Weekly Case Law Update: New Rule 37(e) & Inherent Authority More Ambiguous than Before

Case #1: Hsueh v. N.Y. State Dep’t of Fin. Sers. (S.D.N.Y March 31, 2017)

Why this Case is Important Rule 37(e) does not apply when intentional spoliation occurs, empowering the court to use inherent authority to issue sanctions.

Case Facts:

• Sexual harassment case in which the plaintiff created a digital recording of her meeting with an HR representative.
• After spoliation sanctions were filed, the plaintiff found the supposedly deleted audio recording.

Ruling:

• Based on the court’s inherent authority, the court issued an adverse inference against plaintiff.
• Rule 37(e) did not apply, because the spoliation in this case was intentional.

Case #2: United States ex. Rel. Scutellaro v. Capitol Supply (D.C. Apr 19, 2017)

Why this Case is Important

Violations of regulatory or contractual obligations are not within the purview of Rule 37(e), empowering courts to issue spoliation sanctions based on inherent authority.

Case Facts:

• Over 7 years, the plaintiff served the defendant with numerous subpoenas, which weren’t complied with.
• The Defendant failed to retain relevant “casedipositive” data, thus the plaintiff filed for spoliation sanctions.

Ruling:

• Since the defendant failed to preserve data in violation of their regulatory duty and not in anticipation of litigation, the court ruled Rule 37(e) did not apply.
• Based on its inherent authority, they granted the plaintiff’s motion for an adverse inference.

Expert Analysis:

• “The requirements under Rule 37(e) do not clearly state the conditions for when it should apply. I think that they use the term "intent to deprive," which is confusing, because in a lot of the case they discussed the “intent to destroy,” and then intent to destroy is mentioned once in the committee notes. So, if it's really about intent to destroy, that's the language that should have been used, and if it was about intent to deprive, but not intent to destroy, it becomes a gray area and leaves confusion.”

JAMES KEUNING, Director of Practice Support; Briggs and Morgan, P.A.

• “I think the Hsueh case sheds light on an area that, in e-discovery, we don't talk about enough, and that is the electronic data that individual plaintiffs have within their "possession, custody, and control," because whether you’re counsel for the defendant of the plaintiff, you don't have a lot of control over that data. So for both, it's very important to use tools, work with a trusted vendor and a trusted tool to be able to capture that data, especially social media data and other employee data that easily disappears. So, working with tools, paying attention to the data, and making sure to capture this data when you can with neither side relying on an individual plaintiff to do it.”

BRENDAN KENNY, ESQ. Trial Lawyer; Blackwell Burke