Ascot Ins. Co. v. Am. River Transp. Co.
Ascot Ins. Co. v. Am. River Transp. Co.
2023 WL 11262197 (E.D. La. 2023)
December 14, 2023

Roby, Karen W.,  United States Magistrate Judge

Failure to Preserve
Spoliation
Sanctions
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Summary
Plaintiffs filed a motion for spoliation sanctions against Defendant ARTCO for its failure to preserve evidence related to a breakaway incident during Hurricane Ida. Plaintiffs argue that ARTCO had a duty to preserve the evidence and seek an adverse inference for discarding the moorings. ARTCO opposes the motion, stating that it did not have a duty to preserve evidence and that Plaintiffs cannot prove intentional destruction of evidence in bad faith. The court must determine whether ARTCO breached its duty to preserve evidence.
ASCOT INSURANCE COMPANY, et al.
v.
AMERICAN RIVER TRANSPORTATION COMPANY, LLC
CIVIL ACTION NO: 22-2874, CIVIL ACTION NO: 22-2979, CIVIL ACTION NO: 22-2966, CIVIL ACTION NO: 23-2542
United States District Court, E.D. Louisiana
Filed December 14, 2023
Roby, Karen W., United States Magistrate Judge

REPORT AND RECOMMENDATION

*1 Before the Court is a Motion for Spoilation Sanctions (R. Doc 70), filed by Lower River Ship Service, LLC, Crescent Ship Service, and Ascot/XL Insurance Company (“Plaintiffs), seeking an Order from this Court imposing sanctions on Defendant, American River Transportation Company, LLC (“ARTCO”). This matter was referred to a United States Magistrate Judge for hearing and determination pursuant to 28 U.S.C. § 636(b)(1)(A). R. Doc. 76.
 
The motion is opposed. R. Doc. 97. Plaintiffs filed a reply. R. Doc. 109. The motion was heard with oral argument on Wednesday, September 20, 2023, and supplemental briefing was ordered. R. Doc. 111. ARTCO filed a supplemental memorandum in opposition. R. Doc. 114. Plaintiffs filed a reply. R. Doc. 115.
 
I. Background
This case arises from a breakaway incident that occurred during Hurricane Ida on August 29, 2021. R. Doc. 97 at 1-2. ARTCO suffered breakaways from some of its fleets near mile markers 115 and 122 on the Lower Mississippi River. Id. The present dispute concerns ARTCO's actions in the aftermath of Hurricane Ida related to the preservation of barge lines and moorings.
 
A. Factual Summary
On August 29, 2021, Hurricane Ida made landfall as a category four storm. R. Doc. 97 at 1. It was the second strongest storm to ever make landfall in Louisiana and produced some of the highest hurricane-related gusts ever measured in the United States. Id. (citing expert report, R. Doc. 97-1). A significant number of barges broke away during the storm. R. Doc. 70-7 at 13.
 
Plaintiff Crescent Ship Service (“CSS”) alleges that three months after Hurricane Ida, it notified ARTCO of the damage caused by ARTCO's barges that broke away during the storm and expressed its intent to hold ARTCO liable. See R. Doc. 70-12. Plaintiffs thereafter filed suit on August 26, 2022. R. Doc. 1.
 
Five months after filing suit, Plaintiffs propounded Request for Inspection No. 1 (“Request”), seeking to inspect the mooring wires, ropes, chains, anchors, pilings, dead men mechanism in use and operated between mile markers 113 and 118 and/or involved in the breakaway between August 29 and August 30, 2021. R. Doc. 70-10.
 
ARTCO responded to the Request on March 1, 2023, and objected on the grounds of relevancy because, according to ARTCO, there was no evidence that the shore wires or anchor chain buoys in ARTCO's fleets between mile markers 113 and 118 failed during Hurricane Ida. R. Doc. 70-11. Therefore, ARTCO did not believe it should permit an inspection. ARTCO also stated that it was no longer in possession of any rigging that broke between the barges in its fleets during Hurricane Ida. Id. ARTCO further responded that its rigging was replaced as needed after Hurricane Ida in order to restore its fleets to their pre-hurricane condition. Id.
 
B. The Motion
Plaintiffs filed the subject motion contending that ARTCO had a duty to preserve the rigging and mooring lines, that the duty to preserve was triggered during the storm, and that according to one witness the mooring may still be on the barge. R. Doc. 70-1 at 8. Plaintiffs contend that if ARTCO cannot produce the mooring, then it should be held accountable for sanctions because the rigging and mooring lines are central to the issues in this case. Id. at 14. Plaintiffs contend that though ARTCO allowed its employees to discard the lines in a hopper barge on September 16, 2021, based upon the testimony of Captain Mike Tilley, ARTCO's lead fleet captain, the mooring lines at issue were sitting in ARTCO's hopper barge on December 7, 2021, when CSS put ARTCO on notice. Id. at 15.
 
*2 Plaintiffs contend that unless the hopper barge was scrapped or emptied between October or November 2021, ARTCO possessed the mooring lines when litigation was foreseeable. Id. ARTCO's failure to retrieve them after receiving written notice of a claim despite having a duty to do so and knowing they would be useful to claimants in ensuing litigation, constitutes spoilation. ARTCO, in contrast, contends that Plaintiffs have failed to meet their burden to prove spoilation and that it did not have a duty to preserve evidence because it was not placed on notice prior to the alleged destruction. R. Doc. 97 at 5. ARTCO also asserts that Plaintiffs cannot prove it intentionally destroyed evidence in bad faith by placing broken lines in its regularly used trash barge during cleanup after a major natural disaster. Id. at 6.
 
ARTCO contends that the duty to preserve did not trigger because it would first have to know that specific damages were caused by its barges, identify from which fleets the loose barges originated, and the exact location of the barges within those fleets. Id. ARTCO contends it could not determine the exact location of the barges because it had no power, no internet, no cell phone service, and no other immediate access to electronic data. Id. at 3.
 
ARTCO contends that without the ability to determine the location of its barges, it could not have known which lines and rigging to preserve for speculative future litigation, nor could it effectively preserve the lines for future analysis. Id. at 4. Further, ARTCO contends that it cannot be held to have spoliated evidence because Plaintiffs cannot show that they acted in bad faith when discarding the mooring lines. Id. at 7-8. Finally, ARTCO contends that it cannot be held responsible pursuant to Rule 37 for spoliation because at the time the lines were discarded, there was no discovery order in place. Id. at 12-13.
 
II. Standard of Review
Allegations of spoliation, including the destruction of evidence in pending or reasonably foreseeable litigation, are addressed by federal courts through the court's inherent power to regulate the litigation process (1) if the conduct occurs before a case is filed or (2) if, for another reason, there is no statute or rule that adequately addresses the conduct. See Chambers v. NASCO, Inc., 501 U.S. 32, 43–46 (1991). If an applicable statute or rule can adequately sanction the conduct, that statute or rule should ordinarily be applied, with its attendant limits, rather than the court's more flexible or expansive inherent power. Id. at 50; see Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d 98, 109 (3rd Cir. 1999) (“[A] trial court should consider invoking its inherent sanctioning powers only where no sanction established by the Federal Rules or a pertinent statute is ‘up to the task’ of remedying the damage done by a litigant's malfeasance ....”) (quoting Chambers, 501 U.S. at 50)). If the court's inherent power, rather than a specific rule or statute, provides the source of sanctioning authority, then under Chambers, the court's ability to sanction is limited by the party's degree of culpability, which must be greater than mere negligence. Coastal Bridge Co., L.L.C. v. Heatec, Inc., 833 F. App'x 565, 573 (5th Cir. 2020) (citing Catoire v. Caprock Telecommunications Corp., No. 01-3577, 2002 WL 31729484, at *1 (E.D. La. Dec. 2, 2002).
 
In contrast, Rule 37 applies when a party has violated a court order, such as a discovery ruling, during a period of active litigation. FED. R. CIV. P. 37(b)(2); Brandt v. Vulcan, Inc., 30 F.3d 752, 756 & n.7 (7th Cir. 1994); see also Settles v. United States, No. 17-1272, 2018 WL 5733167, at *3 (W.D. Tex. Aug. 29, 2018).
 
III. Analysis
A. Duty to Preserve Evidence
Plaintiffs contend that ARTCO's employees intentionally failed to preserve the moorings that it knew caused damage to the plaintiff's barges and facilities. Id. Plaintiffs further contend that ARTCO made no effort to inventory the lines but instead discarded them even though it knew that it was supposed to investigate barge breakaways to identify the cause of the line failures. Id. Plaintiffs further contend that the duty to preserve the moorings occurred before suit and alternatively after they were sued. Consequently, because ARTCO allegedly breached its duty to preserve evidence, Plaintiffs seek to hold it responsible for spoliation and, as a penalty, seek an adverse inference for discarding the moorings and depriving them of the opportunity to inspect and perform break testing. Id.
 
*3 ARTCO opposes the motion. According to ARTCO, there were numerous other breakaways along the Lower Mississippi River during Hurricane Ida and so its efforts were focused on complying with regulatory requirements and ensuring that the river was clear of hazards. Id. ARTCO contends that due to a disruption in communication and power outages, it could not have known which lines and rigging to preserve for speculative future litigation, nor could it effectively preserve the lines for future analysis. Id. ARTCO contends that it was part of the cooperative effort among several fleeters on the Lower Mississippi River to retrieve and re-fleet barges between mile markers 87 and 158 so that the river could be reopened. R. Doc. 97. ARCTO contends that due to the intermingling or tangling of vessels after the storm, it was impossible for it to tell which barges may have caused damages. Id.
 
A duty to preserve arises when a party knows or should know that certain evidence is relevant to pending or future litigation. Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 612 & n.7 (S.D. Tex. Feb. 19, 2010) (citing John B. v. Goetz, 531 F.3d 448, 459 (6th Cir. 2008)); accord Toth v. Calcasieu Parish, No. 06-998, 2009 WL 528245, at *1 & n.6 (W.D. La. Mar. 2, 2009) (citing Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. Oct. 22, 2003)). A party's obligation to preserve evidence that may be relevant to litigation is triggered once the party has notice that litigation may occur. See Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 521-22 (D. Md. Sept. 9, 2010) (noting that the duty to preserve “ ‘may arise from statutes, regulations, ethical rules, court orders, or the common law .... a contract or another special circumstance,’ ” and that the “common law imposes the obligation to preserve evidence from the moment that litigation is reasonably anticipated”) (citations omitted), adopted in relevant part, 2010 WL 11747756 (D. Md. Nov. 1, 2010); O'Brien v. Ed Donnelly Enters., Inc., No. 2:04-cv-85, 2010 WL1741352, at *3 (S.D. Ohio Apr. 29, 2010) (citation omitted).
 
A party clearly is on notice of the relevance of evidence once it receives a discovery request. However, the complaint itself may also “alert a party that certain information is relevant and likely to be sought in discovery.” McGinnity v. Metro-North Commuter R.R., 183 F.R.D. 58, 60 (D. Conn. Aug. 18, 1998) (quoting Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y.1991), aff'd, No. 89 Civ. 4252(PKL), 1992 WL 51570, at *3–4 (S.D.N.Y. Mar. 9, 1992)); id. (“[N]o duty to preserve arises unless the party possessing the evidence has notice of its relevance.”) For example, in In re Kmart, the Court held that a party's duty to preserve specific types of documents does not arise unless the party controlling the documents has notice that the documents are relevant, which ordinarily comes from discovery requests or from the complaint itself. 371 B.R. 823, 842, 844 (Bankr. N.D. Ill. July 31, 2007).
 
Although a party's duty to preserve may often be triggered before litigation, courts have emphasized that the mere possibility of litigation is not sufficient to trigger the duty because the “undeniable reality is that litigation is an ever-present possibility in our society.” Salvatore v. Pingel, No. 08-cv-00312-BNB-KMT, 2009 WL 943713, at *4 (D. Colo. Apr. 6, 2009) (quoting Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 621 (D. Colo. Mar. 2, 2007); see RealNetworks, Inc. v. DVD Copy Control Ass'n, 264 F.R.D. 517, 523–24 (N.D. Cal. May 5, 2009). One court indicated that “the duty to preserve evidence may arise when a substantial number of key personnel anticipate litigation,” but explained that “speculation by one or two employees regarding a lawsuit ‘does not generally impose a firm-wide duty to preserve.’ ” Crown Castle USA Inc. v. Fred A. Nudd Corp., No. 05-CV-6163T, 2010 WL 1286366, at *9 (W.D.N.Y. Mar. 31, 2010) (quoting Zubulake, 220 F.R.D. at 217).
 
*4 Pre-filing communications between the litigants can, however, provide constructive notice that litigation is likely. Also, demand letters stating a claim may be sufficient to trigger an obligation to preserve. Goodman v. Praxair Services, Inc., 632 F. Supp. 2d 494, 511 (D. Md. July 7, 2008); Asher & Assocs. v. Baker Hughes Oilfield Operations, Inc., 2009 WL 1328483, at *3 (D. Colo. May 12, 2009) (finding letter from counsel stating that plaintiff had been “significantly damaged,” provided defendant with an “interim damage calculation,” claimed that “damages continue[d] to accrue,” demanded immediate payment within a five-day deadline, and identified specific claims that plaintiff “would assert if it initiated ‘such legal or other action to enforce its rights’ ” was sufficient to trigger a duty to preserve because the defendant “should have understood that future litigation was reasonably foreseeable and substantially ‘more than a possibility’ ”).
 
It is undisputed that ARTCO did not preserve its moorings in the aftermath of Hurricane Ida. The issue is whether they were required to preserve the moorings because the duty to preserve had attached.
 
Plaintiffs contend that the duty to preserve attached the morning after the Hurricane because Troy Currault communicated with an ARTCO employee via radio and told them that their barges had broken loose. Currault Dep. at 104-05, R. Doc. 70-1. He testified that he spoke with someone from ARTCO twice between 11:00 p.m. and 6:00 a.m. Id. He does not recall who he spoke with but indicated that it was someone on an ARTCO boat or dispatch with a marine radio. Id. According to Mr. Currault, he advised the person that ARTCO had barges that broke loose which were hitting their fleet and that they needed help removing or gathering them up. Id. at 106.
 
Mr. Currault testified that the ARTCO employee advised him that the weather conditions were bad, and they needed to wait for the conditions to subside before they could come out. Id. at 106-07. Mr. Currault testified that he did not recall the visibility at the time of the call but that the seas were looking like “four to six.” Id. at. 107. He testified that during his second call, he advised the ARTCO employee that ARTCO had “plenty [of] barges” that broken loose and that their barges were hit numerous times by the ARTCO breakaways. Id.
 
He recalled that ARTCO sent a Woods fleet boat out to the location for observation around 9 am. Id. According to Currault he told the Woods fleet boat that he should not just observe because the ARTCO barges were still moving with all the barges that were coming down river and causing damages to Plaintiffs' barges. Id. According to Plaintiffs, when ARTCO was told that it needed to come and get their barges, litigation was foreseeable and was the triggering event that prompted ARTCO's duty to preserve the moorings.
 
While Mr. Currault testified that he contacted and spoke with someone from ARTCO, given the magnitude of the event—where barges had broken away along the Lower Mississippi River—the Court finds that telling ARTCO that its barges broke away during the Hurricane is not sufficient to constitute a triggering event. Mr. Currault could not identify the person with whom he spoke even though he communicated with someone on an ARTCO boat.
 
Further, when Mr. Currault told the third party to move the ARTCO barges at the location he was sent to observe the barges, this was not enough to constitute a triggering event or constructive notice. Telling the third-party operator does not mean he communicated with ARTCO that its barges had broken away and damaged Plaintiffs' facilities and vessels.
 
Plaintiffs also contend that three months after Hurricane Ida, it sent a notice letter to ARTCO on December 7, 2021. R. Doc. 70-12. This letter specifically advised ARTCO that Crescent Ship Service intended to hold ARTCO liable for the damages sustained by their vessels and structures in the allision on August 29, 2021. Id. The letter further stated that the allision occurred when barges from ARTCO's Flowers fleet collided into Crescent's moored barges and vessels at the Ama Facility. Id.
 
*5 The Court finds that the notice letter was sufficient to inform ARTCO of Crescent's intent to pursue litigation. The language in the letter was: “Crescent Ship Service will be holding your respective company liable for all damages that our vessels and structures sustained in the allision on August 29, 2021.” Id. Therefore, December 7, 2021, is the date that ARTCO should have understood that future litigation was “reasonably foreseeable and substantially ‘more than a possibility.’ ” Therefore, ARTCO's duty to preserve was triggered on December 7, 2021.
 
B. Spoliation and Intent
Plaintiffs contend that ARTCO has earned the imposition of sanctions for its failure to preserve the bare moorings. Plaintiffs further contend that a significant number of barges broke away and that any reasonable base fleeter should have immediately anticipated that litigation was likely. According to Plaintiffs, ARTCO's captain testified that barge moorings are the most critical evidence in a barge breakaway case, so ARTCO opted to intentionally dispose the evidence.
 
ARTCO contends that it did not intentionally destroy evidence but that it did clean up its numerous fleets after Hurricane Ida and disposed of loose rigging in a hopper barge used for trash. ARTCO contends that as of August 30, 2023, the hopper barge had not been emptied and may still contain remnants of lines collected after Hurricane Ida. ARTCO contends that while some lines and rigging may still be in its possession, they are not in a condition useful for analyzing the issues.
 
The spoliation of evidence doctrine governs the intentional destruction of evidence. Menges v. Cliffs Drilling Co., No. CIV. A. 99-2159, 2000 WL 765082, at *1 (E.D. La. June 12, 2000) (citing Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995) and Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 78 (3d Cir. 1994)). If a party intentionally destroys evidence, the trial court may exercise its discretion to impose sanctions on the responsible party. Id. The seriousness of the sanctions that a court may impose depends on the consideration of:
(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.
Id. (quoting Schmid, 13 F.3d 76, 78 (3d Cir. 1994).
 
According to the facts, there was a period from August 29, 2021, when Hurricane Ida occurred, to December 7, 2021, when the notice letter was sent, where ARTCO was not on notice of Plaintiffs' intent to pursue litigation against it. However, Plaintiffs rely on the testimony of Captain Tilly, whose deposition was not provided,[1] but who purportedly stated that unless the hopper barge was scrapped or emptied between October and November, the mooring would have been sitting in ARTCO's hopper barge on the day the notice was written. If this is true, then there is no spoliation of the evidence if the evidence is located in the hopper barge.
 
However, even if the moorings exist in the hopper per the testimony of Captain Tilly, given that the duty to preserve did not trigger until some three months after the Hurricane, the lines from the barges that allegedly damaged Plaintiffs' barges were clearly commingled with other lines that may have been found during the Hurricane clean up. The Court finds that the evidence fails to establish that the mooring lines were thrown away on purpose to prejudice Plaintiffs.
 
*6 Next, Plaintiffs must prove that they were prejudiced by the commingling of the mooring lines because it impedes their ability to present evidence of the exact reason ARTCO's lines failed during the Hurricane. However, Plaintiffs aptly point out that in a barge breakaway case like this one, there is a presumption of fault against ARTCO under The Louisiana Rule. See James v. River Parishes Co., 686 F.2d 1129, 1132 (5th Cir. 1982); see also Combo Mar., Inc. v. U.S. United Bulk Terminal, LLC, 615 F.3d 599, 602 (5th Cir. 20210) (holding that the presumption shifts the burden of production and persuasion to the defendant). Since The Louisiana Rule shifts the burden of production and persuasion to Defendants, it seems that ARTCO's inability to produce the lines associated with the various barges may prejudice its position more than the Plaintiffs' position. It appears that without the mooring lines, ARTCO will be challenged in its ability to rebut the presumption of its fault because it will have to show that it exhausted every reasonable possibility which circumstances admit and that it did all that reasonable care required. E.g., In re ENSCO Offshore Co., 9 F. Supp. 3d 713, 734 (S.D. Tex. Mar. 26, 2014).
 
The evidence presented also shows that ARTCO's captains could not testify about the precise condition of the mooring lines, that ARTCO had no preventative maintenance procedure to take them out of service (199), and that it has no evidence on how the barges broke away. See, e.g., Boeckman Dep. at 199, 204, 213, 215. The Court finds that Plaintiffs have failed to show they were prejudiced by the discarding or commingling of the mooring lines.
 
C. Rule 37
Plaintiffs also contend that ARTCO's conduct satisfies the standard for imposing spoliation sanctions either under Rule 37 or the Court's inherent power. Plaintiffs point out that where the Court finds a violation of Rule 37, it must generally impose attorney's fees and costs against the wrongful party.
 
ARTCO contends that Rule 37 does not apply because the evidence was disposed of before litigation ensued and before there was a discovery order in place. ARTCO notes that it would have had to fail to obey an order to produce or permit discovery which it did not do because the evidence at issue was discarded after the Hurricane but before notice and commencement of the litigation.
 
Allegations of spoliation are addressed in federal courts through either Federal Rule of Civil Procedure 37 or the court's inherent powers. Rule 37 provides a basis for sanctions during the discovery period of active litigation and a party has failed to comply with a court order or to preserve electronically stored information. FED. R. CIV. P. 37(b), (e); see also Settles v. United States, No. 17-1272, 2018 WL 5733167, at *3 (W.D. Tex. Aug. 29, 2018). When conduct occurs before a case is filed, it may be addressed through the court's inherent power to regulate the litigation process. Coastal Bridge Co., L.L.C. v. Heatec, Inc., 833 F. App'x 565, 573 (5th Cir. 2020) (citing Chambers, 501 U.S. at 43-46); see also Union Pump Co. v. Centrifugal Tech. Inc., 404 F. App'x 899, 905 (5th Cir. 2010) (citing Hodge v. Wal–Mart, 360 F.3d 446, 449 (4th Cir. 2004) (“The imposition of a sanction ... for spoliation of evidence is an inherent power of federal courts.”)).
 
It is undisputed that the act of disposing of the lines occurred before the lawsuit or notice that a lawsuit would be forthcoming. The Court has already dispensed with the effectiveness of the radio communication to an ARTCO employee whose identity is not known. Further, the request for inspection was not propounded until January 30, 2023. R. Doc. 70-10.
 
IV. Conclusion
Accordingly,
 
IT IS RECOMMENDED that Plaintiffs' Motion for Spoliation Sanctions (R. Doc. 70) be DENIED.
 
A party's failure to file written objections to the proposed findings, conclusions, and recommendation in a magistrate judge's report and recommendation within fourteen (14) days after being served with a copy shall bar that party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court, provided that the party has been served with notice that such consequences will result from a failure to object. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1430 (5th Cir. 1996).
 
*7 New Orleans, Louisiana, this 14th day of December 2023.

Footnotes
Note that Plaintiffs marked placeholders for various depositions upon filing, including Captain Tilley, but failed to include the depositions in its supplemental briefing. The Court delayed ruling on the subject matter to permit the supplementation of the record, but to no avail.