U.S. Equal Employment Opportunity Commission v. Wedco, Inc.

Filing 104

ORDERED that Wedco's # 91 Motion to Seal is GRANTED. ORDERED that Wedco's # 92 Motion for Spoliation Sanctions is DENIED. FURTHER ORDERED that the EEOC's # 94 Cross Motion for Spoliation Sanctions is DENIED. Signed by Judge Robert C. Jones on 9/15/2014. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA
U.S. EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION,

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Plaintiff,

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vs.

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WEDCO, INC., and DOES 1-10,
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Defendants.
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3:12-cv-00523-RCJ-VPC
ORDER

Before the Court is Defendant Wedco, Inc.’s Motion to Seal (ECF No. 91) and its Motion

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for Spoliation Sanctions (ECF No. 92), as well as Plaintiff’s Opposition and Cross Motion for

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Spoliation Sanctions (ECF No. 94).

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I.

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BACKGROUND
Larry Mitchell is an African American who worked as a deliveryman for Wedco, Inc.

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from about October 2007 to July 25, 2008. (Intake Inquiry Form 1, ECF No. 92 Ex. 1). During

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that time, Mitchell allegedly experienced a work environment that caused him to quit. On

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August 21, 2008, Mitchell submitted an “Intake Inquiry Form” to the Nevada Equal Rights

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Commission (“NERC”) claiming that he was forced to leave his job due to discrimination.

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(Id. at 2–3). Mitchell alleged that he was denied breaks, required to ask permission to use the

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bathroom, and intimidated by a hangman’s noose that hung in Wedco’s warehouse. (Id. at 2).

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Maurice Davis, a NERC Intake Officer, sent a letter to Mitchell on August 22, 2008 scheduling a

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phone interview to discuss his complaint. (Davis Letter 1, ECF No. 92 Ex. 3). Davis’s usual

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practice during these interviews was to take handwritten notes and then transpose those notes

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into a draft of the charge, which was then placed into the complaining party’s case folder. (Davis

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Dep. 21:18–25, 31:19–33:13, 55:20–56:13, ECF No. 92 Ex. 5). Davis would subsequently shred

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his handwritten notes. (Id. at 33:4–6). While Davis could not remember the specifics of

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Mitchell’s case, he agreed that he likely followed his usual practice at the time he interviewed

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Mitchell. (Id. at 14:9–15:9, 33:1–13). Shortly after the intake interview, Mitchell filed a Charge

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of Discrimination (“the Charge”) with the NERC against Wedco. (Notice of Charge of

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Discrimination, ECF No. 92 Ex. 4). Wedco’s Vice President, Richard Stoltz (“Stoltz”), upon

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receiving the Charge, immediately removed the noose and threw it in the trash. (Stoltz Dep.

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92:8–21, ECF No. 94 Ex. E).

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After the Charge was formalized, Dennis Maginot became the lead NERC Compliance

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Investigator on Mitchell’s case. Maginot conducted a number of investigatory interviews related

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to Mitchell’s case. (Maginot Dep. 18:18–21, ECF No. 92 Ex. 9). Maginot generally recorded

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these interviews to be placed in the complaining party’s case file, but on the day he interviewed

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Stoltz and others, neither his microcassette recorder nor his digital recorder functioned properly,

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which left Maginot without any recordings of those meetings other than a forty-second clip of

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introductory remarks. (Id. at 18:1–21:2).

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The NERC transferred Mitchell’s case to the United States Equal Employment

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Opportunity Commission (“EEOC”) around August 31, 2011. The case was assigned to Miguel

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Escobar and he also conducted an interview with Mitchell. (Follow-Up Interview Notes, ECF

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No. 92 Ex. 10). In conjunction with his own interview notes, Escobar relied on information

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contained in the NERC case file when he recommended that the EEOC file a lawsuit against

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Wedco based on Mitchell’s discrimination claim. (Escobar Dep. 45:14–17, ECF No. 92 Ex. 11).

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On September 27, 2012, the EEOC filed its complaint against Wedco. (ECF No. 1).
During the discovery process, Wedco submitted requests for production of all the notes

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pertaining to Mitchell’s allegations that the EEOC had in its possession, including those created

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by Davis, Maginot, and Escobar. (EEOC’s Response to Wedco’s First Request for Production of

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Documents 6, ECF No. 92 Ex. 12). The EEOC replied that the notes created and kept by the

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NERC and the EEOC were excluded from discovery by the governmental process privilege.

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(Id.). The parties submitted this discovery dispute to the magistrate judge who reviewed the

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EEOC’s privilege log and the documents for which it claimed a privilege. (ECF No. 45). On

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January 6, 2014, the magistrate judge, after conducting an in camera review, ruled that the case

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notes and other notes in question should not be produced. (ECF No. 57).
Notwithstanding this ruling, Wedco here claims that the NERC and the EEOC engaged in

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spoliation of relevant evidence by either destroying notes that were kept regarding Mitchell’s

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case or by hiding from Wedco portions of notes that would otherwise be discoverable. Besides

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the notes, Wedco asserts that the EEOC and Mitchell are responsible for the unavailability of

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other pieces of evidence. Wedco seeks to have the EEOC’s case dismissed, or alternatively it

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requests lesser evidentiary sanctions. The EEOC denies all allegations of spoliation and cross

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moves for spoliation sanctions against Wedco based on Stoltz throwing away the noose.

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II.

LEGAL STANDARDS

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Spoliation is “the destruction or significant alteration of evidence, or the failure to

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preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.”

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LaJocies v. City of N. Las Vegas, No. 2:08-cv-00606-GMN-GWF, 2011 WL 1630331, at *1 (D.

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Nev. Apr. 28, 2011) (Navarro, J.) (citing United States v. Kitsap Physicians Serv., 314 F.3d 995,

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1001 (9th Cir. 2002)). The duty to preserve evidence arises not only when a formal complaint is

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filed, but when a party should know that evidence may be relevant to future litigation. See In re

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Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1067 (N.D. Cal. 2006). If a party fails to

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properly preserve evidence, the opposing party may move for sanctions based on the district

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court’s “inherent discretionary power to make appropriate evidentiary rulings in response to the

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destruction or spoliation of relevant evidence.” Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir.

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1993). Before any sanction is appropriate, however, the party alleging spoliation has the burden

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to prove by a preponderance of the evidence that the accused party actually destroyed, altered, or

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failed to preserve relevant evidence. See LaJocies, 2011 WL 1630331, at *1 (stating that the

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applicable standard in the Ninth Circuit “appears to be by a preponderance of the evidence”);

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In re Napster, 462 F. Supp. 2d at 1072.

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Once spoliation is proven, the court may sanction the offending party by instructing the

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jury to draw an inference adverse to the party or witness responsible for destroying the evidence,

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excluding witness testimony proffered by the responsible party and based on the destroyed

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evidence, or dismissing the claim of the responsible party. In re Napster, 462 F. Supp. 2d at

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1066. “Generally, the court should choose the least onerous sanction corresponding to the

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willfulness of the destructive act and the prejudice suffered by the victim.” LaJocies, 2011 WL

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1630331, at *1. Moreover, a court must find that the party accused of spoliation acted with

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“willfulness, fault, or bad faith” before dismissal is an appropriate sanction. Leon v. IDX Sys.

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Corp., 464 F.3d 951, 958 (9th Cir. 2006). “[A] finding of bad faith is not a prerequisite” for

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lesser sanctions, however. Glover, 6 F.3d at 1329. A court also has the option of considering

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whether the wronged party was prejudiced by the alleged spoliation before it imposes sanctions.

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See In re Napster, 462 F. Supp. 2d at 1075 n.4 (citing Halaco Eng’g Co. v. Costle, 843 F.2d 376,

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382 (9th Cir. 1988)) (stating that under the court’s inherent authority to impose sanctions,

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“prejudice is an ‘optional’ consideration” as compared to sanctions under Rule 27 of the Federal

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Rules of Civil Procedure where prejudice is essential). A prejudice inquiry determines whether

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the spoliating party’s actions impaired the other party’s “ability to go to trial or threatened to

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interfere with the rightful decision of the case.” Leon, 464 F.3d at 959 (citation omitted).

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III.

DISCUSSION

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A. Wedco’s Motion for Spoliation Sanctions

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Wedco cites three reasons supporting spoliation sanctions against the EEOC. Its first

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reason is that the EEOC failed to preserve notes and other information gathered during the

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investigation of Mitchell’s discrimination claim. Second, Wedco argues that the EEOC’s failure

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to preserve a camera used by Mitchell to photograph the noose and the negatives of those

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photographs amounts to spoliation. The final contention is that the EEOC’s inability to produce

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a calendar Mitchell used to track days he did not receive breaks also proves spoliation.

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1. NERC and EEOC Investigatory Notes
Wedco’s assertion of spoliation as to the EEOC’s investigatory notes focuses on notes

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taken by Davis, Maginot, and Escobar. As an initial matter, the Court advises the parties that it

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does not recognize the EEOC’s asserted governmental process privilege as it pertains to the

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investigatory notes. “This privilege permits the government to withhold documents that reflect

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advisory opinions, recommendations and deliberations comprising part of a process by which

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government decisions and polices are formulated.” FTC v. Warner Commc’ns Inc., 742 F.2d

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1156, 1161 (9th Cir. 1984) (citing NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150 (1975)).

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The privilege is meant to allow open and frank discussion among those responsible for making

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governmental decisions without worrying that such communications will be subject to discovery

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requests. Dep’t of Interior v. Klamath Water Users Protective Ass’n, 532 U.S. 1, 8–9 (2001).

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Davis’s handwritten notes were clearly not intended to facilitate discussion and deliberation

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within the NERC or the EEOC since the notes were intended to only help Davis complete

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Mitchell’s Charge and since they were shredded immediately thereafter. Accordingly, the

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process privilege would not apply, and Davis’s notes would have been discoverable by Wedco.

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The process privilege is also inapplicable to notes taken by either Maginot or Escobar.

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Notes taken during an interview, without more, are not advisory opinions, recommendations, or

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deliberations. They instead reflect only the information that was transmitted from interviewee to

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interviewer. If either Maginot or Escobar took notes during interviews with Mitchell, Wedco is

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entitled through discovery to know the contents of those discussions. However, if Maginot or

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Escobar drafted any sort of opinion after meeting with Mitchell that was then sent to the EEOC

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attorneys with recommendations regarding Mitchell’s claim, that document would likely qualify

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for the process privilege. See Nat’l Wildlife Fed’n v. U.S. Forest Serv., 861 F.2d 1114, 1117 (9th

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Cir. 1988) (stating that the privilege could allow the government to withhold memoranda

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containing advice and subjective analysis).

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The Court further notes that it will not find any privilege to cover statements made by

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Mitchell to Davis, Maginot, or Escobar. There is no attorney-client privilege that the EEOC can

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assert as to these individuals because they are not attorneys or legal staff working at the direction

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of EEOC attorneys. Rather, they are the government employees who conducted interviews as

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part of the administrative investigation to determine whether “there was reasonable cause to

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believe a claim existed” against Wedco. See EEOC v. Int’l Profit Assocs., Inc., 206 F.R.D. 215,

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220 (N.D. Ill. 2002) (stating that no attorney-client privilege could be asserted in regards to

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interview notes taken by EEOC enforcement employees prior to the filing of the lawsuit). It

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would therefore be inappropriate to extend any sort of privilege to communications between

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nonattorney administrative employees and Mitchell that occurred before any lawsuit was filed.

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With that in mind, the Court first considers Wedco’s allegations relating to Maginot’s and

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Escobar’s investigatory notes.

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Maginot and Escobar’s notes

Wedco offers no concrete evidence that the EEOC spoliated any of Maginot’s or

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Escobar’s notes. Wedco argues that despite Maginot’s admission that he communicated with

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Mitchell numerous times, the EEOC failed to produce any documentation of those conversations.

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(Def.’s Mot. Spoliation Sanctions 7, ECF No. 92). Wedco further asserts that Maginot’s digital

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recorder was functioning properly on the day he conducted interviews on-site at Wedco and it

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was for this reason Maginot left the recorder on the table, despite Maginot’s deposition

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testimony that the recorder wasn’t working. (Id. at 8). Wedco’s argument is apparently that

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Maginot’s plan was to keep the recorded interviews for himself by feigning ignorance of why the

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recorder was not functioning that day. A party moving for spoliation sanctions is not entitled to

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have the Court agree with broad inferences of spoliation based on nothing more than speculation.

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Even the low-threshold preponderance of the evidence standard still requires sufficient objective

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evidence to allow the fact-finder to conclude that the existence of a fact is more probable than its

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nonexistence. See Kennedy v. S. Cal. Edison Co., 268 F.3d 763, 770 (9th Cir. 2001) (citing

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Concrete Pip and Prods. Of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S.

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602, 622 (1993)). The facts Wedco asserts regarding Maginot’s notes and recordings do not lead

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the Court to believe that it is more probable than not that the EEOC spoliated either.

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Wedco’s evidence that the EEOC spoliated notes created by Escobar is even more
speculative. The copy of Escobar’s notes that the EEOC produced to Wedco is titled “Follow-

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Up Interview with CP Larry Mitchell.” (Follow-Up Interview Notes 1). Wedco took this title to

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mean that Escobar must have conducted previous interviews with Mitchell since this interview

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was called the “Follow-Up.” (Def.’s Mot. Spoliation Sanctions 9). However, Escobar stated in

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his deposition that he reviewed the NERC’s case notes when he received Mitchell’s file.

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(Escobar Dep. 45:14–17). Escobar would then logically conduct an interview with Mitchell to

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follow up on the case notes contained in Mitchell’s case file. Since Wedco does not provide any

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other proof that Escobar created additional notes or that the EEOC destroyed or is hiding

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additional notes, there is no basis to find spoliation.

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Davis’s notes

Wedco’s proof of spoliation increases significantly in relation to Davis’s notes. Wedco

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points out that Davis admitted that he would shred his notes after drafting a complaining party’s

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charge and that he followed this practice when preparing Mitchell’s Charge. (Def.’s Mot.

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Spoliation Sanctions 6–7). Even though Davis transposed portions of his notes into Mitchell’s

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Charge, Davis concedes that not all of his notes actually made it into the final draft. (Davis Dep.

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33:1–6). Those excess notes were also shredded. Wedco is right to wonder whether the

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statements in those shredded notes contradict any portion of Mitchell’s current claim of

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discrimination. (Def.’s Mot. Spoliation Sanctions 6). Davis’s actions, however, do not rise to the

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level of bad faith required to warrant dismissal of the EEOC’s case. The evidence provided

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shows that Davis shredded his handwritten notes because they were “cryptic” and “decipherable”

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only by him. (Davis Dep. 55:18–56:5) The facts do not support a conclusion that Davis

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specifically sought to destroy evidence so that Wedco’s defense would be inhibited. Cf. Leon,

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464 F.3d at 959 (finding sufficient bad faith for dismissal where plaintiff intentionally deleted

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computer files and then ran a program to write over deleted documents). Absent a strong

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showing of bad faith on Davis’s part, the Court does not find dismissal to be appropriate based

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on his actions.

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The Court also does not find an adverse inference jury instruction to be appropriate. An

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adverse inference jury instruction is warranted if “(1) the party having control over the evidence

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had an obligation to preserve it at the time it was destroyed; (2) the records were destroyed with

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a culpable state of mind; and (3) the destroyed evidence was relevant to the party’s claim or

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defense such that a reasonable trier of fact could find that it would support that claim or

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defense.” In re Napster, 462 F. Supp. 2d at 1078 (citation omitted). The duty to preserve

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evidence arises as soon as the party knows or reasonably should know that the evidence is

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relevant to a potential action. Id. at 1067. As a NERC officer, Davis should have realized that

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Mitchell’s statements to him and Davis’s own notes of those statements would be relevant to

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potential litigation. Davis’s purpose in interviewing Mitchell was to determine whether Mitchell

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had a legitimate claim of discrimination against Wedco. It follows that anything written down

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during that interview could be relevant to a lawsuit eventually filed by Mitchell or the EEOC.

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Davis therefore had an obligation to preserve his notes rather than shredding them even if he

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believed that the important information was transposed onto the official charge form.

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Despite Davis’s failure to comply with the duty to preserve relevant evidence, the facts

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do not indicate that Davis acted with a culpable state of mind. When relevant evidence is made

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unavailable for an innocent reason, “an adverse evidentiary inference from the loss may be

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rejected.” Med. Lab. Mgmt. Consultants v. Am. Broad. Co., 306 F.3d 806, 824 (9th Cir. 2002).

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As stated, Davis explained that he shredded his handwritten notes because he copied what he

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believed was relevant onto Mitchell’s final Charge. (Davis Dep. 32:17–33:6). Davis felt that his

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handwritten notes did not possess intrinsic value because he viewed them as simply a draft of the

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Charge. (Id. at 55:18–56:13). While the Court finds Davis’s practice questionable, it cannot

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conclude that he acted intentionally or with bad faith to frustrate Wedco’s defense. See Med.

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Lab. Mgmt. Consultants, 306 F.3d at 825. Therefore, the Court does not grant Wedco’s request

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for an adverse inference jury instruction.

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Alternatively, Wedco asks the Court to issue an exclusion sanction against the EEOC

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precluding it from presenting a number of arguments related to statements made by Mitchell

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prior to his interviews with the NERC. (Def.’s Mot. Spoliation Sanctions 24–25). Whether

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preclusion sanctions are appropriate depends on the extent to which the nonspoliating party was

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prejudiced by the spoliating party’s destruction of evidence. See Unigard Sec. Ins. Co. v.

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Lakewood Eng’g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992). In this case, the extent of

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prejudice suffered by Wedco is not readily determinable based solely on parties’ memoranda.

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Since Davis shredded his notes, there is no way to review what was written and determine

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whether Mitchell’s admissions to Davis contradicted the statements appearing in the official

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Charge that was sent to Wedco. Despite Davis’s actions, Wedco is not entitled to an inference

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that the shredded notes did in fact contain contradictions. Rather, the Court in its discretion

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believes that the most effective method for ascertaining the truth regarding Mitchell’s statements

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to the NERC would be to allow both parties the opportunity to call witnesses at trial. See Glover,

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6 F.3d at 1329 (recognizing that it is within the trial court’s inherent discretionary power to make

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rulings in response to the spoliation of evidence). An examination under oath of Mitchell as well

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as those who interviewed him should be sufficient for both parties to effectively present their

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theories as to whether Mitchell’s early claims of discrimination evolved after his initial contact

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with the NERC and the EEOC.

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Therefore, the Court denies Wedco’s motion because it does not find sufficient bad faith

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or culpability to warrant spoliation sanctions. The Court does find, however, that Wedco should

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have the opportunity at trial to inquire into the statements and admissions Mitchell made to the

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NERC and EEOC officers during the agencies’ administrative investigations. This allowance

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remedies the prejudice Wedco suffered due to Davis’s note shredding.

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2. Mitchell’s Camera, Negatives, and Calendar
The second and third pieces of evidence that Wedco believes were spoliated are the

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camera Mitchell used to take pictures of the noose, along with the negatives of those pictures,

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and the calendar that Mitchell used to track the days he was allegedly denied breaks. The EEOC

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acknowledges that the originals of these pieces of evidence are unavailable. (Pl.’s Opp’n to

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Def.’s Mot. Spoliation Sanctions 17–18, ECF No. 94). However, it explains that the camera at

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issue was of the “disposable” variety, which means that the party developing the pictures

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disposes of the camera after removing the roll of film. (Id.). It thus makes sense that the original

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camera would not be available. Despite not having the negatives of the pictures, Wedco was

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given an authenticated copy of the relevant photographs. (Copies of Mitchell’s Photographs,

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ECF No. 94 Ex. P). Since Wedco’s position is that the photographs were staged rather than

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“doctored,” the photographs themselves have as much evidentiary value as the negatives. The

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Court thus determines that there has been no prejudice here.

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Similarly, the EEOC admits that Mitchell’s original calendar is no longer available. (Pl.’s

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Opp’n to Def.’s Mot. Spoliation Sanctions 18). While neither side offers an explanation for the

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original calendar’s unavailability, authenticated photocopies of the calendar are available. (Id.).

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Since a photocopy of the calendar gives Wedco the same information as the original copy would

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have provided, there does not appear to be any prejudice in this instance either. Accordingly, the

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Court does not find spoliation sanctions appropriate as to either the camera or the calendar

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because of the lack of prejudice to Wedco.

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The Court also denies Wedco’s request for attorney’s fees. “Under its ‘inherent powers,’

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a district court may also award sanctions in the form of attorneys’ fees against a party or counsel

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who acts ‘in bad faith, vexatiously, wantonly, or for oppressive reasons.’” Leon, 464 F.3d at 961

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(quoting Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997)). Before a

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court may award attorney’s fees, it “must make an express finding that the sanctioned party’s

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behavior constituted or was tantamount to bad faith.” Id. (quoting Primus Auto., 115 F.3d at 648)

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(internal quotations omitted). Bad faith is demonstrated when a party delays or disrupts the

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litigation or hampers the enforcement of a court order. Primus Auto., 115 F.3d at 649. The Court

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does not find that the EEOC acted in bad faith or that it unnecessarily delayed litigation. The

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EEOC’s assertions that it had produced all nonprivileged documents responsive to Wedco’s

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discovery requests is compatible with the magistrate judge’s previous ruling that the process

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privilege protected the notes. The Court thus declines to award attorney’s fees.

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Therefore, Wedco’s motion is DENIED.

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B. EEOC’s Motion for Spoliation Sanction

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The EEOC argues that Wedco should be subject to sanctions for destroying the noose that

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hung in Wedco’s warehouse before and during Mitchell’s employment. Stoltz indeed stated that

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once he received Mitchell’s Charge from the NERC he took the noose and threw it in the trash.

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(Stoltz Dep. 92:8–21). Beyond this admission, however, the EEOC does not provide any

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evidence that Stoltz was motivated by bad faith rather than by a desire to administratively

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resolve the problem of the noose. Since there is no evidence of bad faith, the Court does not

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agree with the EEOC’s request for a default sanction. Lesser spoliation sanctions do not require

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a showing of bad faith, In re Napster, 462 F. Supp. 2d at 1066, but the decision of whether to

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impose a sanction at all is squarely within the court’s broad discretion. Unigard, 982 F.2d at 368.
The EEOC’s Complaint alleges that Mitchell “was exposed to a noose hanging in the

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receiving area that was visible from his workspace” and that “[r]acial comments were made on

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more than one occasion about the noose.” (Compl. 5, ECF No. 1). The Complaint also alleges

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that members of Wedco’s upper management “were aware of the noose and its discriminatory

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connotation and took no action to remove it.” (Id. at 6). In its Answer, Wedco denies all of these

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allegations. (Answer 3–4, ECF No. 21). It is undisputed, however, that Mitchell took pictures of

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the noose hanging in the warehouse and that those photographs are available to both parties. The

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evidence available to the EEOC supportive of its contention that a noose was displayed in

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Wedco’s warehouse during Mitchell’s employment appears sufficient to overcome any prejudice

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the EEOC might have suffered because Stoltz threw out the noose. The Court finds that the lack

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of prejudice supports the denial of the EEOC’s motion for lesser sanctions.

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The Court also denies the EEOC’s request for attorney’s fees. As stated, such a sanction

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is appropriate only when the court makes an explicit finding of bad faith. Leon, 464 F.3d at 961

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(quoting Primus Auto., 115 F.3d at 648 (9th Cir. 1997)). It is true that Wedco’s arguments

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contained a number of large inferential leaps with which the Court did not agree. Nevertheless,

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the evidence of Davis’s shredding of interview notes alone demonstrates that this motion was not

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brought in bad faith.
Therefore, the EEOC’s motion is DENIED.

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CONCLUSION

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IT IS HEREBY ORDERED that Wedco’s Motion to Seal (ECF No. 91) is GRANTED.

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IT IS ORDERED that Wedco’s Motion for Spoliation Sanctions (ECF No. 92) is DENIED. IT

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IS FURTHER ORDERED that the EEOC’s Cross Motion for Spoliation Sanctions (ECF No. 94)

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is DENIED.

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IT IS SO ORDERED.

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Dated: September 15, 2014
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_____________________________________
ROBERT C. JONES
United States District Judge

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