The Sixth Circuit’s recent decision in Automated Solutions Corporation v. Paragon Data Systems, Inc., reinforces its approach to discovery sanctions, which includes deference to the district court and a fact intensive “case-by-case approach” to determining the need for sanctions and the form that those sanctions should take.  This is the same approach taken by the Court last year in Flagg v. City of Detroit.  In this case, the plaintiff sought sanctions in the form of an adverse inference instruction for the defendant’s failure to preserve certain hard drives and an external server.  A report and recommendation from the magistrate judge determined that the defendant failed to implement a litigation hold and was at least negligent, and recommended that the district judge consider a permissive adverse inference instruction at trial based on the loss of one of the hard drives.  Because the district judge granted summary judgment to the defendant, the trial court held that the sanction recommendation was moot.

On appeal, plaintiff argued that the trial court erred by denying sanctions.  Citing to its decision in the Beaven v. U.S. Dep’t of Justice case in 2010, the Sixth Circuit held that a party seeking an adverse inference instruction must establish that (1) the party having control of the evidence had a duty to preserve the evidence at the time it was destroyed; (2) the evidence was destroyed with a culpable state of mind; and (3) the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it would support the claim or defense.   Applying the test, the Sixth Circuit upheld the denial of sanctions and continued the approach from Flagg and other cases of affording deference to the trial court’s discretion in determining culpability and the need for sanctions on a case-by-case basis without “bright-line rules.”  Among other things, the Sixth Circuit held that the district court did not err in determining that plaintiff failed to satisfy the third prong – relevance – required for the imposition of an adverse inference instruction.  The Sixth Circuit emphasized that in this context, relevance meant something more than the mere FRE 401 standard and the party seeking sanctions must adduce evidence that would allow a reasonable trier of fact to infer that the destroyed evidence was of the character suggested by the movant.

An interesting side note to this case is that the panel included Judge Sutton.  Judge Sutton chairs the Committee on Rules and Practices of the Judicial Conference (the “Standing Committee”).  At the Standing Committee’s May 29, 2014 meeting, it approved a package of proposed amendments to the Federal Rules of Civil Procedure recommended by the Civil Rules Advisory Committee.  Among the proposed amendments is a change to Rule 37(e) that would require a specific finding that a “party acted with the intent to deprive another party of the information’s use in the litigation” in order to impose an adverse inference instruction or certain other types of sanctions.  If the proposed amendment to Rule 37(e) goes forward, it will supplant the imposition of eDiscovery-related sanctions under a trial court’s inherent authority and will require a change to the type of analysis conducted in this case, including by requiring a focus on bright-line rules contained in Rule 37(e).