In Burris v. JPMorgan Chase & Co., No. 21-16852, No. 22-15775 (9th Cir. April 18, 2024), the Ninth Circuit Court of Appeals upheld the district court’s ruling of terminating sanctions and fees and costs totaling over $363,000 for “systematic efforts” to destroy ESI in this case.

Case Discussion

In this case involving claims of improper termination and violation of the whistleblower retaliation provisions of the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010, the Arizona district court dismissed the plaintiff’s case in October 2021 with prejudice under Federal Rule of Civil Procedure 37(e)(2) because it found he intentionally spoliated electronically stored information (ESI).

Burris appealed three aspects of the ruling of terminating sanctions and fees and costs. First, he argued that the district court erred when it relied upon the court-appointed digital forensics specialist, Jefford Englander’s report without first establishing its admissibility. Second, he argued that he did not violate Rule 37(e) because the deleted documents were not relevant ESI. And third, he challenged the district court’s award of attorneys’ fees and costs, contending that “[t]he court had no legal authority to award fees in addition to the underlying dismissal sanction.” The district court awarded JPMorgan $296,490.50 in attorneys’ fees and $66,973.62 in costs based on its prior determination that Burris violated the district court’s October 2020 order.

Circuit Court’s Ruling

In upholding the district court’s ruling of terminating sanctions and fees and costs, the Circuit Court ruled on the issues as follows.

Regarding the first issue, the Circuit Court stated: “Burris contends that the district court could not rely on the report without first conducting a Daubert hearing to qualify Englander as an expert in digital forensics. This argument is unconvincing. At the outset, because Burris failed to raise a Daubert challenge in the district court, he has waived any objection to Englander’s qualifications… However, even assuming that Burris had properly raised a Daubert challenge in the district court, his challenge to the report’s admissibility is meritless. ‘District courts are not always required to hold a Daubert hearing to discharge their reliability and relevance gatekeeping duties under Federal Rule of Evidence 702.’”

Continuing, the Court stated: “The record demonstrates that Englander had significant technical expertise in computer forensics and the use of industry-standard tools and methods for forensic imaging. And Burris presented no evidence that undermines Englander’s methodology, which included searching for digital artifacts of deletions on Burris’s various devices and examining the metadata on those devices to determine when deletions occurred.” The Court also rejected Burris’s argument that there was a conflict of interest because Englander was selected and paid by JPMorgan, reminding him that he stipulated that JP Morgan pay for the forensic examination.

Regarding the second issue, the Circuit Court stated: “The district court first determined that ‘large volumes of ESI were lost’ and that Burris was on notice that the destroyed ESI should have been preserved…In its analysis, the district court identified several categories of destroyed ESI that were potentially relevant to the litigation…The court also found that the ESI was ‘irretrievably lost’ and was ‘not replaceable through additional discovery.’”

Continuing, the Court stated: “Finally, the district court determined that Burris acted with intent to deprive JPMorgan of the information’s use in the litigation, noting that ‘the sheer number of obfuscatory actions undertaken by [Burris] … evince an unusually clear level of intent to deprive Defendants of potentially relevant ESI.’…The district court noted that Burris had engaged in ‘systematic efforts’ to destroy ESI ‘from an array of phones, laptops, email accounts, and external storage devices.’ …The district court observed the temporal proximity of Burris’s spoliation efforts, noting that Burris wiped at least one of his devices the day before he was required to produce it for forensic examination…Applying the five-factor test for terminating sanctions articulated in Anheuser-Busch, 69 F.3d at 348, the court found that dismissal was warranted.”

Regarding the third issue, the Circuit Court stated: “The district court awarded JPMorgan its attorneys’ fees and costs based on its ‘inherent authority,’ which allows district courts ‘to sanction a litigant for bad-faith conduct by ordering it to pay the other side’s legal fees.’… This was not error. It is well-established that a district court may award attorneys’ fees and costs in addition to imposing terminating sanctions due to discovery misconduct…Here, the district court properly determined that Burris’s spoliation misconduct explicitly amounted to bad faith… In its order appointing a forensic specialist, the district court warned Burris that JPMorgan might seek reimbursement of its fees and costs in addition to sanctions. Despite that warning, Burris continued his spoliation efforts and withheld some of his devices from Englander, causing the parties to hold additional meetings to address the deficiencies, and thereby increasing their litigation costs. The district court correctly found that these were ‘attorneys’ fees incurred because of the misconduct at issue.’”

The Court also rejected Burris’s argument that the award was “excessive” and “not reasonable” because not all the attorneys’ fees requested by JPMorgan were attributable to the motion for terminating sanctions, stating: “A fees award based on a district court’s inherent authority ‘is limited to the fees the innocent party incurred solely because of the misconduct—or put another way, to the fees that party would not have incurred but for the bad faith. A district court has broad discretion to calculate fee awards under that standard.’”

So, what do you think? Do you agree with the ruling to uphold the district court’s ruling of terminating sanctions and fees and costs? Please share any comments you might have or if you’d like to know more about a particular topic.

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