UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Frank J. Steinhauser, III, et al., Civil No. 04-2632 JNE/SRN Plaintiffs, v. PLAINTIFFS’ JOINT OBJECTIONS TO MAGISTRATE’S ORDER OF APRIL 23, 2008, AND AMENDED ORDER OF MAY 8, 2008 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. Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 1 of 15 2 TO THE HONORABLE JUDGE ERICKSEN: NOW COMES Plaintiffs in order to file their Joint Objections to Magistrate Nelson’s April 23, 2008, Order (04-2632, ECF 220; 05-461, ECF 195; and 05-1348, ECF 188), and Amended Order of May 8, 2008 (04-2632, ECF 225, 05-461, ECF 199, 05-1348, ECF 192) pertaining to Plaintiffs’ Renewed Motion for Sanctions (04-2632, ECF 161; 05-461, ECF 138; 05-1348, ECF 132), and to respectfully show the Court: INTRODUCTION In Plaintiffs’ Joint Renewed Motion for Sanctions, Plaintiffs’ provided evidence that during the course of this litigation Defendants destroyed documents relevant to the claims of Plaintiffs including intentional discrimination, and defenses raised by Defendants, including immunity defenses, made egregious misrepresentations concerning the destruction and therefore unavailability of other relevant evidence, and delayed production of evidence and failed to produce large volumes of other “City documents” relevant to Plaintiffs’ claims. The Court refused to find that Defendants had acted in “bad faith” (Order at 7-10, 13, 14), determined that Plaintiffs had failed to establish that they had been prejudiced by Defendants’ destruction of documents, misrepresentations and failures to produce other documents (Order at 8-11, 13, 14), denied Plaintiffs’ requests for sanctions, including costs and attorney’s fees related to bringing its motion (Order at 14, 15) and failed to grant Plaintiffs’ request for an evidentiary hearing (Shoemaker Aff., 3-5-08 ECF 183 – Steinhauser, para. 90). Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 2 of 15 3 FACTUAL BACKGROUND TO MOTION FOR SANCTIONS The Steinhauser, the Harrilal, and the Gallagher cases were filed in May 2004, March 2005 and July 2005, respectively. Defendants failed to place a “litigation hold” on potentially relevant documents. Order at 2, 3. Plaintiffs initially moved in June 2007 for sanctions based upon spoliation of relevant evidence and non-production of relevant evidence. Order at 2. The Court determined that Plaintiffs had not demonstrated prejudice from Defendants’ conduct and denied the motion. Order at 3. Plaintiffs original and renewed motion for sanctions were based on Defendants’ destruction of 15,000-18,000 Truth-In-Sale-of-Housing (“TISH”) housing inspection reports for 2001-2003 after litigation was commenced, destruction of most of the e-data/e-mails for the time periods prior to December 2005 (most relevant time period for Plaintiffs’ claims and Defendants’ claimed immunity defenses was 1999 through 2005), failure to produce City documents related to the Saint Paul Public Housing Agency (PHA), and failure to produce certain other City documents including documents related to the City’s Problem Properties 2000 code enforcement initiative. Order at 2. Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 3 of 15 4 ISSUES 1. The Court made a decision contrary to the law by holding that where a party during the course of litigation destroys or fails to retain relevant evidence, a finding of intentional - bad faith destruction is required in order for any sanction to be imposed. Order at 7, 8, 9, 10, 13, 14. 2. The Court made a decision contrary to the law that Plaintiffs’ had a high burden to show that they were “prejudiced” by Defendants’ destruction or non-retention of relevant evidence during the course of litigation. Order at 6. 3. The Court made a decision contrary to the law that Plaintiffs had failed to demonstrate prejudice from Defendants’ overall conduct including destruction and non-retention of relevant evidence and other abusive litigation tactics. Order at 8, 9, 10, 11, 13, 14. 4. The Court made a decision contrary to the law in failing to award Plaintiffs’ their costs and attorney’s fees incurred as a result of Defendants conduct when the Court acknowledged Plaintiffs may have been harmed. Order at 8, 14. 5. The Court made clearly erroneous determinations of fact concerning Defendants’ failure to produce City-PHA documents, Defendants’ destruction of TISH housing inspection reports, and Defendants’ destruction of e-data/e-mails from the time periods relevant to Plaintiffs’ claims and Defendants claims of immunity. STANDARD OF REVIEW The Court must modify or set aside any portion of the Magistrate’s Order found to be clearly erroneous or contrary to law. Fed.R.Civ.P. 72(a); and Local Rule 72.2(a). At the same time, however, where, as here, the decision under review does not offer a reasoned explanation for its decision, and merely adopts one party's arguments in their entirety (as the Court did here in adopting Defendants’ arguments in their entirety), “it is incumbent on the Court to check the adopted findings against the record ‘with particular, even painstaking, care.’ ” Holland v. Island Creek Corp., 885 F. Supp. 4, 6 (D.D.C. 1995), citing Berger v. Iron Workers Reinforced Rodmen Local 201, 843 F.2d 1395, 1408 (D.C.Cir.1988).
ARGUMENT AND AUTHORITIES 1. Where a party during the course of litigation destroys or fails to retain relevant evidence, a finding of intentional - bad faith destruction indicating a desire to suppress the truth is not required in order for certain sanctions to be imposed. At the April 14, 2008, hearing on Plaintiffs renewed motion for sanctions the Court acknowledged that no showing of “bad faith” was required because the subject documents had been destroyed by Defendants after litigation was commenced. Nevertheless, the Court applied the “bad faith” standard in its Order. Order at 7-10, 13, 14. The Eighth Circuit’s decision in Stevenson v. Union Pacific, 354 F.3d 739, 745 (8th Cir. 2004) is directly on point. The Court in Stevenson determined that the district court’s order for an adverse inference instruction sanction based upon the ongoing destruction of records during litigation was supported by the court's inherent power even absent an explicit bad faith finding. 354 F.3d at 750. See E*Trade Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 589 (D.Minn 2005) (no “bad faith” needed to sanction defendants where computer hard drives wiped clean after defendants aware of potential for litigation). Any possible destruction of evidence is to be treated as a serious transgression of discovery procedures in that it goes to the core of the Court’s truth-finding mission. See Dillon v. Nissan Motor Co., 986 F.2d 263, 269 (8th Cir. 1993). Here, after being sued by Plaintiffs, Defendants and other public officials and employees destroyed written communications related to their policies and actions and multiple years of housing inspection records. The Court made an egregious mistake in treating these shocking violations of the law and Court rules in such a light manner. Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 5 of 15 6 Plaintiffs submit that at the very least public defendants should be held to the same standard of preserving evidence applicable to private corporations before this Court. When considering the sophisticated and litigious nature of the Defendant City and the important policies of honesty and openness by government officials and employees in public matters, the Court seriously erred in not sanctioning Defendants for destruction of relevant evidence while these cases were before this Court. Defendants had a duty at the commencement of the Steinhauser lawsuit in May 2004, to place a litigation hold on all relevant evidence that might be useful to Plaintiffs. Defendants failed to do so then or thereafter when they were sued in Harrilal and Gallagher in 2005. Discovery requests in Steinhauser were served on Defendants in November of 2004 requesting all inspection reports, records and “emails” of all officials and City agencies. Defendants continued to destroy e-data/e-mails and TISH reports thereafter until sometime in January 2007. How could that have happened without being intentional? During the filings of these three lawsuits, Defendant Dawkins was a lawyer who headed the main code department of the City. Defendants had a large full service law firm at their disposal. Defendants were familiar with Court rules due to the City’s vast experience with state and federal court actions. Yet the Court has held that such a failure to preserve the written communications of City officials and employees and housing inspection reports for the relevant time period prior to December 2005 was not in “bad faith”. Even though Plaintiffs were not required to demonstrate Defendants’ “bad faith,” Plaintiffs submit that Defendants conduct rose to the level of “bad faith” or at least “gross Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 6 of 15 7 negligence” thereby justifying a finding of “prejudice” because the evidence was relevant, would have been helpful to Plaintiffs and could have led to discovery of other evidence. Defendants having “destroyed a significant quantity of documents, the exact extent of which is now indeterminable,” should not now be allowed to “claim that the information contained is irrelevant or unimportant.” Capellupo v. FMC Corp., 126 F.R.D. 545, 551 (D.Minn. 1989). Here, as in Capellupo, Plaintiffs were “deprived of significant amounts of potentially helpful information” especially evidence going to the issues of Defendants’ claimed immunity defenses and Plaintiffs’ claims requiring a showing of “intentional discrimination.” Id. at 552. 2. The Magistrate Judge made a decision contrary to the law in requiring a high standard for a showing of “prejudice” from Defendants’ destruction or non-retention of relevant evidence during the course of litigation. Order at 6. Magistrate Nelson determined that “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’” (citing E*Trade, 230 F.R.D. at 592; and Stevenson, 354 F.3d at 745; and Keefer v. Provident Life & Accident Ins. Co., 238 F.3d 937, 940 (8th Cir. 2000). Plaintiffs submit that the Court improperly applied a heavy burden on Plaintiffs to demonstrate prejudice when the Court should have found prejudice from the nature and volume of the documents destroyed and from the time period the destruction took place. Equally as important, the Court failed to account for the necessity of Plaintiffs showing intentional discrimination in support of many of their claims, which would best be shown by the written, electronic communications of City officials and employees – e-data/e-mails that were destroyed for all relevant time periods prior to December 2005. Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 7 of 15 8 The Court also failed to consider that the written, electronic communications of Defendants and City officials and employees would have been the best source of evidence directly bearing on their claimed immunity defenses. The e-data/e-mails destroyed for the time periods prior to December 2005 relate directly to the knowledge, motive and conduct of Defendants on the issues of immunity. Plaintiffs have been prejudiced by the almost complete destruction of key evidence on the immunity issues. The nature and volume of destruction justifies a prohibition against Defendants’ motion for summary judgment. The substantial and complete nature of the destruction of three years of TISH housing inspection reports and the e-data/e-mails of Defendants, City Council members and other key players for all periods prior to December 2005, the time periods relevant to Defendants’ claims of immunity and Plaintiffs constitutional and statutory claims, justifies a finding of “prejudice” to Plaintiffs from said destruction. See E*Trade, 230 F.R.D. at 592. The written communications of Defendants and City officials/employees on the issues of immunity defenses and intentional discrimination is similar to the only recording of conversations contemporaneous to an accident. Stevenson, 354 F.3d at 748. There is no substitute evidence available. The Court here, contrary to the Court in Stevenson, placed too high of a burden on Plaintiffs to demonstrate prejudice. “Courts must take care not to ‘hold the prejudiced party to too strict a standard of proof regarding the likely contents of the destroyed [or unavailable] evidence,’ because doing so ‘would subvert the…purposes of the adverse inference and would allow parties who have…destroyed evidence to profit from that destruction.” Residential Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 8 of 15 9 Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 109 (2d Cir. 2002). 3. The Magistrate Judge made a decision contrary to the law in determining that Plaintiffs had failed to demonstrate that they had suffered prejudice from Defendants’ overall conduct including destruction and non-retention of relevant evidence and other abusive litigation tactics. Order at 8, 9, 10, 11, 13, and 14. The Court erred in its determination that, “Utterly absent from Plaintiffs’ affidavits and exhibits is a showing that they were prejudiced by the non-disclosure of PHA-related documents.” Order at 8. Plaintiffs detailed the substantial prejudice suffered by Plaintiffs due to Defendants non-disclosure of City documents related to PHA. See Shoemaker Affs., 3/5/08, ECF 183 - Steinhauser, pp. 9-25, 43-44, and 3-31-08, ECF 211 – Steinhauser - moreover, Defendants have not yet produced the large volumes of City’s documents related to PHA as set forth in Counsel’ affidavits. See Shoemaker Aff. ECF 211. Defendants during the litigation destroyed three years of TISH housing inspection records that Defendants’ own liability expert opined were relevant to Plaintiffs’ claims. The Court recognized the relevancy of these TISH reports. Order, 11-13-07, ECF 134 - Steinhauser, at 5, fn 3). See Shoemaker Aff. 3-5-08 ECF 183, pp. 25-33. Due to Defendants’ destruction of the TISH reports that were centrally located at Defendant Dawkins’ office, Plaintiffs were forced to attempt to obtain TISH reports from 45 inspectors with no assurance that those inspectors maintained their copies of reports past the three-year retention period applicable to both the City and TISH inspectors. The Court erred in determining that, “Plaintiffs never subpoenaed the TISH evaluators. Such a failure to pursue discovery is incongruent with Defendants’ claim of prejudice.” Order at 10. The Court suggested that Plaintiffs could seek the TISH reports from inspectors Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 9 of 15 10 through subpoenas and Defendants would be required to bear the subpoena costs. Order at 10. Arguably, the Court’s Order included service fees, but there was no provision for $15,000 in copy costs of the replacement records (15,000 reports, four pages each, at $.25/page), for $13,500 from 45 deposition transcripts ($300 each), or for the Plaintiffs’ attorney fees. But for Defendants destruction of centrally stored TISH housing inspection reports, Plaintiffs would not have been faced with these prohibitively burdensome additional costs and fees. The Eighth Circuit in Stevenson held that even though the destroyed track maintenance records were of limited use, where those documents had been destroyed after litigation was commenced, Plaintiffs had suffered sufficient prejudice to warrant an adverse inference instruction sanction. Id. at 749-50. Here, the Court determined that Plaintiffs had not shown what the missing e-data/e-mails would have contained - but Plaintiffs had demonstrated that the missing e-data consisted of written communications of Defendants, City officials and employees and influential third-parties. Under Stevenson, even if this e-data was of limited use, its destruction during litigation should have resulted in a prejudice finding and an adverse inference instruction and/or other sanctions. 4. The Magistrate Judge made a decision contrary to the law in failing to award Plaintiffs’ their costs and attorney’s fees incurred as a result of Defendants conduct when the Magistrate Judge acknowledged that Plaintiffs may have been harmed. Order at 8 and 14. The Magistrate erred by failing to award Plaintiffs’ their costs and attorney’s fees incurred as a result of Defendants conduct. Here, as in Capellupo, the actions of Defendants “have imposed an enormous burden on counsel for plaintiffs.” Capellupo, 126 F.R.D. at 553. Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 10 of 15 11 5. The Magistrate Judge made clearly erroneous determinations of fact concerning Defendants’ destruction of TISH inspection records, non-production of Problem Property reports, and Defendants’ destruction of emails and e-data from the key time period of the illegal code enforcement. a. TISH inspection records. The Court made a clearly erroneous factual determination that, “Defendants also reminded Plaintiffs that they had not even asked for the [TISH] reports until 2007, approximately two years after they first learned of the reports, and that the City had produced all of the reports in its possession to Plaintiffs at that time.” Order at 10. Defendants deliberately misrepresented the facts to the Court. In November 2004, the Steinhauser Plaintiffs requested Defendants produce all inspection reports; Defendants responded that those reports included TISH reports. Shoemaker Aff., 8-6-07, ECF 114 – Steinhauser, para. 16. Finally, the Court made a clearly erroneous factual determination, “The Court finds no malfeasance by Defendants or prejudice to Plaintiffs with respect to the Sandberg [TISH] report[s] and related documents.” Order at 10 (emphasis added). The Sandberg Reports fell within the scope of the Steinhauser discovery requests and yet were not produced until years later. b. E-data/E-mails. In November of 2004, the Steinhauser Plaintiffs requested Defendants produce all edata/ e-mails. Shoemaker Aff., 8-6-07, ECF 114 – Steinhauser, paras. 18, 21. Because Defendants’ failed to place a litigation hold on e-data/e-mails, Defendants produced miniscule e-data/e-mails for the relevant periods prior to December 2005. See Engel Aff. ECF 152 - Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 11 of 15 12 Gallagher, Ex. 12-39. The Court made the following clearly erroneous factual determination concerning the destruction of e-data prior to December 2005: “Other than the reasons already discussed, Defendants offer an additional reason: because Plaintiffs’ counsel had explicitly limited the discovery request to emails from December 2005 onward, in a letter dated June 6, 2007.” Order at 13. Plaintiffs never limited their document request to email communications from December of 2005 forward, or at any other time waived their right to email communications for the relevant periods prior to December 2005. As Mr. Shoemaker stated to Ms. Seeba in a letter dated May 15, 2007: We understand from you that the electronic communications such as emails between City departments and third parties have not been retained for the period prior to December 2005. In light of that surprising and disturbing development, we request production of the following: emails, inter-departmental emails, correspondence, memos, and other written communications from December 2005 through April 30, 2007, between City departments, and to and from City departments and non-city entities and individuals, … We want to know what date each e-document … was discarded after your receipt of the Steinhauser Notice of Claim in July 2003 and who authorized the employees of the City’s Information Services staff to destroy the edocuments that were relevant to Plaintiffs’ claims. See Exhibit 10 to Seeba affidavit in opposition to sanctions, page 3 (emphasis added). In Plaintiffs June 6, 2007 letter, Plaintiffs again sought emails from 1994 to present: Emails, inter-departmental emails, correspondence, memos, and other written communications during 1994 through 2004, and thereafter to present, between City Agencies, and to and from same and non-city entities and individuals, … Emails both within the City and to and from third parties have been relevant to the claims herein since 2002. …inspectors also testified to use of the e-mail system in their work for the City. It certainly appears to us that Defendants and City officials and Case 0:04-cv-02632-JNE-SRN Document 229 Filed 05/12/2008 Page 12 of 15 13
CONCLUSION Because Plaintiffs’ provided evidence to the Court that during the course of this litigation that Defendants destroyed documents relevant to the claims of Plaintiffs and defenses raised by Defendants, including immunity defenses, made egregious misrepresentations concerning the destruction and therefore unavailability of other relevant evidence, and delayed and failed to produce large volumes of other “City documents” relevant to Plaintiffs’ claims, and this abusive conduct prejudiced Plaintiffs, Plaintiffs’ requests for sanctions should be granted, including an award of costs and attorney’s fees. WHEREFORE, PREMISES CONSIDERED, Plaintiffs pray this Court: 1. Overrule Magistrate Judge’s Order on the specific objections noted herein; 2. Award reasonable attorney fees and costs in bringing the motions for sanctions; and 3. Order such other and further relief, at law or in equity, to which Plaintiffs may be justly entitled. Respectfully submitted, SHOEMAKER & SHOEMAKER, P.L.L.C. Dated: May 12, 2008 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.