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#CaseoftheWeek Episode 71: Whether Declaring Your Client Incompetent Helps You Avoid a Finding of Intent

Episode 71 is an analysis of another decision from District Judge Iain D. Johnston, author of the DR Distributors case covered in Feburary 2021 on Case of the Week. Kelly Twigger of eDiscovery Assistant discusses a his decision that suggests declaring your client incompetent in preserving ESI may be sufficient to avoid the intent requirement of Rule 37(e). The case for this week’s episode is Hollis v. CEVA Logistics U.S., Inc. 2022 WL 159 1731 (N.D. Ill. 2022) from May 19, 2022.

Good morning and welcome to Episode 71 of our Case of the Week series, published in partnership with ACEDS. My name is Kelly Twigger, I am the CEO and founder of eDiscovery Assistant, as well as the principal at ESI Attorneys, and I’m very happy to be here with you today. Thank you so much for joining me.

As you know, each week on our Case of the Week series, we choose a recent decision from our eDiscovery Assistant case law database and highlight the practical issues associated with that case or talk about noteworthy decisions that it makes sense for you to be aware of as you move forward in your litigation practice.

Today we’ve also got two additional links for you, as the case that we’re talking about raises some interesting issues and is from a judge who is pretty well known in the eDiscovery circles for previous decisions. Those two links come to us from Doug Austin at eDiscovery Today and also an article written by my colleague Eric Mandel at Driven (Innovative Driven is the name of the company now) that was published on Law.com.

All right let’s talk about this week’s decision. This week’s decision comes to us in a case titled Hollis v. CEVA Logistics U.S. It is from the Northern District of Illinois and was a decision authored by Judge Iain Johnston on May 19th of 2022.

You may remember Judge Johnston—if you’re a fan of the Case of the Week—from his decisions in DR Distributors, one of which we featured on Case of the Week back from February of 2021.

Judge Johnston has eight cases in our eDiscovery Assistant database. He was appointed to the bench in 2013 and was elevated from a United States Magistrate Judge to a United States District Judge in 2020. Judge Johnston has written multiple articles on discovery issues and had some speaking engagements related to what he sees in front of him in his court.

Today’s decision is an interesting one for us to look at. I think it really speaks to something that I note regularly on Case of the Week, which is we need some additional information from the Rules Commission on how the Courts are to find intent under Rule 37(e) for sanctions for failure to preserve.

All right, as always, we tag our decisions with each of the issues from our proprietary issue structure in the eDiscovery Assistant. The issues for this decision include adverse inference, sanctions, video, spoliation, and failure to preserve.

What are the facts of this case? I’m going to start with a quote from the Court, and I think we’re going to find that, as we saw in the DR Distributors decisions from Judge Johnston, that he sets up this case so that we think we’re going to be led to one conclusion when we get led to a different one. This is an opening quote from Judge Johnston:

“The common pedestrian step of determining if a video recording of an event exists, and if so, observing and preserving it to be used in litigation makes CEVA Logistics unexplained and cavalier failure to take these steps — in the face of explicit and repeated requests from a terminated employee, no less — all the more troubling and deserving of a curative measure.”

All right, what are our facts here? The plaintiff, Mr. Hollis, worked in the receiving area of the defendant’s warehouse, beginning on November 12, 2017. About a year into his employment, on November 28th, 2018, there was an incident on the warehouse floor involving a fellow employee in which Mr. Hollis got into an argument with Mr. Bayer, who was the fellow employee.

According to the defendant, CEVA, witnesses reported that Mr. Hollis got into an argument with Mr. Bayer, yelled at him, and initiated some form of physically threatening behavior or touching. As a result, the defendant fired Mr. Hollis on December 4, 2018.

Just about a week later, in doing its evaluation of the incident, CEVA got three written statements from witnesses, including Mr. Bayer, all who reported that Mr. Hollis was yelling and pushing or grabbing Mr. Bayer. Those three witnesses were all white.

The defendant also collected written statements from Mr. Hollis and one other witness describing Mr. Hollis putting his hands up to stop Mr. Bayer, but not touching Mr. Bayer. A third witness also stated in the declaration that he told Mr. Hollis’s supervisor, Mr. Berkshire, that he never saw Mr. Hollis touch Mr. Bayer. Those three witnesses are all African-American.

Ultimately, Mr. Berkshire, the supervisor, credited the three witnesses who claimed that Mr. Hollis grabbed Mr. Bayer on November 28, 2018, rather than the African-American witnesses who asserted that Mr. Hollis never touched Mr. Bayer. Based on his credibility determination, CEVA fired Mr. Hollis.

At the time of the incident, there were three security cameras aimed at the area on the warehouse floor. CEVA presented absolutely no evidence that any of its employees ever attempted to view, preserve, or recover the footage before Mr. Hollis’ termination or, frankly, at any point thereafter.

On December 5th, 2018, the day after Mr. Hollis termination, Mr. Hollis wrote to CEVA’s Human Resources Department about the termination in a document, he labeled, “A Formal Letter of Complaint Against CEVA Logistics for Workplace Race Discrimination.” Twice in the letter, Mr. Hollis referred to a request that someone review footage of the incident. “I suggested Tom pull and watch the video as the entire warehouse is being monitored,” and “Finally, if I had put my hands around any person’s neck management can confirm what took place by viewing the cameras.”

The Court also noted that the evidence established that the very next day after the incident, Mr. Hollis verbally requested that the general manager review the video recordings, and about a week later, in a document complaining about race discrimination, that same letter that I just mentioned, twice requested a review of the video recordings that he asserted would clear him of any wrongdoing. Still, CEVA never looked at or viewed the security footage from the incident.

Mr. Hollis filed a discrimination charge with the EEOC on March 13, 2019, which was timely, according to the Court, and after receiving a right to sue letter, filed this case on June 6, 2019. We’re a little over seven months from the actual date of the incident, or just under seven months, I should say. Plaintiffs served discovery requests on February 18, 2020, more than a year after the case was initially filed, but as we know in federal court, you’ve got to jump through some hoops before you can serve discovery, so that timing kind of makes sense.

At the time of those discovery requests, the plaintiff asked for the video recordings and for CEVA to identify the custodian of the video. The defendant responded on April 3, 2020, so couple of months after the request, that no video existed and that the custodian of the video was a third-party vendor.

However, plaintiff then took the deposition of the third-party vendor, and the representative from that vendor testified that it was never the custodian of the footage from the plant, that they merely sold the recording equipment to the plant, and that the defendant owned and operated the system and the recordings. Effectively, we’ve got an attempt to deflect responsibility for the video from CEVA to the third-party by CEVA.

The Court notes that recordings on the cameras are usually retained from anywhere from 30 to 90 days. At 30 days, we would have been looking at December 28th as the time they would have rolled off. At 90 days, we will be looking more at February 28th, as the timing that the video would have rolled off of CEVA’s recordings.

A related fact on the recordings that the Court noted — in August 2018, a couple of months before this incident and Mr. Hollis’s termination, the exact same supervisor, Mr. Berkshire, investigated an unrelated claim of misconduct brought by a different employee. During that investigation, Mr. Berkshire pulled the security camera video recordings of the alleged incident to review them, and during his deposition, Mr. Berkshire described the simple process that he used to obtain the video. Essentially, he just contacted security and asked for it.

What’s the Court’s analysis based on those facts? Well, the Court begins its analysis in a frequent rule that we visit here on Case of the Week, and I’ve already mentioned to you, which is Rule 37 of the Federal Rules of Civil Procedure. Judge Johnston looks to Section (e), which provides, “The sole source to address the loss of relevant ESI that was required to be preserved but was not because reasonable steps were not taken resulting in prejudice to the opposing party.”

Judge Johnston identifies the five factors in Rule 37(e) that must be met:

  • First, the information must be ESI.
  • Second, that there must have been anticipated or actual litigation that triggers the duty to preserve ESI.
  • Third, that the relevant ESI should have been preserved at the time of the litigation was anticipated or ongoing.
  • Fourth, that the ESI must have been lost because a party failed to take reasonable steps to preserve it.
  • Fifth, the lost ESI cannot be restored or replaced through additional discovery.

The Court notes that all five of those requirements must be met in order to allow for curative measures and sanctions under Rule 37(e), and once those five requirements are met, the Court must also determine if the party seeking the ESI has suffered prejudice, or if the party with possession, custody, or control of the ESI intended to deprive the seeking party of the ESI. So, in addition to those five requirements, we have to prove prejudice to the plaintiff and that the defendant had the requisite intent.

If prejudice exists but not intent, then the Court may impose curative measures, including, but not limited to an instruction that jurors may consider the circumstances surrounding the laws of the ESI. If intent does exist, then the Court can impose sanctions, including presuming that the information was unfavorable, instructing the jury to presume the information was unfavorable, or by entering, dismissal or default.

The Court then undertakes an analysis of those five factors. The first factor of whether or not the evidence that issue is ESI is a fairly simple one here because video is ESI, but the defendant argues that it is not ESI because there’s no evidence that the video ever actually existed and that it is the plaintiff’s burden to show that it did, which is an unusual and somewhat novel argument for someone to assert. The Court notes that the defendant, “speculates, without any evidence, that many things could cause a video camera not to work, such as power loss, cable disconnections, malfunctions, or recorder software errors, but puts no evidence before the Court to suggest that that happened on this particular date.”

In terms of the burden of proof issue, the Court states that it is not convinced that the burden to establish the ESI ever existed falls on the plaintiff here, and that generally, the burden of proof falls on the party with better access to the information, which here is the defendant. The Court also points to the fact that the defendant knew by at least December 5th of 2018, just a week after the incident, that Mr. Hollis was requesting the video be reviewed and that, once alerted, the defendant was on notice and had the burden to determine whether the incident was recorded.

The Court found that even if the burden was on the plaintiff, they found that he satisfied it because the plaintiff had said just weeks earlier that the security system was working, that a supervisor knew how to access recordings, and had obtained and reviewed video evidence as part of an unrelated incident. The defendant didn’t contest it but continued to speculate that a power outage or something could have caused a failure to record, even though there was absolutely no evidence put before the Court that there was an incident on that particular day.

As a result, the Court found that the video of the incident was recorded and that it was ESI. We have the Court now saying, and I think this is really important, there was a video and you lost it. That’s established, we can’t overcome that fact.

Next on the duty to preserve, the defendant argued that it had no duty to preserve until after March 27th of 2019, when it first learned of the charge of the EEOC, and that the 90-day retention period would have passed. The video would have been deleted, of course, if it was ever recorded in the first place. In, “painful obvious contrast to case law cited by the defendant”, the Court found that Mr. Hollis’s December 5, 2018, letter triggered the duty to preserve, so that requirement is met under 37(e).

Next, relevance of the video. The video would have been relevant to whether Mr. Hollis engaged in the conduct for which he was fired or whether the allegations of the conduct were merely pretext for discrimination. The Court has said the video was not only relevant, but it would essentially be the definitive proof of what happened here.

Next element was the failure to take reasonable steps to preserve. The Court pretty much satisfies this requirement as well. Very quickly, the Court notes that nothing before it even hinted that CEVA had intervened to stop its security system from proceeding as designed and overriding any video recordings after 30 to 90 days. That even after Mr. Hollis’s December 5th letter alerting CEVA to the relevance and potential importance of the footage, that it did nothing, but during his deposition, the defendant’s general manager testified that he could not recall any reason why it would not have looked at the video to determine which version of the events was more accurate. Essentially, the Court found that the defendant did not take any steps, let alone any reasonable steps, to preserve the security footage.

Next and last requirement under Rule 37(e), those first five steps was, can it be restored or replaced? The answer to this one is pretty emphatically no. Witness statements for what happened at the incident, especially given that they are competing, are not a replacement for actual evidence of what have taken place of the incident.

The Court then moves to whether there was prejudice and intent to deprive, both of which are required for terminating sanctions.

With regard to prejudice, first, the judge cites the Advisory Committee notes for Rule 37(e), which gives the Court the discretion to determine which party bears the burden to establish prejudice. Establishing prejudice can be a very dicey proposition, according to the Court, because the ESI is gone. The Court notes that it evaluates prejudice in the context of determining the harm inflicted by the nonexistence of relevant information, which is different than the general concept of prejudice under different contexts in Rule 37.

The Court notes that prejudice under Rule 37(e) really includes thwarting a party’s ability to obtain the evidence that it needs for the case, and that here, as we’ve determined from the facts, it’s pretty clear that the record establishes prejudice because the security video would have offered proof and, because the defendant took no steps to preserve it, the plaintiff does not have the video for his case, and he is about as prejudiced as a party can be. Those are my words, not the Court’s.

Prejudice is determined. We’ve got the five factors of Rule 37. Now, that leads us to our final analysis, which is intent.

Intent, as the Court notes, is difficult for a moving party to prove and for a court to find. That being said, Judge Johnston notes that plenty of evidence exists in the record that could lead a reasonable person to conclude that CEVA acted with intent. The defendant doesn’t know of any steps that are taken to review or preserve video for this incident when they had just done it a couple of months prior. The failure to review the video supports a reasonable inference that CEVA intentionally disregarded Mr. Hollis’ request so that the ESI would be lost, that no one would actually be able to look at the video, and that Mr. Hollis would not be able to use that video evidence to get his job back or to support a discrimination claim.

The Court also noted that the defendant listed a third-party vendor as the custodian of the video in discovery responses, which a reasonable person could conclude was an attempt to deflect attention and stated that “false exculpatory statements are often evidence and consciousness of guilt.”

Now, key here is the Court has also recounted evidence that could support a conclusion that CEVA intentionally allowed the ESI to be destroyed and tellingly, CEVA has even failed to present the usual obligatory after the fact affidavit so often filed in spoliation cases — that it did not intentionally fail to preserve the video recordings.

What the Court says is, hey, it’s kind of surprising to me that defense counsel didn’t even say, this wasn’t our fault, this just happened, and we didn’t take any steps to preserve it, but we didn’t intentionally spoliate evidence either. Defense counsel does not say that, and the Court notes, it’s kind of surprising that we didn’t have them say that.

However, despite the defendant’s failure to make that argument, the Court then says that counsel could have made a reasonable argument that her client was incompetent, versus intentionally allowing the evidence to be destroyed. The Court then references Hanlon’s Razor — which says, in its most polite form, that we should not infer malice from conduct that can be adequately attributed to incompetence — and says that, “humans are just as likely to be dim witted as they are dastardly.”

As a result, the Court says it can’t definitively determine intent, and based on the difficulty of establishing it, decides to leave the determination to a jury and does not impose sanctions under Rule 37(e). Instead, the Court does say that because all five factors are met and the required prejudice exists, it will impose a curative measure of instructing the jury that it can consider the circumstances surrounding the loss of the ESI.

Now, the curative instruction that the Court provides is missing a couple of things in my estimation, but that’s what Judge Johnston comes to the conclusion of, essentially, that the job of finding intent should be left to the jury, because despite all of the evidence that he has, that’s the way that he chooses to proceed, so no sanctions, no terminating sanctions anyway.

I don’t know that you can call the instruction that Judge Johnston leaves at the end of this decision to be an adverse inference instruction for a couple of reasons. Judge Johnston’s instruction doesn’t say that the video is actually lost. It doesn’t say that defendants took no steps to preserve it.

Now, obviously, that information can all come out at trial, but one really wonders whether this is a situation that should even be allowed to go to a trial where you have a black plaintiff against a large corporation in this kind of situation.

All right, what are our takeaways from this case?

Much like his decision in 2021 in DR Distributors, Judge Johnston really gives you the impression throughout the case that he’s willing to find intent in the non-actions of defendants to allow for spoliation of evidence. If you recall from the DR Distributors case, there was a Yahoo Chat function that was a key piece of evidence that showed the communications with the overseas provider of SEO services. The defendant in DR Distributors allowed that chat information to roll off and be deleted, even though he knew that it should have been preserved. It’s a very similar situation to the case before us. Instead, now we have video evidence and not Yahoo Chat evidence, but just as he did in the DR Distributors case, the judge here refuses to impose terminating sanctions.

This decision seems to go even further in that he presupposes that defense counsel could make an argument that it was his client’s incompetence that allowed the video to never be viewed, not to be preserved, and be allowed to be overwritten per the practice of retaining video. If you recall, in the DR Distributors case there was actual incompetence. The lawyers didn’t interview the clients about all the sources of ESI. Here the judge is saying, well, you didn’t make the argument, but it’s a legitimate argument that could have been made, so I’m going to let you try and make that argument at trial instead of imposing sanctions. I think there’s a lot of questions about fairness in that analysis.

I also think we should juxtapose this court’s ruling to what we just covered in episode 70 of the Case of the Week, where the defendant in For Life Products made no argument to address the fabricated images that it put before the Court. Now, the analysis there was on fraud and not on intent under Rule 37(e) and there are differences between those two standards, but Judge Jones in For Life Products had no issues finding fraud there versus leaving that determination to a jury. Slightly different analysis, but a very different result.

What’s our takeaway? Know your judge. Know what you’re going to be able to do, and what arguments you should make. Here, Judge Johnston essentially laid out a playbook for defense counsel as to how to address these issues. Whether they’ll be successful or not obviously depends on the jury.

This decision is consistent with federal case law that requires that action be taken to find intent under Rule 37(e). We’ve talked about this numerous times on Case of the Week that Rule 37(e)’s intent requirement generally requires some action to be taken. Here you have non-action. The failure to preserve the video and to let it roll off is similar to the failure to preserve the Yahoo Chat and let it roll off in the DR Distributors case. Neither one give rise to terminating sanctions or to a finding of intent.

I mentioned that the jury instruction that’s laid out by Judge Johnston at the end of the case is a bit problematic to me in that it doesn’t actually say that the video is gone or that because the defendant could have taken reasonable steps to preserve it, leaving those conclusions to be determined by the jury. And while a reasonable person standard is definitely appropriate, I think those of us who are trial lawyers often have a concern that a jury is not going to be able to make the same sort of legal conclusions that a court might be able to make. Oftentimes they won’t necessarily understand how video systems work and it becomes much more incumbent upon the plaintiff in this case to be able to explain those things effectively to a jury, which in many respects often can be viewed as shifting the burden of proof to the plaintiff here, where the burden of proof should rest with the defendant to defend its actions for failure to preserve.

Unfortunately, there is really not much that a plaintiff can do in a situation like this unless there is some mechanism earlier on in the administrative proceeding that would allow the plaintiff to get access to the video evidence, to be able to request that video evidence as part of the administrative proceeding. Since this is a workplace discrimination issue, the plaintiff is required to go through the EEOC and exhaust his administrative remedies before he can bring an action in federal court. In other situations, a federal court action could have been filed very soon after Mr. Hollis’s termination on December 5th.

Here, while Judge Johnston notes that the Court has the discretion to determine intent, he declines to do so in a situation where another conclusion is very difficult given the evidence.

It really seems to me that we need either a language change, additional advisory information, or something that’s going to allow courts to make a determination of intent under Rule 37(e), where there is non-action. The DR Distributors case, this case, the myriad of other cases that we’ve discussed both on Case of the Week and not, that require action in order to be able to determine intent, under Rule 37, it’s a huge line of case law. That’s where the courts are with the current language of the rule that exists. If something needs to change, it’s going to have to be in the language of the rule in order for that to be able to move forward.

All right, this is always a controversial decision here. Not unusual for Judge Johnston to wade into these waters, but again, his decision is very consistent with line of federal case law. It’s just that we’re getting to sets of facts that really challenge the traditional notions of fairness.

That’s our Case of the Week for this week. Thanks so much for joining me. We will be back next week with another decision from our eDiscovery Assistant database. If you are an ACEDS member and interested in using eDiscovery Assistant, there is a discount available to current ACEDS members and a trial for folks taking the ACEDS exam. If you’re interested in either of those, please drop us a line at ACEDS@ediscoveryassistant.com or check out the information in your portal and one of our team will be in touch.

If you’re interested in doing a free trial of our Case Law and Resources database, but are not an ACEDS member, you can sign up, or you can reach out to support@ediscoveryassistant.com to set up a demo for your team. We also do regular weekly demos on Thursday mornings that you can sign up for.

Thanks so much. Stay safe and healthy out there, and I’ll see you next week.

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