Steinhauser-Harrilal-Gallagher v. City St.Paul CV05-461

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

Frank J. Steinhauser, III, et al.,

Plaintiffs,

v.

City of St. Paul, et al.,

Defendants.

Civil No. 04-2632 (JNE / SRN)

ORDER

Sandra Harrilal, et al.,

Plaintiffs,

v.

Steve Magner, et al.,

Defendants.

Civil No. 05-461 (JNE / SRN)

ORDER

Thomas J. Gallagher, et al.,

Plaintiffs,

v.

Steve Magner, et al.,

Defendants.

Civil No. 05-1348 (JNE / SRN)

ORDER

Matthew A. Engel, 11282 86th Avenue North, Maple Grove, MN 55369, for Plaintiffs

Gallagher et al.; John R. Shoemaker, Shoemaker & Shoemaker, P.L.L.C., 7701 France Ave.

South, Suite 200, Edina, MN 55435, for Plaintiffs Steinhauser et al., and Harrilal et al.

Louise Toscai Seeba, Assistant City Attorney, 750 City Hall and Courthouse, 15 West

Kellogg Blvd., St. Paul, MN 55102, for Defendants.

2

SUSAN RICHARD NELSON, United States Magistrate Judge

This matter comes before the undersigned United States Magistrate Judge on Plaintiffs’

Joint Motion For Sanctions (Doc. No. 102 (No. 04-CV-2632), Doc. No. 73 (No. 05-CV-1348), &

Doc. No. 79 (No. 05-CV-461)). The matter has been referred to the undersigned pursuant to 28

U.S.C. § 636 and District of Minnesota Local Rule 72.1(a). For the reasons stated below, the

Court denies the motion without prejudice.

I. FACTUAL AND PROCEDURAL HISTORY

In these three related actions, several owners of rental properties within the City of St.

Paul (Plaintiffs) generally allege that the City of St. Paul and various municipal officials

(Defendants) illegally discriminated against them with respect to enforcing building codes

regarding Plaintiffs’ properties, which are allegedly occupied primarily by “protected-class”

renters.

Plaintiffs contend that they submitted discovery requests for e-mails, Truth-In-Sale-of-

Housing (“TISH”) reports, Problem Property 2000 documents and St. Paul Public Housing

Agency (“PHA”) documents. (Mem. at 2.) Plaintiffs assert that they learned that the TISH

reports continued to be subject to the City’s routine document destruction policy well after the

filing of the first Complaint in 2004. Plaintiffs further claim that they were told in early 2007

that all e-mails prior to December 2005 had been destroyed. Finally, they argue that Defendants

have failed to produce the PHA documents as well as other documents that an anonymous source

provided Plaintiffs.

Plaintiffs now move for sanctions, contending that Defendants have committed discovery

abuses–the spoliation of evidence and failures to produce relevant documents–that warrant

various sanctions including (1) an award of fees, costs and expenses, (2) prohibiting Defendants

3

from moving for summary judgment, (3) an adverse inference, and (4) the direction of factual

findings in favor of Plaintiffs. (Mem. at 20.) They also seek the ultimate sanction of a default

judgment. (Id. at 19, 20.)

II. DISCUSSION

Plaintiffs claim that Defendants destroyed certain types of relevant evidence and have

failed to produce other relevant evidence or produced it too late for Plaintiffs to use in

depositions. (Mem. at 2.) They contend that Defendants

destroyed irreplaceable vital evidence (TISH reports from 2001, 2002 and 2003,

and all emails and other electronically delivered communications proper to

December or 2005), suppressed discoverable material (shown by the five (5)

packets of undisclosed anonymous material), and failed to search for responsive

documents (PHA cooperative, police service, and other agreements with the City.)

(Id. at 9.) Plaintiffs assert that the destruction was improper because it occurred after Defendants

had notice of these actions, arguing that Defendants’ duty “to preserve evidence was triggered no

later tha[n] upon service of the Complaint in Steinhauser in May 2004.” (Id. at 9.) They also

note that Defendants should have been put on notice of the particular issues based on the “first

discovery requests [that] were served in the Steinhauser” case in November 2004. (Id. at 6.)

The Court agrees that Defendants should have initiated a litigation hold specifically

tailored to these particular actions when they were filed. The present question, however, is what

if any sanction is appropriate for the loss of any relevant evidence. As Plaintiffs themselves

acknowledge (Mem. at 11), sanctions for improper document destruction may not be imposed

until “the moving party can demonstrate that they have suffered prejudice as a result of the

spoliation.” E*Trade Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 592 (D. Minn. 2005).

Accord Stevenson v. Union Pacific R.R., 354 F.3d 739, 748 (8th Cir. 2004) (“There must be a

finding of prejudice to the opposing party before imposing a sanction for destruction of

1 Plaintiffs premise their motion in substantial part on Rule 37. (Mem. at 8.) But Rule

37 requires the existence of a court order, and a violation of that order, before sanctions may be

premised on its authority. E.g. Chrysler Co. v. Carey, 186 F.3d 1016, 1019 (8th Cir. 1999). No

such order exists here. Insofar as Plaintiffs’ motion is premised on the federal courts’ inherent

authority to impose sanctions in such matters, a sanction based on that authority would require a

showing of bad faith. E.g. Steinlage v. Mayo Clinic Rochester, 235 F.R.D. 668, 674 (D. Minn.

2006). On the present record, the Court cannot conclude at this juncture that Defendants’

discovery practices constitute bad faith.

4

evidence.”); Keefer v. Provident Life and Accident Ins. Co., 238 F.3d 937, 940 (8th Cir. 2000)

(stating that showing of prejudice is required for sanction of dismissal).1

Plaintiffs claim they were prejudiced by the failure of Defendants to produce–or to retain

so that they could be produced–several types of documents. To establish prejudice, however, a

movant must generally be able to show the contents of the documents at issue, that is, the

substance of the evidence to which they were improperly denied access. See LEXIS-NEXIS v.

Beer, 41 F. Supp. 2d 950, 955 (D. Minn. 1999) (noting that movant must show that destroyed

material “would have contained evidence pertinent to the present litigation”). As one court has

ruled, the movant “must establish a reasonable possibility, based on concrete evidence rather

than a fertile imagination, that access to the [destroyed material] would have produced evidence

favorable to his cause.” Gates Rubber Co. v. Bando Chemical Indus., 167 F.R.D. 90, 104 (D.

Colo. 1996), quoted in LEXIS-NEXIS, 41 F. Supp. 2d at 955. Moreover, the destroyed evidence

must be “substantially different in character from that of the preserved information.” LEXISNEXIS,

41 F. Supp. 2d at 955 (refusing to “presume that the overwritten computer data . . .

contained information any more sensitive, or evidence any more damning, that what [movant]

expected to find in the first place”).

Here, it remains at present undetermined what the missing documents at issue contained.

Although the Court recognizes that a movant might frequently be placed in a difficult position

2 The Court notes, however, that it is not suggesting that the mere similarity between the

condition of Plaintiffs’ properties and the condition of those against which Defendants did not

pursue the same level of code enforcement would, by itself, suffice to establish discriminatory

intent.

3 Defendants’ argument that the TISH reports need not be produced because they are

necessarily irrelevant is not well taken. Defendants contend the City does not use those reports

as a means of code enforcement and that such reports are created by housing inspectors and are

retained by the City only because it is “the licensing agency of the TISH evaluators.” (Mem. at

3.) Defendants also note that TISH inspectors are not City employees and that the City’s code

enforcement officers do not rely on the TISH reports. (Id. at 11.) But this does not preclude

their relevance–the standard for which in the discovery context is quite broad–if they would

show, as Plaintiffs contend, that properties against which Defendants vigorously enforced

housing codes and which were owned by protected class individuals did not differ from other

properties that Defendants did not target for such enforcement. Granted, Defendants appear not

to be the best source for obtaining such reports (compared to the TISH inspectors themselves),

but Defendants should produce whatever TISH reports they might have in their possession,

custody or control that would be responsive to Plaintiffs’ discovery requests. Fed. R. Civ. P.

34(a). Similarly, with respect to Plaintiffs’ arguments that Defendants destroyed or otherwise

5

having to establish the contents of documents that were never produced to it, particularly where

those documents were in fact destroyed, Plaintiffs have offered no proof in the form of testimony

or other documentary evidence (that is, documents other than those allegedly destroyed) as to

what the destroyed documents contained.

Rather, Plaintiffs seem to assume or speculate that the documents at issue contain

evidence supporting their claims. For example, Plaintiffs contend that “[d]estruction of TISH

reports is prejudicial” because “these reports will show the conditions of similar properties,” but

only assert that such “TISH reports would show” similarities among properties that were

nevertheless treated differently by Defendants and that “TISH reports of similarly situated

property” would be “likely to show that Plaintiffs’ properties were illegally targeted.” (Doc. No.

115 (Affidavit of Matthew Engel), ¶ 11 (emphasis added).) Such reports could be relevant.2 But

any finding of prejudice based on the destruction of such reports must await a showing of the

contents of any such reports that, following the completion of discovery, remain inaccessible.3

did not produce documents of the PHA, it appears that the PHA is not an agency of the

Defendant City and thus Defendants would not be the best source for obtaining PHA documents.

But, of course, Defendants would be obligated to produce any responsive relevant PHA

documents that nevertheless happen to be within their possession, custody or control.

4 The documents that Plaintiffs claim Defendants improperly destroyed–essentially broad

categories of e-mails and property inspection reports–are not of the type the destruction of which

itself would support an inference either that the documents necessarily (or even likely) contained

evidence supporting Plaintiffs’ claims or that their destruction was in bad faith. Thus any

finding of prejudice must await a showing of the contents of any documents that remain missing

(or otherwise not produced) once discovery is complete.

6

Likewise, Plaintiffs assert that the destruction of e-mails and other such electronic

documents and communications “is prejudicial to Plaintiffs” but then claim only that “[t]hose

emails may have shown Defendants knew and intended that their selectively aggressive code

enforcement operations . . . would have a discriminatory impact.” (Doc. No. 115, ¶ 23 (emphasis

added).) For the same reasons, Plaintiffs cannot establish prejudice with respect to the evidence

they claim was produced anonymously, but should have been produced by Defendants.

Plaintiffs simply assert, without any persuasive factual support, that “[i]t is reasonably likely that

this type of evidence would have been contained in the emails from 2002-2005.” (Id.)

In some situations, the nature of the documents themselves coupled with the extent and

circumstances of their destruction might support an inference of prejudice. See E*Trade, 230

F.R.D. at 592 (noting that “the substantial and complete nature of the destruction of the evidence

contained in the recorded telephone conversations and hard drives . . . . justifies a finding of

prejudice”); see also Stevenson v. Union Pacific R.R., 354 F.3d 739, 748 (8th Cir. 2004)

(concluding that finding of prejudice is warranted “by the nature of the evidence destroyed . . .

the very fact that it is the only recording of conversations . . . contemporaneous with the

accident”).

But here, no such inference is presently warranted.4 Granted, Defendants were remiss in

7

not imposing an appropriate formal litigation hold no later than when the first complaint was

filed. E*Trade Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 588 (D. Minn. 2005) (noting

that duty “to preserve evidence begins when a party knows or should have known that the

evidence is relevant to future or current litigation”). Defendants assert that they relied on their

existing document retention policy and that any requirement that they systematically retain every

document and other form of evidence would “cripple” them. (Mem. at 7 (citing Zubulake v.

UBS Warburg L.L.C., 220 F.R.D. 212, 217 (S.D.N.Y. 2003)).) But while one generally may

employ a document retention policy that permits the routine destruction of documents, once

litigation is likely–and certainly once it has begun–a party may not destroy relevant evidence,

even pursuant to a preexisting document retention policy that one has not superseded or

otherwise modified by an appropriate litigation hold. E*Trade Sec. LLC, 230 F.R.D. at 588-89.

Nevertheless, the record at this juncture does not support the conclusion that Defendants’

action (or inaction) was taken in bad faith. As Defendants note, they had a document retention

policy that systematically discarded particular documents after a fixed period of time. With

respect to the TISH reports, Defendants contend that they were under no obligation to retain all

of those reports because (1) Plaintiffs were informed in January 2005 of the three-year retention

policy but did not then request the reports, (2) Plaintiffs did not specifically request them until

January 2007, and (3) the reports are “completely irrelevant.” (Mem. at 8; see id. at 11.) In

short, Defendants argue that because Plaintiffs’ 2004 document requests did not specifically

mention TISH reports, Defendants should not be sanctioned for routinely destroying what they

viewed as irrelevant, particularly when they informed Plaintiffs that those reports were retained

for only three years and met with no specific request in response. (Id. at 9.) Defendants claim

that despite this notice, “Plaintiffs did nothing to obtain a review of the reports until 2007.” (Id.)

5 This is particularly true insofar as TISH reports are generated by property inspectors

who are independent of Defendant City. Defendants presumably would have little if any logical

motivation to attempt to destroy evidence that, as they have consistently maintained, is generated

and retained by such independent inspectors and thus is incapable of being reliably destroyed by

the City, which would possess at most only its own copies.

8

Although the Court does not agree with all of Defendants’ justifications for their discovery

conduct, the Court cannot presently conclude on this record that the failure to preserve the TISH

reports beyond the three years provided in the document-retention policy constitutes bad faith or

willful spoliation.5

With respect to deleted e-mails, Defendants agreed to restore all available e-mails and are

in the process of recovering many of the deleted e-mails at issue. Defendants note that they in

fact informed Plaintiffs that many of the e-mails have been restored from disaster recovery tapes

and “are being prepared for production to Plaintiffs.” (Mem. at 12.) Accordingly, a motion for

sanctions based on any alleged improper destruction of such e-mails must await (1) the

completion of that recovery process, and (2) a showing of prejudice resulting from the loss of

any relevant e-mails that could not be recovered.

Finally, Plaintiffs claim that documents they received from an anonymous source should

have been produced by Defendants. But Defendants contend that they cannot be sanctioned for

not producing what they did not possess. (Mem. at 15.) They assert that Plaintiffs received

documents from an anonymous source that has never been identified and that “it is undisputed

that these documents were not in Defendants’ possession.” (Id. at 4-5.) Defendants need only

produce responsive documents within their possession, custody or control. Fed. R. Civ. P. 34(a).

A motion for discovery sanctions can be entertained only if and when Plaintiffs could establish

that documents they received from any such anonymous source were drafted or received by

Defendants or otherwise within their possession, custody or control.

9

In sum, after having reviewed the entire record, The Rottlund Co., Inc., 222 F.R.D. 362,

374 (D. Minn. 2004) (“Sanctions are considered based on the record as a whole, rather than

merely considering the latest instance of misconduct that broke the camel’s back.”), the Court

concludes that there is no basis at this juncture to find that Defendants or their attorneys

improperly destroyed any evidence (or even intentionally permitted the routine destruction

pursuant to an otherwise valid policy to continue despite notice that the documents to be

destroyed were relevant to a pending action) for the purpose of obstructing discovery.

Most importantly for present purposes, Plaintiffs have not (yet) established prejudice

from the lack of access to any evidence they allege has been destroyed. This present lack of

prejudice is particularly decisive here, where Defendants are currently attempting to recover and

restore relevant e-mails and otherwise continue to produce at least some of the evidence that

Plaintiffs still seek and where some of the documents are best obtained from those non-parties

that originally generated them.

III. CONCLUSIONS

Because Plaintiffs have not, as yet, shown any prejudice resulting from the loss of any

relevant evidence, their motion for sanctions is premature and thus must be denied but without

prejudice to its renewal if and when Plaintiffs can demonstrate that they were prejudiced by the

destruction or non-production of responsive documents. Cf. LEXIS-NEXIS v. Beer, 41 F. Supp.

2d 950, 956 (D. Minn. 1999) (directing movant to renew its sanctions motion “at an appropriate

time later in the litigation”).

Several miscellaneous matters warrant brief discussion. With respect to the ongoing

production of documents, either pursuant to the City’s recovery of deleted e-mails or otherwise,

the parties shall meet and confer to establish a protocol governing the production of evidence

10

that (1) prevents any disclosure of private data that would violate the Minnesota Data Practices

Act, (2) protects claims of privilege by incorporating a provision on inadvertent production, and

(3) designates all e-mails as “Attorney Eyes Only.” Once all of the remaining documents are

produced, the parties shall meet and confer regarding any additional depositions that need to be

taken in light of any such new evidence. If they are unable to agree, the Court will entertain an

appropriate motion. The Defendants shall pay the costs of any court reporter fees but Plaintiffs

may not recover attorney fees for any such depositions.

With respect to the TISH reports, at Plaintiffs’ election, the City may continue to produce

any relevant reports it might have in its possession, custody or control, or Plaintiffs may

subpoena the inspectors to produce their reports, with the costs being borne by the City. With

respect to the PHA documents, Plaintiffs should contact the appropriate individual at the PHA to

request that the Agency provide copies of the relevant documents. But if Defendants have such

documents in their possession, custody or control, Plaintiffs’ ability to obtain them elsewhere

does not preclude Defendants’ obligation to produce any such relevant documents responsive to

Plaintiffs’ discovery requests. Finally, with respect to the documents provided to Plaintiffs by an

anonymous source, the parties should meet and confer regarding whether the documents can be

authenticated.

IV. ORDER

Based on the foregoing, and all the files, records and proceedings herein, IT IS

HEREBY ORDERED that:

1. Plaintiffs’ motions for sanctions (Doc. No. 102 (No. 04-CV-2632), Doc. No. 73

(No. 05-CV-1348), & Doc. No. 79 (No. 05-CV-461) are DENIED WITHOUT PREJUDICE;

2. Plaintiffs’ request for their fees and costs incurred in bringing these motions is

11

DENIED;

3. Defendants’ request for their fees and costs incurred in responding to this motion

is DENIED.

Dated: November 13, 2007

s/ Susan Richard Nelson

SUSAN RICHARD NELSON

United States Magistrate Judge