What is Spoliation? Why does my business need to worry about it?
If you or your business are involved in a lawsuit or a potential lawsuit, you need to be concerned about the concept of “spoliation of evidence.” Spoliation of evidence occurs when an individual or entity breaches its duty to preserve relevant evidence. In the 2013 case of DuPont v. Kolon, a federal judge in the Eastern District of Virginia awarded DuPont approximately $4.5M in expenses, costs and attorney’s fees as a result of Kolom’s violation of its “obligation not to spoliate evidence”. This sanction award was over and above the actual damages of $919.9M awarded by a jury to DuPont. In addition, the charge of spoliation at trial resulted in the jury receiving an “adverse inference instruction”, which may have contributed to the verdict and/or the amount of damages awarded. (An “adverse inference instruction” is when the jury is told that it can assume that the missing evidence would have been unfavorable to the party who destroyed the evidence.)
Although the size of the spoliation award in the DuPont case was extraordinary, spoliation motions and sanctions have become increasingly common. Having to defend a spoliation motion can be time consuming, nerve-wracking and expensive. Therefore, it is important to know the rules and avoid spoliation claims.
Before an aggrieved party files a lawsuit against you or your company, you may receive a letter from such party containing a warning not to spoliate evidence. Upon receipt of such a letter, you should immediately take steps to ensure that no documents or other evidence relevant to the aggrieved party’s claims are permanently destroyed. Failure to do so is likely to result in a sanctions award, regardless of whether the destruction was intentional or negligent. Even in the absence of such a warning, you should avoid permanently destroying any documents relevant to recent transactions and events that have any likelihood of being the basis for future litigation, as sanctions may still be awarded in such cases. Once the lawsuit commences, parties to a litigation have a duty to preserve evidence.
In order to permit an adverse inference, there must be a showing that there was a duty to preserve the evidence and that the missing evidence was relevant, not just cumulative.
Virginia Rule 3:12 provides the judge hearing the spoliation issue discretion to impose a wide range of sanctions, including:
1. Entering a default judgment when there is a showing of bad faith.
2. Dismissal of a claim or defense for intentional or negligent spoliation.
3. A jury instruction, or, in a bench trial, an admission that the missing evidence would have been adverse to the party destroying the evidence.
4. Limitations on evidence that may be admitted at trial by the offending party.
5. Striking out pleadings or parts thereof.
6. Staying further proceedings.
7. A monetary sanction award of attorney’s fee and costs related to spoliation, as well as the additional expenses required to reconstruct the missing evidence.
Virginia thus far has not held non-parties responsible for spoliation of evidence. However, since there is no specific prohibition in the law against holding non-parties liable for spoliation, it is possible that in the future an independent legal action will be allowed against non-parties that destroy evidence. Some attorneys feel that it is unfair for a non-party to withhold or destroy evidence with impunity, arguing that a non-party should be held accountable if it receives notice to preserve evidence.
Attacking the opposing party in court based on spoliation can be an effective trial strategy. Therefore, if you intend to file a lawsuit or you see one coming at you, persevere your hard and electronic files, as well as physical evidence related to the claim. Otherwise, you may have to explain why these items are no longer available. Many companies are adopting written retention policies so that they can demonstrate that destroyed or destroyed documents and electronic files were the result of reasonable routine destruction, and not done to destroy evidence.
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