Case Blurbs-OR: In re Helicopter Crash near Wendle Creek; Dist. Court Predicts Oregon will allow Spoliation Cause of Action

Post Process-This is an opinion by a district court in Connecticut sitting in judgment of a diversity case to be tried under the laws of the state of Oregon.

The Oregon Supreme Court has not yet considered whether intentional or negligent spoliation claims present cognizable causes of action. In such instances, “[i]n the absence of controlling forum state law, a federal court sitting in diversity must use its own best judgment in predicting how the state’s highest court would decide the case.”

In [Blincoe v. Western States Chiropractic College, 2007 U.S. Dist. LEXIS 51955, 2007 WL 2071916 (D. Or. July 14, 2007)], Magistrate Judge Papak recommended granting the defendant’s motion to dismiss an intentional spoliation claim and concluded that “Oregon law does not recognize the tort of intentional spoliation of evidence by a party.” Judge Papak’s analysis considered the law of other states, as well as Oregon’s numerous statutory, non-tortious remedies dealing with spoliation of evidence, in reaching that conclusion. FN2.

In Marcum v. Adventist Health System/West, 215 Ore. App. 166, 168 P.3d 1214, 1228-29 (Or. App. 2007), rev’d on other grounds, 345 Ore. 237, 193 P.3d 1 (Or. 2008), the Oregon appellate court acknowledged the parties’ dispute regarding spoliation causes of action under Oregon law, declined to “address the precise contours” of a negligent spoliation claim, and ultimately held that the plaintiff-appellant’s negligent spoliation claim failed. Nonetheless, the Marcum court discussed the merits of that claim:

We need not, and do not, address the precise contours of a cognizable claim for “negligent spoliation” under Oregon law. That is so because plaintiff here failed to make a prima facie showing that defendants’ alleged failure to maintain or produce the allegedly “missing” records materially impaired her prosecution of her medical negligence and informed consent claims.

Plaintiff’s “negligent spoliation” claim is akin to a legal malpractice claim in that “damages arise from the loss” — or diminution of value — of an underlying claim. . . . [P]laintiff’s primary medical negligence and informed consent claims ultimately failed for lack of proof of scientific/medical causation. Plaintiff argues that, if the allegedly absent records had been created or maintained and produced, Williamson might have been provided with the “missing link” that would have enabled him to identify and persuasively explain the causal relationship between gadolinium extravasation and Raynaud’s syndrome. Specifically, plaintiff points to the fact that no records reflect the amount of gadolinium used during the procedure. . . .

Accordingly, on this record, there is no evidence that plaintiff’s prosecution of her primary claims was materially impaired by the absence of such information-whether because of affirmative “spoliation” or by any negligent failure to create, maintain, or produce records pertaining to the MRI procedure.

Even without discussing the precise nature and elements of a negligent spoliation claim, absent further guidance or development from the Oregon Supreme Court, the appellate court’s decision in Marcum indicates that Sikorsky’s proposed amendments adding spoliation claims would not be futile. Absent a more recent or more authoritative ruling to the contrary, I predict on the basis of the Marcum decision that the Supreme Court of Oregon would recognize intentional and negligent spoliation of evidence as causes of action. FN3. “In the absence of a pronouncement by the highest court of a state, the federal courts must follow the decision of the intermediate appellate courts of the state unless there is convincing evidence that the highest court of the state would decide differently.” Here, there is no convincing evidence that the Oregon Supreme Court would not recognize spoliation causes of action.

FN2: Although Judge Papak’s findings and recommendation in Blincoe were adopted by the district court, the district court did not consider or develop the spoliation questions any further; neither did Magistrate Judge Papak in later proceedings.

FN3:The Court of Appeals of Oregon discussed negligent spoliation of evidence, but did not address the question of intentional spoliation. Because intentional spoliation, by its nature, involves a more deliberate action than negligent spoliation, I believe that, if the Oregon Supreme Court were to recognize negligent spoliation as a cause of action, the court would also recognize intentional spoliation of evidence as a cause of action.

In re Helicopter Crash near Wendle Creek, 2009 U.S. Dist. LEXIS 41477 (D. Conn. May 18, 2009)(internal citations omitted).

Case Blurbs-CA: Kearney;State Spoliation Claim Requirements Discussed

Spoliation of evidence 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.” Hernandez v. Garcetti, 68 Cal. App. 4th 675, 680, 80 Cal. Rptr. 2d 443 (Ct. App. 1998). The district court rests its holding on the fact that the tort is not recognized when “the spoliation was or should have been discovered before the conclusion of the litigation.” It held that, because the state trial and appellate courts found Defendants did not withhold evidence and Kearney could have discovered evidence during discovery or trial, Kearney had not showed a probability of prevailing on the merits.

Kearney argues that her spoliation claim was based on the evidence that Defendants told the testing company not to prepare a formal report, and notes that this evidence was not mentioned by either state court. Kearney’s allegations do not indicate when she discovered this evidence, only that she believed the event occurred in 2001, which was prior to the valuation trial. Because Kearney may be able to show a probability of prevailing on the merits here, (FN5) we vacate the district court’s holding on this issue and remand to determine whether she discovered or should have discovered the evidence prior to or during the valuation trial.

The district court found Kearney had not showed a probability of success on the merits here because it found the claim barred by both the Noerr-Pennington doctrine and California’s litigation privilege and because it was unpersuaded to apply the prima facie tort claim as had been done in the case law cited by Kearney.

As analyzed above, the Noerr-Pennington doctrine does not bar this suit because, even if the doctrine applied, the sham exception would also apply.

Nonetheless, we find that the district court did not err when it held that California’s litigation privilege would bar Kearney’s claims. Though Kearney argues that her claims are based on conduct prior to the litigation, the district court was correct that even allegations of such conduct may be privileged if reasonably related to the action. See People ex rel. Gallegos v. Pacific Lumber Co., 158 Cal. App. 4th 950, 958, 70 Cal. Rptr. 3d 501 (Ct. App. 2008) (“[T]he privilege is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.” (internal quotation marks omitted)). Because the alleged misconduct is all reasonably related to the eminent domain proceeding, it is subject to the litigation privilege bar.

FN5: Spoliation claims are exempted from the litigation privilege. Cal. Civ. Code § 47(b)(2).

Kearney v. Foley & Lardner, LLP, 566 F.3d 826, 838-39 (9th Cir. Cal. 2009)

Case Blurb: Asher Assocs LLC; Role of Intent in Assessing Sanctions

Common sense suggests that a failure to produce or preserve relevant evidence may involve conduct that falls “along a continuum of fault — ranging from innocence through the degrees of negligence to intentionality.”

In Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997), the Tenth Circuit held that “the bad faith destruction of a document relevant to proof of an issue at trial gives rise to an inference that production of the document would have been unfavorable to the party responsible for its destruction.” In the same decision, the Tenth Circuit further reasoned that no adverse inference should arise where the destruction of a document resulted from mere negligence, because only bad faith would support an “inference of consciousness of a weak case.” FN11.

FN11: “‘Bad faith’ is the antithesis of good faith and has been defined in the cases to be when a thing is done dishonestly and not merely negligently. It is also defined as that which imports a dishonest purpose and implies wrongdoing or some motive of self-interest.” Of course, in cases where an adverse inference instruction is neither requested nor appropriate, the Tenth Circuit has held that a finding of bad faith is not required to impose non-dispositive sanctions, such as excluding evidence.

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *27-28 (D. Colo. May 12, 2009)(internal citations removed).

Case Blurb: Asher Assocs LLC; Exercise of the Court’s ‘Inherent Powers’ to Sanction Party for Spoliation (10th Cir)

Plaintiffs correctly note that the court has inherent power to impose sanctions for the destruction or loss of evidence. []A spoliation sanction is proper where (1) a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.[]

In exercising its discretion to fashion an appropriate sanction, the court must consider the culpability of the responsible party and whether the evidence was relevant to prove an issue at trial.

First, the court must determine whether the missing [evidence] would be relevant to an issue at trial. If that question is answered in the negative, the court’s analysis stops there. If the missing evidence would be relevant, the court must then decide whether [Producing Party] was under an obligation to preserve the [evidence]. Finally, if such a duty existed, the court must consider what sanction, if any, is appropriate given the non-moving party’s degree of culpability, the degree of any prejudice to the moving party, and the purposes to be served by exercising the court’s power to sanction.

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *16-18 (D. Colo. May 12, 2009)(internal citations removed).

Case Blurb: Asher Assocs LLC; A Definition of Spoliation

“Spoliation” has been defined as “the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.”

Asher Assocs., LLC v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 at *16 (D. Colo. May 12, 2009)

Case Summary: Phillip M. Adams & Assocs., On Spoliation and Info. Management

Phillip M. Adams & Assocs., L.L.C. v. Dell, Inc., 2009 U.S. Dist. LEXIS 26964 (D. Utah Mar. 27, 2009)

FACTS: Plaintiffs, and requesting party, Philip M. Adams & Associates, alleged infringement of their patents for technology that detected and resolved defects in the most widely used floppy disk controller, thus preventing data from being destroyed. The patents in question were purportedly assigned to plaintiffs by the original inventor. FDC-related defects gave rise to multiple lawsuits, culminating with the settlement of a class action suit against Toshiba in October of 1999.
Requesting party accused producing party of spoliation, as stated in the opinion:

…first, that ASUS has illegally used Adams’ patented software; and second, that ASUS has destroyed evidence of that use. The first assertion is identical to the liability issue in this case. The second assertion is premised on the first: Assuming ASUS used Adams’ software, ASUS’ failure to produce evidence of that use is sanctionable spoliation. Adams has no direct proof of destruction of evidence but is inferring destruction or withholding of evidence. Since Adams is convinced that ASUS infringed, Adams is also convinced that failure to produce evidence of infringement is sanctionable.

Issues we examine:

1. When did the producing party’s duty to preserve attach?
2. How does the Safe Harbor provision (FRCP 37(e)) factor into the determination of sanctions in this case?
3. What role does producing party’s information management system play in the sanctions calculus?
4. How does the producing party’s lack of produced data on certain subjects in the aggregate balanced against the absence of specific evidence of wrong-doing by requesting party?

Issue 1: Court’s reasoning:
Producing party acknowledges receiving a letter from requesting party’s counsel asserting infringement on February 23, 2005. It does not acknowledge receiving an earlier letter dated October 4, 2004. Thus, Producing Party dates the beginning of its duty to preserve from the date of the February letter, and states that it has complied with that duty from that time forward. Producing party takes the position that a delay in giving notice and bringing suit by requesting party is the reason for the lack of available data from the years 2000 and 2001.
The court noted that both parties agreed that “a litigant’s duty to preserve evidence arises when ‘he knows or should know [it] is relevant to imminent or ongoing litigation.’” The court acknowledged the producing party’s stance that this trigger occurred upon receiving counsel’s letter, but stated that this was “not the inviolable benchmark.” The court cited 103 Investors I, L.P. v. Square D Co., 470 F.3d 985 (10th Cir. 2006) to buttress its argument.
In 103 Investors, the defendant disposed of 50 to 60 feet of “busway” material after a fire had occurred, destroying all but four feet of the busway, and eliminating any of the busway that should have contained a warning label. The court concluded that in that instance, the defendant should have known that litigation was imminent, although the material had been disposed of long before the complaint was filed.
The court described the history of this defect. In 1999 Toshiba paid a large sum to settle a class action related to the floppy drive error in play in the instant matter. That same year, a class action suit was filed against HP for the same defect. In 2000, producing party was working on correcting the issue. Sony became embroiled in a class action in 2000. The court stated that the industry had (or should have become) “sensitized” to the possibility of litigation on this issue.

It appears that this extends the duty to preserve, which is already among the more difficult and costly issues in e-discovery today. By extending the duty’s trigger to occur prior to any direct or specific action against defendants, the court is asking too much of any IT department. It may be that the lack of documents produced by the defendants (this is discussed below) puts the court in the position of trying to fashion a rationale for punishment. But taken literally, the effects of the opinion could set a difficult, perhaps impossible, standards for compliance with the duty.

Issue 2: Safe Harbor?

The court, to the dismay of many commentators, dismisses the effects of the safe harbor provision in FRCP 37(e). Ralph Losey claims the court “mines” the rule into oblivion. I think what is in play here is that the court feels that the producing party would use Safe Harbor as a rationale for not producing data that it should have. Nevertheless, Safe Harbor’s reach, already attenuated, appears to weaken further in this opinion.

Issue 3: What role does producing party’s information management system play in the sanctions calculus?
The court comes down hard on the IG practices of the producing party. It stated that the system’s architecture, possessed of questionable reliability, should not be excused, though it evolved, rather than was deliberately designed to operate as it does. The result is that it operated to deprive the requesting party of access to evidence.
Traits of this system are described thusly:
[Producing Party] extensively describes its email management and storage practices, to explain the nearly complete absence of emails related to the subject of this litigation.

First, [Producing Party] says its email servers are not designed for archival purposes, and employees are instructed to locally preserve any emails of long term value.

[Producing Party] employees send and receive email via company email servers.

Storage on [Producing Party's] email servers is limited, and the company directs employees to download those emails they deem important or necessary to perform their job function from the company email server to their individual company issued computer.

[Producing Party] informs its employees that any email not downloaded to an employee’s computer are automatically overwritten to make room for additional email storage on ASUSTeK ’s servers.

It is [Producing Party's] routine practice that its employees download to their individual computer those emails the employee deems important or necessary to perform his or her job function or comply with legal or statutory obligations.

Second, ASUS employee computers are periodically replaced, at which time ASUS places all archiving responsibility for email and other documents on its employees. During the course of their employment, ASUSTeK employees return their individual company issued computers in exchange for newer replacement computers.

40. The hard drives of all computers returned to or exchanged with the company are formatted to erase all electronic information stored on these computers before they are recycled, reused or given to charity.

41. During a computer exchange, it is [Producing Party's] practice to direct its employees to download those emails and electronic documents from the employee’s individual computer to the employee’s newly issued computer that the employee deems important or necessary to perform his or her job function or comply with legal or statutory obligations.

The court stated that descriptions these data management practices may explain why relevant e-mails were not produced, but it did not establish the Producing Party’s good faith in managing its data. It calls the information management practices of the producing party “questionable” and that although an organization may design its systems to suit its business purposes, the information management practices are still accountable to such third parties as adversaries in litigation. The court opines that: “[a] court – and more importantly, a litigant – is not required to simply accept whatever information management practices a party may have. A practice may be unreasonable, given responsibilities to third parties.

Furthermore, while the court accepts that the Producing Party’s system “evolved” rather than was purposefully designed with the goal of hiding data needed for litigation, it nevertheless quoted the Sedona Conference: “An organization should have reasonable policies and procedures for managing its information and records.”

Finally, the court took aim at the practice of allowing individual users to drive retention practices, when it stated: “[Producing Party's]‘ practices invite the abuse of rights of others, because the practices tend toward loss of data. The practices place operations-level employees in the position of deciding what information is relevant to the enterprise and its data retention needs.”

Issue 4: How does the producing party’s lack of produced data on certain subjects in the aggregate balanced against the absence of specific evidence of wrong-doing by requesting party?

Producing Party turned over executable files of their own invention, but failed to surrender the source code for those executables. They also failed to produce other relevant executables and related source code, or “a single document” relating to the development of the applications under scrutiny. The court expressed concern over the absence of certain types of documents from the production:

[Producing Party's] only response is that it has produced a large volume of documents. That may be the case; but, it has not produced the most critical documents – those that relate to its misappropriation, its copying, and its willful behavior. The only conclusion after all this time is that [Producing Party] has destroyed critical evidence that it simply cannot show did not exist.

By this expression, the court adopted Requesting Party’s argument that Producing Party had “’spoliated the most critical evidence in this case, e.g., test programs and related source code’ “[S]ince [Producing Party] has not produced it, the only conclusion is that [they have destroyed it."

The court also noted, in its analysis of Producing Party's objection to the admissibility of data produced by third parties on grounds of authentication, that the Producing Party, while claiming "a near total absence of evidence...[sought] to eliminate the only evidence available. The court concluded that such tactics should not prevail to “prevent consideration of the best evidence available.”

Requesting Party listed types of documentation that they would expect Producing Party to possess, but never received during production. Communications and documentation from outside sources contributed to a suspicion that such documentation once existed. Indeed, as the court examines the Producing Party’s duty to preserve, it leads off by stating: “[t]he universe of materials we are missing is very large. Indisputably, we have very little evidence compared to what would be expected.”

In dismissing arguments that destruction of the data in question was covered by the “Safe Harbor” provision under FRCP 37(e), the court stated: “[o]ther than the patent application and the executable file, it does not appear [Producing Party] has produced any significant tangible discovery on the topics where information is conspicuously lacking.”

Ultimately the court found that Producing Party had breached its duty to preserve relevant data. It appears from the information above that the dearth of critical documentation from the Defendant’s productions was a significant contributor to the ruling, but the court does not explain the weight to which it assigned this as an element in its ruling.

Case Blurb: Nursing Home Pension Fund; Standards for the imposition of ‘lesser sanctions’

The parties debate whether plaintiffs must demonstrate prejudice before the Court can impose lesser sanctions. The Ninth Circuit has recognized that it has sent conflicting signals regarding whether prejudice must be shown in order for the sanction of dismissal to be appropriate. A court in this district recently clarified that the Ninth Circuit has required a showing of prejudice only when courts are acting under Federal Rule of Civil Procedure 37, which applies when a party disobeys a court order regarding discovery. When acting under its inherent authority, however, a district court need not consider prejudice to the party moving for sanctions…and prejudice has not been required when a party moves for lesser sanctions. Here, the Court is considering lesser sanctions in the form of an adverse inference, and even assuming prejudice is required, the Court notes that it would be quite difficult for plaintiffs to demonstrate how they were harmed by evidence to which they do not have access.

Nursing Home Pension Fund v. Oracle Corp., 2008 WL 4093497 at *5 (N.D.Cal. Sept. 2, 2008) (internal citations removed).

Case Blurb: Nursing Home Pension Fund; Process to Determine nature of sanctions a court should impose for destruction of evidence

In determining whether and what type of sanctions to issue, the Third Circuit has explained that courts should consider three factors: 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.” Schmid v. Milwaukee, 13 F.3d 76, 79 (3rd Cir.1994); see also Toste, 1996 WL 101189 at * 2 (“[A] party’s motive or degree of fault in destroying evidence is relevant to what sanction, if any, is imposed.”). The Ninth Circuit has also explained that “[b]efore imposing the ‘harsh sanction’ of dismissal,” courts should consider “(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.” Leon, 464 F.3d at 958. However, district courts “need not make explicit findings regarding each of these factors.” Id.

Nursing Home Pension Fund v. Oracle Corp., 2008 WL 4093497 at *4 (N.D.Cal. Sept. 2, 2008)

Case Blurb: Nursing Home Pension Fund; Court lists ‘three types of sanctions’ available for destruction of evidence

Courts have developed three types of sanctions for destruction of evidence. First, a court can instruct the jury that it may infer that evidence made unavailable by a party was unfavorable to that party.
Second, a court can exclude witness testimony based on the spoliated evidence.
The third and harshest of sanctions is to dismiss the claim of the party responsible for the spoliation.

Nursing Home Pension Fund v. Oracle Corp., 2008 WL 4093497 at *4 (N.D.Cal. Sept. 2, 2008).

Case Blurb: Ed Schmidt Pontiac-GMC Truck, Inc.; Elements for Spoliation as a Cause of Action in Ohio

In Ohio, the elements of a spoliation claim [i.e., a claim for interference with or destruction of evidence] are:
(1) pending or probable litigation involving the plaintiff, (2) knowledge on the part of defendant that litigation exists or is probable, (3) willful destruction of evidence by defendant designed to disrupt the plaintiff’s case, (4) disruption of the plaintiff’s case, and (5) damages proximately caused by the defendant’s acts.

Ed Schmidt Pontiac-GMC Truck, Inc. v. Chrysler Motors Co., LLC, 2008 WL 2704859 (N.D. Ohio July 7, 2008 )