Fourth Circuit: Appellate Challenge to Summary Chart Requires Careful Attention to Avoid Waiver

A recent decision by the U.S. Court of Appeals for the Fourth Circuit illustrates the need for careful planning at the briefing stage to review the admission of a summary chart at trial.  In U.S. v. Katsipis, 598 Fed. Appx. 162 (4th Cir. 2015), an appeal from the U.S. District Court for the Eastern District of Virginia (Norfolk Division), a criminal defendant challenged his conviction under 33 U.S.C. § 1908(a) (2012), which requires ocean-going vessels to maintain an accurate “Oil Record Book.”  The Oil Record Book is a log of any discharge of oil contaminants into the sea, which is required under MARPOL, an international treaty governing ocean-going vessels.

During a U.S. Coast Guard inspection of the M/V Antonis G. Pappadakis, a bulk cargo carrier, multiple crew members accused Chief Engineer Lambros Katsipis of rigging a bypass system that flushed contaminated bilge water out to sea without sending the water through the ship’s oily water separator as required.  The crew members alleged that Katsipis encouraged them to lie about this bypass system to any law enforcement personnel who asked about it, and the Oil Record Book failed to reflect the bypass system.  Katsipis was subsequently indicted and tried by a jury in the Norfolk Division of the U.S. District Court for the Eastern District of Virginia.

At trial, the Government offered into evidence, under Fed. R. Evid. 1006, a summary chart prepared by a witness who investigated the ship.  The summary chart totaled the number of times that the defendant’s predecessor ran the oily water separator and then compared that number against the substantially-lower number of times that the defendant ran the separator over the same period of time.  The summary chart drew upon records in the ship’s Oil Record Book. The jury convicted Katsipis, and he was sentenced to one year of probation.

On appeal, Katsipis argued that the summary chart was improperly admitted into evidence.  Katsipis pointed to the witness’s testimony about the chart, specifically that the witness acknowledged during cross-examination that “the chart was of limited usefulness, as it accounted for no potentially confounding variables over the aggregate twenty-three month period.”

In a pointed comment in the opinion, the Fourth Circuit interpreted Katsipis’s argument as a challenge to admission under Fed. R. Evid. 403 and not under Fed. R. Evid. 1006.  The Fourth Circuit noted, “[w]hile Fed. R. Evid. 1006 typically governs the admission of summary charts, Katsipis only claims that the chart presented a danger of prejudice that outweighed its probative value, not that it failed to meet the standard for admission under Rule 1006.  Accordingly, we review Katsipis’s claim under Rule 403.”

As most federal trial lawyers know, Fed. R. Evid. 403 provides a low bar to the admission of relevant evidence.  If the danger of unfair prejudice substantially outweighs the probative value of the evidence, the court may exclude the evidence.  In real practice, Rule 403 does not often succeed in excluding evidence.  Instead, the Rule is only seriously considered in extreme cases, an illustrative example being repetitive graphic photos of murder victims at a crime scene.  It is no real surprise that the Fourth Circuit rejected Katsipis’s Rule 403 argument.

Further, the Court never considered whether the summary chart was proper under Rule 1006 because Katsipis was deemed to have waived the argument.  The Fourth Circuit’s opinion is unclear whether the waiver resulted from Katsipis’s failure to object under Rule 1006 during trial or whether the appellate briefs submitted to the Fourth Circuit omitted the argument.  Either way, this case offers an example of how an appellate consultant could assist a lawyer at trial, especially in criminal cases.  An appellate lawyer with a different eye can assist trial counsel to identify and preserve issues for appeal, while the trial lawyer focuses on the many preparations needed for a jury case.

Finally, this case reminds trial practitioners of the value of Fed. R. Evid. 1006 and the charts that may be presented to a jury to summarize voluminous (and dry) information or records.  We are all aware that people tend to be visual learners, especially so in our modern era dominated by smart phones and tablets.  Trial counsel should use this important tool of advocacy, which is chiefly limited only by the attorney’s creativity.

Is the Specter of New Rule 37(e) Influencing District Courts in Spoliation Rulings?

We have written multiple times on the EDVa Update Blog about the Court’s handling of spoliation claims. Recently we covered the 4th Circuit’s remand of a District Court ruling applying an adverse inference following a failure to preserve certain evidence.  We have also written on the workings of amended Fed. R. Civ. P. 37(e).  With sweeping changes ahead with the amendment to Rule 37(e) (effective date: December 1, 2015), the Court’s analysis of spoliation claims and associated sanctions will undergo major changes.

The Eastern District’s 61-page opinion in Integrated Direct Marketing, LLC v. May & Merkle, Inc., Case No. 1:14-cv-1183 (E.D. Va. Sept. 8, 2015), is likely one of the last pre-Rule 37(e) amendment spoliation rulings we will see. In this case, the ruling is consistent with the analysis that will soon apply, but the District Court in the case took a very different route to get to the same place. Even though the record included substantial evidence of ESI spoliation, the Court based its ruling on its finding of false statements in an affidavit, which allowed it to side-step the current legal swamp on spoliation.

IDM Case Posture: Summary Judgment and Spoliation Arguments

The IDM case presented an unfortunate but common fact pattern.   It is alleged in the pleadings that Drew May, an Executive Vice President at IDM, was pushed out of the company.   As he left, he allegedly downloaded a large number of IDM’s electronic documents to an external hard drive. May then signed on as new vice president at Merkle, a competitor to IDM.   While IDM was threatening suit, the former VP allegedly deleted (on the day before the filing of the Complaint) many of the IDM documents that he allegedly downloaded to his external hard drive. The deletion activity allegedly continued for the next couple weeks. Since the VP knew of the credibly threats of a lawsuit, there was a duty preserve relevant ESI and documents.

IDM sued in the Alexandria Division of the Eastern District on multiple counts. The lead claims were for trade secrets misappropriation, breach of fiduciary duty, beach of a confidentiality agreement, and conversion. The discovery quickly turned to the ESI on the VP’s external hard drive.

IDM retained Craig Ball, a nationally-known eDiscovery attorney and forensic investigator to examine the VP’s external hard drive.  Ball uncovered the VP’s conduct and identified more than 500 deleted IDM documents. Ball’s work also identified incriminating dates of the VP’s alleged deletions.

After a prolonged discovery war, both defendants moved for summary judgment arguing that there were no trade secrets involved and there had been no misappropriation. Defendant Merkle was apparently able to distance itself from the VP’s conduct; the Court granted Merkle’s motion on all counts.

The VP’s defense was complicated by the spoliation and false statement issues. The Court’s opinion notes that relevant evidence was not truly lost, and in fact, had been recovered. The Court was nonetheless troubled by the conduct, which included false statements in an affidavit submitted to the Court. IDM’s substantive case, however, was deteriorating. It faced an added hurdle that its designation of experts came late, and the Court had barred the damages experts from testifying—a huge problem in proving IDM’s $46 million claimed damages.

In its post-discovery pleadings, IDM emphasized the evidentiary spoliation and the VP’s false statements, and it targeted the most severe spoliation sanctions—striking of defenses and/or an adverse inference instruction to the jury.

The District Court‘s solution in its rulings was to veer away from spoliation and to focus on the false statements in the VP’s affidavit. Curiously, the Court concluded that since the forensic work led to the recovery of the deleted ESI, there was “insufficient evidence to support a finding of spoliation.” In its remedy, the Court avoided the draconian sanctions requested by IDM, but imposed stiff financial sanctions against the VP.

The VP’s motion for summary judgment was granted on all but the conversion counts, but the Court ordered him to pay a portion of IDM’s attorney’s fees plus the forensic expert’s bill.

Influence of Rule 37(e)’s Upcoming Arrival?

The District Court’s ruling comes under the current rules and case law. In 10 weeks, however, amended Rule 37(e) will be effective, and the requisite analysis will shift. The coming rule will limit the Court’s inherent authority to impose spoliation sanctions (instead, authority will come from the new amended Rule), will structure the factual and legal analysis, and will direct turning away in most situations from the draconian sanctions and towards remedies that are not outcome determinative. Hopefully, what is currently a legal swamp will disappear, and District Courts will then see have a clearer analytical path and predictable sanctions.

Notwithstanding the District Court’s conclusion that there was insufficient evidence to support a finding of spoliation (the findings suggest egregious spoliation but not real prejudice to IDM), it appears that IDM had a serious argument that the VP’s conduct supported striking his defenses or giving IDM an adverse inference instruction. Even under the upcoming new Rule 37(e) provisions, the VP’s spoliation arguably could support the imposition of the requested draconian sanctions. But the new Rule and the accompanying Committee Note state a preference for the alternative yet less-severe sanctions.

The IDM Court arrived at a solution that would be consistent with the coming rule. But the Court arrived at this result by a very different route.   The lengthy opinion side-stepped entirely the spoliation issue, and thereby avoided the current legal swamp. Instead, the Court grounded its ruling on the VP’s submission of a false affidavit.   This is an understandably safe route, but an unnecessary path after December 1, 2015 under the new Rule 37(e).

Is the Standard for Summary Judgment Evolving in EDVA?

Is the standard for summary judgment evolving, and has the Eastern District kept up with the evolution? 

In a July 6, 2016 decision in Guessous v. Fairview Property Investments, LLC, (Dkt. No. 15-1055), the Fourth Circuit reversed Judge Lee on all six counts in a fairly standard discrimination case.  The Court found repeatedly that the record was sufficient to permit a reasonable jury to find for the plaintiff, yet the District Court had credited the Defendant’s summary judgment evidence and granted summary judgment.  Stated differently, the appellate court reminds us that a district court’s weighing the evidence at summary judgment is impermissible.

The adjustment to the summary judgment standard traces to a May 2014 Supreme Court decision in what was a fairly routine § 1983 case.  In Tolan v. Cotton, 572 U.S. __ , 134 S.Ct. 1861 (2014), a Texas district court had granted summary judgment to a police officer deciding that his conduct in a police shooting was “objectively reasonable.”  There was evidence on both sides of the summary judgment issues; the district court weighed the evidence and came down in favor of the police officer.

The Fifth Circuit affirmed, albeit on different grounds, but three judges on that court voted in favor an en banc hearing. The case could easily have been passed over at the certiorari stage (Justice Alito, joined by Justice Scalia, wrote a concurring opinion complaining that the case was so routine that the Court should not have granted certiorari), but it seemed that several of the Supreme Court justices were looking for the opportunity to remind lower courts that a judge’s function at summary judgment is not to weigh the evidence but to determine whether there is a genuine issue for trial.”  This is the time-honored directive from Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986), but the Court’s Tolan decision suggests that justices believed that the standard needed some reinforcing.

The Fourth Circuit followed Tolan a few weeks later in McAirlaids, Inc. v. Kimberly-Clark Corp., 756 F.3d 307, 310 (4th Cir. 2014).  It then quoted from Tolan: “It is an ‘axiom that in ruling on a motion for summary judgment, [t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.’”   Not long afterwards, in March 2015, the Fourth Circuit provided “further elaboration” of the summary judgment standard in Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568 (4th Cir. 2015).  In an ominous introduction that highlighted a “clear misapprehension of summary judgment standards”, the panel of Judges Floyd, Keenan, and Harris cited Tolan:

Ordinarily we would begin our discussion with a brief restatement of the standard of review for a motion for summary judgment. When “the opinion below reflects a clear misapprehension of summary judgment standards,” however, further elaboration is warranted. Tolan v. Cotton (citations omitted) (per curiam).

Given this harsh treatment of the district court, it was no surprise that the Fourth Circuit reversed in part and remanded for trial.  The Court observed that in the Tolan case the district court had “fail[ed] to credit evidence that contradicted some of its key factual conclusions” and “improperly ‘weighed the evidence’ and resolved disputed issues in favor of the moving party.”

The Tolan and Jacobs decisions arguably provide a course correction in the summary judgment standards in cases where there is conflicting record evidence. The frequent Tolan quote is this:

Where there is conflicting evidence, the court must credit the evidence of both sides and acknowledge that there is a genuine issue of material fact that cannot be resolved by summary judgment. See Tolan v. Cotton (stating that summary judgment is inappropriate where each side has put forward competent evidence that raises a dispute about a material fact).

Westlaw identifies more than 870 case citations to Tolan.  Granted, many of the citations are for the § 1983 issues, but the case still stands tall because of the adjustments to the summary judgment standard.  Since Tolan, the above quote appears in multiple summary judgment rulings by Judge Cacheris, and in several ruling by Judge O’Grady.  Magistrate Judge Buchanan has also cited Tolan.  The Westlaw search shows, however, no other reliance either way on Tolan in the Alexandria Division of the Eastern District.

Sometimes district courts cite only the controlling circuit court decision without mentioning the Supreme Court case. The leading Fourth Circuit authority is the Jacobs decision.  Westlaw confirms that Jacobs has been cited in 136 cases, with most of these from within the circuit; there are more than 70 citations from the Maryland District Court, but only four from the Eastern District of Virginia, and just one of those four is from the Alexandria Division.

The Fourth Circuit’s Guessous decision relies on both Tolan and JacobsThe Court writes:

The court must “view the evidence in the light most favorable to the [nonmoving] party.”  Tolan v. Cotton, 134 S. Ct. 1861, 1866 (2014) (internal quotation omitted).   “The court . . . cannot weigh the evidence or make credibility determinations.” Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568-69 (4th Cir. 2015).  In general, if “an issue as to a material fact cannot be resolved without observation of the demeanor of witnesses in order to evaluate their credibility, summary judgment is not appropriate.” Fed. R. Civ. P. 56 advisory committee’s note to 1963 amendment.

Guessous at 16-17.  It is after these pointed citations that the Court launches into its “reasonable jury” analysis.   “A reasonable jury could easily conclude, however . . .”       Id. at 22. “This alone would be enough to allow a reasonable jury to conclude. . .”   Id. at 23.  “[T]he record is sufficient to permit a reasonable jury to conclude . . .” Id. at 28.  “[A] reasonable jury would certainly be entitled to reach a different conclusion . . .”   Id. at 30.  The Court’s unanimous decision reversed and remanded on all six counts.

Because so much of the Eastern District’s civil docket encounters summary judgment, Tolan and Jacobs are important precedents.  Other districts within the circuit, mostly notably the District of Maryland, seem to have recognized the course adjustment.  The Guessous decision perhaps is a wake-up call to the rest of the circuit, including the Eastern District of Virginia, to recognize the appellate direction for a tighter summary judgment standard.