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Thursday, August 16, 2007

City St.Paul Guilty-Destruction records

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August 2007 Vol. 7, Iss. 8 Forensic Evidence submitted by Sharon Anderson re: Title 26 501(c) 3 for Educational Purposes and Fed Litigation scrool below to next post.
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In This Issue:

Recent E-Discovery and Computer Forensic Court Decisions
Practice Points: What is "Data Downgrading" and Why Should Practitioners Be Cautious?
News & Events

Recent E-Discovery and Computer Forensic Court Decisions

Court Imposes $1,250,000 in Sanctions for E-Discovery Violations
In re Sept. 11th Liab. Ins. Coverage Cases, 2007 WL 1739666 (S.D.N.Y. June 18, 2007). Following the terrorist attacks of September 11, 2001, numerous victims filed claims against the Port Authority of New York and New Jersey (“Port Authority”) as the owner and operator of the Twin Towers, and its lessee Westfield Corporation, which procured commercial liability insurance under the general name World Trade Center Properties LLC (“WTCP”) through Zurich American Insurance Company (“Zurich”). In the pending litigation, these parties sought indemnification and declaratory relief from Zurich. Zurich argued that neither the Port Authority nor Westfield were named insureds under the policy and refused to indemnify or pay out claims. Ultimately, Zurich changed its position, and following dismissal of the case, Port Authority and Westfield moved for sanctions, alleging Zurich’s position throughout the pleadings was objectively unreasonable in violation of Rule 11 of the Federal Rules of Civil Procedure (“FRCP”) and the discovery abuses violated FRCP 37. The court held Zurich and its counsel liable for $1,250,000 based on violation of both Rules. The lease holders were successful in meeting the burden for the court to impose sanctions since Zurich deleted the electronic version of an essential document and possessed the paper version for over three years before producing it,. The court determined the $1,250,000 was sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.

Court Refuses to Modify Production Format Agreement between Parties
In re ATM Fee Antitrust Litig., 2007 WL 1827635 (N.D. Cal. June 25, 2007). In a suit alleging an illegal price fixing scheme, the plaintiff motioned the court to compel the defendant to produce numerous additional documents in discovery and sought modification of the production format previously agreed upon by the parties. The plaintiff sought production of material regarding networks other than the defendants, material provided to the government or in connection with other relevant private litigation, material regarding ATM networks in foreign countries, material from the inception of the plaintiff’s network to date, materials regarding entities the defendant acquired, among other things. The defendant argued the scope of discovery sought was limitless and sought relief from complying with all of the requests. The court set forth general guidance regarding the appropriate scope of discovery, operating under the perspective that discovery is limited by the specific subject matter presented in the complaint. As for the production format, the parties originally agreed to produce in a tiff image format, subject to optical character recognition scanning. The court declined to order a different production format because the parties had reached the agreement over two years prior, well before the new Federal Rules of Civil Procedure amendments were modified in December 2006.

Court Determines Keyword List and Sets Out Detailed Discovery Process
Williams v. Taser Int’l Inc. , 2007 WL 1630875 (N.D.Ga. June 4, 2007). In a wrongful death action, the plaintiffs brought three motions before the court to resolve numerous discovery disputes. The parties disagreed about the manner in which the searches for responsive documents contained within the defendants’ electronic databases were to be performed, specifically focusing on the timing of production, the specific search terms to be used and the extent to which the plaintiffs would be allowed to participate in the search process. The plaintiffs requested to participate in the search process at the defendants’ facility. The defendants opposed this request and stated if the search terms can be agreed upon in advance via e-mail, the defendant will locate the documents, conduct a privilege review and produce responsive documents. Finding both proposals deficient, the court, being frustrated with the delay and inability of the parties to reach an agreement, entered an extensive discovery protocol and ordered the defendants to use a specified list of keyword search terms. The court also ordered a protocol to be followed regarding inadvertent disclosure of privileged information and set a deadline for completion of discovery.

Court Issues Evidentiary and Monetary Sanctions for Willful Indifference Toward Discovery Duties
Google Inc. v. Am. Blind & Wallpaper Factory, Inc. , 2007 WL 1848665 (N.D.Cal June 27, 2007). In this trademark case, the plaintiff sought terminating, evidentiary and monetary sanctions from the defendant based on its alleged failure to preserve, collect and produce documentary evidence. The plaintiff showed that no deposed employee recalled the existence of a preservation plan after the litigation ensued, that employees routinely deleted documents and that the defendant confined its production to communications between the two companies, which were already in the plaintiff’s possession. The defendant offered little rebuttal evidence. The court agreed with the plaintiff finding “a willful indifference” with regards to the defendant’s discovery obligations. However, the court was unwilling to impose terminating sanctions and instead ordered evidentiary sanctions in the form of several judicially established facts and also ordered monetary sanctions in the form of a $15,000 sanction against the defendant. The plaintiff also argued the founder and CEO of the defendant’s company destroyed and erased electronic data from certain computers upon his resignation. However, the court found that the weight of the evidence did not support an inference that any wholesale destruction of relevant evidence took place at that time.

Court Issues Spoliation Sanctions Based on Reckless Disregard of Preservation Duties; Bad Faith Not Required
United Med. Supply Co. Inc., v. United States , 2007 WL 1952680 (Fed.Cl. June 27, 2007). In this contract dispute, the plaintiff sought spoliation sanctions based on the defendant’s failure to preserve and produce relevant evidence. The defendant argued that the court was precluded from imposing such sanctions since it acted in good faith, albeit negligently. For over four years, the defendant had neglected to contact the proper custodians to notify them of the litigation, let alone inform them of the preservation requirement. The court held that an injured party need not demonstrate bad faith in order for the court to impose spoliation sanctions, as the spoliation doctrine was not designed solely to punish those who consciously destroy documents, but also to address the manifest unfairness in the loss of relevant information. Therefore, based on the defendant’s reckless disregard of its preservation duty, the court ordered a two facet sanction. First, the defendant was prohibited from cross-examining the plaintiff’s expert regarding gaps in the record. Second, the defendant was ordered to reimburse the plaintiff for any additional discovery related costs because of the defendant’s malfeasance and misrepresentations as well as costs incurred with this motion.

Court Refuses to Allow Defendant to Take Advantage of Rule 37(f) Safe Harbor Clause
Doe v. Norwalk Cmty. Coll. , 2007 WL 2066497 (D.Conn. July 16, 2007). In this suit brought under Title IX of the Education Amendments of 1972, the plaintiff, claiming sexual assault by her college professor, motioned the court to sanction the defendants for discovery misconduct and spoliation of evidence. The plaintiff claimed the defendants scrubbed or wiped the hard drives of relevant individuals and altered, destroyed or filtered relevant data. For example, one witness’s e-mail PST file contained no deleted items and only one sent item. The defendants argued that they should be protected by the safe harbor of Federal Rule of Civil Procedure 37(f) since their production was sufficient and that scrubbing their hard drives was normal business practice. The court held that in order to take advantage of the good faith exception in the new FRCP, a party needs to act affirmatively to prevent the system from destroying or altering information, even if such destruction would occur in the regular course of business. As the defendants failed to suspend their destruction process at any time and such destruction was not due to the routine operation of the information system, the court found the plaintiff was entitled to an adverse jury instruction with respect to the destroyed evidence as well as reimbursement for costs associated with filing the motion.

Other New Case Summaries Added To The Ontrack Discovery Case List This Month:

  • Court Refuses to Impose Protective Order on Inadvertently Produced E-mail – Mugworld, Inc. v. G.G. Marck & Assoc., Inc. 2007 WL 1745606 (E.D.Tex. June 15, 2007).
  • Court Defines E-mail as a Document, Therefore Subject to Inspection – Kasten v. Doral Dental USA, LLC, 2007 WL 1791226 ( Wis. June 22, 2007).
  • Court Refuses to Order Litigation Hold – Valdez v. Town of Brookhaven, 2007 WL 1988792 (E.D.N.Y July 5, 2007).
  • Court Orders Production of Attorney-Client Communication – Kingsway Fin. Serv. Inc. v. Pricewaterhouse-Coopers LLP, 2007 WL 1837133 (S.D.N.Y. June 27, 2007).

To view additional case summaries visit: http://www.krollontrack.com/legalresources/caselawlist.aspx

Practice Points: What is “Data Downgrading” and Why Should Practitioners Be Cautious?

With the changes to the Federal Rules of Civil Procedure (FRCP) on December 1, 2006, new issues are emerging as courts and attorneys attempt to understand and uniformly apply the amended rules. One of the largest issues the legal community is grappling with is data accessibility and the repercussions for failing to preserve accessible data in a continually accessible format. Once a party is reasonably aware of litigation, the duty to preserve relevant electronically stored information (ESI) attaches. However, the question remains -- in what format?

Unlike paper documents, electronic documents exist in numerous formats, on numerous media types and to varying degrees of accessibility. “Data downgrading” occurs when data that is in an accessible format is modified and placed in a less accessible format. For example, taking easily accessible active data on a laptop hard drive and placing the information on a less accessible backup tape which is usually created for disaster recovery purposes. For numerous business purposes, a company is free to move accessible data to a less accessible format. However, when a preservation duty exists, this accessibility downgrade could be considered spoliation.

Spoliation occurs when a party intentionally, negligently or by mistake destroys, alters or conceals data relevant to a pending or probable litigation. Sanctions can include an adverse jury instruction, monetary award, and, in extreme cases, default judgment. Magistrate Judge James Francis of the Southern District of New York was particularly attuned to this issue, even before the FRCP amendments. In Treppel v. Biovail Corporation, Judge Francis held parties that permit the downgrading of data to a less accessible form which hinders future discovery by making the process more costly and burdensome, violates their preservation obligations and may be at risk for spoliation sanctions. Within the same district, Magistrate Judge Henry Pitman asserted an opposite viewpoint in Quinby v. WestLB AG. He did not order spoliation sanctions when the responding party chose to store once accessible data in an inaccessible form, reasoning that the party was still able to produce the data, just at a higher cost. Who should bear the costs of retrieving downgraded data is another issue that must be considered. Judges have been skeptical when parties complain about the costs associated with restoring inaccessible data when they failed to preserve it in an accessible format after a preservation duty arose.

In conclusion, there are no bright line rules relating to data downgrading. One thing that seems to be certain, however, is if litigation is pending or reasonably foreseeable and a party modifies its ESI to a less accessible format, it will likely end up footing the bill to restore it in discovery.

News & Events

Kroll Ontrack Appoints New President
Effective July 19, 2007, Kristin M. Nimsger, Esq. was appointed to the position of president of Kroll Ontrack, as Ben Allen, Kroll Ontrack’s former leader recently assumed new duties as chief operating officer of Kroll Inc. Nimsger brings extensive strategic development and business management experience to her new role. As president, Nimsger is responsible for advancing the strategic vision of Kroll Ontrack and growing the Data Recovery, Legal Technologies and Search business lines through investments in organic growth and geographic expansion. Furthermore, she will work with the broader Kroll organization to continue to enhance the cooperation and collaboration between the Kroll businesses. Among one of the nation’s most knowledgeable legal technology experts, Nimsger most recently served as the vice president of Legal Technologies for Kroll Ontrack. With the company since 2001, Nimsger oversaw the evolution of products and service offerings for the Legal Technologies business group, which primarily serves law firms, corporate counsel, government agencies, and others with electronically stored information consulting services, electronic and paper discovery, and computer forensic solutions. Nimsger earned her J.D. cum laude from William Mitchell College of Law, St. Paul, Minn., and received her B.A. in English/Communications from the University of Minnesota, Duluth.

Standing Committee Approves Proposed New Federal Rule of Evidence 502
The Committee on Rules of Practice and Procedure met on June 11th and 12th and recently issued its final approval and recommendation for the addition of Federal Rule of Evidence 502. Among its provisions, the rule addresses waiver of attorney-client privilege and work product protections during civil discovery. The Advisory Committee on Evidence Rules met earlier in the year on April 12th and 13th and issued a recommendation that the Standing Committee approve the proposal and submit it to the Judicial Conference. The Standing Committee will now convey the proposed new rule to the Judicial Conference and recommend they approve and transmit the proposal to Congress and the Supreme Court for enactment.

Meet our representatives at the following events:

8/20/2007
Minnesota CLE “E-Discovery: Beyond the Basics”Minneapolis, MN
8/20/2007 - 8/23/2007
ILTA 30th Annual Educational ConferenceOrlando, FL
8/27/2007 - 8/29/2007
HTCIA International Training Conference & ExpoSan Diego, CA
9/10/2007 - 9/11/2007
Electronic Discovery Certification CourseEden Prairie, MN
9/20/2007
Electronic Evidence Thought Leadership SeriesChicago, IL
9/24/2007 - 9/27/2007
ASIS International 53rd Annual Seminar and Exhibits 2007Las Vegas, NV
9/28/2007
Legalworks “Electronic Discovery After the New Federal Rules”Austin, TX
10/1/2007
Lorman Litigation InstituteNew York, NY
10/10/2007 - 10/13/2007
IPMA 23rd Annual Conference & ExpoScottsdale, AZ
10/16/2007
Legalworks “E-Discovery Ethics & Best Practices for Counsel”Los Angeles, CA
10/29/2007 - 10/31/2007
American Corporate Council (ACC) Annual MeetingChicago, IL
11/8/2007 - 11/9/2007
Advanced Electronic Discovery Certification CourseEden Prairie, MN
11/29/2007
Legalworks “E-Discovery Ethics & Best Practices for Counsel”Dallas, TX
11/29/2007 - 11/30/2007
4th Annual Paralegal SuperConferenceSan Francisco, CA
12/6/2007 - 12/7/2007
Electronic Discovery Certification CourseEden Prairie, MN
12/12/2007
Electronic Evidence Thought Leadership Series & Awards ReceptionNew York, NY

Visit http://www.krollontrack.com/upcomingevents/ for more information on these events and others.

Back To Top

WE REQUEST YOUR INPUT

This newsletter is written by Michele C.S. Lange, a staff attorney with Kroll Ontrack, with assistance from Joni Heikes a Kroll Ontrack staff attorney. Ms. Lange has published numerous articles and speaks regularly on the topics of electronic discovery, computer forensics, and technology’s role in the law. She can be contacted by writing to mlange@krollontrack.com.

For more information about electronic discovery and computer forensics services, please call 800 347 6105 or visit http://www.krollontrack.com.

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9023 Columbine Road Eden Prairie, MN 55347 800 347 6105

City StPaul MALFEASANCE

August 15, 2007 as posted on Bobby Johnson's Blogs

JOINT MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR SANCTIONS

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Frank J. Steinhauser, III, et. al., Civil No. 04-2632
JNE/SRN
Plaintiffs,
v.
City of St. Paul, et. al.,
Defendants.
Sandra Harrilal, et. al., Civil No. 05-461
JNE/SRN
Plaintiffs,
v.
Steve Magner, et. al.,
Defendants.
Thomas J. Gallagher, et. al., Civil No. 05-1348
JNE/SRN
Plaintiffs,
v.
Steve Magner, et. al.,
Defendants.
Plaintiffs in Frank J. Steinhauser, III, et al., Plaintiffs Sandra Harrilal and Steven R. Johnson in Sandra Harrilal, et al., and Plaintiffs in Thomas J. Gallagher, et al., through their
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undersigned counsel, submit this Joint Memorandum of Law in support of Plaintiffs’ Motion for Sanctions.
INTRODUCTION
Plaintiffs’ counsel learned on March 16, 2007, and April 23, 2007, from counsel for Defendants that certain relevant evidence was destroyed by Defendant’s during the course of this litigation (See Engel Aff., para’s. 6 and 10), including the City’s Truth In Sale of Housing reports for 2001, 2002 and 2003, and all emails and electronic communications between City officials, employees, non-government organizations, district councils, neighborhood groups, public housing agency and other entities and individuals for all time periods prior to December, 2005. Moreover, Defendants have failed to produce any documentation of the City’s “Cooperative agreements,” “police service agreements,” and other agreements it has with the City’s Public Housing Agency (“PHA”) even though Plaintiffs have made proper and repeated requests for this evidence relevant to Plaintiffs’ claims. In addition, relevant City documents that were not produced by the Defendants were provided to Plaintiffs’ counsel after the close of discovery from an anonymous source, long after Plaintiffs could utilize these documents in depositions of inspectors.
Because of Defendant’s spoliation of evidence during the course of this litigation, and due to the further failures by Defendants to produce numerous other relevant City documents, Plaintiffs are request that the Court issue its order sanctioning Defendants.
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On March 12, 2007, pursuant to Fed. R. Civ. P. 37 (a)(2)(A), counsel for Plaintiffs met and conferred in good faith with the attorney for Defendants in an attempt to resolve the discovery disputes regarding Defendants’ failure to respond to Plaintiffs’ requests for production of documents and interrogatories within the time permitted by the Rules. Engel Aff. at para. 2.
Plaintifffs’ in all three cases (Steinhauser, et al, Harrilal, et al. and Gallagher, et al.) submitted Interrogatories and Requests for Production of Documents to Defendants. Requests were made for emails. Requests were made for TISH reports. Requests were made for Problem Property 2000 documents. Requests were made for PHA documents. Engel Aff. at para. 3. See Also John R. Shoemaker Affidavit, paras. 16, 18, 19, 20, 21, 22, 45, 46, 47, 49.
Attorney Engel submitted a letter to Defendants’ counsel confirming the agreements of counsel for the continued discovery efforts. Engel Aff. at para. 4.
During the next 12 weeks, between March 16, 2007 and June 11, 2007, attorney Engel scheduled and appeared at various City of St. Paul offices to review and scan documents. There were approximately 20 document reviews on or about the following dates: TISH reports on the following dates: March 16, 21, 22, 26, and 27; April 3, 5, 13, and 17; Fire Prevention documents on April 19; Employee Mileage Reports and Police Call Reports on April 23; NHPI documents on April 27; LIEP documents on May 7; Moermond research files on May 8; Legislative Hearing documents on May 23 and 24; Problem property lists, Sweep reports,
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and other NHPI documents on May 31; Fire Prevention documents on June 4; LIEP files on June 11 and 18, 2007. Engel Aff. at para. 4.
During the document review session on April 23, 2007, at the offices of the City Attorney, Defendants’ counsel Ms. Seeba stated to attorney Engel that her IT people would like to work on getting the emails, but that they only have emails available back to December of 2005. During several of these meet and confer meetings with Defendant’s counsel, attorney Engel was informed that all emails prior to December of 2005 had been destroyed and were no longer available. Engel Aff. at para. 5 and 6.
Attorney Engel sent a letter to Defendant’s counsel Ms. Seeba dated May 1, 2007, confirming the destruction of all emails prior to December, 2005. Ms. Seeba responded with a letter dated May 3, 2007, confirming that no emails prior to December of 2005 were available, but certain emails were available after December, 2005. During the document review sessions at the St. Paul City Attorney’s office, on no less than five occasions attorney Engel sat down to meet and confer with Defendant’s counsel, Louise Seeba, and discussed the status, progress, and technicalities of the production of emails by the defendants. Engel Aff. at para. 7 and 8.
Defendants’ counsel stated that she needed a list of names of the individuals of whom Plaintiffs would like emails produced. Plaintiffs’ attorneys requested a list of all of the employees for each of the departments listed in the discovery request. Defendants’ counsel agreed to produce the lists. On June 4, 2007, counsel agreed that defendants would restore available emails of certain city employees. Plaintiffs’ and Defendants’ counsel exchanged
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letters on June 6, 2007. Defendants’ letter dated June 6, 2007, contained a list with the city employees to restore available emails. Plaintiffs’ counsel responded to defendants’ counsel with additional City employee names. Engel Aff. at para. 9.
During the document review session of Truth In Sale of Housing (TISH) Reports on March 16, 2007, at the offices of Neighborhood Housing and Property Improvement, 1600 White Bear Avenue, City of St. Paul employee Connie Sandberg stated to attorneys Shoemaker and Engel, and Plaintiff Frank Steinhauser that copies of TISH reports are only maintained for three (3) years, and that all TISH reports prior to 2004 had been destroyed. Engel Aff. at para. 10.
Defendants were put on notice of the Plaintiffs’ claims with detailed facts, circumstances and issues surrounding such claims. See John R. Shoemaker Affidavit, paras. 2, 3, 4, 5 and 6 (selective enforcement – targeting claims), 7 (claims that Defendants were targeting Plaintiffs’ rental properties at the same time many other properties near by had significant problems and code violations the City claimed it was concerned about but City ignored), 8 (Defendants admitted to learning of Steinhauser’s claim of selective enforcement during 2002 meeting), 9 (whether Defendants’ code enforcement was being applied to single family properties across the City on a “consistent basis”), 10 (PHA has similar maintenance, repair and behavior problems to Plaintiffs properties), 11 (the system of “inspections” of the privately owned rental properties in the City, including, but not limited to, exterior and interior inspections of single family and duplex properties by City Inspectors, inspections of Section 8 rental properties by PHA, and inspections by housing advocates), 12 (Defendants
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illegal conduct included intentionally claiming false code violations at Plaintiffs’ properties), 13 (Plaintiffs forced to sell their rental properties), 14 (all communications between City officials, employees, agents, non-governmental organizations (NGOs” and other third parties, including neighbors of Plaintiffs’ properties were at issue), 15 (“Problem Property 2000” initiative was relevant to Plaintiffs claims). These detailed claims provided Defendants with sufficient notice to require Defendants to place a “litigation hold” on normal document retention and destruction policies and to refrain from destroying relevant evidence.
The Complaints in each of the three cases were filed on May 5, 2004 (Steinhauser, et. al., 04-2632), March 3, 2005 (Harrilal, et. al., 05.461), and July 6, 2005 (Gallagher, et. al., 15-1348). The Complaints provide Defendants with further notice of the issues and claims subject to litigation and the evidence and documents relevant to such claims.
The first discovery requests were served in the Steinhauser, et. al. case on the defendants on November, 2004. Certainly the discovery requests would have put the Defendants on notice of the issues and claims subject to litigation and the evidence and documents relevant to such claims. See John R. Shoemaker Affidavit, paras. 16, 18, 19, 20, 21, 22, 23.
Since then, Defendants have failed to produce emails, TISH reports, PHA documentation requested or the complete documentation concerning PP2000 to Plaintiffs.
TISH reports are relevant to the Plaintiffs claims as they show the condition of the interior of properties within the City of St. Paul. Plaintiffs’ expert Don Hedquist, reviewed TISH reports of Plaintiffs’ properties in forming his opinions in support of Plaintiffs’ claims. See John R.
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Shoemaker Affidavit, para. 33. Defendants’ expert Dr. Musil opined in his expert reports herein that the TISH reports were relevant to Plaintiffs claims of damages and to Plaintiffs’ claims that they were selectively targeted. See John R. Shoemaker Affidavit, paras. 35 and 39. Nevertheless, Defendants destroyed TISH reports for 2001, 2002, and 2003 after the filing of the Complaints herein. See John R. Shoemaker Affidavit, para. At the time the Steinhauser Complaint was filed and served in May 2004, the City would have had TISH reports and files for the “current year” of 2004, and three previous years, 2001, 2002 and 2003. See John R. Shoemaker Affidavit, para. 17.
TISH reports of similarly situated properties is relevant and likely to show that Plaintiffs’ properties were illegally targeted – in violation of and in support of Plaintiffs’ claims, including claims under RICO, Fair Housing, Civil Rights, Antitrust, Abuse of Process, and Tortious Interference with Contract and Business Expectancy. Engel Aff. at para. 11.
Defendant Dawkins prepared a memo to code enforcement inspectors regarding the discriminatory impact of code enforcement. This evidence along with other relevant documents, was produced anonymously in one of the five (5) anonymous packets received by John Shoemaker. See Exhibit “39” of Affidavit of John Shoemaker, paras. 63-68, 71-73. It is reasonably likely that this type of evidence would have been contained in the emails from 2002-2005, the time period in which Plaintiffs claim illegal code enforcement. However, all emails during Defendant Dawkins’ employment have been destroyed, and this is prejudicial to the Plaintiffs. Engel Aff. at para. 23.
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The power of the court to impose sanctions for discovery arises from two distinct authorities. The Federal Rules of Civil Procedure provide for sanctions when a party fails to respond to discovery requests or when a party fails to comply with a court order regarding discovery. See Fed.R.Civ.P. 37(b) and (d). Sanctions also may be imposed if a party violates Rule 26(g) by submitting false certifications. If the party's conduct falls outside of conduct sanctionable under the Rules, the court may impose sanctions based on its inherent authority to control its own judicial proceedings. See E-Trade Securities, LLC, v. Deutsche Bank AG, 230 F. R. D. 582, 586 (D. Minn. 2005)(citing Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 745 (8th Cir. 2004); see also Chambers v. NASCO, Inc. 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991)). The range of sanctions available to the court includes awarding of attorney fees and costs, imposing an adverse inference instruction to the jury, directing factual findings, and finding a default judgment against the spoliator. See E-Trade Securities, LLC, at 586-587 (citing Fed.R.Civ.P. 37(b)(2)(A)-(C)).
ARGUMENT
Spoliation is the intentional destruction of evidence and when it is established, the fact finder may draw inference that the evidence destroyed was unfavorable to the party responsible for its spoliation. See E-Trade, 230 F.R.D. at 587 (citing Black's Law Dictionary 1401 (6th ed.1990); see also Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003)(spoliation of evidence is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonable foreseeable litigation); see also West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d
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Cir.1999)).
In the E-Trade case, the plaintiff claimed that, inter alia, defendant had destroyed irreplaceable vital evidence; suppressed large quantities of discoverable material, and failed to search for responsive documents. 230 F.R.D. at 587.
Like the E-Trade case, the Defendants in this case have destroyed irreplaceable vital evidence (TISH reports from 2001, 2002 and 2003, and all emails and other electronically delivered communications prior to December of 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).
The Court must determine when the Defendant's duty to preserve evidence was triggered. See E-Trade, 230 F.R.D. at 587 (citing Zubulake, 220 F.R.D. at 216).
Defendants’ duty herein to preserve evidence was triggered no later that upon service of the Complaint in Steinhauser in May 2004. In fact, Defendants received multiple Notice of Claim letters from the Plaintiffs during 2003 through early 2005 detailing the nature of the claims. Certainly, Defendants duty to preserve evidence arose no later than when they were served with a more than 80 page Steinhauser Complaint in May of 2004 detailing the Plaintiffs claims that (1) Defendants had selectively targeted and were continuing to target Plaintiffs and other low-income landlords with discriminatory code enforcement, (2) that defendants were ignoring the clearly visible code violations on the exteriors of properties in the neighborhoods of Plaintiffs’ rental properties, (3) that Plaintiffs had placed the condition of their properties and those surrounding their properties at issue (4) that the inspection
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programs for single family and two-family rental homes in the City were relevant to Plaintiffs’ claims, (5) that the communications between City officials and employees and with certain third parties were relevant to Plaintiffs’ claims, (6) that PHA had rental properties and tenants that were similar in many respects to those of Plaintiffs and had their own inspection system, (7) that Plaintiffs considered the City’s “Problem Property 2000” initiative to be very significant to Plaintiffs’ claims.
The destruction of relevant evidence by the Defendants and others working together with them after receiving from Plaintiffs specific discovery requests for the production of documents, makes the destruction all the more egregious.
The obligation to preserve evidence begins when a party knows or should have known that the evidence is relevant to future or current litigation. See E-Trade, 230 F.R.D. at 588 (citing Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 746 (8th Cir. 2004); see also Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003). If destruction of relevant information occurs before any litigation has begun, in order to justify sanctions, the requesting party must show that the destruction was the result of bad faith. Id. Bad faith need not directly be shown but can be implied by the party's behavior. For example, the Eighth Circuit Court of Appeals has explained that, (1) a party's decision to selectively preserve some evidence while failing to retain other evidence or (2) a party's use of the same type of evidence to their advantage in prior instances, may be used to demonstrate a party's bad faith. Id (citing Stevenson, 354 F.3d at 747-48).
In order to determine whether sanctions are warranted when documents have been
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destroyed due to a company's retention policy prior to litigation, the court must consider: (1) whether the retention policy is reasonable considering the facts and circumstances surrounding those documents, (2) whether lawsuits or complaints have been filed frequently concerning the type of records at issue, and (3) whether the document retention policy was instituted in bad faith. See E-Trade, 230 F.R.D at 588-589 (citing Lewy v. Remington Arms Co., 836 F.2d 1104, 1112 (8th Cir.1988)).
However, when the destruction of evidence occurs after litigation is imminent or has begun, no bad faith need be shown by the moving party. 230 at 589. When litigation is imminent or has already commenced, "a corporation cannot blindly destroy documents and expect to be shielded by a seemingly innocuous document retention policy." See Id. at 589 (citing Stevenson, 354 F3d at 749); see also Lewy, 836 F.2d at 1112.
An imposition of sanctions is only merited when the moving party can demonstrate that they have suffered prejudice as a result of the spoliation. See E-Trade, 230 F.R.D. 592 (citing Stevenson, 354 F.3d at 748).
PREJUDICE TO PLAINTIFFS
In the case before us, Plaintiffs have been prejudiced by the defendants’ destruction of evidence.
1.
TISH Reports.
During 2002 through 2005, the City’s TISH program was administered by Dawkins’ NHPI department. The normal document retention policy (without the litigation hold requirement being considered here) was for the City to maintain the current year of TISH
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reports and three previous years of reports.
Thus, in March 2007, at the close of discovery, the TISH officials had the following TISH reports to produce to Plaintiffs: 2007 (current year) and 2006, 2005, 2004.
In 2006, the TISH reports that should have been available in the absence of litigation, would have been 2006 (current year) and 2005, 2004, and 2003. The 2002 TISH reports would have been destroyed after January 2006!
In 2005, the TISH reports that should have been available in absence of litigation, would have been 2005 (current year) and 2004, 2003, and 2002. The 2001 TISH reports would have been destroyed after January 2005!
In May 2004, the TISH reports that should have been available in absence of litigation, would have been 2004 (current year) and 2003, 2002, and 2001. The filing of the Steinhauser Complaint in May 2004 and discovery requests from Plaintiffs later that year to Defendants, and the specific requests in 2004 by Defendants to Plaintiffs for TISH reports, clearly triggered the duty of Defendants to maintain copies of all TISH reports Defendants had in their possession at that time – 2001, 2002, 2003 and 2004 TISH reports. Defendants thereafter, repeatedly destroyed TISH reports sometime after the turn of each new year.
The destroyed TISH Reports for 2001 through 2003 were relevant and a necessary part of the evidence to support Plaintiffs claims of discriminatory code enforcement in that Plaintiffs claim much of the City’s housing stock was similar in exterior and interior conditions to Plaintiffs’ rental properties before, during and after the period of Defendants’ PP 2000 initiative (1999-2001), during the period Defendants were developing their “targeting”
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polices (2001-2002), and during the time Defendants were targeting Plaintiffs with “code to the max” enforcement operations, and that the 2001-2003 TISH reports would have supported Plaintiffs’ claims.
The TISH reports that Defendants were not able to destroy, reports for 2004 through 2007, a time period in which Plaintiffs were forced by the effect of illegal targeting to sell their rental properties, demonstrate that the exterior and interior conditions of the properties owned by PHA, City officials and employees, non-governmental organizations, other entities and officials, and home owners adjacent to Plaintiffs’ former properties, were similar in up keep and need of repairs.
Defendants in 2004, recognizing the significant of the TISH reports to their claims that the code operations against Plaintiffs were justified due to poor conditions of Plaintiffs properties, served the Steinhauser Plaintiffs with a document request specifically requesting production of all TISH reports Plaintiffs had in their possession. Plaintiffs produced TISH reports for 2003 through 200_.
Defendants’ counsel inquired of Plaintiffs in their depositions about the TISH reports on Plaintiffs’ properties, made the TISH reports exhibits to the deposition, and provided the TISH reports to Defendants’ experts. Defendants’ experts relied upon these reports and claimed they were relevant to defeat Plaintiffs’ claims.
2.
Emails and Electronically Stored Documents.
Plaintiffs from early on in the Steinhauser case made clear that communication between City official, employees and third parties was relevant to Plaintiffs claims that Defendants
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intentionally discriminated against them and their tenants. Specific requests by Plaintiffs to Defendants were made in 2004 for all emails. Nevertheless, Defendants failed to save the electronic versions of these relevant documents and instead destroyed the emails for the entire time period up through when Dawkins and Mayor Kelly left office.
3.
Documents Not Disclosed By Defendants.
The Affidavit of John Shoemaker details the relevant evidence that was withheld from production to and inspection by Plaintiffs and this willful non-disclosure prejudiced Plaintiffs by leaving them without key documents to use with inspectors in their depositions. Many inspectors answered with the “I don’t recall” line where if Plaintiffs would have had the documents that were withheld, the inspectors would have been forced to recall the facts as recorded in the documents.
SANCTIONS
Based on this alleged conduct, Plaintiffs in each of the three cases requests that the court impose sanctions sufficient to punish and deter Defendants’ misconduct. The conduct of the defendants in destroying evidence and failing to disclose documents rises to the level of intentional spoliation of evidence and therefore the court should sanction them appropriately by finding judgment in favor of Plaintiffs, or in the alternative, issue adverse inference instructions to the jury.
In E-Trade, the court found that relevant email was deleted by NSI's failure to place a litigation hold on mailboxes or preserve the backup tapes for the relevant time period. Email messages in the record demonstrate that there are internal communications that shed light on
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the company’s knowledge of Reed's actions in the Stock Lending Group and measure the company took after notice of the problems with the transactions. See E-Trade, 230 F.R.D. at 592. NSI itself has identified additional mail boxes it deemed relevant to search for this litigation but failed to preserve at an earlier date. This destruction of potentially relevant evidence has prejudiced the plaintiffs in presenting their case about NSI's involvement in and knowledge of the transactions in question. Id.
In a District Court opinion out of Florida, the Court found that EEOC (the plaintiff) was prejudiced by the destruction of the records. “The question squarely presented is whether this prejudice warrants the ultimate sanction of directing summary judgment on the liability issue for the relevant time period.” See EEOC v. Jacksonville Shipyards, Inc., 690 F.Supp. 995, 997 (M.D.Fla., 1988).
In EEOC, the Court held that the Defendant destroyed records for which it was on notice that it had a legal duty to preserve, and that duty is imposed, in part, to ensure that those records are available for litigation of a discrimination charge. See EEOC, 690 F. Supp. at 998 (citing Rozen v. District of Columbia, 702 F.2d 1202, 1204 (D.C.Cir.1983)). Rule 37 deals with similar conduct when the legal duty to preserve evidence is imposed in the course of a lawsuit. Id (citing Wm. T. Thompson Co. v. General Nutrition Corp., 593 F.Supp. 1443, 1455 (C.D.Cal.1984)). The Court in EEOC held that the present case logically extends Rule 37 principles to the situation in which the legal duty to preserve evidence arises by force of administrative regulation prior to the commencement of a lawsuit. Two of the policies underlying Rule 37-the elimination of profit from failure to comply with the legal duty to
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preserve evidence and the general deterrent effect that sanctions for an offense will have on the instant case and on other litigation, (citing Aztec Steel Co. v. Florida Steel Corp., 691 F.2d 480, 482 (11th Cir.1982); Cine Forty-Second Street Theatre Corp. v. Allied Artists Pictures Corp., 602 F.2d 1062, 1066 (2d Cir.1979)) -particularly justify the Court's decision to extend Rule 37 principles to the present case. See EEOC, 690 F. Supp. at 998.
In this case, like EEOC, the Defendants destroyed records for which it was on notice that it had a legal duty to preserve, and that duty is imposed, in part, to ensure that those records are available for litigation of a discrimination charge. Further, the policies underlying Rule 37- the elimination of profit from failure to comply with the legal duty to preserve evidence and the general deterrent effect that sanctions for an offense will have on the instant case and on other litigation – fit squarely within the context of the actions of the Defendants in destroying TISH reports, emails, and the non-production of relevant documents.
The choice of what sanction to impose is vested in the court's discretion. The court considers four factors in deciding whether to impose the drastic sanction of dismissal (against a plaintiff) or entering judgment (against a defendant): (1) evidence of willfulness or bad faith; (2) prejudice to the adversary; (3) whether the violating party had notice of the potential sanction; (4) whether less drastic sanctions have been imposed or ordered. See Phillips v. Cohen, 400 F.3d 388, 402 (6th Cir. 2005)(citing Bass v. Jostens, Inc., 71 F.3d 237, 241 (6th Cir.1995)). In Phillips, the magistrate judge determined that he could not know how much the unavailability of these documents prejudiced plaintiffs' case until hearing the merits. Even assuming this conclusion was within his discretion, the magistrate judge granted the
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Secretary's motion for summary judgment one month later, leaving the sanctions issue unresolved. This was problematic. The magistrate judge never made an assessment of the quality of the evidence lost and did not mention the sanctions issue in its summary judgment order. If anything, the magistrate judge appears to have found that both parties suffered as a result of the lost evidence as it exposed flaws in their expert reports. However, the magistrate judge had previously found that plaintiffs were entitled to sanctions. The magistrate judge's failure to address the sanctions issue in light of the summary judgment ruling resulted in the imposition of no sanctions of any kind. This was an abuse of discretion under the circumstances. Id.
In the case before the Court, the Defendants are bringing a dispositive motion for summary judgment, yet evidence that is relevant to Plaintiffs’ claims has been destroyed. Defendants should be prohibited from bringing their motion for summary judgment. Defendants in this case should not be allowed to profit from failure to comply with the legal duty to preserve evidence and the general deterrent effect that sanctions for an offense will have on the instant case and on other litigation.
In U.S. v. Phillip Morris, the Court found that a monetary sanction is appropriate. The Court stated that “it is particularly appropriate here because we have no way of knowing what, if any, value those destroyed emails had to Plaintiff's case; because of that absence of knowledge, it was impossible to fashion a proportional evidentiary sanction that would accurately target the discovery violation. Despite that, it is essential that such conduct be deterred, that the corporate and legal community understand that such conduct will not be
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tolerated, and that the amount of the monetary sanction fully reflect the reckless disregard and gross indifference displayed by Philip Morris and Altria Group toward their discovery and document preservation obligations. Consequently, Philip Morris and Altria Group will be jointly required to pay a monetary sanction of $2,750,000 into the Court Registry no later than September 1, 2004. In addition, Phillip Morris and Altria Group will be required to reimburse the United States for the costs associated with a Fed.R.Civ.P. 30(b)(6) deposition on email destruction issues.” See U. S. v. Phillip Morris USA, Inc., 327 F.Supp.2d 21, 26 (D.D.C. 2004).
EEOC effectively sought a limited default sanction to redress the failure to preserve evidence (the loss of the Change of Status Sheets). See EEOC, 690 F. Supp. at 998. The Court declined to impose this extreme sanction of default, reasoning that “the default sanction under Rule 37 is a last resort, to be ordered only if noncompliance is due to willful or bad faith disregard of court orders which cannot reasonably be expected to be remedied by lesser but equally effective sanctions.” Id (citing Adolph Coors Co. v. Movement Against Racism & the Klan, 777 F.2d 1538, 1542-43 (11th Cir.1985). However, the EEOC Court stated “Although the Court believes that failure to insure the preservation of records after receiving official notice is “willful” behavior, (citing Wm. T. Thompson Co., 593 F.Supp. at 1455), the law of this Circuit demands a greater record of intransigence to justify the default sanction. See EEOC, 690 F. Supp. at 998 (citing Ford v. Fogarty Van Lines, Inc., 780 F.2d 1582, 1583 (11th Cir.1986) (clear record of delay or contumacious conduct by party necessary to justify dismissal or default sanction); see also Cox v. American Cast Iron Pipe Co., 784 F.2d 1546,
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1566(11th Cir.) (court must make finding of bad faith resistance to discovery orders and indicate on record that less severe sanctions than dismissal were considered and rejected)). Additionally, the Court perceived that lesser sanctions may effectively remedy the prejudice suffered by EEOC. In particular, the Court stated that if defendant is correct in asserting that the lost records can be reconstructed, then the appropriate remedy is to require that defendant bear the cost and burden of accurately reconstructing the records. Id (citing United States v. American Telephone & Telegraph Co., 86 F.R.D. 603, 657 (D.D.C.1980)). Further, the Court stated that “since some evidence is available on the relevant issue, the Court also could limit defendant's production of evidence in opposition to EEOC's presentation, and equitably adjust the level of proof necessary to demonstrate discrimination. Id at 998-999 (citing Hicks v. Gates Rubber Co., 833 F.2d 1406, 1419 (10th Cir.1987) (granting presumption to plaintiff that records destroyed in violation of 29 C.F.R. § 1602.14 would support her case).
In the case before the Court, a default sanction is appropriate. The Defendants destroyed TISH reports and emails. Defendants have promised to produce emails from December of 2005 forward, but cannot produce emails before that time period (see letter from Seeba to Engel, Ex. “D” to Engel Aff.).
Defendants’ failure to insure the preservation of records after receiving official notice of claim letters, the filing of the complaints, and requests for production of documents is the “willful” behavior contemplated by the Court in EEOC to justify the default sanction. Further, the Court also considered limiting defendant's production of evidence in opposition to Plaintiff EEOC's presentation, and equitably adjusting the level of proof necessary to
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demonstrate discrimination.
The Plaintiffs request that the Court consider all of the same alternatives for sanctions as considered by the Court in EEOC, including not only the default sanction of judgment against Defendants and in favor of Plaintiffs on the issues of liability and/or damages, but also the following: a monetary sanction as was entered in Phillip Morris; that Defendants’ Motions for Summary Judgment herein are dismissed; for an adverse inference to be made against Defendants and in favor of Plaintiffs as part of Defendants’ Motions for Summary Judgment; that factual findings are directed in favor of Plaintiffs; that Plaintiffs are awarded their attorney’s fees, expert fees, costs and expenses incurred by Plaintiffs as a result of Defendants’ wrongful conduct, including deposition costs for all depositions the Court authorizes to be taken or supplemented; and an adverse inference instruction shall be made to the jury at trial.
Rule 37 (a) (4) provides that, “[i]f the motion is granted or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard, require the party or deponent whose conduct necessitated the motion or the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorney’s fees.” Fed.R.Civ.P. 37(a)(4)(A) (West 2007). Certain limited circumstances are set out in Rule 37 (a)(4)(A) where the Court is authorized to forgo an award of costs and fees to the movant. Id.
Plaintiffs seek reimbursement for the expenses and attorney’s fees incurred herein as a result of Defendants’ failure to comply with the Rules.
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CONCLUSION
For the reasons set forth above, Plaintiffs request that their motion for sanctions be granted. Plaintiffs also request an award of the Court for reasonable attorney fees and costs in bringing this motion.
Respectfully submitted,
SHOEMAKER & SHOEMAKER, P.L.L.C.
Dated: August 6, 2007 By: s/ John R. Shoemaker
John R. Shoemaker (Attorney Lic. #161561)
Centennial Lakes Office Park
7701 France Avenue South, Suite 200
Edina, Minnesota 55435
(952) 841-6375
Attorneys for Plaintiffs Steinhauser, et. al. Attorneys for Plaintiffs Harrilal, et. al.
THE ENGEL FIRM, PLLC
Dated: August 6, 2007 By: s/ Matthew A. Engel
Matthew A. Engel (Attorney Lic. #315400)
11282 86th Avenue North
Maple Grove, Minnesota 55369
T: (763) 416-9088
F: (763) 416-9089
Attorney for Plaintiffs Gallagher, et. al.

Sunday, August 5, 2007

RICO-updates-Compell Steve Magner-DSI

Friday, August 03, 2007

RICO Suit/ Plaintiffs objections to magistrate Nelsons order of July 16, 2007

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Frank J. Steinhauser, III, et al., Civil No. 04-2632
JNE/SRN
Plaintiffs,
v. PLAINTIFFS’ OBJECTIONS TO MAGISTRATE NELSON’S ORDER OF JULY 16, 2007
City of St. Paul, et al.,
Defendants.
Sandra Harrilal, et al., Civil No. 05-461
JNE/SRN
Plaintiffs,
v.
Steve Magner, et al.,
Defendants.
Thomas J. Gallagher, et al., Civil No. 05-1348
JNE/SRN
Plaintiffs,
v.
Steve Magner, et al.,
Defendants.
TO THE HONORABLE JUDGE ERICKSEN:
NOW COMES the Plaintiffs, in order to file their Objections to Magistrate Nelson’s
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July 16, 2007, Order (04-2632, ECF 112; 05-461, ECF 88; and 05-1348, ECF Doc. No. 82), pertaining to Plaintiffs’ Motion to Compel Discovery (05-1348, ECF Doc. Nos. 39 and 40), and to respectfully show the Court:
INTRODUCTION
Magistrate Nelson denied Plaintiffs’ joint motion to compel the production of the tax records, banking records and cell phone records of Defendant Steve Magner, a supervisor of vacant buildings for the Neighborhood Housing and Property Improvement office (N.H.P.I.) of St. Paul and a member of the Problem Property Unit of N.H.P.I.
Plaintiffs sought these personal records to support claims that Defendant Magner had committed the predicate acts of “attempted extortion” and “extortion” under the federal Racketeering Act, 18 U.S.C. Section 1961, et seq. (hereinafter referred to as “RICO Act”).
Plaintiffs submit that the affidavits and sworn statement from four individuals that were presented to the Magistrate on Plaintiffs’ Joint Motion to Compel, constituted direct evidence of “attempted extortion” by Defendant Magner in his official position as a supervisor of code enforcement for Defendant City. Plaintiffs RICO claims include extortion and attempted extortion as pleaded in Plaintiffs’ Complaints (see for example, Steinhauser Third Amended Complaint, ECF 60-1, Count I, paragraph 213 (a)).
Plaintiffs were seeking Magner’s personal records as further evidence that Magner had committed the RICO predicate act of “attempted extortion” and for evidence that he had committed “extortion” under the RICO Act.
On the issue of tax and banking records, Magistrate Nelson held that Plaintiffs had not
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produced evidence that Magner had derived any income from the alleged pattern of racketeering (Order, page 3) and refused to order the production of those records.
Plaintiffs were also seeking Magner’s personal cell phone records as further evidence of the RICO predicate acts of “attempted extortion” and “extortion.”
Magistrate Nelson held that while these personal cell phone records would show phone numbers and the length of calls made by Magner, these records “could not show any improper conduct, which would depend on a showing of the particular content of those conversations” and therefore these records were not discoverable (Order, page 3).
Plaintiffs submit that Magistrate Nelson’s decision is erroneous, misplaced, and contrary to law.
FACTUAL BACKGROUND
Prior to the close of discovery, Plaintiffs’ specifically requested Defendant Magner to produce: “The state and federal and state tax returns, personal bank records, and personal cell phone records … for the years 1999 through 2006.” See Defendants’ Response to Plaintiffs’ Request for Production of Documents (Set II) in Steinhauser, et al., Response No. 9, attached as Exhibit 6 to the Affidavit of John R. Shoemaker (05-1348, ECF Doc. No. 72 and attachments); and Defendants’ Response to Plaintiffs Harrilal and Johnson’s Request for Production of Documents, No. 46, attached as Exhibit 7 to the Affidavit of John R. Shoemaker (05-1348, ECF Doc. No. 72 and attachments).
Defendants objected to production of these personal documents on the basis that the request sought, “information which is irrelevant, immaterial and not likely to lead to the
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discovery of admissible evidence and requests information protected by the Minnesota Government Data Practices Act, Minn. Stat. 13.43, Subd.4, as non-public.” See Defendants’ Response No. 9 (Steinhauser, et al.), attached as Exhibit 6 to the Affidavit of John R. Shoemaker; and Defendants’ Response, No. 46 (Harrilal, et al), attached as Exhibit 7 to the Affidavit of John R. Shoemaker (05-1348, ECF Doc. No. 72 and attachments).
Plaintiffs filed as part of their motion, three (3) affidavits and one (1) sworn statement from four individuals relating to two different properties describing Mr. Magner’s commission of, at the very least, the predicate RICO acts of attempted extortion. Part of the evidence before Magistrate Nelson was as follows:
Affidavit of Nancy Osterman.
Nancy Osterman provided a sworn Affidavit dated 6/22/05[Exhibit 2, Affidavit of John R. Shoemaker]. Ms. Osterman’s home at 14 Jessamine East was condemned and a code compliance demanded by Magner. After substantial repairs totaling about $10,000, Magner told her that he would not allow her to complete the renovation but she would be required to sell her home to someone of Magner’s choosing and if she refused, her home would be demolished. See Paragraphs 8-10, Affidavit of Osterman.
Affidavit of Julian Jayasuriya.
Julian Jayasuriya has provided a sworn Affidavit dated 6/22/05 [Exhibit 3, Affidavit of Shoemaker]. Mr. Jayasuriya purchased a property owned by Nancy Osterman in 2003 after Ms. Osterman informed him that Magner had threatened to demolish her condemned home if she did not sell her home to a buyer of Magner’s choosing at a price drastically below the fair market value of her home. See Paragraphs 5 and 6, Affidavit of Jayasuriya. Mr. Jayasuriya states that he purchased Osterman’s home for approximately $90,000 in value. Paragraph 5, Affidavit of Jayasuriya. Mr. Jayasuriya stated that Inspector Magner has on occasion threatened him with dire consequences including condemnation of his properties when Mr. Jayasuriya expressed disagreement with Magner’s methods of code enforcement and ethics. See Paragraph 7, Affidavit of Jayasuriya. Mr. Jayasuriya met with the St. Paul City Council on June
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15, 2005, and stated that no one from the City ever answered his questions as to who was really benefiting from the forced demolition of his property or how Magner could operate his own real estate placement firm or tie forcing sales of properties into Code Compliance. See Paragraph 16, Affidavit of Jayasuriya. Mr. Jayasuriya stated that it was his belief that the City had a problem controlling Magner and other code enforcement, Paragraph 17, Affidavit of Jayasuriya, and that Mr. Jayasuriya was concerned that Magner may be able to continue to retaliate against him for not giving into his demands that Magner control the sale of14 Jessamine or other properties, under cover of enforcing City Codes. See Paragraph 21, Affidavit of Jayasuriya.
Statement of Douglas Hayes.
Douglas Hayes has provided a notarized statement dated 6/10/07, wherein he supports the claims made by Osterman in her affidavit [Exhibit 4, Affidavit of Shoemaker]. Mr. Hayes was living with Osterman at 14 Jessamine when condemned and a code compliance required. Page 1, Statement of Hayes. Mr. Hayes worked on trying to meet Magner’s code compliance demands. Magner stopped by the house periodically to check on the progress. Magner eventually told Hayes that he might as well quit working on the home as the home was going to the City Council and the home will be demolished. Page 3, Statement of Hayes. Mr. Hayes informed Magner that he and Osterman were thinking of selling the home. Magner replied that they could not just sell the home to anyone but that they had to sell their home to someone Magner had worked with before. Page 3, Statement of Hayes. Magner told Hayes that if he and Osterman did not sell the home as directed, they would be left with a hole in the ground. Page 4, Statement of Hayes. Magner told Hayes that Magner knew a guy who he had worked with before who buys vacant homes and was someone who could get the work done. Page 4, Statement of Hayes. Magner told Hayes that he and Osterman should take whatever they could get or they would be left with a hole in the ground. Hayes then called the buyer that Magner suggested and that buyer came to the 14 Jessamine home to look it over while Hayes was present. Page 4, Statement of Hayes. Hayes showed the buyer the code compliance inspection report, and the buyer then prepared a purchase agreement proposal to buy the home for $40,000.00 that he handed to Hayes. Page 4, Statement of Hayes. Hayes states that he and Osterman rejected the proposal because the home was worth approximately $150,000.00. Pages 4 and 5, Statement of Hayes. Hayes states that the 8-15-03 Purchase Agreement that is attached to his statement is the same purchase agreement presented to him by Magner’s buyer. Page 5, Statement of Hayes. Wally Nelson admitted in his deposition that this Purchase Agreement was in fact his purchase proposal. See Nelson’s Deposition, pages 79-80, Exhibit 3, Matthew Engel Affidavit.
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Lois Jacobs, a St. Paul property owner has provided a sworn Affidavit dated 6/11/07 [Exhibit 5, Affidavit of Shoemaker]. Ms. Jacobs details her experience with Magner during 2004 and thereafter. Ms. Jacobs owns a home located at 1008 Farrington Street that she purchased for her grandson to live in. She says that her home was in good condition. In May 2004, her home was condemned by the City because the electricity had been turned off for non-payment. Paragraph 3, Jacobs’Affidavit. Even though Ms. Jacobs paid the overdue bill, the City would not remove the condemnation. She says that after her home was condemned, Magner told her that her home could not be re-occupied until she completed a code compliance. See Paragraph 4, Jacobs’ Affidavit. Following the inspection results of the code compliance inspection, Ms. Jacobs discovered that she would have approximately $32,000.00 in renovation costs. She also states that she had considerable expenses in repairing damages caused to her doors and windows from forced entries and boarding by the City. While Ms. Jacobs home was under Magner’s control, he offered to buy her home for $50,000.00 cash. Ms. Jacobs refused his offer. Paragraph 5, Jacobs’ Affidavit. Ms. Jacobs states that she notified certain City officials about her experience with Magner and his offer to purchase her home. See Paragraph 7, Jacobs’ Affidavit. She told City officials that she thought it was improper for a City employee involved in condemnation of her home to then make an offer to purchase the home. Even though she pleaded with City officials, her home remained condemned and the City has continued to require a code compliance. See Paragraph 8, Jacobs’ Affidavit.
ISSUE
Plaintiffs submit that Magistrate Nelson’s decision is erroneous, misplaced, and contrary to law in denying Plaintiffs’ motion to compel. The discovery issue presented to Magistrate Nelson was whether it was proper to compel the production of personal tax returns, bank records and cell phone records of Defendant Magner. Plaintiffs submit that discovery of Mr. Magner’s tax returns, bank records and cell phone records is reasonably calculated to lead to the discovery of admissible evidence related to Plaintiffs’ claims of “attempted extortion” and/or “extortion.”
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Plaintiffs direct the Court’s attention to Plaintiffs’ Joint Letter Brief in Support of Plaintiffs’ Motion to Compel and supporting affidavits and exhibits (05-1348, ECF Doc. Nos. 65, 71 and 72) for a more complete statement of Plaintiffs’ arguments and authorities.
Magistrate Nelson stated in her Order that, “Parties generally are entitled to conduct liberal discovery into any relevant non-privileged material. Fed. R. Civ. P. 26(b)(1) (Order, page 2). Rule 26 of the Federal Rules of Civil Procedure, provides that where the requested discovery “appears reasonably calculated to lead to the discovery of admissible evidence, the discovery request is proper.” Fed. R. Civ. P. 26(b)(1) (West 2007).
Given the nature of Plaintiffs RICO claims of mail fraud, wire fraud, bank fraud, attempted extortion and extortion, Magner’s tax, banking and personal cell phone records fall within the proper scope of discovery as promulgated by the Rules. Plaintiffs’ request is not unreasonable, overbroad, or unduly burdensome. Plaintiffs are seeking the bank records, tax returns and personal cell phone records from one of the Defendants from three (3) cases and only where the evidence clearly shows “attempted extortion” by Magner in his code enforcement role against owners of single family properties, properties similar to Plaintiffs’ properties.
“Attempted extortion” is an illegal predicate act under the RICO Act. 18 U.S.C. § 1961. Under the RICO Act, “Racketeering activity” is defined as, “(A) any act or threat involving…extortion, or (B) any act which is indictable under any of the following provisions of title 18, United States Code §1951 (relating to interference with commerce, robbery, or extortion). 18 U.S.C. §1961 (emphasis added).
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The Hobbs Act provides that: “(a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both.” See 18 U.S.C. §1951(a). The Hobbs Act further defines extortion as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” 18 U.S.C. § 1951(b)(2) (emphasis added).
Federal Courts have also recognized “attempted extortion” as a predicate act within the RICO Act. See McLaughlin v. Anderson, 962 F.2d 187, 194 (2nd Cir. 1992) ( financing officer alleged threat to lose successful bidder's forms unless bidder entered joint venture H.U.D. project, was use of fear of economic loss needed for Hobbs Act extortion claim and predicate act of attempted extortion for civil RICO claim); see also Dooley v. Crab Boat Owners Ass'n., 271 F.Supp.2d 1207, 1214 (N.D.Cal.2003) (defendants attempts through threats and property damage to obtain control over fishing company's intangible property could amount to attempted extortion, Hobbs Act violation, and RICO predicate acts).
The predicate acts of “attempted extortion” and “extortion” relate to the other predicate acts detailed by Plaintiffs in their Complaints to show relatedness and continuity, including mail fraud, wire fraud and bank fraud, and other acts of Magner and other Defendants, many of who were members of NHPI. In order to prove a pattern of racketeering activity, Plaintiffs must show that “the racketeering predicates are related, and that they
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amount to or pose a threat of continued criminal activity.” H.J. Inc. v. Northwestern Bell Tel., 492 U.S. 229, 239 (1989). The “relatedness” element of the pattern test embraces “criminal acts that have the same or similar purposes, results, participants, victims or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.” Id. at 240.
Tax returns and banking records
In seeking the tax returns and bank records of Magner, Plaintiffs were seeking additional evidence that Magner had committed a RICO predicate act of “attempted extortion”. The bank records, for example, could in fact show that at the time Jacobs claims Magner offered her $50,000 in cash to buy her condemned property subject to code compliance requirements by Magner, that Magner in fact had $50,000 in available funds. That would constitute evidence to support a claim of attempted extortion. Magner’s tax returns could show “other income” that would have been available to him for carrying out his attempt at extorting Jacobs.
Plaintiffs are seeking the evidence that Magistrate Nelson states Plaintiffs do not have – the bank records and tax returns - that would show Magner derived income and committed “extortion,” a second RICO predicate act. These financial records clearly fall within the requirement that a party’s request be “reasonably calculated to lead to the discovery of admissible evidence,” and be related to their claims, as these records could show that Magner has derived income from the alleged extortion and pattern of racketeering.
In Dooley v. Crab Boat Owners Ass’n, the Defendants contended that none of the acts,
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even if proved, could be considered extortion or attempted extortion because defendants did not obtain or try to obtain property. 271 F.Supp.2d at 1212. The court held that defendants attempted to acquire “something of value” through their threats, warnings and property damage. Id. at 1214.
The Federal District Court for the Eastern District of New York has held that where claims of fraud, unjust enrichment, and RICO conspiracy were brought against physicians who allegedly performed unnecessary diagnostic testing on automobile insureds, the physician's financial records, including tax returns, were discoverable as relevant to show that the physicians profited from the willingness to order tests that were billed to an insurer as reimbursable personal injury protection (PIP) benefits by medical clinics. See State Farm Mut. Auto. Ins. Co. v. CPT Medical Services, P.C, 375 F.Supp.2d 141 (E.D.N.Y.2005). The Federal District for the Eastern District of Pennsylvania has held that given the broad definition of "relevance" articulated in Rule of Civil Procedure pertaining to discovery, financial records requested by a plaintiff from a defendant were relevant in a civil RICO action against the defendant and members of his family, where the financial records pertained to the transaction involving family members and the suit was based on their allegedly fraudulent transactions. See Constitution Bank v. Levine, 151 F.R.D. 278 (E.D.Pa.1993).
Magistrate Nelson’s determination that, “Plaintiffs have produced absolutely no evidence that he has derived any income from the alleged pattern of racketeering” was clearly erroneous and contrary to law. Plaintiffs are seeking to show evidence Magner “derived income” from the alleged pattern of racketeering through his bank records and tax returns. Case 0:05-cv-01348-JNE-SRN Document 84 Filed 07/30/2007 Page 10 of 13

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Plaintiffs have already presented evidence of the predicate act of “attempted extortion.” Because “attempted extortion” is a RICO predicate act, Plaintiffs should be allowed to examine Magner’s bank records and tax returns to determine if in fact he has derived any income that would constitute the additional predicate act of “extortion.”
The fact the Magner was unsuccessful in his attempted extortion, or that he did not derive income from those individuals, does not mean that an illegal predicate act was not committed or that discovery of his bank records and tax returns should not be allowed. As the Court held in MacLaughlin, “that the extortion effort ultimately failed can not exonerate Anderson, since Macgall alleged, and the Hobbs Act forbids, attempted extortion.” See McLaughlin at 194 (citing 18 U.S.C. § 1951(a)).
Personal Cell Phone Records
Magistrate Nelson also denied Plaintiffs’ request to compel the production of Magner’s personal cell phone records because “the information that Plaintiffs seek – the number and frequency of their (Magner and Nelson’s) phone conversations – could not show any improper conduct, which would depend on a showing of the particular content of those conversations.” (Order, page 3). This determination is clearly erroneous and contrary to law.
Again, “Parties generally are entitled to conduct liberal discovery into any relevant non-privileged material,” and “Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party.” Fed. R. Civ. P. 26(b)(1).
Plaintiffs contend that the number and frequency of Magner and Wally Nelson’s phone conversations – not just the content of those conversations - are in fact relevant to Plaintiffs’
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claims. The amount of time Magner was spending on his personal cell phone talking to Nelson during City business hours and the frequency of those calls during those hours, would be additional evidence of Magner’s improper involvement with Nelson, as Plaintiffs have claimed. Additionally, phone numbers of other property owners similarly subject to attempted extortion and/or extortion may be discovered in Magner’s cell phone records. Other phone numbers may lead to fellow conspirators involved in racketeering activity with Magner.
CONCLUSION
In sum, given the nature of the claims against Magner, his tax, banking and personal cell phone records fall within the proper scope of permissible discovery under the Federal Rules of Civil Procedure and the Court should allow such discovery. Plaintiffs are agreeable to subjecting Magner’s cell phone records and financial documents to provisions of a protective order to protect his privacy and financial security interests.
WHEREFORE, PREMISES CONSIDERED, Plaintiffs pray this Court:
(1)
Overrule Magistrate Nelson’s Order denying discovery of the tax records, banking records and personal cell phone records of Defendant Steve Magner;
(2)
Compel production of Magner’s state and federal tax returns, personal bank records, and personal cell phone records for the years 1999 through 2006, as this information is “reasonably calculated to lead to the discovery of admissible evidence” in support of Plaintiffs’ RICO claims;
(3)
Award reasonable attorney fees and costs in bringing this motion; and
(4)
Order such other and further relief, at law or in equity, to which Plaintiffs may be
Case 0:05-cv-01348-JNE-SRN Document 84 Filed 07/30/2007 Page 12 of 13

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justly entitled.
Respectfully submitted,
SHOEMAKER & SHOEMAKER, P.L.L.C.
Dated: July 30, 2007 By: s/ John R. Shoemaker
John R. Shoemaker (#161561)
Centennial Lakes Office Park
7701 France Avenue South, Suite 200
Edina, Minnesota 55435
(952) 841-6375
Attorneys for Plaintiffs Steinhauser, et. al. Attorneys for Plaintiffs Harrilal, et. al.
THE ENGEL FIRM, PLLC
Dated: July 30, 2007 By: s/ Matthew A. Engel
Matthew A. Engel (#315400)
11282 86th Avenue North
Maple Grove, Minnesota 55369
(763) 416-9088
Attorneys for Plaintiffs Gallagher, et. al.
Case 0:05-cv-01348-JNE-SRN Document 84 Filed 07/30/2007 Page 13 of 13

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