Sanctions for Lost or Destroyed ESI: FRCP 37(e)’s Application Amid the Advancement of Technology

As technology continues to advance, it has become more difficult for bad-faith litigants to get away with altering or destroying electronically stored information (ESI). The recovery of lost or destroyed ESI is easier than ever due to new recovery tools available to attorneys and consultants. Litigants are also more cognizant of widespread document-retention requirements, leading to a decrease in lost or destroyed ESI.

Rule 37(e) of the Federal Rules of Civil Procedure (FRCP) was enacted to allow courts to impose sanctions when ESI cannot be recovered due to a party’s intentional tampering with potentially relevant ESI.  But what happens when ESI is not completely lost or destroyed? What recourse is available when ESI has been altered or may still be partially recoverable? In these instances, courts may rely on their inherent power to sanction a litigant for the attempted spoliation of ESI. This article addresses the limited scope of Rule 37(e) and provides a case study illustrating how courts may use their inherent authority to sanction when the requirements of Rule 37(e) are not met.

The Limited Scope of FRCP 37(e)

Rule 37(e) does not provide a remedy when ESI is recoverable or altered. The rule applies only when ESI is lost or destroyed and “it cannot be restored or replaced through additional discovery.” The comments to the 2015 amendments to Rule 37(e) state that the rule “forecloses reliance on inherent authority or state law to determine when certain measures should be used.” The comments further state that when a party fails to take reasonable steps to preserve ESI “and the information is lost as a result, Rule 37(e) directs that the initial focus should be on whether the lost information can be restored or replaced through additional discovery.”  Finally, the comments state that “[t]his subdivision applies only if information should have been preserved in the anticipation or conduct of litigation, a party failed to take reasonable steps to preserve the information, information was lost as a result, and the information could not be restored or replaced by additional discovery.”

The plain language of the rule and its comments make clear that Rule 37(e) is not triggered when the lost or destroyed ESI can be recovered.  So what happens when a party attempts—and fails—to alter or destroy evidence completely?  Under this scenario, a court might end the analysis at Rule 37(e) and not impose sanctions, even when a litigant intentionally tampers with ESI.  Several courts have refrained from applying their well-recognized inherit authority to sanction parties attempting to modify or destroy evidence. By not imposing sanctions, courts allow bad-faith actors to avoid any adverse consequences, thereby negating the deterrent effect that sanctions are designed to promote.

The policy underlying the inherent power of the courts to sanction is the necessity of preserving the integrity of the judicial process to retain confidence that the process works to uncover the truth. This policy is not achieved by ignoring the shortcomings of Rule 37(e) and allowing a bad actor off the hook. A simple Google search will provide a plethora of software or programs that are capable of recovering lost evidence. With recovery tools more accessible than ever, a litigant’s conduct may not fall under Rule 37(e).

Several courts have declined to impose sanctions because a party’s conduct is not technically subject to Rule 37(e).  In MB Realty Group v. Gaston County Board of Education, a court refused to apply its inherent authority to sanction a party for deleting emails and text messages. After determining that Rule 37(e) did not apply, the court relied on case law within its district to disclaim its inherent authority. The court observed that the Advisory Committee’s notes on Rule 37(e) foreclosed reliance on inherent authority. Thus, the court denied the moving party’s request for sanctions.

In a similar case, a court held that a party who could not satisfy the required elements for sanctions under Rule 37(e) would not be awarded sanctions pursuant to the court’s inherent authority. In Steves and Sons v. JELD-WEN, the defendants deleted emails that were later recovered. The court found sanctions were not appropriate under Rule 37(e) since the ESI was recoverable, and there was little evidence of the party’s intent—even though the defendant did not make reasonable preservation efforts. Electing not to award sanctions under Rule 37(e), the court turned to its inherent authority. The court refused to impose sanctions upon finding that the defendant’s culpability in failing to suspend his standard document-deletion policy was not substantial. The court concluded that when a party cannot satisfy the required elements of Rule 37(e), a claim for sanctions would not be permitted under the court’s inherent authority.

The limited scope of Rule 37(e), which does not permit sanctions for spoliation of ESI when it is recoverable, poses a dilemma for litigants seeking sanctions against a party that deliberately, but unsuccessfully, attempts to alter or destroy evidence. Some courts have simply denied sanctions after finding Rule 37(e) does not apply.  Other courts, however, have utilized their inherent authority to sanction parties for the attempted destruction of ESI in bad faith.

A Case Study

After the 2015 amendments to Rule 37(e), at least three district courts continued to recognize the inherent power to sanction when ESI is not completely lost or destroyed.  In the most recent of these decisions, the U.S. District Court for the Eastern District of Louisiana imposed sanctions on a plaintiff who altered and deleted photos of a project site. In Guarisco v. Boh Bros Construction Co., LLC, the plaintiff in a car-accident case alleged that a traffic sign, alerting drivers of two-way traffic, was not placed near a roadway blocked off for construction. During the discovery process, the defendant-contractor suspected that the plaintiff had manipulated a photo taken on her iPhone immediately after the accident to remove the traffic sign she alleged was not in place.  The contractor moved to compel production of the original photos stored in the plaintiff’s iCloud account.  Under court order, the plaintiff produced a set of photos that differed from the original production, including one photo that appeared to show the sign in place on the day of the accident.  However, the plaintiff argued this photo was taken several days after the accident, contending—without evidence—that the contractor had installed the sign after the accident to make it appear that the sign was in place on the day of the accident.

The contractor retained a forensic technology expert to examine the plaintiff’s photos.  The expert used Adobe Photoshop to overlay the supposed original photo without the sign and the later-produced photo that included the sign.  The overlay demonstrated beyond doubt that the photos were one and the same, except that the earlier-produced photo had been cropped to remove the sign.  The left-hand side of the photo had been removed:

But that did not end the inquiry.  The expert also determined based on an evaluation of metadata that the photo with the two-way traffic sign was taken on the day of the accident, not days later as the plaintiff claimed.  The expert also used several programs, including DFPLive and ExifTools, to determine who had altered the photo.  The metadata recovered from the photo revealed that it had been altered on a Mac computer owned by the plaintiff.  Based on a forensic examination of the photos, the technology expert also concluded that the plaintiff had deleted other photos from the same time period. 

Upon reviewing the overwhelming forensic evidence, the Guarisco court found that Rule 37(e) did not apply because the ESI had not been permanently lost.  But due to the egregious conduct demonstrated through technology, the court decided to use its inherent power to sanction the plaintiff.  The Guarisco court ruled that it had the inherent authority to sanction the plaintiff for deliberately altering evidence, reasoning that courts should not be constrained from imposing sanctions, where appropriate, when a procedural rule does not address the precise conduct at issue. The court concluded that to “allow a party to avoid sanctions merely because the attempt to destroy evidence was unsuccessful would be to ignore one of the primary goals of sanctioning spoliative conduct.”  The Guarisco court explained that a “party’s falsification of evidence and attempted destruction of authentic, competing information threatens the integrity of judicial proceedings even if the authentic evidence is not successfully deleted.” After dismissing the case on the merits, the court imposed sanctions against the plaintiff in the form of expert’s fees.

Conclusion

Although Rule 37(e) does not apply when ESI can be recovered, courts have the latitude to impose sanctions under their inherent authority.  Due to the rapid advancement of technology, parties that find themselves without recourse under Rule 37(e) can pursue sanctions by relying on recovery tools to prove a party has attempted to modify or destroy ESI.  Bad-faith litigants who unsuccessfully lose or destroy ESI should be on notice that their conduct may not be shielded by the limited scope of Rule 37(e).