*1 Plaintiffs move the Court for an order granting an adverse jury instruction and monetary sanctions in response to Defendants' destruction of documents and other discovery misconduct. Plaintiffs' Notice of Motion and Motion for Adverse Jury Instruction and Other Appropriate Relief for Defendants' Destruction of Documents and Discovery Misconduct (“Motion”) and supporting Declarations were filed December 16, 2004. Defendants' Opposition to Plaintiffs' Motion for Adverse Jury Instruction (“Opposition”) and supporting Declarations were filed December 28, 2004.[1] Plaintiffs' Reply in Support of Motion for Adverse Jury Instruction and supporting Declaration was filed January 3, 2005. For the reasons discussed below, the Court GRANTS Plaintiffs' Motion for Adverse Jury Instruction and Other Appropriate Relief for Defendants' Destruction of Documents and Discovery Misconduct. The Court will fashion an appropriate instruction at the time of trial.

The Court deems the matter appropriate for disposition without oral argument.

“A federal trial court has the inherent discretionary power to make appropriate evidentiary rulings in response to the destruction or spoliation of relevant evidence.” Med. Lab. Mgmt. Consultants v. Am. Broad. Cos., 306 F.3d 806, 824 (9th Cir.2002) (internal citations and quotations omitted). “This power includes the power to sanction the responsible party by instructing the jury that it may infer that the spoiled or destroyed evidence would have been unfavorable to the responsible party.” Id.

“The determination of an appropriate sanction ... is confined to the sound discretion of the trial judge, and is assessed on a case-by-case basis.” Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir.2001) (internal citations omitted). However, “[t]he sanction should be designed to: (1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party.” West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir.1999) (internal citations and quotations omitted). Other considerations in fashioning the appropriate sanction are: “(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.” Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir.1994).

“The obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.” Fujitsu Ltd., 247 F.3d at 436.

*2 Plaintiffs brought this action alleging that Defendants implemented a pattern and practice of housing discrimination, evidenced by their preference for Korean tenants, in violation of the Fair Housing Act and other federal and state laws.

The conduct of Defendants and their counsel falls well below the standard required by this Court. Their attitude toward the litigation process and their discovery obligations is even more troublesome. The record before this Court establishes that Defendants and their counsel have regularly failed to comply with federal law, the applicable rules, and the orders of the Court.

Plaintiffs here argue that Defendants: (1) failed to implement a “litigation hold” in connection with this case, (2) destroyed relevant documents, and (3) failed to instruct their agents to search for responsive documents. Plaintiffs further claim that Defendants' late and incomplete production of documents hindered their discovery efforts. The Court first outlines the nature of the discovery misconduct allegations and then addresses the appropriate sanction.

“Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y.2003) (“Zubulake IV” ). Controller Darren Schield testified that he was not made aware that there was a litigation hold in place in this case. No procedures were established to preserve documents and there was no document retention policy. Turrill Decl., Ex. C at 152:12-25, 150:13-25. Defendant Rochelle Sterling also testified that she has not done anything differently in terms of maintaining documents since the lawsuit was brought and that she continues to throw away notes taken in relation to refurbishments. Turrill Decl., Ex. E at 305:11-17, 307:15-308:6.

In spite of this and other testimony, Defendants claim that they did institute a litigation hold. Former counsel of record for Defendants, George Preonas, declares: “Throughout my law firm's representation of Defendants, we informed Defendants' legal counsel, Barak Lurie, Esq., David Fischer, Esq. and Craig Hubble, Esq., about obtaining all documents that were relevant to this lawsuit and that may be responsive to the discovery requests propounded by Plaintiffs at the time.” Preonas Decl. ¶ 3 (emphasis added). Current counsel for Defendants, Sharon Bauman, declares: “Throughout my law firm's representation of Defendants, I have informed Defendants' legal counsel, Craig Hubble, Esq., about preserving all documents that are relevant to this lawsuit and that may be responsive to the discovery requests propounded by Plaintiffs and/or the litigation in general.” Bauman Decl. ¶ 3 (emphasis added).

Based on the relatively consistent testimony of the witnesses, it is doubtful that such a litigation hold was properly communicated to Defendants and their agents. The lack of a declaration from in-house counsel affirming that the necessity of preserving documents was communicated to employees also seems rather telling.

*3 Defendants and their agents have testified to throwing away certain documents, as detailed below. Defendants argue that the documents claimed to have been destroyed were not relevant to this action and not required to be maintained. “[A] litigant is under no duty to keep or retain every document in its possession ... it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery and/or is the subject of a pending discovery request.” Zubulake IV, 220 F.R.D. at 217 (internal citations and quotations omitted). “[T]he duty to preserve extends [only] to those employees likely to have relevant information-the ‘key players' in the case.” Id. at 218. Defense counsel's apparent attitude that so long as the documents destroyed were not “smoking gun issue[s],” “it's a big so what,” Transcript of argument before Magistrate Judge Eick at 56:23-24, 57:4, is exceedingly troublesome in a member of the bar of this court. Defense counsel's apparent failure, in this electronic age, to verify with appropriate representatives of their client whether there was an e-mail backup system, cannot be countenanced.

Defendant Donald Sterling testified that he throws away monthly financial statements. Turrill Decl., Ex. D at 96:11-23. Defendants argue that Donald Sterling's throwing away of monthly financial statements is of no consequence because Plaintiffs have not shown that such documents were originals. Presumably, the originals or copies have been provided to Plaintiffs. A party need not retain multiple identical copies of documents. Zubulake IV, 220 F.R.D. at 218. Furthermore, Defendants argue that only rent rolls were required to be produced, not other financial documents. Platt Decl., Ex. C. at p. 2.

In response Plaintiffs argue that this financial information would be relevant to their punitive damages and disgorgement of profits claims. The documents are certainly relevant.

Defendant Rochelle Sterling testified that she throws away notes taken during inspections and remodeling, as well as memos from property supervisors. Turrill Decl., Ex. E at 307:15-308:6, 309:15-20, 363:23-364:7. Plaintiffs claim such documents are relevant to their claim that Defendants have illegally inspected tenants' apartments as part of their discriminatory pattern. Because of their relevance, Plaintiffs served a document request for documents relating to these inspections. Turrill Decl., Ex. N at p. 8. Defendants argue that Rochelle Sterling did not destroy any compliance or inspection notes in the relevant time frame-after February 2003-because there have been no compliance orders and Defendants have conducted no inspections. Platt Decl., Ex. E at 306:16-307:14. Defendants argue it is irrelevant that it is Rochelle Sterling's general practice to throw such documents away, as destruction of documents prior to the threat of litigation is of no consequence.

*4 In rebuttal, Plaintiffs point out that Rochelle Sterling testified in the present tense to a practice of throwing away all photographs taken inside the units. Turrill Decl., Ex. E at 219:3-222:11. Defendants provide no declaration suggesting that the practice ceased. Plaintiffs also argue that post-February 2003 is not the relevant time frame. A duty to preserve evidence arose as soon as Defendants reasonably anticipated litigation. Zubulake v. UBS Warburg, LLC, No. 02 Civ. 1243(SAS), 229 F.R.D. 422, 2004 WL 1620866, at *7 (S.D.N.Y. July 20, 2004) (“Zubulake V” ). Plaintiffs argue that Defendants should have reasonably anticipated litigation in December of 2002 when Plaintiffs sent their demand letter.

Plaintiffs argue that they are prejudiced by the destruction of this evidence because it may have been relevant to their claim that Defendants conducted bogus “city inspections” in an effort to compile information on existing tenants' race, national origin, and familial status. Depending on the testimony at trial, an adverse inference instruction may be appropriate.

A Koreatown manager, Harley Choi (“Choi”), testified that she throws away some unapproved rental applications as well as some tenant complaints. Turrill Decl., Ex. G at 120:18-121:2, 128:13-25. Defendants do not challenge this. Plaintiffs do not assert that the destroyed evidence would be adverse to Defendants, but the potential significance is obvious.

A Koreatown property supervisor, Brenda Leung (“Leung”), testified during her deposition that she doesn't keep written notices of city inspections. Turrill Decl., Ex. F at 108:9-18. Defendants argue that Plaintiffs provide no evidence that these were original documents. But Defendants provide no evidence that they were merely copies. Plaintiff does not indicate whether such notices are available from the city.

Koreatown property supervisor Jocelyn Baltazar (“Baltazar”) testified at her deposition that she instructed Koreatown building managers to destroy forms and stamps that contained references to the “Korean” building names. Turrill Decl., Ex. O at 156:13-157:14. A Koreatown property manager Hogan Lee (“Lee”) testified at her deposition that she was instructed by Baltazar to throw away stamps using the old building names. Turrill Decl., Ex. Q at 110:3-17. Plaintiffs argue that this evidence was relevant to their claim that Defendants changed the names of their Koreatown buildings to include the word “Korean” to demonstrate an unlawful preference for Korean tenants. Further, Plaintiffs served a document request that requested all documents relating to the names of each of the apartment buildings. Turrill Decl., Ex. P at p. 9.

Defendants argue that only documents “limited to the naming of the apartment buildings or the changing of the names of the apartment buildings” were responsive to Plaintiffs' request. Platt Decl., Ex. C at p. 2. Defendants further claim that employees only threw away blank forms and stamps containing the Korean names to ensure that employees did not accidentally use them in violation of the Court's preliminary injunction. Platt Decl., Ex. H.

*5 Plaintiffs argue that this evidence is relevant to a dispute about whether Defendants intentionally changed the names of certain buildings to include the word “Korean.” Donald Sterling has testified that at least one of the buildings was intended to be named “Wilshire Korea Town Towers” but that a painter made an error in painting the sign to read “Wilshire Korean Towers.” Backstrom Decl., Ex. D at 100:6-15. Documents and stamps showing the old names would be directly relevant to rebutting this claim.

A property supervisor, Karen Wong (“Wong”), testified at her deposition that she threw away a memorandum relating to a management meeting held in August or September of 2000. Turrill Decl., Ex. H at 130:10-131:11. It is not clear when the memorandum was discarded. Document destruction that occurred in August or September of 2000 is of no relevance to this motion, when a duty to preserve did not arise until at least December 2002.

Plaintiffs also argue that Defendants have failed properly to search for relevant and responsive documents, as detailed below. “A party's discovery obligations do not end with the implementation of a ‘litigation hold’-to the contrary, that's only the beginning. Counsel must oversee compliance with the litigation hold, monitoring the party's efforts to retain and produce the relevant documents.” Zubulake V, 229 F.R.D. 422, 2004 WL 1620866, at *7.

Schield testified at his deposition that employees' computers were never searched for responsive documents. Turrill Decl., Ex. C at 158:11-23. Defendants refute this testimony by submitting a declaration written by Schield after the deposition, in which he states:

Platt Decl., Ex. P ¶ 5. Plaintiffs point out that this declaration only states that two out of a total of thirty six employees searched their computers for electronically stored information.

Assistant Building Manager Jessica Shim (“Shim”) testified at her deposition that she had never searched for potentially relevant documents. Turrill Decl., Ex. K at 110:6-9. Defendants argue that this is of no consequence. Defendants claim that an exhaustive search of the Irolo building management office was conducted with the assistance of Choi, who is Shim's colleague. Platt Decl. ¶ 22. Defendants claim that Shim's assistance would have been duplicative and unnecessary.

Wong testified at her deposition that she had never been asked by anyone to search her computer, e-mails, or paper files for documents relating to this lawsuit. Turrill Decl., Ex. H at 190:10-17. Defendants argue that Wong is a property supervisor for areas outside of Koreatown and cannot be deemed a “key player.” Wong's only connection to the Koreatown buildings has been covering for Koreatown supervisors during their infrequent vacation periods. Platt Decl., Ex. J at 37:18-38:12, 179:10-180:19.

*6 Plaintiffs argue that Wong is a key player because she is likely to have access to relevant management and training policies implemented by Defendants. Plaintiffs also argue that Wong would certainly be included in general, company-wide discussions of rental procedures that would be directly relevant to procedures at the Koreatown buildings. Certainly Wong should have been told to search for documents from the times she covered for Koreatown supervisors.

A current Koreatown property supervisor, Chris Kim (“Kim”), testified at his deposition that he believed he was only asked to search his e-mails for responsive documents. Turrill Decl., Ex. L at 101:22-102:13. Ruby Gaeta (“Gaeta”), a property management assistant at Beverly Hills Properties testified at her deposition that she was never instructed to search her computer or files for responsive documents. Turrill Decl., Ex. M at 85:11-14. Defendants argue that Kim worked in the accounting department until August of 2004 and had no access to responsive documents. Platt Decl., Ex. Q at 9:10-24. When in August of 2004 Kim became a property supervisor, it was unnecessary for Kim to search for responsive documents since he was a new employee. Similarly, Defendants justify Gaeta's failure to search for responsive documents because she was not an employee until September 2004. Platt Decl., Ex. R.

The discovery cutoff date in this case was October 29, 2004. Plaintiffs argue that Defendants committed further discovery misconduct by inexcusably producing 2,701 highly relevant documents on the very last day of discovery, over a year after their first document request. Turrill Decl., Ex. R. Plaintiffs also claim that Defendants produced another 135 pages of discovery on October 29, 2004 that were not received by Plaintiffs until November 1, 2004. Turrill Decl., Ex. I. Plaintiffs claim that such documents were clearly sought by their first set of document requests.

Included in the 2,701 documents were vacancy reports. Platt Decl. ¶ 15. Defendants contend that vacancy reports were not requested as part of any of Plaintiffs' document requests. Plaintiffs argue that such reports are responsive to the September 2003 Request for Production No. 26 that sought all documents that relate to the operation of the apartment buildings, including but not limited to reports concerning building operations, incident reports, and any documents relating to building maintenance. Platt Decl., Ex. M. Defendants disagree that such a request covers the vacancy reports and claim their response to Plaintiffs' informal request of October 12, 2004 on October 29, 2004 was timely.

Also produced on October 29, 2004 were the first copies of e-mails. In June of 2004, Defendants represented that no e-mails had been produced in response to Plaintiffs' document requests because no responsive e-mails had been found. Turrill Decl., Ex. J at p. 2. However, Schield testified on September 23, 2004 that e-mail backup tapes had not been searched for their responsiveness to Plaintiffs' requests. Turrill Decl., Ex. C at 154:09-15.

*7 In their Opposition, Defendants state:

Paragraph 19 of the Platt Declaration merely attaches the referenced transcript. Mr. Platt makes no attempt to explain his conduct or even to assist the Court in finding where Defendants might have attempted to justify this failure to Magistrate Judge Eick. Apparently he believes the Court should accept his representation or search on its own to find the explanation. The Court has reviewed the transcript. To the extent there is any explanation, it is patently insufficient. At the hearing another of Defendants' counsel, Mr. James, simply volunteers that “Mr. Platt [who apparently was not present at the hearing] at the time he made the statement [that there were no backup tapes] was simply unaware because his knowledge was there was not such a system in place.” Ex. O at 137:25-138:2. Paragraph 26 provides no further explanation of the alleged miscommunication or misimpression that resulted in at least 226 responsive e-mail messages and attachments being provided on the last date for discovery. Thus nowhere do Defendants state under oath how this unlikely mistake came to be made. The Court does not consider this an adequate explanation of Defendants' conduct, and finds it was at least grossly negligent.

Plaintiffs claim that they are entitled to an adverse inference jury instruction because the destruction of evidence has prejudiced them by depriving them of the opportunity to develop their case fully. In order to obtain an adverse jury instruction, it must be established that: “(1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the party that destroyed the evidence had a sufficiently culpable state of mind; and (3) some evidence suggests that a document or documents relevant to substantiating the claim of the party seeking sanctions would have been included among the destroyed files.” Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 105 (2d Cir.2002) (internal citations and quotations omitted); accord Akiona v. United States, 938 F.2d 158, 161 (9th Cir.1991) (requiring showing of bad faith and that opposing party had notice of relevance).

Defendants argue that Plaintiffs cannot show that any evidence was destroyed during the time period when Defendants had an obligation to preserve it. However, Defendants ignore the fact that Plaintiffs have evidence that at least the name change documents were destroyed while litigation was ongoing. Testimony during the trial may indicate that other relevant evidence was destroyed.

*8 Defendants also argue that they did not destroy any documents in bad faith. “[T]he culpable state of mind factor is satisfied by a showing that the evidence was destroyed knowingly, even if without intent to breach a duty to preserve it, or negligently.”. DeGeorge Fin. Corp., 306 F.3d at 108 (internal citations and quotations omitted). “Once the duty to preserve attaches, any destruction of documents is, at a minimum, negligent.” Zubulake IV, 220 F.R.D. at 220. Destruction of documents during ongoing litigation was, at a minimum, negligent.

Defendants also argue that Plaintiffs cannot prove any destroyed evidence was relevant. “[R]elevant in this context means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence. Rather, the party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that the destroyed or unavailable evidence would have been of the nature alleged by the party affected by its destruction.” DeGeorge Fin. Corp., 306 F.3d at 108-09 (internal citations and quotations omitted). “Where a party destroys evidence in bad faith, that bad faith alone is sufficient circumstantial evidence from which a reasonable fact finder could conclude that the missing evidence was unfavorable to that party.” Id. at 109.

Considering the other egregious conduct during the course of this litigation, the Court could well conclude Defendants acted in bad faith. If the Court declines to make such a finding, the burden would be on Plaintiffs to show that a reasonable fact finder could infer that the destroyed evidence would have been adverse to the destroying party. It is undisputed that the stamps and forms that were destroyed showed “Korean” names for certain buildings. A reasonable fact finder could certainly infer that such evidence would have been adverse to Defendants in that it could have rebutted Defendants' claim that the inclusion of the word “Korean” in his building names resulted solely from a painter's error. Backstrom Decl., Ex. D at 100:6-15. Documents relating to inspections and remodeling appear to be relevant.

Plaintiffs also argue that Defendants' purposeful sluggishness in taking steps to prevent the destruction of evidence and in responding to discovery requests suggests Defendants were grossly negligent. “[A] showing of gross negligence in the destruction or untimely production of evidence will in some circumstances suffice, standing alone, to support a finding that the evidence was unfavorable to the grossly negligent party.” DeGeorge Fin. Corp., 306 F.3d at 109. Purposeful sluggishness in responding to discovery responsibilities can equate to gross negligence. Id. at 110. “Just as the intentional or grossly negligent destruction of evidence in bad faith can support an inference that the destroyed evidence was harmful to the destroying party, so, too, can intentional or grossly negligent acts that hinder discovery support such an inference, even if those acts are not ultimately responsible for the unavailability of the evidence....” Id. (internal citations and quotations omitted). Under this reasoning, Plaintiffs ask the Court to infer that all of the evidence allegedly destroyed was adverse to Defendants based on the fact that they didn't ensure a litigation hold and delayed in responding to discovery requests.

*9 The Court finds that with respect to the name change evidence, Plaintiffs have established the necessary requirements for the issuance of an adverse inference jury instruction at trial. The Court will determine during trial whether an instruction is appropriate concerning notes relating to inspections and rental applications. In regards to all other evidence, the Court reserves judgment concerning whether an adverse instruction or other sanction is appropriate. This issue may be raised again as jury instructions are being finalized.

Plaintiffs also argue that monetary sanctions are appropriate to punish and deter Defendants' discovery abuses. Where a party to litigation has destroyed relevant evidence, monetary sanctions have been awarded to cover the opposing party's costs incurred in investigating the discovery abuses and bringing related motions. E.g., Nat'l Assoc. of Radiation Survivors v. Turnage, 115 F.R.D. 543, 558 (N.D.Cal.1987). The court may also impose monetary sanctions on the sanctioned party to compensate it “for the unnecessary consumption of the court's time and resources.” Id. at 559.

Plaintiffs argue that they have suffered substantial prejudice as a result of Defendants' acts because they have been forced to incur costs relating to: (1) the review of Defendants' inadequate document production to determine that responsive documents were missing; (2) numerous “meet and confer” conferences with Defendants' counsel regarding such inadequate production; (3) the filing of three motions to compel regarding the documents and e-mails at issue; and (4) the filing of the instant motion. Plaintiffs have requested leave to submit evidence of these costs if the Court is inclined to award monetary sanctions.

The Court finds that Plaintiffs are entitled to monetary sanctions for the costs they incurred in investigating, conducting “meet and confer” conferences, and the filing of the instant motion. Plaintiffs' request to submit the amount of fees and costs is granted.

For the reasons set forth above, the Court GRANTS Plaintiffs' Motion for Adverse Jury Instruction and Other Appropriate Relief for Defendants' Destruction of Documents and Discovery Misconduct.

Plaintiffs argue that the Court should refuse to consider Defendants' late filed Opposition. Local Rule 7-9 provides that opposition papers should be served and filed not later than fourteen days before the hearing date. Defendants missed that deadline by one day. Although Local Rule 7-12 gives the Court the discretion to deem a late opposition consent to the granting of the motion, the Court refuses to do so here because of the potentially serious consequences of this Motion.