Grove City Veterinary Service, LLC et al v. Charter Practices International, LLC

Filing 186

OPINION and ORDER - Plaintiffs' motion 122 for imposition of sanctions for spoliation of evidence is DENIED and Defendants' request for attorney fees contained in their response 140 to motion 122 is DENIED. IT IS SO ORDERED. DATED this 18th day of August, 2015, by United States Magistrate Judge John V. Acosta. (peg)

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON
PORTLAND DIVISION

GROVE CITY VETERINARY
SERVICE, LLC, HEATHER M. FEES,
DVM, HEATHER FEES, DVM, LLC,

No. 3:13-cv-02276-AC
OPINION AND ORDER

THOMAS L. BALTZELL, POLARIS
VETERINARY SERVICE, LLC,
Plaintiff,

v.
CHARTER PRACTICES
INTERNATIONAL, LLC,
Defendant.
Judge ACOSTA, Magistrate Judge:
Plaintiffs Grove City Veterinary Service, LLC, Heather M. Fees, DVM ("Fees"), Heather
Fees, DVM, LLC, Thomas L. Baltzell, DVM ("Baltzell"), and Polaris Veterinary Service, LLC

OPINION AND ORDER - I

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(collectively "Plaintiffs") filed this lawsuit against Defendant Charter Practices International, LLC
("CPI") for breach of contract and for violation of federal and state civil rights statutes. Currently
pending is CPI's motion for summary judgment. (Dkt. No. 126.) However, before CPI filed its
motion for summary judgment, Plaintiffs filed a motion for sanctions in which they allege CPI
committed spoliation of evidence by deleting Baltzell' s archived work emails. Plaintiffs request the
coutt impose dispositive sanctions and dismiss CPI's affirmative defenses to remedy CPI's alleged
wrongdoing. CPI denies it is responsible for "missing" emails, and in their response, requested an
award of attorney fees because of Plaintiffs' "unjustified" motion for sanctions. After reviewing the
record, the court concludes Plaintiffs have not met their burden of showing they are entitled to
sanctions. Therefore, Plaintiffs' Motion for Imposition of Sanctions for Spoliation of Evidence
("Motion for Sanctions") is denied.

Factual Background
Baltzell and Fees are veterinarians. (Comp!. iJ 18.) They serve the public through veterinary
hospitals owned and operated by CPI. (Comp!.

iii! 18-19.)

Pursuant to this arrangement, Baltzell

and Fees entered into a "Chatter Agreement" with CPI which articulates the terms of the business
relationship. (Comp!. iJ 18.) The Plaintiffs now contend CPI breached that Charter Agreement and
are liable under federal and state civil rights statutes. (Comp!. iii! 85-129.)
Baltzell maintains a continuing business relationship with CPI and continues to use an email
system hosted on CPI's servers. (Deel. of Erik Holland in Supp. ofDef.'s Resp. to PJ's Mot. for
Sanctions ("Holland Deel.") iJ 4.) In February 2014, CPI's IT depaitment made significant changes
in the company email system used by CPI employees. (Holland Deel.

iJ 7.)

Of note, CPI updated

the email platform, but also created an email-archiving system whereby emails that are six-months

OPINION AND ORDER - 2

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old or older automatically transfer from an employee's active inbox and into an archive inbox.
(Holland Deel. '\[ 11.) To the extent employees, including Baltzell, had organized their emails in
inbox folders, that organization system remained in place after the archiving process. (Deel. of
Thomas L. Baltzell in Supp. of Pl.' s Mot. for Sanctions ("Baltzell Deel.") Ex. D at I) (emails
retained folder organization after archiving).

As part of the email-system update, CPl's IT

department also downsized the on-computer email storage system. (Affidavit of John Jorgensen
("Jorgensen Deel.")'\[ 5.)
During discovery for this case, Baltzell was required to search for and produce emails stored
in his email archive responsive to CPl's requests for production. (Baltzell Deel.'\[ 2.) In August
2014, Baltzell attempted to access old emails stored in his email archive, but was unable to locate
more than one-hundred folders of archived emails. (Baltzell Deel. '\[ 2.) On August 15, 2014,
Baltzell contacted CPI' s IT department for help finding the "missing" emails. (Jorgensen Deel. Ex.
Cat 3.) A member of the CPI IT department requested a time when he could come and assist
Baltzell. In Baltzell's response, he disclosed that he sought the emails "[r]egarding a legal matter
.... " (Jorgensen Deel Ex.Cat I.) Because Baltzell's request was in furtherance of a legal matter,
the IT department referred the issue to CPI's legal department, which refused further assistance and
advised Plaintiffs that CPI was not responsible for locating documents responsive to its own
discovery requests. (Baltzell Deel. Ex. A at I.)
In December 2014 and January 2015, CPI IT's Senior Systems Analyst Denis Odobasic
("Odobasic") emailed Baltzell to determine whether the issue had been resolved. (Deel. of Denis

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1
Odobasic in Supp. of Def. 's Resp. to Pl. 's Mot for Sanctions ("Odobasic Deel.") 'if'if 4-5.) Baltzell

responded that "some," but not all, of the missing folders had repopulated to his archive inbox.
(Baltzell Deel. 'if 9.) Eventually, more archived email folders became available in Baltzell' s archived
email box, but he contends some remain inaccessible. (Baltzell Deel. 'if'if 9, 11.)

Legal Standard
When a party disobeys a court order during discovery, the comt may impose sanctions on the
offending patty. The court has two sources of sanctions authority. First, Federal Rule of Civil
Procedure 37 ("Rule 37") permits the court to impose sanctions for, among other things, failing to
attend a deposition, failing to obey a discovery order, failing to produce documents in discovery, or
failing to supplement discovery. FED. R. C1v. P. 37(b)-(c). "The definition of 'order' in Rule 37(b)
has been read broadly," and the court may awat·d sanctions for violation of a comt's request in oral
proceedings, so long as the court's order is "unequivocal." Unigard Sec. Ins. Co. v. Lakewood Eng 'g
& Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992) (citing Henry v. Sneiders, 490 F.2d 315, 318 (9th

Cir. 1974)). Whether or not a violation justifies imposition of Rule 37 sanctions is largely "left to
the discretion of the trial comt." Liew v. Breen, 640 F.2d 1046, I 050 (9th Cir. 1981) (citing National

Hockey League v. Metro. Hockey Club, 427 U.S. 639, 642 (1976)). However, sanctions under Rule
37 arise only in situations contemplated by the Rule's text. Unigard, 982 F.2d at 368. Rule 37 "does
not extend to situations in which the rule is 'inapplicable by its very terms,' even when general
discovery misconduct is alleged." Id.
When the moving patty raises a motion for sanctions for failure to produce electronically

1

Plaintiffs moved to strike the Odobasic Declat·ation as untimely filed, but at oral
argument, Plaintiffs dropped their opposition and the court denied their motion to strike as moot.
(Dkt. Nos. 168, 179.)
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stored information ("ESI"), the court's authority is slightly constrained under Rule 37. Rule 37(e)
provides: "Absent exceptional circumstances, a court may not impose sanctions under these mies
on a party for failing to provide electronically stored inf01mation lost as a result of the routine, good
faith operation of an electronic information system." FED. R. CIV. P. 37(e). The destmction of
emails as part of a regular good-faith function of a software application may not be sanctioned absent
exceptional circumstances." Coburn v. PN JI, Inc., No. 2:07-CV-00662-KJD, 2010 WL 3895764,
at *3 (D. Nev. Sept. 30, 2010).
Second, the court has the "inherent power" to levy sanctions for misconduct by the litigants.

Id. "Courts are invested with inherent powers that are 'governed 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 ofcases. "' Unigard, 982 F.2d at 368 (quoting Chambers v. NASCO, Inc. 501
U.S. 32 (1991 )). This includes the authority to, among other things, exclude evidence whose use at
trial "would unfairly prejudice an opposing party." Unigard. 982 F.2d at 368. Similar to the comt's
authority under Rule 37, the co mt has "broad discretion" to shape discove1y and evidentiary rulings
"conducive to the conduct of a fair and orderly trial." Unigard, 982 F.2d at 368. However, the court
will generally exercise its inherent authority only where a party acts "in bad faith, vexatiously,
wantonly, or for oppressive reasons." Coburn, 2010 WL 3895764, at *3.
In extraordinary circumstances, the comt may apply "dispositive sanctions" and dismiss a
party's claim or defense. However, the comt should impose dispositive sanctions only where "a
party has engaged deliberately in deceptive practices that undermine the integrity of judicial
proceedings." Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006). Before imposing the
"harsh" remedy of dispositive sanctions, the court should consider the following factors: "(l) the
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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 sanctions; (4) the public policy favoring disposition of
cases on their merits; and (5) the availability ofless drastic sanctions." Id. The court need not make
explicit findings regarding each factor, but to levy dispositive sanctions the court must specifically
find that a party was at fault for the complained-of conduct, acted willfully, or acted in bad faith.
Id. "Additionally, the comi must consider 'less severe alternatives' than outright dismissal." Id.
Discussion

Plaintiffs contend they are entitled to dispositive sanctions against CPI because CPI: (1)
destroyed or otherwise made unavailable Baltzell's archived emails; (2) refused to help locate the
emails when Plaintiffs raised the issue; (3) imposed a "litigation hold" on Baltzell's email account.
CPI denies it deleted Baltzell' s emails and argues it is entitled to attorney fees under Rule 37 because
Plaintiffs' Motion was legally unjustified.

I. "Spoliation" of Archived Emails
Plaintiffs contend CPI is responsible for deleting or removing hundreds of archived emails
from Dr. Baltzell's email account. CPI argues it did not tamper with Dr. Baltzell's archived emails
and had nothing to do with Dr. Baltzell's emails going missing. In an attempt to explain why the
emails are missing, it presents its own theory to explain why the emails were difficult to locate.
A defendant may be subject to sanctions, patiicularly dispositive sanctions, only if it
committed "willful" spoliation of evidence. Leon, 464 F.3d at 959. "A party's destruction of
evidence qualifies as willful spoliation if the party has 'some notice that the documents were
potentially relevant to the litigation before they were destroyed."' Id. (emphasis original) (quoting
United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002)). A party cannot rely

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on a "presumption of irrelevance" to defeat a motion for sanctions on the basis of spoliation because
"the relevance of destroyed documents cannot be clearly ascertained." Leon, 464 F Jd at 959
(brackets and ellipses omitted).
Here, Plaintiffs do not establish that the emails were willfully destroyed by CPI, or even that
the emails were destroyed at all. Plaintiffs contend that in 2014, after CPI updated its email
archiving system and email platform, hundreds of folders in which Dr. Baltzell organized his emails
were deleted. In support of their argument, Plaintiffs introduce a report (the "Jorgensen Report")
authored by Forensic Computer Analyst John Jorgensen ("Jorgensen"). In it, Jorgensen concludes
CPI remotely accessed Baltzell's computer and deleted the emails.

Although Jorgensen's

conclusions purportedly flow from his "forensic analysis" of Baltzell's computer, Jorgensen
produced no data reports or other evidence to suppo1t his conclusions. Instead, he relies heavily on
circumstantial evidence and the temporal proximity between CPI' s email-system update and the date
on which Baltzell first noticed the emails were "missing." Jorgensen also produces no evidence
which shows CPI's IT depaitment remotely accessed Baltzell's computer without permission or
tampered with Baltzell's archived emails in any way.
In fact, Jorgensen omits from his repmt several facts relevant to assessing the credibility of
his conclusions. First, Jorgensen fails to disclose that, during his analysis of Baltzell 's computer,
the computer was not logged into the CPI's servers where the archived emails are stored. (Holland
Deel. '\[ 26.) Because he was not logged into the servers, he would not have been able to access the
archived emails even if they were readily available in Baltzell' s archived email inbox. Second,
Plaintiffs did not dispute CPI's asse1tion at oral argument that Jorgensen created and analyzed an
"activity log" which documented each time someone remotely accessed Baltzell' s computer.
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Plaintiffs also did not dispute the accuracy of an excerpt of the log, which CPI produced at oral
argument. The excerpt of the activity log showed that CPI IT last remotely accessed Baltzell's
computer on July 2, 2014, well before Baltzell had difficultly finding the emails in question. The
absence of the activity log in the record is telling and suggests Jorgensen found no direct evidence
of knowing wrongdoing by CPI.
Despite Plaintiffs bearing the burden of proof on their sanctions motion, CPI produced ·
evidence that the missing emails were accessible in Baltzell' s email archive, but that they had been
"dragged and dropped" into a folder not typically associated with archived emails. In support of its
theory, CPI introduced a document showing the electronic location of each email folder in Baltzell' s
email archive. It demonstrates that the "missing" archived emails were, at all relevanttimes, located
in a portion ofBaltzell's email archive generally not associated with email storage. (Holland Deel.
Exs. 2-3.) Specifically, as of the time CPI searched Baltzell's email, the "missing" archive email
folders were housed under the "Notes" tab of Baltzell's archived mailbox. No email dated after
December 11, 2014, can be found in the "Notes" folder, and CPI contends Baltzell accidentally
dragged his archived inbox into the "Notes" folder some time in early December 2014.
Although CPI relies primarily on circumstantial evidence to form its "drag-and-drop" theory,
its evidence is more persuasive than that produced by the Plaintiffs, who bear the burden of proof
on this motion. Based on the totality of the record, the comt is persuaded that CPI's "drag-and-drop"
theory is more plausible than Plaintiffs' theory of deliberate spoliation. Plaintiffs have not responded
to Defendant's "drag-and-drop" theory or carried their burden of demonstrating CPI is responsible
for the "spoliation" of the "missing" emails.
Even if Plaintiffs' theory of intentional spoliation was supported by the record, the Plaintiffs
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made no attempt to obtain redress through a motion to compel, and otherwise made no attempt to
info1m the court of the alleged spoliation prior to filing its motion for sanctions. Plaintiffs contend
Baltzell first had problems finding his archived emails in August 2014. Since then, the court has
held five discovery status conferences, Plaintiffs have filed tlu·ee motions to compel, and Plaintiffs
have emailed the comt four times to raise discovery issues. (Dkt. Nos. 59, 65, 69, 75, 92, 106, 108,
132.) In none of those hearings, motions, or emails did Plaintiffs inform the court that CPI had
deleted and possibly withheld hundreds of emails which may have been responsive to CPI's
discovery requests. Because Plaintiffs did not raise this issue during the nine months preceding their
motion, the court concludes they are not entitled to sanctions at this time.
II. Conduct ofCPI's IT Department and CPI's Attomeys
Plaintiffs next contend CPI' s response to Baltzell' s request for help finding the emails
warrants sanctions. Specifically, Plaintiffs contend that, when Baltzell requested CPI's assistance
in finding the missing emails, CPI IT personnel did not respond to Baltzell's emails or otherwise
attempt to assist him for months. CPI disputes Plaintiffs' contention that it offered no assistance.
Moreover, CPI argues that, given the nature and form of Baltzell's request for IT-department
assistance, it had no responsibility to aid Baltzell in fulfilling his discovery duties.
Baltzell first asked for assistance on August 15, 2014, when he wrote to the CPI IT
department, "I was searching for an older email and realize it is no longer in my mail or archive.
How can I retrieve older messages?" (Baltzell Deel. Ex. A at 2.) Tlu·ee days later, Faryar Nasseri
("Nasseri") of CPI Technical Support responded with the following:
I would be happy to address this email issue. When and where would be a good time
to contact you? To help us answer any questions regarding this email would you be
able to say how old the email is or when you received it?

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Baltzell explained that he would be looking for emails "as far back as 2010" "[r]egarding a legal
matter .... " (Baltzell Deel. Ex. A at I.) Because the request for assistance related to "a legal
matter," Nasseri referred Baltzell 's request to the CPI legal department, writing: "Hello legal team,
Can you assist Dr. Baltzell with his email questions and legal concerns?" (Baltzell Deel. Ex. A at
1.) When Baltzell received no further response to his request, Plaintiffs' attorneys called CPI and
requested access to "files from [Baltzell's] email archive from 2010 to the present." (Baltzell Deel.
Ex. A at 1.) However, CPI "responded that it was not Defendant's obligation to assist Plaintiff to
access such documents" responsive to CPI's discovery requests. ((Patel Deel. i! 2.) In January and
Febrnary 2015, Odobasic attempted to help Baltzell locate the emails but was ultimately
unsuccessful. (Odobasic Deel.

i!il 6-8.)

Because Odobasic could not find the email folders, he

elevated Baltzell's issue to the "next level in [CPI's] IT department and sent an email to Dr. Baltzell
info1ming him of that." (Odobasic Deel. if 11.)
The court concludes that CPI' s response to Baltzell' s request for assistance does not warrant
sanctions. First, aside from hosting the archive email system on CPI' s servers, CPI does not
maintain individual archive email boxes, and the weight of the evidence suggests CPI was not
involved in the "disappearance" ofBaltzell' s archived email folders. Because CPI is not responsible
for deleting or making unavailable Baltzell's archived emails, they were under no heightened
obligation to give aid finding the emails, and their failure to find the "missing" emails before
Plaintiffs filed this motion does not give rise to a motion for sanctions. Second, Baltzell explained
in his request for assistance that he needed to locate the emails "[r]egarding a legal matter." CPI IT
personnel were not wrong to refer the request to CPI' s legal department for guidance, and CPI was
not under a duty to assist Plaintiffs in responding to CPI' s requests for production. See Play Visions,

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Inc. v. Dollar Tree Stores, Inc., No. C09-1769 MJP, 2011WL2292326, at *2 (W.D. Wash. June 8,

2011) (the parties agreed, and court did not find to the contrary, that the defendant was under no duty
to assist plaintiff in locating documents responsive to the defendant's discovery requests). Third,
once Baltzell clarified his request for assistance, CPI, through Odobasic, made a good-faith effort
to locate the archived emails. Although Odobasic's attempt to locate the emails was ultimately
unsuccessful, his response to Baltzell' s request demonstrates CPI took concrete steps to find the
archived emails in question. Fourth, as the court discussed infi·a, Plaintiffs did not seek to obtain
the documents through a motion to compel despite the oppo1tunity to do so. Therefore, CPl's
behavior in response to Baltzell' s request does not warrant sanctions.
III. Litigation Hold
Plaintiffs contend sanctions are warranted because CPI imposed a "litigation hold" on
Baltzell' s email account to retain documents unavailable to Plaintiffs during this litigation. Plaintiffs
claimed at oral argument that CPI' s litigation hold was "worse than spoliation" because unlike
evidence unlawfully destroyed by a party, evidence placed in a litigation hold is still available to the
party implementing the litigation hold. CPI contends the litigation hold is a standard technique for
retaining documents relevant to pending litigation and should not result in sanctions.
"As soon as a potential claim is identified, a litigant is under a duty to preserve evidence
which it knows or reasonably should know is relevant to the action." In re Napster, Inc. Copyright
Litigation, 462 F. Supp. 2d 1060, 1067 (N.D. Cal. 2006). A tool commonly used by organizations

to comply with this duty is the litigation hold. Typically, a litigation hold is a "notice issued in
anticipation of a lawsuit or investigation, ordering employees to preserve documents and other
materials relevant to that lawsuit or investigation." BLACK' s LA wDICTIONARY 800 (9th ed. 2009).
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"It is difficult to imagine any document-focused litigation in which parties fail to implement
litigation holds." Don Zupanec, Preservation ofEvidence-Spo/iation- No Written Litigation Hold
26 No. 7 Fed. Lit. 9 (2011) (discussing the ubiquitous nature of litigation holds in cases with
organizational litigants). In fact, where a patty's failure to implement a litigation hold results in the
destruction of relevant documents, it can result in sanctions against it. See Knickerbocker v.

Corinthian Coll., 298 F.R.D. 670, 682 (W.D. Wash 2014) (granting plaintiffs motion for sanctions
where the defendant failed to impose a litigation hold on documents in its possession, resulting in
destruction of evidence.)
The litigation hold to which Plaintiffs object is not a typical, voluntaiy litigation hold,
pursuant to which CPI employees retain documents they would otherwise delete. Instead, CPI' s
litigation-hold system is a computer program applied to Baltzell's email account which "retains
copies of any emails that the account holder (or anyone else) deletes and purges from the mailbox."
(Holland Deel.

ii

17.) Therefore, CPI' s electronic litigation hold activates only when Baltzell

attempted to delete an email in his inbox or archived inbox, at which time the computer program
would duplicate the email and store that copy in a centralized location on CPI' s servers. (Holland
Deel.

ii

17.) Plaintiffs have presented nothing but conjecture to show that the litigation hold's

purpose was to withhold relevant evidence from Plaintiffs.
The court concludes CPI's use of the litigation hold is not grounds for imposing sanctions.
Because Plaintiffs have not demonstrated sufficient cause exists for imposing sanctions on CPI, the
court denies Plaintiffs' Motion for Sanctions.
IV. CPI's Reguest for Attorney Fees
CPI argues it is entitled to attorney fees under Rule 37 because Plaintiffs' motion was not

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"substantially justified." Plaintiffs did not address CPI's request for attorney fees in their Reply.
The comt concludes that, although Plaintiffs did not prevail on their motion for sanctions, their
motion was not unjustified, and Defendants are not entitled to attorney fees.
Federal Rule of Civil Procedure ("FRCP") 37 provides that if a motion for sanctions is
denied:
[T]he court ... must, after giving an opportunity to be heard, require the movant, the
attorney filing the motion, or both to pay the party or deponent who opposed the
motion its reasonable expenses incurred in opposing the motion, including attorney's
fees. But the comt must not order this payment if the motion was substantially
justified or other circumstances make an award of expenses unjust.
FED. R. Crv. P. 37(a)(S)(B). Despite the language of Rule 37 which appears to mandate an award
of attorney fees under ce1tain circumstances, the Ninth Circuit has held the court has some measure
of discretion in whether to award attorney fees under that section. Dague v. Dumesic, 402 Fed.
Appx. 218, 219 (9th Cir. 2010) (mem.).
The comt declines to award Defendants attorney fees because the court cannot conclude
Plaintiffs motion was "unjustified." In this case, a problem occurred in attempting to locate
documents relevant to Plaintiffs' discovery duties. After expending significant effort in an attempt
to locate the documents, including hiring a forensic computer analyst, the Plaintiffs had few
alternatives to seeking comt intervention. That Plaintiffs' motion was ultimately unsuccessful does
not change the reasonableness of their decision to seek the comt's help in divining the location of
the "missing" emails at issue. Because Plaintiffs' motion was substantially justified, the court
concludes CPI is not entitled to attorney fees under Rule 37(a)(S)(B).

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Conclusion
For the aforementioned reasons, Plaintiffs' Motion for Imposition of Sanctions for Spoliation
of Evidence (Dkt. No. 122) is DENIED and Defendants' request for attorney fees (Dkt. No. 140) is
DENIED.
DATED this 18th day of August, 2015.
IT IS SO ORDERED

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