the only remedy for plaintiff's spoliation and perjury, which showed "blatant contempt for th[e] Court and a fundamental disregard for the judicial process"). See generally Quela, 2000 WL 656681, at *7 ("`[P]arties who wish to use the judicial system to settle disputes have certain obligations and responsibilities.'") (quoting Rodriguez v. M & M/Mars, No. 96 C 1231, 1997 WL 349989, at *2 (N.D. Ill. June 23, 1997)). For the judicial process to function properly, the court must rely "in large part on the good faith and diligence of counsel and the parties in abiding by these rules [of discovery] and conducting themselves and their judicial business honestly." Metro. Opera Ass'n, 212 F.R.D. at 181 (emphasis added). The court's inherent authority to impose sanctions for spoliation of evidence is a means of preserving "the integrity of the judicial process" so that litigants do not lose "confidence that the process works to uncover the truth." Silvestri, 271 F.3d at 590.
The civil justice system is designed for courts to decide cases on their merits, and to do so, the fact-finder must review the facts to discern the truth. See Barnhill v. United States, 11 F.3d 1360, 1367 (7th Cir. 1993) ("In the normal course of events, justice is dispensed by the hearing of cases on their merits."); Metro. Opera Ass'n, 212 F.R.D. at 181 ("`A lawsuit is supposed to be a search for the truth.'") (quoting Miller v. Time-Warner Commc'ns, Inc., No. 97 Civ. 7286, 1999 WL 739528, at *1 (S.D.N.Y. Sept. 22, 1999)). While the fact-finder can review only the documents that the parties produce, and production and preservation are not synonymous, production is possible only if documents are preserved. See generally Richard Marcus, Only Yesterday: Reflections on Rulemaking Responses to E-discovery, 73 FORDHAM L. REV. 1, 14 (2004) (noting that the duty to preserve does not mean that all preserved information must be produced, but it "ensure[s] that a judge will be able to make that determination" about what should be produced). Thus, the truth cannot be uncovered if information is not preserved.
That the duty is owed to the court, and not to the party's adversary is a subtle, but consequential, distinction. A proper appreciation of the distinction informs the Court's decision regarding appropriate spoliation sanctions. Where intentionally egregious conduct leads to spoliation of evidence but causes no prejudice because the evidence destroyed was not relevant, or was merely cumulative to readily available evidence, or because the same evidence could be obtained from other sources, then the integrity of the judicial system has been injured far less than if simple negligence results in the total loss of evidence essential for an adversary to prosecute or defend against a claim. In the former instance, the appropriateness of a case-dispositive sanction is questionable despite the magnitude of the culpability, because the harm to the truth-finding process is slight, and lesser sanctions such as monetary ones will suffice. In contrast, a sympathetic though negligent party whose want of diligence eliminates the ability of an adversary to prove its case may warrant case-dispositive sanctions, because the damage to the truth-seeking process is absolute. Similarly, certain sanctions make no logical sense when applied to particular breaches of the duty to preserve. For example, an adverse inference instruction makes little logical sense if given as a sanction for negligent breach of the duty to preserve, because the inference that a party failed to preserve evidence because it believed that the evidence was harmful to its case does not flow from mere negligence—particularly if the destruction was of ESI and was caused by the automatic deletion function of a program that the party negligently failed to disable once the duty to preserve was triggered. The more logical inference is that the party was disorganized, or distracted, or technically challenged, or overextended, not that it failed to preserve evidence because of an awareness that it was harmful. In short, matching the appropriate sanction to the spoliating conduct is aided by remembering to whom the duty to preserve is owed.
Failures to preserve evidence also cause another, less widely discussed, injury to the civil justice system. "When spoliation issues are litigated, more attention is focused on e-discovery than on the merits, with a motion for sanctions an increasingly common filing.'" Allman, Amending the Rules 1) (quoting Dan H. Willoughby, Jr. & Rose Hunter Jones, *Sanctions for E-Discovery Violations: By the Numbers* (2010 Conf. on Civil Litig., May 2010), available at http://civilconference.uscourts.gov/LotusQuickr/dcc/Main.nsf/h_RoomHome/4df38292d748069 d0525670800167212/?OpenDocument, under the links for Papers and Empirical Research); see *Rimkus*, 688 F. Supp. 2d at 607 ("Spoliation allegations and sanctions motions distract from the merits of a case, add costs to discovery, and delay resolution."). Allegations of spoliation and the motions practice that ensues interfere with the court's administration of justice in general by crowding its docket and delaying the resolution of cases. See, e.g., *Leon v. IDX Sys. Corp.*, 464 F.3d 951, 958 n.5 (9th Cir. 2006) (noting that plaintiff's "destruction of 2,200 files on his employer-issued computer greatly impeded resolution of the case' by obscuring the factual predicate of the case and consuming months of sanction-related litigation" and concluding that "there was ample evidence of the time and resources spent in investigating and resolving the spoliation issues," which supported dismissal of the case); Pension Comm., 685 F. Supp. 2d at 471 n.56 ("I, together with two of my law clerks, have spent an inordinate amount of time on this motion. We estimate that collectively we have spent close to three hundred hours resolving this motion. I note, in passing, that our blended hourly rate is approximately thirty dollars per hour (!) well below that of the most inexperienced paralegal, let alone lawyer, appearing in this case. My point is only that sanctions motions, and the behavior that caused them to be made, divert court time from other important duties—namely deciding cases on the merits."); State Farm Fire & Cas. Co. v. Broan Mfg. Co., 523 F. Supp. 2d 992, 997 (D. Ariz. 2007) (noting that the fact that "the Court has spent significant resources investigating and resolving the spoliation issues" supported dismissal); Gutman v. Klein, No. 03 Civ. 1570 (BMC), 2009 WL 3296072, at *8 (E.D.N.Y. Oct. 13, 2009) (noting that, with regard to spoliation sanctions, "defendants have raised pettifogging objections at nearly every stage of the litigation, trying the court's patience . . ."); Zubulake v. UBS Warburg LLC (Zubulake V), 229 F.R.D. 422, 440 (S.D.N.Y. 2004) (stating that "[t]he tedious and difficult fact finding encompassed in this opinion [regarding the duty to reserve ESI] and others like it is a great burden on a court's limited resources"). Interestingly, this burden is the same regardless of whether the culpability underlying the spoliation was negligent, grossly negligent, or intentional.
What frustrates courts is the inability to fashion an effective sanction to address the drain on their resources caused by having to wade through voluminous filings, hold lengthy hearings, and then spend dozens, if not hundreds, of hours painstakingly setting forth the underlying facts before turning to a legal analysis that is multi-factored and involved. Adverse inference instructions do not compensate for the expenditure of court resources to resolve a spoliation dispute, nor do awards of attorney's fees and costs to the prevailing party in the dispute. Further, dispositive sanctions, the appellate courts tell us, are only appropriate where lesser sanctions will not suffice. Silvestri, 271 F.3d at 590 (4th Cir. 2001); West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999). Indeed, it is questionable whether the interests of justice truly are served if a court imposes case-dispositive sanctions for clearly culpable conduct resulting in spoliation of evidence absent a finding that the failure to preserve evidence resulted in the loss of evidence that was relevant, or caused prejudice to the spoliating party's adversary, notwithstanding the amount of time it took the court to resolve the spoliation issue, or the concomitant "opportunity cost" to the court occasioned by its inability to work on other pressing matters because of the need to resolve the spoliation motion.
While some trial courts have ordered the payment of money to the clerk of the court as a sanction for unnecessarily prolonging and increasing litigation expense, or as a fine for unnecessarily consuming court resources, e.g., Pinstripe, Inc. v. Manpower, Inc., No. 07-cv-620-GKF-PJC, 2009 WL 2252131, at *4 (N.D. Okla. July 29, 2009); Claredi v. Seebeyond Tech. Corp., No. 4:04CV1304 RWS, 2007 WL 735018, at *4 (E.D. Mo. Mar. 8, 2007); Wachtel v. Health Net, Inc., 239 F.R.D. 81, 111 (D.N.J. 2006); Turnage, 115 F.R.D. at 559, those rulings were from trial courts and were not appealed. It is far from clear that, had they been appealed, they would have been affirmed. See Bradley v. Am. Household, Inc., 378 F.3d 373, 377-79 (4th Cir. 2004) (vacating and remanding district court order that imposed substantial monetary fine against defendant ($200,000) and attorney ($100,000) for discovery violations including failure to preserve and produce evidence; concluding that the fines were criminal because (a) they were payable to the court rather than to the complaining party; (b) they were not conditioned on compliance with a court order; (c) they were not tailored to compensate the complaining party; and (d) they were imposed for punitive purposes); Buffington v. Baltimore Cnty., Md., 913 F.2d 113, 133 (4th Cir. 1990) (vacating sanctions imposed by trial court as "civil contempt" for violation of discovery obligations; observing that fines were ordered payable to the court, rather than to the complaining party; concluding that the fines were a form of criminal contempt, which could not be imposed without compliance with due process procedures required for criminal contempt proceedings); Law v. Nat'l Collegiate Athletic Ass'n, 134 F.3d 1438, 1442-44 (10th Cir. 1998) (holding that 25% surcharge added to fees that otherwise would be compensatory was a criminal contempt sanction, even though it was payable to the adverse party and not to the court; reversing order for sanctions because court did not follow procedural requirements for criminal contempt).
The bottom line is that resolution of spoliation motions takes a toll on the court, separate from that extracted from the litigants, for which there is no satisfactory remedy short of criminal contempt proceedings, which are unlikely to be initiated absent extraordinary circumstances. In fact, research has revealed only one instance to date in which a court has initiated criminal contempt proceedings against a party for spoliation of ESI in a civil case. See SonoMedica, Inc. v. Mohler, No. 1:08-cv-230 (GBL), 2009 WL 2371507, at *1 (E.D. Va. July 28, 2009) ("The Court further holds that this case will be referred to the United States Attorney to investigate criminal contempt proceedings because the Court finds that the [third party witnesses] willfully violated a court order by failing to produce documents in accordance with the court order, [one of the third party witnesses] failed to tell the truth during [a] deposition and for spoliation of certain files on their computer which were subject to production under the [court's] Order to Compel."). Courts should not shy away from their authority to initiate criminal contempt proceedings when the circumstances warrant such measures. However, in reaching this decision, they cannot ignore the fact that doing so involves compliance with Fed. R. Crim. P. 42, which requires various procedural safeguards, such as referral to the United States Attorney, notice, and a hearing, as discussed below. It seems clear that courts, even those faced with cases involving serious spoliation of evidence, will be reluctant to proceed with criminal contempt proceedings in most instances.
In this case, as the discussions above on pages 7 and 46-48 shows, Defendants clearly were under a duty to preserve ESI relevant to Plaintiff's claims on October 14, 2006, if not earlier, and that, in an unabated destruction continuing for years, failed to comply with that duty. While I have acknowledged that courts must consider issues of proportionality and reasonableness of the alleged spoliator's conduct in determining whether there has been a breach of the preservation duty, neither is at issue in this case.
Proportionality and reasonableness are not at issue because Defendants have never alleged that it would have been an undue burden for them to preserve the ESI they destroyed. Neither is this a case where a hapless party took objectively reasonable steps to preserve ESI, but it nonetheless was destroyed or lost. Defendants candidly admit that "certain CPI ESI was deleted by Pappas and CPI's Computer Engineer Evan DeRouen and/or others after CPI was served with the lawsuit and after a preservation order was issued," and they "take responsibility" for those deletions. Defs.' Opp'n 2. Defendants admit that "between October 14, 2006 and February 17, 2007 thousands of files were deleted from Pappas' laptop computer," id. at 5; that "Pappas made deletions on his laptop" on February 16 and 17, 2007, id. at 2, 7; and that, consistent with Pappas's testimony, "he would put e-mails into a `Deleted Items' folder on his laptop" for what Defendants characterized as "storage purposes," id. at 8 (citation omitted). Acknowledging that the EHD "should not have been disposed of since it was in existence after the lawsuit had been filed," id. at 5, they "take responsibility for . . . the failure to preserve files on the SimpleDrive [EHD]," id. at 2. Defendants also "recognize[] that there has been . . . contradictory testimony about its computer stores, and contradictory testimony about the use of the name Fred Bass." Defs.' Surreply 19. Thus, in this case, the issue is not whether the preservation duty was triggered, or whether Defendants took reasonable and proportional steps to preserve it, or whether the duty was breached. The issue is what sanctions are appropriate, given the nature of Defendants' conduct, the relevance of the ESI that was lost or destroyed, and the prejudice suffered by Plaintiff. See Goodman, 632 F. Supp. 2d at 509.
The second consideration for resolving a spoliation motion is to determine whether the alleged spoliator acted culpably. "Each case will turn on its own facts and the varieties of efforts and failures is infinite." Pension Comm., 685 F. Supp. 2d at 465. The information may have been lost or destroyed inadvertently, "for reasons unrelated to the litigation," or the loss may result from intentional acts, calculated to prevent the other party from accessing the evidence. Rimkus, 688 F. Supp. 2d at 613. Therefore, it has been suggested that the court must rely on its "gut reaction based on years of experience as to whether a litigant has complied with its discovery obligations and how hard it worked to comply." Pension Comm., 685 F. Supp. 2d at 471. As with the elements of duty and breach, the variety of standards employed by courts throughout the United States and the lack of a uniform or consistent approach have caused considerable concern among lawyers and clients regarding what is required, and the risks and consequences of noncompliance.
"Courts differ in their interpretation of the level of intent required before sanctions may be warranted." SEDONA CONFERENCE GLOSSARY, supra, at 48. In United Medical Supply Co. v. United States, 77 Fed. Cl. 257, 266 (Fed. Cl. 2007), the court noted that a "distinct minority" of courts "require a showing of bad faith before any form of sanction is applied"; some courts require a showing of bad faith, but only "for the imposition of certain more serious sanctions"; some do not require bad faith for sanctions, but require more than negligence; and others "require merely that there be a showing of fault." In the Fourth Circuit, for a court to impose some form of sanctions for spoliation, any fault—be it bad faith, willfulness, gross negligence, or ordinary negligence—is a sufficiently culpable mindset. Goodman, 632 F. Supp. 2d at 518, 520; Thompson, F.R.D. at 101; see Pandora Jewelry, LLC v. Chamilia, LLC, No. CCB-06-3041, 2008 WL 4533902, at *9 (D. Md. Sept. 30, 2008). Under existing case law, the nuanced, fact-specific differences among these states of mind become significant in determining what sanctions are appropriate, as discussed infra. See Sampson, 251 F.R.D. at 179 ("Although, some courts require a showing of bad faith before imposing sanctions, the Fourth Circuit requires only a showing of fault, with the degree of fault impacting the severity of sanctions.") (citing Silvestri, 271 F.3d at 590).
Negligence, or "culpable carelessness," is "[t]he failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation[.]" Black's Law Dictionary 846 (Bryan A. Garner ed., abridged 7th ed., West 2000). Negligence is contrasted with "conduct that is intentionally, wantonly, or willfully disregardful of others' rights." Id. With regard to preservation of evidence, if either the failure to collect or preserve evidence or the sloppiness of the review of evidence causes the loss or destruction of relevant information, the spoliator's actions may amount to negligence, gross negligence, or even intentional misconduct. See Pension Comm., 685 F. Supp. 2d at 464 (stating that such acts are "surely" negligence, if not more); Jones, 2010 WL 2106640, at *6 (stating that failure to implement a litigation hold is not negligence per se; reasonableness must be considered). Failure "to assess the accuracy and validity of selected search terms" also could be negligence. See Pension Comm., 685 F. Supp. 2d at 465 (citing Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 259-62 (D. Md. 2008), in which the Court discussed reasonableness of a search to identify and withhold privileged documents).
Gross negligence, which is something more than carelessness, "differs from ordinary negligence only in degree, and not in kind.'" *Pension Comm.*, 685 F. Supp. 2d at 464 (quoting Prosser & Keeton on Torts § 34 at 212 (citations omitted)). In *Jones*, 2010 WL 2106640, at *9, the defendant "did not reasonably prevent employees from destroying [relevant] documents" and "failed to adequately supervise those employees who were asked to preserve documents, such that documents were 'probably' lost. The United States District Court for the Northern District of Illinois, emphasizing reasonableness in its analysis in *Jones*, concluded that the defendant was grossly negligent. Id. The court said that its conclusion did not rise above gross negligence because there was no evidence of "deliberate attempts to wipe' hard drives or to destroy relevant evidence by other technological or manual means." Id. In Pandora Jewelry, 2008 WL 4533902, at *8-9, this Court concluded that it was grossly negligent of the defendants to exchange servers during litigation and to fail to institute a litigation hold even though their emails were automatically archived or deleted after ninety days. This Court in Sampson, 251 F.R.D. at 181-82, concluded that the defendant was negligent, but not grossly negligent, when it failed to implement a litigation hold, because it instructed the employees most involved in the litigation to retain documents. In marked contrast, the United States District Court for the Southern District of New York has concluded that conduct such as the failure to issue a written litigation hold amounts to gross negligence per se. Pension Comm., 685 F. Supp. 2d at 471 (stating that "the following failures support a finding of gross negligence, when the duty to preserve has attached: to issue a written litigation hold; to identify all of the key players and to ensure that their electronic and paper records are preserved; to cease the deletion of email or to preserve the records of former employees that are in a party's possession, custody, or control; and to preserve backup tapes when they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources").
Willfulness is equivalent to intentional, purposeful, or deliberate conduct. Buckley v. Mukasey, 538 F.3d 306, 323 (4th Cir. 2008). In Goodman, 632 F. Supp. 2d at 523, this Court held that the defendant "willfully destroyed evidence that it knew to be relevant" because its chief executive officer deleted her emails, and the defendant destroyed the officer's computer. Conduct that is in bad faith must be willful, but conduct that is willful need not rise to bad faith actions. See Buckley, 538 F.3d at 323; Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995); Goodman, 632 F. Supp. 2d at 520. While bad faith requires "destruction for the purpose of depriving the adversary of the evidence," Powell v. Town of Sharpsburg, 591 F. Supp. 2d 814, 820 (E.D.N.C. 2008), for willfulness, it is sufficient that the actor intended to destroy the evidence. See Goodman, 632 F. Supp. 2d at 520; see also United Med. Supply Co., 77 Fed. Cl. at 268 (distinguishing bad faith and willfulness).
Nevertheless, courts often combine their analysis of willfulness and bad faith. E.g., Metro. Opera Ass'n, 212 F.R.D. at 224-25; Rimkus, 688 F. Supp. 2d at 644; Krumwiede, 2006 WL 1308629, at *9-10. Thus, the following factors supported a finding of intentionality and bad faith in the Fifth Circuit:
[t]he evidence that the defendants knew about the litigation with Rimkus when they deleted the emails; the inconsistencies in the explanations for deleting the emails; the failure to disclose information about personal email accounts that were later revealed as having been used to obtain and disseminate information from Rimkus; and the fact that some of the emails reveal what the defendants had previously denied.
Rimkus, 688 F. Supp. 2d at 644. And, in the Second Circuit, the following facts lead the district court to the same conclusion: defendants "failed to comply with several court orders"; destroyed evidence; failed to search for and produce documents; and lied about "simple but material factual matters." Metro. Opera Ass'n, 212 F.R.D. at 224-25.
In Krumwiede, 2006 WL 1308629, at *9-10, the United States District Court for the Northern District of Illinois found "willful and bad faith spoliation of evidence." Notably, immediately after the defendant in that case sent a preservation letter to Krumwiede's attorney, referring in particular to a laptop in Kruwiede's possession, and again after the court ordered Krumwiede to return the laptop, the laptop "experienced a spike in activity . . . that resulted in the alteration, modification, or destruction of thousands of potentially relevant files and their metadata." Id. at *9. Also, "Krumwiede lied to th[e] Court when he testified that he did not receive notice of the September 15, 2005 order until September 16, 2005," and "continued [to] obstruct[] discovery even after relinquishing control of [the] laptop." Id. at *9-10. The court reached its conclusion based on "the volume and timing of Krumwiede's activities." Id.
Here, the parties disagree about Defendants' level of culpability. Plaintiff characterizes Pappas' behavior as "egregious" and perjurous, and it insists that "Pappas has exhibited a pattern of litigation abuse and a persistent disrespect for the judicial process." Pl.'s Mot. 56, 69. According to Plaintiff, "the record is replete with multiple conscious and affirmative acts by Pappas that led to the deliberate destruction of relevant evidence. Pl.'s Reply 1. Defendants acknowledge wrongdoing but insist that their "culpable state of mind was negligence." Defs.' Opp'n 25. Moreover, according to Defendants, Pappas's September 27, 2007 Rule 37 certification was not false because he was not aware that his production was incomplete. Id. at 9-10. They insist that Plaintiff's allegations that Defendants "manufactured evidence" and removed data instead of producing all ESI are "unfounded." Id. at 14-16. I disagree.
I find the circumstances of this case to be indistinguishable from other cases in which the spoliating party was found to have acted in bad faith. The discussion supra at Sections I.1-I.9 convincingly demonstrates that Pappas, and through him CPI, directly and with the aid of DeRouen and "Federico," set out to delete, destroy, or hide thousands of files containing highly relevant ESI pertaining to Plaintiff's claims. Suffice it also to say that in both Krumwiede, 2006 WL 1308629, at *9-10, and Rimkus, 688 F. Supp. 2d at 607, 629, 644, as well as in this case, the spoliating parties lied about their ESI production; obstructed the discovery process; and intentionally destroyed evidence when they were aware of the lawsuit. As in Rimkus, 688 F. Supp. 2d 598, Pappas disposed of an entire hard drive, despite his knowledge of the lawsuit, and provided wildly inconsistent explanations of his ESI deletions. Id. at 607, 644. As in Krumwiede, 2006 WL 1308629, at *9-10, "the volume and timing" of Defendants' spoliation is telling: Defendants deleted thousands of files and ran programs to ensure their permanent loss immediately following preservation requests and orders, and immediately before scheduled discovery efforts. And, as in Metropolitan Opera Ass'n, 212 F.R.D. at 224-25, Defendants' destruction of evidence was compounded by their failure to comply with numerous court orders. In sum, Defendants took repeated, deliberate measures to prevent the discovery of relevant ESI, clearly acting in bad faith, and if affidavits, depositions, and in open court, Pappas nonchalantly lied about what he had done.
The third consideration is the relevance of the lost evidence. In the context of spoliation, lost or destroyed evidence is "relevant" if "a reasonable trier of fact could conclude that the lost evidence would have supported the claims or defenses of the party that sought it." Thompson, 219 F.R.D. at 101; see Goodman, 632 F. Supp. 2d at 509 (same). It is not enough for the evidence to have been "sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence," i.e., to have any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.'" *Pension Comm.*, 685 F. Supp. 2d at 467 (quoting Fed. R. Evid. 401). Moreover, for the court to issue sanctions, the absence of the evidence must be prejudicial to the party alleging spoliation of evidence. Id.; see *Consol. Aluminum Corp. v. Alcoa, Inc.*, 244 F.R.D. 335, 346 (M.D. La. 2006) (noting that, in determining whether an adverse inference is warranted, the "relevance' factor" involves not only relevance but also "whether the non-destroying party has suffered prejudice from the destruction of the evidence"); see also Rimkus, 688 F. Supp. 2d at 616 (quoting Consol. Aluminum Corp., 244 F.R.D. at 346). Put another way, a finding of "relevance" for purposes of spoliation sanctions is a two-pronged finding of relevance and prejudice.
Spoliation of evidence causes prejudice when, as a result of the spoliation, the party claiming spoliation cannot present "evidence essential to its underlying claim." Krumwiede, 2006 WL 1308629, at *10 (noting that even if the files were only modified and not deleted, "the changes to the file metadata call the authenticity of the files and their content into question and make it impossible for [the defendant] to rely on them"). "Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof." Rimkus, 688 F. Supp. 2d at 613. Generally, courts find prejudice where a party's ability to present its case or to defend is compromised. E.g., Silvestri, 271 F.3d at 593-94 (significant prejudice resulted when plaintiff's failure to preserve vehicle after accident giving rise to litigation "substantially denied the defendant the ability to defend the claim"). However, at least one court has found that the delayed production of evidence causes prejudice. See Jones, 2010 WL 2106640, at *8-9 (noting that the defendant's one-year delay in producing documents caused prejudice to the plaintiff). The court considers prejudice to the party and "prejudice to the judicial system." Krumwiede, 2006 WL 1308629, at *11.
When the party alleging spoliation shows that the other party acted willfully in failing to preserve evidence, the relevance of that evidence is presumed in the Fourth Circuit. Sampson, 251 F.R.D. at 179; Thompson, 219 F.R.D. at 101. Negligent or even grossly negligent conduct is not sufficient to give rise to the presumption; in the absence of intentional loss or destruction of evidence, the party "must establish that the lost documents were relevant to her case." Sampson, 251 F.R.D. at 179; see Thompson, 219 F.R.D. at 101. Similarly, in the Seventh Circuit, unintentional conduct is insufficient for a presumption of relevance. In re Kmart Corp., 371 B.R. 823, 853-54 (Bankr. N.D. Ill. 2007). However, in the Second Circuit, in the court's discretion, "[r]elevance and prejudice may be presumed when the spoliating party acted in bad faith or in a grossly negligent manner."4 Pension Comm., 685 F. Supp. 2d at 467 (emphasis added). Also, "[t]he Fifth Circuit has not explicitly addressed whether even bad-faith destruction of evidence allows a court to presume that the destroyed evidence was relevant or its loss prejudicial." Rimkus, 688 F. Supp. 2d at 617-18. Where there is a presumption, the spoliating party may rebut this presumption by showing "that the innocent party has not been prejudiced by the absence of the missing information." Pension Comm., 685 F. Supp. 2d at 468. If the spoliating party makes such a showing, "the innocent party, of course, may offer evidence to counter that proof." Id. As with the other elements, the lack of a uniform standard regarding the level of culpability required to warrant spoliation sanctions has created uncertainty and added to the concern that institutional and organizational entities have expressed regarding how to conduct themselves in a way that will comply with multiple, inconsistent standards.
Here, Plaintiff alleges that "Defendants' massive and intentional destruction of emails and documents has substantially prejudiced, to various degrees, its ability to prove all of its claims, both in terms of liability and the extent of damages." Pl.'s Reply 43. According to Plaintiff, Defendants' actions caused prejudice because the ESI that Defendants "irretrievably deleted, destroyed and spoliated . . . contained the very information and `fingerprints' that would establish all or most of the elements of Counts I, II, VII, and VIII." Pl.'s Mot. 76. Although Plaintiff concedes that "many of the known deletions . . . were eventually recovered in whole or in part," id., significant numbers of files were permanently destroyed. On the record before me, the evidence of prejudice to Plaintiff is manifest.
Defendants' willful, bad faith conduct allows this Court to presume relevance and prejudice. Defendants utterly fail to rebut this presumption through their inconsistent and incredible explanations for their destruction of ESI. Moreover, as painstakingly discussed in Sections I.2-I.9, supra, it is obvious that the permanent loss of thousands of relevant files that proved that Defendants improperly accessed and used Plaintiff's proprietary information is prejudicial, because, even if the files were cumulative to some extent, Plaintiff's case against Defendants is weaker when it cannot present the overwhelming quantity of evidence it otherwise would have had to support its case. Defendants themselves cannot seriously believe that their willful misconduct did not cause prejudice, because they acquiesced to the entry of a default judgment on Count I, Plaintiff's core claim, a clear concession that the spoliated documents were relevant to that claim and their destruction caused prejudice. And, lest there be any doubt, Defendants affirmatively stated with regard to the copyright claim: ""[W]e've given up on prejudice. . . . which I think was the appropriate thing to do. We gave up on the issue of relevance. . . ." June 25, 2010 Hr'g Tr. 3:16-22. Thus, the loss of ESI deprived Plaintiff of relevant evidence, and this loss was prejudicial.
In determining what sanctions are appropriate, the Court must consider the extent of prejudice, if any, along with the degree of culpability, and, as with the other elements, possible sanctions vary by jurisdiction. See Nucor Corp. v. Bell, 251 F.R.D. 191, 201 (D.S.C. 2009); Rimkus, 688 F. Supp. 2d at 613-15. The harshest sanctions may apply not only when both severe prejudice and bad faith are present, but also when, for example, culpability is minimally present, if there is a considerable showing of prejudice, or, alternatively, the prejudice is minimal but the culpability is great, as discussed infra. For example, in some, but not all, circuits, conduct that does not rise above ordinary negligence may be sanctioned by dismissal if the resulting prejudice is great. Silvestri, 271 F.3d at 593 (stating that dismissal may be an appropriate sanction for negligent conduct "if the prejudice to the defendant is extraordinary, denying it the ability to adequately defend its case" and dismissing case without concluding whether plaintiff's conduct rose above negligence); see Rimkus, 688 F. Supp. 2d at 614-15 ("The First, Fourth, and Ninth Circuits hold that bad faith is not essential to imposing severe sanctions if there is severe prejudice, although the cases often emphasize the presence of bad faith. In the Third Circuit, the courts balance the degree of fault and prejudice.") (footnotes omitted). Conversely, absence of either intentional conduct or significant prejudice may lessen the potential appropriate sanctions. In the Fifth and Eleventh Circuits, for example, courts may not impose severe sanctions absent evidence of bad faith. See Rimkus, 688 F. Supp. 2d at 614; Managed Care Solutions, Inc. v. Essent Healthcare, Inc., No. 09-60351-CIV, 2010 WL 3368654, at *12-13 (S.D. Fla. Aug. 23, 2010). The different approaches among the Circuits regarding the level of culpability that must be shown to warrant imposition of severe sanctions for spoliation is another reason why commentators have expressed such concern about the lack of a consensus standard and the uncertainty it causes.
Sanctions that a federal court may impose for spoliation include assessing attorney's fees and costs, giving the jury an adverse inference instruction, precluding evidence, or imposing the harsh, case-dispositive sanctions of dismissal or judgment by default. Goodman, 632 F. Supp. 2d at 506; In re NTL, Inc. Secs. Litig., 244 F.R.D. at 191. The court may also "treat[] as contempt of court the failure to obey" a court order to provide or permit discovery of ESI evidence. See Fed. R. Civ. P. 37(b)(2)(A)(vii). "While a district court has broad discretion in choosing an appropriate sanction for spoliation, the applicable sanction should be molded to serve the prophylactic, punitive, and remedial rationales underlying the spoliation doctrine.'" *Silvestri*, 271 F.3d at 590 (quoting *West*, 167 F.3d at 779). Put another way, appropriate sanctions should "(1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party.'" Thus, the range of available sanctions serve both normative—designed to punish culpable conduct and deter it in others—and compensatory—designed to put the party adversely affected by the spoliation in a position that is as close to what it would have been in had the spoliation not occurred—functions. Because, as noted above, the duty to preserve relevant evidence is owed to the court, it is also appropriate for a court to consider whether the sanctions it imposes will "prevent abuses of the judicial system" and "promote the efficient administration of justice." Jones, 2010 WL 2106640, at *5. The court must "impose the least harsh sanction that can provide an adequate remedy." Pension Comm., 685 F. Supp. 2d at 469; see Rimkus, 688 F. Supp. 2d at 618.
In this case, Plaintiff has urged this Court to impose the most severe of sanctions, including entry of a default judgment as to all remaining counts—Counts I (copyright infringment), II (unfair competition), VII (Lanham Act violations, namely false advertising and reverse palming off), and VIII (patent violations)—for both liability and damages; assessment of attorney's fees and costs for what likely will amount to most of the litigation costs that Plaintiff has incurred; assessment of a civil fine; and referral of the matter to the United States Attorney for initiation of criminal proceedings against Pappas for "criminal contempt of Court, obstruction of justice, and perjury." Pl.'s Mot. 97, 98, 99. On the record before me, Plaintiff hardly can be blamed for taking such an extreme position. Indeed, as exhaustively inventoried above, Defendants' willful misconduct has had a considerable adverse impact on the Court's pretrial schedule, imposed substantial burden on two judges of this Court and their staffs, and Pappas has essentially thumbed his nose at the Court's efforts to oversee a pretrial process that would facilitate a fair and timely resolution of this case on its merits. Nonetheless, in fashioning spoliation sanctions, Courts must strive to issue orders that generate light, rather than heat, and without ignoring the magnitude of willful misconduct and prejudice, must fashion remedies that strike the appropriate balance between those that are normative and those that are compensatory. With this in mind, I will turn to what sanctions are appropriate in this case.
Courts may order a default judgment or dismissal to "send a strong message to other litigants, who scheme to abuse the discovery process and lie to the Court, that this behavior will not be tolerated and will be severely sanctioned." Krumwiede, 2006 WL 1308629, at *11. In the Fourth Circuit, to order these harshest sanctions, the court must "`"be able to conclude either (1) that the spoliator's conduct was so egregious as to amount to a forfeiture of his claim, or (2) that the effect of the spoliator's conduct was so prejudicial that it substantially denied the defendant the ability to defend the claim."'" Goodman, 632 F. Supp. 2d at 519 (quoting Sampson, 251 F.R.D. at 180 (quoting Silvestri, 271 F.3d at 593)) (emphasis in Goodman). To conclude that the second prong was met, i.e., that there was sufficient prejudice to warrant dismissal or a default judgment, "the Court must examine the record that remains to determine whether it contain[ed] enough data" for the aggrieved party to build its case or defense, and "the Court must decide whether a lesser sanction than dismissal [or default judgment] would level the playing field." Erie Ins. Exch. v. Davenport Insulation, Inc., 659 F. Supp. 2d 701, 707 (D. Md. 2009); see Sampson, 251 F.R.D. at 180 (stating that second prong requires proof that "plaintiff was highly prejudiced and denied the only means to establish her case.").
Although "Silvestri posits an either/or test," Erie Ins. Exch., 659 F. Supp. 2d at 707, indicating two distinct means of justifying severe sanctions, this Court has not terminated a case where a spoliator acted in bad faith, absent a showing of substantial prejudice.6 Elsewhere, dispositive or potentially dispositive sanctions are impermissible without bad faith, even if there is considerable prejudice. See Rimkus, 688 F. Supp. 2d at 614 (In the Seventh, Eighth, Tenth, Eleventh, and D.C. Circuits, "the severe sanctions of granting default judgment, striking pleadings, or giving adverse inference instructions may not be imposed unless there is evidence of `bad faith.'"); see also the Appendix to this Memorandum, Order and Recommendation (identifying requirements by jurisdiction). And, in the Fifth Circuit, "[a] severe sanction such as a default judgment or an adverse inference instruction requires bad faith and prejudice." Id. at 642 (emphasis added). The sheer variety of formulae used by various courts to determine whether case-dispositive sanctions are appropriate also contributes to the difficulty that lawyers and clients experience in attempting to evaluate the risks and consequences of failing to preserve evidence.
In its discretion, the court may order an adverse inference instruction, which informs a jury that it may "draw adverse inferences from . . . the loss of evidence, or the destruction of evidence," by assuming that failure to preserve was because the spoliator was aware that the evidence would have been detrimental. Vodusek, 71 F.3d at 156. Because such a definitive inference is not always warranted, courts have crafted various levels of adverse inference jury instructions: The court may instruct the jury that "certain facts are deemed admitted and must be accepted as true"; impose a mandatory, yet rebuttable, presumption; or "permit[] (but . . . not require) a jury to presume that the lost evidence is both relevant and favorable to the innocent party." Pension Comm., 685 F. Supp. 2d at 470-71; see examples cited in the Appendix to this Memorandum, Order and Recommendation. In this Circuit, to impose an adverse jury instruction, the court "must only find that the spoliator acted willfully in the destruction of evidence." Goodman, 632 F. Supp. 2d at 519 (citing Vodusek, 71 F.3d 148, and noting at footnote 15 that "in the Fourth Circuit, the Vodusek standard detailing the requirements for an adverse jury instruction remains applicable," rather than the oft-cited Zubulake IV standard from the Southern District of New York, because although it "remains insightful," the Zubulake IV standard "could be read to limit the availability of sanctions" in this Circuit); see Sampson, 251 F.R.D. at 181. But see Pension Comm., 685 F. Supp. 2d at 478-79 (stating that an adverse jury instruction was warranted for the grossly negligent, but unintentional, conduct).7 While negligence or even gross negligence is not sufficient in this Circuit, the conduct need not rise to the level of bad faith. Goodman, 632 F. Supp. 2d at 519. But see Rimkus, 688 F. Supp. 2d at 617 (stating that "the severe sanctions of . . . giving adverse inference instructions may not be imposed unless there is evidence of `bad faith.'"); see also Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008) (same); Johnson v. Avco Corp., 702 F. Supp. 2d 1093, 1110 (E.D. Mo. 2010) (same); Stevenson v. Union Pac. R.R., 354 F.3d 739, 745, 747 (8th Cir. 2004) (stating that if spoliation occurs before litigation commences, there must be evidence of bad faith for the court to impose an adverse inference instruction, but if spoliation occurs during litigation, the court may impose an adverse inference instruction "even absent an explicit bad faith finding"). The court must also consider relevance and prejudice. Pension Comm., 685 F. Supp. 2d at 467; see Vodusek, 71 F.3d at 156 ("To draw an adverse inference from the absence, loss or destruction of evidence, it would have to appear that the evidence would have been relevant to an issue at trial and otherwise would naturally have been introduced into evidence."). Once again, the approaches taken by courts vary widely, making predictability difficult for parties who are trying to determine what they must preserve, and what can happen if they do not.
Less severe sanctions include costs, attorney's fees, and fines, which not only compensate the prejudiced party but also "punish the offending party for its actions" and "deter the litigant's conduct, sending the message that egregious conduct will not be tolerated." See Pension Comm., 685 F. Supp. 2d at 467, 471; Goodman, 632 F. Supp. 2d at 506. (citations and quotation marks omitted). The court's "inquiry focuses more on the conduct of the spoliating party than on whether documents were lost, and, if so, whether those documents were relevant and resulted in prejudice to the innocent party." Pension Comm., 685 F. Supp. 2d at 467. This Court will award costs or fees in conjunction with a spoliation motion as an alternative to a harsher sanction; if further discovery is necessary due to the spoliation; or in addition to another sanction, in which case the award may be for "reasonable expenses incurred in making the motion, including attorney's fees," or also for the cost of investigating the spoliator's conduct. Goodman, 632 F. Supp. 2d at 524. Additionally, a few courts have ordered the spoliating party to pay a fine to the clerk of court or a bar association for prolonging litigation and wasting the court's time and resources. E.g., Pinstripe, Inc. v. Manpower, Inc., No. 07-CV-620-GKF-PJC, 2009 WL 2252131, at *4 (N.D. Okla. July 29, 2009); Claredi v. Seebeyond Tech. Corp., No. 4:04CV1304 RWS, 2007 WL 735018, at *4 (E.D. Mo. Mar. 8, 2007); Wachtel v. Health Net, Inc., 239 F.R.D. 81, 111 (D.N.J. 2006); Turnage, 115 F.R.D. at 559. However, as stated supra at page 59, it is unclear whether these unappealed trial court holdings would withstand appellate review, because in similar cases the Fourth and Tenth Circuits have vacated discovery sanctions ordering the payment of money to the Clerk of the Court, deeming them to be criminal contempt sanctions, which are unavailable without the enhanced due process procedure requirements criminal contempt proceedings require. Bradley v. Am. Household, Inc., 378 F.3d 373, 377-79 (4th Cir. 2004); Buffington v. Baltimore Cnty., Md., 913 F.2d 113, 133 (4th Cir. 1990); Law v. Nat'l Collegiate Athletic Ass'n, 134 F.3d 1438, 1442-44 (10th Cir. 1998).
Fed. R. Civ. P. 37(b)(2)(A)(vii) provides that the court may "treat[] as contempt of court the failure to obey" a court order to provide or permit discovery of ESI evidence. Similarly, pursuant to its inherent authority, the court may impose fines or prison sentences for contempt and enforce "the observance of order." United States v. Hudson, 11 U.S. (7 Cranch) 32, 34 (1812). Contempt sanctions may be civil or criminal. Buffington, 913 F.2d at 133-34.
When the nature of the relief and the purpose for which the contempt sanction is imposed is remedial and intended to coerce the contemnor into compliance with court orders or to compensate the complainant for losses sustained, the contempt is civil; if, on the other hand, the relief seeks to vindicate the authority of the court by punishing the contemnor and deterring future litigants' misconduct, the contempt is criminal. . . .
If the relief provided is a sentence of imprisonment, it is remedial if "the defendant stands committed unless and until he performs the affirmative act required by the court's order," and is punitive if "the sentence is limited to imprisonment for a definite period." If the relief provided is a fine, it is remedial when it is paid to the complainant, and punitive when it is paid to the court, though a fine that would be payable to the court is also remedial when the defendant can avoid paying the fine simply by performing the affirmative act required by the court's order.
Id. (quoting Hicks v. Feiock, 485 U.S. 624, 631-32 (1988) (citations omitted)); see also Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 828, (1994) ("The paradigmatic coercive, civil contempt sanction . . . involves confining a contemnor indefinitely until he complies with an affirmative command such as an order `to pay alimony, or to surrender property ordered to be turned over to a receiver, or to make a conveyance.'" (quoting Gompers v. Bucks Cnty. Stove & Range Co., 221 U.S. 418 (1911))); Bradley, 378 F.3d at 378 (discussing the "basic difference between civil and criminal contempt sanctions" and quoting Buffington, 913 F.2d at 133).