STATE NATIONAL INSURANCE COMPANY v. THE COUNTY OF CAMDEN
Filing
428
MEMORANDUM OPINION & ORDER denying 399 Appeal Magistrate Judge Decision to District Court. Signed by Judge Noel L. Hillman on 3/21/2012. (dmr)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
STATE NATIONAL INSURANCE
COMPANY,
Plaintiff,
v.
THE COUNTY OF CAMDEN,
Defendants.
THE COUNTY OF CAMDEN,
Counterclaimant and
Third-Party Plaintiff,
v.
STATE NATIONAL INSURANCE
COMPANY,
Counterclaim-Defendant
and
NICHOLAS M. ANDERSON,
Third-Party Defendant,
and
SCIBAL ASSOCIATES, INC.,
Third-Party Defendant and
Third-Party Counterclaimant.
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA,
Intervening Plaintiff,
v.
THE COUNTY OF CAMDEN and SCIBAL
ASSOCIATES,
Defendants.
APPEARANCES:
PETER E. MUELLER
HARWOOD LLOYD, LLC
130 MAIN STREET
HACKENSACK, NJ 07601
CIV. NO. 08-5128(NLH)(AMD)
MEMORANDUM
OPINION & ORDER
WALTER J. ANDREWS
MICHAEL S. LEVINE
ROCKLAN W. KING III
HUNTON & WILLIAMS LLP
1751 PINNACLE DRIVE
SUITE 1700
MCLEAN, VA 22102
On behalf of State National Insurance Company
WILLIAM M. TAMBUSSI
JOSEPH T. CARNEY
WILLIAM F. COOK
BROWN & CONNERY, LLP
360 HADDON AVENUE
P.O. BOX 539
WESTMONT, NJ 08108
On behalf of the County of Camden
JEFFREY MATTHEW BEYER
MARK D. SHERIDAN
DRINKER BIDDLE & REATH LLP
500 CAMPUS DRIVE
FLORHAM PARK, NJ 07932-1047
On behalf of The Insurance Company of the State of
Pennsylvania
ALAN J. BARATZ
JOSEPH T. DALY
WEINER LESNIAK
629 PARSIPPANY ROAD
POST OFFICE BOX 438
PARSIPPANY , NJ 07054-0438
On behalf of Scibal Associates, Inc.
HILLMAN, District Judge
This matter having come before the Court on the County of
Camden’s appeal of the June 30, 2011 Order entered by the Honorable
Ann Marie Donio, U.S.M.J., that granted a motion by State National
Insurance Company regarding the County’s failure to preserve its
2
electronically stored information (“ESI”) when it did not implement
a “litigation hold” on the its email system after being notified
about State National’s lawsuit against it1; and
Judge Donio having found, inter alia, that:
(1) the County had a duty to preserve evidence in this case,
but failed to implement a litigation hold in order to preserve such
evidence; and
(2) the record developed to date was insufficient to permit a
spoliation inference instruction; but
(3) the County’s failure to institute a litigation hold, to
disable its automatic email deletion program, and to preserve
copies of its backup tapes, warranted the imposition of reasonable
attorneys’ fees and costs associated with the time incurred by
State National in assessing the scope of the County's email
production; and
The County arguing on appeal that the decision to sanction it
was in error because there has been no spoliation; and
This Court recognizing that a United States Magistrate Judge
may hear and determine any non-dispositive pretrial matter pending
before the court pursuant to 28 U.S.C. § 636(b)(1)(A), and a
district court judge will only reverse a magistrate judge’s opinion
on pretrial matters if it is “clearly erroneous or contrary to
1
Because numerous Opinions have been issued in this case,
and those decisions detail the underlying facts and legal issues,
the Court will not restate those again here.
3
law,” 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); L. Civ. R.
72. 1(c)(1)(A); and
A finding is clearly erroneous when “although there is
evidence to support it, the reviewing court on the entire evidence
is left with the definite and firm conviction that a mistake has
been committed,” South Seas Catamaran, Inc. v. M/V Leeway, 120
F.R.D. 17, 21 (D.N.J. 1988) (citation omitted), and a ruling is
contrary to law if the magistrate judge has misinterpreted or
misapplied applicable law, Gunter v. Ridgewood Energy Corp., 32 F.
Supp. 2d 162, 164 (D.N.J. 1998), but a “district judge’s simple
disagreement with the magistrate judge’s findings is insufficient
to meet the clearly erroneous standard of review,”
Andrews v.
Goodyear Tire & Rubber Co., Inc., 191 F.R.D. 59, 68 (D.N.J. 2000),
and the party filing the notice of appeal bears the burden of
demonstrating that the magistrate judge’s decision was clearly
erroneous or contrary to law, Exxon Corp. v. Halcon Shipping Co.,
Ltd., 156 F.R.D. 589, 591 (D.N.J. 1994); and
The County arguing that the law does not support the
imposition of sanctions for its failure to implement a litigation
hold when that failure did not result in any actual spoliation; but
The Court finding the County’s argument to be unavailing, as
follows:
When faced with a motion for spoliation sanctions for a
party’s failure to preserve evidence, a court must first determine
4
whether that party failed in its duty to preserve.
Kounelis v.
Sherrer, 529 F. Supp. 2d 503, 518 (D.N.J. 2008) (“Before sanctions
for spoliation can be imposed, it must be determined whether the
duty to preserve evidence has been triggered.”).
If the court
determines that the party failed to properly preserve evidence,
the court must then determine whether to sanction the party for
that failure.
Id. at 519 (explaining that in order to “provide
redress to the party harmed by spoliation, as well as to punish the
spoliator, a court may impose appropriate sanctions pursuant to the
Federal Rules of Civil Procedure and the court's inherent powers”
(citation omitted)).
Sanctions for spoliation include (1)
dismissal of a claim or granting judgment in favor of a prejudiced
party, (2) suppression of evidence, (3) an adverse inference,
referred to as the spoliation inference, (4) fines, or (5)
attorneys’ fees and costs.
Id. (citation omitted).
In this case, Judge Donio determined that because the County
did not implement a litigation hold after State National filed its
declaratory judgment action against the County, the County failed
in its duty to preserve evidence.
Judge Donio then determined to
sanction the County for that failure--not by dismissing the claim,
suppressing any evidence, or granting State National’s request for
an adverse inference--but instead by finding:
In this case, when a party fails to issue a litigation
hold despite pending litigation and does not preserve
emails of relevant custodians in breach of its duty, the
adversary is forced to explore whether sanctions such as
5
an adverse inference or more drastic sanctions dismissal or suppression of evidence - are warranted. To
perform such an investigation requires the nonbreaching
party to expend attorney time, and in some cases, expert
fees to determine the extent and scope of the deletion or
destruction. If, following such an investigation, there
is no basis to award such spoliation sanctions or, as in
this case, a court concludes that there is a failure to
demonstrate that an adverse inference is warranted, the
non-breaching party still has suffered damages in the
context of attorneys' fees and costs. Consequently, in
light of the failure to implement the litigation hold
here, the Court finds that an award of reasonable
attorneys' fees and costs incurred in connection with
investigating the scope of the County's email deletion is
appropriate in this case.
(June 30, 2011 Order, Docket no. 396 at 22-23 (citations omitted).)
Judge Donio then directed State National to submit an
appropriate affidavit setting forth with specificity the reasonable
attorneys’ fees and expenses incurred, and explaining why such fees
and expenses would not have been incurred but for the County's
failure to preserve.
The County then would have the opportunity to
respond to State National’s submission.2
(Id.)
The County has not provided this Court with any cases that
contradict the law, as set forth in Kounelis v. Sherrer, 529 F.
2
As a result of the County’s appeal, Judge Donio issued an
order instructing State National to refrain from submitting its
costs and fees affidavit until after the resolution of the
appeal. Even though the County complains in the appeal that
State National’s request for over $70,000 in sanctions, including
$56,000 in attorneys’ fees, is excessive, Judge Donio has not yet
ruled on the amount of the sanctions. This Court notes that
“monetary sanctions are used to compensate a party for the time
and effort it was forced to expend in an effort to obtain
discovery to which it was entitled,” Kounelis, 529 F. Supp. 2d at
521, and that this Court is confident that Judge Donio will
fashion a fair award to State National.
6
Supp. 2d 503, 518 (D.N.J. 2008) and other cases, that provided
Judge Donio with the ability to (1) determine that the County
failed to preserve evidence, and (2) impose sanctions in the form
of attorneys’ fees and costs incurred by State National because of
the County’s failure to preserve evidence.
Consequently,
IT IS HEREBY on this
21st
day of March
, 2012
ORDERED that the “Appeal of Magistrate Judge Decision to
District Court” by the County of Camden [399] is DENIED.
s/ Noel L. Hillman
At Camden, New Jersey
NOEL L. HILLMAN, U.S.D.J.
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