Zucchella v. Olympusat, Inc.
Zucchella v. Olympusat, Inc.
2021 WL 8317028 (C.D. Cal. 2021)
December 20, 2021

Fischer, Dale S.,  United States District Judge

Exclusion of Witness
Privilege Log
Dismissal
Sanctions
Adverse inference
Exclusion of Evidence
Bad Faith
Failure to Preserve
Spoliation
Default Judgment
Failure to Produce
Protective Order
Forensic Examination
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Summary
The defendants moved for termination sanctions against the plaintiff for spoliation of evidence. The court found that the plaintiff had destroyed or concealed evidence on an HP Laptop that was potentially relevant to the litigation, and awarded the defendants an adverse jury instruction and attorney's fees and costs associated with bringing the motion.
Additional Decisions
MARIA LUZ ZUCCHELLA, Plaintiff,
v.
OLYMPUSAT, INC., et al., Defendants
CV 19-7335 DSF (PLAx)
United States District Court, C.D. California
Signed December 20, 2021

Counsel

Lindsey Wagner, Scott Wagner and Associates, P.A., Ventura, CA, Barbara Faye Enloe Hadsell, Brian D. Olney, Dan Stormer, Hanna Chandoo, Tanya Sukhija-Cohen, Hadsell Stormer Renick and Dai LLP, Pasadena, CA, Robert D. Newman, Jr, Robert Newman Law Offices, Los Angeles, CA, for Plaintiff.
Laura Reathaford, Lathrop GPM LLP, Los Angeles, CA, Cecilia Hernandez, Pro Hac Vice, Colby Conforti, Pro Hac Vice, M. Mary Nikezic, Pro Hac Vice, Robert M. Einhorn, Pro Hac Vice, Robert Zarco, Pro Hac Vice, Zarco Einhorn Salkowski and Brito PA, Miami, FL, for Defendants.
Fischer, Dale S., United States District Judge

Order GRANTING in Part and DENYING in Part Defendants' Motion for Terminating Sanctions (Dkt. 265) and DENYING Plaintiff's Request to Strike Expert Opinions and Declaration (Dkts. 292)

*1 Defendants and Counter-Claimants Olympusat, Inc., Thomas Mohler, Olympusat Holdings, Inc., Ocean New Media LLC, and Ocean Communications, Inc. (collectively, Defendants) move for termination sanctions against Plaintiff Maria Luz Zucchella for spoliation of evidence. Dkt. 265-1 (Mot.). Specifically, Defendants seek an order dismissing the case; in the alternative, Defendants seek (1) an issue sanction in Defendants' favor as to each of Plaintiff's fifteen claims and Defendants' counterclaims, or (2) adverse jury instructions. Id. at 29. Defendants also seek monetary sanctions. Id. Plaintiff opposes. Dkt. 291 (Opp'n). Plaintiff also asks to strike the declarations of Corey Gildart, Valerie Ford, Nadia Espinosa, and Laura Reathaford. Dkt. 292. Defendants oppose. Dkt. 303.
The Court deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78; Local Rule 7-15. Defendants' motion is GRANTED in part and DENIED in part. Plaintiff's request is DENIED.
I. BACKGROUND
Zucchella asserts claims of sexual harassment, hostile workplace, and retaliation she purportedly suffered while working for Olympusat from 2000 to 2019. She alleges she was subjected to “frequent and aggressive sexual harassment” from Mohler, Olympusat's CEO and founder. Dkt. 47 at 1. Defendants counterclaimed, alleging Zucchella “brought false claims of sexual harassment against them as a pre-emptive strike to avoid prosecution” for taking kickbacks, knowingly making false statements to give her company credibility, and submitting false receipts to obtain expense reimbursements to which she was not entitled. Id.
The subject of the present motion – and the subject of nearly all of the parties' discovery disputes – is an HP Spectre Laptop (HP Laptop) purchased by Zucchella, see dkt. 145 (May 13 Order), in March 2018, for which she was reimbursed by Defendants. Id. at 1. Zucchella used the HP Laptop for both work and personal matters. Id. She returned the HP Laptop to Defendants when her employment ended in October 2019. Id.
On August 14, 2019, after the suit was filed, Zucchella (and Zucchella's counsel) had the HP Laptop's hard drive copied and then “wiped clean.” Id. Zucchella's counsel maintain the backup copy of the HP Laptop is in their possession. Id. When Zucchella returned the HP Laptop to Defendants in October 2019, the HP Laptop contained no documents or data for any time prior to August 2019, when the device was wiped. Id.[1]
On April 21, 2021, Defendants brought a motion to compel the production of the backup copy of the HP Laptop and all documents that were deleted from the device on or before August 14, 2019. Dkt. 140. On May 13, 2021, Magistrate Judge Abrams granted the request in part and ordered Zucchella to provide the backup copy to a neutral forensics expert, who would then perform a limited examination to determine whether the backup copy contained additional data or information not already produced by Zucchella or listed in a privilege log. May 13 Order at 6. Magistrate Judge Abrams also ordered Zucchella's counsel to provide a declaration under penalty of perjury stating that all documents deleted on or before August 14, 2019 had been produced other than those withheld on privilege grounds. Id. On May 27, 2021, Defendants filed with this Court a motion for review of the May 13 Order. Dkt. 154. The May 13 Order was stayed pending the Court's review. Dkt. 147.
*2 On May 19, 2021, Defendants filed a motion to compel the testimony of Zucchella regarding the HP Laptop. Dkt. 149; see also dkts. 150, 152. On the same day, Zucchella filed a motion for a protective order prohibiting Defendants from deposing her and her agents, including her attorneys and the IT professionals who allegedly copied the HP Laptop and later wiped it. Dkt. 148; see also dkts. 150-51, 153. On June 7, 2021, Magistrate Judge Abrams granted in part Defendants' motion and ordered Zucchella to answer deposition questions concerning the actions she took with respect to the copying and wiping of the HP Laptop, whether she was aware that any files or data were deleted, and her knowledge regarding the backup copies. Dkt. 156 (June 7 Order) at 3-4. Magistrate Judge Abrams denied Defendants' motion to the extent they sought to depose Zucchella about her conversations with her attorneys about the HP Laptop. Id. at 4-5. On June 21, 2021, Defendants filed a motion with this Court seeking review of the June 7 Order. Dkt. 160. Zucchella filed an ex parte application for an order staying Zucchella's further deposition in light of Defendants' request for review, dkt. 161, which Magistrate Judge Abrams granted, dkt. 163.
On June 16, 2021, Magistrate Judge Abrams denied Zucchella's motion for a protective order prohibiting the depositions of the IT consultants who copied and wiped the HP Laptop in August 2019. Dkt. 159 (June 16 Order) at 3. Magistrate Judge Abrams elaborated that the deposition questions posed to the IT consultants could seek only facts regarding the methods and procedures they implemented and the actions they took when copying and wiping the HP Laptop. Id. at 4. Magistrate Judge Abrams granted Zucchella's motion for a protective order prohibiting the depositions of Zucchella's attorneys. Id. On June 21, 2021, Defendants filed a motion for review of the June 16 Order. Dkt. 160.
On June 28, 2021, Zucchella filed an Additional Statement Re the Joint Discovery Stipulation for an Order to Compel Production of Documents from HP Spectre Laptop Computer, notifying the Court and the parties that Zucchella's counsel “recently discovered a more complete backup of [the] laptop ... that contained additional files.” Dkt. 165 at 3. Two of Zucchella's attorneys submitted declarations explaining why a complete backup of the HP Laptop was not located at an earlier time. See dkts. 165-1, 165-2. According the declarations, Zucchella brought three devices to Hadsell Stormer Renick & Dai LLP (HSRD) in August 2019: the HP Laptop, a Mac laptop, and an external hard drive (Other Drive). See dkt. 219 (October 5 Order) at 1. The declarations also stated that an HSRD IT consultant made backups of the devices by plugging an external hard drive into the HP Laptop and copying the C:Drive. Id. The backups were saved on a computer in HSRD's office, and the IT consultant restored the HP Laptop to its factory settings. Id. Dan Stormer, one of Zucchella's attorneys, declared that no one at HSRD made a forensic copy of the HP Laptop and when Zucchella went to collect the HP Laptop, Mac laptop, and Other Drive, Zucchella apparently took the external drive containing the backup of the HP Laptop and left the Other Drive at HSRD. Id. at 2. On June 4, 2021, “it became clear” to Hanna Chandoo, an HSRD associate, that the Other Drive was different from the backup of the HP Laptop. Id. (citation omitted). Chandoo also learned that Zucchella possessed a USB drive and she asked Zucchella to send her the USB. Id. Stormer and Chandoo declare that on June 28, 2021, Zucchella produced all nonprivileged and nonprivate files in the backup and would serve a detailed privilege log. Id.
On September 13, 2021, in light of the June 28 filings, the Court referred the May 13 Order, June 7 Order, and June 16 Order back to Magistrate Judge Abrams for further consideration. Dkt. 207. In the October 5 Order, Magistrate Judge Abrams ordered Zucchella's counsel to provide a declaration under penalty of perjury stating that all documents deleted on or before August 14, 2019 had been produced other than those withheld on privilege grounds, including any responsive documents in Zucchella's USB drive, and that no additional responsive documents exist other than the items listed on Zucchella's privilege log. October 5 Order at 3-4. In addition, the Magistrate Judge (1) denied Defendants' motion for reconsideration of the May 13 Order with respect to requiring Zucchella to produce the backup copy of the HP Laptop to Defendants' forensic expert; (2) rescinded the earlier order ordering Zucchella to produce the backup copy to a neutral forensics expert for examination; and (3) rescinded the prior order requiring the IT consultants who backed up and wiped the HP Laptop to submit a detailed declaration explaining the backup and wiping procedure that was implemented. Id. at 3-4. Magistrate Judge Abrams also (1) expanded the amount of time awarded in the June 7 Order to depose Zucchella about her actions with respect to the HP Laptop from two hours to four hours and (2) permitted Defendants to ask Zucchella about the USB drive. Id. at 5. With respect to the June 16 Order, Magistrate Judge Abrams permitted Defendants to inquire about communications between the IT consultants and Zucchella's counsel about the copying and wiping of the HP Laptop. Id. at 6.
*3 On October 12, 2021, Zucchella filed an ex parte application seeking a stay of the October 5 Order, dkt. 221. On October 14, 2021, Zucchella's application was denied with respect to Zucchella's deposition and was granted with respect to staying the depositions of HSRD's IT consultants. Dkt. 223. On October 19, 2021, Defendants filed a motion for review of the October 5 Order, dkt. 226, which this Court denied, dkt. 300.
On October 28, 2021, Defendants filed an ex parte application to compel Zucchella's deposition pursuant to the October 5 Order. See dkts. 240, 244. On October 29, 2021, the Magistrate Judge reluctantly granted the application in part to permit Defendants an additional opportunity to depose Zucchella by no later than November 12, 2021 and denied the application to the extent it sought to have the Magistrate Judge overrule Zucchella's objections to questions outside the scope of questions permitted by the October 5 Order. Dkt. 244 at 3-4.
It is unclear whether the depositions of the IT consultants or further deposition of Zucchella have taken place.
II. LEGAL STANDARD
District courts may impose sanctions as part of their inherent power “to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.” Chambers v. NASCO, Inc., 501 U.S. 32, 43, reh'g denied, 501 U.S. 1269 (1991); see also Unigard Sec. Ins. v. Lakewood Eng'g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992) (excluding evidence as a sanction for spoliation). If a party breaches its duty to preserve evidence during litigation, the opposing party may move the court to sanction the party destroying evidence. See Unigard, 982 F.2d at 365. The obligation may attach even before a lawsuit is filed. See, e.g., In re Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1067 (N.D. Cal. 2006) (“As soon as a potential claim is identified, a litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action.”). Spoliation occurs when a party destroys, significantly alters, or fails to preserve evidence after its duty to preserve arose. See United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002); see also Apple Inc. v. Samsung Elecs. Co., 888 F. Supp. 2d 976, 989 (N.D. Cal. 2012).
A party's destruction of evidence need not be in “bad faith” to warrant a court's imposition of sanctions. Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993); Unigard, 982 F.2d at 368 n.2 (sanctions may be imposed for “willfulness or fault by the offending party”). Nonetheless, a party's motive or degree of fault in destroying evidence is relevant to what sanction, if any, is imposed. In re Napster, Inc., 462 F. Supp. 2d at 1066 (citing Baliotis v. McNeil, 870 F. Supp. 1285, 1291 (M.D. Pa. 1994) and Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)).
Rule 37(e) of the Federal Rules of Civil Procedure was amended to establish the findings necessary to support certain curative measures for failure to preserve electronically stored information. This amendment “forecloses reliance on inherent authority or state law to determine when certain measures should be used” to address spoliation of electronically stored information. See Fed. R. Civ. P. 37(e), Advisory Committee Note to 2015 Amendment.
Rule 37 states:
e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court: (1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or (2) only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may: (A) presume that the lost information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action or enter a default judgment.
*4 Fed. R. Civ. P. 37(e).
III. DISCUSSION
A. Timeliness of Defendants' Motion
Zucchella contends Defendants' motion is untimely because “Defendant[s] waited to file their motion until three months after fact discovery closed on August 9, 2021.” Opp'n at 12. Defendants filed the motion on November 8, 2021. While the motion was filed after the close of discovery, the ongoing discovery saga in this case has delayed bringing a motion for sanctions. Indeed, on June 28, 2021, Zucchella notified the Court and opposing counsel that Zucchella's counsel became aware that they did not possess the most complete backup of the HP Laptop. See generally October 5 Order. On the same day, Zucchella produced 387,803 documents from the HP Laptop. Opp'n at 11. On August 9, 2021, Zucchella produced an additional 1,088 documents and a privilege log identifying documents withheld from the June 28 production. Id.
Finally, on October 19, 2021, Zucchella's counsel filed a declaration under penalty of perjury stating that “[it] is Plaintiff's counsel's belief that all documents and [electronically stored information] that were requested by Defendants ... have either been produced or included in Plaintiff's privilege log.” Dkt. 225 ¶ 5. In the declaration, Zucchella's counsel “commit[ted] to producing or logging as privileged or private all documents and ESI in the USB Drive by November 15, 2021.” Id. ¶ 17. Therefore, because it appears Zucchella was – and perhaps still is – producing documents as of October 19, 2021, the Court finds Defendants' motion is timely.
B. Zucchella's Request to Strike Defendants' Declarations
Zucchella asks the Court to strike the declarations of Valerie Ford, Sandra Row, Nadia Espinosa, and Laura Reathaford as untimely. Dkt. 292 at 9. Defendants admit that all of the declarations except Reathaford's are untimely; however, because Zucchella had ample opportunity to respond to the untimely declarations, the Court finds Zucchella is not prejudiced and declines to strike the declarations.
In addition, Zucchella asks the Court to strike the expert opinion of Corey Gildart on the grounds that Gildart's testimony is speculative and inadmissible under Daubert. Id. at 1. Specifically, Zucchella argues Gildart “avoids” opining that it is “ ‘more likely than not’ that the opinions he offers are correct.” Id. Zucchella also contends Gildart's declaration includes impermissible legal conclusions. Id. at 7-9. The Court declines to strike Gildart's declaration.
District courts act as the gatekeeper for expert testimony by applying Rule 702 to ensure evidence is both relevant and reliable. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999) (Daubert imposed a special “gatekeeping obligation” on trial judges for all expert testimony). An expert witness may testify if:
(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
*5 (c) the testimony is the product of reliable principles and methods; and
(d) the expert has reliably applied the principles and methods to the facts of the case.
Fed. R. Evid. 702. “Expert opinion testimony is relevant if the knowledge underlying it has a valid connection to the pertinent inquiry.” Primiano v. Cook, 598 F.3d 558, 565 (9th Cir. 2010) (quoting United States v. Sandoval-Mendoza, 472 F.3d 645, 654 (9th Cir. 2006)). Assessing an expert's reliability is a “fact-specific inquiry” that depends on “the nature of the issue at hand, the witness's particular expertise, and the subject of the testimony.” United States v. Hankey, 203 F.3d 1160, 1168 (9th Cir. 2000); see also Kumho Tire, 526 U.S. at 150 (“[T]he relevant reliability concerns may focus upon personal knowledge or experience” of the expert). The proponent of the expert carries the burden of proving admissibility. Cooper v. Brown, 510 F.3d 870, 942 (9th Cir. 2007).
While “relevant” is certainly a legal term, it is a term that has more than one interpretation. As Defendants argue, “ ‘relevant refers to whether a file, document, or data on the laptop ... was work related.” Dkt. 303 at 10. In addition, Gildart testified that his expert report “does not proffer any conclusions about the legal relevance of the information that is, or used to be, contained on the laptop.” Id. To the extent Gildart's declaration includes impermissible legal conclusion, the Court disregards those conclusions.
The Court finds Gildart has satisfied the Daubert standard. Zucchella may disagree with Gildart's methodology, but she has not sufficiently identified any shortcomings with his methodology. Nor has Zucchella taken issue with Gildart's level of expertise or knowledge. Any shortcomings in Gildart's methodology can be attributed, at least in part, to Zucchella wiping the HP Laptop before returning it to Defendants.
Zucchella's request to strike Defendants' declarations is DENIED.
C. Finding of Spoliation and Appropriate Sanction
In order to establish spoliation, Defendants must demonstrate that Zucchella destroyed evidence that was potentially relevant to reasonably foreseeable litigation. See Kearney v. Foley & Lardner, LLP, 590 F.3d 638, 649 (9th Cir. 2009) (explaining that spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence, in pending or future litigation.”).
First, more than being merely reasonably foreseeable, litigation was pending when the computer was copied and wiped before being returned to Defendants. See May 13 Order at 1 (“On August 14, 2019, while this lawsuit was ongoing, plaintiff's counsel had the laptop's hard drive copied and then ‘wiped clean.’ ”).
Second, the Court agrees with Defendants that spoliation has occurred. Defendants have provided persuasive evidence that Zucchella destroyed or concealed evidence that she knew, or should have known, was relevant to this action. This showing supports an adverse jury instruction but is insufficient to warrant the ultimate sanction of default judgment. Evidence of Zucchella's attempt to destroy or conceal evidence on the HP Laptop includes among other things: (1) failing to inform Defendants that she copied and wiped the HP Laptop before returning it to Defendants; (2) Zucchella's counsel waiting months to disclose the fact that the computer had been wiped in August 2019; and (3) Zucchella's counsel submitting a declaration stating that all documents had been produced only to supplement that declaration informing the Court and opposing counsel of the alleged mistake that occurred at HSRD's office concerning Zucchella taking the complete backup copy.
*6 District courts have “the broad discretionary power to permit a jury to draw an adverse inference from the destruction or spoliation [of evidence] against the party or witness responsible for that behavior.” Glover, 6 F.3d at 1329. To determine whether an adverse instruction is appropriate, courts in this Circuit have generally followed the Second Circuit's three-part test, which requires the moving party to establish: “(1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a ‘culpable state of mind[;]’ and (3) that the evidence was ‘relevant’ to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.” Jackson Family Wines, Inc. v. Diageo N. Am., Inc., CV 11-5639 EMC (JSC), 2014 WL 595912, *4 (N.D. Cal. Feb. 14, 2014) (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002)). “[A] finding of ‘bad faith’ is not a prerequisite to this corrective procedure.” Glover, 6 F.3d at 1329.
As discussed above, Zucchella does not dispute that she wiped the HP Laptop. Zucchella had an obligation to preserve the HP Laptop at the time it was wiped. Zucchella contends only that (1) a backup copy was made and (2) Defendants have not shown how the deleted or concealed evidence is relevant. Opp'n at 1-2, 5, 18-21, 25. But because Zucchella wiped the HP Laptop while this suit was pending and purportedly accidently took the complete backup copy, the Court will never know the extent of destruction and concealment of information and evidence on Zucchella's HP Laptop. In addition, Defendants have identified at least some potentially relevant documents that were wiped, including documents relating to a network Zucchella purchased, which is relevant to Defendants' claims against Zucchella for kickbacks and documents relating to Olympusat's distribution channels in the Middle East North Africa region. Mot. at 23 n.9. A reasonable fact finder could determine the evidence destroyed or concealed on the HP Laptop would support Defendants' claims against Zucchella. Moreover, given that Zucchella's wiping of the HP Laptop and the subsequent issues relating to the backup copy (or copies) makes the information on it unavailable, Defendants have sufficiently shown that the HP Laptop contained relevant information, and that they were therefore prejudiced by its partial destruction and concealment.
The foregoing factors weigh in favor of an adverse jury instruction concerning Zucchella's wiping of her HP Laptop and failure to adequately preserve the evidence on it. The Court will provide the jury with an adverse instruction similar to the following language:
Plaintiff had a duty to preserve relevant evidence on the HP Laptop. Plaintiff breached this duty by intentionally wiping the HP Laptop before returning it to Defendants. You may, but are not required to, decide that the evidence contained on the HP Laptop would have been unfavorable to Plaintiff.
Given the availability of this lesser sanction, the ultimate sanction of dismissal is unnecessary. See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006). In addition, the Court awards the attorney's fees and reasonable costs associated with bringing the instant motion. The parties are ordered to meet and confer in good faith in an effort to resolve the amount of attorneys' fees to be awarded. If they are unable to agree, they are to follow the directions on the Court's website.
IV. CONCLUSION
Defendants' motion for sanctions is GRANTED in part and DENIED in part. Zucchella's request to strike Defendants' declarations is DENIED.
IT IS SO ORDERED.

Footnotes

The parties dispute the ownership of the HP Laptop. Defendants contend it is their property and Zucchella maintains the device is hers. Id. at 2-3. Magistrate Judge Abrams has not resolved the ownership dispute but has determined that Zucchella has at least some privacy rights with respect to the HP Laptop. See id. at 4-7.