All too often, a perfectly defensible claim or case contains significant flaws due to evidence spoliation issues. However, recent changes to the Federal Rules of Civil Procedure (“FRCP”) and Nevada Rules of Civil Procedure (“NRCP”) have changed and softened some of the sanctions surrounding spoliation of electronically stored information.
In 2015, the FRCP were amended and changes were made to Rule 37 regarding sanctions. The Rule was amended to include the following language:
(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:
- upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
- only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may:
A. presume that the lost information was unfavorable to the party;
B. instruct the jury that it may or must presume the information was unfavorable to the party; or
C. dismiss the action or enter a default judgment.
In making this amendment, the committee that drafted it notes that subsection (e)(2), despite authorizing the Court to use measures to address and deter spoliation, rejects cases such as Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99 (2d Cir. 2002), which authorize giving adverse-inference instructions to a jury upon a finding of only negligence or gross negligence in failing to preserve evidence. The amendment to FRCP 37(e) now requires courts to find more than negligence or gross negligence prior to giving adverse inference instructions to a jury, effectively raising the bar for obtaining these sanctions.
The foregoing note from the committee refuting cases such as Residential Funding Corp. is important because Nevada law, similar to the holding in Residential Funding Corp., allows adverse-inference instructions upon a finding of mere negligence or gross negligence. The Federal rule change therefore conflicts with current Nevada law found in the oft-cited case Bass-Davis v. Davis.
In Nevada, NRS §47.250(3) provides sanctions for a willful spoliation of evidence and a rebuttable presumption that the evidence, if available, would have been adverse to the party that failed to preserve or intentionally destroyed evidence. However, in the event there is no evidence of willful or intentional spoliation, the Nevada Supreme Court has held that an adverse inference should be permitted. Bass-Davis v. Davis, 122 Nev. 442, 448, 134 P.3d 103, 106 (2006). In Bass-Davis, the franchisees of a 7-Eleven convenience store had notice of potential litigation. They obtained and forwarded videotape of the incident to a Southland employee, who then forwarded it to the insurer, where it was negligently lost. Id. Using principles of agency law, the negligence of the insurer losing the videotapes was imputed to the franchisees and the Court held that an adverse inference instruction was appropriate. Id.
The NRCP was recently amended in early 2019, and NRCP 37(e), entitled “Failure to Preserve Electronically Stored Information,” was amended to mirror the language in its Federal counterpart. No Nevada Advisory Committee Notes were provided specifically discussing this amendment and whether the amendment was intended to change Nevada case law established in Bass-Davis; however, the Preface of the 2019 Amendments does note that the amendments were modeled on the FRCP. This at least indicates that the Nevada Committee was most likely aware of the Federal Committee notes discussing the effect of the rule on pre-existing case law and adverse inference instructions provided upon a finding of negligent destruction/loss of evidence. More importantly, the Supreme Court has not, as of yet, decided any cases addressing the recent rule change and its effect on Bass-Davis and electronically stored information.
As such, it can only be assumed that the amended NRCP will eventually affect and/or alter the Court’s holding in Bass-Davis. Had this rule been in place at the time that case was decided, the outcome would likely have been different because the lost videotape would likely be considered electronically stored evidence. Assuming it does constitute electronically stored evidence, the Court would have been required to hold that an adverse inference was inappropriate due to the lack of evidence that the franchisees acted with intent to deprive another party of the tapes.
The rule change should not, however, result in relaxing protocols and/or policies and procedures related to preserving evidence by either the party, insurance carrier or third-party administrators. All too often defensible cases wind up being settled for far more than they otherwise would have due to spoliation issues and looming sanctions for negligent failure to preserve evidence. The rule change, however, should help to alleviate some of the pressure that plaintiffs place on defendants and carriers to settle cases that are otherwise defensible and should reduce valuations of certain cases that have spoliation issues.