Confusion Continues Regarding the Court's Power to Use Inherent Authority as Basis for E-Discovery Sanctions

Alsadi v. Intel Corporation (D. Ariz. July 17, 2020) shows that judges across the country are not in alignment on whether spoliation sanctions can be warranted under the court’s inherent authority and outside the scope of FRCP 37(e). This ruling clearly states that inherent authority should not be used when issuing these e-discovery sanctions.

Overview:

In this tort lawsuit involving the inadvertent indigestion of chemicals, the plaintiffs motion for an negative adverse inference instruction against the defendant for “Intel’s alleged failure to collect and preserve data showing actual levels of hazardous emissions.”

The plaintiffs contend that FRCP 37(e) should not apply to whether sanctions were warranted because the evidence wasn’t stored on a computer system. Because of that the plaintiffs argue that the court should use their inherent authority to issue the adverse inference.

The defendants counter by arguing that “it had no duty to preserve evidence before it received notice that litigation was probable, that it had no duty to create evidence of hazardous emission levels, and that plaintiffs ignore Federal Rule of Civil Procedure 37(e), which governs negative inference sanctions for the loss of electronically stored information ("ESI").”

Ruling:

• • Sanctions Denied. The court found that the plaintiffs could not prove that the defendants acted with an intent to deprive the requested data so an adverse instruction was not warranted. The plaintiffs only could speculate to the reasoning for why the defendant lost the requested data.
    
  • What is ESI? The presiding judge, David Campbell, who helped draft Rule 37(e) explained that the meaning of ESI under this rule was to be construed broadly to include any type of stored electronic data (charts, graphs, writings, drawings, images, sound recordings, etc.), including the data plaintiffs requested.
    
  • FRCP Exclusive Standard for ESI Spoliation Sanctions. Judge Campbell re-enforced the Rule Committee Notes stating that Rule 37(e) should be the exclusive standard for assessing ESI spoliation sanctions. Additionally, he quoted case law supporting this claim citing, "The 2015 amendment to Rule 37(e) now ‘forecloses reliance on inherent authority’ to determine whether and what sanctions are appropriate for a party's loss of discoverable ESI."
    

Expert Opinion from Hon. Andrew Peck, J.D. Sr. Counsel, DLA Piper

"Judge Campbell held that ESI need not be stored on a computer, but any device that can store information. The line between computers and other devices, including cell phones, is too blurry to have any significance. But more important is Judge Campbell’s analysis of Rule 37(e), especially since he was chair of the Rules Committee. A party seeking spoliation sanctions must analyze the entire Rule. Relief may be granted when ESI is lost or destroyed, but not for failure to create ESI in the first place (e.g., before litigation is anticipated. And Judge Campbell authoritatively states that Rule 37(e) precludes reliance on a court’s inherent authority."

Case Law Tip:

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