In Skanska USA Civil Se. Inc. v. Bagelheads, Inc., No. 21-13850, No. 22-10203 (11th Cir. August 2, 2023), the Eleventh Circuit affirmed sanctions for Skanska for the destruction of the data from five of its custodians’ cell phones, stating: “The court’s finding of bad faith thus was not clear error, and its imposition of Rule 37(e)(2) sanctions was not an abuse of discretion.”

Case Background

In this case involving construction contractor Skanska and potential economic damages after its barges knocked out the Pensacola Bay Bridge during Hurricane Sally, the district court ultimately concluded that Skanska had acted negligently and dismissed Skanska’s petitions for exoneration from or limitation of liability and dissolved the injunction barring prosecution of all related litigation.

Along with the adverse verdict, Skanska was sanctioned for spoliating electronic evidence under Rule 37(e); the data from five out of thirteen discovery custodians’ cell phones was destroyed. Even with an active litigation hold and actual litigation, Skanska did not back up the relevant employees’ cell phones. Nor did it suspend its ordinary cell phone data destruction policies.

Two phones were deliberately reset according to Skanska’s ordinary employee departure procedures when their owners left the company. Another was somehow “disabled” and became inaccessible after the owner left Skanska. Yet another was allegedly lost overboard. And still another had all text messages deleted under disputed circumstances.

The district court ruled that Skanska “acted with the intent to deprive” the claimants of the cell phone data and sanctioned the company under Rule 37(e)(2). The court emphasized that it saw no cogent explanation, apart from bad faith, for Skanska’s systematic failure to make any effort to preserve cell phone data until at least seven months after the litigation hold was (technically) in place. So, it made two adverse inferences against Skanska and ordered it to pay the claimants’ costs and attorneys’ fees for the sanctions motion. Skanska appealed both the district court’s final judgment and its sanctions order.

Circuit Court’s Ruling

The Circuit Court stated: “Rule 37(e)(2) sanctions do not require ‘any further finding of prejudice.’…’This is because the finding of intent required by the subdivision can support not only an inference that the lost information was unfavorable to the party that intentionally destroyed it, but also an inference that the opposing party was prejudiced by the loss of information that would have favored its position.’”

The Circuit Court also stated: “This is the first time we have had reason to thoroughly consider Rule 37(e)(2). In previous cases, we have suggested or assumed, but never held in a published opinion, that the Rule’s ‘intent to deprive’ standard is the same as the ‘bad faith’ standard our Court has used in other spoliation contexts…Here, the district court and both parties have assumed that ‘intent to deprive’ and ‘bad faith’ are the same.”

While noting that “Skanska’s in-house counsel had orally informed employees of an evidence retention policy” and that “counsel sent a formal legal hold letter about the Pensacola Bay Bridge incident”, the Circuit Court stated: “But even with an active litigation hold—and then active litigation—Skanska did not back up its employees’ cell phones. Nor did it suspend its ordinary cell phone data destruction policies—not even for known electronic data custodians. It was, as we see it, entirely predictable that cell phone data would be needed for litigation, and that some of that data would be lost.”

The Circuit Court also rejected Skanska’s argument that because discovery of other Skanska employees included some of the text messages and because the claimants were able to depose the five custodians whose data was destroyed, nothing was actually lost, stating: “The district court was not moved; nor are we. While some of the lost text messages were discoverable through other Skanska employees’ text messages, others were not. And it should go without saying that deposing workers well after an event is not a perfect substitute for reviewing their contemporaneous text messages.”

Regarding the finding of bad faith, the Circuit Court stated: “The court found a ‘lack of any cogent explanation’ for Skanska’s complete failure to make any effort to preserve the destroyed cell phones…It focused in particular on how the company ‘took no action’ to educate its custodians and administrators about the litigation hold and ‘made no effort’ to collect its custodians’ cell phone data until at least seven months after the litigation hold was in place…In the district court’s view, bad faith was the only thing that explained the company’s actions.”

Continuing, the Circuit Court stated: “If our review were de novo, this would be a close question. On the one hand, we find Skanska’s utter failure to implement even the most basic data-protection safeguards egregious—so egregious that an inference of bad faith is easy to make. On the other, this is not a case with direct evidence of bad faith; it is also plausible from this record that Skanska was ‘just’ grossly negligent… But we review the district court’s finding of bad faith for clear error. And an inference of bad faith here was not clear error.”

As a result, the Eleventh Circuit affirmed sanctions for Skanska for the destruction of the data from five of its custodians’ cell phones.

So, what do you think? Are you surprised that the Eleventh Circuit affirmed sanctions for Skanska instead of finding them grossly negligent? Please share any comments you might have or if you’d like to know more about a particular topic.

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