Ryan Morrow, Plaintiff, v. Steven Temple, et al., Defendants No. CV-19-0202-TUC-JAS (BGM) United States District Court, D. Arizona Filed May 11, 2022 Macdonald, Bruce G., United States Magistrate Judge REPORT &amp; RECOMMENDATION *1 Currently pending before the Court is Plaintiff Ryan Morrow's Motion for Sanctions Pursuant to Fed. R. Civ. P. 37 (Doc. 86). Defendants have responded (Doc. 87) and Plaintiff has replied (Doc. 88). As such, the motion is fully briefed and ripe for review. Pursuant to Rules 72.1 and 72.2 of the Local Rules of Civil Procedure, this matter was referred to Magistrate Judge Macdonald for Report and Recommendation. In its discretion, the Court finds this case suitable for decision without oral argument. See LRCiv. 7.2(f). The Parties have adequately presented the facts and legal arguments in their briefs and supporting documents, and the decisional process would not be significantly aided by oral argument. The Magistrate Judge recommends that the District Court grant Plaintiff's motion for sanctions and give an adverse inference jury instruction at trial. I. BACKGROUND “Defendant 4 Ropin Ranch, Inc., buys and sells roping horses in Arizona.” Amended Joint Status Rpt. of Atty. Conf. (“Joint Report”) (Doc. 52) at 2. “Defendant Steven Temple is president and CEO of 4 Ropin Ranch, and his wife, Kimberly Temple is its director.” Id. In the summer of 2018, Defendants advertised the 2009 Buckskin Gelding horse, AQHA #5182644, named “Big Rig” on their website. Id.; see also Pl.’s Mot. for Sanctions (Doc. 86). “In late August of 2018, Plaintiff purchased Big Rig for $19,550.” Joint Rpt. (Doc. 52) at 2. Plaintiff alleges that Defendants shipped Big Rig to Texas, and when the horse arrived, Plaintiff noticed that he was exhibiting signs of lameness in his front legs. Second Amended Compl. (“SAC”) (Doc. 35) at ¶¶ 18–19. Plaintiff had Big Rig examined by a veterinarian, and Plaintiff ultimately concluded that Big Rig was not suitable for competition. Id. at ¶ 23. Plaintiff further alleges that he negotiated a Replacement Agreement (“RA”) with Defendant Steven Temple, by which 4 Ropin Ranch would take Big Rig back and issue Plaintiff inhouse credit for the purchase price of Big Rig and allow Plaintiff to select a suitable replacement. Id. The parties also executed a Boarding Agreement and a Consignment Agreement (“BA”). Id. at ¶ 24; see also Defs.’ Response to Mot. for Sanctions (Doc. 87), Exh. “B”. Big Rig was eventually transported back from Texas to Arizona and Defendant Steven Temple took possession of Big Rig but refused to provide a replacement. Id. at ¶¶ 25–33. Defendants continued to refuse to provide Plaintiff with a selection of potential replacement horses and refused to refund his money, alleging that the horse returned from Texas lame and demanding that Plaintiff pay for Big Rig's medical bills. SAC (Doc. 35) at ¶ 34; see Defs.’ Response to Mot. for Sanctions (Doc. 87), Temple E-mail to Morrow 11/4/2018 (Exh. “C”). *2 On November 4, 2018, counsel for Plaintiff sent a pre-litigation letter to Defendants indicating his involvement in the case and noting Defendants’ “duty to preserve evidence which you know or reasonably should know is relevant to this action.” Pl.’s Mot. for Sanctions (Doc. 86), Wcislo Ltr. to Temple 11/4/2018 (Exh. “A”). The SAC alleges causes of action for 1) fraudulent inducement; 2) breach of the purchase agreement; 3) breach of the replacement agreement; 4) breach of the boarding agreement; 5) violation of the Arizona Consumer Fraud Act (“ACFA”); 6) alter ego; 7) fraud by omission; 8) unjust enrichment; and 9) breach of the implied covenant of good faith and fair dealing. See SAC (Doc. 35). In response, Defendants offer several affirmative defenses including that even if the parties had a valid replace agreement, “Plaintiff breached its contract with the Ranch by failing to return Big Rig in a condition substantially equivalent to when Plaintiff received him.” Answer (Doc. 48) at 12. On January 14, 2020, Plaintiff served his First Set of Requests for Production and First Set of Interrogatories (“Initial Discovery”) on Defendants. See Not. of Serv. of Discovery (Doc. 44). On April 21, 2021, Plaintiff re-served his Initial Discovery on Defendants. See Defs.’ Resp. to Pl.’s Mot. for Sanctions (Doc. 87), Initial Discovery (Exh. “I”). Plaintiff reports that Defendants never responded to these requests. Pl.’s Mot. for Sanctions (Doc. 86) at 4. On October 20, 2021, Plaintiff re-noticed Defendant Steven Temple's deposition. See Amended Not. of Depo. of S. Temple (Doc. 78). On October 27, 2021, Plaintiff requested to inspect Big Rig for a health evaluation. Pl.’s Mot. for Sanctions, Wcislo Ltr. to Elis &amp; Sud 10/27/2021 (Exh. “B”). Defendants denied this request, resulting in the current motion. See Order 11/10/21 (Doc. 83). II. ANALYSIS “It is well established that the duty to preserve arises when a party knows or should know that certain evidence is relevant to pending or future litigation.” Christoffersen v. Malhi, 2017 WL 2653055 at *3 (D. Ariz. June 20, 2017) (citations and quotations omitted). “Spoliation of evidence occurs when a party (1) destroys evidence after receiving ‘some notice’ that the evidence was potentially relevant to litigation; and, in doing so, (2) impairs the non-spoiling party's ability to go to trial, or threatens to interfere with the rightful decision of the case.” Padgett v. City of Monte Sereno, 2007 WL 878575 at * 2 (N.D. Cal. Mar. 20, 2007) (citations omitted). A court may impose sanctions for spoliation of evidence pursuant to its inherent powers, or if in violation of a court order, under Federal Rule of Civil Procedure 37(b). Unigard Sec. Ins. Co. v. Lakewood Engineering &amp; Mfg. Corp., 982 F.2d 363, 367–68 (9th Cir. 1992). The Ninth Circuit Court of Appeals “has recognized as part of a district court's inherent powers the broad discretion to make discovery and evidentiary rulings conducive to the conduct of a fair and orderly trial.” Id. at 368 (quotations and citations omitted). “District courts may impose sanctions against a party that merely had notice that the destroyed evidence was potentially relevant to litigation.” Christoffersen, 2017 WL 2653055 at *2 (citations omitted). “When considering a default sanction in response to spoliation of evidence, the court must determine ‘(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.’ ” Id. at *3 (quoting Valley Eng'rs Inc. v. Elec. Eng'g Co., 158 F.3d 1051, 1057 (9th Cir. 1998)). “When a party is prejudiced, but not irreparably, from the loss of evidence that was destroyed with a high degree of culpability, a harsh but less extreme sanction than dismissal or default is to permit the fact finder to presume that the destroyed evidence was prejudicial.” Id. at *4 (citations omitted). “In the Ninth Circuit, a party's destruction of evidence need not be in ‘bad faith’ to warrant a court's imposition of sanctions.” Id. at *5 (quotations and citations omitted). “[C]ourts have found that an adverse inference instruction may be warranted where the destruction was either willful or grossly negligent.” Id. (citations omitted). *3 It is undisputed that Defendants relinquished custody and control of Big Rig on April 22, 2021. Pl.’s Mot. for Sanctions (Doc. 86), Sud E-mail to Wcislo 11/30/2021 (Exh. “E”). Defendant Steven Temple testified at his deposition that he “let [Hector Robles] use [Big Rig]” for general ranch use. Pl.’s Mot for Sanctions (Doc. 86), S. Temple Depo. at 86:14–23 (Exh. “C”). Defendant Steven Temple further testified that “[t]he horse is on a ranch south of here ... [and is] in good use.” Id., Exh. “C” at 85:6–11. Defendant Steven Temple denied that Big Rig continued to suffer from intermittent laminitis, obliquely stating that “he's occasionally sore in the front end.” Id., Exh. “C” at 86:3–8. When asked if Big Rig was in good condition when he was returned to Defendants and is in good condition now, why there was the current lawsuit for a return of Plaintiff's purchase payment, Defendant stated that Big Rig was returned “damaged” and reviewed all the care that was allegedly required to return him to health. Id., Exh. “C” at 92:3–94:17. Defendant Steven Temple admitted, however, that he did not keep any records of this treatment. Id. After Defendant Steven Temple's deposition, Plaintiff sought to inspect Big Rig to assess his condition and determine if he was currently “sound and healthy.” Pl.’s Mot. for Sanctions (Doc. 86), Wcislo Ltr. to Elia &amp; Sud 10/27/2021 (Exh. “B”). It was subsequently disclosed that “Big Rig died between July 4, 2021 and July 6, 2021 in Arizona.” Pl.’s Mot. for Sanctions (Doc. 86), Exh. “E.” The core of Plaintiff's complaint is that Defendants sold him a horse that was not fit for the purpose for which he bought it, specifically competition roping. See Second Amended Compl. (“SAC”) (Doc. 35). Plaintiff alleges that he returned the horse and expected to get his money back or a new horse; however, that did not occur. See id. at ¶¶ 25–33. Instead, Defendants claimed that the horse was returned to them “in a condition [not] substantially equivalent to when Plaintiff received him.” Answer (Doc. 48) at 12; see also SAC at ¶ 34; Defs.’ Response to Mot. for Sanctions (Doc. 87), Temple E-mail to Morrow 11/4/2018 (Exh. “C”). Plaintiff has asserted that Big Rig exhibited front leg lameness upon arrival in Texas which he attributed to the long trip from Arizona. SAC (Doc. 35) at ¶¶ 18–19. After allowing Big Rig to rest for several days, Plaintiff attempted to rope with him and concluded that he was not suited for competition roping. Id. at ¶¶ 19–23. Whether Big Rig suffered from a temporary lameness after returning to Arizona from Texas or a progressive form of disease that existed prior to Plaintiff's purchase of Big Rig, are issues for the jury, who could reasonably conclude in either circumstance that the horse was returned to Defendants in the condition in which Plaintiff received him. Defendants’ contention that Plaintiff should have retaken possession of Big Rig is devoid of merit. Plaintiff returned Big Rig to Defendants with the expectation that he would receive a refund of the purchase price or a new horse. In Plaintiff's view, he relinquished ownership upon return. There would be no reason for him to retake possession of a horse that he did not own. Similarly, Defendants’ contention that Plaintiff waited too long to request inspection is without merit. Defendants did not provide Plaintiff with any documentation regarding Big Rig's ongoing health throughout the litigation process and it was not until Defendant Steven Temple's deposition that Plaintiff learned Big Rig might have some lingering health issues. It was Defendants’ responsibility to maintain custody and control of Big Rig during the pendency of the litigation, which they failed to do. As a result of this failure, Plaintiff was deprived of his ability to have Big Rig reassessed or, in light of his death, determine how or why he died. Big Rig's health was relevant to the litigation. Although the balance of factors for default judgment weighs in favor of Plaintiff, the record is not clear that Defendants acted in bad faith. The Court finds, however, that Defendants willfully relinquished custody and control of Big Rig. As such, it finds that an adverse inference jury instruction is appropriate. See Christoffersen, 2017 WL 2653055, at *5. IV. RECOMMENDATION For the reasons delineated above, the Magistrate Judge recommends that the District Judge enter an order GRANTING Plaintiff Ryan Morrow's Motion for Sanctions Pursuant to Fed. R. Civ. P. 37 (Doc. 86). *4 Pursuant to 28 U.S.C. § 636(b) and Rule 72(b)(2), Federal Rules of Civil Procedure, any party may serve and file written objections within fourteen (14) days after being served with a copy of this Report and Recommendation. A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed. R. Civ. P. 72(b)(2). No replies shall be filed unless leave is granted from the District Court. If objections are filed, the parties should use the following case number: CV-19-0202-TUC-JAS. Failure to file timely objections to any factual or legal determination of the Magistrate Judge may result in waiver of the right of review. Dated this 10th day of May, 2022. Footnotes  In its March 5, 2020, Report and Recommendation, the Court outlined the procedural background of this case, as well as Plaintiff's factual allegations. R &amp; R (Doc. 46), adopted by Order 3/30/2020 (Doc. 47). Accordingly, the Court only briefly reiterates the events giving rise to this lawsuit.  It appears that on May 21, 2022, Defendants responded to Plaintiff's interrogatories; however, Defendants failed to file a notice of service regarding the same. See Defs.’ Response to Mot. for Sanctions (Doc. 87), Exh. “J.” Additionally, Defendants failed to respond to Plaintiff's requests for production beyond objections and a general reference to their initial disclosure without more. See id.  Deposition page and line designations refer to the deposition page number rather than the CM/ECF page number.