eDiscovery Daily Blog

• June 5, 2015

In Compass Bank v. Morris Cerullo World Evangelism, Civil No. 13-CV-0654-BAS(WVG)(S.D. Cal. May 8, 2015), California Magistrate Judge William V. Gallo ruled that the plaintiff “wilfully engaged in the spoliation of relevant evidence”, and “has demonstrated a pattern of recalcitrant behavior during discovery in this litigation” and awarded an adverse inference jury instruction sanction against the plaintiff as well as defendant’s attorney fees and costs.

Case Background

During discovery in this case, the defendant issued two sets of document requests (in April and October 2014, respectively) which included all audio recordings relating to a letter of credit at the center of the dispute, allegedly issued on behalf of the plaintiff by its former branch manager. The plaintiff did not produce any audio recordings during discovery. Then, on February 12 of this year, the defendant took the deposition of the plaintiff’s Rule 30(b)(6) witness, during which she stated that during a phone call with the former branch manager in February of 2013, he admitted that he issued the letter of credit. She also testified that the plaintiff automatically records all of her phone calls in the regular course of business, and automatically records the calls of all its Trade Service Division officers. During her deposition, the plaintiff’s Rule 30(b)(6) witness stated, “our lines in international trade services and the letter of credit are recorded 24/7.”

The defendant immediately requested that the plaintiff produce the audio recording of the subject call. In a letter dated March 6, 2015, the plaintiff informed the defendant that it could not locate any such recording. The defendant subsequently filed a motion for sanctions, requesting either terminating or adverse inference jury instruction sanctions against the plaintiff, presenting evidence that the plaintiff had only searched one of the witness’s work phone numbers, when she actually had two phone numbers.

Judge’s Ruling

Because one of the main disputes in this case is whether the plaintiff issued the letter of credit and the audio recording seemed to verify that, Judge Gallo ruled that “the relevance of this evidence cannot reasonably be disputed”. He also ruled that the plaintiff had a duty to preserve the recording, noting that even though “the subject call occurred prior to Plaintiff filing the Complaint, Plaintiff has previously argued to this Court that it reasonably anticipated litigation regarding the letter of credit in February of 2013.”

With regard to whether the evidence was lost or destroyed with a culpable state of mind, based on the fact that “no evidence has been presented to the Court that Plaintiff initiated a litigation hold” and that “not only did Plaintiff not produce the recording of the subject call or any other calls, it utterly failed to even disclose that such calls were recorded”, Judge Gallo found that “Plaintiff wilfully failed to produce the recording in response to discovery requests, wilfully failed to conduct a diligent search in an effort to locate the recording, and wilfully withheld the recording from Defendant”. Judge Gallo also noted that the plaintiff “has a history of being recalcitrant and failing to produce relevant discovery” for failing to produce an Interview Summary of the former branch manager under the work product doctrine that ultimately proved to be clearly not protected.

As a result, Judge Gallo, while declining to award terminating sanctions, awarded a “less drastic” adverse inference jury instruction sanction against the plaintiff as well as ordered the plaintiff to reimburse defendant’s attorney fees and costs to be determined after a review the defendant’s detailed time calculations and declaration(s).

So, what do you think? Do you agree that the audio recording was lost or destroyed with a culpable state of mind? Please share any comments you might have or if you’d like to know more about a particular topic.

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