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placing the anticipated litigation date to when a potential claim was identified
Summary of this case from Christoffersen v. MalhiOpinion
No. CIV. S-00-113 LKK/JFM.
August 8, 2006
AND CONSOLIDATED ACTION AND CROSS- AND COUNTER-CLAIMS.
Pending before the court is plaintiff and counter-defendant Huhtamaki Foodservice Inc.'s ("Huhtamaki") motion for sanctions. Huhtamaki alleges that defendant and counter-claimant, AmeriPride Services Inc. ("AmeriPride") intentionally destroyed crucial evidence relating to Huhtamaki's claim that hazardous substances were being released from AmeriPride's wastewater system. Huhtamaki requests that the court enter default judgment against AmeriPride on the issue of liability under the Comprehensive Environmental Response, Compensation Liability Act ("CERCLA") and Huhtamaki's tort claims as well as dismissing AmeriPride's counterclaims against Huhtamaki, or, in the alternative, award any sanction that the court deems appropriate. The court decides the matter based on the parties' papers and after oral argument.
Also pending before the court are ten motions for summary judgment. These motions are set for oral argument on September 1, 2006. The court will issue a separate order as to those motions sometime after the hearing.
I. BACKGROUND FACTS
A. BRIEF OVERVIEW OF THE HUHTAMAKI v. AMERIPRIDE CASE
This case involves the migration of contaminated groundwater from an industrial laundry facility in Sacramento that is currently owned by AmeriPride to neighboring properties, including property owned by Huhtamaki. The hazardous substance at issue is perchloroethene, also known as "perc" or "PCE." Before the groundwater was contaminated, Huhtamaki used the groundwater (pumped through two wells located on Huhtamaki's property) to manufacture paper plates. Huhtamaki seeks an order requiring AmeriPride to remove the contamination and to compensate Huhtamaki for its response costs, including the cost of procuring clean replacement water. Huhtamaki also seeks damages.
Huhtamaki's complaint raises seven causes of action: (1) cost recovery under CERCLA; (2) cost recovery under the California Carpenter Presley-Tanner Hazardous Substances Account Act; (3) public nuisance; (4) private nuisance; (5) trespass; (6) negligence; and (7) declaratory judgment.
AmeriPride brought three counterclaims against Huhtamaki: (1) contribution under CERCLA; (2) negligence; and (3) equitable indemnity.
B. FACTS RELEVANT TO THE MOTION FOR SANCTIONS
Huhtamaki maintains that the day before it was to inspect the AmeriPride plant, AmeriPride began construction of a new on-site groundwater treatment system. The court reviews the key facts in chronological order.
1. Construction Schedule
In May of 2003, the Central Valley Regional Water Control Board ("Regional Board") ordered that a new groundwater treatment system be installed at the AmeriPride facility. The new groundwater system was one of several provisions in the Cleanup and Abatement order that governed the AmeriPride facility. Over the course of several negotiations, the time-table to begin construction was set for the fall of 2005. Cleanup and Abatement Order, Ex. B to Lee Smith Dec. in Supp. of AmeriPride's Opp'n to Mot. for Sanctions ("Smith Dec.").
AmeriPride asserts that the general schedule was "contained in a public documents [sic] that had been reviewed and received by Huhtamaki." AmeriPride's Opp'n at 3-4. Huhtamaki denies having learned of the fact through public record and AmeriPride fails to provide any evidence to the contrary.
On September 19, 2005, AmeriPride's hired consultant, Delta Environmental, informed the Regional Board that construction would begin on October 17, 2005. Email from Jeffery Thuma to Water Board, Ex. C to Smith Dec.
2. Huhtamaki's Rule 34 Notice of Inspection
On October 12, 2005, Huhtamaki served on AmeriPride a Notice of Inspection pursuant to Fed.R.Civ.P. 34. The notice requested an on-site inspection of AmeriPride's facility beginning on October 18, 2005. Huhtamaki Rule 34 Notice, Ex. D to Smith Dec. The request stated that Huhtamaki sought to "examine the location of releases of hazardous substances from the AmeriPride facility and its infrastructure, hazardous materials handling equipment or areas, and wastewater treatment equipment and/or areas." Id. The request specified forty-two (42) separate areas, including: (8) wastewater treatment system; (10) any discharge to sewer lateral and discharge points; (11) lateral to main, if on AmeriPride property; (16) concrete wash pad to east of building; (25) sewer compliance sampling point; and (28) all sewer floor drains. Id. All these identified areas are located in the southeast corner of the AmeriPride facility.
Around this same time, AmeriPride objected to the inspection, stating that there was too little time to allow four parties and their respective consultants to schedule the inspection for October 18. AmeriPride Opp'n at 4.
No site inspection occurred on October 18, 2005.3. Commencement of Construction Removal of Soil and Pipes
On October 20, 2005, Mission Linen Supply also objected to the inspection because they failed to get notice until the 18th of October. Mission Linen Objections, Ex. D of Smith Dec.
On October 17, 2005, the day before Huhtamaki asked to inspect the facility, construction began on the new groundwater treatment system. Jeff Thuma Dec., Ex. E of Stephen J. Darmody Dec. in Supp. of Mot. for Sanctions ("Darmody Dec."). Construction was ongoing from this date until October 30th. Craig Johnson Dec., Ex. F to Smith Dec.
The construction took place outside of the facility in the southeast corner of the property. The construction involved the removal of the concrete wash pad and "associated soils at the front of the building." Jeffery Thuma Dep., Ex. E to Darmody Dec. Approximately 110 tons of soil was taken from the area. Huhtamaki's Mot. for Sanctions at 4, citing Don Tilford Excavation invoices, Ex. I to Darmody Dec.
During the construction process, two wastewater pipes were broken and the broken portions of the pipes were ultimately removed and discarded. The soil around the broken pipes was also removed. The first break occurred on October 19, 2005. A drain pipe 12 inches in diameter that ran from the plant to the sump was accidentally broken during excavation around the pad area. Although both ends of the pipe were capped, the pipe spilled about 50 gallons of wastewater for several minutes into the excavated area. Johnson Dec., Ex. F of Smith Dec. The released water was later pumped back into the sump. Id. The broken pipe was removed and discarded. Id. It is important to note that the broken and removed section of pipe remained at the AmeriPride facility until January 17, 2006, when it was discarded. Thuma Dec., Ex. E of Darmody Dec.
The second pipe break occurred on October 24, 2005. While digging a trench as part of the new groundwater system, the subcontractors damaged the sewage pipe that ran from the sump to the main sewer line. Johnson Dec., Ex. F and Field Notes, Ex. G of Smith Dec. Although a small hole was created at the top of the pipe, no water ran out. The contractors waited until the plant stopped operating and replaced a 16-inch portion of the pipe. During repairs, a "cupful" of water was spilled and returned to the sump. Id. The 16 inch portion of broken pipe was removed and discarded at an unknown time.
No samples were taken of the materials inside either of the removed wastewater pipes prior to their disposal. Thuma Dep., Ex. H to Darmody Dec.
The 110 tons of soil was removed from the AmeriPride site between October 19, 2006 and October 29, 2006. This soil was randomly sampled to determine "whether, in the aggregate, the soil needed to be disposed of as hazardous waste under the Solid Waste Disposal Guidelines." The soil was then disposed of in a landfill. Thuma Dec., Ex. E to Darmody Dec.
4. Communication Between Huhtamaki and AmeriPride
On October 19, 2005, one of Huhtamaki's plant managers observed the construction and removal of soil at AmeriPride's facility. Dec. of Craig Komulainen, Ex. G of Darmody Dec. On October 25, 2005, counsel for Huhtamaki contacted counsel for AmeriPride concerning the on-site construction. On or about the same date, counsel for AmeriPride in turn contacted the AmeriPride facility and "for the first time discovered that construction had actually begun and was ongoing." AmeriPride's counsel then instructed AmeriPride's consultants to ensure that their subcontractor test any soil that was excavated at the site. Smith Dec ¶ 14.
On October 26, 2005, AmeriPride's counsel transmitted the construction schedule to Huhtamaki's counsel to indicate to him that the construction had been scheduled for October 17, 2005 since September of that year. The same letter noted that Huhtamaki had not yet attempted to reschedule the inspection. October 26, 2005 Letter from Smith to Darmody, Ex. J of Smith Dec.
On October 28, 2005, Huhtamaki's counsel transmitted a letter to AmeriPride. The letter expressed concern that the excavation was occurring in the exact areas identified in the Rule 34 notice. The letter stated: "Huhtamaki and its experts had intended to analyze the concentration of contaminants in these areas to pinpoint the sources of contaminants released from the AmeriPride facility. Now that may be impossible." Letter from Darmody to Smith, Ex. D of Darmody Dec. The letter went on: "Huhtamaki is quite concerned that the actions taking place on the AmeriPride facility may be destroying evidence that is relevant to this action." Id.
On November 4, 2005, AmeriPride's counsel responded to the October 28, 2005 letter, indicating that additional sampling of the soil that was removed during construction would take place. November 4, 2005 Letter from Smith to Darmody, Ex. L of Smith Dec. The letter also stated that "no material evidence has been lost or will be lost." Id. 5. Subsequent Rule 34 Notices Filed by Huhtamaki
On December 16, 2005, Huhtamaki submitted a revised Rule 34 Notice to inspect AmeriPride's facility on January 13, 2006. Revised Notice of Rule 34 Inspection, Ex. J to Darmody Dec. The only change from the original request was the addition of the following language to item 11 of the specific items or areas Huhtamaki sought to inspect: ". . . and all plumbing and water supply infrastructure." Id. AmeriPride claims this revised request attempted to "retroactively include the areas of construction, absent from Huhtamaki's original Rule 34 inspection." Opp'n at 6.
On December 28, 2005, AmeriPride again filed objections to this revised request. Among other things, AmeriPride claimed that the descriptions of the areas that Huhtamaki sought to inspect were too broad. With respect to the request to view the concrete wash pad, AmeriPride stated that "the concrete in this area was replaced during the scheduled installation of the onsite treatment center." AmeriPride's Objections dated Dec. 27, 2005, Ex. K to Darmondy Dec.
On January 6, 2006, Huhtamaki served AmeriPride with a final request for inspection. This notice was one page and set the inspection date for February 11, 2006. Revised Rule 34 Notice, Ex. O of Smith Dec. On February 6, 2006, Huhtamaki provided AmeriPride with a work plan, that included the testing protocol and indicated that the inspection might take two days. Work Outline, Ex. P of Smith Dec.
6. The Rule 34 Inspection Beyond
On February 11 and 12, 2006, Huhtamaki conducted its inspection of AmeriPride's facility. During the inspection, Huhtamaki observed newly paved areas in AmeriPride's parking lot and videotaped the inside of AmeriPride's wastewater pipes, "discovering for the first time that portions of the pipes had been replaced." Mot. for Sanctions at 6.
On February 20, 2006, Huhtamaki requested production of the missing pipes and soil that AmeriPride removed from its facility. Request for Production of Evidence, Ex. N of Darmody Dec.
On March 20, 2006, AmeriPride filed its response to Huhtamaki's request for production, stating, inter alia, that it no longer had control over the items in question. AmeriPride's Objections, Ex. O of Darmody Dec.
On May 15, 2006, the assigned magistrate judge ordered that by the end of the day AmeriPride produce the requested items or to have a person with authority at AmeriPride file a declaration stating that the items sought were not in AmeriPride's custody or subject to its control. May 15, 2006 Order, Ex. Q to Darmody Dec.
On May 15, 2006, AmeriPride filed the declaration of Jeffery Thuma, which stated that the items were not under AmeriPride's custody or subject to its control. Thuma Dec., Ex. E to Darmody Dec.
III. STANDARD FOR THE IMPOSITION OF SANCTIONS
Courts are invested with inherent powers that are "governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991). As part of its powers, courts have "broad discretion to make discovery and evidentiary rulings conducive to the conduct of a fair and orderly trial." Campbell Indus. v. M/V Gemini, 619 F.2d 24, 27 (9th Cir. 1980) (citations omitted). This includes sanctioning parties for spoliation or destruction of evidence. Unigard Sec. Ins. Co. v. Lakewood Engineering Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992).
The court notes that sanctions pursuant to Rule 37 are not applicable in this case. Generally, discovery violations are properly remedied pursuant to Rule 37 of the Federal Rules of Civil Procedure. Rule 37 permits the district court, in its discretion, to enter a default judgment against a party who fails to comply with an order compelling discovery. Fed.R.Civ.P. 37(b)(2)(C); Computer Task Group, Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir. 2004). In the case at bar, however, there was no outstanding court order which AmeriPride violated. Therefore, Rule 37 is inapplicable. See, e.g., Unigard Sec. Ins. Co. v. Lakewood Engineering Mfg. Corp., 982 F.2d 363 (9th Cir. 1992) (Rule 37 sanctions do not apply in cases where party's alleged discovery-related misconduct is not encompassed by language of rule.)
A party's destruction of evidence need not be in "bad faith" to warrant the imposition of sanctions. Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993); Unigard, 982 F.2d at 368 n. 2. The Court may impose sanctions against a party that merely had notice that the destroyed evidence was potentially relevant to litigation. Glover, 6 F.3d at 1329; Akonia v. United States, 938 F.2d 158, 161 (9th Cir. 1991), cert. denied, 503 U.S. 962 (1992).
Indeed, as soon as a potential claim is identified, a litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action. National Ass'n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 556-57 (N.D. Cal. 1987).
A court may sanction parties responsible for spoliation of evidence by instructing the jury that it may draw an inference adverse against the party or witness responsible for destroying the evidence. See Glover, 6 F.3d at 1329; Akiona, 938 F.2d at 161. As our sister court has held, "[w]here one party wrongfully denies another the evidence necessary to establish a fact in dispute, the court must draw the strongest allowable inferences in favor of the aggrieved party." National Ass'n of Radiation Survivors, 115 F.R.D. 543, 557 (N.D. Cal. 1987).
The adverse inference is based on two rationales, one evidentiary and one prophylactic:
The evidentiary rationale is nothing more than the common sense observation that a party who has notice that a document is relevant to litigation and who proceeds to destroy the document is more likely to have been threatened by the document than is a party in the same position who does not destroy the document. . . . The other rationale for the inference has to do with its prophylactic and punitive effects. Allowing the trier of fact to draw the inference presumably deters parties from destroying relevant evidence before it can be introduced at trial.Akiona, 938 F.2d at 161 (quoting Nation-Wide Check Corp. v. Forest Hills Distribs., Inc., 692 F.2d 214, 218 (1st Cir. 1982)).
Although not explicitly adopted by the Ninth Circuit, several unpublished cases from the Northern and Central Districts have concluded that a moving party seeking an adverse inference must establish that: (1) the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) the party that destroyed the evidence had a sufficiently culpable state of mind; and (3) some evidence suggests that a document or documents relevant to substantiating the claim of the party seeking sanctions would have been included among the destroyed files. See Housing Rights Center v. Sterling 2005 WL 3320739, *7 (C.D. Cal. 2005); Hamilton v. Signature Flight Support Corp., 2005 WL 3481423 (N.D. Cal. 2005) (citingResidential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 105 (2d Cir. 2002)).
IV. ANALYSIS
For the reasons discussed herein, the court concludes that evidence was destroyed by AmeriPride and that sanctions are warranted.A. DESTRUCTION OF EVIDENCE
1. AmeriPride's Duty to Preserve The Evidence
Neither party disputes that over 110 tons of soil and two pieces of pipe were removed from the AmeriPride facility and discarded. The court must determine if AmeriPride had a duty to preserve this evidence.
As our sister court remarked,
Sanctions may be imposed against a litigant who is on notice that documents and information in its possession are relevant to litigation, or potential litigation, or are reasonably calculated to lead to the discovery of admissible evidence, and destroys such documents and information. While a litigant is under no duty to keep or retain every document in its possession once a complaint is filed, it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request.Wm. T. Thompson Co. v. General Nutrition Corp., 593 F.Supp. 1443, 1455 (C.D. Cal. 1984).
See also Graham v. Teledyne-Continental Motors, 805 F.2d 1386, 1390 n. 9 (9th Cir. 1986) ("sanctions available to punish those who alter or destroy evidence"); Struthers Patent Corp. v. Nestle Co., 558 F.Supp. 747, 765-66 (D.N.J. 1981) (the destruction of documents which the party knew or should have known would be relevant to a lawsuit soon to be filed is sanctionable).
In the case at bar, AmeriPride was well aware of the nature of Huhtamaki's claim and should have known that the evidence removed from the facility was relevant to the pending action. To compound the matter, AmeriPride was explicitly given notice that Huhtamaki sought to inspect the very evidence that was removed and discarded.
As both parties know well, one of the key issues in the pending case is whether AmeriPride discharged PCE into the soil. Huhtamaki's complaint specifically alleges that "[o]perations at the AmeriPride Site have resulted in the release of contaminants into the soil and groundwater . . . [these] operations have contaminated the groundwater beneath the Huhtamaki facility with PCE and its degradation compounds." Complaint at ¶¶ 6 7.
AmeriPride claims that the PCE detected in both the soil and groundwater was caused by previous owners of the facility and that AmeriPride did nothing to contribute to the contamination.See AmeriPride's SUF 1 2 in Supp. of its Motion for Summary Judgment on Huhtamaki's State Law Claims. AmeriPride maintains that there is no evidence that the pipes and wastewater system leaked after 1983 (the year AmeriPride took ownership of the facility). See, e.g., AmeriPride's Opp'n to Huhtamaki's Mot. for Summ. J. for Cost Recovery Under Federal and State Law, at 7:17-8:16. ("Huhtamaki has not cited any evidence that AmeriPride's discharges to the sanitary sewer have contaminated the property.")
The removed evidence would have either revealed that there were no leaks and thus, no on-going contamination (which is what AmeriPride claims); or that there were leaks and that there was on-going contamination (which is what Huhtamamki claims). For these reasons, the removed soil and pipes were clearly relevant to the pending action.
This dispute — whether the PCE-contaminated wastewater leaked through the pipes at the AmeriPride facility — centers on the exact area where the October 2005 construction occurred and where 110 tons of soil and two pipes were removed. AmeriPride should have been aware that the removed soil and pipes were important and relevant to the issues at play in the pending case.
Even if AmeriPride was not independently aware of the importance of the soil and pipes in the pending case (a somewhat implausible conclusion), Huhtamaki provided ample notice that it wanted to test and inspect the exact area where the soil and pipes were removed. Thus, not only should AmeriPride have known to preserve this evidence, AmeriPride did know that the evidence was important to Huhtamaki.
On October 12, 2005, Huhtamaki served a Notice of Inspection pursuant to Rule 34 on AmeriPride. The notice stated that Huhtamaki sought to "examine the location of releases of hazardous substances from the AmeriPride Facility, as well as the structure of the AmeriPride Facility and its infrastructure, hazardous materials handling equipment or areas, and wastewater treatment equipment and/or areas." Huhtamaki Rule 34 Notice, Ex. C, Darmody Dec. Among other things, the Notice specifically requested inspection of the wastewater treatment system; any discharge to sewer lateral and discharge points; lateral to main, if on AmeriPride property; concrete wash pad to east of building; drainage pipe to southwest of building from drop inlet to drainage ditch; sewer compliance sampling point; and all sewer floor drains. The Notice requested that the inspection occur on October 18, 2005.
Although the court notes that neither party explained the meaning of some of these terms, from what the court can decipher, several items mentioned in the Rule 34 notice were either removed or altered during the October construction. The concrete pad which was identified in the Rule 34 notice was removed during construction, as was soil surrounding the "wastewater treatment" area. Moreover, a part of the sewer pipe that ran from the lateral to main was removed. These removals occurred after Huhtamaki served its Rule 34 notice that specifically identified these areas for inspection.
The first Rule 34 Notice was not the only time that AmeriPride was made aware of Huhtamaki's intent to inspect the area where the soil and pipes were removed. On October 28, 2006, while construction was ongoing, Huhtamaki wrote to AmeriPride's counsel expressing concern that "the actions taking place on the AmeriPride facility may be destroying evidence that is relevant to this action." Oct. 28 Letter from Darmody to Smith, Ex. F of Darmody Dec. Counsel for Huhtamaki concluded the letter by stating, "please let me know immediately what actions AmeriPride has taken to preserve the physical evidence Huhtamaki notified you it intends to inspect." Id. As noted above, this letter was written while construction was ongoing and at a time when AmeriPride could have taken steps to preserve the removed pipes and soil.
Counsel for AmeriPride responded to Huhtamaki's letter on November 4 and stated that "no material evidence has been or will be lost." November 4, 2005 Letter from Smith to Darmody, Ex. N of Smith Dec.
AmeriPride was once again given notice of the importance of this evidence when, on December 16, 2005, Huhtamaki filed a revised Rule 34 notice in which it specifically sought to inspect "all plumbing and water supply infrastructure." Revised Notice of Rule 34 Inspection, Ex. J to Darmody Dec. Despite this notice, AmeriPride failed again to take any steps to preserve the pipes and soil that was removed from the site. As mentioned previously, one of the two removed pipes remained on AmeriPride's property until January 16, 2006, when it was discarded.
2. AmeriPride's Failure To Preserve the Evidence in Question
On October 17, 2005, the day before Huhtamaki had asked to inspect the facility, construction began at the AmeriPride site. On October 25, after learning of the construction, Huhtamaki's counsel contacted counsel for AmeriPride. Counsel for AmeriPride "in turn, contacted the AmeriPride plant and for the first time discovered that construction had actually begun and was ongoing. Counsel for AmeriPride then instructed the consultants to ensure that their subcontractors tested any soil that was excavated at the site." AmeriPride Opp'n at 5. Despite this instruction, over 110 tons of soil and two pipes were removed and discarded.
AmeriPride's counsel clearly failed to preserve evidence that he knew or should have known was relevant to the immediate litigation. See National Ass'n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 556-57 (N.D. Cal. 1987). AmeriPride's actions are unacceptable.
The court rejects AmeriPride's contention that the litigation counsel was unaware of the construction schedule and therefore had no way of knowing that the destruction of evidence was occurring. This is no excuse. Counsel should have been in contact with his client. As one district court remarked, the "obligation [to preserve evidence runs] first to counsel, who ha[s] a duty to advise his [or her] client of the type of information potentially relevant to the lawsuit and of the necessity of preventing its destruction." Donato v. Fitzgibbons, 172 F.R.D. 75, 79 (S.D.N.Y. 1997). Counsel for AmeriPride should have known when the construction was to begin, especially in light of Huhtamaki's request to conduct a site visit on the day after construction was set to begin.
The court notes that this contention is also somewhat disingenuous. AmeriPride argues that the construction schedule was public knowledge, and thus Huhtamaki should have known about it, and yet, AmeriPride's own counsel apparently did not even know when the construction began. Clearly, the construction start date was not as well publicized as AmeriPride maintains.
It is evident to the court that AmeriPride failed to take appropriate action to preserve the evidence in question. Upon receipt of Huhtamaki's Rule 34 notice, the October 28 Letter and the Revised Rule 34 notice, AmeriPride should have taken steps to preserve the evidence at issue. Instead, time passed and the evidence was removed and discarded. As previously noted, the last of the soil was not removed until October 29, 2005 and one of the two broken pipes remained on AmeriPride's property until January 17, 2006.
Moreover, AmeriPride appears to admit that evidence requested by Huhtamaki was removed and discarded. On March 20, 2006, Huhtamaki filed a second request for production of documents. Among other things, Huhtamaki requested any and all soil removed from the AmeriPride facility on or after October 12, 2005. Huhtamaki also requested any and all wastewater pipes removed from the facility. AmeriPride responded and stated that Huhtamaki's request "calls for the production of materials which plaintiff is well aware have been already removed from the site." AmeriPride's Response to Huhtamaki's Request for Production, Ex. O to Darmody Dec. In short, AmeriPride destroyed evidence clearly relevant to the pending case.
3. Prejudice to Huhtamaki
There are numerous ways in which Huhtamaki was prejudiced by the destruction of the evidence in question. Most obviously, AmeriPride destroyed evidence which may have revealed that PCE contaminated wastewater was released into the soil through AmeriPride's wastewater system and pipes. Huhtamaki's Mot. For Sanctions at 13. AmeriPride's own environmental consultant concedes that the highest concentrations of contaminates released from sewer leaks are likely to be observed in a "linear pattern along the sewer line." Thuma Dep., Ex. H to Darmody Dec. Thus, the soil that was adjacent to the pipes and wash pad may have shown this "linear pattern."
AmeriPride, meanwhile, is using the lack of evidence to its advantage and to Huhtamaki's disadvantage. For example, in AmeriPride's Opposition to Huhtamaki's Motion for Summary Judgment for Cost Recovery Under Federal and State Law, AmeriPride states "Huhtamaki has not cited any evidence that AmeriPride's discharges to the sanitary sewer have contaminated the property." Opp'n to Huhtamaki's Mot. for Summ. J. for Cost Recovery Under Federal and State Law at 7:17-8:16. Similarly, in AmeriPride's Opposition to Huhtamaki's Motion for Summary judgment on Tort Causes of Action, AmeriPride states: "The evidence is disputed as to whether any activities that occurred after 1983 at the site contributed to the groundwater contamination." AmeriPride's Opp'n to Huhtamaki's Mot. for Summ. J. on Tort Causes of Action at 11:11-18.
In short, AmeriPride is using the lack of evidence as proof that a disputed fact remains regarding AmeriPride's contribution to the groundwater contamination. Because of the missing evidence, it is impossible for Huhtamaki to determine with any degree of certainty whether the lack of evidence means that there were no leaks in the pipes or if the evidence was simply destroyed.
In its defense, AmeriPride lists several reasons why Huhtamaki is not prejudiced by the destruction of evidence. These arguments are unavailing.
First, AmeriPride contends that the "soils tested were subjected to the same testing that Huhtamaki indicated in its outline for the site inspection." AmeriPride Opp'n at 11. This argument is without merit. There is no evidence that the testing performed on the soil was similar to the testing Huhtamaki would have performed. Although AmeriPride attaches as Exhibit H the results of the tested soil, this document is incomprehensible to a non-scientist. What the court can decipher, however, is that the removed soil was tested in the aggregate and at random. In other words, the soil that was directly adjacent to pipes, the wash pad, and close to where the spills occurred was not segregated from the rest of the soil and specially tested. See Thuma Dec., Ex. E to Darmody Dep.; AmeriPride Documents, Ex. I to Darmody Dec.
Similarly, the contention that the 12-inch wide pipe had not been in use is also without merit. It is undisputed that when contractors broke the pipe, wastewater came out of the pipe. Clearly, there was liquid in the pipe. Moreover, there is simply no evidence before the court as to whether or not the pipe was in use.
The court further agrees with Huhtamaki that although the removal of the pipes was fully documented and photographed, "[s]cientific testing cannot be conducted on field notes. Samples cannot be taken from photographs." Huhtamaki's Reply at 8.
Finally, AmeriPride also asserts that Huhtamaki was provided with a full opportunity to test anywhere on the facility on February 11, and even if the pipes had not been removed, testing the pipes would have been impossible since the pipes were underground. Again, this argument is unavailing. First, when Huhtamaki's experts inspected the property, they were able to videotape the inside of the other pipes, so clearly, the fact that pipes are underground does not preclude inspection. See Mot. for Sanctions at 6. Second, although Huhtamaki extensively tested the soil and pipes that remained at the facility on February 11, the fact remains that parts of two pipes and 110 tons of soil were not available to be tested and inspected.
For these reasons, Huhtamaki clearly suffered prejudice from the destruction of the evidence at issue. The court turns next to the question of sanctions.
B. SANCTION: ADVERSE INFERENCE
In a case such as this, the court may permit a jury to draw an adverse inference from the destruction or spoliation of evidence against the party or witness responsible for that behavior.Glover, 6 F.3d at 1329; Akiona, 938 F.2d at 161.
An adverse inference may be appropriate even absent "bad faith" on the part of the party responsible for destroying the evidence. "Surely a finding of bad faith will suffice, but so will simple notice of 'potential relevance to the litigation.'" Glover, 6 F.3d at 1329 (citing Akiona, 938 F.2d at 161); See also B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1108 (9th Cir. 2002) (bad faith does not require actual ill will; substantial and prejudicial obduracy may constitute bad faith).
See also Residential Funding Corp. v. Degeorge Financial Corp., 306 F.3d 99 (2nd Cir. 2002) ("Culpable state of mind" factor required for adverse inference instruction based on breach of discovery obligation is satisfied by showing that destruction of or failure to produce evidence was knowing or negligent, a showing of bad faith or gross negligence is not required).
AmeriPride, while perhaps not acting with ill-will, acted with "substantial and prejudicial obduracy," when it failed to take steps to preserve the soil and pipes in question, especially in light of Huhtamaki's Rule 34 Notices and subsequent letters.B.K.B., 276 F.3d at 1108.
There are several ways that AmeriPride acted with "substantial and prejudicial obduracy." First, when AmeriPride received Huhtamaki's Rule 34 notice, it failed to alert Huhtamaki that construction would begin the day before Huhtamaki sought to inspect the facility. As discussed previously, this construction took place in the exact areas Huhtamaki sought to inspect. Second, AmeriPride was completely unaware of construction occurring at its own facility, construction which directly impacted evidence in the pending litigation. Third, once AmeriPride was alerted to the construction and the removal of soil, it did little to preserve the evidence that was specifically identified by Huhtamaki.
The rationale on which the adverse inference principal is based also lends support to imposing such a sanction in this case. A party who is on notice that evidence is relevant and then destroys that evidence is "more likely to have been threatened" by that evidence. Akiona, 938 F.2d at 161. Here, AmeriPride vehemently argues that it did not contribute to the discharge of PCE into the soil. As Huhtamaki aptly points out, "AmeriPride's destruction of the pipes and adjacent soils has conveniently made its claims that those particular wastewater pipes were not leaking into the soils and were not the source of the PCE contamination extraordinarily difficult to counter." Huhtamaki's Reply at 8.
The other rationale, that an adverse inference acts as a deterrent, is also relevant. In the case at bar, it is imperative that AmeriPride fully understand and appreciate the consequences of destroying evidence. Drawing an adverse inference addresses this prophylactic rationale.
In short, the court finds that drawing an adverse inference against AmeriPride is an appropriate sanction. Specifically, the court will instruct the jury that the removed pipes leaked PCE-contaminated wastewater into the soil and groundwater and that this contamination was a cause of the contamination on the Huhtamaki property. AmeriPride will be prohibited from presenting any evidence which denies that AmeriPride contributed to the soil and groundwater contamination.
The court notes that Huhtamaki's motion for sanctions focused primarily on imposing default judgment as a sanction. Where a dismissal or entry of default judgment is contemplated as a sanction pursuant to the court's inherent authority, several factors must be considered: (1) whether willfulness, bad faith, or fault can be attributed to the offending party, (2) whether certain extraordinary circumstances exist, (3) whether lesser sanctions would be efficacious, (4) the relationship or nexus between the misconduct and the matters in controversy in the case; and (5) the prejudice to the party victim of the misconduct. Halaco v. Costle, 843 F. 2d 376, 380 (9th Cir. 1988). In the case at bar, several of the Halaco factors weigh in favor of default judgment. However, as discussed herein, lessor sanctions (such as drawing an adverse inference) are just as efficacious and thus, default judgment is not appropriate.
IV. CONCLUSION
Huhtamaki's motion for sanctions is GRANTED. The court imposes sanctions as detailed in the order.All parties shall file supplemental briefs no longer than ten (10) pages addressing how the adverse inference affects the pending motions for summary judgment and for good faith settlement. The supplemental briefs are due no later than August 15, 2006 at 10:00 a.m.
IT IS SO ORDERED.