On May 22, 2013, U.S. District Judge Joan H. Lekfow issued an opinion in Pillay v. Millard Refrigerated Services Inc.citing preservation failures done in bad faith as the court’s reasoning for granting a motion for an adverse inference instruction. The outcome reflects a number of recent cases nationwide including Kirgan v. FCA, Gatto v. UAL, EEOC v. JP Morgan Chase, and EEOC v. Ventura Corp. in which adverse inference instructions have been meted out for spoliation.

The Pillay case started in summer 2008 when the plaintiff was dismissed after he opposed the firing of another employee at Millard.  Pillay alleged the firing had been discriminatory under the Americans with Disabilities Act because of a perceived disability, whereas the defendant cited poor work performance as the sole cause for the termination. In Judge Lekfow’s opinion, the court cited an email between Millard’s upper management saying, “Let’s get him out asap…” (*1) once it had been brought to his attention that the employee had documentation of previous work injury that left him partially disabled.

The defense relied on evidence produced from Millard’s Labor Management System (LMS) reflecting the fired employee’s unsatisfactory productivity and performance rating, despite having been told previously his LMS numbers were great. The plaintiff countered that the system could be manipulated and wanted underlying data to show any potential discrepancies. The defendant revealed that “[i]n August 2009, the raw data used to create [the fired employee’s] LMS numbers were deleted because the LMS software automatically deleted the underlying data after a year.”

The court found that a duty to preserve existed, that the defendant acted in bad faith in failing to suspend the automatic deletion of relevant data, and that the plaintiff suffered prejudice as a result.

[The general counsel] is charged with knowledge of the duty to preserve evidence after receiving the December 10, 2008 letter from plaintiffs’ counsel. There is no evidence that he took any action to intercept the automatic deletion of relevant evidence. As such, recklessness and bad faith are permissible inferences. (*3)

Given the facts of Pillay, the adverse inference is consistent with a number of other recent cases cited above. Some in the defense bar may conclude that Pillar v. Millard is yet another example of the courts over-reaching and causing an undue burden on corporations – the burden of being able to anticipate that the data in the LMS system would be relevant to discovery, and the steps required to prevent its destruction through the routine operation of its IT systems.

Interestingly, proposed rule changes now published for public comment attempt to address the limitations of the “safe harbor” of Rule 37(e) by providing a more uniform set of guidelines for the courts to consider when assessing a party’s conduct. From the committee notes: 

“The amended rule is designed to ensure that potential litigants who make reasonable efforts to satisfy their preservation responsibilities may do so with confidence that they will not be subjected to serious sanctions should information be lost despite those efforts.”

However, even under these proposed amendments, I would not foresee a different outcome in the Pillay case. The revised rules articulate a number of factors:

  • The extent to which the party was on notice that litigation was likely and that the information would be discoverable;
  • The reasonableness of the party’s efforts to preserve the information;
  • Whether the party received a request to preserve information, whether the request was clear and reasonable, and whether the person who made it and the party consulted in good faith about the scope of preservation;
  • The proportionality of the preservation efforts to any anticipated or ongoing litigation; and
  • Whether the party timely sought the court’s guidance on any unresolved disputes about preserving discoverable information.

Given the facts in this case, the court likely would have reached the same conclusion. The defendant had a clearly identified trigger, the data in question was responsive, and the efforts required to preserve it were minimal – and therefore proportional. The clincher, though, was the email evidence that undermined the Millard’s rationale for termination and corroborated the plaintiff’s claims.

Further Reading: