Free Motion for Sanctions - District Court of Colorado - Colorado

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 1 of 7

I N T HE U NITED S TATES D ISTRICT C OURT F OR T HE D ISTRICT O F C OLORADO Civil Action No. 01-cv-0413-JLK M.D. MARK, INC. Plaintiff, vs. KERR-McGEE CORPORATION and ORYX ENERGY COMPANY, Defendants. DEFENDANTS' MOTION FOR DISCOVERY SANCTION OF "ADVERSE INFERENCE" JURY INSTRUCTION AGAINST PLAINTIFF M.D. MARK Defendant Kerr-McGee Corporation ("Kerr-McGee") submits this motion for a discovery sanction of an "adverse inference" jury instruction against Plaintiff M.D. Mark. I. INTRODUCTION

M.D. Mark's President, Marilyn Davies ("Davies") admits to shredding 487 pounds of accounting records relating to the database of seismic data ("PGI Data") at issue after M.D. Mark filed this action. M.D. Mark was on notice that these accounting records were relevant before it shredded them. The shredded records relate to M.D. Mark's claim that Kerr-McGee wrongfully possesses approximately 3100 miles of socalled "bootleg data." M.D. Mark's destruction denies Kerr-McGee access to accounting information that could assist Kerr-McGee's defense against this claim. This Court should, therefore, sanction M.D. Mark by issuing a jury instruction permitting the

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 2 of 7

jury to infer that the information contained in the shredded accounting records was unfavorable to M.D. Mark's claims. II. LEGAL STANDARD

Rule of Civil Procedure 37(b)(2) vests the trial court with broad discretion to impose sanctions against a party for spoliation, i.e., destroying evidence. 1 Gates Rubber Co. v. Bando Chemical Indus., 167 F.R.D. 90, 102 (D. Colo. 1996)(citing National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639, 642 (1976)). The elements of a sanctionable spoliation offense are (1) the destruction (2) of discoverable material (3) that the party knew or should have known (4) to be relevant to pending, imminent or reasonably foreseeable litigation. Gates Rubber Co. v. Bando Chemical Indus., 167 F.R.D. at 102. The trial court should also consider other factors, including the culpability of the offender and the degree of prejudice suffered by the non-offending party. Id. The general rule, however, is that bad faith destruction of documents relevant to proof of an issue at trial gives rise to an inference that production of the documents would have been unfavorable to the party who destroyed them. Aramburu v. The Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997).

1

Kerr-McGee acknowledges that this Court indirectly addressed this spoliation issue in conjunction with Kerr-McGee's motions for summary judgment. The legal standard applicable to summary judgment, however, is quite different from the legal standard applicable to this motion. Further, Kerr-McGee does not seek dispositive relief in this motion as it did in its summary judgment motions.

-2-

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 3 of 7

III. A.

ARGUMENT

OF

M.D. M ARK I NTENTIONALLY S HREDDED D OCUMENTS D ESPITE N OTICE T HEIR R ELEVANCE .

A party's mental state in destroying documents is a significant factor in determining whether the trial court should impose sanctions against it. Id.; Gates Rubber Co. v. Bando Chemical Indus., 167 F.R.D. at 102. Culpability heightens where a party, like M.D. Mark, received advanced notice that the documents it eventually destroyed were relevant to pending litigation. Computer Assoc. Int'l v. American Fundware, Inc., 133 F.R.D. 166, 169-70 (D. Colo. 1990). Shortly after M.D. Mark filed this action in 2001, Kerr-McGee served requests for production of documents giving M.D. Mark notice that account records are relevant. For example, Kerr-McGee requested all documents relating to the value of the seismic license agreements at issue. (Ex. A, Defendants' First Set of Discovery Requests to Plaintiffs, Requests for Production 9-10, September 28, 2001.) Accounting records for the PGI Data relate to their value. They are also relevant to payments received for the licensing of seismic data ­ a subject M.D. Mark made an issue when it filed this action. Yet despite advance warning, Davies admits that: · · · M.D. Mark shredded 487 pounds of documents regarding the PGI Data. (Ex B, Davies Depo. April 23, 2004, 57:19 ­ 59:3.) These documents were accounting records. (Ex C, Davies Depo. April 6, 2004, 243:5-11; 244:5-8; 245:22 ­ 246:2.) She personally reviewed Kerr-McGee's request for production of documents. (Ex. D, Davies Depo., April 6, 2004, 246:23 ­ 247:5)

-3-

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 4 of 7

These admissions establish each element of a sanctionable spoliation offense-- destruction, discoverability, and knowledge of the accounting records' relevance to this litigation. Gates Rubber Co., 167 F.R.D. 15 102. Moreover, Davies' personal review of discovery requests that included requests for the accounting records she would later destroy is the type of bad faith that warrants the most severe of sanctions. See Computer Assoc. Int'l 133 F.R.D. at 169-70 (holding that party's advance notice that destroyed documents were relevant and important to case warranted default judgment). Kerr-McGee does not, however, seek dispositive relief as was granted in Computer Assoc. Int'l, but merely a jury instruction permitting the jury to infer that the shredded documents were unfavorable to Kerr-McGee's claims. (A copy of Kerr-McGee's proposed instruction is attached as Ex. E.) B. M.D. M ARK ' S D OCUMENT D ESTRUCTION H AS P REJUDICED K ERR M C G EE .

Destruction of evidence gives rise to a presumption of prejudice. Aramburu, 112 F.3d at 1407; Gates Rubber Co.,167 F.R.D. at 105. Kerr-McGee need only establish a nexus between the prejudice it suffered and the accounting records M.D. Mark destroyed in order to maintain that presumption. Gates Rubber Co.,167 F.R.D. at 105. By their very nature, accounting records contain information about payments received by a company. PGI accounting records, like those that M.D. Mark shredded, could have contained information regarding licensing fees received from companies to whom PGI licensed its seismic data. This type of evidence with respect to licensing fees paid by Kerr-McGee would undermine M.D. Mark's claim that Kerr-McGee

-4-

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 5 of 7

wrongfully possesses 3,100 miles of so-called "boot leg data." Such evidence could also rebut M.D. Mark's claims regarding the value of the data it claims that unlawfully Kerr-McGee possesses. Without such evidence (that could have been contained in the accounting records PGI destroyed) Kerr-McGee is prejudiced in its ability to defend against this claim. Thus, there is a nexus between these destroyed accounting records and the prejudice suffered by Kerr-McGee. M.D. Mark offers nothing except Davies' testimony to argue that Kerr-McGee is not prejudiced. However, as the party who ordered the accounting records to be shredded, Davies' testimony regarding their relevance is inherently unreliable. See Gates Rubber Co., 167 F.R.D. at 112 (court cannot rely on testimony person who destroyed documents at issue to determine their relevance). Davies further undermines her credibility on this issue through her inconsistent testimony. When the spoliation issue first arose, Davies testified that the destroyed documents were PGI accounting records. (Ex. F, Davies Dep., April 6, 2004, 244:5-17.) In a subsequent deposition on the specific issue of spoliation, Davies testified that the destroyed documents were nothing more than per diem expense reports for a company called Seis Pro that PGI acquired before its bankruptcy. (Ex. G, Davies Depo., April 23, 2004, 26:12-24.) Davies recalled this fact two weeks after giving inconsistent testimony, even though there was no inventory of the destroyed accounting records to which Davies could refer in preparation for her subsequent deposition on this issue. (Id. at 25:22-26:4). Davies' testimony is not sufficient to overcome the presumption and evidence that Kerr-McGee is prejudiced.

-5-

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 6 of 7

IV.

CONCLUSION

M.D. Mark intentionally destroyed accounting records despite notice of their relevance. Kerr-McGee's ability to defend against M.D. Mark's claims is prejudiced as a result. Therefore, this Court should sanction M.D. Mark by issuing a jury instruction permitting the jury to infer that the document M.D. Mark shredded was unfavorable to its claims. Dated this 16th of January, 2007. Respectfully submitted,

s/ M. Antonio Gallegos Scott S. Barker Gregory E. Goldberg M. Antonio Gallegos H OLLAND & H ART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Phone: (303) 295-8513 Fax: (303) 975-5416 [email protected] [email protected] [email protected] A TTORNEYS F OR D EFENDANTS

-6-

Case 1:01-cv-00413-JLK-BNB

Document 207

Filed 01/16/2007

Page 7 of 7

C ERTIFICATE O F S ERVICE

I hereby certify that, on January 16, 2007, I electronically filed the foregoing with the Clerk of Court using CM/ECF system which will send notification of such filing to: Harlan P. Pelz Daniele W. Bonifazi Pelz, Bonifazi & Inderwish [email protected] [email protected]

s/Sally A. Walter__________
3643053_1.DOC

-7-