Month: September 2019

District Court Awards Sanctions for Spoliation of Evidence


The defendant in this lawsuit allowed a key item to be destroyed and sold for scrap – after it had notice that the item was relevant to discovery requests. The court ordered an award of attorney fees and costs and also permitted plaintiff an adverse inference instruction to be read to the jury.

This is a breach of contract case. TVI sued Harmony Enterprises and alleged that a baler manufactured by Harmony was defective. Defendant sold the baler for scrap.

It is undisputed that Defendant had control over the Mt. Vernon baler when it sold it for scrap, and Defendant does not dispute that the Mt. Vernon baler was relevant to this litigation. (See Dkt. No. 30 at 1, 7-9.) Defendant argues that it did not have an obligation to preserve the Mt. Vernon baler and could not have acted with a culpable state of mind because Plaintiff asked Defendant to dispose of it on October 3, 2017. (Dkt. No. 30 at 8-9; see Dkt. No. 20 at 8.) But Plaintiff’s initial request was followed by multiple indications that Defendant had a duty to preserve the Mt. Vernon baler, including Plaintiff’s October 10, 2017 letter reserving its right to pursue legal or equitable remedies related to the Mt. Vernon baler’s failure and Defendant’s own inspection of the Mt. Vernon baler that revealed unnecessary welds that contributed to its failure. (See id. at 2-4, 31-32; Dkt. No. 21 at 14-15, 25.) Further, Defendant shared a summary of its inspection with its counsel, who may have informed Defendant of the possibility of future litigation. (Dkt. No. 21 at 20-22.) All of this occurred while Defendant was still in possession of the Mt. Vernon baler. (See Dkt. No. 21 at 19.) Thus, Defendant was on notice of its obligation to preserve the Mt. Vernon baler, and consciously disregarded that obligation when it sold the Mt. Vernon baler for scrap. See Apple Inc., 888 F. Supp. 2d. at 989, 998; Surowiec, 790 F. Supp. 2d at 1005.[2] The Court finds that Plaintiff has carried its burden of establishing that Defendant spoliated the Mt. Vernon baler….

Defendant had exclusive control over the Mt. Vernon baler, was on notice of the obligation to preserve it, and consciously disregarded its obligation by selling the baler for scrap. See supra. Plaintiff has been substantially prejudiced by Defendant’s destruction of the Mt. Vernon baler, as Plaintiff cannot conduct its own examination following Defendant’s disclosures about the reasons for the baler’s failure during discovery. See Apple Inc., 888 F. Supp. 2d at 992.[3] Thus, the Court finds that an adverse jury instruction regarding Defendant’s spoliation of the Mt. Vernon baler is an appropriate sanction. The instruction shall inform the jury that Defendant was on notice that it had an obligation to preserve the Mt. Vernon baler, that Defendant destroyed the Mt. Vernon baler before Plaintiff could inspect it, that the Mt. Vernon baler was relevant to Plaintiff’s claims, and that an inspection of the Mt. Vernon baler would have corroborated Plaintiff’s claim that it was defective.

Defendant then moved for reconsideration. That motion was denied. The explanation:

Defendant moves for reconsideration of the Court’s order, arguing that the Court committed manifest error in imposing its spoliation sanction and awarding Plaintiff attorney fees. (See generally Dkt. No. 42.) ….Defendant contends that the Court committed manifest error when it found that Plaintiff is entitled to an adverse jury instruction following Defendant’s spoliation of the Mt. Vernon baler. (Dkt. No. 42 at 10-13.) Defendant argues that the Court erred by looking only to Defendant’s conscious disregard of its discovery obligations to determine that Defendant’s degree of fault warranted an adverse jury instruction. (See id. at 10-12.) But the Court’s order looked beyond Defendant’s conscious disregard in finding that an adverse jury instruction was warranted. Specifically, the Court considered: Defendant’s exclusive control over the Mt. Vernon baler; Defendant’s substantial prior notice that it had an obligation to preserve the Mt. Vernon baler; and Defendant’s subsequent conscious disregard of that obligation when it sold the Mt. Vernon baler for scrap. (See Dkt. No. 39 at 2-3, 6.) Defendant’s remaining arguments opposing the Court’s evaluation of Defendant’s degree of fault simply restate those it raised in its response to Plaintiff’s original motion. (Compare Dkt. No. 42 at 11-12, with Dkt. No. 30 at 8-9.) Thus, Defendant has not identified a manifest error in the Court’s evaluation of Defendant’s degree of fault in spoliating the Mt. Vernon baler. See Premier Harvest, Case No. C17-0784-JCC, Dkt. No. 61 at 1; W.D. Wash. Local Civ. R. 7(h)(1).

The case is TVI, Inc. v. Harmony Enterprises, Inc. Case No. C18-1461-JCC. (D. W.D. Washington).

This case is instructive for any lawyer handling litigation involving an allegedly defective product. Preserve the product until both sides have had an opportunity to examine it. Failing to preserve the product risks a spoliation of evidence instruction to the jury and an award of fees and costs.

Lawyer Sanctioned by 8th Circuit For Forging Document


The case is SPV-LS, LLC v. TransAmerica Life, 912 F.3d 1106 (8th Cir. 2018). The plaintiff estate sued TransAmerica and lost on summary judgment. The outcome of the case was not at issue in the sanctions motion. This case is from a year ago, but it is important and I am including it in this blog.

The discussion of the forgery of an engagement letter is below:

Fed. R. Civ. P. 26(g)(1) requires attorneys and pro se litigants to certify that every disclosure is “complete and correct at the time it was made” and that every discovery request, response, and objection is consistent with the Federal Rules of Civil Procedure, nonfrivolous, not submitted for an improper purpose, and not unreasonable or unduly burdensome. Fed. R. Civ. P. 26(g)(3) imposes “appropriate” sanctions on attorneys or parties who violate Rule 26(g)(1). Such sanctions may include monetary penalties, such as expenses and attorneys’ fees, Johnson Int’l Co. v. Jackson Nat. Life Ins. Co., 19 F.3d 431, 438 (8th Cir. 1994), and are particularly appropriate when an attorney submits a forged discovery document. See Perkins v. Gen. Motors Corp., 965 F.2d 597, 600 n.5 (8th Cir. 1992). Unlike § 1927 sanctions, these sanctions are nondiscretionary. Fed. R. Civ. P. 26(g)(3); Perkins, 965 F.2d at 600 n.5; see also Rojas v. Town of Cicero, 775 F.3d 906, 909 (7th Cir. 2015) (“Rule 26(g)(3) gives the judge discretion over the nature of the sanction but not whether to impose one.”); Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1372 (11th Cir. 1997) (“The decision whether to impose sanctions under Rule 26(g)(3) is not discretionary.”).

SPV’s key evidence supporting Rule 26(g) sanctions is an allegedly-forged discovery document and the associated metadata produced by Attorney Kroll. SPV presents no evidence that Attorney Donahoe participated in this violation of Rule 26(g)(1). We therefore decline to find that the district court abused its discretion in denying Rule 26(g) sanctions against Attorney Donahoe.

In response to a discovery request, Attorney Kroll provided SPV with a redacted copy of the retainer agreement between himself and the Estate’s personal representative. After filing a motion to compel production in a related proceeding against Attorney Kroll in the United States District Court for the Central District of California, SPV obtained an unredacted draft of the same retainer agreement. This draft showed Attorney Kroll would receive a contingency fee if either the Estate or the Trust prevailed in obtaining the death benefits payable under the Policy, supporting SPV’s theory that the Estate and Trust were controlled by the same parties in interest. When SPV produced the unredacted draft to the district court, the Estate claimed that draft was not a correct copy and produced its own unredacted copy of the retainer agreement. The Estate’s copy omitted the provision awarding Attorney Kroll a contingency fee if the Trust prevailed.

SPV requested Rule 26(g)(3) sanctions based on document metadata, taken directly 1114*1114 from Attorney Kroll’s computer by his e-discovery vendor. The metadata showed that the retainer agreement produced by the Estate, while purportedly signed by the Estate’s personal representative in August 2015, was not created until July 20, 2016—two days before Attorney Kroll produced the document to the court. Therefore, SPV argued, the document was forged. The district court acknowledged that fabricating discovery documents is grounds for sanctions, see SPV-LS, LLC v. Transamerica Life Ins. Co., No. CIV 14-4092, 2017 WL 3668765, at *3 (Aug. 23, 2017), but it denied sanctions against Attorney Kroll. It did so under the mistaken belief that SPV relied on a document examiner’s report to prove forgery, stating that SPV should have produced that report. However, SPV never claimed that it relied on a document examiner’s report; in fact, it indicated that it never consulted a document examiner and relied solely on the document’s metadata. Because the district court based its denial of sanctions on SPV’s failure to introduce a nonexistent report into evidence, it clearly conducted an erroneous assessment of the evidence. See, e.g., MDU Res. Grp. v. W.R. Grace & Co., 14 F.3d 1274, 1280 (8th Cir. 1994) (finding the district court clearly conducted an erroneous assessment of evidence when it misunderstood the purpose for which the evidence was offered). It therefore abused its discretion in denying Rule 26(g) sanctions against Attorney Kroll on this basis.

This is an unfortunate finding. The forgery was discovered because of the metadata that is present in every document.

If you have any questions about discovery obligations or your responsibilities as a lawyer, do not hesitate to contact me at ed@clintonlaw.net.

Ed Clinton, Jr.

8th Circuit Reverses Discovery Sanctions Dismissal


In Akins v. Southern Glazers Wine & Spirits of Arkansas, LLC, 18-1957, the 8th Circuit vacated a case dismissed for a violation of Rule 37. Akins filed a pro se employment case against his former employer. The Defendant noticed his deposition for two days. Akins appeared both days but left the deposition on at 5:00 p.m. on the second day to go to work. Defendant claimed that it had 15 more minutes of questioning. Defendant moved for dismissal pursuant to Rule 37(b)(2)(A) and the district court granted the motion.

The 8th Circuit reversed on the ground that the district court abused its discretion in dismissing the case. The 8th Circuit faulted the district court for failing to determine whether Akins acted in bad faith and whether a lesser sanction would suffice.

Rule 37 authorizes dismissal as a sanction if there is (1) an order compelling discovery, (2) willful violation of that order, and (3) prejudice. Before dismissing a case as a discovery sanction, the court must investigate whether less extreme sanctions would suffice, unless the failure was deliberate or in bad faith. Fed. R. Civ. P. 37. Dismissals are reviewed for an abuse of discretion. Comstock v. UPS Ground Freight, Inc., 775 F.3d 990, 992 (8th Cir. 2014). Factual findings of willful or intentional failure to comply with a court order are reviewed for clear error. Smith v. Gold Dust Casino, 526 F.3d 402, 404 (8th Cir. 2008).
Akins did not violate the “fails to appear” discovery order, nor did he act in bad faith. He appeared for his deposition both days at the ordered time, and was deposed for nearly six hours over the two days. Both the discovery order and notice of deposition were silent about when the deposition would end. Akins had reason to believe the deposition would end at 5:00 because Southern’s counsel erroneously told him depositions must occur between 9 a.m. and 5 p.m., and he requested that his deposition be scheduled between 2 and 5 p.m. each day. Southern did not identify the additional questions counsel would ask if the deposition continued past 5 p.m. so Southern did not demonstrate prejudice. This court concludes that the dismissal of Akins’s complaint was an abuse of discretion because his conduct did not violate the district court’s discovery order, and the court erred when it failed to consider sanctions less severe than dismissal with prejudice.

Comment: this case, while unpublished, is very unusual for two reasons. First, the district court appears to have acted abruptly in dismissing the case and not ordering Akins to sit for a further deposition. Second, I have never seen a dismissal where the Plaintiff did what he was supposed to do – he sat for his deposition on the days he was told to be there.

Ed Clinton, Jr.

http://www.clintonlaw.net