In Episode 140, Kelly Twigger reviews the District Court’s decision and discusses why the Court found spoliation of video evidence with intent to deprive, even when the restaurant preserved evidence of the plaintiff’s fall in Nagy v. Outback Steakhouse, 2024 WL 712156 (D.N.J. 2024).
Introduction
Welcome to this week’s episode of our Case of the Week series brought to you by eDiscovery Assistant in partnership with ACEDS. My name is Kelly Twigger. I am the CEO and founder at eDiscovery Assistant, your GPS for ediscovery knowledge and education. Thanks so much for joining me today.
A couple of announcements before we get started. If you haven’t yet had a chance to grab our 2023 eDiscovery Case Law Report that discusses the key trends and cases from last year, you can download that today.
I am working with the Midwest Chapters of ACEDS on a four-part series on ESI protocols. There are four webinars in total, two have already aired, but are available to stream here. The third installment will be a judges panel moderated by my good friend David Horrigan in June, and I’ll be hosting a workshop on ESI protocols in July to close out the series. You can use the link to sign up to receive more details and view the previous sessions.
Finally, our team from eDiscovery Assistant will be at the Masters Conference in Chicago on May 15th, and we’ll be conducting a breakout session in which we invite you to play our eDiscovery Navigator Trivia Game. If you’re in the area or planning to attend the Masters add our session to your agenda. Here is the link to register and that link includes a 20% off discount to attend. The game is a lot of fun, and we have a great time with it wherever we go. We also have complimentary passes for law firms or in-house counsel, so email us to get one of those!
On with the show.
Each week on the Case of the Week I choose a recent decision in ediscovery and talk to you about the practical implications. This week’s decision involves the failure to preserve video evidence in a slip and fall case at an Outback Steakhouse restaurant. What will surprise you — and what is so key about this decision — is that Outback did preserve video. They just didn’t preserve enough video. This decision is one of a line of cases we are seeing on video evidence and the heightened awareness of it and the duty to preserve that follows the Aposaga v. Rite Aid Corp. decision we covered on Episode 121 on Case of the Week.
All right, let’s dive in. This week’s decision comes to us from Nagy v. Outback Steakhouse. It’s a decision from February 21, 2024, written by United States Magistrate Judge Douglas Arpert. The issues for the case, as always, which we add to each decision in our eDiscovery Assistant database include: scope of preservation, bad faith, failure to preserve, failure to produce, spoliation, adverse inference, sanctions, and video.
Facts
We are before the Court on plaintiffs’ motion for spoliation and sanctions against Outback for the failure to preserve video of plaintiff’s slip and fall in an Outback restaurant. Plaintiffs’ motion also included allegations of the failure to produce an incident report, but that part of the motion was dismissed, as the Court found that there was no formal incident report produced at the time.
Plaintiff’s fall occurred in an Outback restaurant in Greenbrook, New Jersey, where she was having dinner with her husband and two friends. Plaintiff left the table to use the restroom and she fell as she was walking through the restaurant. Paramedics were called and the plaintiff was taken to the hospital in an ambulance. Testing showed that the plaintiff fractured her hip and femur. The following day, a representative from Outback called plaintiff and learned she was waiting to go into surgery.
The area in the restaurant in which plaintiff slipped and fell was directly outside of the restaurant’s kitchen, where Outback servers entered and exited carrying trays of food and beverages. Pointing to witness deposition testimony, the plaintiff contends that there was a greasy substance on the floor in the vicinity of where the plaintiff fell.
Outback’s manager on duty that night testified that hosts are required to perform a bathroom check every 15 minutes, and that includes walking through the restaurant and inspecting the floor. Hosts and servers are also to inspect the floors as they perform their general duties. If the host or servers notice a substance on the floor, they are required to clean it up, per restaurant policy. After the plaintiff’s fall, per Outback’s policy, the manager called to report the incident to Outback’s insurance claims administrator, Gallagher-Bassett. The manager answered questions from the claims administrator and was given a report number. He did not create a written report.
Outback had a video camera in the restaurant trained right on where the plaintiff fell. The camera was operating and recorded the entirety of plaintiff’s fall and likely would have included any visuals of a substance being spilled on the floor. Twelve days after the incident, Outback received a preservation letter demanding that it preserve any and all surveillance video related to the incident for 24 hours preceding and 24 hours following plaintiff’s fall. Data from Outback’s cameras are overwritten every seven days, but until overwritten, Outback had the ability to save and preserve all of the video footage.
According to the manager on duty that night, if an incident occurs at the restaurant, the manager on duty would be responsible for preserving surveillance footage, or, if a preservation letter is received, the managing partner would be responsible. The manager testified that Outback does not have a policy requiring the manager on duty to preserve a particular amount of video footage when an incident occurs. He also testified he does not know if Outback has a retention policy. The manager did take steps to preserve some of the video from the time period following plaintiff’s fall. First, he preserved a 19 second video clip of the actual incident and sent that to the insurance adjusters. The following day, the claims adjuster’s office called and asked the manager for more video, and he preserved footage that was 27 minutes in length total; that clip included 5 minutes and 36 seconds before plaintiff’s fall and about 22 minutes after the fall. Because Outback surveillance camera operates on a seven-day loop, the remaining footage from that evening and day was overwritten five days before the preservation letter asking for Outback to keep video for the full day.
Plaintiffs’ motion now asks the Court to find that Outback is liable for spoliation for failing to preserve more of the video footage. This is an unusual case, right? Usually, we see that there’s no video footage preserved at all. This is a situation where we’re talking about the scope of preservation of the video footage.
Analysis
The Court begins with the legal standard for spoliation, which, as we know, is the destruction or significant alteration of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation, which may give rise to sanctions pursuant to both the Federal Rules of Civil Procedure and the Court’s inherent authority.
The Court then looked to Federal Rule of Civil Procedure 37(e) for failure to preserve, which states that spoliation occurs where “electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party fails to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery.” For the Court to make a finding that spoliation occurred, plaintiffs bear the burden of showing that:
- ESI should have been preserved in anticipation or conduct of litigation,
- that ESI was lost,
- that the information was lost because the parties failed to take reasonable steps to preserve it, and
- the information cannot be recovered elsewhere, restored or replaced.
The Court also notes that under Rule 37(e) there are two levels for spoliating ESI:
- a finding of prejudice to another party from the loss of the information, and
- a finding that the party acted with the intent to deprive.
Applying the facts to the Rule, the Court moved quickly to the key issue here, which really was whether Outback should have preserved more than five minutes of video footage from the time period immediately preceding the plaintiff’s fall. Citing case law, the Court found that determining whether a party had a reason to believe that the evidence in question would be required in litigation is governed by “a flexible fact-specific standard that allows a district court to exercise the discretion necessary to confront the myriad factual situations inherent in the spoliation inquiry.” That language here is key, and we’re going to reference it later.
The fact that plaintiff fell in Outback’s restaurant and was taken away in an ambulance, and that Outback was aware of the severity of plaintiff’s injuries and need for surgery made litigation reasonably foreseeable and triggered Outback’s duty to preserve. The Court also noted that Outback clearly anticipated litigation immediately, as Outback claimed that the record of information reported by Outback’s manager on the day of the incident to its claims administrator was privileged because it was prepared in anticipation of litigation.
Because litigation was foreseeable, the Court found that Outback had a duty to preserve evidence that it knew or reasonably should have known would likely be requested in that litigation. What’s interesting here to me is that the Court finds that Outback anticipated litigation instantly because it called the claims administrator and kept some video. But I think even without that fact here, given the severity of the plaintiff’s injuries that they found out the next day, that they would have reasonably anticipated litigation. Because that next day would have still been within the window of the seven days for video to be retained, they would have still been able to preserve the entirety of the video from that event.
Here comes the interesting part. The Court found that Outback, a sophisticated business entity and experienced litigant working with an experienced claims administrator, should have known that more than five minutes of video footage prior to the plaintiff’s fall would be relevant and would be requested by a plaintiff in any potential litigation:
Indeed, it is hard to imagine evidence that would be more pertinent to Ms. Nagy’s claims in this case. The Court agrees with Plaintiffs that such footage would have been probative of issues such as whether a slippery substance was deposited on the floor and, if so, how long it was there, whether Defendants had notice of a condition that could have caused Ms. Nagy’s fall, and whether Defendants’ employees inspected the floor in accordance with Outback’s policies. Under the circumstances here, the Court finds that Outback had a duty to preserve the disputed video footage.
So not only do we have a duty to preserve video, but the scope of that duty to preserve is in question. Keep in mind that quote from the Court. It basically says, hey, if there was something on the floor that made her fall and that caused her injuries, this video would have shown it. That’s pretty key. That’s going to be the best evidence that anyone can have is an actual factual evidence of what happened at the time.
Continuing the analysis of Rule 37, the Court found that the lost data could not be restored or replaced and rejected the idea that it could be replaced via witness testimony. The Court noted that the surveillance camera was trained directly on the area where the plaintiff fell, and it made a continuous recording of all the activities in its frame. Per the Court, “no witness or combination of witnesses had that perspective. Further, as one court has noted, ‘the unbiased eye of a surveillance camera’ can lend credibility to one side’s versions of an event when witness testimony conflicts.”
We’ve seen this multiple times on Case of the Week. The Rite Aid case was one example. We’ve also had multiple instances on Case of the Week, including Episode 71, Hollis v. CEVA Logistics U.S., Inc., in which the Court noted that it’s the video that is going to tell us the facts.
The Court then turned to whether or not Outback failed to take reasonable steps to preserve the video. In doing so, the Court reviewed the dockets of both the current District Court and other courts, which showed that Outback had defended several similar cases and was not an unsophisticated litigant. Despite that, Outback provided no guidance to its manager on how much video footage to save, and the manager on duty that night testified that managers are “not really given a time frame” as to how much video to preserve. The Court noted:
It is unclear to the Court how a sophisticated litigant can reasonably expect to fulfill its duty to preserve evidence by leaving the responsibility of that preservation in the hands of a restaurant manager who is given absolutely no guidance as to Outback’s preservation duties.
The Court also noted that saving the video footage would not have been burdensome and that Outback failed to take reasonable steps to prevent the automatic overriding of the relevant video footage.
The Court then turned to whether Outback acted with the intent to deprive plaintiffs of the video footage and noted that
Because direct evidence of intent is typically not available, courts generally look to circumstantial evidence to infer a party’s intent. … Factors that may be consider include the timing of the destruction, whether there was selective preservation, and what preservation policies the party had in place.
Just reading that language does not sound good for Outback. Reviewing the circumstances of the preservation, the Court found that the circumstantial evidence supported the conclusion that defendants acted with the requisite intent to deprive plaintiffs of access to relevant video footage, based on the following:
- Video from the day of the incident was reviewed and selectively preserved. Both preserved video clips were also reviewed by an experienced claims administrator.
- Preservation of the video was admittedly subjective and content-based with the most relevant portion of the video — the time period before the incident — being the shortest portion of the clip.
The Court found that the fact that the video was preserved in this manner rather than, for example, based on a more objective standard of saving 30 minutes before the incident or 30 minutes after, weighed against Outback when it came to the question of intent. Further, Outback assigned the task of saving the video footage to its restaurant manager, yet, as mentioned, it had no policy in place to guide the employee in the preservation of critical video evidence and instead relied solely on the manager’s judgment. According to the Court:
The lack of guidance is troubling and failure to provide it appears to the Court to be intentional, as Outback is no stranger to slip and fall litigation. At the time of the incident or immediately thereafter, Outback knew that litigation was reasonably likely and was aware of the importance of preserving evidence. It apparently had other policies in place to be followed by its managers in the event of a slip and fall incident. Indeed, [the manager] was required to call a ‘hotline’ to report the incident and answer a series of questions (which, as noted below, Outback states was done in anticipation of litigation).
Immediately after plaintiff was taken from the premises by ambulance, the manager took photos of the area where the incident occurred. In this context, absent a policy to follow, the manager preserved some but not all of the most pertinent video evidence while allowing the rest to be overwritten.
According to the Court:
[t]he video at issue here was not merely overwritten in the normal course, but affirmatively not preserved after being viewed by an Outback employee and claims administrator, and it was allowed to be overwritten.
The Court notes that the video produced by Outback clearly shows plaintiff slipping and falling and that it seems self-evident that a person viewing and preserving the video would, at a minimum, want to see enough video footage to answer the most basic questions relevant to that incident, such as whether a slippery substance had been deposited on the floor and whether the floors were inspected according to the Defendants’ policies. Yet video footage that would have answered these questions was not preserved. This, again, weighs against Outback on the question of intent.
The Court rejected Outback’s argument that bad faith has only been shown where no video was produced and found that that was a distinction without a difference and that there was sufficient evidence to find intent to deprive:
Indeed, if the Court were to accept Outback’s argument, a litigant such as Outback could avoid its preservation obligations by simply producing an incomplete video footage preserved by an untrained employee, rather than no video footage, without consequence. In this case, whether no video was produced or an incomplete selectively-preserved clip was produced, the result is the same: namely, that Plaintiffs are deprived of evidence relevant to the claims in this case. The Court finds sufficient evidence here to establish the intent to deprive Plaintiffs of video footage at the time period prior to Ms. Nagy’s fall.
With prejudice and intent established, the Court turned to the appropriate sanction and settled on a permissive adverse inference instruction, finding that:
- Outback was completely responsible for the loss of the evidence,
- plaintiffs had been prejudiced because the video would have shown if there was a slippery substance on the floor, and
- an adverse inference instruction is a lesser sanction than a dispositive one and is appropriate.
With that, the Court granted plaintiffs’ motion to the extent that the jury may be instructed that Outback intentionally failed to preserve the disputed video evidence and that the jury may presume that the lost video footage was unfavorable to Outback.
That’s a lot of facts and analysis from the Court, but this is a key case.
Takeaways
My reaction to this case is, wow — this is a significant decision in the preservation of surveillance video at a retail establishment that could apply in any context.
The Court’s ruling here required Outback to not only preserve video, but to have a complete scope of what should have been collected — and the Court uses language to say that the scope of preservation is specific to the facts. That’s a quote I mentioned earlier that we said we’d come back to. Here, it’s highly likely that if something was on the floor through spill or otherwise, that it might have gotten there more than five minutes before the plaintiff’s fall, and preservation of that five minutes before the fall was insufficient. On its face, that makes sense. But what the Court said here is that Outback had some pieces of preservation in place, but not enough. There was no guidance for the manager to know how much video he should preserve, and the Court says that it’s not good enough — you claimed privilege over the conversation between the manager and the claims administrator, so you already anticipated litigation immediately, and someone needed to say “preserve more video”.
The Court’s decision here requires a legal analysis of what should have been preserved to meet Outback’s duty to preserve. That’s easily solvable by putting a 24-hour preservation policy in place. But what if the next time 24 hours is not enough? It’s a slippery slope, and we only have a reasonableness standard to guide us here. The implications of this decision for any retail establishment are challenging and require training of those in charge of making those decisions, as well as policies and procedures to be followed about scope of preservation. Turnover at restaurants happens regularly, and the pure logistics of having a process in place to preserve video and making a judgment about what to preserve is onerous at best. What the Court says here is that Outback is regularly engaged in this type of litigation, and it should have known. I wonder how this analysis changes if the restaurant is a single owner place with no history of litigation. Maybe they don’t have any cameras at all, and this is moot. But what if they do? Do they have the same obligations as a serial litigant?
The next issue is one that we started seeing a trend on in 2023 and we talked about in our 2023 Case Law Report — that courts are finding intent to deceive under Rule 37(e) based on circumstantial evidence. There was no failure to preserve any video here. Rather, Outback’s manager selectively preserved the incident and then more video at a claim administrator’s request. He could have preserved more had he been asked or had there been a policy to preserve something more, say, all 24 hours preceding the incident.
Despite finding prejudice and intent to deceive, the Court really lets Outback off here with a permissive inference instruction. If the loss of the evidence is so prejudicial and the Court comes down harshly on Outback for its lack of guidance to the manager, will the adverse inference instruction that says the jury may presume that the lost video footage was unfavorable to Outback really combat that prejudice? I’d love to sit down with Judge Arpert here and have that conversation.
Conclusion
That’s our Case of the Week for this week. Thanks so much for joining me. We’ll be back again next week with another decision from our eDiscovery Assistant database.
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