No. CV 03–753–PA
United States District Court, D. Oregon
May 05, 2004
Albert J. Bannon, Bannon Mediation, LLC, Glen P. McClendon, Roy E. Pulvers, Lindsay, Hart, Neil & Weigler, LLP, Portland, OR, for Plaintiff.
Arman Y. Oruc, Joseph F. Tringali, Kevin J. Arquit, Peter E. Kazanoff, Simpson Thacher & Bartlett, LLP, New York, NY, Fredric C. Nelson, John R. Foote, Robert A. Weikert, Stephen J. Fowler, William C. Rogers, Thelen Reid & Priest LLP, San Francisco, CA, George J. Cooper, III, Thomas H. Tongue, Dunn Carney Allen Higgins & Tongue LLP, Portland, OR, for Defendant.
CORRECTED ORDER TO SHOW CAUSE WHY SANCTIONS SHOULD NOT BE IMPOSED
*1 On May 3, 2004, the court heard argument on Plaintiff's Motion (# 125) for Sanctions. The court was advised that Defendant apparently did not issue a records retention order until April 2003, and that documents potentially relevant to this case—both electronic and paper—may have been destroyed prior to then, either deliberately or by failing to take the steps necessary to preserve those documents.
Plaintiff asked the court to instruct the jury that it may draw an adverse inference from the destruction of documents. Plaintiff also seeks monetary sanctions.
At oral argument, Plaintiff argued it had fully complied with the court's order of February 5, 2004, regarding efforts to recover electronic records. Regardless of whether that is so, the issue here is Defendant's conduct before then, with emphasis on the period between June 1999 and April 2003.
Sanctions may be warranted without a showing that Defendant violated a specific court order. “A federal trial court has the inherent discretionary power to make appropriate evidentiary rulings in response to the destruction or spoliation of relevant evidence.” Glover v. Bic Corp., 6 F.3d 1318, 1329 (9th Cir.1993). Among other things, the “trial court ... has the broad discretionary power to permit a jury to draw an adverse inference from the destruction or spoliation against the party or witness responsible for that behavior.” Id. Accord
Medical Lab. Management Consultants v. American Broadcasting Companies, Inc., 306 F.3d 806, 824 (9th Cir.2002).
The duty to preserve relevant evidence commences prior to the filing of the action, once the defendant reasonably anticipates an action may be forthcoming. See
Silvestri v. General Motors, 271 F.3d 583, 590 (4th Cir.2001); Kronish v. United States, 150 F.3d 112, 126 (2d Cir.1998). See also
Akiona v. United States, 938 F.2d 158, 161 (9th Cir.1991) (defining inquiry as whether party that destroyed documents “was on notice that the [documents] had potential relevance to litigation”); United States v. Kitsap Physicians Service, 314 F.3d 995, 1001 (9th Cir.2002) (discussing when defendant has a duty to preserve records prior to commencement of litigation).
The June 8, 1999 letter from Washington Alder, threatening to sue Weyerhaeuser for antitrust violations, put defendant on notice of possible litigation, and the specific subject matter. As the statute of limitations on an antitrust claim is four years, Weyerhaeuser arguably
should have retained relevant documents until at least June 2003, and had a further duty to preserve documents after December 2000, when Siletz
was filed. Indeed, Weyerhaeuser's own company policy mandates retention of documents under those circumstances. Nevertheless, Weyerhaeuser allegedly continued to destroy documents—and did not instruct employees to take steps to preserve documents—until at least April 2003. If true, it raises serious concerns.
“Bad faith” is a consideration in deciding whether to impose sanctions, though not a prerequisite. “Surely a finding of bad faith will suffice, but so will simple notice of ‘potential relevance to the litigation.’ “ Glover, 6 F.3d at 1329. See also
Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 108 (2d Cir.2002) (“culpable state of mind” requirement satisfied by a showing that failure to produce the evidence was either knowing or negligent). The rationale for allowing sanctions even when the destruction was merely negligent is that “each party should bear the risk of its own negligence.” Id.
“It makes little difference to the party victimized by the destruction of evidence whether that act was done willfully or negligently. The adverse inference provides the necessary mechanism for restoring the evidentiary balance. The inference is adverse to the destroyer not because of any finding of moral culpability, but because the risk that the evidence would have been detrimental rather than favorable should fall on the party responsible for its loss.” Id.
(citations omitted). But cf.
Procter & Gamble Co. v. Haugen, 179 F.R.D. 622, 631 (D.Utah 1998) (under Tenth Circuit law, finding of bad faith required before adverse inference may be drawn).
*2 Since it may be impossible to prove the contents of the destroyed document with a high degree of certainty, the moving party need show only that a reasonable trier of fact could find that the evidence would support its claim or defense. Residential Funding, 306 F.3d at 107.
The court has considerable discretion in deciding whether to impose sanctions, and the form thereof. See Medical Lab. Management Consultants,
306 F.3d 824–25 (court did not abuse its discretion by declining to draw adverse inference, where court found that loss of evidence was accidental, and the plaintiff was not prejudiced since secondary evidence was available that served the same purpose).
Defendant asserts that it has produced 400,000 pages of discovery in these actions. However, as good lawyers know, even large cases frequently turn on just a handful of documents. If those few critical documents are destroyed, that loss is not offset by producing 400,000 documents of lesser significance.
Plaintiff contends that, by reviewing bits of electronic data recently recovered from Defendant's computers, Plaintiff learned for the first time of the existence of a Hardwood Raw Material Council (HRMC) headed by a senior Weyerhaeuser executive, involved in formulating log buying strategies. Defendant disputes this, and represents that this information was disclosed to Plaintiff earlier.
Plaintiff also asserts that, in the data recovered from Defendant's computer, there were references to a “West Coast log reduction strategy,” though Defendant has produced no documents regarding that strategy. Perhaps the “log reduction strategy” was a plan to create miniature Christmas trees, but Plaintiff believes it may pertain to allegations that Weyerhaeuser sought to prevent competing mills from obtaining logs.
Plaintiff also represents that, on April 19, 2004, Defendant belatedly disclosed a report entitled “Hardwood Stain Loss, January–June 1999.” Plaintiff contends this proves Weyerhaeuser has been withholding crucial documents, and that Weyerhaeuser witnesses gave perjured testimony during Siletz
when they denied that the company kept records of stain loss.
Plaintiff further represents that a critical document in this case—from Plaintiff's perspective anyway—was obtained from the personal files of a former Weyerhaeuser employee, who retained a copy. No copy was ever produced by Weyerhaeuser.
At oral argument, Weyerhaeuser argued that this is much ado about nothing, noting that two other antitrust cases have settled without these documents, and this evidence was not available at the Siletz
trial either. Far from allaying the court's concerns, it heightens them. Assuming the Plaintiff's representations are accurate, hundreds of depositions have been taken, over the course of almost four years, hundreds of thousands of pages of discovery provided, and a trial conducted, all without any mention of the HRMC, the Stain Loss Report, or the “West Coast log reduction strategy.”
*3 This may all turn out to be much ado about nothing, as Defendant suggests, or it may be evidence of spoliation and possible perjury, as Plaintiff contends. We're going to get to the bottom of this, and soon.
On Friday, May 7, 2004, at 1:30 p.m., Defendant shall appear and show cause why sanctions should not be imposed for failing to preserve electronic and paper records potentially relating to antitrust litigation after June 8, 1999, when Weyerhaeuser was notified of a forthcoming antitrust claim. Among other things, Defendant shall be prepared to present testimony from:
1. Persons responsible for implementing the company's document retention policy, regarding the extent of compliance by Weyerhaeuser with that policy and with any legal duty to preserve potentially relevant documents after June 8, 1999, in connection with antitrust allegations regarding Weyerhaeuser's alder business;
2. Persons knowledgeable about Weyerhaeuser's e-mail and file servers, who can testify whether potentially relevant electronic documents were preserved during the above time period, and whether a retention order was issued and when;
3. Persons with knowledge regarding what steps were taken to provide electronic and paper documents to Perkins Coie, and the timing of those actions;
4. Persons with knowledge regarding the Hardwood Stain Loss report, the “West Coast log reduction strategy,” and the HRMC, and whether documents (paper, electronic or otherwise) once existed regarding those matters that have since been destroyed or were not produced to Plaintiff.
I emphasize that at this point, no determination has been made regarding any destruction of documents or the other allegations by Plaintiff. Sufficient concerns have been raised, however, to warrant a full investigation without delay.
For instance, unless affirmative steps are taken to preserve it, the backup of the e-mail server reportedly is over-written after 30 days. There also are concerns about preservation of electronic document files and paper records.
There are some exceptions, see
Kitsap, 314 F.3d at 1001, and Defendant can attempt to show that those exceptions are applicable here.
End of Document.