Companies can harm their defenses to a future lawsuit by inadvertently destroying relevant evidence. Under the laws of several states, including Virginia, the circumstances under which a trial court can penalize a party for discarding relevant evidence have been unclear. But in a case of first impression, the Virginia Supreme Court recently clarified that issue by holding that a trial court cannot sanction a party for destroying relevant evidence unless that party intended to deprive its opponent of that evidence. Emerald Point, LLC v. Hawkins, 808 S.E.2d 384 (Va. 2017).
The Supreme Court’s Ruling
After a Carbon Monoxide alarm went off in a Virginia Beach apartment complex, the complex’s repairman inspected the problem and suspected that the furnace was leaking CO. The repairman replaced that furnace and stored it for over a year before discarding it. Long after the furnace was discarded, the tenants filed suit against, among others, the complex’s owner and alleged that they suffered injuries from CO poisoning. After learning that the furnace had been discarded, the tenants requested that the trial court instruct the jury to accept as an undisputed fact that the discarded furnace would have proven that the furnace caused CO to leak into their apartment. The trial court found that the owner did not discard the furnace in bad faith, but the court still instructed the jury that it could infer that the furnace would have hurt the owner’s defenses. The jury later returned a verdict that awarded over $4 million to the tenants.
On appeal, the Virginia Supreme Court addressed for the first time whether a trial court can sanction a party for discarding evidence in a negligent manner, but not in bad faith. Because it lacked guiding precedent, the court turned to the Federal Rules of Civil Procedure. Under the analogous federal rule, courts cannot sanction a party for failing to preserve electronic evidence unless its opponent shows that it destroyed the evidence with an “intent to deprive.” The drafters of this rule reasoned that if a party acted with this intent, then a court can safely assume that the discarded evidence would have hurt that party’s case. But if the party discarded the evidence negligently (but not in bad faith), then the evidence could have either hurt or helped its case. Finding this reasoning sound, the Virginia Supreme Court held that a court may not issue an instruction that permits a jury to infer that evidence was wrongfully destroyed unless the destruction of evidence was intentional. Here, because the trial court found that the furnace was not discarded in bad faith, it had to retry the case without the adverse jury instruction.
The Ruling’s Consequences
Most companies facing suit in Virginia state court can breathe easier knowing that they cannot be sanctioned for destroying documents or physical equipment that is later determined to be relevant evidence in a lawsuit, unless they destroyed it to deliberately deprive an adversary of relevant evidence. Plaintiffs’ lawyers often try to convince a jury that a corporate defendant destroyed evidence only because the evidence harmed the corporation’s defenses, but those plaintiffs’ lawyers now will have a harder time doing so. In particular, they will have a more demanding burden to overcome when trying to convince Virginia courts to sanction corporations for failing to preserve relevant evidence.
Arent Fox's Complex Litigation group will continue to monitor developments in this area. If you have any questions, please contact Joshua Fowkes, Zach Smith, or the Arent Fox professional who usually handles your matters.