When Electronically Stored Information That Should Have Been Preserved Was Lost, the Court Interpreted It as Intent to Deprive

11 Sep 2017

Follow our blog for regular updates on electronic discovery trendsIn the case of Christoffersen v. Malhi, No. CV-16-08055-PCT-JJT (D. Ariz. June 20, 2017), a personal injury case, Defendant Malhi was the owner-operator of his trucking company when he was in an accident that lead to a fatality. In discovery, Defendant failed to provide documents relating to his trucking company. Because of this alleged spoliation, Plaintiff Christoffersen filed a motion for sanctions.

Defendant Hardeep Singh Malhi was the sole owner of Defendant MD Trucking and one of only two employees. On November 2, 2013, Defendant was driving a tractor-trailer owned by MD Trucking and crashed into Plaintiff’s vehicle. The car, which was being driven by Plaintiff’s husband, rolled repeatedly upon impact. In November, MD Trucking’s insurance company, National Casualty Company, sent letters acknowledging Plaintiff’s injury claim to Plaintiff’s counsel. On November 16, 2013, Mr. Christoffersen (Plaintiff’s husband) died. On January 14, 2014, National Casualty was informed of his death and communicated that information to Defendant.

Ten days later, Defendant transferred real estate holdings to his brother-in-law. On February 3, 2014, Plaintiff sent Defendant and MD Trucking letters of preservation by certified mail demanding they retain documents related to the impending litigation. Although Plaintiff’s counsel sent such letters to the correct address, they were returned unclaimed. In June or July 2014, Defendant dissolved MD Trucking and shredded all of its records and files. On October 23, 2015, Plaintiff filed her Complaint in the Superior Court of the State of Arizona alleging negligence, negligence per se, negligent hiring and supervision, statutory violations, and wrongful death. In subsequent discovery, MD Trucking failed to provide any documents relating to its business operations in any form. MD Trucking’s only document production consisted of a copy of its insurance policy.

The district courts’ inherent power to sanction may be invoked in response to destruction of evidence. If a party breaches its duty to preserve evidence, the opposing party may move the court to sanction the responsible party. At courts’ disposal are three methods of sanction. First, a court can instruct the jury that it may draw an inference adverse to the party or witness responsible for destroying the evidence. Second, a court can exclude witness testimony regarding the destroyed evidence proffered by the responsible party. Third, a court may dismiss the claim of the party responsible for destroying the evidence or grant default judgment to the opposing party. A party’s destruction of evidence need not be in “bad faith” to warrant sanctions.

Here, the Court must determine whether or not Defendants had a duty to preserve the records that were destroyed and, if so, when. If the Court determines that Defendants had a duty preserve, it must then decide what sanction is appropriate for noncompliance. The Court must also address Defendants’ duty to preserve the missing evidence. Plaintiff argues that the duty to preserve was triggered on November 2, 2013, when the crash occurred. Plaintiff also claims Defendant was informed of Mr. Christoffersen’s death; and Plaintiff’s counsel’s attempts to deliver notices of preservation on February 3, 2014. Defendants claim that they were unaware of any pending litigation when they destroyed the records and were therefore under no duty to preserve them.

Plaintiffs’ Complaint was not filed until 15 to 18 months after Defendants dissolved MD Trucking and destroyed the records. However, Defendants knew about the incident. Not only was Mr. Malhi the driver of the truck that struck Plaintiff’s vehicle, he was the owner and operator of MD Trucking. Defendants received multiple notifications from their insurance company regarding the injury claims and Mr. Christoffersen’s death. The Court found that Defendants knew of a potential claim and should have known that any records relating to MD Trucking may be relevant to that claim. Thus, Defendants had a duty to preserve their documents prior to the dissolution of MD Trucking.

When considering sanctions in response to spoliation of evidence, the court must determine the public’s interest in speedy resolution of litigation; the court’s need to manage its dockets; the risk of prejudice to the party seeking sanctions; the public policy favoring disposition of cases on their merits; and the availability of less drastic sanctions. The first two factors favor default judgment. Both the public and judicial interest in expeditious resolution is affected by Defendants’ failure to preserve evidence, the resulting delay caused by internal discovery disputes and the instant motion for sanctions. It is apparent that Plaintiff has been prejudiced by the spoliation of any and all records regarding MD Trucking’s operations, and the Court concludes that the spoliation will force Plaintiff to rely on incomplete evidence at trial. The fourth factor, weighs against a terminating sanction. As to the fifth factor, an adverse inference sanction, is available in place of a case-dispositive one.

Applying the five-factor test, the Court finds entry of default judgment to be too drastic. However, because Plaintiff must rely on incomplete evidence without the documents that were destroyed during MD Trucking’s dissolution, the Court will impose lesser sanctions for that harm.

Defendants destroyed all MD Trucking-related documents that they had a duty to preserve. Defendants should have known the documents would be related to any subsequent claim. The timing of Defendant’s transfer of assets to his brother-in-law—within days after he learned of Mr. Christoffersen’s death—is at least circumstantial evidence of Defendant’s awareness of potential liability and intent to avoid it. Defendants’ conduct amounts to gross negligence, if not willfulness, which is sufficient culpability to justify an adverse inference. Therefore, the Court finds an adverse inference instruction to be warranted. Plaintiff did not present evidence of bad faith. Plaintiff’s motion is granted as to the request for an adverse inference instruction.

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