Opinion ID: 764886
Heading Depth: 2
Heading Rank: 6

Heading: The May 8 Rulings

Text: 47 NatWest next raises substantive objections to each of the May 8 Rulings, none of which warrant reversal. 48 Whether exercising its inherent power, or acting pursuant to Rule 37, a district court has wide discretion in sanctioning a party for discovery abuses, see New York State NOW v. Terry, 886 F.2d 1339, 1354 (2d Cir. 1989), and for the spoliation of evidence. See West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999).
49 At the beginning and close of trial Judge Conti instructed the jury that if Reilly proved that: (1) NatWest had failed to deliver the Deal Files in a timely fashion or that it delivered them incomplete; and (2) that such nondelivery prejudiced Reilly because the files were important to him, then you can infer these matters in his favor and against NatWest. The court premised this instruction on its finding that NatWest had acted with gross negligence in searching for, and preserving, the Deal Files. 50 The law in this Circuit regarding the level of fault necessary to justify an adverse inference instruction is unsettled. In Kronisch v. United States, 150 F.3d 112 (2d Cir. 1998), it is suggested that district courts must find that a party intentionally destroyed evidence before giving an adverse inference instruction. See id. at 126-127 & n.11 (2d Cir. 1998) (citing Welsh v. United States, 844 F.2d 1239, 1246 (6th Cir. 1988)). Similarly in Berkovich v. Hicks, 922 F.2d 1018, 1024 (2d Cir. 1991), we affirmed a district court's refusal to grant a plaintiff an adverse inference instruction, noting that absent any evidence of bad faith, plaintiff was not entitled to such an instruction. Berkovich, however, avoided announcing a per se rule; instead it explicitly limited its holding to the facts of this case, thereby leaving open the possibility that, in certain circumstances, an adverse inference instruction would be appropriate even without a finding of bad faith. See id. 51 We do not read either Kronisch or Berkovich as an absolute prohibition against granting an adverse inference instruction where there is no bad faith but there is gross negligence. To the contrary, we have previously approved more severe sanctions based solely on gross negligence. See Cine Forty Second St. Theatre Corp. v. Allied Artists Pictures Corp., 602 F.2d 1062, 1064 (2d Cir. 1979) (holding that a plaintiff's grossly negligent failure to produce discovery justified the preclusion of all evidence related to damages, even though that sanction was tantamount to a dismissal of plaintiff's claim). 52 Our case-by-case approach to the failure to produce relevant evidence seems to be working. Such failures occur along a continuum of fault - ranging from innocence through the degrees of negligence to intentionality. Welsh, 844 F.2d at 1246. Trial judges should have the leeway to tailor sanctions to insure that spoliators do not benefit from their wrongdoing - a remedial purpose that is best adjusted according to the facts and evidentiary posture of each case. See West, 167 F.3d at 779. As other Circuits have recognized, it makes little sense to confine promotion of that remedial purpose to cases involving only outrageous culpability, where the party victimized by the spoliation is prejudiced irrespective of whether the spoliator acted with intent or gross negligence. See Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995); Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993); Pressey v. Patterson, 898 F.2d 1018, 1023-24 (5th Cir. 1990); Welsh, 844 F.2d at 1246. 53 Thus, we hold that a finding of bad faith or intentional misconduct is not a sine qua non to sanctioning a spoliator with an adverse inference instruction. Here, it is clear that NatWest exhibited at least the gross negligence found by Judge Conti in light of: (1) NatWest's failure to produce the Deal Files until the eleventh hour; and (2) Reilly's showing at trial - through the identification of missing documents - that NatWest sanitized those files. In these circumstances, we cannot say that the district court abused its discretion by granting Reilly an adverse inference instruction. 54
55 NatWest maintains that Judge Conti abused his discretion when he precluded all five of its fact witnesses who were not produced for deposition in response to Reilly's Rule 30(b)(6) notice. We disagree. 56 First of all, the district court did not, as NatWest alleges, actually preclude five fact witnesses from testifying. Instead, Judge Conti authorized NatWest to call Letzler and/or Adams to testify about its document retention policies, even though neither witness had been produced in response to Reilly's Rule 30(b)(6) notice. NatWest chose not to call either witness on the subject of document retention. Nor did it call any other witness who, it now claims, would have testified to some unspecified facts. Because we cannot know whether any witnesses called would have been precluded had they, like Adams and Letzler, been offered at trial, we deem NatWest's challenge to their purported preclusion an issue not actually passed upon below and therefore waived. See Austin v. Healey, 5 F.3d 598, 601 (2d Cir. 1993) (quoting Singleton v. Wulff, 428 U.S. 106, 120 (1976)). Thus, we confine our analysis to whether Judge Conti abused his discretion in precluding Letzler and Adams from testifying about Reilly's work (testimony that remains germane to this appeal notwithstanding our rejection of Reilly's quantum meruit claim because it would also have been relevant to the revenues generated by Reilly for purposes of his contract claim). 57 Under Rule 30(b)(6), when a party seeking to depose a corporation announces the subject matter of the proposed deposition, the corporation must produce someone familiar with that subject. See Fed. R. Civ. P. 30(b)(6); James Wm. Moore et al., Moore's Federal Practice, ¶30.25[3] (3d ed. 1998). To satisfy Rule 30(b)(6), the corporate deponent has an affirmative duty to make available such number of persons as will be able to give complete, knowledgeable and binding answers on its behalf. Securities & Exchange Comm'n v. Morelli, 143 F.R.D. 42, 45 (S.D.N.Y. 1992) (quotations omitted); see Moore's Federal Practice, at ¶30.25. When a party fails to comply with Rule 30(b)(6), Rule 37 allows courts to impose various sanctions, including the preclusion of evidence. See Fed. R. Civ. P. 37(b)(2)(B); see, e.g., Commodity Futures Trading Comm'n v. Noble Metals Int'l, Inc., 67 F.3d 766, 770-71 (9th Cir. 1995). 58 To comply with Rule 30(b)(6), as well as Judge Sprizzo's order regarding the completion of discovery, NatWest was required to produce for deposition by March 31, 1998 such of its representatives who were familiar with the specifics and thus the value of Reilly's work. NatWest chose to produce only Sayre by that date, despite Reilly's complaints that Sayre was not sufficiently knowledgeable about Reilly's work. Nevertheless, before and during trial, NatWest sought to have Adams and Letzler testify on that very issue, claiming that they were knowledgeable in that area. By failing to produce Adams and Letzler for deposition, NatWest violated Rule 30(b)(6). Moreover, by failing to produce those witnesses in a timely fashion, NatWest violated Judge Sprizzo's order regarding the completion of discovery. 59 Having determined that NatWest violated both Rule 30(b)(6) and Judge Sprizzo's order, we have little difficulty in concluding that barring Adams and Letzler from testifying about Reilly's work was proper. In assessing the propriety of a district court's preclusion of witness testimony, we consider the following factors: 60 (1) the party's explanation for the failure to comply with the discovery order; (2) the importance of the testimony of the precluded witness; (3) the prejudice suffered by the opposing party as a result of having to prepare to meet the new testimony; and (4) the possibility of a continuance. 61 Softel, Inc. v. Dragon Medical Scientific Comm. Inc., 118 F.3d 955, 961 (2d Cir. 1997); see Outley v. City of New York, 837 F.2d 587, 590 91 (2d Cir. 1988). 62 Judge Conti did not abuse his discretion in precluding the testimony of Adams and Letzler because: (1) even to this day NatWest has never explained why they were not made available for deposition; (2) their testimony would have been cumulative in light of the testimony of NatWest's expert, Johnson and, to a lesser extent, of Sayre on the subject of Reilly's work; (3) Reilly would have been prejudiced by the fact that he did not have an opportunity to depose them; and (4) due to what would have been the cumulative nature of their testimony, delaying the trial to allow Reilly to conduct such a deposition would have been wholly unwarranted. See Softel, 118 F.3d at 961-63.
63 In view of NatWest's failure to produce the Deal Files until the eve of trial, we cannot say that the district court abused its discretion by barring NatWest from using those files at trial. See Softel, 118 F.3d at 963; Cine Forty Second St. Theatre Corp., 602 F.2d at 1068. In any case, any error was harmless, as even now NatWest cannot point to a single document from those files that could have been important to its case. Instead, it argues only that it would have used the Deal Files to demonstrate the lack of documentation substantiating Reilly's contract claims. As NatWest is aware, however, Reilly himself complained about the lack of such documentation repeatedly during trial. Thus, NatWest has failed to show prejudice arising from the preclusion of the Deal Files. 64 Similarly, Judge Conti did not abuse his discretion in barring NatWest from using Reilly's deposition to impeach his testimony at trial. During that deposition, Liddle questioned Reilly repeatedly about the extent of his participation in various transactions. Frequently, Reilly was unable to give specific answers because he did not have his Deal Files. Preventing NatWest from capitalizing on Reilly's inability to describe his specific participation in various transactions was an eminently fair exercise of Judge Conti's discretion. 65 Finally, the trial judge did not abuse his discretion in quashing the third party subpoenas served in violation of Judge Sprizzo's unequivocal order that Reilly receive five days notice of such subpoenas. NatWest contends that because that order had been issued before the liability trial, it did not apply to damages discovery. The record simply does not support that contention.