Dickinson Frozen Foods, Inc. v Food Process Solutions Corporation

Filing 69

MEMORANDUM DECISION AND ORDER FPS's Motion for Sanctions (Dkt. 39 ) is GRANTED. The Court will instruct the jury as outlined. Signed by Judge David C. Nye. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
)
)
Plaintiff/Counterdefendant, ) Case No: 1:17-cv-00519-DCN
)
) MEMORANDUM DECISION AND
vs.
) ORDER
)
)
FPS FOOD PROCESS SOLUTIONS
)
CORPORATION,
)
)
Defendant/Counterclaimant. )
)
DICKINSON FROZEN FOODS, INC.,

I. INTRODUCTION
Before the Court is a Motion for Sanctions for Spoliation of Evidence (Dkt. 39)
filed by Defendant/Counterclaimant FPS Food Process Solutions Corporation. Having
reviewed the record, the Court finds that the facts and legal argument are adequately
presented in the briefs. Accordingly, in the interest of avoiding further delay, and because
the Court finds the decisional process would not be significantly aided by oral argument,
the Court decides the Motion on the record without oral argument. Dist. Idaho Loc. Civ.
R. 7.1(d)(2)(ii). For the reasons set forth below, the Court GRANTS the Motion.
II. BACKGROUND
Plaintiff/Counterclaimant Dickinson Frozen Foods, Inc. (“Dickinson”) owns and
operates a vegetable processing facility located in Sugar City, Idaho.

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Defendant/Counterclaimant FPS Food Process Solutions Corporation (“FPS”) designs,
manufactures, and sells large industrial tunnel freezers internationally to the food
processing industry. This case arises out of the purchase and sale of an industrial freezer
built by FPS for Dickinson.
FPS freezers are custom designed and created to meet a customer’s specific needs.
The units are approximately the size of a semi-truck trailer, or even larger, and can cost
millions of dollars. Food products enter FPS freezers on one end, and, while traveling
through a series of conveyor belts, are blast frozen and ready for packaging by the time
they exit the freezer. Unlike a home freezer, industrial tunnel freezers do not have an
independent ability to cool or freeze products. Instead, the freezers are supported by a
refrigeration infrastructure fueled by a cooling liquid.1 Refrigeration infrastructures are
complex and can take up entire buildings, or even several buildings. In the food
processing industry, customers seeking to purchase an industrial tunnel freezer are
responsible for designing and installing a sufficiently robust refrigeration infrastructure to
support the freezer.
In its collaboration with customers to design a freezer, a customer informs FPS of
the intended food product, the required production amount, and the temperature desired
after freezing. Using this information, FPS then calculates the cooling output the
customer’s refrigeration infrastructure will need to produce to support the custom
designed freezer and meet the customer’s desired outcome.
1

A refrigeration infrastructure consists of one or more compressors, condensers, evaporators, vessels,
valves, gauges, piping, and suction risers, and powers a freezer. Ammonia is typically the cooling liquid
used to fuel a refrigeration infrastructure. Dkt. 40, ¶¶ 4-5.

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On March 11, 2016, Dickinson and FPS entered a written contract (hereinafter the
“Agreement”) for Dickinson’s purchase of an FPS freezer. Dickinson agreed to pay FPS
$926,000 in exchange for an FPS model MT5-6 IQF Tunnel Freezer (hereinafter the
“FPS Freezer”). Under the Agreement, FPS promised to build Dickinson a freezer that
would freeze 8,000 pounds of diced and shredded potatoes an hour to 0°F. FPS
represented the FPS Freezer would fully perform with a refrigeration infrastructure that
provided 210 tons of refrigerant delivering -40°F of cooling “at the coil.” This meant
Dickinson’s refrigeration infrastructure needed to be capable of delivering -40°F to the
refrigeration coil of the FPS Freezer. Dickinson hired Kemper Northwest, Inc.
(“Kemper”) to design and install the refrigeration infrastructure (hereinafter the
“Refrigeration System”).
On July 23, 2016, FPS delivered the FPS Freezer to Dickinson’s Sugar City
facility. FPS hired third-party contractor Cold Steel Contractors, LLC (“Cold Steel”) to
assist it with installation. The FPS Freezer arrived in two halves, each about 28 feet long,
14 feet wide, and 14 feet high. After portions of Dickinson’s building were demolished to
make room for the FPS Freezer, the two halves were loaded by crane onto the frame
assembly and then welded together by Cold Steel.
Dickinson alleges the FPS Freezer failed to meet contract specifications as soon as
it started operating. For instance, instead of producing 8,000 pounds of frozen potatoes an
hour, the FPS Freezer produced a maximum of 4,000 pounds per hour. Dickinson also
claims the FPS Freezer could only run for 6 hours or less at a time (when it was intended
to run for 20-22 hours per day) and suffered from excessive ice and frost buildup.
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Dickinson immediately notified FPS of the performance issues. For the next year, FPS
sent numerous field service technicians to the Sugar City facility to attempt to resolve the
issues.
During the course of these visits, the parties disagreed over whether the FPS
Freezer was incapable of meeting contract specifications, or whether Dickinson’s
Refrigeration System was instead inadequate. FPS contends its technicians repeatedly
alerted Dickinson that the Refrigeration System appeared incapable of delivering -40°F at
the coil, and that Dickinson’s employees were harming the FPS Freezer’s efficiency by
spraying hot water on the unit to clean it, by constantly opening the door to look inside,
and by using the wrong oil to run the FPS Freezer. FPS claims Dickinson largely
dismissed these warnings. Dickinson maintains it made each of FPS’ suggested
modifications to its Refrigeration System, but that the FPS Freezer still failed to meet
contract specifications and continued to suffer from the same performance problems.
On or about June 21, 2017, Jason Kwok, Senior Manager of the Support Group for
FPS, met with representatives from Dickinson, Kemper, and Nestle (one of Dickinson’s
biggest customers) at the Sugar City facility to conduct more tests on the FPS Freezer and
Refrigeration System. Although, during the visit, representatives from Kemper and
Nestle concluded the Refrigeration System was sufficient to meet contract specifications,
FPS continued to maintain Dickinson’s Refrigeration System was incapable of supporting
the FPS Freezer.

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On July 13, 2017, Dickinson’s in-house counsel sent a letter to FPS rejecting and
revoking Dickinson’s acceptance of the FPS Freezer. The letter demanded a full refund of
the entire sum paid by Dickinson to FPS pursuant to the Agreement, and also stated:
At this time in order to mitigate Dickinson’s damages, until a new replacement
Tunnel Freezer can be ordered and fully operational, it would be best to retain
possession of the Freezer machine and continue to operate it, even in its
unsatisfactory condition, so as to limit Dickinson’s continuing lost profit damages,
and consequential and incidental damages.
When the time has come with a fully operational replacement Tunnel Freezer,
Dickinson will make arrangements for FPS to take back possession of the defective
Freezer Machine.
Dkt. 39-5, at 3.
FPS’s in-house counsel responded on July 24, 2017, and rejected Dickinson’s
repudiation of the Agreement. Based in part on a report prepared by James Peterson, a
consultant hired by FPS, FPS’s in-house counsel suggested Dickinson’s failure to provide
the FPS Freezer with the contractually required refrigeration capacity was the cause of
the FPS Freezer’s alleged failure to meet contract specifications.2 However, FPS
conceded there were minor issues with the FPS Freezer that were capable of being
resolved, and suggested litigation would not result in a satisfactory outcome for either
party. The letter concluded: “FPS has the knowledge, the resources, and the resolve to
provide the highest level of freezer functionality that is reasonably possible in the

2

Peterson is an independent consultant for Cold Solutions, LLC (“Cold Solutions”). FPS hired Peterson
as a refrigeration consultant in November 2016 to provide consulting on numerous FPS projects. On July
17, 2017, Peterson emailed Kwok and Jeffrey Chang, President of FPS, an analysis of the FPS Freezer
and Refrigeration System. Dkt. 44-39. Although it is not apparent from the briefing what prompted
Peterson’s report, or what specific information Peterson relied upon to write it, it is clear Peterson did not
visit the Sugar City facility or inspect the FPS Freezer prior to his July 17, 2017, email. Instead,
Peterson’s “one and only site visit to the Plant [occurred] in September, 2017.” Dkt.51-1, at 19.

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circumstances, but it can only do so with the ongoing cooperation of Dickinson. FPS
kindly requests that such cooperation continue.” Dkt. 39-6.
After receiving FPS’ July 24, 2017, correspondence, Dickinson showed Peterson’s
analysis to representatives from Nestle and Kemper. Believing Peterson’s conclusions
were based on some flawed assumptions and speculations, they suggested Peterson
should visit the Sugar City facility to inspect the FPS Freezer and Refrigeration System.
Dickinson did not respond to FPS’s rejection of Dickinson’s repudiation letter until
August 23, 2017. On that date, Dickinson’s in-house counsel emailed FPS and invited
Peterson to come to the “Sugar City facility to observe the freezer tunnel and to meet
with Bent Wiencke of Nestle and with a representative of Kemper. . . so that they can
have an impartial engineering discussion.” Dkt. 44-23, at 1. FPS agreed, and Dickinson
contends it thereafter planned an “Engineer Summit” for Peterson to meet with engineers
from Nestle, and representatives from Dickinson, Kemper, and Colmac Coil.3
The meeting occurred on September 20-22, 2017, and Kwok and Peterson
attended. FPS contends Kwok and Peterson were present at the meeting to continue
FPS’s attempt to resolve performance issues, as FPS believed Dickinson had accepted its
request that the parties continue to work together to avoid litigation. FPS was under this
impression because Dickinson responded to FPS’s July 24, 2017, letter rejecting
repudiation and requesting cooperation by inviting FPS’s consultants to the facility to
“have an impartial engineering discussion,” and also because FPS had continued to send
3

Colmac Coil (“Colmac”) is an industrial and commercial coil manufacturer. The parties utilized
Colmac’s services during the “Engineer Summit” to “pull data,” such as system component information
on the Refrigeration System, during “‘performance tests’ of the FPS Freezer.” Dkt. 44-13, at ¶ 12.

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service technicians to the Sugar City facility to work on the FPS Freezer after
Dickinson’s July 13, 2017, repudiation letter. Id. In fact, FPS continued to send
technicians to Dickinson’s facility to troubleshoot through September, 2017. Dkt. 41, at ¶
11. However, unbeknownst to FPS, Dickinson purchased a new tunnel freezer for
approximately $1.4 million from GEA Food Solutions North America (“GEA”) in
August, 2017.
Following the September 20-22, 2017 meeting, an engineer from Kemper sent
Dickinson an email suggesting the tests run during the meeting illustrated the
Refrigeration System was adequate but that the FPS Freezer continued to malfunction.
On September 27, 2018, Dickinson asked FPS to outline a plan for what it intended to do
to modify the FPS Freezer. In response, FPS sent Dickinson a pre-litigation settlement
offer on October 17, 2017. Without admitting fault, FPS offered Dickinson a full refund
of the purchase price of the FPS Freezer in exchange for Dickinson’s release of any
claims against FPS. Believing it was still using the FPS Freezer, FPS offered Dickinson
the opportunity to retain possession of, and to continue to operate, the FPS Freezer until
the earlier of 150 days from: (a) the date Dickinson received FPS’s full refund; or (b) the
date Dickinson notified FPS in writing that the FPS Freezer was no longer required and
could be removed. Dkt. 39-8, at 2. The settlement offer advised Dickinson that FPS
would remove the FPS Freezer at its own expense following the aforementioned
possession period, and also directed Dickinson to exercise reasonable care to avoid injury
or damage to the unit prior to removal.

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Dickinson rejected FPS’s settlement offer the next day. In an October 18, 2017,
letter, Dickinson suggested it would work with FPS’s insurance provider to obtain
prompt payment of its purchase price refund and to initiate settlement discussions
regarding Dickinson’s “significant claim” for consequential damages. Dkt. 39-9, at 2.
The letter also stated: “[Dickinson] is anticipating having the Freezer removed in
January, 2018. We would seek FPS’s full cooperation by coordinating the exact dates and
being in agreement on the vendor FPS will use for the removal.” Id. Shortly after
rejecting FPS’s settlement offer, Dickinson’s industrial refrigeration expert, Chuck
Taylor, examined the FPS Freezer and provided opinions on its design, installation,
configuration, and operation. Taylor spent over 225 hours analyzing the FPS Freezer and
Refrigeration System. Dkt. 46-1, at 5.
Dickinson thereafter filed the instant suit on December 21, 2017, pleading claims
for breach of contract and, in the alternative, breach of express warranty, violations of the
implied covenant of good faith and fair dealing, and promissory estoppel. On December
22, 2017, Dickinson, through counsel, sent FPS’s in-house counsel a letter stating:
Please take notice that beginning on January 13, 2018, Dickinson will have a crane
and initiate the multi-day process of removing the defective Freezer Machine from
its facility and will temporarily have it on site. Given that Dickinson has revoked its
acceptance of the Freezer Machine, FPS is invited, at its own expense, to arrange
for pick-up of the uninstalled Freezer Machine. Assuming FPS will elect to salvage
the Freezer Machine, please coordinate with our office so we can make the
necessary arrangements.
Once the Freezer Machine is in FPS’s possession, FPS will remain obligated to
preserve it as evidence during the pendency of Dickinson’s dispute with FPS.
Failure to adequately preserve the Freezer Machine, or any other documents or
evidence relevant to the parties’ dispute, may constitute spoliation of evidence or
subject FPS to sanctions.
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Dkt. 39-11, Exhibit G, at 3.
Dickinson maintains the parties’ lawyers were in touch through emails and
telephone conversations between December 22, 2017, and January 11, 2018, but FPS
never requested that it be provided with an opportunity to inspect the FPS Freezer or
Refrigeration System during such communications. On January 10, 2018, Dickinson’s
counsel spoke with FPS’s in-house counsel. Although the phone call dealt primarily with
whether FPS would waive formal service of process and whether FPS had tendered the
lawsuit to its insurer, Dickinson’s counsel notes, “at no point in that call did [FPS’s inhouse counsel] raise an objection to Dickinson’s intent to disassemble the FPS Freezer
three days later nor make any demand whatsoever that FPS be allowed to test or to
inspect the FPS Freezer or Refrigeration System prior to disassembly.” Dkt. 44-26, at ¶
23.
However, on January 12, 2018, the day before Dickinson planned to disassemble
the FPS Freezer, Kwok emailed Todd Campbell, Dickinson’s Director of Operations, and
stated FPS would have people at the Sugar City facility to observe and record the unit’s
dismantling and to “arrange transportation to pick up” the FPS Freezer so that FPS could
store and preserve it. Dkt. 39-12, Exhibit H, at 3. Campbell replied FPS could not
“monitor[] anything.” Id., at 2. On January 17, 2018, four days after the FPS Freezer and
Refrigeration System were removed and dismantled, an independent contractor for FPS
emailed Campbell that he had been asked by FPS to get some photos “and assess pick up
and storage of the unit.” Id. Campbell responded, “[a]t this point you or anyone

MEMORANDUM DECISION AND ORDER - 9

associated with FPS are not allowed on site. No photos or access. When that changes FPS
will be notified and things can move forward.” Id.
The extraction of the FPS Freezer took place on January 13, 2018. The parties
offer widely varying accounts of Dickinson’s disassembly and subsequent storage of the
unit. Dickinson contends it hired a number of qualified professional contractors,
including most of the contractors who initially installed the FPS Freezer, to carefully
disassemble it. Dickinson also hired Idaho Steel Products, Inc. (“Idaho Steel”), a thirdparty contractor that specializes in the construction, installation, and removal of food
processing equipment, to assume primary responsibility for disassembly of the FPS
Freezer.
Dickinson maintains that, given the sheer size of the FPS Freezer, Idaho Steel’s
personnel had to remove the welding where the two halves of the FPS Freezer had
originally been welded together. Idaho Steel personnel then disconnected the belts and
chains and the four connecting bolts for each fan motor and dismounted the various fans
and engines from the FPS Freezer. Dickinson’s employees subsequently worked to store
the FPS Freezer, its component parts, and its control panel, in Dickinson’s parking lot in
crates and under tarps. Dickinson states it asked its employees and Idaho Steel to take
special care and every reasonable precaution in the disassembly process to ensure that the
FPS Freezer and its component parts were not damaged, destroyed, or altered any more
than reasonably necessary during removal.
FPS alleges Dickinson instead used straight edges to cut the FPS Freezer in half
and cut the legs out from under the two halves. Rather than simply disconnecting or
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unhooking them, FPS suggests Dickinson severed all refrigeration, water, steam, air lines,
and electrical wiring and conduits from the FPS Freezer. FPS contends Dickinson also
severed fan motors, thumper motors, and chains and pipe sections from the FPS Freezer.
Dickinson allegedly used duct tape to cover the “gaping holes it had created” with
removal of such parts, as well as to cover “the massive incision it cut down the middle of
the FPS Freezer.” Dkt. 39-1, at 8.
The parties also disagree over Dickinson’s subsequent storage of the dismantled
unit. While Dickinson claims it has carefully stored the disassembled FPS Freezer in its
parking lot—“the only place with adequate space at Dickinson’s Sugar City Facility to
store it”—in crates covered with tarps, FPS alleges all parts were “dumped” into crates
and have been exposed to the elements ever since the January 13, 2018, disassembly.
Compare Dkt. 44, at 17 with Dkt. 39-1, at 8. FPS contends such exposure has resulted in
significant damage above and beyond that sustained during Dickinson’s initial removal.
For instance:
A ‘refrigeration coil’ consists of a series of pipes and ‘fins’ that dissipate heat. . .
[t]he pipes of the refrigeration coils have suffered weathering and damage; [t]he
conduit piping, which feeds cooling power to the FPS Freezer, has been . . . exposed
to the elements for prolonged periods of time and will require dehydrating and
chemical treatment to be restored, if at all; [r]ust appears throughout the FPS
Freezer; [v]ermin have invested the FPS Freezer and the floor is now covered in
droppings; [and] the computer control panel shows signs of standing water and the
circuitry is weathered.
Dkt. 39-1, at 9-10.
FPS also highlights Dickinson significantly altered the Refrigeration System to
work with its new GEA freezer after disassembling the FPS Freezer. As a result,

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“significantly meaningful discrepancies exist within the various paper records relating to
the FPS Freezer’s design and installation,” including “differences in dimensions,
equipment make and model, configurations, and diagnostic numbers.” Id., at 10. Given
such discrepancies, FPS contends “testing of the actual FPS Freezer and the actual
refrigeration infrastructure on site at the Plant at the time of operation (as opposed to
relying on documents) is critical.” Dkt. 39-1, at 10.
Because Dickinson barred FPS access to the Sugar City facility, FPS contends it
was unable to assess the unit’s condition until October 16, 2018, during a site visit with
FPS’s counsel and technical expert arranged through discovery. After FPS’s expert
determined there were multiple tests he could not run due to the disassembly and storage
of the FPS Freezer and subsequent modification of the Refrigeration System, FPS’s
counsel conferred without resolution with Dickinson’s counsel. FPS’s counsel thereafter
filed the instant Motion for Spoliation, seeking dismissal as a sanction for Dickinson’s
purportedly willful destruction of the key evidence in this suit.
III. LEGAL STANDARD
The authority to sanction a party who has despoiled evidence is based on Federal
Rule of Civil Procedure 37 and on the court’s inherent power to levy sanctions in response
to abusive litigation practices. Leon v. IDX Sys., Corp., 464 F.3d 951, 958 (9th Cir. 2006).
Rule 37 sanctions are available when a party “fails to obey an order to provide or permit
discovery.” Id. (citing Fjelstad v. Am. Honda Motor Co., Inc., 762 F.2d 1334, 1337-1338
(9th Cir. 1985)). Where, as here, Rule 37 is not applicable because there was no associated
discovery order, federal trial courts “are invested with inherent powers that are governed
MEMORANDUM DECISION AND ORDER - 12

not by rule or statute but by the control necessarily vested in courts to manage their own
affairs so as to achieve the orderly and expeditious disposition of cases.” Unigard Sec. Ins.
Co. v. Lakewood Eng’g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992) (internal quotation
marks and citations omitted). The court’s inherent powers include “‘the broad discretion to
make discovery and evidentiary rulings conducive to the conduct of a fair and orderly
trial.’” Id. (quoting Campbell Indus. V. M/V Gemini, 619 F.2d 24, 27 (9th Cir. 1980)).
A court’s discretion in imposing sanctions can range in severity from minor
sanctions, such as awarding attorneys’ fees, to more severe sanctions including
permitting a jury to draw an adverse inference against a party responsible for the
destruction of evidence, ordering the exclusion of evidence, or even dismissal of claims.
Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993); Reinsdorf v. Skechers U.S.A.,
296 F.R.D. 604, 626 (C.D. Cal. 2013). To decide which spoliation sanction, if any, to
impose, courts generally consider: (1) the degree of fault of the party who altered or
destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and
(3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing
party. Reinsdorf, 296 F.R.D. at 626.
The exercise of a court’s inherent powers must be applied with “restraint and
discretion” and only to the degree necessary to redress the abuse. Chambers v. NASCO,
Inc., 501 U.S. 32, 45 (1991); see also Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76,
79 (3rd Cir.1994) (courts should choose “the least onerous sanction corresponding to the
willfulness of the destructive act and the prejudice suffered by the victim”). Accordingly,
the determination of an appropriate sanction for spoliation is “confined to the sound
MEMORANDUM DECISION AND ORDER - 13

discretion of the trial judge, and is assessed on a case-by-case basis.” Fujitsu Ltd. v. Fed.
Express Corp., 247 F.3d 423, 436 (2d Cir.2001) (internal citations omitted).
IV. ANALYSIS
As an initial matter, the Court must address Dickinson’s claim that spoliation
sanctions are unavailable because it did not “destroy” any evidence. Dkt. 44, at 28.
Dickinson suggests it merely “disassembled” the FPS Freezer and Refrigeration System,
and that courts have found spoliation sanctions are unavailable where evidence is not lost
or destroyed. Id. Dickinson’s definition is overly restrictive. Spoliation is “‘the
destruction or significant alteration of evidence, or the failure to preserve property for
another’s use as evidence[,] in pending or reasonably foreseeable litigation.’” Reinsdorf,
296 F.R.D. at 626 (quoting Zubalake v. UBS Wardburg, LLC, 220 F.R.D. 212, 216
(S.D.N.Y. 2003) (emphasis added)). FPS has presented substantial evidence to establish
the FPS Freezer and Refrigeration System were not simply “disassembled,” but were at
least significantly altered, if not destroyed.
For instance, with respect to the FPS Freezer, Dickinson did not simply remove
the welding between the two original halves, but cut metal and plastic inside the FPS
Freezer that were not part of the mid-line. Dkt. 41, at ¶¶ 15, 17-18. All six of the unit’s
“fins” used to dissipate heat “have been completely bent beyond repair” and have large
gashes in them. Id., at ¶ 13. Other large metal components are severely dented. Dkt. 41-7.
The conduit piping, which feeds cooling power to the FPS Freezer, has been cut and
sections have been removed. Dkt. 41, at ¶ 15. The insulation encapsulating the FPS
Freezer body has been shredded. Id., at ¶ 16. The conveyor belt support bed, which runs
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the entire length of the FPS Freezer, has been cut in half, and the conveyor belt chain
mail has been removed from the freezer “and dumped in a wooden box.” Id., at ¶¶ 17-18.
In addition, components such as fan motors, gear motors, and computer wiring used to
connect the FPS Freezer to its computer control panel have all been severed, and the
mounting brackets and connection points used to attach these items to the FPS Freezer
have also been cut. Id., at ¶ 19.
Dickinson also significantly altered the Refrigeration System. Specifically:
The FPS Freezer only required a single ammonia supply line (“LTRL”), coil
connection, and defrost condensate (“DC”) riser for each refrigeration coil. Since
removing the FPS Freezer, Dickinson has reconfigured its refrigeration
infrastructure by splitting its pipes into two LTRL lines, two coil connections, and
two DC risers. . . .
New refrigeration piping has been added to attach to a new GEA precooling unit,
which is of an entirely different type and configuration than the precooling unit that
previously served the FPS Freezer.
The FPS Freezer piping was removed, the sections where those pipes entered and
exited the Plant’s ceiling were patched with . . . metal, and new pipes for the GEA
Freezer added in different areas of the Plant’s ceiling than that of the FPS Freezer’s
piping. . . .
A surge drum for the GEA precooler that did not exist when the FPS Freezer was
installed has now been integrated into the refrigeration infrastructure.
New valves for the refrigeration infrastructure roof piping have been added.
Dkt. 40, at ¶¶ 11, 14, 15, 17-18.
Due to such changes, testing of the FPS Freezer and Refrigeration System, both as
they interfaced together and independently during the relevant period of operation, is
impossible at this point. Id., at ¶¶ 22-29.

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Moreover, Dickinson’s subsequent storage of the FPS Freezer has caused
additional damage to the FPS Freezer. As mentioned, the pipes of the refrigeration coils
“have suffered weathering and damage”; the conduit piping has “been exposed to the
elements for prolonged periods of time and will require dehydrating and chemical
treatment to be restored, if at all”; rust appears throughout the FPS Freezer; vermin have
“infested the FPS Freezer and the floor is now covered in droppings”; and the control
panel shows signs of standing water and the circuitry is weathered. Dkt. 41, at ¶¶ 14-15,
20-22.
Although Dickinson argues it hired and utilized qualified professional third-party
contractors to disassemble the Freezer, that it warned such contractors “to take special
care and employ every reasonable precaution in the disassembly process,” and that FPS’s
characterization of the disassembly is mere hyperbole, Dickinson does not present
evidence to rebut FPS’s evidence showing both the FPS Freezer and Refrigeration
System have been significantly altered. Dkt. 44, at 16, 28-29. As such, the Court finds
Dickinson did not merely disassemble the FPS Freezer and Refrigeration System, but
improperly engaged in the spoliation of evidence.
A. Elements of Spoliation
A party seeking sanctions for spoliation of evidence must establish that the party
having control over the evidence had an obligation to preserve it at the time it was
destroyed, that the evidence was destroyed with a “culpable state of mind,” and that the
evidence was relevant to the party’s claim or defense. Reinsdorf, 296 F.R.D. at 626
(quoting Zubalake, 220 F.R.D. at 220); see also Lofton v. Verizon Wireless LLC, 308
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F.R.D. 276, 287 (N.D. Cal. 2015) (“The party requesting spoliation sanctions bears the
burden of proving all three elements of the claim.”). The parties dispute FPS’s ability to
prove the first two elements of a spoliation claim. As to the third element, Dickinson and
FPS agree the FPS Freezer and Refrigeration System are relevant to both parties’ claims
and defenses. The FPS Freezer is the object of the parties’ Agreement and the basis for
Dickinson’s multi-million dollar claim, while the Refrigeration System is the basis of
FPS’s defense. As such, there can be no question as to the relevance of the evidence.
1. Duty to Preserve
“A party must preserve evidence it knows or should know is relevant to a claim or
defense of any party, or that may lead to the discovery of relevant evidence.” Bown v.
Reinke, 2016 WL 107926, at *5 (D. Idaho 2016). The duty to preserve arises “not only
during litigation, but also extends to the period before litigation when a party should
reasonably know that evidence may be relevant to anticipated litigation.” Id. Further, a
party must ensure that relevant information is retained on a continuing basis once the
preservation obligation arises. Zubalake, 220 F.R.D. at 218-220. FPS contends Dickinson’s
duty to preserve the FPS Freezer and Refrigeration System as evidence was triggered on
July 13, 2017, when Dickinson attempted to repudiate the Agreement, continued
throughout the pre-litigation period, and remained in place after Dickinson filed its
Complaint on December 21, 2017, and subsequently disassembled the FPS Freezer and
Refrigeration System on January 13, 2018.
Dickinson agrees its duty to preserve the FPS Freezer as evidence arose on July
13, 2017, but maintains it discharged this duty because it gave FPS a meaningful and
MEMORANDUM DECISION AND ORDER - 17

adequate opportunity to inspect the FPS Freezer prior to removal. Dickinson cites several
cases for the proposition that spoliation sanctions are inappropriate when the opposing
party had an adequate and meaningful opportunity to inspect the evidence prior to its
destruction. Dkt. 44, at 19-20 (citing Fujitsu, 247 F.3d at 436; Cedar Petrochemicals, Inc
v. Dongbu Hannong Chem. Co., Ltd., 769 F. Supp. 2d 269, 291 (S.D.N.Y. 2001);
Gaffield v. Wal-Mart Stores E., LP, 616 F. Supp. 2d 329, 337-388 (N.D.N.Y. 2009)). FPS
responds such cases are inapposite and are solely Second Circuit authority. Regardless,
the Court finds FPS was not given an “adequate and meaningful opportunity to inspect”
the FPS Freezer and Refrigeration System.
Dickinson first suggests FPS had an adequate and meaningful opportunity to
inspect the FPS Freezer and Refrigeration System prior to disassembly because FPS’s
employees tested both many times after installation in an attempt to resolve performance
issues. FPS’s visits to the Sugar City facility to troubleshoot are entirely distinguishable
from the opportunity to inspect evidence after a lawsuit is filed. FPS’s site visits were
made to work with Dickinson to resolve problems with the FPS Freezer and Refrigeration
System, not in the anticipation of litigation. As such, FPS did not have the opportunity to
run tests or analysis to defend against Dickinson’s claims.
Dickinson also suggests Peterson, FPS’s “retained expert,” had already tested and
inspected the FPS Freezer and Refrigeration System before disassembly, thus relieving
Dickinson of any further preservation obligations. Dkt. 44, at 22-23. However, Peterson
was hired by FPS in November 2016 (eight months before Dickinson attempted to
rescind the Agreement in July 2017) as an independent consultant for numerous FPS
MEMORANDUM DECISION AND ORDER - 18

projects, and was never retained by FPS as an expert in this litigation. Peterson repeatedly
confirmed this during his deposition:
Q.
A.

Mr. Peterson, were you ever requested by any representative of FPS to be an
expert witness in this litigation?
No.

Dkt. 49-1, Ex. B at 131: 13-16)
Q.
A.
Q.
A.

Okay. And I think we already established, you weren’t retained as any sort
of litigation expert in this case or anything like that.
I am not.
Okay. You’re not here to defend against a lawsuit or claims or anything like
that. Right?
I don’t believe so.

Id., at 191: 7-13.
Q.

A.
Q.
A.

Okay. So said another way, you -- the first time you received a
communication from FPS regarding litigation and that you need to prepare
files and whatnot in order to -- in case there was going to be a lawsuit was
approximately one month after your visit in September of 2017.
Yes.
So obviously, in September of 2017, you weren’t going there with an eye
towards litigation. Right?
Correct.

Id., at 250: 10-20.
Dickinson’s claim that “FPS’s own retained expert, James Peterson . . . actually
tested and inspected the FPS Freezer,” is misleading in light of such testimony. Dkt. 44,
at 22. Moreover, although Peterson visually inspected the FPS Freezer, he did not run any
tests on the FPS Freezer or Refrigeration System during his September 2017 visit:
A.
Q.
A.

As far as testing goes, I didn’t hook anything up to the system. Everything I
did was visual off of the freezer panel or off the compressor panels. Colmac
[h]ooked up some pressure testing equipment to the data loggers -Okay.
-- that I looked at --

MEMORANDUM DECISION AND ORDER - 19

Q.
A.
Q.
A.

Okay.
-- but I didn’t do the testing.
-- Okay, so that -- that’s helpful. . . So you did visual observations; Colmac
collected some data?
Yes.

Id., at 184: 11-24.
Dickinson suggests Peterson agreed the Refrigeration System exceeded contract
specifications and the FPS Freezer was inadequate after his site visit. Although FPS
disputes this contention, Peterson’s conclusions are irrelevant to the instant motion
because he viewed the FPS Freezer and Refrigeration System on one occasion three
months before the instant suit was filed, and did not run any tests on either.
Nonetheless, Dickinson contends, due to Peterson’s September, 2017, site visit,
FPS “had an opportunity to obtain a refrigeration engineering expert to test and to
evaluate the Refrigeration System after the date that FPS knew Dickinson’s lawyer was
making a claim for damages, and FPS then in fact conducted such an inspection with a
well-qualified industrial refrigeration engineer.” Dkt. 44, at 22 (emphasis in original).
This assertion is inaccurate. FPS did not know Dickinson was making a claim for
damages during the September, 2017, site visit. At that time, FPS believed Dickinson had
accepted FPS’s July 24, 2017, rejection of Dickinson’s repudiation of the Agreement
because Dickinson responded by inviting FPS’s consultants to the Sugar City facility to
“have an impartial engineering discussion,” and because FPS had continued to send
service technicians to the Sugar City facility to work on the FPS Freezer after
Dickinson’s July 13, 2017, repudiation letter. Dkt. 44-23.

MEMORANDUM DECISION AND ORDER - 20

Although Dickinson suggests it is disingenuous for FPS to claim it did not know in
September of 2017 that it would be defending against litigation while, at the same time,
arguing Dickinson knew litigation was likely as early as July of 2017, it is not unusual for
a plaintiff to have knowledge that it will be filing suit long before a defendant does.
Silvestri v. Gen. Motors Corp., 271 F.3d 583 (4th Cir. 2001) (plaintiff reasonably
anticipated litigation three years prior to notifying defendant). As late as September 27,
2017, after the September 21, 2017, site visit, Dickinson asked FPS to “outline a plan
[sic] what FPS intends to do . . . for all modification you are planning to perform” on the
FPS Freezer, implying FPS should continue with its repair attempts, rather than prepare
for litigation. Dkt. 44-41, at Exhibit 15-1.
Because it was unaware Dickinson had already purchased a new freezer, and
believed the parties were still working together to resolve the issue, FPS did not
reasonably anticipate litigation until a month after the September 2017 visit, when
Dickinson rejected FPS’s offer to buy back the FPS Freezer on or around October 18,
2017. Since each of FPS’s visits to the Sugar City facility were made in the attempt to
troubleshoot and service the FPS Freezer, rather than to inspect the FPS Freezer and
Refrigeration System to defend against litigation, FPS did not have an “adequate and
meaningful opportunity to inspect” the relevant evidence prior to disassembly. Dkt. 44, at
19.
Finally, Dickinson argues it discharged its duty to preserve the FPS Freezer and
Refrigeration System as evidence because it notified FPS, in July, October, and
December of 2017, that the FPS Freezer and Refrigeration System would be removed,
MEMORANDUM DECISION AND ORDER - 21

but FPS neither made any demands to inspect or test the unit prior to disassembly, nor
suggested Dickinson should not remove it. Dkt. 44, at 24-25. The record does not support
this contention. Dickinson’s July 13, 2017, repudiation letter stated Dickinson would
retain the FPS Freezer until it could purchase a replacement and then “make
arrangements for FPS to take back possession of the defective Freezer machine.” Dkt.
39-5, at 3 (emphasis added). As discussed, FPS reasonably believed Dickinson retracted
this repudiation. Moreover, Dickinson never notified FPS it purchased the GEA
replacement freezer and never made arrangements for FPS to take back possession of the
FPS Freezer. In the absence of such communication, Dickinson’s July 13, 2017,
correspondence did not give FPS notice of the unit’s imminent removal.
Similarly, Dickinson’s October 18, 2017, letter notified FPS Dickinson was
“anticipating having the Freezer removed in January, 2018.” Dkt. 39-9, at 2. However,
the letter also stated: “We would seek FPS’s full cooperation by coordinating the exact
dates and being in agreement on the vendor FPS will use for the removal.” Id., at 3.
Dickinson cannot be said to have given notice of its impending removal and disassembly
of the FPS Freezer and Refrigeration System by requesting that the parties work together
to coordinate a date for FPS to remove the unit.
Dickinson did not file this suit until December 21, 2017. In a December 22, 2017,
email, Dickinson notified FPS for the first time that Dickinson would remove the FPS
Freezer on January 13, 2018. Although it is unclear why FPS did not request that
Dickinson refrain from disassembly after receiving the December 22 letter, FPS only had
approximately three weeks to do so. The Court cannot find Dickinson discharged its duty
MEMORANDUM DECISION AND ORDER - 22

to preserve the key evidence in this dispute by giving FPS less than a month to request an
inspection or to prevent Dickinson’s removal and disassembly of the FPS Freezer and
Refrigeration System.4
Once Dickinson’s duty to preserve took effect in July of 2017, Dickinson was
required to preserve the FPS Freezer as evidence. This duty was not discharged simply
because FPS’s employees and independent consultant attempted to repair the FPS Freezer
and Refrigeration System before FPS was aware litigation was likely, nor because
Dickinson gave FPS three weeks-notice that the FPS Freezer and Refrigeration System
would be disassembled. Having found Dickinson had the duty to preserve the FPS
Freezer as evidence, its removal and disassembly of the unit was, at a minimum,
negligent. In re Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1070 (N.D. Cal.
2006) (once the duty to preserve attaches, any destruction of evidence is negligent).
2. Dickinson’s culpability
Federal courts have not been “uniform in defining the level of culpability—be it
negligence, gross negligence, willfulness or bad faith—that is required before sanctions
are appropriate for evidence destruction.” Reinsdorf, 296 F.R.D. at 627 (internal
4

The cases Dickinson relies upon to suggest otherwise do not support its position. Dickinson suggests the
court in Thiele v. Oddy’s Auto & Marine, Inc., 906 F. Supp. 158, 162 (W.D.N.Y. 1995) held there was no
spoliation claim where the party asserting spoliation had an opportunity to inspect evidence but failed to
do so. Thiele instead held sanctions were inappropriate where the party seeking them inspected the
relevant evidence at the same time it was inspected by plaintiffs. Id. While Dickinson retained an expert
who inspected the FPS Freezer and Refrigeration System in preparation for litigation, FPS did not have
this opportunity. Nor did the court in McDonald v. ISK Biosciences, Inc., 1997 WL 34479221, at *2 (S.D.
Tex. 1997) deny sanctions because the plaintiff failed to utilize her opportunity to conduct an inspection.
Instead, sanctions were denied because defendant “was under no duty to interrupt the operation of its
plant, including the completion of its scheduled construction project” and because plaintiff “failed to
demonstrate defendant intentionally destroyed evidence it was required to preserve in connection with the
case.” Id.

MEMORANDUM DECISION AND ORDER - 23

quotation marks and citation omitted). In the Ninth Circuit, district courts may impose
sanctions for negligent destruction of evidence, even without a finding of bad faith. In re
Napster, 462 F. Supp. 2d at 1066. The Ninth Circuit has instructed sanctions may be
imposed against a spoliating party that merely had “simple notice of ‘potential relevance
to the litigation.’” Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 2013) (quoting
Akiona v. United States, 938 F.2d 158, 161 (9th Cir. 1991)). Because Dickinson
destroyed relevant evidence it had a duty to preserve, the Court finds its conduct was
sufficiently culpable to warrant sanctions.
Dickinson argues the Court should apply Idaho law, which requires a “rigid
scienter requirement for spoliation claims.” Dkt. 44, at 25. In Idaho, the “merely
negligent loss of destruction of evidence is not sufficient to invoke the spoliation
doctrine.” Courtney v. Big O Tires, Inc., 87 P.3d 930, 933 (Idaho 2004). Dickinson cites
ArcelorMittal Indiana Harbor LLC v. Amex Nooter, LLC, 2018 WL 509890, at *4 (N.D.
Ind. 2018) to suggest many federal courts have held that where state law claims are
involved, the court should apply the spoliation law of the state in which it sits. The
Indiana court’s holding was limited, however, to sanctions based on pre-suit spoliation.
Id. at *3. Where, as here, the destruction of evidence took place after litigation
commenced, “federal courts must have the power to sanction for litigation abuse and
need not look to state law in fashioning appropriate sanctions.” Id. at *6 n. 2 (quoting
Ward v. Texas Steak Ltd., 2004 WL 1289776, at *2 (W.D. Va. 2004)); see also Glover, 6
F.3d at 1329 (assessing district court’s spoliation sanction in a diversity action under
federal spoliation standard); Adkins v. Wolever, 554 F.3d 650, 652 (6th Cir. 2009); Flury
MEMORANDUM DECISION AND ORDER - 24

v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005) (“[F]ederal law governs
the imposition of sanctions for failure to preserve evidence in a diversity suit.”); King v.
Ill. Cent. R.R., 337 F.3d 550, 556 (5th Cir. 2003) (a spoliation ruling is evidentiary in
nature and federal courts generally apply their own evidentiary rules); Silvestri v. General
Motors Corp., 271 F. 3d 583, 590 (4th Cir. 2001) (applying federal law of spoliation
because the power to sanction for spoliation derives from the inherent power of the court,
not from substantive law).
While the Court finds Dickinson was at least negligent in destroying evidence it
had a duty to preserve, which sanction, if any, that it imposes depends largely on
Dickinson’s degree of fault and the resulting prejudice to FPS. In re Napster, 462 F.
Supp. 2d at 1066.
B. Appropriate Sanction
FPS argues dismissal is the most appropriate sanction for Dickinson’s destruction
of evidence it had a duty to preserve.
1.

Dismissal

Dismissal is an available sanction when “a party has engaged deliberately in
deceptive practices that undermine the integrity of judicial proceedings.” AnheuserBusch, Inc. v. Nat. Beverage Distrib., 69 F.3d 337, 348 (9th Cir. 1995) (citations
omitted). Before imposing the harsh sanction of dismissal, the Court must weigh several
factors:
(1) the public’s interest in expeditious resolution of litigation; (2) the court’s
need to manage its dockets; (3) the risk of prejudice to the party seeking

MEMORANDUM DECISION AND ORDER - 25

sanctions; (4) the public policy favoring disposition of cases on their merits;
and (5) the availability of less drastic sanctions.
Id.
While the Court is not required to make explicit findings with respect to each of
these factors, a finding of willfulness, fault, or bad faith is required for dismissal to be
proper. Leon, 464 F.3d at 958.
a.

Willfulness

“A party’s destruction of evidence qualifies as willful spoliation if the party has
some notice that the evidence was potentially relevant to the litigation before it was
destroyed.” State Farm Fire and Cas. Co. v. Broan Mfg. Co., Inc., 523 F. Supp. 2d 992,
997 (9th Cir. 2007) (citing Leon, 464 F.3d at 958). Here, the FPS Freezer and
Refrigeration System were not only relevant to this case, but were integral to Dickinson’s
theory of liability and to FPS’s defense. Dickinson clearly had notice that such evidence
was relevant to this litigation. In fact, Dickinson warned FPS one day after Dickinson
filed suit that if FPS obtained possession of the FPS Freezer, FPS would “remain
obligated to preserve it as evidence during the pendency of Dickinson’s dispute with
FPS,” and cautioned “[f]ailure to adequately preserve the Freezer Machine . . . may
constitute spoliation of evidence or subject FPS to sanctions.” Dkt. 39-11, Exhibit G, at 3.
Because it destroyed evidence it knew was relevant to the litigation, Dickinson’s
destruction of the FPS Freezer and Refrigeration System was willful.
b.

Anheuser-Busch Factors

Having found Dickinson’s destruction of evidence was willful, the Court considers

MEMORANDUM DECISION AND ORDER - 26

the five nonexclusive factors articulated by the Ninth Circuit in Anheuser-Busch to
determine whether case dispositive sanctions are just.5 69 F. 3d at 348. The first and
second factor support dismissal when the destruction of evidence “obscure[es] the factual
predicate of the case and consum[es] months of sanction-related litigation.” Leon, 464
F.3d at 958 n. 5. Dickinson’s spoliation of the FPS Freezer and Refrigeration System
obfuscates the very heart of the matter in dispute: whether the FPS Freezer was
inadequate or whether the Refrigeration System was instead incapable of supporting the
FPS Freezer. The Court has also spent significant time investigating and resolving the
spoliation issue. The first two factors thus support dismissal. Id.; see also State Farm, 523
F. Supp. 2d at 997.
The fourth factor, the public policy favoring disposition on the merits, “always
weighs against the sanction of dismissal.” BNSF Ry. Co. v. Quad City Testing Lab., 2009
WL 1067824, at *4 (D. Mont. 2009). Because factors one and two support sanctions and
four “cuts against case-dispositive sanctions,” factors three and five—the prejudice
suffered by the non-spoliating party and the availability of less drastic sanctions— “are
decisive.” Valley Engineers v. Electric Eng’g Co., 158 F.3d 1051, 1057 (9th Cir. 1998).
(i)

Prejudice to FPS

A defendant suffers prejudice if the plaintiff’s actions impair the defendant’s
ability to go to trial or threaten to interfere with the rightful decision of the case.

5

Although this five-factor test is generally used in the Ninth Circuit to review the propriety of Rule 37
sanctions, the Anheuser-Busch Court applied it to review sanctions granted under the court’s inherent
authority. Id.at 348; see also Leon, 464 F.3d at 951 n. 4. The Court accordingly applies the five-factor test
here.

MEMORANDUM DECISION AND ORDER - 27

Anheuser-Busch, 69 F.3d at 353 (citation omitted). Dickinson suggests FPS fails to
provide any meaningful detail regarding what evidence it believes it has been prohibited
from establishing at trial. Dkt. 44, at 29-32. For example, while, in its Motion, FPS
details all of the changes Dickinson made to the Refrigeration System once it installed the
replacement GEA Freezer, Dickinson claims FPS “fails to explain what data it could have
gathered from the prior iteration of the Refrigeration System that it cannot now gather.”
Id., at 30. Dickinson argues FPS has not only already collected such data, but also fails to
explain how new data could be materially different from the previous data. Id. Dickinson
also contends FPS has not shown how the purported damage to the FPS Freezer
“somehow prevents it from gathering evidence to defend its case.” Id. at 31. Dickinson
repeatedly suggests FPS’s allegations of prejudice, “beg the question: ‘So what?’”
because FPS purportedly has not established precisely how Dickinson’s spoliation of
evidence prevents FPS from defending its case. Id. at 30-31.
Dickinson’s contentions are misplaced. First, the finding of spoliation shifts the
burden of proof “to the guilty party to show that no prejudice resulted from the
spoliation” because that party “is in a much better position to show what was destroyed
and should not be able to benefit from its wrongdoing.” Apple Inc. v. Samsung, 888 F.
Supp. 2d 976, 998 (N.D. Cal. 2012). Dickinson’s attempt to instead shift the burden to
FPS to definitively prove prejudice is inappropriate in light of Dickinson’s destruction of
the key evidence in this dispute just weeks after it filed suit against FPS. Nor can the
Court take seriously Dickinson’s claim that the data FPS needs to defend its claims “has
already been gathered.” Dkt. 44, at 30 (emphasis in original). Clearly, Dickinson felt
MEMORANDUM DECISION AND ORDER - 28

more data was necessary to prosecute its claims, as Dickinson’s expert, Taylor, inspected
the FPS Freezer and Refrigeration System after the relationship between the parties
deteriorated to the point where litigation was imminent, and also ran additional tests on
January 8, 2018—just five days before Dickinson disassembled the unit. Dkt. 46-1, at 4,
18. FPS has been prejudiced because Dickinson’s expert had the opportunity to run tests
and analyze the FPS Freezer and Refrigeration System as it existed at the time the
Complaint was filed, while FPS’s expert cannot.
Second, the Court finds FPS has demonstrated specific prejudice it has suffered
due to Dickinson’s spoliation. FPS’s expert, Eduardo Ford, as well as FPS’s witnesses,
detail not only a number of tests that could not be run due to the destruction of the unit,
but also why such tests are relevant to FPS’s defense. For instance, Ford noted, “had
Dickinson not cut the FPS Freezer in half and left it outside for a year, and had it not
significantly changed its refrigeration infrastructure, I would have engaged a third-party
certifier to calibrate the refrigeration infrastructure instrumentation and gauges to verify
the accuracy of the data being recorded.” Dkt. 40, at ¶ 23. Such testing is relevant
because Dickinson told FPS its temperature sensors indicated the Refrigeration System
was providing -40 degrees “at the coil,” of the FPS Freezer, as contractually required, but
that the FPS Freezer was still malfunctioning. FPS contends the Refrigeration System’s
temperature gauges were not properly calibrated and weren’t operating at a low enough
temperature to provide -40 degrees coil temperature, so the Refrigeration System was
instead at fault. See, e.g., Dkt. 51-1, at 22; Dkt. 49-3, Exhibit B, at 206, ll. 4-25; 207, ll.

MEMORANDUM DECISION AND ORDER - 29

1-25. FPS cannot support its claim that the temperature sensors were miscalibrated due to
Dickinson’s destruction of evidence.
Among other issues, Ford also identifies the following tests which cannot be
performed due to Dickinson’s conduct:
Effectiveness of the FPS Freezer’s Sequential Hot-Gas Defrost System relied on
Kemper, the refrigeration system designer/contractor. Kemper was required to
provide sufficient hot-gas flow to the coils at the design saturated condensing
pressure and temperature of the refrigeration system, to assure adequate defrosting
of the coils. Case file documents reviewed do not indicate that Kemper performed
engineering calculations to determine the required minimum hot-gas flow, pressure
and temperature, required to support FPS’ Sequential Hot-Gas Defrost System.
Opportunity to determine an optimum defrost initiation, frequency and duration was
lost by [Dickinson] prematurely cutting-up, dismantling and disposing of the FPS
Freezer.
[C]alculations reported on [by Nestle following the September 2017 meeting] were
based on sound engineering calculations and estimates commonly used by industrial
refrigeration practitioners to approximate production demand loads vs. installed
coil capacity; these calculations do not account for coil inefficiencies introduced by
fouling of the coil’s surfaces with oil, temperature penalty introduced by liquid
columns imposed on the coils, uneven distribution of frost on the coils, and, external
factors such as operating personnel entering the freezer [an] inordinate amount of
times throughout the day.
The freezer Evaporator Coils and refrigeration infrastructure that supported the FPS
Freezer are no longer in place to allow proper testing of equipment and components
by sources competent and qualified to conduct and certify test results. Therefore,
expert testimony of the actual freezer cannot be performed to arrive at a conclusive
opinion as to whether the FPS Freezer evaporator coils were undersized [as
Dickinson contends] or not[.]
Dkt. 44-46, at 9-11 (emphasis in original).
In short, FPS has offered specific evidence to establish it was prejudiced due to
Dickenson’s destruction of evidence. However, there is also a great deal of data regarding
the FPS Freezer and Refrigeration System obtained by both parties before the unit was

MEMORANDUM DECISION AND ORDER - 30

disassembled. Much of the evidence regarding the respective performance issues
associated with the FPS Freezer and with the Refrigeration System, and the parties’
interpretations of each, is already in the record. See, e.g., Dkt. 39-6, Exhibit B; Dkt. 39-7,
Exhibit C; Dkt. 41; Dkt. 44-7; Dkt. 44-8; Dkt. 44-16; Dkt. 44-31; Dkt. 44-32; Dkt. 44-39;
Dkt. 44-46; Dkt. 49-1, Exhibit B. Such evidence will undoubtedly be supplemented at
trial. FPS’s employees can also testify about the problems they encountered with the
Refrigeration System, and their conclusions that the Refrigeration System was
inadequate. Thus, although FPS has been prejudiced by Dickinson’s conduct, it is not
without evidence to support its claims.
(ii)

Alternative Sanctions

Even where, as here, a party’s destruction of evidence was willful and the victim
suffers prejudice as a result, the Court must consider “less severe alternatives than
outright dismissal.” Leon, 464 F.3d at 958 (internal quotation marks and citation
omitted). The Court is to choose the “least onerous sanction corresponding to the
willfulness of the destructive act and the prejudice suffered by the victim.” Reinsdorf,
296 F.R.D. at 626. Although the court may impose sanctions for willful spoliation, “a
party’s motive or degree of fault in destroying evidence is relevant to what sanction . . . is
imposed.” Realnetworks, Inc. v. DVD Copy Control Ass’n, Inc., 264 F.R.D. 517, 523
(N.D. Cal. 2009).
FPS argues Dickinson not only willfully destroyed the FPS Freezer, but had an
improper motive because, with full understanding of its obligation to preserve and protect
evidence, “Dickinson proceeded to destroy the very evidence upon which the case centers
MEMORANDUM DECISION AND ORDER - 31

weeks after filing this litigation, while actively preventing FPS’s efforts to remove and
preserve it.” Dkt. 39-1, at 17. Dickinson does not acknowledge, much less offer any
explanation, for its refusal to allow FPS to view the disassembly of the FPS Freezer and
Refrigeration System, nor for its rejection of FPS’s request to remove and store the FPS
Freezer following removal.
Nevertheless, Dickinson suggests it acted “in good faith from a desire to mitigate
damages, not with an intent to destroy evidence.” Dkt. 44, at 25 (emphasis in original).
Dickinson contends it could not provide its customers with a sufficient supply of potatoes
due to the defective FPS Freezer, and suggests it was losing millions of dollars in lost
profits as a result. Dickinson states it “knew of its obligation to mitigate damages” and
“disassembled and replaced the Freezer out of a desire to prevent unnecessary financial
losses and to remedy the product supply problems harming its customer relationships.”
Dkt. 44, at 27. Dickinson cites several cases holding a party may demonstrate good faith
by showing it acted from a legitimate business reason or a desire to mitigate damages.
See, e.g., Flint Hills Res. LP v. Lovegreen Turbine Servs., Inc., 2006 WL 2472819, at *5
(D. Minn. 2006); Steuhl v. Home Therapy Equip., Inc., 23 A.D.3d 825, 827 (N.Y. 2005);
Kleinberg v. 516 W. 19th LLC, 138 A.D.3d 549, 550 (N.Y. App. 2016).
The Court certainly understands Dickinson’s need to remove the FPS Freezer to
make room for the new GEA freezer, and to alter the Refrigeration System to support the
GEA freezer in order to resume desired levels of production and mitigate damages.
However, the need to mitigate damages cannot explain Dickinson’s refusal to allow FPS
to monitor the FPS Freezer’s disassembly, its decision to bar FPS from inspecting the
MEMORANDUM DECISION AND ORDER - 32

unit shortly after removal, or its rejection of FPS’s offer to remove and store the unit at
no cost to Dickinson.
Dickinson also claims representatives from Nestle, Kemper, Dickinson, and even
FPS’s consultant all agreed during the September 2017, meeting that the Refrigeration
System was adequate.6 Dkt. 44-20, at 23. Dickinson further maintains that it believed
FPS had conceded that the Refrigeration System met contractual specifications given
FPS’s near immediate offer to settle shortly after the September 2017, meeting. Id., at 27.
Yet, Taylor, Dickinson’s industrial refrigeration expert, inspected the FPS Freezer and
Refrigeration System on November 10, 2017. Dkt. 46-1, at 4. Dickinson does not explain
why it hired Taylor to provide “expert opinions on the design, installation, configuration
and operation of the FPS Freezer” if it believed FPS agreed and had conceded the
Refrigeration System met contractual specifications and the FPS Freezer was inadequate.
Dkt. 46, at ¶ 8. Nor does Dickinson explain why it removed the FPS Freezer and
Refrigeration System before FPS’s expert had a chance to inspect the unit in preparation
for litigation, while, at the same time, ensuring its own expert had such opportunity.
Finally, Dickinson emphasizes that it notified FPS more than once that the FPS
Freezer was going to be removed in January 2018, and, on December 22, 2017,
specifically told FPS it was going to remove the FPS Freezer on January 13, 2018.
Despite multiple subsequent communications between counsel, FPS never objected to the
removal. While the Court determined such notification did not provide FPS with an

6

As mentioned, FPS disputes Peterson agreed the Refrigeration System was adequate. See Dkt. 51-1, at
20.

MEMORANDUM DECISION AND ORDER - 33

adequate opportunity to inspect the FPS Freezer, FPS does not attempt to explain, much
less even acknowledge, its apparent failure to take any steps to prevent removal and
disassembly when it had notice of Dickinson’s intent to do so. Because it had already
been served with Dickinson’s Complaint and had notice of the precise date the unit would
be removed, FPS’s failure to request that Dickinson refrain from removal until FPS’s
expert could conduct an inspection weighs against the harsh sanction of dismissal.
FPS argues dismissal is appropriate even in the absence of bad faith, where, as
here, “a party has destroyed the very item at issue in the lawsuit.” Dkt. 51-1, at 16 (citing
Unigard, 982 F.2d at 365, State Farm Fire, 523 F. Supp. 2d at 995. However, Unigard
and State Farm both involved a party’s destruction of key evidence before the injured
party had notice of a potential claim against it.
In Unigard, 982 F.2d at 368, the Ninth Circuit affirmed the district court’s
exclusion of plaintiff insurer’s expert testimony regarding the cause of fire, and resulting
summary dismissal, where plaintiff destroyed the electric heater it believed had caused a
yacht fire two years before filing suit against defendant heater manufacturer. Similarly, in
State Farm, 523 F. Supp. at 997, the district court determined dismissal was an
appropriate sanction against plaintiff insurer where plaintiff allowed the fire scene and a
ventilation fan—the posited cause of the fire—to be destroyed without first confirming
that defendant fan manufacturer had notice of the potential claim against it. Unlike
plaintiffs in Unigard and State Farm, Dickinson had filed suit against FPS and notified
FPS of the imminent removal and disassembly of the FPS Freezer and Refrigeration
System before removing the unit. Although the Court finds such warning did not
MEMORANDUM DECISION AND ORDER - 34

discharge Dickinson’s duty to preserve the evidence, or excuse Dickinson’s conduct, it is
relevant to the Court’s assessment of Dickinson’s level of culpability and determination
of whether less severe sanctions are appropriate.
Under the circumstances, the Court does not believe Dickinson mounted a
knowing and concerted effort to destroy the FPS Freezer. Given FPS’s failure to take any
action, despite its notice of both Dickinson’s suit and imminent intent to remove the FPS
Freezer and Refrigeration System, Dickinson believed, however imprudently, that FPS
did not object to its removal of the FPS Freezer and Refrigeration System, and that FPS
did not desire a pre-removal inspection. Although inadequate, Dickinson also took steps
to preserve the unit by instructing Idaho Steel to take special care and employ every
reasonable precaution in the removal process to ensure the FPS Freezer and its
component parts were not damaged. Dkt. 44, at 29.
Thus, although Dickinson’s conduct was willful because it severely altered
relevant evidence it had a duty to preserve, the Court does not find Dickinson acted in
bad faith. The distinction may appear imprecise, however, willfulness does not always
equate to bad faith in the context of spoliation of evidence. For instance, “[w]illfulness
could include virtually any intentional act, such as adoption of an email management
system that deletes stored emails after 30 days, even if the intentional action was not
taken with an intent to destroy relevant information.” Pettit v. Smith, 45 F. Supp. 3d
1099, 1112 (D. Ariz. 2014). Bad faith is more egregious, and suggests not just an
intentional action, but a specific intent to destroy relevant evidence.

MEMORANDUM DECISION AND ORDER - 35

Except for cases where key evidence was destroyed before the injured party had
notice of a claim, such as in State Farm and Unigard, Ninth Circuit cases cited by the
parties have not imposed case-terminating sanctions without a finding of culpability
approaching bad faith. See, e.g., Leon, 464 F.3d at 956 (finding plaintiff acted in bad faith
and affirming dismissal of case as sanction where plaintiff intentionally wiped all of the
data on his hard drive and deleted more than 2,200 files, despite having been warned by
defendant to “ensure no data on the laptop is lost or corrupted so as to avoid any possible
despoliation of evidence.”); Anheuser-Busch, 69 F.3d at 348 (affirming dismissal as
sanction where plaintiff purposefully concealed relevant documents for three years and
continuously lied about their existence and condition under penalty of perjury); Valley
Engineers, 158 F.3d at 1056 (dismissal of claims against counter-defendants was an
appropriate sanction where defendant and its lawyers hid critical memorandum and failed
to produce it in violation of the district court’s order); Roadrunner Transp. Services, Inc.
v. Tarwater, 642 Fed. Appx. 759 (9th Cir. 2016) (affirming dismissal as sanction where
there was ample evidence defendant deleted emails and files on his laptops after
receiving multiple preservation demands from plaintiff and even after the district court
explicitly ordered him to preserve “all data” on his electronic devices); see also Halaco
Eng’g Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988) (reversing dismissal of
counterclaim where, although defendant had improperly failed to disclose evidence,
“[t]he fault at issue was insufficient to support a dismissal”).
Thus, although various Ninth Circuit cases have noted that spoliation sanctions
may be imposed “not only for bad faith, but also for willfulness or fault by the offending
MEMORANDUM DECISION AND ORDER - 36

party,” the Court is not persuaded that dismissal is appropriate here. Although Dickinson
acted improperly, it did not act in bad faith. Nor did Dickinson deprive FPS of notice that
the unit would be removed. Under such circumstances, the Court finds a less harsh
sanction than dismissal is appropriate. See, e.g., Compass Bank v. Morris Cerullo World
Evangelism, 104 F. Supp. 3d 1040, 1054 (S.D. Cal. 2015) (the degree of harshness of
sanction should be dictated by the nature of the spoliating party’s conduct—the more
egregious the conduct, the more harsh the sanction); In re Napster, 462 F. Supp. 2d at
1076 (although spoliated evidence was relevant and plaintiff was prejudiced by its
destruction, dismissal was not warranted where defendant took steps, however
inadequate, to preserve evidence); see also Milbourn v. Marriott, 67 F.3d 307 (9th Cir.
1995) (it was within district court’s discretion to rely upon the absence of defendants’ bad
faith as basis for its choice of remedy). 7
FPS suggests if the Court does not dismiss Dickinson’s action, testimony about the
FPS Freezer and Refrigeration System should be excluded. Dkt. 39-1, at 18. FPS seeks
exclusion of any testimony by Dickinson regarding the FPS Freezer and Refrigeration
System, as it contends the Court should prohibit Dickinson “from introducing any
testimony related to, or derived from, the spoliated evidence.” Id., at 1. Because the FPS
Freezer and Refrigeration System are the sole items at issue in this dispute, Dickinson

7

In its Reply, FPS argues the Court is not required to find Dickinson acted in bad faith in order to dismiss
this case, citing Erlandson v. Ford Motor Co., 2009 WL 3672898, at *1 (D. Or. 2009). FPS notes the
Erlandson Court determined dismissal was an appropriate sanction even where plaintiffs’ motives in
spoliating key evidence were innocent. Dkt. 51-1, at 17. However, as was the case in State Farm and
Unigard, and unlike here, plaintiffs in Erlandson spoliated evidence before they filed suit and without
giving defendant notice of their intent to do so. Id. at *5.

MEMORANDUM DECISION AND ORDER - 37

would be precluded from presenting any evidence at all if the Court ordered such
exclusion, negating the need for a trial. Excluding any evidence regarding the destroyed
evidence would thus be tantamount to dismissal, which the Court has already determined
is not warranted.
If the Court does not dismiss Dickinson’s case or order exclusion of any testimony
regarding the FPS Freezer and Refrigeration System, FPS seeks an adverse inference jury
instruction as a sanction for Dickinson’s conduct. A party seeking an adverse inference
instruction based on the destruction of evidence must establish (1) that the party having
control over the evidence had an obligation to preserve it at the time it was destroyed; (2)
that the evidence was destroyed with a culpable state of mind; and (3) that the destroyed
evidence was relevant to the claim or defense of the party seeking sanctions. In re
Napster, 462 F. Supp. 2d at 1078.
As discussed above, Dickinson disassembled the FPS Freezer and Refrigeration
System despite its duty to preserve such evidence. As the basis for this suit, Dickinson
knew or should have known it had a duty to preserve the FPS Freezer and Refrigeration
System as evidence. Dickinson further acted recklessly in executing its duties to preserve
crucial evidence—by failing to allow FPS to observe disassembly or to store the FPS
Freezer, by damaging parts of the FPS Freezer and significantly altering the Refrigeration
System prior to allowing FPS’s expert an opportunity to inspect, and by carelessly storing
the FPS Freezer so that it has been exposed to the elements and further deterioration over
the course of this litigation. Such conduct constitutes sufficient culpability to justify an
adverse inference. Apple, 881 F. Supp. 2d at 1150; see also Glover, 6 F.3d at 1329 (a
MEMORANDUM DECISION AND ORDER - 38

finding of bad faith is not a prerequisite to an adverse jury instruction, destruction of
evidence with simple notice of its potential relevance is sufficient culpability for such
sanction). The relevance of the FPS Freezer and Refrigeration System to this suit is also
undisputed. Therefore, FPS is entitled to an adverse inference instruction. Id.
Given the significant prejudice to FPS resulting from Dickinson’s conduct, the
Court finds that a non-rebuttable inference is appropriate. A rebuttable presumption
would not be an effective alternative because it would leave Dickinson free to tell its own
story, unchecked by the evidence it failed to preserve. Apple, 881 F. Supp. 2d at 1150.
(“[W]hen a spoliating party has acted willfully or recklessly, a court may impose a
mandatory presumption.”) (citation omitted); see also Evans v. Avista Corp., 2012 WL
4140649, at *15 (D. Idaho 2012). The Court will thus instruct the jury to presume the
following:
Dickinson has failed to preserve relevant evidence for FPS’s use in this litigation.
This is known as the “spoliation of evidence.” Specifically, Dickinson destroyed
the FPS Freezer and Refrigeration System after its duty to preserve this evidence
arose. As a result of this spoliation, you are to presume that had Dickinson not
destroyed the FPS Freezer and Refrigeration System, FPS would have been able to
prove that the FPS Freezer was capable of performing at the levels specified by the
Parties’ Agreement.8

8

Although both parties request them, the Court finds monetary sanctions are not appropriate. Given the
conclusions herein, FPS’s Motion for Sanctions was clearly not frivolous or brought in bad faith, as
Dickinson contends. The Court also disagrees with Dickinson’s contentions regarding the circumstances
surrounding FPS’s disclosure of its expert report and declines to address the issue further. Nor are
monetary sanctions appropriate against Dickinson since the Court has not found that Dickinson acted in
bad faith. Leon, 464 F.3d at 961 (before awarding monetary sanctions under its inherent powers, the court
must make an express finding that the sanctioned party’s behavior “constituted or was tantamount to bad
faith”).

MEMORANDUM DECISION AND ORDER - 39

V. CONCLUSION
Dickinson spoliated the key evidence at issue in this dispute shortly after filing
suit against FPS. It did so despite having warned FPS, a mere three weeks before, that
failure to preserve the FPS Freezer as evidence could subject FPS to sanctions.
Moreover, although Dickinson ensured its own expert had an opportunity to inspect the
FPS Freezer and Refrigeration System in preparation for litigation, it denied FPS this
opportunity. For this reason alone, as well as for those detailed herein, FPS has been
prejudiced.
Because Dickinson willfully destroyed relevant evidence it had a duty to preserve,
and because FPS has been prejudiced thereby, significant sanctions are warranted.
However, in the absence of bad faith, and because FPS is not entirely without evidence to
support its case, the Court finds an adverse jury instruction imposing a mandatory
presumption is the most appropriate sanction. In re Napster, 462 F. Supp. at 1078 (a court
must impose the least onerous sanction given the extent of the offending party’s fault and
the prejudice to the opposing party); Apple, 881 F. Supp. 2d at 1150 (“[A] ny sanction
must be the least drastic available to adequately mitigate the prejudice” the injured party
has suffered.).
///
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///
///
MEMORANDUM DECISION AND ORDER - 40

VI.

ORDER

For the foregoing reasons, IT IS HEREBY ORDERED:
1. FPS’s Motion for Sanctions (Dkt. 39) is GRANTED. The Court will instruct
the jury as outlined above.

DATED: May 21, 2019
_________________________
David C. Nye
Chief U.S. District Court Judge

MEMORANDUM DECISION AND ORDER - 41