Plaintiffs brought a shareholders' derivative suit on behalf of Meritor Savings Bank to recover compensation for breaches of a regulatory contract with the Federal Deposit Insurance Corporation and the closure of the bank. The instant dispute concerns the government's partial withholding of the minutes and complete withholding of the transcripts and the tapes of these meetings through most of the litigation in this case to date. The minutes were produced in two redacted versions, until the government made available a substantially unredacted version in the waning days of trial in January, 2000.
Plaintiffs contend that the government's failures to produce constitutes spoliation of evidence.
Plaintiffs argue in their briefs that spoliation is proved when the Court finds destruction or alteration of potentially probative evidence that prejudiced the opposing party as a result of either bad faith or negligence. At oral argument, plaintiffs maintained in the alternative that the government's privilege assertions, which lead to redactions, are themselves evidence of bad faith. The Court now finds that the government's position reflects controlling law and that the facts do not warrant a finding of bad faith. In the course of discovery in this case, the government produced copies of the minutes that were heavily redacted on the grounds of executive privilege. The production occurred in April of 1997, and, in all likelihood, during the tenure of the prior government counsel of record, Mr. Richard Rice.