Insufficient Preservation Efforts Warranted Monetary Sanctions, but not Adverse Inference Instruction

Consol. Aluminum Corp. v. Alcoa, Inc., 2006 WL 2583308 (M.D. La. July 19, 2006)

In this opinion, the magistrate judge considered plaintiff’s motion for sanctions based on spoliation of evidence, and concluded that, although adverse inference instructions were not warranted, defendant’s conduct in negligently failing to preserve electronic evidence “should not go unpunished.” Accordingly, the magistrate ordered that defendant bear plaintiff’s costs for re-deposing certain witnesses for the limited purpose of inquiring into issues raised by the destruction of evidence and regarding any newly discovered emails. The magistrate further granted plaintiff’s request to serve additional discovery relating to the electronic evidence which was not preserved, and awarded plaintiff the reasonable costs and attorneys’ fees incurred in bringing this motion and in investigating and attempting to obtain the discovery at issue.

In its motion, Consolidated contended that Alcoa deleted relevant emails and other electronic data for years after it reasonably anticipated the litigation, and even after the litigation actually commenced, in violation of its affirmative duty to preserve all potentially relevant evidence. Specifically, Consolidated made four arguments: (1) Alcoa failed to implement a proper “litigation hold” upon reasonably anticipating litigation with Consolidated; (2) Alcoa failed to notify all personnel with relevant documents of the requirement to preserve their emails; (3) Alcoa failed to prevent the routine overwriting of relevant electronic evidence; and (4) Alcoa failed to preserve the documents of even its most significant witnesses.

According to Alcoa’s supplemental discovery responses in this matter, Alcoa’s counsel met with and/or participated in telephone conferences with four individuals to establish a “document hold” in conjunction with its issuance of a demand letter to Consolidated in November 2002. Consolidated contended that Alcoa’s list of four individuals was “woefully inadequate” because numerous other Alcoa employees were involved in the investigation that led to the drafting of Alcoa’s demand letter and were involved with or had information regarding environmental issues at the plant. In particular, Consolidated noted that Alcoa failed to confer about the “litigation hold” with the plant manager at the time the demand letter was sent. Further, with respect to the four individuals listed, Consolidated argued that Alcoa should not only have informed them to preserve emails pursuant to the “litigation hold,” but it also should have preserved backup tapes for those individuals’ emails for the six months preceding November 2002.

Consolidated contended it was only after it propounded discovery to Alcoa in April 2005 that Alcoa expanded its preservation efforts and contacted 11 additional individuals to request that they begin preserving relevant documents and emails. This group of eleven individuals did not include one individual whom Consolidated viewed as one of the “key players” in this litigation (Mr. Blair), given that Alcoa made a special request to depose him during the early stages of discovery. Consolidated also asserted that Alcoa’s suspension of its janitorial email deletion policy and maintenance of backup tapes as of May 27, 2005, only after receiving Consolidated’s April 2005 discovery requests, was performed far too late and with knowledge that countless relevant emails had been destroyed since the time litigation was reasonably anticipated.

Based on these allegations, Consolidated contended that it was entitled to certain adverse inference instructions in its favor and to an award of the costs and reasonable attorneys’ fees.

The court first discussed applicable law, noting that neither the Fifth Circuit nor any district court within the Fifth Circuit has had the opportunity to directly address the standards for preservation of electronic evidence and applicable sanctions where such evidence has been spoliated. It observed: “The cases which have been recognized as setting the benchmark standards for modern discovery and evidence-preservation issues are the series of Zubulake decisions out of the Southern District of New York.”

After discussing the Zubulake case holdings, the court set out Consolidated’s burden of proof on its motion:

A party seeking the sanction of an adverse inference instruction based upon the spoliation of evidence must establish the following three elements: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a “culpable state of mind,” and (3) that the destroyed evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense. In addition, the Fifth Circuit only permits an adverse inference sanction against a destroyer of evidence upon a showing of “bad faith” or “bad conduct.” Thus, for Consolidated to receive an adverse inference instruction, it must show that Alcoa not only destroyed evidence relevant to its claims and defenses, but also that Alcoa acted intentionally and in “bad faith” in doing so.

(Citations and footnote omitted.)

Based upon the standards set forth in Zubulake IV, the court found that Alcoa failed to preserve electronic evidence that it had a duty to preserve.

First, the court found that Mr. Blair was one of the “key players” in the litigation and that Alcoa had conceded as much early in the litigation, but was now attempting to rescind that statement only because of its failure to instruct him to preserve evidence. Alcoa had also argued that, for every email sent and received by Mr. Blair, there was a corresponding recipient or sender, and thus, any emails sent to or received by the “key players” in which Mr. Blair participated were preserved, even though Mr. Blair’s email box was deleted as a part of Alcoa’s normal practice when Mr. Blair left the company in September 2003. The court found this “unpersuasive,” and pointed out that emails sent and received by him, other than those involving the four “key players” might also be relevant and should have been preserved.

Next, the court found that Alcoa’s expansion of its “litigation hold” to include 11 additional employees after receiving Consolidated’s discovery requests in April 2005 likely came too late. It stated that, if such individuals indeed possessed information relevant to this suit, they should have been instructed to preserve such evidence in November 2002 when the other four individuals were advised to do so; when Consolidated’s complaint was filed; or at the very least, as soon as Alcoa determined that they might have information relevant to this matter. The court continued:

As to whether the list of eleven additional individuals is adequate, the Court cannot make a specific determination but notes that, because Alcoa’s initial disclosure dated February 28, 2005 identified approximately one hundred (100) individuals as being “likely to have discoverable information that Alcoa may use to support its claims and defenses,” the Court finds it highly probable that instructing only eleven Alcoa employees to abide by the “litigation hold” in May 2005 is inadequate to fulfill its preservation obligations.

In addition, the court found that Alcoa had potentially spoiled relevant evidence through its failure to override its standard document destruction policies when the litigation became reasonably foreseeable in November 2002. According to Alcoa’s supplemental discovery responses, it “prophylactically maintained backup tapes of [its] backup system following suspension of its janitorial procedures shortly following Consolidated’s discovery requests [in April 2005].” Thus, the court found that Alcoa did not officially suspend its routine destruction policy until 2½ years after sending its demand letter to Consolidated and approximately 20 months after Consolidated filed suit. “At the very least, the emails of the eleven (11) individuals who were not advised until May 2005 to preserve their electronic data were lost during the time period when the routine destruction policy was still in effect.”

Further, the court found that even potentially relevant emails of the four individuals initially instructed to preserve electronic data in November 2002 were lost due to Alcoa’s failure to immediately suspend its routine document destruction policy in November 2002. It explained: “Those four individuals were involved in any environmental assessment of the facility which occurred prior to sending the demand letter to Consolidated; thus, any emails concerning such investigatory work during the months immediately preceding November 2002 would have been preserved through the system’s “backup” feature and maintained if the destruction policy had been immediately suspended in November 2002.”

Finally, the court rejected Alcoa’s argument that attributed its failure to institute a “litigation hold” in November 2002 to the fact that it did not learn of the “previously concealed scope and magnitude of Consolidated’s pollution” until it conducted interviews with a variety of current and retired employees after being served with Consolidated’s complaint in September 2003. The court pointed out that Alcoa’s duty to preserve was triggered, not when it had actual knowledge of this litigation and its scope, but instead when it had constructive knowledge or should have known that certain information may be relevant to future litigation. The court further noted that, even assuming Alcoa did not have actual or constructive knowledge of the relevance of certain emails until September 2003, its “litigation hold,” except with respect to the four individuals initially instructed to preserve emails, was not imposed until over a year and a half later, in May 2005.

The court went on to find that there was insufficient evidence to find that Alcoa acted in bad faith or with a “culpable state of mind” in failing to preserve the electronic evidence at issue: “At most, Consolidated has shown that Alcoa negligently failed to preserve emails, which might have had some relevance to this lawsuit, by failing to timely inform employees of their duty to preserve.” The court also determined that Consolidated had failed to provide sufficient evidence that the destroyed emails were “relevant” to its claims and defenses:

Although Consolidated has generally asserted that the destroyed information is relevant to this litigation “based simply on the time frame and the individuals involved,” a court cannot infer that destroyed documents would contradict the destroying party’s theory of the case, and corroborate the other’s party’s theory, simply based upon temporal coincidence. While Consolidated is not held to “too specific a level of proof” regarding the destroyed documents, it must provide some evidence that the documents would have aided it in the manner alleged in their inferences in order for such sanction to be imposed 

Finally, the court was not convinced that Consolidated was necessarily prejudiced as a result of the missing email:

[I]n most instances where prejudice to the non-spoliating party has been found to have occurred, the prejudice was readily apparent. In this case, even if relevant emails were deleted, it is not clear to the Court whether Consolidated would suffer any significant prejudice as a result. Consolidated should be able to obtain the great majority of information relevant to its claims from the emails of the original four “key players” instructed to preserve evidence and through the documentary evidence produced. In other words, even assuming every email deleted during the time period in question had some relevance to this lawsuit, it is doubtful that Consolidated will be sufficiently prejudiced in its ability to put on its case to warrant an adverse inference instruction, considering the overwhelming amount of documentary evidence and emails already produced by Alcoa in this matter.