Court Orders Adverse Inference for Failure to Prevent Automatic Deletion

Pillay v. Millard Refrigerated Servs., Inc., No. 09 C 5725, 2013 WL 2251727 (N.D. Ill. May 22, 2013)

In this case, the court granted Plaintiff’s motion for an adverse inference instruction where Defendant failed to prevent the automatic deletion of relevant data despite notice of impending litigation and receipt of a specific preservation notice, sent directly to Defendant’s general counsel.

Plaintiff alleged that he was terminated for his opposition to the termination of another employee, who Plaintiff believed was fired because of a “perceived disability.”  Defendant claimed, however, that the non-party employee was fired because of a low performance rating, as indicated by Defendant’s labor management system (“LMS”).  Plaintiff, in turn, asserted that the data underlying the LMS rating could have been manipulated and that Defendant’s reliance on that rating was mere pretext.

The non-party employee was terminated on August 21, 2008 and Plaintiff was (apparently) terminated around that same time.  In September, Plaintiff sent Defendant a “demand letter,” “placing Millard on notice of an impending lawsuit.”  In December, Plaintiff’s counsel (who at that time also represented the non-party employee) sent a letter to Defendant’s general counsel “informing him . . . that Millard was ‘to preserve evidence and documents’ . . . related to his clients’ employment, specifically citing ‘[a]ll communications, documents, emails, or anything relating to [the non-party employee’s] productivity and work evaluations.’”  In January 2009, Plaintiff and the non-party employee also filed charges with the U.S. Equal Employment Opportunity Commission, to which Defendant responded and relied upon the non-party employee’s “deficient LMS rating to explain his termination.”

In August 2009 (before the lawsuit was filed), the raw data used to create the at-issue LMS rating was deleted “because the LMS software automatically deleted the underlying data after a year.”  Plaintiff was informed of the deletion in July 2010, and was told that the data was automatically deleted to keep the LMS system “operating at an optimal level.”  Defendant also claimed that the deleted data was not used in making personnel decisions.

Plaintiff sought an adverse inference instruction.  Defendant argued that such a sanction was unwarranted because it had no obligation to preserve the overwritten data and because there was no evidence that it acted in bad faith by allowing the data to be deleted.  The court found that the “pre-filing correspondence with [Defendant]” and the EEOC charges had invoked Defendant’s duty to preserve.  The court also rejected Defendant’s assertion that the deleted information was not relevant, noting that the “inquiry is whether this information is the type that would have been discoverable under Rule 26”—which it would have—and also noting Defendant’s own reliance on the information when responding to the EEOC charges.

Turning to the question of culpability, the court first stated that Plaintiff must demonstrate bad faith, “which is akin to conduct that is intentional or reckless” but later indicated that “[e]ven if merely negligent, however, sanctions can still be appropriate when a party’s culpability is based on fault.”  First, as to the existence of bad faith, the court found that “recklessness and bad faith [were] permissible inferences,” where Defendant was on notice that the LMS data was at issue and still failed to preserve.  More specifically, the court noted that general counsel was “charged with knowledge of the duty to preserve evidence” after receipt of Plaintiff’s preservation demand and that there was no evidence that he took any action “to intercept the automatic deletion of relevant evidence.”  Turning to its discussion of “fault,” the court indicated that “[f]ault entails actions deemed ‘objectively unreasonable’” and reasoned that even absent bad faith, the failure to preserve fell “squarely within the realm of conduct deemed to constitute fault.”  Thus, “even without a finding of bad faith,” the court concluded that it was permitted to craft a proper sanction.

Finally, the court found that Plaintiff had suffered prejudice as a result of the loss of relevant evidence and concluded that it would give an adverse jury instruction to alleviate that prejudice.  The court’s instruction would allow the jury to assume the deleted evidence was unfavorable to the Defendant if they found by a preponderance of evidence that 1) Defendant “intentionally or recklessly caused the evidence to be destroyed” and 2) that Defendant caused the evidence to be destroyed in bad faith.  The court further indicated that it would instruct the jury that “reckless conduct rises above a mistake or carelessness and evinces a conscious disregard of a duty” and that “[o]ne may infer that conduct was in bad faith if it was intentionally or recklessly done.”