Washington Court Enters Ultimate Sanction of Default Against Defendants for Discovery Abuses, Reinstating $8,064,055 Jury Verdict

Maga?a v. Hyundai Motor America, No. 00-2-00553-2 (Clark County, Wash. Super. Ct. Feb. 15, 2006) (Findings of Fact and Conclusions of Law Re:  Default Judgment)

At the first trial of this product liability case, the jury awarded plaintiff over $8 million in damages for injuries he sustained after he was ejected out of the hatchback of a 1996 Hyundai Accent in a 1997 accident.  Hyundai appealed liability but not damages, and the case was remanded for a second trial on the issue of liability.  Preparing for the second trial, plaintiff filed a motion to compel defendants to produce documents relating to other similar incidents.  The court granted the motion, and ordered Hyundai to produce “Police Reports, legal claims, consumer Complaints and Expert Reports or Depositions and Exhibits and photographs thereto with respect to all consumer complaints and lawsuits involving allegations of seatback failure on all Hyundai vehicles with single recliner mechanisms regardless of incident date and regardless of model year.”  Hyundai was ordered to produce all legal claims, consumer complaints and policy reports by November 21, 2005, and to produce all expert reports, photographs, depositions and exhibits thereto by December 1, 2005.

On December 1, 2005, Hyundai submitted a Motion for Relief from November 18, 2005 Order Granting Plaintiff’s Motion to Compel, asking that the court relieve it of certain of its production obligations.  Specifically, Hyundai requested that it be permitted to produced only those responsive consumer complaints that were maintained on its current computer system, and that it not be required to restore some 96 backup tapes which were believed to contain original data from Hyundai’s old mainframe computer. 

Hyundai explained that its Consumer Affairs department was responsible for handling consumer contacts and inquiries, and that prior to Hyundai’s conversion to a new computer system, Consumer Affairs files were kept on the mainframe for 12 months.  If there was no activity on the file for 12 months, it was moved to an “inactive” table, but still on the mainframe.  If there was then no activity for 12 months thereafter, the file would be converted to a backup tape.  Hyundai stated it had located a total of 96 backup tapes dating from mid-1995.

Hyundai further explained that existing backup tapes were not converted into the new computer system; thus, Hyundai would need to restore the tapes and then access the data.  Hyundai estimated that the process would take at least two months, and would cost at least $24,000 to complete.  Plaintiff opposed the motion, and filed a "motion for an order re spoliation creating an inference that favorable evidence was destroyed."  Plaintiff argued that Hyundai’s failure to convert the tapes containing consumer complaints amounted to spoliation, and that an adverse inference instruction should be given to the jury.  The court denied Hyundai’s motion for relief, and also denied plaintiff’s motion for spoliation sanctions. 

Two months later, the court granted plaintiff’s motion for default judgment based upon Hyundai’s failure to produce evidence regarding other similar claims and incidents.  The court held a four-day evidentiary hearing on the motion for default judgment and concluded that Hyundai and its counsel committed numerous discovery violations, “which were willful, deliberate, direct and egregious.”  A copy of the court’s February 15, 2006 Findings of Fact and Conclusions of Law re:  Default Judgment is available here.

Hyundai apparently did not search its Consumer Affairs Department’s electronic records for responsive documents.  Paragraph 22 of the decision states:

In response to questions at the hearing, Hyundai’s corporate counsel Thomas Vanderford explained the search for documents in response to plaintiff’s RFP 20 was limited to the records of the Hyundai legal department.  He stated no effort was made to search beyond the legal department, as this would have taken an extensive computer search.

The court stated that there was no legal basis for limiting a search for documents in response to a discovery request to those documents available in the legal department.  Additionally, the record was clear that the legal department at Hyundai worked closely with the Consumer Affairs Department with respect to customer complaints and claims, including product liability claims.  It described how, in some instances, the Consumer Affairs Department would refer a claim to the legal department, which directed an investigation of the claim and/or provided direction to Consumer Affairs regarding the claim.  The court observed:

26.  Mr. Vanderford testified no record was maintained in the legal office of this activity.  As head of the products liability section, he was familiar with this process and supervised attorneys involved in this process.  A search limited to the corporate legal office, which did not seek or disclose records from claims which originated with the Consumer Affairs Department, even though many of the claims involved the legal department, was not a diligent search.
27.  Hyundai had the obligation not only to diligently and in good faith respond to discovery efforts, but to maintain a document retrieval system that would enable the corporation to respond to plaintiff’s requests.  Hyundai is a sophisticated multinational corporation, experienced in litigation.  A search of computer records for documents requested by plaintiff, even if voluminous in nature, is standard operating practice of attorneys practicing in the products liability field.  In fact, Hyundai did not object to the request as burdensome.  The false answer to RFP 20 was without reasonable excuse or explanation.

The court further opined:

52.  Hyundai and its legal department knew that there had been customer complaints and claims of incidents of seat back failure.  Defendant knew that these happened in the Accent and Elantra, as well as other vehicles.  Some of these complaints had been litigated.  Most involved personal injuries.  It was the duty of Hyundai to establish an adequate system to respond to discovery requests.  Hyundai failed to establish such a system and failed to respond accurately to discovery requests.  Hyundai unreasonably limited its search, and failed to supplement those answers that were incorrect.

The court went on to discuss the other sanctions available, and concluded that nothing short of default judgment was appropriate.  The court’s entry of default judgment reinstated the jury’s damage award of $8,064,055.  In a separate opinion, the court also awarded plaintiff the attorneys’ fees and costs occasioned by Hyundai’s discovery violations.

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