ORION DRILLING COMPANY, LLC. v. EQT PRODUCTION COMPANY
Filing
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MEMORANDUM OPINION and ORDER GRANTING IN PART AND DENYING IN PART 117 Motion for Sanctions. Signed by Chief Magistrate Judge Maureen P. Kelly on 09/11/18. (eca)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ORION DRILLING COMPANY, LLC.,
Plaintiff,
v.
EQT PRODUCTION COMPANY,
Defendant,
V.
EQT PRODUCTION COMPANY,
Counter Claimant,
V.
ORION DRILLING COMP ANY, LLC.,
Counter Defendant.
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Civil Action No. 16-1516
Chief Magistrate Judge Maureen P. Kelly
Re: ECFNo. 117
MEMORANDUM OPINION
I.
INTRODUCTION
Presently before the Court is a Motion for Sanctions for Spoliation of Evidence (the
"Motion for Sanctions") filed by Defendant EQT Production Company ("EQT"). ECF No. 117.
In the Motion for Sanctions, EQT seeks sanctions for spoliation of evidence by Plaintiff Orion
Drilling Company, LLC ("Orion"). The Court has thoroughly reviewed the relevant documents
supporting the Motion for Sanctions, ECF Nos. 118 and 131, and opposing the Motion for
Sanctions, ECF Nos. 128 and 132. The Motion for Sanctions is now ripe for consideration.
II.
FACTUAL AND PROCEDURAL BACKGROUND
The instant litigation is based on two contracts entered into between Orion and EQT in
which Orion agreed to build two oil and gas drilling rigs to EQT' s specifications. The contract
dated April 21, 2014, relates to the construction of Rig 17 and the contract dated August 7, 2014,
relates to the construction of Rig 18. ECF No. 1 at 2.
The parties also entered into drilling
contracts relative to Rig 17 and Rig 18. Following EQT accepting and taking possession of both
rigs, there were three dropped block incidents that occurred on Rig 18 that Orion was operating
for EQT. After those three incidents, Rig 18 was pulled out of service and inspected over the
course of weeks by multiple parties. Ultimately, EQT terminated the contract with Orion for the
drilling operations of Rig 18 and Rig 17.
The parties have engaged in extensive discovery, including: multiple motions to compel
discovery, an emergency motion to compel inspection, motions to quash, motions for sanctions,
an emergency motion to compel supplemental responses and multiple motions for protective
orders. ECF Nos. 29, 41, 47, 52, 59, 61, 92, 102 and 107.
In the Motion for Sanctions, EQT alleges, in detail, six specific categories of conduct by
Orion in destroying and/or failing to preserve significant relevant evidence, along with the failure
to conduct thorough searches with current and former key employees for responsive documents.
These categories of conduct also provide the Court with the context upon which EQT argues that
Orion has repeatedly engaged in sanctionable discovery misconduct. Following briefing and
Orion's belated production of certain documents, two categories of conduct remain at issue.
First, the destruction of and failure to preserve handwritten notes of Jamie Garza ("Garza").
Second, the destruction of and failure to preserve handwritten notes and copies of IADC
contracts marked-up by Owen Brandt ("Brandt"). ECF No. 131 at 2, 5. The Court will address
each category separately.
III.
STANDARD OF REVIEW
A party seeking sanctions bears the burden of proving spoliation of evidence occurred.
Universal Underwriters Ins. Co. v. Dedicated Logistics, Inc. Civ. A. No. 11-1153, 2014 WL
7335668, at *4 (W.D. Pa. Dec. 19, 2014). Spoliation of evidence occurred if: (1) the evidence
was in the defendant's control; (2) the evidence is relevant to the plaintiffs claims; (3) there has
been actual, intentional, suppression or the withholding of evidence in bad faith; and (4) the duty
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to preserve evidence was reasonably foreseeable to defendants. Bull v. United Parcel Serv .• Inc.,
665 F. 3d 68, 73 (3d Cir. 2012) (citing Brewer v. Quaker State Oil Refining Corp., 72 F. 3d 326,
334 (3d Cir. 1995)). In this case, Defendant EQT alleges spoliation by Plaintiff Orion.
IV.
DISCUSSION
A.
Handwritten Notes of Jamie Garza
1.
Description
Garza is an Operations Manager at Orion who was a Superintendent for both Rig 17 and
Rig 18, the two rigs at issue in this case, and was present in Pennsylvania for the entirety of the
operation of Rigs 17 and 18. ECF No. 118 at 3. At his deposition, Garza testified that, in the
relevant time period, he would make notes during meetings at Orion on a notepad or scratch
pieces of paper. ECF No. 117-2 at 4. Garza further testified that he did not bring any of those
notes with him when he left Pennsylvania on September 29, 2016, and that "Some of them got
thrown away when I left. I threw some of them away. It was considered junk in my office that I
didn't need." Id. at 4-6. Garza left Pennsylvania and the two rig sites only one day before Orion
filed this lawsuit.
2.
Spoliation Factors
a.
Evidence in party's control
Orion does not dispute that Garza's notes were within its control. Thus, the Court finds
that EQT has established this element of spoliation.
b.
Evidence relevant to claims or defenses
EQT asserts that Garza's handwritten notes concerning meetings which took place prior
to and through the construction and performance of Rigs 17 and 18 are plainly relevant. ECF
No. 118 at 9. EQT specifically states, "Because Garza was the Orion employee overseeing day-
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to-day operations of the rigs, it is reasonable to conclude that at least some of his destroyed notes
regarding workplace meeting he participated in would be relevant to the rigs. Of course, EQT
cannot know the exact content of Garza's destroyed meeting notes because they have been
destroyed." ECF No. 131 at 4 (emphasis in original).
Orion provides an affidavit from Garza in which he states that he did not throw away any
notes relating to Rig 17 or Rig 18. ECF No. 132-1 at 3. Garza further states that he received a
litigation hold notice concerning claims involving "EQT termination of the drilling contract" and
that he complied with that notice. Id. He further states that what he threw away was junk, not
document relating to Rig 17 or Rig 18. Id.
Given Garza's leadership position with Orion, the Court finds that the documents at issue
were clearly relevant to Orion's claims, EQT' s defenses and counterclaim. Thus, the second
factor is easily satisfied.
c.
Actual suppression or withholding of evidence in bad faith
In Bull, the United States Court of Appeals for the Third Circuit discussed the "key
issue" of bad faith in the context of spoliation. Bull, 665 F .3d at 76-77. The court observed:
For the [spoliation] rule to apply ... it must appear that there has been
an actual suppression or withholding of the evidence. No unfavorable
inference arises when the circumstances indicate that the document or
article in question has been lost or accidentally destroyed, or where
the failure to produce it is otherwise properly accounted for. See
generally 31A C.J.S. [Evidence]§ 156(2); 29 [AM. JUR.2d Evidence]
§ 177 ("Such a presumption or inference arises, however, only when
the spoliation or destruction [of evidence] was intentional, and
indicates fraud and a desire to suppress the truth, and it does not arise
where the destruction was a. matter of routine with no fraudulent
intent.").
Brewer, 72 F.3d at 334 (emphasis added). Therefore, a finding of bad
faith is pivotal to a spoliation determination. This only makes sense,
since spoliation of documents that are merely withheld, but not destroyed,
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requires evidence that the documents are actually withheld, rather than for instance - misplaced. Withholding requires intent.
Bull, 665 F.3d at 79 (quoting Brewer, 72 F.3d at 334) (italicized emphasis in original, bold
emphasis added).
Consistent with this principle, district courts within the Third Circuit have routinely
distinguished between situations where "the spoliation or destruction [of evidence] was
intentional, and indicates fraud and a desire to suppress the truth," and those where "the
document or article in question has been lost or accidentally destroyed, or where the failure to
produce it is otherwise properly accounted for." Brewer, 72 F.3d at 334; see Baliotis v. McNeil,
870 F. Supp. 1285, 1290-91 (M.D. Pa. 1994) (finding intentional authorization of destruction of
missing evidence critical); Bozic v. City of Washington, 912 F. Supp. 2d 257, 270 (W.D. Pa.
2012) (finding sanctions warranted where conduct rose well above inadvertence or normal
activities); Micjan v. Wal-Mart Stores, Inc., Civ. A. No. 114-866, 2016 LEXIS 23173, at *28-29
(W.D. Pa. Feb. 25, 2016) (finding no evidence that actions were deliberate att~mpt to impede a
potential defense); Punch v. Dollar Tree Stores, Inc., Civ. A. No. 12-154, 2017 U.S. Dist. LEXIS
23443, at * 14-17 (Feb. 17, 2017) (disposal of critical evidence did not amount to spoliation in
the absence of "a deliberate attempt to impede a potential defense"); Heck v. Mem'l Health Sys.,
Civ. A. No. 10-1675, 2012 U.S. Dist. LEXIS 117287, at *7 (M.D. Pa. Aug. 20, 2012) ("merely
... misplaced"); Victor v. Lawler, Civ. A. No. 08-1374, 2012 U.S. Dist. LEXIS 65740, at *2430 (M.D. Pa. May 10, 2012) (evidence lost despite unsuccessful efforts to preserve); Dunn v.
Mercedes Benz of Ft. Washington, Inc., Civ. A. No. 10-1662, 2012 U.S. Dist. LEXIS 17089, at
*17-20 (E.D. Pa. Feb. 10, 2012) (conduct was negligent but not "willful[] or in bad faith").
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Here, EQT argues that Garza intentionally destroyed his hard-copy documents and
handwritten notes with knowledge of the existing dispute with EQT over Rig 17 and Rig 18 on
the very day before Orion filed this lawsuit. ECF No. 118 at 10. As such, EQT contends that
litigation was necessarily foreseeable as of that date. Id. at 9-10.
In opposing the Motion for Sanctions, Orion argues that EQT cannot establish the
requisite element of bad faith. ECF No. 128 at 10-12. Specifically, Orion responds that EQT's
allegations are generalities not sufficient to show that Orion engaged in actions that were a
deliberate attempt to impede a potential defense.
Upon review, the Court finds that Orion has conveniently ignored the deposition
testimony of Garza, their own Operations Manager for Rig 17 and Rig 18, that he intentionally
destroyed the documents in question: "I threw some of them away." ECF No. 117-2 at 6.
Clearly, Garza had knowledge that a dispute had arisen between the parties, that a lawsuit was
about to be filed and he destroyed certain documents relative to operations of the two rigs at
issue. This intentional action is sufficient to satisfy the element of bad faith.
d.
Reasonably foreseeable duty to preserve evidence
In support of the Motion for Sanctions, EQT asserts that multiple events, including
Orion's retention of outside counsel and a statement by Orion's CEO that it "was in litigation"
over the contractual situation with EQT, indicate that Orion reasonably foresaw the need to
preserve evidence for the instant lawsuit. ECF No. 118 at 12-13. As noted above, the instant
lawsuit was filed one day after Garza destroyed his notes.
In opposition to the Motion for Sanctions, Orion makes no argument on tp.is point as it
relates to Garza. ECF No. 128 at 13.
The Court finds that this factor has been established.
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3.
Conclusion
Having found that all four factors have been established, the Court finds that there has
been spoliation.
B.
Notes and Copies of the IADC contract marked up by Owen Brandt
1.
Description
Brandt worked for Orion in Pennsylvania between 2011 and 2015, in the dual role of
Superintendent and Operations· Manager.
ECF No. 118 at 4.
Brandt was responsible for
multiple rigs, including Rigs 17 and 18. Id. When Brandt left Pennsylvania in 2015, he boxed
up some "stuff' and took it with him but the rest stayed in Pennsylvania. Id. At his deposition,
Brandt testified that he had possessed IADC contracts for Rig 17 and Rig 18. ECF No. 117 at
3 5. When asked, "Did you mark those up, take notes on them, kind of highlight this is important
or something like that if you wanted to draw your attention to something quickly," id., Brandt
replied, "Probably." ECFNo. 131 at7. 1
2.
Spoliation Factors
a.
Evidence in party's control
Orion does not dispute that Brandt's copies of the subject contracts were within its
control. Thus, the Court finds that EQT has established this element of spoliation.
b.
Evidence relevant to claims or defenses
EQT argues that "[t]he markings of an Orion management employee on the documents
which form the entire basis of this litigation 'are plainly relevant to the instant case' as they are
'at the very heart of the dispute' between the parties." ECF No. 131 at 5. Orion argues that EQT
did not establish the existence of any marked-up copies of the contracts or how portions of the
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EQT has not provided the deposition page containing Brandt's response; however, there appears to be no dispute
that Brandt answered "Probably." ECF No. 132 at 3.
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contract highlighted by Brandt could harm Orion's ability to prove its claims against EQT. ECF
No. 132 at 3.
In his deposition testimony, Brandt indicated that it was more likely than not that he
marked up his copy of the contract at issue. ECF No. 131 at 7. Given Brandt's leadership
position with Orion, the Court find that the documents at issue were clearly relevant to Orion's
claims, EQT's defenses and counterclaim. Thus, the second factor is satisfied.
c.
Actual suppression or withholding of evidence in bad faith
In support of the Motion for Sanctions, EQT points to Orion's failure to produce the
documents in question as well as to the surrounding allegations of discovery misconduct on the
part of Orion in order to demonstrate bad faith in Orion's failure to produce the Brandt
documents. ECF No. 118 at 9-11. EQT also argues that Orion only asked Brandt for a copy of
his hard drive and never asked him for hard copies of any documents that he had in his
possession. Id. at 4. In opposition to the Motion for Sanctions, Orion asserts that EQT fails to
show that Orion engaged in any deliberate conduct related to the Brandt do_cuments and posits
that EQT's "massive discovery effort on anything and everything related to Rigs 17 and 18
undermines its argument that it was somehow deprived of some critical (but unidentified)
fragment of information." ECF No. 128 at 10-12.
The Court does not agree with Orion.
Brandt's admitted intentional act of discarding documents is sufficient to satisfy this element.
d.
Reasonably foreseeable duty to preserve evidence
In support of the Motion for Sanctions, EQT asserts that Orion should have reasonably
foreseen the need to preserve Brandt's hard-copy documents at the time that he left Pennsylvania
in 2015 because, by that time, both Rig 17 and Rig 18 had experienced significant operational
incidents. ECF No. 118 at 13. In opposition to the Motion for Sanctions, Orion merely denies
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that any basis exists to find that it was on notice of a duty to maintain Brandt's hard-copy
documents and notes in December 2015. ECF No. 128 at 13.
As cited by EQT in support of this element, Garza's deposition testimony reveals that
multiple operational incidents on Rig 17 and Rig 18 occurred earlier in 2015. ECF No. 118 at 13
(citing ECF No. 117-2 at 10-25, 29-30). As such, when Brandt left Pennsylvania in 2015, it was
reasonably foreseeable that Orion had a duty to preserve the documents of this key employee.
The Court finds that this factor has been established.
3.
Conclusion
Having found that all four factors have been established, the Court finds that there has
been spoliation.
C.
Sanction
Having found that spoliation occurred in this case, the Court now turns to the matter of
determining an appropriate sanction. EQT requests: (1) a spoliation inference enhanced with a
directive to the factfinder that Orion was charged with having anticipated this litigation and had a
duty to preserve evidence; and (2) compensation for the attorneys' fees associated with litigating
the instant Motion for Sanctions. ECF No. 118 at 12-16. In opposition, Orion argues that no
sanction is appropriate because EQT did not establish that it suffered prejudice. ECF No. 128 at
14-15.
To determine the appropriate sanction for spoliation, the court must consider: (1) the
degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice
suffered by the party seeking sanctions; and (3) whether there is a lesser sanction that will avoid
substantial unfairness to the aggrieved party and, where the offending party is seriously at fault,
will serve to deter such conduct by others in the future. Bull, 665 F .3d at 73 n.5 (quoting Schmid
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v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)). Spoliation sanctions include
dismissal of a claim, judgment in favor of the prejudiced party, suppression of evidence, an
adverse inference instruction that the spoiled evidence was harmful to the offending party's case,
fines, and attorneys' fees and costs. Jacobs v. City of Pittsburgh, 143 F. Supp. 3d. 307, 311
(W.D. Pa. 2015) (citation omitted).
As the United States Court of Appeals for the Third Circuit has explained: "Since the
early 17th century, courts have admitted evidence tending to show that a party destroyed
evidence relevant to the dispute being litigated.
Such evidence permitted an inference, the
'spoliation inference', that the destroyed evidence would have been unfavorable to the position
of the offending party." Schmid, 13 F.3d at 78 (citation omitted).
In this case, upon consideration of the relevant factors, and finding that Orion was solely
responsible for the failure to preserve and destruction of the relevant evidence, that the prejudice
suffered by EQT is unknown but that no lesser sanction can remedy the spoliation, the Court
finds that a spoliation instruction to the jury is warranted.
The precise wording of such
instruction will be determined at an appropriate time in the prior to the trial of this case. In light
of this sanction, the Court exercises its discretion and declines to award attorneys' fees.
V.
CONCLUSION
For the reasons set forth herein, EQT's Motion for Sanctions for Spoliation of Evidence,
ECF No. 117, is granted in part and denied in part. An appropriate order follows.
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ORDER
AND NOW, this 11 th day of September, 2018, IT IS HEREBY ORDERED that the
Motion for Sanctions for Spoliation of Evidence, ECF No. 117, is GRANTED as to the request
for a spoliation instruction to be given at trial and DENIED as to the request for attorney's fees.
BY THE COURT:
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TE JUDGE
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