Court Opinion

ID: 3033613
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:49:46.941178+00
Date Added: 2024-06-11T11:48:25.090984
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                              ________________

                             Nos. 01-3686/02-2093
                              ________________

Frank Stevenson,                      *
                                      *
      Cross-Appellant/Appellee,       *
                                      *      Appeals from the United States
Rebecca Harshberger,                  *      District Court for the
Administratrix of the Estate of       *      Eastern District of Arkansas.
Mary E. Stevenson, Deceased,          *
                                      *
      Appellee,                       *             [PUBLISHED]
                                      *
      v.                              *
                                      *
Union Pacific Railroad Company,       *
                                      *
      Appellant/Cross-Appellee,       *
                                      *
Operation Lifesaver, Inc.             *
                                      *
      Cross-Appellee.                 *

                              ________________

                              Submitted: April 17, 2003
                                  Filed: January 5, 2004
                              ________________

Before LOKEN, Chief Judge, HANSEN and RILEY, Circuit Judges.
                            ________________

HANSEN, Circuit Judge.
       This case arises out of a car-train grade crossing accident in which Frank
Stevenson was injured and his wife was killed. In this diversity lawsuit against the
Union Pacific Railroad Company ("Union Pacific" or "the Railroad"), a jury awarded
damages to Mr. Stevenson and Rebecca Harshberger as Administratrix of Mary
Stevenson's estate1 on claims of negligence. Union Pacific appeals, and Stevenson
cross appeals. We affirm in part and reverse and remand for a new trial. We affirm
on the issues raised in the cross-appeal.

                                         I.

       On November 6, 1998, a Union Pacific train struck the Stevensons' vehicle as
it crossed the tracks on Highway 364 in Vanndale, Arkansas. Mrs. Stevenson died
as a result of the collision, and Mr. Stevenson suffered severe injuries and has no
memory of the accident. Mr. Stevenson and the administratrix of his wife's estate
filed this action alleging that the accident was caused by Union Pacific's negligence.
Later, they amended their complaint to include additional negligence claims and to
add Operation Lifesaver, Inc. ("Operation Lifesaver") as a defendant, asserting that
it made negligent and fraudulent misrepresentations concerning the safety of the
crossing. The district court granted partial summary judgment, dismissing several
negligence claims, including allegations concerning the speed of the train. Stevenson
v. Union Pacific R.R., 110 F. Supp. 2d 1086 (E.D. Ark. 2000). The district court also
granted Operation Lifesaver's motion to dismiss for failure to state a claim.

      The plaintiffs filed a motion for sanctions on the ground that Union Pacific had
destroyed evidence, namely, a voice tape of conversations between the train crew and
dispatch at the time of the accident and track maintenance records from before the

      1
        While this appeal was pending, Union Pacific satisfied the judgment in favor
of Mrs. Stevenson's estate. Thus, the appeal against the estate is moot, and we refer
in this opinion to Mr. Stevenson as the only appellee.
                                          2
accident. Union Pacific argued that sanctions were not justified because it destroyed
the documents in good faith pursuant to its routine document retention policies. The
district court granted the motion following a three-day evidentiary hearing. The
district court imposed sanctions of an adverse inference instruction regarding the
destroyed evidence and an award of costs and attorneys' fees incurred as a result of
the spoliation of evidence. Stevenson v. Union Pacific R.R., 204 F.R.D. 425 (E.D.
Ark. 2001).

       Prior to trial, the plaintiffs filed a motion in limine, seeking to prohibit Union
Pacific from calling witnesses to explain that it destroyed the tape and track
maintenance records pursuant to its routine document retention policies. The district
court granted the motion and, at the outset of trial, orally instructed the jury that the
voice tape and track inspection records "were destroyed by the railroad and . . .
should have been preserved," and that the jurors "may, but are not required to, assume
that the contents of the voice tapes and track inspection records would have been
adverse, or detrimental, to the defendant." (Trial Tr. at 180.) The district court thus
permitted the plaintiffs to immediately reference the destroyed material and the fact
that Union Pacific willfully destroyed it, but denied Union Pacific any opportunity
to offer its routine document retention policy as an innocent explanation for its
destruction of the evidence.

       The parties stipulated that the only liability issues for trial were (1) whether the
train sounded its horn appropriately, (2) whether the vegetation at the crossing
obstructed Mr. Stevenson's view, and (3) whether the crossing surface was
negligently maintained. At the close of trial, over Union Pacific's renewed objection,
the district court repeated the spoliation instruction to the jury: "You may, but are not
required to, assume that the contents of the voice tape and track inspection records
would have been adverse, or detrimental, to the defendant." (Instr. No. 26, Trial Tr.
at 1415-16.) Union Pacific moved for judgment as a matter of law on the horn claim,
asserting that there was insufficient evidence from which the jury could find that the

                                            3
alleged failure to sound the horn was a proximate cause of the accident. The district
court denied the motion.

       The jury returned a general verdict in favor of the plaintiffs, awarding Mr.
Stevenson $2,000,000 in damages and awarding the estate $10,000 for funeral and
ambulance expenses. The district court entered judgment on these amounts and also
awarded the plaintiffs $164,410.25 in costs and attorneys' fees on the sanctions order.
Union Pacific appeals, asserting that it was entitled to judgment as a matter of law on
the alleged horn violation, that the district court abused its discretion in giving the
adverse inference instruction, and that the district court abused its discretion by
ordering attorneys' fees as sanctions. Mr. Stevenson filed a cross-appeal, challenging
the district court's partial grant of summary judgment concerning the speed of the
train and appealing the order dismissing the defendant Operation Lifesaver.

                                        II.
                                 A. The Horn Claim

        At trial, the plaintiffs alleged that the train crew did not properly sound the
horn and that this failure proximately caused the accident. The train conductor
testified that the engineer began sounding the horn at the whistle board 1,800 feet
from the crossing, blowing a sequence of two longs, a short, and a long as required
by Union Pacific's rules, all the way through the crossing. The event recorder on the
train was malfunctioning and did not record any horn soundings for the entire trip on
the day of the accident. Several lay witnesses testified that they did not hear a horn
sound before the collision. One witness who lived 75 to 100 yards south of the
crossing testified that he heard two horn blasts which lasted about ten seconds but
were off in the distance, not directly before the collision.

       An expert audiologist, Dr. David Lipscomb, testified on behalf of the plaintiffs
that he had measured the sound output generated by the horn and the reduction of

                                          4
sound as it penetrated the interior of the Stevensons' car. Dr. Lipscomb testified that,
placing the horn blasts some witnesses heard at the tree line 410 feet from the
intersection, the train horn might have been detectable for up to six seconds before
the collision, but the sound would not have been "alerting" given the noise inside the
car. (Trial Tr. at 1184-86.) On cross-examination, Dr. Lipscomb testified that under
the conditions present at the time of the accident, even if the horn had been blown all
the way through the intersection, it was his opinion that the horn would not have
alerted Mr. Stevenson until less than one second before the impact–too short a time
to avoid the collision. (Trial Tr. at 1204-05.) Union Pacific asserts that it was
entitled to judgment as a matter of law on the horn claim, arguing that the alleged
failure to sound the horn could not have been the proximate cause of the accident
because the plaintiffs' own expert testified that blowing the horn all the way through
the intersection would not have prevented the collision.

       We review de novo the district court's denial of a postverdict motion for
judgment as a matter of law, considering whether the record contains sufficient
evidence to sustain the verdict. Racicky v. Farmland Indus., Inc., 328 F.3d 389, 393
(8th Cir. 2003). We examine the sufficiency of the evidence in the light most
favorable to the verdict, and judgment as a matter of law is appropriate only when all
of the evidence points one way and is susceptible of no reasonable inference
sustaining the verdict. Id.

       In this diversity action, we apply Arkansas's substantive negligence law. See
Jordan v. NUCOR Corp., 295 F.3d 828, 834 (8th Cir. 2002) (applying the law of the
forum state in a diversity action for negligence). To justify submitting a claim of
negligence to the jury under Arkansas law, a plaintiff must show that the defendant
breached a duty of care, that the plaintiff sustained damages, and that the defendant's
negligence proximately caused the damages. Barriga v. Ark. and Mo. R.R., 87
S.W.3d 808, 810 (Ark. App. 2002). "Proximate causation is usually an issue for the
jury to decide in a negligence action, and when there is evidence to establish a causal

                                           5
connection between negligence of the defendant and damage to the plaintiff, it is
proper for the case to go to the jury; in other words, proximate causation becomes a
question of law only if reasonable minds could not differ." Id.

        In this case, we cannot say that reasonable minds could not differ on the horn
issue. In addition to the expert's testimony, lay witnesses testified to close encounters
with Union Pacific trains at the same intersection. In each instance, the lay witnesses
had been able to avoid an accident where the engineer had blown the horn at the last
moment. One witness was able to quickly back up off of the tracks and avoid a
collision where the engineer had not blown the whistle until he saw the witness's
vehicle. (Trial Tr. at 406-07.) Other witnesses said the horn did not blow at all but
they avoided a collision by seeing the train at the last minute. At least one lay witness
testified that, while the horn blew at the last moment and he was able to avoid a
collision, he believed he would have been alerted sooner had the whistle blown
before the engineer saw his vehicle. (Trial Tr. at 809-10.)

       The jury was free to believe the lay testimony and disregard the expert's cross-
examination testimony. The jury may use common sense in evaluating witness
testimony and may disregard all or part of any witness's testimony, even that of an
expert. "It is for the jury to decide who to believe and who not to believe." United
States v. Barrett, 74 F.3d 167, 168 (8th Cir. 1996). "Determining the credibility of
a witness is the jury's province, whether the witness is lay or expert." DiCarlo v.
Keller Ladders, Inc., 211 F.3d 465, 468 (8th Cir. 2000). We thus conclude that the
district court did not err in denying judgment as a matter of law on the horn claim.

                                     B. Sanctions

      Both prior to the filing of the lawsuit and during its pendency, Union Pacific
destroyed two types of evidence–the tape of any recorded voice radio
communications between the train crew and dispatchers on the date of the accident

                                           6
and all track maintenance records close in time to the accident. The district court
imposed sanctions for this conduct under its inherent power by giving an adverse
inference instruction, refusing to permit testimony to rebut the adverse inference, and
imposing an award of attorneys' fees.

       "We review a [district] court's imposition of sanctions under its inherent power
for an abuse of discretion." Dillon v. Nissan Motor Co., 986 F.2d 263, 267 (8th Cir.
1993); see also Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (discussing the
inherent powers of federal courts). A court's inherent power includes the
discretionary "ability to fashion an appropriate sanction for conduct which abuses the
judicial process." Chambers, 501 U.S. at 44-45. Our interpretation of Supreme Court
authority concerning a court's inherent power to sanction counsels that a finding of
bad faith is not always necessary to the court's exercise of its inherent power to
impose sanctions. Id. at 267; Harlan v. Lewis, 982 F.2d 1255, 1260 (8th Cir. 1993)
(noting bad faith requirement does not extend "to every possible disciplinary exercise
of the court's inherent power"). The Union Pacific argues that the sanctions were an
abuse of discretion because it did not engage in bad faith conduct by destroying
evidence pursuant to document retention policies. We will consider the extent to
which a finding of bad faith is necessary separately below with regard to each type
of sanction employed. Finally, "whether the extent of a sanction is appropriate is a
question peculiarly committed to the district court." Dillon, 986 F.2d at 268.

                       1. The Adverse Inference Instruction

        At the close of trial, over Union Pacific's renewed objection and as a sanction
for the destruction of records, the district court instructed the jury, "[y]ou may, but
are not required to, assume that the contents of the voice tape and track inspection
records would have been adverse, or detrimental, to the defendant." (Instr. No. 26,
Trial Tr. at 1415-16.) Union Pacific asserts that the sanction of giving an adverse
inference instruction in this case amounted to an abuse of discretion, citing both

                                          7
federal and Arkansas law. We need not decide and do not reach any choice of law
question in this case because the standard is the same under either state or federal
law–there must be a finding of intentional destruction indicating a desire to suppress
the truth. See Lewy v. Remington Arms Co., 836 F.2d 1104, 1111-12 (8th Cir. 1988)
(citing federal law for the general proposition that the adverse inference instruction
is appropriate only where the spoliation or destruction of evidence is intentional and
indicates a fraud or desire to suppress the truth); Rodgers v. CWR Constr. Inc., 33
S.W.3d 506, 510 (Ark. 2000) (noting that "[s]poliation is defined as 'the intentional
destruction of evidence and [that] when it is established, the factfinder may draw an
inference that the evidence destroyed was unfavorable to the party responsible for its
spoliation,'" quoting Goff v. Harold Ives Trucking, Co., 27 S.W.3d 387, 388 (Ark.
2000) (alterations omitted)).

       The district court imposed this sanction of an adverse inference instruction
after concluding that Union Pacific destroyed the voice tape in bad faith (Appellant's
Add. at 8), and that Union Pacific destroyed the track maintenance records in
circumstances where it "knew or should have known that the documents would
become material" and "should have preserved them" (id. at 12). The district court
reached these conclusions after discussing the factors set forth in Lewy, requiring the
court to consider (1) whether the record retention policy is reasonable considering the
facts and circumstances surrounding those documents, (2) whether lawsuits or
complaints have been filed frequently concerning the type of records at issue, and (3)
whether the document retention policy was instituted in bad faith. 836 F.2d at 1112.

       In Lewy, we were called upon to address the prelitigation destruction of
documents pursuant to a routine document retention policy, but the record was
insufficient for us to decide whether the trial court erred by giving the adverse
inference instruction. Id. Consequently, we set forth the above-listed guidelines for
the court to consider on remand, and they include a bad faith consideration. See id.
By way of example, and as dicta, we also stated that if a corporation "knew or should

                                          8
have known that the documents would become material at some point in the future
then such documents should have been preserved." Id. In support of this proposition,
however, we quoted Gumbs v. Int'l Harvester, Inc., 718 F.2d 88, 96 (3d Cir. 1983),
which states that the adverse inference from the destruction of evidence arises only
where the destruction was intentional "and indicates a fraud and a desire to suppress
the truth, and it does not arise where the destruction was a matter of routine with no
fraudulent intent." Thus, while in dicta we articulated a "knew or should have
known" negligence standard, such a standard, standing alone, would be inconsistent
with the bad faith consideration and the intentional destruction required to impose an
adverse inference for the prelitigation destruction of documents. We have never
approved of giving an adverse inference instruction on the basis of prelitigation
destruction of evidence through a routine document retention policy on the basis of
negligence alone.2 Where a routine document retention policy has been followed in
this context, we now clarify that there must be some indication of an intent to destroy
the evidence for the purpose of obstructing or suppressing the truth in order to impose
the sanction of an adverse inference instruction. See Lewy, 836 F.2d at 1112.

      The facts here are as follows. The accident occurred on November 6, 1998.
The Stevensons filed this lawsuit on September 20, 1999, and mailed their requests

      2
        In Dillon, 986 F.2d at 267, we affirmed the imposition of sanctions (mainly
the exclusion of evidence) for the destruction of evidence where there was no bad
faith finding regarding the spoliation of evidence but only a finding that the spoliators
(including plaintiff's counsel) "knew or should have known" that the evidence would
be relevant to imminent litigation. We did note in a footnote discussing the sanction
of exclusion of evidence that, although the trial court did not make a bad faith
finding, the facts of the case "might have supported a finding of bad faith and at least
similar, if not more severe, sanctions [than the exclusion of evidence] under Rule 37."
Id. at 269 & n. 3. We did not discuss in Dillon whether a finding of bad faith or
intentional destruction was necessary to impose the specific sanction of an adverse
inference instruction. We considered the instruction issue only on plain error review.
Id. at 269. Thus, Dillon is not controlling on this issue.
                                           9
for production of the voice tape on October 25, 1999. By that time, Union Pacific had
long since destroyed the voice tape from the November 6, 1998, accident by
recording over it in accordance with the company's routine procedure of keeping
voice tapes for 90 days and then reusing the tapes. The district court found that
although Union Pacific's voice tape retention policy was not unreasonable or
instituted in bad faith, it was unreasonable and amounted to bad faith conduct for
Union Pacific to adhere to the principle in the circumstances of this case.

       In support of its bad faith determination, the district court found that Union
Pacific had been involved in many grade crossing collisions and knew that the taped
conversations would be relevant in any potential litigation regarding an accident that
resulted in death and serious injury. There was evidence that Mike Reed, a claims
representative for Union Pacific, had received notice of the accident shortly after it
occurred, and he immediately began his investigation by calling the Railroad's Risk
Management Communications Center to get details about the accident. He also called
the Harriman Dispatching Center in Omaha to request copies of the train orders and
warrants, the train consist, and a dispatcher's record of the train's movement. He did
not, however, request a copy of the voice tape. The district court listened to available
samples of this type of voice tape and found that they generally contain evidence that
is discoverable and useful in developing a case. Additionally, the district court found
that Union Pacific had preserved such tapes in cases where it was helpful to Union
Pacific's position. The district court also found that the plaintiffs were prejudiced by
the destruction of this tape because there are no other records of comments between
the train crew and dispatch contemporaneous to the accident. The district court thus
held that sanctions were justified and that an adverse inference instruction was an
appropriate sanction for the destruction of the voice tape.

       After considering the record and the particular circumstances of this case, we
conclude that, while this case tests the limits of what we are able to uphold as a bad
faith determination, the district court did not abuse its discretion by sanctioning

                                          10
Union Pacific's prelitigation conduct of destroying the voice tape. See Lewy, 896
F.2d at 1112 (stating that "even if the court finds the policy to be reasonable given the
nature of the documents subject to the policy, the court may find that under the
particular circumstances certain documents should have been retained
notwithstanding the policy"). The district court's bad faith determination is supported
by Union Pacific's act of destroying the voice tape pursuant to its routine policy in
circumstances where Union Pacific had general knowledge that such tapes would be
important to any litigation over an accident that resulted in serious injury or death,
and its knowledge that litigation is frequent when there has been an accident
involving death or serious injury. While these are quite general considerations, an
important factor here is that a voice tape that is the only contemporaneous recording
of conversations at the time of the accident will always be highly relevant to potential
litigation over the accident. We conclude that this weighs heavier in this case than
the lack of actual knowledge that litigation was imminent at the time of the
destruction. Additionally, the record indicates that Union Pacific made an immediate
effort to preserve other types of evidence but not the voice tape, and the district court
noted that Union Pacific was careful to preserve a voice tape in other cases where the
tape proved to be beneficial to Union Pacific. The prelitigation destruction of the
voice tape in this combination of circumstances, though done pursuant to a routine
retention policy, creates a sufficiently strong inference of an intent to destroy it for
the purpose of suppressing evidence of the facts surrounding the operation of the train
at the time of the accident.

       There must be a finding of prejudice to the opposing party before imposing a
sanction for destruction of evidence. Dillon, 986 F.2d at 267. The requisite element
of prejudice is satisfied by the nature of the evidence destroyed in this case. While
there is no indication that the voice tape destroyed contained evidence that could be
classified as a smoking-gun, the very fact that it is the only recording of conversations
between the engineer and dispatch contemporaneous with the accident renders its loss
prejudicial to the plaintiffs. We find no abuse of discretion in the district court's

                                           11
decision to sanction the Railroad through an adverse inference instruction for its
prelitigation destruction of the voice tape.

       As to the track maintenance inspection records, the Union Pacific demonstrated
that its policy is to destroy them after one year and replace them with the new
inspection records. These records generally note defects that appear at a crossing on
the day of its inspection and list the name of the person who inspected the track on
that particular day, but they would not show the exact condition of the tracks on the
day of the accident. The Stevensons requested the production of track maintenance
records for two years prior to the accident. Union Pacific made no effort to preserve
these documents from its routine document destruction policy.

       The district court said it was not persuaded that the document retention policy
was instituted in bad faith, but "[a]s with the voice tape, however, [Union Pacific]
knew or should have known that the documents would become material and should
have preserved them." (Appellant's Add. at 12.) The "knew or should have known"
language indicates a negligence standard, and as noted earlier, we have never
approved of giving an adverse inference instruction on the basis of negligence alone.
Even if the district court intended its findings to be the equivalent of a bad faith
determination, we conclude that the findings regarding the prelitigation destruction
of track maintenance records do not amount to a showing of bad faith and that the
district court abused its discretion in giving the adverse inference instruction in
relation to the destruction of all track maintenance records up to two years prior to the
accident.

      There is no showing here that Union Pacific knew that litigation was imminent
when, prior to any litigation, it destroyed track maintenance records from up to two
years prior to the accident pursuant to its document retention policy. Additionally,
maintenance records would only be relevant to potential litigation to the extent that
they were relatively close in time to the accident and defective track maintenance was

                                           12
alleged to be the cause of the accident. Even then, track maintenance records are of
limited use. While they may reveal defects in the track that existed at the time of the
last inspection, they do not show the exact condition of the track at the time of the
collision. The district court weighed heavily the fact that the Union Pacific knew that
litigation is possible when there has been a serious accident but did not consider
whether, when the prelitigation destruction was occurring, there had been any notice
in this case of potential litigation or that the track maintenance would be an issue or
an alleged cause of the accident. It appears that Union Pacific was not on notice that
the track maintenance records should be preserved until it received the October 1999
request for production of documents, and the condition of the track was not formally
put into issue until the second amendment to the complaint in May 2000. Thus, any
bad faith determination regarding the prelitigation destruction of the track
maintenance records is not supported by the record, and any adverse inference
instruction based on any prelitigation destruction of track maintenance records would
have been given in error.

        Union Pacific continued destroying track maintenance records after this lawsuit
was initiated. We find no abuse of discretion in the district court's decision to impose
sanctions for the destruction of track maintenance records after the commencement
of litigation and the filing of the plaintiffs' request for production of documents on
October 25, 1999. At the time the plaintiffs requested the production of the track
maintenance records, the records from October and November 1998 (closest in time
to the accident and thus most relevant) would have been available, but Union Pacific
made no effort to preserve them. Although Union Pacific's counsel did not send the
discovery request to the claims agent, Mr. Fuller, until November 17, 1999, even then
the records from November 1998 would have been available and could have been
preserved, but they were not.

     At the sanctions hearing, Union Pacific claimed innocence under its routine
document retention policy and a lack of knowledge because the proper agents did not

                                          13
know that the records were relevant or where they were kept. Mr. Fuller testified that
he did not know where the track inspection records were kept because this was his
first grade crossing collision case. Distracted by a derailment and his own vacation,
Mr. Fuller did not start looking for the requested records until December 1999. The
November 1998 records had been routinely destroyed by then. The district court did
not credit the Railroad's claimed lack of knowledge because of its specific knowledge
of and participation in this litigation, the actual notice of the document request, and
the relevance of track maintenance documents to the pending litigation because they
could have revealed the Railroad's extent of knowledge about the track conditions at
the time of the accident. After the specific document request for track maintenance
records, Union Pacific cannot rely on its routine document retention policy as a
shield. See Lewy, 836 F.2d at 1112 (noting that "a corporation cannot blindly
destroy documents and expect to be shielded by a seemingly innocuous document
retention policy"). Sanctioning the ongoing destruction of records during litigation
and discovery by imposing an adverse inference instruction is supported by either the
court's inherent power or Rule 37 of the Federal Rules of Civil Procedure, even
absent an explicit bad faith finding, and we conclude that the giving of an adverse
inference instruction in these circumstances is not an abuse of discretion.

                            2. Refusal to Allow Rebuttal

       Union Pacific argues that even if the district court did not abuse its discretion
by giving the adverse inference instruction as a sanction for the destruction of
evidence in this case, the district court abused its discretion by not permitting it to
offer a reasonable rebuttal to the inference. We agree.

      The permissive language of Instruction Number 26 allowed, but did not
require, the jury to draw an adverse inference from the destruction of evidence. A
permissive inference is subject to reasonable rebuttal. See Webb v. District of
Columbia, 146 F.3d 964, 974 n.20 (D.C. Cir. 1998) (noting that "[a]lthough an

                                          14
adverse inference presumption should not test the limits of reason," it is a common
sanction in response to the destruction of documents and the opposing party "would
be entitled to attempt to rebut it"); Lamarca v. United States, 31 F. Supp. 2d 110, 128
(E.D.N.Y. 1999) ("An adverse inference that the missing evidence is harmful can be
rebutted by an adequate explanation of the reason for non-production.") (internal
quotation marks omitted). While the district court need not permit a complete retrial
of the sanctions hearing during trial, unfair prejudice should be avoided by permitting
the defendant to put on some evidence of its document retention policy and how it
affected the destruction of the requested records as an innocent explanation for its
conduct. Absent this opportunity, the jury is deprived of sufficient information on
which to base a rational decision of whether to apply the adverse inference, and an
otherwise permissive inference easily becomes an irrebuttable presumption.

       The district court's timing of the instruction in this case also contributes to our
finding of unfair prejudice by the exclusion of reasonable rebuttal testimony. At the
very outset of trial, the district court informed the jury that the Railroad had destroyed
evidence that should have been preserved (Trial Tr. at 180), and the plaintiffs referred
to this destruction throughout the trial. We see no need to unduly emphasize the
adverse inference at the outset of trial, especially where there is no finding that the
evidence destroyed was crucial to the case. No doubt the evidence destroyed was
relevant and its destruction prejudiced the plaintiffs' discovery efforts, but in previous
cases where we have sustained a sanction of precluding evidence completely or
settling a disputed matter of fact (thus permitting no rebuttal), the offending party had
destroyed the one piece of crucial physical evidence in the case. See Sylla-Sawdon
v. Uniroyal Goodrich Tire Co., 47 F.3d 277, 280 (8th Cir.) (noting that the tires
destroyed were "critical to this litigation"), cert. denied, 516 U.S. 822 (1995); Dillon,
986 F.2d at 266 (noting that the "crucial evidence" destroyed was the car that caused
the injuries that were the subject of the lawsuit). No such finding exists here.

                                           15
                                  3. Attorneys' Fees

       The district court also awarded attorneys' fees as a sanction. Although such an
award in a diversity case is generally governed by the applicable substantive state
law, federal courts also have inherent power to award attorneys' fees as a sanction.
Lamb Eng'g & Constr. Co. v. Neb. Pub. Power Dist., 103 F.3d 1422, 1434-35 (8th
Cir. 1997). The district court did not cite Arkansas law as authority for this award,
and we therefore review the award of attorneys' fees under the federal court's inherent
powers. "Federal courts sitting in diversity can use their inherent power to assess
attorney fees as a sanction for bad faith conduct even if the applicable state law does
not recognize the bad faith exception to the general rule against fee shifting." Id. at
1435. This inherent power reaches conduct both before and during litigation as long
as that conduct abuses the judicial process in some manner. A bad faith finding is
specifically required in order to assess attorneys' fees. Dillon 986 F.2d at 266 (citing
Chambers, 501 U.S. at 45-46, and Roadway Express, Inc. v. Piper, 447 U.S. 752, 767
(1980)). This bad faith conduct must have practiced a fraud upon the court or defiled
"the temple of justice," Chambers, 501 U.S. at 46, and cannot be based solely on the
prelitigation conduct that led to the substantive claim of the case, Lamb Eng'g, 103
F.3d at 1435.

       Union Pacific argues that the district court erred by imposing an award of
attorneys' fees on the basis of its prelitigation destruction of evidence. We found no
abuse of discretion in the district court's conclusion that the prelitigation destruction
of the voice tape amounted to bad faith conduct, but any award of attorneys' fees
based on prelitigation destruction of track maintenance records may be unwarranted
because it is not supported by a bad faith finding. Because part of the existing award
might be based upon prelitigation conduct that does not amount to bad faith, we
vacate the award of attorneys' fees and remand for recalculation under the bad faith
standard.

                                           16
                                D. The Cross-Appeal

       Mr. Stevenson filed a cross-appeal, challenging the district court's order
dismissing his claim based upon the speed of the train as preempted and dismissing
the defendant Operation Lifesaver from the case for failure to state a claim against it.
We find no merit to either claim and affirm the judgment of the district court on the
basis of its well-reasoned opinions. See 8th Cir. Rule 47B.

                               E. Additional Motions

       Mr. Stevenson moved to dismiss the appeal, urging that the appeal is moot
because Union Pacific has admitted liability by satisfying the judgment in favor of the
estate. We have already denied this motion and see no reason to revisit the issue. We
also deny Mr. Stevenson's request to file a supplemental brief. Finally, Mr. Stevenson
moved for additional sanctions on the basis of other evidence that the Union Pacific
allegedly concealed during this case. Because we remand for a new trial, this issue
and any request for additional sanctions would be best presented in the first instance
to the district court. Accordingly, we dismiss the motion without reaching its merits.
The parties may submit this issue to the district court on remand.

                                         III.

      Accordingly, we affirm in part and reverse and remand for a new trial
consistent with this opinion and for reconsideration of the amount of attorneys' fees.
We affirm the judgment of the district court on the issues raised in the cross-appeal,
and we dismiss without prejudice Mr. Stevenson's motion for additional sanctions.
                     __________________________________

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