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TVI, Inc v. Harmony Enterprises Inc

United States District Court, W.D. Washington, Seattle

August 13, 2019

TVI, INC., a Washington corporation, Plaintiff,
v.
HARMONY ENTERPRISES, INC., a Minnesota corporation, Defendant.

          ORDER

          JOHN C. COUGHENOUR, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Plaintiff's motion to compel and for sanctions (Dkt. No. 28). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS the motion for the reasons explained herein.

         I. BACKGROUND

         The Court previously set forth the underlying facts of this case and will only restate those facts relevant to the instant motion. (See Dkt. No. 34.) On October 3, 2017, a baler manufactured and installed by Defendant at Plaintiff's Mt. Vernon store (the “Mt. Vernon baler”) failed. (Dkt. No. 20 at 8.) Plaintiff immediately notified Defendant and demanded that Defendant inspect the Mt. Vernon baler, produce a report on the failure, and remove and dispose of the Mt. Vernon baler. (Id.) Defendant offered to take the Mt. Vernon baler to Minnesota for an evaluation and to provide Plaintiff with a report on its findings. (Id. at 17.) On October 10, 2017, Plaintiff sent Defendant a letter titled, “Notice of Defect and Potential Claim of Indemnity.” (Id. at 31-32.) The letter conditioned Plaintiff's relinquishing of the Mt. Vernon Baler on Defendant's production of a report as to its failure, and stated that, “[Plaintiff] hereby reserves its right to pursue all available remedies at law or in equity related to this incident, or any other incident related to a [Defendant-made] product.” (Id. at 2, 31-32.)

         Prior to its inspection of the Mt. Vernon baler, Defendant's employees discussed how to weld certain parts of its balers to address safety issues that had arisen. (See Dkt. No. 27 at 5-7.) Following a brief inspection of the Mt. Vernon baler on or around October 19, 2017, Defendant found unnecessary welds had contributed to the Mt. Vernon baler's failure. (Dkt. No. 21 at 6, 9, 14-15, 25.) Defendant has since been unable to locate any notes from the inspection of the Mt. Vernon baler. (Id. at 12.)

         On November 30, 2017, Plaintiff discovered that a baler manufactured and installed by Defendant at Plaintiff's Flagstaff, Arizona business location (the “Flagstaff baler”) was unsound due to welding failures. (Dkt. No. 20 at 3, 34-39.) Plaintiff immediately notified Defendant and demanded that Defendant inspect the Flagstaff baler, produce a report on the failure, and remove and dispose of the Flagstaff baler. (Id. at 34-35.) On December 1, 2017, Plaintiff sent Defendant a letter titled “Second Notice of Defect and Potential Claim for Indemnity: Second Demand for Inspection, ” which reiterated Plaintiff's demands for reports on the Mt. Vernon and Flagstaff balers. (Id. at 41-42.) The letter also stated that Plaintiff would require Defendant to indemnify and hold Plaintiff harmless if another of Defendant's balers failed, and that “[Plaintiff] hereby reserves its right to pursue all available remedies at law or in equity related to this incident, or any other incident related to a [Defendant-made] product.” (Id. at 42.)

         Plaintiff did not provide Plaintiff with reports on the Mt. Vernon and Flagstaff balers. (Id. at 3.) In October or November 2017, Defendant prepared a summary of its inspection of the Mt. Vernon baler, which it shared with its counsel. (Dkt. No. 21 at 20-22.) Defendant did not share this summary with Plaintiff until after Plaintiff filed this lawsuits. (Id.; Dkt. No. 20 at 4.) During Defendant's Rule 30(b)(6) deposition, Defendant stated that it sent the Mt. Vernon baler to be scrapped in December 2017. (Dkt. No. 21 at 19.) Defendant's responses to Plaintiff's interrogatories indicate that the Mt. Vernon baler was picked up for scrapping in January or February 2018. (Id. at 40, 61.) Defendant did not notify Plaintiff that the Mt. Vernon baler had been scrapped. (Dkt. No. 21 at 29.) Ultimately, Plaintiff removed all of Defendant's balers from Plaintiff's stores. (Dkt. No. 20 at 3.) On January 17, 2018, Plaintiff's counsel sent Defendant a letter formally requesting a litigation hold on material related to the Mt. Vernon and Flagstaff balers, and demanding that Defendant “refrain from performing any work on, making any alterations to, or discarding any part of the [Mt. Vernon baler]” as such could be grounds for spoliation. (Id. at 46.)

         In September 2018, Plaintiff brought suit against Defendant for various state law claims arising from Defendant's allegedly dangerous and defective balers. (See Dkt. Nos. 1, 1-2.) On December 28, 2018, Plaintiff served interrogatories and requests for production on Defendant. (Dkt. No. 29 at 2.) Interrogatory No. 5 sought information about whether Defendant's balers had failed in other instances and, if so, the cause of the failures. (Dkt. No. 21 at 34.) Defendant's response listed the Mt. Vernon and Flagstaff balers and stated that it had not found any malfunctions in either. (Id. at 34-35.) Interrogatory No. 8 asked if Defendant believed that it had provided sufficient warnings to consumers regarding its balers, to which Defendant responded that it had via the balers' manuals, which included maintenance instructions, safety instructions, and warnings, and safety decals affixed to each baler. (Id. at 37.)

         In April 2019, Defendant testified in its Rule 30(b)(6) deposition that a baler it had sold to Lowe's had failed in the spring of 2017. (Dkt. No. 29 at 8-10.) Lowe's notified Defendant of the failure and, following an inspection by Defendant, Defendant and Lowe's agreed that the failure was due to user error. (Id. at 10-11.) Defendant did not notify Plaintiff of the Lowe's baler failure prior to the Rule 30(b)(6) deposition. (Dkt. Nos. 20 at 4, 21 at 7.) Defendant also disclosed for the first time that the unnecessary welds on the Mt. Vernon baler contributed to its failure. (Dkt. No. 21 at 25.)

         During May and June 2019, Plaintiff sought supplemental discovery from Defendant to cure alleged deficiencies in Defendant's responses. (See Dkt. Nos. 21 at 48-67; 29 at 2, 35-39, 41-44.) Ultimately, Plaintiff filed the instant motion seeking to compel additional responses from Defendant. (Dkt. Nos. 28 at 3, 29 at 2.) Defendant has since supplemented its written discovery and produced additional documents. (Dkt. No. 35 at 2.)[1] Plaintiff also moves for sanctions against Defendant for its alleged spoliation of the Mt. Vernon baler abuse of the discovery process. (See generally Dkt. Nos. 28, 35.)

         II. DISCUSSION

         A. Spoliation Sanctions

         District courts possess inherent authority to impose sanctions against a party in response to the party's spoliation of relevant evidence. See Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993). Spoliation is the “destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence, in pending or future litigation.” Kearney v. Foley & Lardner, LLP, 590 F.3d 638, 649 (9th Cir. 2009). The party alleging spoliation must prove:

(1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a ‘culpable state of mind;' and (3) that the evidence was ‘relevant' to the party's claim or defense such that a ...

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