Sanctions were denied for spoliation in a recent Qui Tam government fraud case against a company notorious for chopping down Redwood trees. U.S. v. Maxxam, Inc., 2009 WL 817264 (N.D.Cal. March 27, 2009). Turns out they also chopped up a whole room full of backup tapes, and deleted emails too, just before the law suit. The destruction of what later proved to be key evidence was, however, all in done in accord with their “general practice … to discard material that no longer had a business value.” Id. at *3. Since it was also done before a duty to preserve had triggered, the plaintiffs' motion for sanctions was denied. The plaintiffs then had to start a jury trial without the evidence and without the adverse inference jury instruction they had wanted. Interestingly, although the reasoning of Rule 37(e) FRCP was employed, there is no mention of the rule itself.
This case settled for $4,000,000 on April 28, 2009, two days into a two week jury trail. I dare say the settlement would have been much, much higher had the plaintiffs obtained the adverse inference instruction they wanted. For more about this case, and another doozy of a case in Utah that went the other way and found a duty to preserve triggered eight years before the suit was filed, that's right eight years, see my latest blog: Utah Court Mines Safe Harbor Rule 37(e) Into Oblivion - Part One.
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