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Costs of Special Master Appointed to Manage Discovery of City’s Computers to be Paid by City as Spoliation Sanction

Posted in CASE SUMMARIES

Padgett v. City of Monte Sereno, 2007 WL 878575 (N.D. Cal. Mar. 20, 2007)

Plaintiffs in this litigation sued the city of Monte Sereno and several city employees for civil rights violations and other torts.  Among other things, plaintiffs alleged that certain city employees had sent plaintiffs an anonymous, threatening letter that included a newspaper article downloaded from the Internet.  One city employee (Rice) subsequently admitted to authoring and sending the threatening letter from her workstation at City Hall.  Although Rice indicated that she wrote the letter at her own direction without telling anyone about it, plaintiffs contended that Rice wrote the letter at the direction of other city employees, including the city manager (Loventhal).  To explore this allegation, plaintiffs moved to compel inspection of the city’s computers, printers and backup tapes.

The court originally denied the motion to compel on the ground that the burden and expense to the city outweighed the potential benefit of the inspection.  Plaintiffs sought reconsideration, and a hearing was held in April 2006.  At the hearing, the court specifically ordered counsel to "continue to preserve everything."  Counsel for the city asked the court to permit the computers in question to remain in use and represented that "nothing is being deleted."

In December 2006, the court ordered the inspection of certain computer workstations, hard drives and laptop computers used by several city employees, including Rice and Loventhal.  In January 2007, plaintiffs learned that the city had destroyed Loventhal’s laptop hard drive in August 2006.  According to defendants, a city employee with no connection to the litigation serviced Loventhal’s laptop after it had “crashed,” and then inadvertently discarded the defective hard drive.  Plaintiffs disputed the city’s explanation for replacing and discarding the laptop hard drive, and filed a motion for terminating sanctions, monetary sanctions, and entry of default judgment.

The court found that the city and Loventhal failed to take adequate precautions to preserve Loventhal’s computer equipment for forensic analysis.  It found that, whether characterized as willful or negligent, Loventhal’s conduct was the kind of "fault" sufficient to warrant sanctions, including dismissal, under the court’s inherent powers.

The court declined to make a finding as to prejudice.  Plaintiffs contended that the spoliation would prevent them from finding positive evidence of collusion between Loventhal and Rice.  Defendants argued that plaintiffs had access to other sources of evidence to investigate their conspiracy claim – namely, the city’s network server and Rice’s computer hard drive.  The court noted that: “Interestingly, at the hearing on this motion, counsel for the City informed the Court that his clients have now just ‘found’ the discarded ‘crashed’ laptop hard drive.  No further explanation is provided other than the hard drive has ‘appeared.’"  As a result of this development, the court reserved its determination as to whether the spoliation of Loventhal’s laptop hard drive prejudiced plaintiffs to the extent that would warrant the imposition of the severe sanctions requested.  The court stated it would rule on plaintiffs’ motion for terminating sanctions, striking of answers, or entry of default judgment after an inspection of the hard drive was completed.

The court granted plaintiffs’ motion for monetary sanctions, and ordered defendants to reimburse to plaintiffs all costs associated with the motion and any subsequent supplement briefings, to pay certain fees of plaintiffs’ expert, and to bear the cost of the Special Master that the court had appointed to manage the discovery process with respect to the examination of the computers and servers.