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.
FACTS Case 0:04-cv-02632-JNE-SRN Document 116 Filed 08/06/2007 Page 2 of 21
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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.
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.
FACTS Case 0:04-cv-02632-JNE-SRN Document 116 Filed 08/06/2007 Page 2 of 21
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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.
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