Equal Employment Opportunity Commission v. FRY'S ELECTRONICS, INC.
Filing
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ORDER granting in part pltfs' motion for sanctions; granting in part and denying in part 142 Motion for Sanctions; granting 165 Motion to Seal; granting 166 Motion for Extension of Time; granting 178 Motion to Seal by Judge Robert S. Lasnik.(RS)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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_______________________________________
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EQUAL EMPLOYMENT OPPORTUNITY
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COMMISSION,
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Plaintiff,
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v.
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FRY’S ELECTRONICS, INC.,
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Defendant.
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_______________________________________)
No. C10-1562RSL
ORDER GRANTING IN PART
PLAINTIFFS’ MOTION FOR
SANCTIONS
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This matter comes before the Court on “Plaintiffs’ Motion for Sanctions for
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Defendant’s Willful Spoliation of Evidence and Failure to Appear for Deposition” (Dkt. # 142),
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“Plaintiffs’ Motion for Extension of Time to File Supplemental Declarations” (Dkt. # 166),
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plaintiffs’ “Motion to Seal Exhibits II-NN to the Second Supplemental Declaration of Scott C.G.
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Blankenship” (Dkt. # 165), and plaintiffs’ “Motion to Seal Exhibits E-F to the Declaration of
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Scott C.G. Blankenship in Support of Plaintiffs’ Reply” (Dkt. # 178). Having reviewed the
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memoranda, declarations, and exhibits submitted by the parties,1 and having heard the arguments
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Defendant’s sur-reply (Dkt. # 160) has been disregarded. Although some of the statements
identified in the motion are appropriately characterized as misrepresentations of fact, most of them are
plausible, though entirely one-sided, interpretations of the evidence. While the Court disapproves of
statements that stretch the truth, especially when offered by officers of the court, both sides have
exhibited a disturbing willingness to make assertions that are only loosely based on the testimony or
documents produced in this litigation. The Court understands that this not the first time counsel have
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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of counsel, the Court finds as follows:
(1) In December 2011, plaintiffs served discovery requests seeking, among other things,
(a) the identification and location of “all computers or other devices on which documents and
communications regarding Plaintiff’s discipline, termination, or complaints of harassment or
discrimination or retaliation were created or stored,” (b) the identification of all employees
selected for “A Teams” from 2003 to the present, and (c) production of Merchandise Operations
Personnel Audit Reviews (“MOPARs”) performed at the Renton store while Arturo Squires was
manager. Plaintiff filed a timely motion to compel responses, which was granted in part. Based
on defendant’s responses to written discovery and the testimony of its witnesses, plaintiffs came
to the conclusion that at least some of the information sought had been destroyed by defendant.
This motion for sanctions followed. Although defendant argues that the motion is actually a
discovery motion that should have been filed before the discovery cutoff, plaintiffs request that
the Court determine whether defendant wilfully destroyed relevant evidence in a way that
undermines the integrity of this proceeding and, if so, the appropriate remedy therefore. Except
as noted below, plaintiff is not seeking to compel additional discovery: rather, plaintiff seeks a
dispositive sanction for litigation misconduct. Plaintiffs’ motion for sanctions is timely.
(2) While the Court generally disapproves of Mr. Blankenship’s practice of raising
arguments and/or presenting evidence piecemeal, the prompt presentation of this motion for
sanctions coincided with the supplemental production ordered by the Court on February 16,
2012. Because additional documents relevant to the pending motion were provided in the
supplemental production, plaintiffs’ motion for leave to file additional declarations in support of
squared off against each other, but it expects counsel to assist, rather than hinder, the search for truth
that is the purpose of these proceedings. Failure to do so in the future may result in sanctions. For
purposes of this motion, the parties can rest assured that the Court has discounted much of counsel’s
hyperbolic and/or overzealous statements and has considered the facts only as they are revealed by the
underlying evidence.
That having been said, the Court appreciates counsels’ recent willingness to work
together to bring additional information before the Court in a timely manner.
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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the motion for sanctions is GRANTED.
(3) Spoliation is the “destruction or significant alteration of evidence, or the failure to
preserve property for another’s use as evidence, in pending or future litigation.” Kearney v.
Foley & Lardner, LLP, 590 F.3d 638, 649 (9th Cir. 2009) (citation omitted). Pursuant to its
inherent powers to control the litigation before it, the district court may levy sanctions, including
the entry of judgment, for spoliation of evidence. U.S. v. $40,955.00 in U.S. Currency, 554 F.3d
752, 758 (9th Cir. 2009). Sanctions for spoliation are appropriate only if the party had notice
that the evidence is potentially relevant to a claim. Leon v. IDX Syss. Corp., 464 F.3d 951, 958
(9th Cir. 2006). Thus, the duty to preserve evidence is triggered when a party knows or
reasonably should know that the evidence may be relevant to pending or future litigation.
Plaintiff Ka Lam engaged in protected activity and was fired a few weeks after his
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store manager learned of the complaint. Assuming, for purposes of this motion, that the
temporal relationship between these two events did not provide sufficient notice of a potential
retaliation claim, notice was certainly provided when Mr. Lam responded to his suspension
notice with reference to the Equal Employment Opportunity Commission (“EEOC”). Defendant
is a sophisticated corporate employer: the mention of the EEOC in this context put it on notice
that a charge might be filed. Thus, the duty to preserve potentially relevant documents was
triggered as of May 24, 2007.2
(4) When describing the loss or absence of documents, defendant provides very few
details regarding its document retention policies or when/where/how/by whom a particular piece
of evidence was destroyed. It is undisputed, however, that defendant failed to preserve
MOPARS and sales/projection numbers for the department Mr. Lam supervised and in which
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The duty would encompass documents and evidence that are relevant to Mr. Lam’s retaliation
claim. Because Mr. Lam has the burden of proving that he engaged in protected activity and that the
activity was causally connected to his termination, evidence regarding his objections to the sexual
harassment of Ms. Rios and any investigation of that complaint should have been preserved.
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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Ms. Rios worked even after the EEOC had requested such information. Dkt. # 151 at 8 and 11.
Defendant argues that it had no reason to believe these documents were relevant to the potential
claim because Mr. Lam was terminated for reasons other than his individual sales performance
or that of his department. At the time of his termination, however, Mr. Lam was told that he was
being fired for “a decrease in Mr. Lam’s overall productivity and performance as a Sales
Supervisor.” Dkt. # 143, Ex. A. In response to the EEOC’s investigation, defendant argued that:
To evaluate a supervisor’s sales performance, it is mandatory to consider the sales
of the entire department for which he is responsible. As the only Audio Sales
supervisor in Fry’s Renton store, Mr. Lam was directly responsible for the overall
sales performance of all Audio Sales. To the extent the sales performance of the
Audio Sales Department is relevant [which defendant contested], for the period
starting January 1, 2007 up to and including Mr. Lam’s termination, the
Department averaged 83.93% of its sales projection. For the period following Mr.
Lam’s departure from June 2007 through January 2008, the Department’s sales
performance improved dramatically, averaging 100.34% of its sales projection.
Thus, the sales numbers demonstrate that Audio Sales improved by approximately
20% in the months following Mr. Lam’s termination, supporting the position that
the Audio Department had significant room for sales improvement while under
Mr. Lam’s supervision.
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Dkt. # 143, Ex. H at 3-4. Although defendant argues that this justification was an error and that
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it never meant to suggest that Mr. Lam’s sales or supervisory performance was lacking, Mr. Lam
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is entitled to discovery regarding the validity of a proffered justification for the adverse
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employment action. Documents and sales data that may help him show that his overall
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productivity and performance as a sales supervisor was on par with other supervisors and/or did
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not decrease are clearly relevant. Such evidence would allow him to argue that one of the
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justifications defendant provided for his termination was a smokescreen. If the jury found
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pretext, it would be entitled to infer a hidden retaliatory motive. Defendant would, of course, be
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entitled to argue that the reference to sales performance was an error or that its statements at the
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time of termination meant something other than that Mr. Lam had failed to coax sufficient sales
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from his associates, but it would be up to the jury to decide whether the justification was simply
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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inartful or was pretextual. By destroying relevant evidence that had been sought by the EEOC
and on which defendant relied for its own purposes, defendant has put these arguments out of
plaintiffs’ reach.
Plaintiffs also argue that the decision to scrap two computer hard drives in 2009
constitutes willful spoliation. The computers were located in the office of the Renton store
where plaintiffs were employed. Defendant offers no justification or explanation for their
destruction. There is no evidence that they were replaced on a planned schedule or as part of a
company-wide upgrade. Rather, the hard drives on which documents and communications
regarding plaintiffs’ discipline, termination, and/or complaints of harassment, discrimination, or
retaliation were simply rendered unavailable. Defendant argues that their destruction was
irrelevant because they did not contain any unique information: all personnel-related documents
were printed out and sent to defendant’s corporate offices in San Jose for retention and were not
saved on the two computers. Thus, defendants argue, plaintiffs have no evidence that the hard
drives contained any relevant information that was not separately preserved.
This is not, however, a case in which defendant mirrored or otherwise transferred
the contents of a hard drive to another medium for preservation. The evidence shows only that
the office computers were used to create documents, which, if they were considered personnel
documents, were transferred to San Jose. Defendant has not shown that drafts of documents
(including personnel documents), notes, informal communications, investigative documents, or
documents related to issues that were handled at the local level were sent to corporate
headquarters. Nor has defendant shown that all documents sent to San Jose were preserved. In
light of defendant’s failure to retain relevant sales performance documents and the MOPARs
after their relevance should have been apparent, its spontaneous destruction of the computers
located in the Renton store is suspicious. Having unilaterally caused the loss of information that
was potentially relevant to the claims of both Mr. Lam and Ms. Rios, defendant is not entitled to
a presumption that the documents on the hard drives were irrelevant or that all relevant
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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documents were saved in another format. See Leon, 464 F.3d at 959 (where “‘the relevance of .
. . [destroyed] documents cannot be clearly ascertained because the documents no longer exist,’ a
party ‘can hardly assert a presumption of irrelevance as to the destroyed documents.’” (quoting
Alexander v. Nat’l Farmers Org., 687 F.2d 1173, 1205 (8th Cir. 1982)).
Plaintiffs have not adequately supported their other allegations of spoliation,
namely those related to the A-Team lists, individual performance reviews, text messages, or
investigative documents. After months of denying the continued existence of A-team lists,
defendant finally conducted the full and complete search ordered by the Court in February 2012
and located a number of responsive documents. The Court cannot, however, conclude that
defendant should have known these lists would be of interest to plaintiffs until they were
requested in discovery, and there is no evidence that responsive documents were destroyed after
that date (i.e., December 2011). Nor is there evidence that individual performance reviews or
additional investigative documents ever existed. While plaintiffs are free to argue that, had
defendant taken Mr. Lam’s complaint about Ms. Rios’ situation seriously, there would have been
additional documents generated and/or that defendant’s destruction of the computer hard drives
suggests that it has something to hide, there is simply not enough evidence to show that the
documents were, in fact, created and then destroyed. Finally, the Court declines to place on
defendant the sole burden of preserving text messages that were equally available to both parties.
(5) Defendant has effectively precluded plaintiffs from testing defendant’s claims
regarding Mr. Lam’s performance as a sales supervisor and has made unavailable original
sources of documents with the unconvincing promise that all relevant materials were saved
elsewhere. Overall, the Court is left with the distinct impression that the defendant has gained
an unfair advantage through the destruction of evidence it knew or should have known was
relevant to Mr. Lam’s claims. At this juncture, it appears that defendant seeks to disavow one of
its stated justifications for the termination without having to deal with the adverse inferences that
could be drawn if plaintiffs were able to prove pretext. It has also wilfully destroyed hard drives
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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on which relevant documents were admittedly created without making any effort to mirror or
otherwise preserve the data for plaintiffs’ review. Sanctions are therefore appropriate.3
The real issue here is identifying which sanction will best achieve a just resolution
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of this matter. Plaintiff requests that the Court strike defendant’s answer and limit the trial to the
issue of damages. Before granting dispositive relief as a sanction, the Court should consider
“(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its
dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring
disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Leon, 464
F.3d at 958. The first and second factors are not particularly important here. Whether this case
goes to trial regarding liability and damages or only damages will not have a significant impact
on the trial date or the Court’s docket. The third factor favors plaintiffs (there is a risk of
prejudice) while the fourth factor favors defendant (striking the answer will preclude the jury
from considering issues of intent that are clearly in dispute). The availability of a less drastic
sanction suggests that dispositive relief is not appropriate.
Although it is a very close call, the Court finds that terminating sanctions are too
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extreme in this case. Defendant’s spoliation goes primarily to the issue of pretext, rather than
liability. “A district court’s adverse inference sanction should be carefully fashioned to deny the
wrongdoer the fruits of its misconduct yet not interfere with that party’s right to produce other
relevant evidence.” In re Oracle Corp. Securities Litig., 627 F.3d 376, 386-87 (9th Cir. 2010).
In order to ameliorate the risk of prejudice caused by the destruction of the sales performance
data and MOPARs, the Court will direct the jury to draw an adverse inference against defendant
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Plaintiffs have not shown that the loss of sales performance data regarding Ms. Rios will
impede her ability to try any issue that is in genuine dispute. Ms. Rios acknowledged that her sales
performance had decreased in the months prior to her termination and has asserted only a claim for
sexual harassment. Because Ms. Rios has not challenged the validity of her termination, she has no
need of the now-lost sales data.
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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regarding the validity of its sales-related justification for Mr. Lam’s termination.4 In an effort to
lessen the potentially adverse effects of the destruction of the Renton store hard drives on both
Mr. Lam and Ms. Rios, the Court will allow plaintiffs considerable leeway in arguing what
information might have been gleaned from those hard drivers, inferences that could be drawn
from the absence of particular documents, and defendant’s motive in destroying them.
As Mr. Blankenship put it at oral argument, the situation with which plaintiffs (and
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the Court) have been presented “stinks. It’s that bad.” The Court is concerned that the
defendant’s repeated destruction of potentially relevant evidence was not merely knowing, but
was part of a systematic effort to make it difficult for plaintiffs to prove their claims and/or to
destroy evidence that was adverse to defendant. If, as we progress through the trial of this
matter, it appears that additional information has been “lost” and/or that the prejudice caused by
the spoliation cannot be undone, the Court may reconsider this order to provide more robust
relief to plaintiffs.
(6) The dispute regarding the two depositions that were noted at the very end of the
discovery period does not reflect well on either counsel. While plaintiffs were within their rights
to seek information regarding document retention policies and corporate procedures (the
importance of which only lately came to light), the attempt to take an apex deposition on the
flimsy theory defendant’s founder and president might have some relevant information because
he accepts comment cards from employees is completely unjustified (and too late to be the
subject of a motion to compel). Defendant’s unilateral decision to skip both the apex deposition
and the Rule 30(b)(6) deposition without moving for a protective order was also inappropriate.
(7) Defendant has shown good cause for sealing the personnel records of employees who
are not parties to this litigation.
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Because plaintiffs have not shown that Ms. Rios’ sexual harassment claim has been impacted
by the loss of sales performance data, neither a finding of liability nor an adverse inference regarding
her claim is necessary to protect the integrity of the judicial process.
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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(8) The Court will issue an amended case management order in keeping with the parties’
February 27, 2012, stipulation.
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For all of the foregoing reasons, plaintiffs’ motion for sanctions (Dkt. # 142) is
GRANTED in part. The jury will be instructed that defendant’s sales performance-related
justification for the termination of Mr. Lam was unfounded and pretextual. The Court will also
allow plaintiffs considerable leeway in arguing what information might have been gleaned from
the computer hard drivers that were destroyed. Plaintiffs’ motion to file Exhibits II-NN under
seal (Dkt. # 165), their motion for leave to file supplemental declarations (Dkt. # 166), and their
motion to file Exhibits E-F under seal (Dkt. # 178) are GRANTED.
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Dated this 10th day of May, 2012.
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A
Robert S. Lasnik
United States District Judge
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ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS
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