Dismissal of Case as Spoliation Sanction Affirmed: Eighth Circuit | Practical Law

Dismissal of Case as Spoliation Sanction Affirmed: Eighth Circuit | Practical Law

The US Court of Appeals for the Eighth Circuit held in Sentis Group, Inc. et al. v. Shell Oil Co. et al. that dismissal was an appropriate spoliation sanction where the plaintiffs controlled and failed to preserve certain evidence, causing prejudice to the defendants.

Dismissal of Case as Spoliation Sanction Affirmed: Eighth Circuit

Practical Law Legal Update 9-578-3285 (Approx. 4 pages)

Dismissal of Case as Spoliation Sanction Affirmed: Eighth Circuit

by Practical Law Litigation
Published on 18 Aug 2014 • USA (National/Federal)
The US Court of Appeals for the Eighth Circuit held in Sentis Group, Inc. et al. v. Shell Oil Co. et al. that dismissal was an appropriate spoliation sanction where the plaintiffs controlled and failed to preserve certain evidence, causing prejudice to the defendants.
On August 14, 2014, in Sentis Group, Inc. et al. v. Shell Oil Co. et al., the US Court of Appeals for the Eighth Circuit affirmed the US District Court for the Western District of Missouri's dismissal of an action where the plaintiffs failed to preserve relevant evidence and caused prejudice to the defendants (No. 12-3623, (8th Cir. Aug. 14, 2014)).
The underlying lawsuit involved an action for alleged violations relating to an operating agreement between the parties. The parties had numerous disagreements about discovery during the case. In June 2007, the district court dismissed the plaintiffs' complaint for the first time as a sanction, based in part on its finding that the plaintiffs:
  • Failed to comply with several discovery orders concerning an expert witness.
  • Failed to disclose the nature of the plaintiffs' relationship with an accountant and to produce financial records held by the accountant, which were mostly on his computer.
  • Purportedly attempted to bribe the accountant to hide documents.
After the plaintiffs appealed, the Eighth Circuit reversed the initial dismissal. It found that the extent of the plaintiffs' non-compliance with discovery orders was unclear, and that evidence of plaintiffs' bribery was unreliable. It also determined that the remaining perceived abuses involved close-call interpretations of the record. The Eighth Circuit then remanded the case. On remand, the parties conducted additional discovery. After an evidentiary hearing, the district court found that the evidence did not show that the plaintiffs had actually bribed or attempted to bribe the accountant, and that the plaintiffs failed to comply with only one discovery order concerning their expert witness, which warranted exclusion of the expert witness.
However, the district court dismissed the case a second time based on its findings that:
  • The plaintiffs were responsible for the loss of certain evidence, including evidence of payments to the accountant and information that had been in the accountant's possession on his computer, which was material to the case.
  • The loss of or failure to preserve the evidence was intentional, given:
    • the plaintiffs did not identify their accountant until seven months into the litigation; and
    • the volume of information missing.
  • The loss of this information prevented the defendants from receiving a fair trial.
The plaintiffs again appealed, arguing among other things that:
  • Dismissal was improper because the defendants had access to the accountant and his computer during a deposition.
  • The evidence was immaterial to the plaintiffs' claims and the defendants therefore suffered no prejudice.
  • The district court abused its discretion by imposing something other than the minimum punitive sanction available.
However, the Eighth Circuit rejected these arguments and affirmed dismissal of the case, finding that:
  • Access to a computer at one point does not shield its later disappearance from spoliation claims, particularly where the defendants suspended the deposition in question pending the plaintiffs' production of requested materials, which the plaintiffs later asserted had already been or need not be provided (a response that triggered the motion for sanctions).
  • The missing evidence was material, and that:
    • the plaintiffs could not dictate the scope of discovery based on their own views of the parties' theories in the case;
    • the concept of materiality, relevancy and what is discoverable changes as the parties' theories change; and
    • the missing evidence included the same type of evidence the plaintiffs identified as material to their claims in their initial disclosures.
  • The district court has the discretion to choose a proper sanction when the facts show willfulness and bad faith.
Counsel should be aware that dismissal of a lawsuit as a sanction is not reserved for those cases in which parties actively destroy evidence. Delaying the production of evidence and allowing evidence to disappear may also result in the harsh sanction of dismissal.