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54. How should the appellate court rule with regard to the sanction imposed on the banker?
A banker sued a previous business partner in federal court under diversity jurisdiction for breach of contract. The business partner showed that, when the banker was exploring the possibility of litigation against the business partner, the banker knowingly destroyed materials that contained evidence that was highly relevant to the case. The banker also created financial reports (relevant to issues in the case) that contained material deviations from the destroyed files. As a sanction, the district court dismissed the case with prejudice and entered judgment for the business partner. The banker appealed.
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A is incorrect. The FRCP do treat spoliation of evidence as a sanctionable offense. Although the Rules do not explicitly prohibit the destruction of evidence, the parties have a common law (and sometimes otherwise grounded) obligation to preserve information when they know or should know that it is relevant to present or future litigation.
The federal courts have been held to have inherent authority to sanction evidence destruction, using the sanctions authorized by FRCP 37. The selection of sanctions depends primarily on the degree of culpability of the spoiler and the degree of prejudice the spoliation caused.
B is incorrect. A party's conduct can be sanctionable even when it does not violate a court order. See FRCP 37.
D is incorrect. The court does have jurisdiction over the appeal. Dismissal of the complaint with prejudice results in a final judgment on the merits.