Opinion
C.A. No. 00C-09-235 SCD.
Submitted: December 12, 2006.
Decided: February 20, 2007.
Decision upon Plaintiff's Motion for Sanctions for Spoliation of Evidence and Failure to Comply with the Discovery Order.
Raymond M. Radulski, Esquire, Wilmington, Delaware, and David Staats, Esquire, Law Office of David Staats, P.A., Wilmington, Delaware, attorneys for the plaintiff.
M. Duncan Grant, Esquire, Pepper Hamilton, LLP, Wilmington Delaware, attorney for the defendant.
MEMORANDUM OPINION
Before the Court is the plaintiff's Motion for Sanctions for Spoliation of Evidence and Failure to Comply with the Discovery Order.
The nature of this case is described by the Supreme Court in the decision of April 17, 2006, reversing and remanding the matter. The case was tried before a jury on liability only due to persistent difficulties in getting the damages case ready. Those circumstances are recited in my letter opinion of June 28, 2005.
June 28, 2005 Letter Opinion in response to Plaintiff's Motion for Rearguement or Relief from Judgment.
After a summary judgment ruling which excluded certain causes of action, the plaintiff's claim of civil conspiracy went to the jury. The jury considered the following interrogatories:
1. Do you find that the plaintiff, Empire, has proven by a preponderance of the evidence that before Elviro Ocasio left his employment with Empire, he and James Armistead reached an agreement about what would happen with the Bank's accounts. 2. Do you find that the plaintiff, Empire, has proven by a preponderance of the evidence that the agreement included the commission of an unlawful or improper act? 3. Do you find that plaintiff, Empire, was damaged.
All interrogatories were answered YES.
After the trial, the plaintiff was given the opportunity to prepare and present its case on damages, limited by the earlier ruling of this court. A damages award of Zero was entered by the Court on June 28, 2005, because plaintiff failed to comply with an order of the Court related to the production of an expert report, a continuation of the conduct which had caused the liability issue to be severed for trial.
The plaintiff took an appeal. The Supreme Court found, inter alia, that the conduct of Ocasio, the employee of Empire who stole records and set up a competing business, was wrongful interference with a prospective contractual relationship. The Supreme Court directs that "Empire's damages, therefore, are not limited to the value of the stolen records and of the assets that were destroyed at its offices. Empire can recover for the lost profits that it would have earned, but for Ocasio's wrongful interference, from servicing the Bank's accounts."
Based on the above direction, a case scheduling order was entered in the remanded case. Deadlines were established for the identification of experts, a cut-off of discovery, and dispositive motions. Trial is set for June 11, 2007.
Before me now is the plaintiff's motion for sanctions related to discovery of Bank's business records. The very same records were the subject of a motion to compel on May 24, 2001. At that time, Empire was requesting records on 3,338 accounts. The Bank claimed the request was too burdensome. On Empire's Motion to Compel, I ruled:
This is what I'd like to do. This is a big list. These are a lot of accounts. This is a lot of expense for the bank . . . I'm ordering the bank to give you the full run on . . . six accounts. You [plaintiff's counsel] pick them out. They give you the full account. And let's see if you can show me from that sample something to justify imposing this huge burden on the bank. Maybe it's not huge. Maybe it's pushing a few buttons. Let's take a look at some real examples.
[Plaintiff] pick them out and [defendant] produce it. The whole run on six accounts that [defendant] produce and then [plaintiff] can show me [that production of all accounts is necessary].
Transcript of Oral Argument on May 24, 2001 at 39.
The wrongful removal of books and records from Empire occurred on February 3, 1997. That in mind, plaintiff agreed to limit the time period for the sample to end on September 30, 1998.
The six sample accounts were produced in June, 2001. Plaintiff did not return to the Court to request further production until after it had tendered, late, its expert's report and after the liability trial.
January 7, 2005, six months after the jury verdict on the liability issue, Empire served the Bank with a request for production of documents directed to the issue of damages. Empire sought information about 391 paying accounts and 464 legal accounts, for a total of 855 accounts, substantially fewer accounts than requested in 2001.
On January 27, 2005 I entered an order which embodied the Rulings of the January 21, 2005 hearing which imposed duties on both parties. As to the defendant's obligations, it says:
1. On or before January 28, 2005, the defendant shall provide the plaintiff with (1) additional account data in the form of the six sample accounts furnished earlier on the 355 paying accounts and the 374 legal accounts previously identified by the plaintiff, which accounts underlie the spread sheet prepared by the defendant which was discussed during the January 21, 2005 hearing, and which data to the extent feasible shall be produced in electronic form; (2) an affidavit confirming that the defendant possesses [sic] has no additional account data on the paying and legal accounts previously identified by the plaintiff other than what has already been produced, whether on Recovery Management System, a Main Enterprise System, or otherwise (3) a list of which of the paying and legal accounts previously identified by the plaintiff were sold by the defendant; and (4) to the extent not already produced, copies of the agreements pursuant to which such accounts were sold by the defendant.
2. As soon as it is reasonably able, the defendant will provide the plaintiff with additional account data in the form of the six sample accounts furnished earlier on the paying accounts and legal accounts identified by the plaintiff in its formal discovery requests filed January 7, 2005.
After the production of records following the Order of January 27, 2005, and the production of an affidavit from Gabrielle Daws, the plaintiff took the deposition of Ms. Daws, employee of the Bank. In that deposition she said that the records of interest to the plaintiff were purged in July, 2001.
Gabrielle Daws was deposed on February 9, 2005. References to that testimony will be cited as "Daws at__." Daws at 47-48, 64-66.
Subsequent production and testimony by way of affidavits have demonstrated that Ms. Daws testimony was, at best, incorrect and misleading.
But the story continues! In Answering this Motion, the Bank has provided an affidavit from Peter Behling to explain that beginning in 1999 his group at the bank which is charged with maintaining data, was engaged in the transfer of data such as that of interest in this litigation. He expresses the opinion that it would take approximately 350 hours to find the 350 account records which he understands to be desired. The Bank contends that "[o]n January 28, 2005, the Bank produced numerous documents from its Recovery Management System. It has since produced additional documents from Recovery Management System, which were inadvertently overlooked in the January 2005 production." The Bank claims that Recovery Management System reports for 465 of the accounts at issue have been produced. Plaintiff has demonstrated that the produced reports are abbreviated, and do not contain as detailed a record of the account transactions as the reports provided in 2001.
Defendant's Answering Brief at 7.
There are problems on both sides of this dispute. Plaintiffs sought discovery, were given a limited production, and took no steps to secure the additional business records even though that avenue had been left open. The case was set for trial, and bifurcated because of plaintiff's eleventh hour production of a damages report calculated on the basis of pre-termination performance. There was no contention that there were missing business records which impaired plaintiff's ability to proceed to trial. I severed liability because I could not hear the Daubert motion presented by defendant in the few days available before the trial. It was four years later that the business records were again requested from the Bank. It was not unreasonable for the Bank to conclude that the plaintiff had abandoned its desire for business records and was presenting its damages claim based on a theory of pre-termination performance.
On the other hand, I can easily infer that the Bank was aware of this dispute well in advance of the filing of this lawsuit because of other proceedings in other courts. Counsel for the Bank acknowledged at oral argument that the Bank should have been informed of the need to preserve the records associated with the litigation. The Bank had notice of plaintiff's desire to secure the business records in 2001 as its counsel made an argument that it would be too burdensome, and that is why I started the process with a sample. While I conclude that the actual transfer and consolidation of the data into a form more compressed than the plaintiff would like should have been avoided, it was not intentional or reckless, but it was negligent. It is disturbing that much of the hard data which has been produced since the remand from the Supreme Court was not produced in the normal course of discovery. Instead, it was produced pursuant to Court Order, though I recognize that the Order compelling the production in January, 2006, was entered before the time had expired for the production under the rules, i.e., the Order was premature. The now corrected, if not repudiated, testimony of Ms. Daws is also a problem. It reflects inadequate communication between the Bank and its attorney, at the very least. I also note that the information about the Access files, both in hard copy and electronically, was not produced until the summer of 2006. Defense counsel candidly acknowledged that it was part of the foundation for defense expert's report, thus its production was inevitable. Why did it take so long?
Exhibit 2 to plaintiff's Opening Brief in support of the Motion for Sanctions includes an Order to Show Cause issued by the United States District Court, District of New Jersey, dated February 11, 1997. The Order is directed to Elviro Ocasio, Jr.
This Court has a strong preference for the resolution of all claims on the merits. Spoliation requires wrongful conduct indicating a desire to suppress the truth. Since I do not find a wrongful state of mind, and a substantial amount of data has been produced by the defendant, a conclusion that there was spoliation does not fit. The delay in the sharing of information, the misleading affidavit and deposition testimony from Ms. Daws, and the modified condition of the information, have imposed upon the plaintiff the burden of filing the Motion for Sanctions and of submitting an expert report before the expert had the best available data to review. In order to remedy those two problems, the defendant will pay plaintiff's counsel fees and costs associated with the preparation and presentation of the Motion for Sanctions as well as counsel fees and costs associated with the Daws deposition. I will also permit the plaintiff the opportunity to secure the deposition of the defense expert and revise its expert opinion if necessary. If plaintiff chooses to do that, a suggested time frame must be received promptly. The Bank will pay the cost of presenting its expert for deposition.
Sears, Roebuck and Co. v. Midcap, 893 A.2d 542, 549 (Del. 2006) (adopting the ruling of Morris v. Union Pac. R.R., 373 F.3d 896 (8th Cir. 2004)).
The theory of this case, and the measure of damages, changed after review in the Supreme Court. That change requires both sides to adjust. I am content that enough data has been produced to permit the plaintiff to present its case with a reasonable foundation and defensible assumptions.
The Motion for Sanctions for Spoliation of Evidence is DENIED. Plaintiff shall submit applications supported by affidavits related to the costs I have ordered.
IT IS SO ORDERED.