Earlier this month, the Texas Supreme Court issued a key decision on a subject every business owner and executive should know about: the duty to preserve company documents and the consequences for failing to do so. A court, in some circumstances, can hold a company that has destroyed or failed to preserve documents responsible for “spoliating” evidence. When this occurs, the company may become subject to serious sanctions, which a court may craft to “even the playing field” to make up for the other party’s inability to use the destroyed evidence in presenting its case. Business owners must know when these circumstances arise and how to avoid a “spoliation” finding.
Texas courts over time have applied somewhat broad and inconsistent standards for “spoliation.” Litigants have seized on these decisions to attack opponents over alleged missing records, sometimes with unfair results.
In Brookshire Bros., Ltd. v. Aldridge, the Texas Supreme Court clarified the standards governing spoliation. A customer who had slipped and fallen at a grocery store sued the store. The premises owner retained a relevant portion of the surveillance video footage covering the customer’s fall but allowed additional footage to be automatically erased. Based on these facts, the trial court admitted evidence at trial of the premises owner’s alleged spoliation of the video footage and also submitted a jury instruction on spoliation. The court of appeals affirmed, and the Texas Supreme Court granted review.
After examining the development of spoliation law in Texas and the balance of concerns associated with the issue of spoliation, the Texas Supreme Court made several pronouncements and clarifications about spoliation law in Texas that business owners, executives, and in-house counsel should be aware of:
- Spoliation analysis involves a two-step process: first, the trial court must determine whether a party spoliated evidence; and second, the court must determine the appropriate remedy.
- To support a spoliation finding, the court must first find that (1) the party accused of spoliating evidence had a duty to reasonably preserve the evidence, and (2) the party intentionally or negligently breached that duty. A duty to preserve evidence arises when a party knows or should know that there is a substantial chance of litigation and that there is relevant and important evidence in the party’s possession or control.
- Once a spoliation finding is made, the trial court has broad discretion to impose a remedy.
- A remedy may even include a “spoliation instruction.” The judge can instruct the jury that it may draw negative inferences from the fact that the company spoliated evidence. In other words, the jury can—and likely will—assume the missing evidence would have hurt the case of the party who destroyed it.
- A spoliation instruction can devastate a party’s case. Accordingly, it “is warranted only when the trial court finds that the spoliating party acted with the specific intent of concealing discoverable evidence, and that a less severe remedy would be insufficient to reduce the prejudice caused by the spoliation.”
- There is a caveat, however, to this specific-intent requirement: A negligent failure to preserve evidence may support a spoliation instruction “in the rare situation in which a nonspoliating party has been irreparably deprived of any meaningful ability to present a claim or defense.”
Business owners and executives would be wise to make a careful analysis of Brookshire Bros. to ensure that their document-retention policies remain sound and to avoid the potentially harsh penalties that can result from accusations of spoliation.
Cantey Hanger attorneys regularly advise their business clients on document-retention policies and similar issues that can impact them in litigation. For more information about the Brookshire Bros. decision, contact associate attorney Derek Carson at 817-877-2850 or firstname.lastname@example.org
Brookshire Bros., Ltd. v. Aldridge, — S.W.3d —, No. 10-0846, 2014 WL 2994435, at *1 (Tex. July 3, 2014).