New Jersey District Judge Upholds Sanctions for Camden County’s Grossly Negligent Litigation Hold Procedures

On March 21, 2012, New Jersey District Judge Noel Hillman upheld Magistrate Judge Ann Marie Donio’s ruling against Camden County, New Jersey (the “County”) for spoliation of evidence in an insurance dispute arising out of injuries to a motorist on a county road. State National Insurance Co. v. County of Camden, 08-cv-5128 (D.N.J. March 21, 2012). Judge Hillman’s March 21, 2012, decision addresses the County’s appeal of a June 30, 2011, decision of Judge Donio granting State National Insurance Company’s (“State National”) motion regarding the County’s failure to preserve electronically stored information (“ESI”). Specifically, the County failed to institute a litigation hold, to disable its automatic email deletion program, and to preserve copies of its backup tapes after litigation was commenced.

In its June 30, 2011, opinion, the Court denied State National’s request for an adverse inference based upon allegedly missing emails from the County’s production, as it explained that there was an insufficient record to support such a finding. This is a long standing and common obstacle faced by many litigants dissatisfied with an adversary’s production, but who otherwise lack specific evidence demonstrating spoliation particularly in jurisdictions that require some showing of relevance of the missing evidence for certain spoliation sanctions. Treppel v. Biovail Corp., 233 F.R.D. 363 (S.D.N.Y. 2006). Not surprisingly, the Court noted that “in the absence of specific testimony or other evidence, such as affidavits, that the types of email communications State National alleges are missing from the County’s production existed, State National has not sufficiently demonstrated that the emails it asserts are missing existed.”

However, the Court refused to let the County off unscathed for its “gross negligence.” In particular, the Court found that the County’s failure to institute a litigation hold, to disable its automatic email deletion program and to preserve copies of its backup tapes warranted the imposition of reasonable attorneys’ fees and costs associated with State National’s time incurred in investigating the County’s email production. The Court reasoned:

In this case, when a party fails to issue a litigation hold despite pending litigation and does not preserve emails of relevant custodians in breach of its duty, the adversary is forced to explore whether sanctions such as an adverse inference or more drastic sanctions – dismissal or suppression of evidence – are warranted. To perform such an investigation requires the non-breaching party to expend attorney time, and in some cases, expert fees to determine the extent and scope of the deletion or destruction. If, following such an investigation, there is no basis to award such spoliation sanctions or, as in this case, a court concludes that there is a failure to demonstrate that an adverse inference is warranted, the non-breaching party still has suffered damages in the context of attorneys’ fees and costs.

The County appealed the Court’s June 30, 2011, decision, as it asserted that sanctions were inappropriate because there had been no showing of spoliation. The District Court summarily rejected the County’s arguments, and noted that the County failed to provide the Court with any cases calling into question the magistrate judge’s ability to impose sanctions in the form of attorneys’ fees and costs incurred by State National as a result of the County’s failure to preserve evidence.

In addition to the obvious lesson that litigation hold procedures must be timely and comprehensive, this case teaches that Practitioners should, to the extent possible, take all steps available to them to develop a record regarding the nature of the spoliated evidence, and particularly its relevance to the issues in the case, before making an application to the court for severe sanctions like an adverse inference or dismissal of claims/suppression of defenses.

A prior post discusses a New Jersey District Court’s finding of “gross negligence” based at least in part upon a party’s failure to institute a timely litigation hold.