Opinion ID: 3027931
Heading Depth: 2
Heading Rank: 3

Heading: The Spoliation Motion

Text: UFP also appeals the Bankruptcy Court’s denial of its motion for an evidentiary inference in its favor that Hechinger intended its transfers during the preference period to be contemporaneous exchanges for new value under §547(c)(1) because, it argued, Hechinger improperly destroyed records prior to discovery that might have assisted UFP in proving Hechinger’s intent. Hechinger acknowledged that it destroyed various records in September 1999, after filing for bankruptcy, in order to reduce the amount of space occupied by the company. In Schmid v. Milwaukee Electric Tool Corp., 13 F.3d 76 (3d Cir. 1994), we explained the history of the “spoliation inference:” Since the early 17th century, courts have admitted evidence tending to show that a party destroyed evidence relevant to the dispute being litigated. 22 Such evidence permitted an inference, the “spoliation inference,” that the destroyed evidence would have been unfavorable to the position of the offending party. Id. at 78 (internal citation omitted). We found that the “key considerations in determining whether such a sanction is appropriate should be: (1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future.” Id. at 79. Neither of the first two factors identified in Schmid favors UFP. There is no evidence that Hechinger intentionally destroyed documents that it knew would be important or useful to UFP in defending against a preference action. In fact, there is no evidence that any of the documents destroyed would have been useful to UFP. There was also no showing that UFP was prejudiced because UFP did not identify any evidence that was destroyed by Hechinger that would have aided UFP. Any finding that this conduct prejudiced UFP would be purely speculative. Therefore, the Bankruptcy Court had little basis for granting UFP’s spoliation motion and we will not disturb the Court’s denial of that motion.