Court Levels Interim Sanctions Against Party Who Admittedly Spoliated Evidence; Terminating Sanction May Follow

18 Oct 2017

Our blog explains ESI and spoliation of evidenceIn Blasi v. United Debt Services, No. 2:14-cv-83, (S.D. Ohio Feb. 21, 2017), the Court ruled that a named party in a class action was prejudiced by a Defendant’s intentional destruction of potentially relevant evidence, and failure to comply with Court-ordered discovery.

The original complaint alleged, on a class action basis, that various defendants violated the Fair Credit Reporting Act (“FCRA”) by using “prescreened consumer lists” for improper purposes, and sent direct mail solicitations to consumers in financial distress.

Plaintiffs moved on January 15, 2016 to certify a class comprised of approximately 166,000 Ohio residents whose names were on the consumer lists referred to in the complaint. While that motion was pending, one of the defense parties moved for leave to, and eventually did, file a crossclaim against AMG Lead Source (“AMG”).

The Court has held a number of conferences and issued a number of orders concerning discovery. The parties had agreed that AMG would serve written discovery responses by July 25, 2016, produce all responsive documents, and prepare and serve a privilege log. AMG also agreed to produce witnesses for deposition in mid-August. A month later, the discovery order was amended, also by agreement, to provide that the AMG depositions would take place at the end of September, 2016.

That September 2016 discovery order is significant because it also contained provisions concerning AMG’s production of a laptop computer and a thumb drive.  AMG had given the laptop and the thumb drive to its counsel, and the parties agreed that the laptop and thumb drive would be preserved and imaged. Name Seeker would then be allowed to access the documents contained on the laptop and thumb drive, subject to an appropriate agreement. However, on September 30, 2016, the AMG depositions were again postponed.

As it turned out, the laptop and thumb drive proved not to be useful sources of information. Based on an examination of those devices, Name Seeker concluded that information on both devices had been deleted and that the destruction of the information which they previously contained was intentional. Name Seeker therefore requested and received permission to file a motion for sanctions based on spoliation of evidence.

AMG agreed not to oppose a motion for leave to amend the crossclaim to include a cause of action for spoliation. Because of these disputes regarding the discovery and spoliation, the Court stayed other proceedings in the case. It also scheduled a hearing on the motion for sanctions, which motion had been filed on November 10, 2016.

Name Seeker’s sanctions motion identified three reasons why the Court should sanction AMG: (1) AMG intentionally destroyed evidence, (2) it violated discovery orders, and (3) it served false discovery responses. Name Seeker further recounted the history of its efforts to obtain full discovery from AMG, noting, most significantly, the fact that after AMG produced some small number of documents which it purportedly found on the laptop, once the laptop was actually produced and examined, it contained neither copies of the emails previously produced nor any other documents relating to AMG’s business activities.

AMG apparently told its counsel that the missing contents had been transferred to a thumb drive, which led to the orders described above relating to production and copying of that storage device. When the thumb drive was examined, it had, indeed, contained a folder entitled “Name Seeker E-mails.” But that folder had been deleted. A hearing was on the spoliation set for December 20, 2016. First, counsel for AMG, Brian Melber, moved for leave to withdraw from the case. Second, at the request of counsel, the Court vacated the hearing. Third, AMG elected not to oppose the motion for sanctions. The Court decided that it was entitled to assume that all of the factual statements made in Name Seeker’s motion were true. The Court further found it reasonable to conclude that AMG intentionally destroyed relevant evidence both in violation of its obligations under the Federal Rules of Civil Procedure and in contravention of the Court’s earlier discovery orders. The Court then ruled that the destruction allowed it to sanction AMG, and that the only question left to be resolved was the extent of the appropriate sanctions.

Name Seeker’s sanction request included request for entry of default judgment. The Court acknowledged Name Seekers argument that lesser sanctions were not appropriate  because of the egregious nature of the conduct and the prejudice which lesser sanctions could not cure. However, the Court also noted an upcoming hearing to receive forensic evidence which could possibley cure the prejudice against Name Seeker.  Therefore, the Court declined to enter a default judgment on the crossclaim at that time, but reserved the right to do so later time depending on the results of the upcoming hearing on the forensic discovery.

The Court also considered Name Seeker’s request for monetary sanctions, including reasonable attorneys’ fees expended in its pursuit of discovery from AMG. The Court directed that Name Seeker  submit an itemization of its costs and fees., and stated that if those costs and fees are reasonable, the Court would enter a fee award in Name Seeker’s favor against AMG.

ILS–Plaintiff ESI Discovery Experts