Closing The Loop

Virginia could soon adopt legislation that would make it much easier to obtain potentially case-changing sanctions for the spoliation of evidence. Under proposed legislation currently on the fast track to the governor's desk, should evidence be altered or deleted once a lawsuit is reasonably anticipated, litigants in the Commonwealth could face a permissive adverse inference instruction allowing the jury to determine that the evidence would have been detrimental to the spoliating party—without any showing that the destruction of evidence was done in bad faith or even intentionally.

The law, HB 1336, is a renunciation of the Virginia Supreme Court’s recent Emerald Point, LLC v. Hawkins decision, and, in turn, of the federal courts' approach to spoliation as well.

 

Virginia Is For Lovers (of Sanctions)

Under the legislation, introduced this January by Delegate Gregory D. Habeeb of Virginia’s 8th District, any destruction, alteration, or failure to preserve evidence in the face of pending litigation could result in a permissive adverse inference. The bill, as amended by the Senate Committee for Courts of Justice, states:

If a party, or such party's agents, employees, or servants, has possession, custody, or control of evidence that such party, or such party's agents, employees, or servants, has been put on notice that such evidence is material to pending or probable litigation, and such evidence is disposed of, altered, concealed, destroyed, or not preserved by such party, or such party's agents, employees, or servants, or by another person or entity at the direction or with the consent or knowledge of such party, or such party's agents, employees, or servants, a court may instruct that a jury may infer, subject to any explanation that may be made by such party, that, if such evidence had been introduced, such evidence would be detrimental to the case of such party.

Importantly:

The party seeking such instruction need not show that the disposal of, alteration of, concealing of, or failure to preserve such evidence was undertaken intentionally or in bad faith in order for such instruction to be given.

“Evidence,” here includes ESI, paper records and documents, and “any other materials that any party [...] may have desired to introduce at trial.” The bill further specifies that “probable litigation” exists “where there has been a specific threat of litigation”.

 

An Older Approach to Sanctions for the Old Dominion

If this sounds awfully familiar, that’s because it is. The new Virginia rule operates similarly to the spoliation sanction regime that was in place in federal courts prior to the 2015 amendments. In 2002’s Residential Funding Corp. v. DeGeorge Financial Corp., for example, the Second Circuit ruled that “ordinary negligence” was sufficient to support an adverse inference instruction for the spoliation of ESI, rejecting arguments that such sanctions were only appropriate following a showing of gross negligence or bad faith. Other courts rebuffed that demanding standard, resulting in significant variation in approaches to sanctions between jurisdictions. Meanwhile, the 2006 rules amendments created a “safe harbor” provision for the loss of ESI “as a result of the routine, good-faith operation of an electronic information system,” but did little to stem the uncertainty around where and when harsh sanctions would be applied.

Of course, the Residential Funding approach allowed a host of sanctions, from cost shifting, to adverse inferences, to default judgments. The Virginia rule simply allows a permissive, rather than a mandatory, adverse inference jury instruction and one that is subject, thanks to the Senate amendments, to “any explanation that may be made” by the spoliating party.

However, the rule still feels closer to the past than the present. That’s because in 2015, the Federal Rules of Civil Procedure were updated, in part to address concerns over excessive and unpredictable sanctions for the spoliation of ESI. For an adverse inference instruction like that which Virginia proposes, the federal rules now explicitly require a finding “that the party acted with the intent to deprive another party of the information’s use in the litigation”.

Federal courts are still dealing with the impact of those changes. But in Virginia courts, there was no similar pivot in terms of spoliation sanctions—until just a few weeks ago.

 

Richmond Rejects the D.C. Approach—And VA's Supreme Court

So why the ESI revanchism in Richmond? The Virginia Supreme Court. Just two months ago, that court decided Emerald Point, LLC v. Hawkins, a landlord-tenant lawsuit over alleged carbon monoxide poisoning, possibly caused by a faulty furnace. At trial, a jury found in favor of tenants of a Virginia Beach apartment complex who were injured by excessive CO levels in their units.

At trial, the court allowed an adverse inference for the landlord’s spoliation of evidence. That evidence? Not emails about the furnace’s condition, or records of communications with city inspectors, or ESI from carbon monoxide detectors. It was the furnace itself. After replacing the furnace following the detection of high CO levels, the landlord stored it for a year in its maintenance bay, then threw it out a few months before the tenants’ lawsuit was filed.

The jury was instructed that they could infer that the destroyed evidence would have been detrimental to the landlord's case, inferring “whatever force or effect you think is appropriate under all the facts and circumstances.” The instruction was issued even though the landlord “did nothing in bad faith,” according to the trial court. 

Whether such an adverse inference was allowable was an issue of first impression for the Virginia Supreme Court. Where, the Supreme Court ruled, there is no finding of bad faith spoliation, an adverse inference sanction is inappropriate. In so ruling, the Virginia Supreme Court explicitly adopted the standard established by amended Federal Rule of Civil Procedure 37(e)(2). “[W]e are of opinion that the standard it sets forth and the rationale underlying it as stated in the Advisory Committee Notes are persuasive,” the court explained. “We are further of opinion that the resolution of a spoliation issue in the Commonwealth should be guided by the same standard and applicable to all forms of spoliation evidence.”

The Commonwealth’s legislature disagrees, it seems.

HB 1336 legislatively overrules the state Supreme Court with regards to spoliation, making sure that Rule 37(e) is not the rule that applies when it comes to spoliation.

The bill passed in Virginia’s House of Delegates in early February, by a vote of 99-0, and is currently pending before the Senate, where it appears to be on track to pass as well. The result is likely to be a stricter sanctions regime for litigants in Virginia and a shift away from the more sanction-adverse approach federal courts adopted barely two years ago.


This post was authored by Casey C. Sullivan, who leads education and awareness efforts at Logikcull. You can reach him at casey.sullivan@logikcull.com or on Twitter at @caseycsull. 
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