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A.O.A. v. Rennert

United States District Court, E.D. Missouri, Eastern Division

March 12, 2018

A.O.A., et al, Plaintiffs,
IRA L. RENNERT, et al, Defendants.



         Plaintiffs seek sanctions for defendants' failure to produce documents after being ordered to do so. I held a hearing on the motion on March 6, 2018, and the parties have filed extensive briefs. I will grant the motion in part.

         My order of August 29, 2017, [ECF # 636] granted plaintiffs' motion to compel production of documents requested in their Sixth Request for Production. Defendants have not complied with that order as they have not produced general ledgers or banking documents for subsidiaries Doe Run Mining and Doe Run Peru and also have not produced general ledgers of defendant Doe Run Resources Corporation for dates before 2006. As to the documents of Doe Run Mining and Doe Run Peru, defendants state that they did not understand they were expected to seek documents from the receiver in Peru. As to the pre-2006 general ledgers of Doe Run Resources Corporation, defendants say they have been unable to produce these documents because essential parts of the electronic files have been lost or corrupted.

         Plaintiffs' motion for sanctions is based on Federal Rules of Civil Procedure Rule 37(b) (failure to comply with court order) and Rule 37(e) (failure to preserve electronically stored information). They ask me to impose adverse inferences that go to the heart of the merits of these complex cases. Although sanctions are appropriate, imposing adverse inferences is more draconian than necessary. Instead, I will order defendants to pay plaintiffs' reasonable attorneys' fees incurred both in bringing the motion and in investigating and attempting to resolve the non-compliance.

         I. Factual Background

         Almost four years ago I considered in detail defendants' general objection to producing documents from Peru that were in the hands of the Peruvian receiver. [April 7, 2014 Order, ECF #190]. I overruled defendants' objection after concluding that defendants had the practical ability to obtain documents from the Peruvian receiver. Part of my rationale for this was that another company controlled by defendants, Doe Run Cayman, "is a one-third member of the creditors' committee in Peru, and that committee controls Doe Run Peru."[1] Defense counsel stated at the hearing that following the 2014 order they produced seventy to eighty thousand pages of documents that they obtained from the receiver in Peru, and produced many more documents that they obtained from the Atlanta-based law firm that had collected documents from Peru for the ongoing international arbitration between Peru and defendants. After that production, however, defendants apparently made no effort to seek documents from the receiver in Peru in responding to additional discovery requests, relying on the same argument that I rejected in 2014 - that they do not control Doe Run Peru.[2] It was only after the Court's January 18, 2018, telephone status conference that defendants finally requested documents from the Peruvian receiver. Not surprisingly, they have not obtained any documents yet, although their most recent filings indicated that they now are making additional efforts to do so.

         The August 29, 2017 Order required production of the compelled documents within thirty days. On the thirtieth day, Defendant Doe Run Resources Corporation - but not the other defendants - asked for and was granted another thirty days to complete its production, explaining that, among other reasons, it was having difficulty restoring the back-up tapes that contained its general ledger for dates before 2006. That same day defendants Renco Group, Inc. and Ira L. Rennert and the defendants associated with them filed a motion to reconsider the order, which I denied.

         II. Legal Standards

         Under Rule 37(b)(2), Fed. R. Civ. P., a court may impose "just" sanctions against a party for failing to obey a discovery order. Rule 37 sanctions "are an invaluable penalty and deterrent to be employed by district courts to thwart discovery abuse." First Am. State Bank v. Cont'l Ins. Co., 897 F.2d 319, 331 (8th Cir. 1990). A court does not abuse its discretion when imposing discovery sanctions when parties fail to comply with discovery orders. Funk v. Belneftekhim, 861 F.3d 354, 370 (2d Cir. 2017).

         A court may only impose sanctions for failing to preserve electronically stored information that should have been preserved under Rule 37(e) "upon finding prejudice to another party" or "only upon finding that the party acted with the intent to deprive another party of the information." Fed.R.Civ.P. 37(e). To seek relief under the rule, "a finding of intentional destruction indicating a desire to suppress the truth" must be present. Burris v. Gulf Underwriters Ins. Co., 787 F.3d 875, 879 (8th Cir. 2015). A finding of negligence, or even gross negligence, regarding a party's failure to preserve will not usually support an adverse inference instruction. Krueger v. Ameriprise Fin., Inc., No.0:1 l-cv-02781, 2014 WL 8108458, at *7 (D. Minn. July 7, 2014); see also Applebaum v. Target Corp., 831 F.3d 740, 745 (6th Cir. 2016) ("a showing of negligence or even gross negligence will not do the trick."). A party is not under a duty to preserve documents before litigation commences, or before it is foreseeable that litigation will commence. Bakhtiari v. Lutz, 507 F.3d 1132, 1135 (8th Cir. 2007).

         III. Records of Doe Run Peru and Doe Run Mining

         As stated above, not until January of 2018 did defendants make any attempts to produce documents from the entity that now controls Doe Run Peru. In the August 29, 2017, Order I determined that the financial documents sought by plaintiffs were both relevant and necessary for their completion of discovery. In the April 7, 2014 Order, I made clear that defendants could not claim that they did not possess or control Doe Run Peru documents. The discovery requests sought these documents and I granted the motion to compel. Defendants claim that they did not understand that they were required to seek documents from the Peruvian receiver, and that it may not now be possible to obtain those documents. But defendants have not said that production is impossible, they have said that they did not even try until the issue was raised during the January 2018 telephone conference. At the hearing on the motion for sanctions, defendants argued that several changes to the identity of the receiver since 2014 caused even more delay in the request they ultimately sent on January 24, 2018. But it is defendants' own failure to abide by my 2014 Order that caused them to lose touch with the receiver, and that failure has introduced an unnecessary burden to the already contentious discovery process. I conclude that defendants' failure to comply with both the August 2017 Order and April 2014 Order were willful violations the Court's orders.

         Defendants argue that sanctions under Rule 37(b)(2) nevertheless should not be granted because plaintiffs cannot show that they were prejudiced. Defendants assert that other materials, such as audited financial statements, Renco's general ledgers, inter-company related financial transfer documents, and a "Peru payment spreadsheet, " depicting the flow of money from Doe Run Resources, will suffice instead of the Court-ordered general ledgers. I previously determined that the materials were relevant and discoverable, and plaintiffs have shown that they cannot obtain all the information they seek from the documents that have been produced. Plaintiffs reasonably need the documents in order to take depositions and to prepare their brief on the issue of foreign law, as well as for the ultimate merits of the case.

         Further, plaintiffs' exhibits demonstrate the efforts plaintiffs employed to avoid the need for this motion. Defendants assert that plaintiffs failed to sufficiently meet and confer before filing the motion. Although Rule 37(a) requires parties to meet and confer before filing a motion to compel, Rule 37(b) does not require doing so before a party can seek sanctions for the opponents' failure to comply with a court order. Linstedt v. City of Granby,238 F.3d 933, 936 (8th Cir. 2000). In any event, plaintiffs made repeated requests to defendants about these documents. They also, of course, were required to spend many hours reviewing the documents that were produced to determine what might be missing. Defendants' actions required plaintiffs to spend their time "hounding" defendants for discovery instead of preparing the case, which has been held to be sufficient prejudice for sanctions to be imposed. Schoffstall v. Henderson,223 F.3d 818, 824 (8th Cir. 2000). ...

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