Gaddy v. Blitz U.S.A., Inc.
Gaddy v. Blitz U.S.A., Inc.
2010 WL 11527376 (E.D. Tex. 2010)
September 13, 2010

Everingham, Charles, IV,  United States Magistrate Judge

Failure to Produce
Legal Hold
Bad Faith
Adverse inference
Spoliation
Sanctions
Failure to Preserve
Initial Disclosures
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Summary
The court found that Blitz U.S.A. Inc. had failed to issue a litigation hold or effectively communicate to its employees the need to preserve written and electronic documents, resulting in the loss of relevant evidence. The court ordered Blitz to certify that it had made a reasonable search for and had produced all relevant materials related to both the Gaddy and the Zecaida cases, and to identify the searches that it conducted.
Chris GADDY, A.J. McSwain, and Chris Raymond
v.
BLITZ U.S.A., INC.
Leonel Zecaida and Amber Zecaida
v.
Blitz U.S.A., Inc., et al
Civil Action No. 2:09–CV–52–DF, Civil Action No. 6:09–CV–283–MHS
United States District Court, E.D. Texas, Marshall Division
Signed September 13, 2010

Counsel

Matthew Boyd Flanery, Darren Dee Grant, Grant & Flanery, Tyler, TX, Diane M. Breneman, Pro Hac Vice, Stacey L. Dungan, Pro Hac Vice, Breneman Dungan LLC, Kansas City, MO, John L. Tippit, Pro Hac Vice, Escobedo, Tippit & Cardenas, LLP, McAllen, TX, for Chris Gaddy, A.J. Mcswain, and Chris Raymond.
Michael Thomas Bridwell, Strong Pipkin Bissell & Ledyard, Beaumont, TX, Douglas S. Beck, Pro Hac Vice, Jennifer M. Stevenson, Mark C. Hegarty, Pro Hac Vice, Scott W. Sayler, Pro Hac Vice, Shook Hardy & Bacon, Kansas City, MO, Fernando DeLeon, Strong Pipkin Bissell & Ledyard, Houston, TX, Michael L. Dunn, Smead Anderson & Dunn, Longview, TX, for Blitz U.S.A., Inc., et al.
Everingham, Charles, IV, United States Magistrate Judge

MEMORANDUM OPINION AND ORDER

*1 Before the Court are Plaintiffs' Motion for Sanctions Against Blitz Pursuant to Rule 37 for Destruction and Deletion of Documents and for Failure to Disclose Documents and for Show Cause Hearing that Defendant Be Held in Contempt, Gaddy v. Blitz U.S.A., Inc., 2:09–cv–52, Dkt. No. 67, and Plaintiffs' Amended Motion to Compel and for Sanctions Against Blitz Pursuant to Rule 37 for Destruction and Deletion of Documents and for Failure to Disclose Documents and for Show Cause Hearing that Defendant Be Held in Contempt, Zecaida v. Blitz U.S.A., Inc., 6:09–cv–283, Dkt. No. 73. The above-referenced motions were consolidated and referred to the undersigned United States Magistrate Judge in accordance with 28 U.S.C. § 636. After considering the parties' arguments and the applicable law, the undersigned GRANTS in PART and DENIES in PART the motions for the reasons set forth below.
I. BACKGROUND
These cases assert product liability claims against Defendant Blitz U.S.A., Inc. (“Blitz”). Blitz is a leading manufacturer of portable plastic gasoline canisters. It is alleged that Blitz manufactures approximately 70% of portable plastic gas cans sold in the United States. In both cases under consideration, the plaintiffs seek damages for severe injuries that were sustained when Blitz gas cans exploded in separate incidents. These cases are similar to other cases filed around the country, the first of which was instituted in 1993.
In the Gaddy case, the plaintiffs assert that Blitz improperly failed to include a “flame arrester” in its gas can design. Under the plaintiffs' theory, a flame arrester is a small wire mesh screen interposed between the spout and the gas can that would help prevent explosions. A similar case was tried in this court in 2008, and the parties settled that case with a high-low settlement while the jury was deliberating. Green v. Blitz, 2:07–cv–372 (“the Green case”). The jury found for Blitz in that case, concluding that the gas can was not defectively designed and that the decedent was negligent on the occasion in question. This resulted in a settlement payment at the low end of the agreed range. In the Zecaida case, the plaintiffs complain that the Blitz gas can failed to incorporate a flame arrester and additionally allege that Blitz failed to implement child-safety features in their gas cans and that such failures were causes of the injuries to Leonel and Ramon Zecaida.
In the motions under consideration, the plaintiffs ask the Court to sanction Blitz for what they believe to be a systematic destruction of evidence and repeated discovery violations. The plaintiffs levy broad allegations against Blitz—allegations that have expanded since the hearing on these motions. Essentially, the plaintiffs seek death penalty sanctions against Blitz for its alleged misconduct. They also seek a spoliation instruction. The undersigned has carefully reviewed the allegations made by the plaintiffs in light of the procedural posture of the cases and has attempted to evaluate the allegations based on the sworn testimony in the record related to each specific allegation. The court's effort is compounded by the numerous supplements and responses that have been filed since the motion was originally heard.[1]
*2 Much of the argument focuses on events that occurred at Blitz from 2004 through approximately 2006; therefore, the court will focus on that timeframe. By 2004, Blitz was actively engaged in the defense of lawsuits alleging that its cans were defectively designed because they failed to include a flame arrester. In September 2004, Blitz engaged Dunbar Engineering, a Tulsa-based engineering firm, to perform certain engineering services for a flame arrester project. Various Blitz employees have testified that Blitz hired Dunbar because Blitz had faced allegations that a flame arrester was a relatively simple device that could be placed in a gas can. According to Blitz, it asked Dunbar to research the concept of a flame arrester. Dunbar was hired by Larry Chrisco, who at that time was the head of Blitz's research and development efforts and who also has acted as Blitz's risk manager. Phase I of the project was dedicated to determining for Blitz the basic principles of flame arresting. Phase II of the project was originally planned to actually implement the principles into an application for Blitz's gas can. On November 15, 2004, a letter outlining the scope of work for Phase I was signed by Charlie Forbis, a senior Blitz designer who reported to Chrisco. During Phase I of the project, Dunbar personnel performed research on basic flame arresting principles and authored a report that was sent to Blitz in December 2004. The report included, among other things, a list of references and definitions common in the science of flame arresting. Although the testimony is not entirely clear on this issue, the report also included at least some of the references themselves.
At or near the time of the Dunbar consultation, Forbis made at least one drawing of, as he calls it, a canister for housing flame arresting material that might be adapted to fit into a gas can. Forbis recently described it as “a drawing of a tube inside a tube that had a bunch of holes in it that would house some kind of media; whether it be, you know, screen wires like what's in a safety can or whether it be other media.” There is no dispute that Forbis intended this drawing to depict at least a preliminary design of a type of flame arrester.
Forbis worked with David Price, another Blitz employee, on the preliminary design of a flame arrester. Price testified that he gained his understanding of what a flame arrester was from a book that Chrisco kept in his office and from a flame arrester designer at Underwriter Laboratories (“UL”). He also did some research on the Internet and discovered some materials there, including some patents.
Blitz's interest in flame arresters was not limited to the design department. On August 16, 2005, Rocky Flick, the CEO for Blitz, hand wrote a memorandum to Larry Chrisco. The document is referred to as Flick's “wish list,” and it is entitled “Expectations for Gas Cans.” Flick wrote, under the heading “To be completed in next 2 yrs,” that he wanted Blitz to “Develop & introduce device to eliminate flashback from a flame source. Water heater incidents should be the test case for this. Once this is developed we should advocate the device be standardized under ASTM req's or law.”
There is no dispute that this “wish list” document was relevant and was not produced in the Green case. The record, however, is ambiguous regarding whether Blitz failed to conduct a diligent search in the Green case such that the document would have been discovered. Blitz argues that the document was discovered after the conclusion of the Green case in a file folder labeled “CARB 8/5/03 Meeting.” CARB is an acronym for the California Air Resources Board, a state regulatory body enforcing California environmental laws. Blitz contends a file concerning compliance with California environmental laws would not have immediately appeared relevant to the flame arrester cases pending in this court—thus explaining why the document was not timely discovered and produced. The plaintiff asserts, however, that Blitz produced documents in Greenthat were related to CARB. As such, the plaintiff contends that, at a minimum, the scope of Blitz's search would have reasonably included the CARB file at issue. The “wish list” was, however, produced in both Gaddyand Zecaida.
In mid to late 2005, Forbis and other Blitz personnel travelled to a meeting with UL to discuss flame arrester issues. Sometime after the UL meeting (in either 2005 or 2006), Blitz decided to stop actively working on designing a flame arrester for its gas cans. Chrisco recently testified that Blitz deferred to ASTM International, an international standards organization, for its evaluation as to the feasibility of incorporating a flame arrester into a plastic gasoline can. Price threw away his research materials, and copies were not maintained by Blitz. Price testified that no one at Blitz instructed him not to destroy written documents that might be relevant to litigation. He also testified that no one told him to avoid destroying emails or electronically stored information that might be relevant to litigation. Finally, he testified that no one ever asked him whether he had information relevant to flame arrester litigation.
*3 Blitz did not produce Forbis's drawing in Green and has not produced it in Gaddy or Zecaida. It appears that the drawing no longer exists. Forbis suggested in his deposition testimony and in an affidavit that he did not consider the drawing important—he likened it to a doodle on a piece of notebook paper. Although Forbis states that he was aware that he should not discard documents related to litigation, he cannot remember anyone telling him that until recently. He also could not recall anyone asking him for emails or documents regarding flame arresters.
From approximately March 2006 through September 2006, Blitz was engaged in a project known as the “cap and collar” project. According to Blitz, the cap and collar project was designed to identify the cause of and to fix a problem that Blitz was having with a self-venting gasoline can. Blitz maintains there was a fit problem with the cap and collar parts of the self-venting can. Jody Wood (“Wood”) is a Blitz employee who worked in production and then transitioned to the IT department. During his involvement in the cap and collar project, Blitz personnel would intercept the manufactured gas cans and determine how many cans were good and how many had problems. Wood maintained charts indicating the frequency of problems. He testified that he kept charts in a manila folder that was less than a quarter of an inch thick.
The plaintiffs maintain that the cap and collar issues impacted the safety of the particular model at issue because the fit problems allegedly allowed children to open the child-resistant caps. Thus, according to the plaintiffs, documents related to Blitz's cap and collar project are relevant to the Zecaida case. Because Blitz had previously been sued in at least one case involving the failure of a gasoline can to have a child-resistant cap, the plaintiffs argue that Blitz had an obligation to preserve such documents because they could be relevant to ongoing products liability suits. Wood testified that he discarded his folder after the project closed. At the time of his March 18, 2010 deposition, Wood had never heard of a litigation hold, and he had never received any written correspondence indicating that email and other electronic and hard copy documents needed to be retained for litigation purposes. Wood also testified that Blitz sent emails instructing people that they needed to delete emails because the server was getting full, but the emails contained no cautionary language instructing people to retain emails relevant to pending litigation.
The Green case was tried to verdict in 2008. In the Green case, Blitz did not disclose Dunbar Engineering as a party with knowledge of relevant facts. Counsel for Blitz, Mr. David Jones, informed the court at the hearing on this matter that a decision was made to withhold the Dunbar materials on the grounds that they constituted work product. (Transcript of March 26, 2010 Hearing at 31, Dkt. No. 142).[2] Blitz, however, failed to log any Dunbar documents on any privilege log.
Despite the failure to identify Dunbar or log the documents on a privilege log, a review of the trial record reveals that the plaintiffs in Green were on notice of the existence of Dunbar and documents generated by that consultation. Chrisco had previously testified by deposition in a case pending in the Northern District of Illinois about Blitz's consultation with Dunbar and the documents generated in the course of that consultation. (Chrisco Dep., Hadid v. Blitz USA, Inc., Case No. 05–CV–1168, N.D. Ill., March 2, 2006, 93:6–96:21). Mr. Chrisco's deposition transcript from the Hadid case was produced to the plaintiffs in the case. Plaintiffs' counsel, Mr. Todd Tracy, cross-examined Mr. Chrisco during the Green trial with excerpts from Mr. Chrisco's Hadid deposition. Prior to the hearing on this motion, the Dunbar documents were produced to counsel for both the Gaddy plaintiffs and the Zecaida plaintiffs.
*4 The plaintiffs make essentially two broad arguments in their motion for sanctions. The first argument focuses on spoliation issues. The plaintiffs point out that, since 1993, Blitz has been defending lawsuits that allege its gas cans were defectively designed because they failed to include a flame arrester or other system to prevent explosions caused by flashbacks from heat sources. Likewise, since 1997, Blitz was on notice that it could be sued because its gasoline cans had allegedly defective child-resistant closures. According to the plaintiffs, the pendency of litigation imposed a duty on Blitz to preserve relevant evidence related to the design of gas cans—including Blitz's consideration of any flame arrester technology and child-resistance issues. The plaintiffs argue that Blitz never instituted a litigation hold that instructed its employees to preserve relevant hard copies of documents or electronically stored information. As such, the plaintiffs assert that Blitz personnel routinely discarded or destroyed relevant documents, including electronically stored information. They contend that this was done deliberately and in bad faith, so as to support sanctions that include striking Blitz's pleadings and an adverse inference instruction.
The plaintiffs' second broad argument is more appropriately characterized as a failure to produce certain materials—primarily emails and other electronically stored information. The plaintiffs argue that the court's discovery order in Gaddy required the production of all relevant documents, including electronically stored information, within 45 days of the scheduling conference, and Blitz's failure to do so violated the order. In Zecaida, the plaintiffs argue that Blitz's obligations were essentially the same under Fed. R. Civ. P. 26(f) and this court's Local Rule CV–26. The plaintiffs contend that Blitz's refusal to timely produce relevant materials was done in bad faith and has prejudiced their preparation in this case. Of course, to the extent relevant information cannot be produced because it has been destroyed for failure to institute a litigation hold, then the plaintiffs contend that such evidence has been spoliated.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 37 authorizes sanctions for failure to comply with discovery orders. This court may bar the disobedient party from introducing evidence, or it may direct that certain facts shall be “taken to be established for purposes of the action.” Fed. R. Civ. P. 37(b)(2)(A)(i). Rule 37 also permits this court to strike claims from the pleadings and even to “dismiss the action ... or render a judgment by default against the disobedient party.” Roadway Express, Inc. v. Piper, 447 U.S. 752, 763, 100 S. Ct. 2455, 65 L.Ed.2d 488 (1980); accord Fed. R. Civ. P. 37(b)(2)(A)(v)–(vi). “Rule 37 sanctions must be applied diligently both to penalize those whose conduct may be deemed to warrant such a sanction, [and] to deter those who might be tempted to such conduct in the absence of such a deterrent.” Roadway Express, 447 U.S. at 763–64.
Rule 37(b)(2) requires that any sanction be just and that the sanction must be related to the particular claim that was the subject of the discovery violations. Compaq Computer Corp. v. Ergonome Inc., 387 F.3d 403, 413 (5th Cir. 2004) (citations omitted) (reviewing a sanction, the finding of alter ego liability, based upon party's behavior regarding discovery related to the alter ego issue). Further, the penalized party's discovery violation must be willful. United States v. $49,000 Currency, 330 F.3d 371, 376 (5th Cir. 2003). Finally, a severe sanction under Rule 37 is to be employed only where a lesser sanction would not substantially achieve the desired deterrent effect. Id.
In addition to Rule 37, this court also has inherent powers to enter sanctions. The inherent powers of this court are those which “are necessary to the exercise of all others.” Roadway Express, 447 U.S. at 764(citation omitted). The contempt sanction is the most prominent inherent power, “which a judge must have and exercise in protecting the due and orderly administration of justice and in maintaining the authority and dignity of the court.” Id. (citation omitted). When inherent powers are invoked, however, they must be exercised with “restraint and discretion.” Gonzalez v. Trinity Marine Group, Inc., 117 F.3d 894, 898 (5th Cir. 1997). Thus, severe sanctions should be confined to instances of “bad faith or willful abuse of the judicial process.” Id. In any event, when parties exploit the judicial process, a court may sanction conduct beyond the reach of other rules. Natural Gas Pipeline v. Energy Gathering, Inc., 2 F.3d 1397, 1407 (5th Cir. 1993).
*5 Spoliation is a longstanding doctrine which applies to “the destruction of evidence [or] [t]he destruction, or the significant and meaningful alteration of a document or instrument.” Andrade Garcia v. Columbia Med. Ctr. of Sherman, 996 F. Supp. 605, 615 (E.D. Tex. 1998) (quoting Brewer v. Dowling, 862 S.W.2d 156, 158 n.2 (Tex. App.—Fort Worth 1993, writ denied)). “If a party with a duty to preserve evidence fails to do so and acts with culpability, a court may impose appropriate sanctions.... 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.” Lopez v. Kempthorne, 684 F. Supp. 2d 827, 890 (S.D. Tex. 2010) (quoting Smith v. Am. Founders Fin. Corp., 365 B.R. 647, 681 (S.D. Tex. 2007)). The harmed party is entitled to “an adverse inference against the destroyer of evidence only upon a showing of ‘bad faith’ or ‘bad conduct.’ ” Condrey v. SunTrust Bank of Ga., 431 F.3d 191, 203 (5th Cir. 2005).
III. ANALYSIS
A. Spoliation Arguments
The plaintiffs' first argument is that Blitz spoliated certain relevant evidence. In assessing this argument, the first question is whether Blitz was under a duty to preserve relevant evidence. If so, the court inquires into what evidence Blitz should have preserved. Finally, the court inquires into whether the failure to produce the evidence was done in bad faith. The duty to preserve evidence is not seriously questioned in this case—the record reflects that Blitz has been sued in several cases in which the failure to equip its cans with a flame arrester was the alleged defect. In addition, Blitz does not appear to dispute that it had been sued in cases involving child-safety issues, like those raised in Zecaida, and therefore was on notice of the potential for future litigation. As a result, Blitz was under a duty to preserve documents relevant to those issues. At a minimum, Blitz was under a duty to preserve documents related to its gasoline can designs insofar as they involved the consideration of flame arresters, investigations into the design changes involving flame arresters, and documents related to child-safety issues. Moreover, Blitz was under a duty to preserve its electronically stored information concerning these same topics to the extent that information was kept by individuals who were likely to have knowledge of these matters.
Although the existence of a duty to preserve is not seriously challenged by Blitz, the more difficult question is whether and to what extent Blitz failed to preserve relevant, material evidence, and whether any such failure to preserve occurred in bad faith. As will be seen, the sworn testimony is hotly disputed, and thus case-dispositive sanctions and a bad faith finding are inappropriate on the current record. The court will examine each argument the plaintiffs make in support of their motion.
1. Allegations that Blitz Personnel Routinely Discarded or Shredded Relevant Documents.
The plaintiffs allege that Blitz personnel routinely discarded or shredded relevant documents and that this occurred in bad faith. First, the plaintiffs assert that Blitz destroyed the drawing of a flame arrester prepared by Charlie Forbis. Second, the plaintiffs contend that David Price, a Blitz employee, did research on the Internet concerning flame arresters and discarded this research. Third, the plaintiffs allege that Blitz employees Jim Calcagno and Miriam George routinely shredded documents. Fourth, the plaintiffs argue that Jody Wood discarded his file from his work on the cap and collar project. Finally, the plaintiffs point to the testimony of Martha Landers, who suggests that Blitz should have in its possession documents and meeting minutes for a flame arrester project that occurred between 2004-2006. Each will be addressed.
*6 With respect to the Forbis drawing, the plaintiffs contend that the evidence supports a finding that Forbis destroyed or discarded his drawings in bad faith. Although the court agrees that one view of the evidence would support that finding, Mr. Forbis's testimony also supports a conclusion that the drawings were nothing more than his preliminary thoughts concerning a possible flame arrester design that were not materially relevant to any pending litigation. At a minimum, his testimony would support a view that he, personally, did not believe his sketch or sketches constituted material evidence that needed to be preserved.
With respect to the second argument, the plaintiffs challenge David Price's conduct in discarding his research conducted at the behest of Charlie Forbis. There is no dispute that Price threw away these documents. What is disputed is whether the evidence was discarded under circumstances that were designed to obscure the truth—the predicate for a spoliation instruction or the other extreme sanctions plaintiffs seek. Under Price's testimony, the documents were publicly available articles on the Internet and publicly available patents. Mr. Price said he discarded these materials when he was told that Blitz would no longer actively seek to design a gasoline can with a flame arrester.
The third allegation is that Blitz executives routinely shredded documents. This allegation is vague, but the implication is that the Blitz executives shredded documents relevant to gas can litigation. The primary basis for this allegation is testimony given by Will Bailey. Mr. Bailey worked for Blitz for 17 years. In March 2009, Bailey sent Rocky Flick, Blitz's CEO, a letter inquiring about Blitz's email policy. According to the plaintiffs, he was terminated shortly thereafter. After he was terminated, he gave deposition testimony that in 2004–2005, Jim Calcagno, Blitz's plant manager, suggested that documents “could end up in court” and that Mr. Bailey (and other Blitz employees) should keep minimal amounts of email. According to Bailey, he understood Calcagno to be telling him to get rid of his email by deleting it. Bailey also understood Calcagno to be telling him to get rid of hard copy documents by shredding them. Bailey went on to testify that “I've seen Jim Calcagno shred documents every day.” He also testified that he witnessed two other management employees shredding documents. The plaintiffs rely on this testimony to support an allegation that Blitz routinely shredded relevant documents in bad faith while litigation was pending.
If Bailey's testimony is credited, then Blitz directed its employees, at least implicitly, to destroy relevant documents that might wind up in court. Blitz, however, has responded to these allegations by submitting affidavits from various employees. In particular, the court has examined the affidavits of Jim Calcagno, Vice President and Director of Manufacturing at Blitz, and Miriam George, a Blitz employee who was working in the Human Resources Department at the relevant time period.
Calcagno states under oath that “I have never deliberately or in bad faith destroyed any documents, including electronic documents and emails, relevant to the gasoline container litigation. I have never directed any other employees to do so. I have never witnessed or heard about any other Blitz U.S.A. employees deliberately destroying documents, including electronic documents and email, relevant to pending cases.” (Affidavit of Jim Calcagno, at ¶ 9). Calcagno also states that he recalls only two time frames in which he used a paper shredder at work. In both instances the documents would not be apparently relevant to gasoline can litigation. Calcagno also states that he shredded these documents because he knew that others were maintaining copies of them.
*7 As to Ms. George, she states that her office was located near Bailey's office, which would explain why Bailey was able to witness certain events, including the shredding of documents. She admits to shredding a large volume of employee explanation of benefits or “EOB” forms during that time frame after checking with the insurance company to verify that electronic copies of these records were available. Ms. George also indicated that she recalled the days that Mr. Bailey referred to in his deposition, because that was the only time that she ever had a shredder in her office. She confirmed specifically that the documents shredded did not have any relationship to pending litigation or the design of gasoline containers—including flame arresters or child resistance features.
After considering all of the testimony on this issue, and absent more concrete allegations or proof concerning specific instances of shredding hard-copies of documents, the undersigned is not persuaded that Blitz shredded, in bad faith, documents relevant to pending litigation.
Turning next to the Jody Wood documents, the plaintiffs contend that Blitz discarded these documents in bad faith with knowledge of potential litigation concerning child-resistant closures. It is true that Wood discarded his documents related to the cap and collar project. But Blitz maintains that the cap and collar project was not focused on child resistance issues, while the plaintiffs contend that the fit of the cap implicates child safety issues. In addition, certain documents related to this project were produced by Blitz as well as a third party in the Zecaida case. In all, although the undersigned finds that the documents were arguably relevant to the plaintiffs' claims, and that Wood therefore discarded his documents under circumstances in which he had a duty to preserve them, the evidence falls short of persuading the court that Wood discarded his charts under circumstances evidencing bad faith.
Finally, the court briefly addresses Martha Landers's allegations, particularly those included in her July 16, 2010 affidavit. The plaintiffs submitted this affidavit as Exhibit 4 to their motion for leave to supplement additional authority to plaintiffs' motion for sanctions (Dkt. No. 169–4). Ms. Landers is Mr. Flick's former executive assistant. She left Blitz in 2008. It bears mention that the plaintiffs' attorneys were involved in the preparation of Ms. Landers's July 16 affidavit for submission to the court. The plaintiffs point to Martha Landers's affidavit in which she describes, among other things, the presence of a formal flame arrester project from 2004–2006. According to the plaintiffs, the presence of a flame arrester project suggests the existence of documents that must have been created by upper management in furtherance of this project. The plaintiffs assert these documents have not been produced. Despite the statement in her affidavit, Ms. Landers testified in her deposition that the project was actually an informal project which did not rise to the level of a formal project. This discrepancy casts serious doubt on whether and to what extent the rest of her affidavit testimony is credible. It is ironic, in a case riddled with numerous perjury allegations made by the plaintiffs, that they would have submitted an affidavit from their own witness that includes this admittedly inaccurate sworn statement. The undersigned has disregarded that affidavit as well as any briefing that relies on it.
2. Allegations concerning incineration of documents.
The plaintiffs contend that Blitz employees incinerated certain documents relevant to the claims made in the pending cases. In particular, the plaintiffs contend that Thomas Jackson, a former Blitz employee who served as controller and as a person responsible for the Blitz computer system maintenance, testified that Blitz routinely incinerated documents because of space-saving concerns. The implication is that documents were routinely incinerated without regard to whether they were relevant to gas can safety litigation.
*8 The basis for this allegation is Jackson's testimony in Beadore v. Blitz U.S.A., Inc., No. 45–1–2006–1479 (N.Y. Sup. Ct.). In that case, Jackson testified that he had people working for him who were responsible for destroying documents. When asked what direction he gave those employees concerning documents to be retained or destroyed, Jackson stated:
The process was something like this typically. Either I or somebody that worked for me would take a magic marker, and we would go mark the boxes that were to be removed and destroyed. And then we had warehouse people or people out in the plant that would typically take those boxes. And we have a local incinerator plant in Miami, and those cartons would be taken to the incinerator plant to be burned.
In addition, Jackson testified in the Beadore matter that either he or someone at his direction would have searched through the accounting information, the quality information, “the operations, regulatory, legal cases, all of these.” Jackson or his employees looked for documents that were outside the retention period, marked them, and then had them destroyed. The plaintiffs rely on these excerpts as proof that incineration of documents relevant to gasoline can design litigation occurred.
Blitz responds to these allegations with an affidavit and additional deposition testimony from Jackson. In particular, Jackson states in his affidavit that the documents stored in the boxes to which he referred were hard copies of invoice records, payable records, payroll tax reports, W–2s, receivables listings, and other accounting source documents. He further stated that none of these documents involved or was related in any way to product design, customer complaints, pending litigation, injuries suffered by consumers, or quality or warnings issues. Jackson also states that, although he never received a formal litigation hold, he was fully aware that documents that were relevant to pending or future litigation needed to be preserved, even after the expiration of Blitz's document retention policy. He also states that he never destroyed any document relevant to or related to litigation, regardless of whether it was inside or outside Blitz's record retention period. Moreover, Jackson states that in 1996–1997, Blitz began scanning accounting source documents, and that electronic copies of these documents should be available at least dating back to the year 2000. In his deposition given in Zecaida, Jackson states that he had primary responsibility for accounting documents, and that others, such as Charlie Forbis and Larry Chrisco, had responsibility for research and product development documents.
The plaintiffs contend, and the court agrees, that Jackson's testimony is inconsistent as to the types of documents that were incinerated. In Beadore, he testified that the documents included “the operations, regulatory, [and] legal cases,” while in his affidavit, he states that the documents were accounting source documents. Nevertheless, considering all of Jackson's testimony on this point, the undersigned is not persuaded that the plaintiffs have sufficiently shown that Jackson in bad faith incinerated hard copies of documents known to be relevant to the gasoline container design litigation.
3. Failure to Issue a Litigation Hold on Hard Copy and Electronically Stored Information
*9 The plaintiffs challenge Blitz's failure to issue a formal litigation hold. Blitz disputes allegations that its employees knowingly destroyed relevant documents and points to evidence that certain employees knew about their duty to preserve relevant documents. But there is strong evidence that Blitz failed to effectively communicate to employees who were likely to have possession of relevant documents and electronically stored information that they should preserve that information for purposes of ongoing and anticipated litigation. Key players at Blitz, who were aware of the ongoing litigation and who had been deposed repeatedly, have testified that until very recently they were unaware of their duty to preserve evidence. Jackson Dep. 115:13–19, Dec. 9, 2009; Forbis Dep. 164:20–165:13, December 9, 2009; Price Dep. 57:2–24, Feb. 18, 2010; Chrisco Dep. 247:17–248:8, Oct 9, 2008. Blitz had an ongoing duty to preserve its documents and correspondence relating to issues in the gas can litigation, including any efforts relating to flame arresters and any other subject that was relevant to safety issues in the exploding gas can cases. See Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir. 2001) (“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.”).
Plaintiffs have presented substantial evidence that Blitz failed to issue a formal litigation hold until late 2009, notwithstanding the ongoing litigation for the previous sixteen years. See Affidavit of David Jones, Esq. In Support of Defendant Blitz U.S.A. Inc.'s Opposition to Plaintiffs' Motion for Sanctions, Feb. 18, 2010, para. 6. (Dkt. No. 77–8). Indeed, the first evidence of a formal statement that Blitz issued to employees advising them of the duty to preserve relevant documents is the notice given by Miriam George, risk management head, in August 2009:
As you know, over the past several years, Blitz has collected documents for the lawsuits related to child resistance issues and the misuse of Blitz gasoline cans around fire. As part of this ongoing process, our lawyers are conducting an inventory of our system. However, the policy that we cannot destroy documents which might be related to the gas can litigation remains in place. Be sure to continue to communicate this to the employees under your guidance.
Affidavit of David Jones, Esq. In Support of Defendant Blitz U.S.A. Inc.'s Opposition to Plaintiffs' Motion for Sanctions, Feb. 18, 2010, para. 6. (Dkt. No. 77–8). As far as the undersigned can discern, even assuming some employees at Blitz knew of their duty to preserve relevant documents, Blitz took no steps to formally preserve any documents and correspondence relevant to litigation until sometime in 2008, when Ms. Linda Kerby drafted a document retention policy.[3] The next document preservation effort on Blitz's part apparently came in August 2009, when Ms. George delivered the litigation hold notice to selected employees.
The undersigned also finds that the failure to issue a litigation hold resulted in the destruction and the deletion of electronically stored information that would have been relevant to the flame arrester cases pending before this court. Plaintiffs have presented evidence that large amounts of electronic evidence were destroyed without conducting a litigation review. Paul Hale, the information technology manager, sent emails to the “All Blitz” mailing group that asked employees to delete emails without cautioning any of the employees that they were to preserve communications that are relevant to pending litigation. E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Jan. 6, 2005 (Dkt. No. 155–8 at 1); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Jan. 12, 2006 (Dkt. No. 155–8 at 2); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, July 13, 2005 (Dkt. No. 155–8 at 3); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Mar. 1, 2005 (Dkt. No. 155–8 at 4); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, July 14, 2005 (Dkt. No. 155–8 at 5); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Dec. 14, 2004 (Dkt. No. 155–8 at 6); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Nov. 27, 2006 (Dkt. No. 155–8 at 7); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, May 31, 2006 (Dkt. No. 155–8 at 8); E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Mar. 1, 2005 (Dkt. No. 155–8 at 10) (collectively “Paul Hale E-mails”).
*10 As late as 2007, Blitz only allotted 50 gigabytes of disk space on the e-mail server for 120 e-mail accounts, or less than 500 megabytes per user. Hale Dep. 76:6–14; E-mail from Paul Hale, Senior Systems Administrator, Blitz, to All Blitz, Jan 12, 2006 (Dkt. No. 155–7). Even in the face of pending litigation, Blitz took no steps to systematically preserve any of its e-mail. Hale Dep. 69:9–25; Wood Dep. 50:6–9, Mar. 18, 2010; Wood Dep. 76:20–77:10. Blitz merely left it to the discretion of its employees as to whether they ought to create archives of their e-mail inboxes and save the archives to CD. See Paul Hale E-mails (Dkt. No. 155–8); Hale Dep. 69:12–20; Wood Dep. 50:24–51:24; Wood Dep. 54:2–18. In those cases where employees did back up their e-mail, the CDs may have been misplaced or discarded and therefore not produced. Wood Dep. 111:7–112:23.
Blitz downplays the importance of any destroyed documents, arguing that they are not relevant or likely never existed in the first place. The undersigned rejects the view that the plaintiffs have suffered no prejudice from this conduct. As to the hard copy materials, Forbis's actual drawing might have tended to show that the plaintiffs' proposed designs (or Forbis's) were feasible alternative designs. Mr. Price's research might have suggested the same thing. Particularly in conjunction with the “wish list” from Blitz's CEO, the documents would tend to undermine Blitz's position that a flame arrester is not a worthwhile design change to a consumer gas can. The electronic information and emails might have shown the same thing. At a minimum, they would help to flesh out the details and the timing of Blitz's flame arrester effort—even one that was never fully realized—from 2004 through 2006.
The plaintiffs also point to testimony given in other cases, particularly the Beadore matter, to support their position that Blitz's conduct was designed to hide the existence of its flame arrester efforts from 2004–2006. The plaintiffs contend that Blitz witnesses perjured themselves in certain deposition testimony by failing to disclose the existence of Dunbar Engineering. In particular, the plaintiffs point to testimony given by Mr. Chrisco in October 2008 in the Beadore case in which Mr. Chrisco failed to disclose the existence of Dunbar Engineering in response to a line of questions concerning outside engineering firms consulted by Blitz on flame arrester technology. The testimony reads as follows:
Q: My question is, can you identify for me which of these firms that you went to for their expertise in the area of flame arrestors?
A: I have—
MR. LAIRD: Objection to the form. I'm objecting to the terms flame arrestor as undefined, definite. But in addition, there's no point in time in the question.
Q: At any point in time, sir?
MR. LAIRD: Same objection.
A: Ah, you want to repeat the question again. There's too much going on here and I'm—I'm not hearing that, I don't guess.
Q: Certainly and subject to your objection of course, Ed, so you don't have to repeat it; can you identify for me which engineering firm Blitz consulted for their expertise in the area of flame arrestor technology?
A: We haven't consulted with any engineering firm regarding flame arrestor technology, is that your question?
Q: Yes, sir.
A: Okay.
(Chrisco Dep., Beadore v. Blitz U.S.A., October 9, 2008, 50:8–51:7)
The plaintiffs also rely on excerpts from the deposition of Charlie Forbis, also in the Beadore matter:
Q: Has anyone at Blitz ever conducted any study, sir, to determine how flame arrestors work?
MR. LAIRD: Objection to the form.
A: No.
Q: (BY MS. BRENEMAN) Has anyone at Blitz done any research to determine how flame arrestors work?
MR. LAIRD: Objection to the form.
*11 A: No. We had asked ASTM if there was a protocol for testing for flame arrestors, and we—for gas cans, and the answer was no.
Forbis Dep., Beadore v. Blitz, May 20, 2009, at 68:15–69:1.
In the same deposition, Forbis testified:
Q: And, sir, can you tell me, after learning of these injuries, that it was alleged to have been connected to gas cans exploding, do you know of any efforts taken by anyone in the design department to try to put a flame arrestor on a plastic can?
MR. LAIRD: Objection to the form. You may answer.
A: No. No.
Id. at 73:12–19.
Forbis also testified in Beadore as follows:
Q: Do you know, sir, of any work ever done on behalf of Blitz by any outside engineering firm to investigate the issue of flame arrestors and/or equipping gas cans with flame arrestors?
A: No.
....
Q: Sir, have you ever had any interaction with any outside engineers on the issue of flame arrestors?
MR. LAIRD: Objection to the form.
A: No.
Q: (BY MS. BRENEMAN) Do you know of any outside engineers ever interacting with anyone in the development department on the issue of flame arrestors:
MR. LAIRD: Objection to the form.
A: No.
Id. at 74:22–75:2; 90:7–17.
In this case, the plaintiffs rely on this testimony to suggest that Mr. Chrisco and Mr. Forbis knowingly perjured themselves in Beadore by failing to disclose the Dunbar Engineering consultation and the internal work at Blitz from 2004 through 2006 to design a flame arrester for a gasoline can. Although the testimony in Beadorewas given in a New York state court proceeding, the plaintiffs suggest that this false testimony is consistent with an overarching scheme to destroy and hide relevant documents from the plaintiffs in these cases.
This court would be inclined to agree with the plaintiffs but for the fact that Chrisco had previously given sworn testimony in the Hadid case that disclosed the existence of Dunbar Engineering and documents related to the consultation. Moreover, Blitz produced the Hadid deposition to the plaintiffs in the Green case pending in this court prior to the trial of that case. These facts cut against a finding that Blitz's inaccurate testimony in a separate New York case supports a finding of bad faith in this case.
More recently, the plaintiffs sought leave to add an additional allegation that Blitz had contacted engineering professors from the University of Tulsa, allegedly to test flame arresters. (Dkt. No. 216). There is a dispute concerning the role of the University of Tulsa personnel. Blitz contends that the engineers were consulting engineers whose identities were protected under the work product doctrine. Because the record is unclear, the court orders Blitz to submit to the court within five days any and all documents relating in any way to Blitz's involvement with the University of Tulsa concerning flame arrester issues.
Although the court's review of all of the testimony raises serious questions concerning Blitz's document preservation efforts, the evidence as a whole counsels the undersigned to reject the argument that the failure to issue a formal litigation hold was done in bad faith. It must be remembered that many Blitz employees—including those in upper management—have testified that even in the absence of a formal litigation hold, they knew they needed to retain documents relevant to gas can litigation. Likewise, the record, as a whole, does not support a finding at this stage, that any destruction of documents was done in bad faith. The evidence on these issues is contested. Blitz has submitted sworn testimony that refutes nearly every allegation made by the plaintiff. However, the undersigned is persuaded that Blitz failed to properly maintain and preserve documents, including both hard copy materials and electronically stored information that should have been preserved given the nature of the allegations raised in the gas can litigation. That conduct approached recklessness, given the number of cases involving the safety of its gasoline cans that Blitz has defended over the years. In addition, Blitz clearly knew about the pendency of the various cases, it failed, in at least the case tried to verdict, to properly log documents claimed to be privileged, and, as will be discussed below, failed to timely search for and produce relevant electronically stored information in the two cases under consideration. When the court add to that the testimony concerning the absence of any litigation hold, this conduct demonstrates a disregard for Blitz's discovery obligations. As a result, the introduction of evidence concerning Blitz's document preservation efforts and document destruction is appropriate. BCE Emergis Corp. v. Cmty. Health Solutions of Am., Inc., 148 Fed.Appx. 204, 219 (5th Cir. 2005) (“Moreover, the district court gave both parties the freedom to put forward evidence about document destruction; thus, the jury was free to consider BCE's contentions and punish Appellees accordingly.”). In addition, the jury should be instructed that Blitz failed to issue effective communications to its employees to preserve documents that were relevant to pending or anticipated litigation and that this failure violated the rules applicable to the discovery process. The jury should also be instructed that this failure has resulted in the loss of relevant, material evidence. After hearing the evidence, should the trial judges determine that the conduct amounts to bad faith, then a more severe spoliation instruction and adverse inference instruction, at their discretion, would be appropriate.
B. Failure to Search for and Produce Electronically Stored Information
*12 The plaintiffs' second broad allegation is more in the nature of a motion to compel. The plaintiffs argued at the hearing on this matter that Blitz had failed to timely search for and produce electronically stored information. After a careful review of the record, the undersigned agrees with the plaintiffs on this point.
In Gaddy, the court's discovery order required Blitz to produce all relevant documents within 45 days after the court's scheduling conference. A similar requirement was imposed in Zecaida to make initial disclosures under the court's scheduling order and this court's local rules. As the briefing unfolded on this matter, Blitz represented to the court in its filings that “last fall Blitz hired an outside vendor to scrub its servers for electronically stored documents.... When complete, this process will allow for searching electronic documents and permit Blitz U.S.A. to supplement outstanding document productions, as described infra.” Defendant's Opp. To Plaintiffs' Motion for Sanctions, at 5 n.2. At a minimum, this statement constitutes an admission that electronic documents had not been properly searched for and timely produced in the Gaddy and Zecaidacases.
Although Blitz suggests that it could not have made its disclosures sooner and has gone to great expense to supplement its production, the court is not persuaded by these arguments. Blitz delayed production of electronically stored information until well after the deadline for making disclosures to the point where it dumped the production on the plaintiffs. What is not apparent to the court at this point is the actual status of the production. For example, the plaintiffs complained at the hearing on this matter that Martha Landers scanned certain design documents, and Blitz had not produced those documents. Blitz now maintains that those documents are not missing and have been produced. (Dkt. No. 214 at 7). A large volume of emails has also now been produced. Although Blitz maintains that its supplemental productions of electronically stored information have been completed, the plaintiffs will likely dispute this fact. Accordingly, the court orders Blitz to certify with an affidavit, within fourteen days, that it has made a reasonable search for and has produced all relevant materials related to both the Gaddy and the Zecaida cases. Blitz shall identify the searches that it conducted, who was involved in the searches, the custodians who were contacted for hard copies of documents and electronically stored information, the general categories of documents produced by Bates ranges, and the dates on which those documents were produced. After considering the status of production, the court will be in a better position to evaluate the prejudice caused to the plaintiffs.
IV. CONCLUSION
The plaintiffs' motions for sanctions in Gaddy and Zecaida are GRANTED IN PART and DENIED IN PART. The undersigned declines to issue a recommendation or an order striking Blitz's pleadings on this record. The undersigned further declines to issue an order declaring the propriety of an adverse inference instruction due to spoliation of evidence at this time. The undersigned concludes, however, that Blitz employees failed to preserve relevant documents at times when those employees had a duty to preserve those documents. That conduct approached recklessness. The undersigned also concludes that Blitz's failure to issue a litigation hold or otherwise effectively communicate to its employees the need to preserve written and electronic documents caused the loss of documents that were likely relevant to the plaintiffs' claims. As such, the court should allow the introduction of evidence of the circumstances surrounding the document destruction. The admission of this evidence is consistent with Fifth Circuit law, and it would enable the trial judges in these cases the opportunity to further consider giving a spoliation instruction should they determine it is warranted. The jury should further be instructed as outlined herein. The court further orders Blitz to make the requisite certification that its production is full and complete within fourteen days from the date of this order.

Footnotes

E.g.Gaddy v. Blitz, Unopposed Motion for Leave to File Additional Attachments to Motion for Sanctions (Dkt. No. 125), Opposed Sealed Motion to File Additional Attachments to Motion for Sanctions (Dkt. No. 138), Notice of Supplemental Authority (Dkt. No. 159), Opposed Motion for Leave to File Additional Authority in Support of Plaintiff's Motion for Sanctions (Dkt. No. 167), Sealed Additional Attachments to Main Document (Dkt. No. 169), Sealed Additional Attachments to Main Document (Dkt. No. 177), Response to Opposed Motion for Leave to File Additional Authority in Support of Plaintiff's Motion for Sanctions (Dkt. No. 189), Additional Attachments to Main Document (Dkt. No. 209), Additional Attachments to Main Document (Dkt. No. 212), Sealed Additional Attachments to Main Document (Dkt. No. 213), Response in Opposition for Leave to File Additional Attachments (Dkt. No. 214); Zecaida v. Blitz, Unopposed Motion for Leave to File Additional Attachments to Motion for Sanctions (Dkt. No. 95), Opposed Sealed Motion to File Additional Attachments to Motion for Sanctions (Dkt. No. 113), Sealed Additional Attachments to Main Document (Dkt. No. 167), Opposed Motion for Leave to File Additional Authority Relating to Perjury in Support of Plaintiffs' Motion for Sanctions (Dkt. No. 181), Additional Attachments to Main Document (Dkt. No. 182), Sealed Additional Attachments to Main Document (Dkt. No. 183), Response in Opposition for Leave to File Additional Authority Relating to Perjury (Dkt. No. 186), Opposed Motion for Leave to File Additional Authority Relating to Flame Arrester Consultation (Dkt. No. 191), Additional Attachments to Main Document (Dkt. No. 192), Sealed Additional Attachments to Main Document (Dkt. No. 193), Opposed Motion for Leave to File Additional Authority Relating to Perjury (Dkt. No. 194), Additional Attachments to Main Document (Dkt. No. 195), Sealed Additional Attachments to Main Document (Dkt. No. 196).
All docket references throughout this order refer to Gaddy v. Blitz U.S.A., Inc., 2:09–cv–52.
Ms. Kerby is a Blitz employee responsible for scanning documents, payroll, and accounts receivable.