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October 27, 2008

Williams v. Russ (2008) 167 Cal. App.4th 1215

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The Second District holds that dismissal of a legal malpractice case is warranted for a party’s intentional destruction of the attorney’s file.

Doug Williams was the administrator and trustee of an employee benefits and retirement plan.  He was involved in litigation in federal court that was settled but which led to his removal as the administrator.  His lawsuit against the attorney handling that litigation was dismissed due to a statute of limitations defense.  Williams then sued Larry Russ and his law firm for legal malpractice based on their representation of Williams in connection with the federal litigation and the malpractice action.  After the litigation was initiated but outside of the discovery process, Williams demanded that Russ turn over the client file.  Russ copied some correspondence but not any other portions of the file.

Through counsel Williams notified Russ that he intended to amend the complaint to state a cause of action for breach of fiduciary duty based on matters in the file.
                                                                                                                                                                            Soon after, Williams fell behind on his rental payments to the storage facility where he kept the client file.  The files were eventually destroyed by the storage facility, a fact Williams did not reveal to Russ.  After the case was dismissed, and then reinstated after an appeal on unrelated issues, the breach of fiduciary duty claim was expanded.  Russ made a discovery request for the entire file.  Williams objected that he had no obligation to produce the documents because they had once been in Russ’s possession.  Eventually counsel for Williams revealed that the files had been destroyed.

Russ moved to dismiss the action as a discovery sanction since he could not reconstruct the file and obtain documents relevant to his defense.  Russ pointed out that the first amended complaint was filed after the client files were produced, and the second amended complaint was filed after the files were destroyed.  He claimed that documents relevant to the new allegations and claims had been in the client files when they were turned over to Williams.  Russ maintained that it was no longer possible to determine what was kept or what had been destroyed.

Williams submitted a declaration stating that he missed a few rental payments to the storage facility due to financial and health issues and that an unidentified paralegal working for Russ’s counsel told him that Russ had copied the file.  He claimed that he was unaware the documents might be destroyed.  He asserted that the file he received did not appear to be the same as the file he had previously seen at Russ’s office.  He claimed that the documents were pleadings and that his counsel pulled out any documents relevant to this action.  He asserted that dismissal was not warranted for merely his negligent conduct, that Russ bore responsibility for not copying the files, that the files could be recreated, and that a lesser sanction was warranted.

The trial court ordered terminating sanctions.  Williams was a sophisticated litigant and had inventoried the contents of his client file more than once.  Williams demanded the file under the Rules of Professional Conduct and was on notice that nonpayment of his storage rental fee would result in destruction of the file.  After filing the action and demanding the file, Williams caused it to be destroyed and then concealed the fact for two years.  The trial court concluded that the destruction of the files was intentional and inferred that this was done to destroy evidence potentially favorable to Russ.  The spoliation was highly prejudicial to Russ’s defense of the case.
Although sanctions should ordinarily be progressive and lesser sanctions should be considered before dismissal, the trial court found dismissal was warranted.  Based on the unique facts of the case and after weighing Williams’s culpability against the harm to Russ, the trial court concluded dismissal was the appropriate sanction because lesser sanctions would not cure the harm done.  The court then ordered the case dismissed and the Court of Appeal affirmed.

Spoliation of evidence is the destruction or significant alteration of evidence or the failure to preserve evidence for another’s use in pending or future litigation.  The conduct is condemned because it can destroy fairness and justice.  It can also increase the costs of litigation as parties attempt to reconstruct the destroyed evidence or to develop other evidence, which may be less accessible, less persuasive, or both.  While there is no tort cause of action for the intentional destruction of evidence, it is a misuse of the discovery process that is subject to a broad range of punishment, including monetary, issue, evidentiary, and terminating sanctions.  A terminating sanction is appropriate in the first instance without a violation of prior court orders in egregious cases of intentional spoliation of evidence.

Sanctions should be tailored to remedy discovery abuse, not to punish the offending party.  They should not put the moving party in a better position and should be proportionate to the offending party’s misconduct.

Williams insisted that the evidence showed he was merely negligent.  The proper standard of review is to presume that the court’s order is correct and indulge all presumptions and intendments in its favor on matters as to which it is silent.  The evidence was more than sufficient to affirm the trial court’s findings.  Shortly after obtaining the file, Williams asserted that he found evidence in the file to support new claims.  At the same time, Williams fell into a pattern of either late or partial payments and ignored numerous and repeated warnings from the storage facility.  Williams did nothing, which was tantamount to intentionally destroying the files.  Williams concealed the destruction for several years.  This conduct raises an inference that Williams selected favorable information from the file and allowed the rest of the files to be destroyed.  There is also an inference that one reason for having done so was to prevent Russ from obtaining documents from the file that were unfavorable to Williams.

The trial court was free to disregard the assertion that Williams’s health and financial issues led to the destruction of the files.  The medical files did not indicate that Williams had surgery, as he claimed.  There was no evidence to support his claimed financial difficulties.  The evidence that a paralegal told Williams that Russ’s counsel had copied the file was denied by Russ’s counsel who stated he only copied some of the files.

Williams’s assertion that some of the missing documents could be found elsewhere was faulty.  It was based on the existence of documents in the possession of the trust’s administrator that were not part of Russ’s client file and it was unrelated to Williams’s intentional misconduct.

The Court of Appeal found it proper to place the burden of proof on Williams.  Generally the moving party has the burden of proof as to the existence or nonexistence of each fact that is essential to his claim for relief.  However, the burden of proof may be shifted to a responding party where there is a substantial probability the defendant has engaged in wrongdoing that makes it practically impossible for the plaintiff to prove the wrongdoing.  A party moving for discovery sanctions based on the spoliation of evidence must make an initial, prima facie showing that the responding party in fact destroyed evidence that had a substantial probability of damaging the moving party’s ability to establish an essential element of his claim or defense.  Russ met this initial burden and the burden was therefore properly shifted to Williams.  Williams failed to counter the evidence of prejudice submitted by Russ.

Comment: Under the unique facts of this case, an attorney benefited from the spoliation of evidence sanction imposed.  However, given that in general attorneys are expected to marshal and preserve evidence, or advise clients in doing so, attorneys should take note of the consequence of failing to preserve.
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