On June 29, 2015, in a rather remarkable opinion that parties continue to struggle with in this evolving digital age, the Georgia Supreme Court in Phillips v. Harmon reversed an appellate court decision on its interpretation of the legal standard for spoliation (i.e., the destruction or failure to preserve evidence).
Longstanding Georgia law held that a party must be on actual notice of pending or imminent litigation in order to be found liable for spoliation of evidence. In Phillips, the relevant question before the court was whether the defendant, which launched its own investigative procedures in response to an incident and prior to the plaintiff initiating litigation, was effectively on notice that litigation was reasonably foreseeable. Writing on behalf of the court, Justice Hines held that a defendant’s actions, without more, could be relevant in determining whether that defendant is on constructive notice that litigation is “reasonably foreseeable,” thus invoking the duty to preserve pretrial evidence.
This holding was a marked departure from the previously understood and accepted notion in Georgia that plaintiffs need to engage in some affirmative conduct to put the evidence-holder on notice that litigation is forthcoming. With this decision, Georgia joins some other state and federal courts, such as Alabama and the Eleventh Circuit, whose test for spoliation is whether the destroying party reasonably anticipated litigation.
For example, the factors to determine spoliation in Alabama are: (1) the importance of the evidence destroyed; (2) the culpability of the offending party; (3) fundamental fairness; (4) alternative sources of the information; (5) the possible effectiveness of other sanctions less severe than dismissal. Story v. RAJ Props., 909 So. 2d 797, 802-03 (Ala. 2005).
Because the Georgia court has now joined the trend toward reasonable foreseeability, the pressure is on those in Georgia who control the evidence to consider their own actions in determining whether they are on constructive notice. Naturally, this is a challenge that is ripe for costly confusion:
How do I know if I am on constructive notice?
Unfortunately, the answer to this question is not as clear as one might like it to be because these determinations are made by the court on a deferential, case-by-case basis; however, Phillips sheds some light on this issue by listing five different ways in which a defendant may be placed on constructive notice:
- Type and extent of injury;
- The extent to which fault or the injury is clear;
- The potential financial exposure if faced with a finding of liability;
- The relationship and course of conduct between the parties, including past or threatened litigation; and
- The frequency with which litigation occurs in similar circumstances.
While “reasonably foreseeable” litigation is the lens through which these factors should be viewed, some may still find it difficult to discern when it is appropriate to abandon routine business practices in an effort to avoid spoliation liability, especially if a business has not yet become a part of the electronic storage age. In Phillips for example, a hospital had a policy that recommended discarding certain fetal health notes 30 days post-delivery of a child. Although practical for the purpose of saving physical space or other resources, these types of policies can be devastating to a case. In some states like Alabama, spoliation of evidence is sanctioned by dismissal. See, e.g., Alfa Mut. Ins. Co. v. Ray’s Refrigeration, 682 So. 2d 452 (Ala. 1996); Verchot v. Gen. Motors Corp., 812 So. 2d 296 (Ala. 2001).
A party should also keep privilege considerations in mind when analyzing whether it is appropriate to destroy evidence under the reasonable foreseeability test. Often, a party claims a privilege based on the fact that materials were made or prepared “in anticipation of litigation.” It would be inconsistent for that same to party to claim it was not on constructive notice of potential litigation. Yet unwary parties sometimes take such positions before recognizing the trap.
How can I avoid spoliation liability?
Although trial courts are granted a great deal of discretion on the issue of spoliation, rest assured that there are safeguards in place to protect those following good faith business policies. Chief among them is the “bad faith” principle underlying the rebuttable presumption against the defendant which is invoked when evidence is destroyed. So long as the evidence-holder considers the aforementioned five factors and acts in good faith when destroying potential evidence, it is less likely to suffer the grave consequences of spoliation liability. The evidence-holder should also be familiar with any statutory, regulatory or contractual obligations it may have to preserve evidence.
Being proactive about document preservation can also help. In an age where electronic discovery is becoming far more prevalent than ever before, there is no better time for clients to revamp their document retention policies. For a paperless business, this means ensuring that the reliability of your electronic storage units is secure and is not plagued by viruses or other data-altering vulnerabilities. For those businesses still heavily relying upon the pen-and-pad method, efficient and reliable filing systems are a worthy investment. All businesses should have in place appropriate litigation hold procedures and should follow them precisely. In any event, a business will serve itself well by having safeguards for preserving evidence, by thinking through potential retention issues before they occur, and by having a plan in place to analyze and address whether and when destruction is an appropriate and safe course of action.
For a copy of the Phillips v. Harmon decision, please visit: http://cases.justia.com/georgia/supreme-court/2015-s14g1868.pdf?ts=1435579267