Clearing the Bar: SDNY Reminds Litigants of High Standard for Imposing Sanctions Under Rule 37(e)(2)

A recent decision out of the Southern District of New York once again illustrates the risk of sanctions under several sections of Fed. R. Civ. P. (“Rule”) 37 for spoliation of evidence and discovery misconduct, as well as the high burden a party must satisfy when seeking sanctions under Rule 37(e)(2). In Bursztein v. Best Buy Stores, L.P., despite finding that defendant flouted discovery obligations, failed to communicate promptly with its adversary, and raised baseless objections throughout discovery, the Court declined to impose sanctions under Rule 37(e)(2), though it did award sanctions – both monetary and in the form of evidence submission to the jury – under Rule 37(e)(1).

In Bursztein, plaintiff alleged she tripped and fell over a raised piece of metal at the top of an escalator in a Best Buy store which resulted in an injured shoulder. At the outset of discovery, plaintiff requested video surveillance footage, inspection and maintenance records for the escalator, as well as Best Buy’s customer safety policy. Best Buy objected to plaintiff’s initial requests and only produced two documents – a safety incident review related to plaintiff’s accident and a “Facilities Services” agreement. Best Buy asserted it did not possess any other responsive documents to plaintiff’s requests. Subsequently, plaintiff served Best Buy with multiple deficiency letters until Best Buy finally responded and asserted that it did not possess any surveillance footage of the fall, that no maintenance or inspection records were kept for the escalator, and that no schedule was maintained for the maintenance or inspection of the escalator.

Tabling this discovery dispute, the parties commenced with the Rule 30(b)(6) deposition of Best Buy’s representative – the general manager for the store where the fall occurred. Despite being underprepared to testify about the noticed deposition topics, the general manager did acknowledge the existence of relevant discovery that Best Buy claimed it did not possess. The representative testified that: (1) copies of the store safety policies and procedures were provided to employees; (2) employees were trained through on-line videos; (3) all repair and maintenance requests were logged on an internal system; (4) surveillance footage of the fall existed; and (5) the general manager personally preserved the footage. Thereafter, plaintiff again served demands for the surveillance footage, the employee training materials and the relevant entries in Best Buy’s internal system related to maintenance and inspection of the escalator.

Two months later, Best Buy responded asserting the same objections in its initial responses, but attached escalator invoices for maintenance and inspection for the relevant time period. Best Buy, however, claimed that employee training materials and procedures for store maintenance and inspection were no longer in Best Buy’s custody and control. Further, Best Buy claimed that the general manager was “mistaken” in his testimony and Best Buy did not possess any surveillance footage of the fall. After plaintiff filed the motion for sanctions at issue, and five months after his deposition, the general manager recanted his testimony via sworn affidavit claiming to have misunderstood the question regarding the surveillance footage.

In her motion, plaintiff alleged that Best Buy violated the Court’s Rule 26(f) order and spoliated evidence and requested sanctions under Rule 37. Specifically, the motion focused on four categories of evidence: (1) video surveillance footage; (2) store safety training materials; (3) maintenance and inspection requests; and (4) inspection reports for the escalator. The Court’s holding recognized several important points. First, the Court found that sanctions in spoliation and discovery abuse situations such as this may be available under Rule 37(b)(2) which provides for sanctions where a party “fails to obey a[] [court] order or provide or permit discovery” including pursuant to Rule 26(f). Since most cases, like this one, commence discovery with a Rule 26(f) order entered by the court, spoliation and discovery misconduct will constitute a violation of that order sufficient to warrant sanctions under Rule 37(b)(2).

With respect to Rule 37(e), which provides the remedy for spoliation of ESI, as we have previously discussed in this blog, a court may impose sanctions where a party fails to take reasonable steps to preserve such information and, as a result, discoverable ESI is lost or destroyed. For Rule 37(e) to be applicable, there must be (1) a duty to preserve ESI; (2) the ESI must be lost or destroyed; (3) the ESI was lost or destroyed as a result of the party’s failure to take reasonable steps to preserve it; and (4) the ESI cannot be attained through any other source.

Here, the Court found all four prongs of Rule 37(e) satisfied. Interestingly, in analyzing the “duty to preserve” element, the Court focused on the clear notice provided to Best Buy prior to the spoliation that the tapes and training materials constituted relevant evidence. Left unaddressed is the fact that the law does not require such external notification of the obligation to preserve if circumstances – as appear to be present in this case – dictate that the party should have been independently aware of the relevance of the evidence. A party’s obligation is inherent and is triggered under a “knew or should have known standard” regarding the relevance of the spoliated evidence. Based on its findings, the Court found sufficient basis to impose remedial measures under Rule 37(e)(1).

However, employing the “clear and convincing evidence” standard, the Court declined to find Best Buy acted with an intent to deprive plaintiff of the information destroyed pursuant to Rule 37(e)(2). In holding Best Buy lacked the requisite intent, the Court compared Best Buy’s actions to those engaged in by the defendants in Moody v. CSX Transp., Inc. There, the defendants actively erased extremely relevant data for the litigation and, therefore, the court imposed sanctions under Rule 37(e)(2). Here, while noting it was a “close call”, the Court explained that plaintiff had failed to provide any evidence that Best Buy affirmatively acted to purposefully destroy the surveillance footage to deprive plaintiff of the evidence. Therefore, because it was unclear whether the lost ESI resulted from Best Buy’s purposeful conduct or its incompetence, the Court declined to impose sanctions under Rule 37(e)(2).

With Rule 37(e)(2) sanctions unavailable, the Court resorted to the remedial measures available under Rule 37(e)(1) because plaintiff was clearly prejudiced by the loss of the ESI that Best Buy failed to preserve. The missing evidence – i.e., surveillance footage – was the primary evidence that Best Buy had actual or constructive notice of the dangerous condition on the escalator landing and Best Buy’s negligence in addressing this condition. In light of this prejudice, the Court allowed plaintiff to present evidence at trial regarding the existence of the footage and Best Buy’s spoliation of the “liability-related” ESI. Further, the Court imposed monetary sanctions on Best Buy, noting its dilatory conduct and failure to take its discovery obligations seriously which necessitated plaintiff’s motion.

Bursztein provides another example of the remedial measures that may be imposed in spoliation of evidence situations under several sections of Rule 37, and the high evidentiary burden a moving party must satisfy when seeking serious sanctions of dismissal or adverse inference under Rule 37(e)(2).