Judge Thynge Grants in Part Motion to Compel and Imposes Sanctions Against Plaintiffs for Spoliation of Documents
In Magnetar Technologies Corp., et al. v. Six Flags Theme Park Inc., et al., C.A. No. 07-127-LPS-MPT (D. Del.), Magistrate Judge Thynge recently issued a Memorandum Order granting in part defendants’ motion to compel production of documents, and imposing sanctions against plaintiffs for spoliation of evidence as a result of the destruction of certain other documents. Id. at 37. In the motion, defendants sought to compel the production of documents (that plaintiffs claimed were protected from discovery and inadvertently produced) on the grounds that by producing the documents to defendants, plaintiffs had waived any claims of attorney-client privilege or work product over the documents. Id. at 8. Defendants further argued that the documents were not shielded from discovery by any joint client privilege, and even if the documents were somehow protected, plaintiffs should nonetheless be ordered to produce them under the crime-fraud exception and as a sanction against the plaintiffs for the spoliation of other evidence and documents in this case. Id. at 8-9. Specifically, on the issue of spoliation, defendants alleged that during the course of discovery “more than seven hundred boxes of documents were destroyed” at the behest of two of the plaintiffs. Id. at 3. In opposition to the motion, along with arguing that the documents at issue were inadvertently and unintentionally produced, plaintiffs argued that the attorney-client privilege, work-product doctrine and the joint client privilege applied to protect the documents from discovery, and that none of these applicable privileges or immunities had been waived by any of the defendants. Id. at 10-11. Plaintiffs also disputed defendants' allegations of spoliation, arguing that to the extent any documents were destroyed, those documents were not destroyed intentionally and at the time were under the control of a third party (and not under the defendants’ control). Id. at 10. In granting the motion to compel in part, Judge Thynge concluded that although the attorney-client privilege may have arguably been waived with respect to perhaps one of the plaintiffs, both the work-product doctrine and the joint client privilege still applied to the contested documents and had not been waived. Id. at 23-25. Judge Thynge noted that the “work product protection is not automatically waived through a client’s (or former client’s) production of documents since that protection is invoked by the attorney.” Id. at 24. Judge Thynge also noted that the existence of an agreement between the plaintiffs to retain “common counsel” and the inclusion of each of the plaintiffs on certain privileged communications indicated that a joint client relationship existed among the plaintiffs, warranting protection under the joint client privilege. Id. at 26. Judge Thynge held that the crime-fraud exception did not apply because there was no evidence that plaintiffs had engaged in a crime or fraud or that defendants’ counsel’s services were utilized in order to plan or perpetrate any such crime or fraud. Id. at 31.
On the issue of spoliation, Judge Thynge found in favor of defendants, holding that plaintiffs had failed to satisfy their preservation obligations and that such failure was a "serious matter worthy of sanction." Id. at 32, 34. Specifically, the Court found that the “destruction of documents in the [third party] warehouse, which was under the control of [one of the plaintiffs], and occurred after the commencement of litigation" constitutes "spoliation.” Id. at 32. In addition, the Court noted that although the plaintiffs “may not have actively obstructed the discovery of evidence, they neglected their duty to preserve evidence, and should have been aware of [the third party’s] document retention policy for approximately six years before this action was filed.” Id. at 32. As a sanction for plaintiffs’ spoliation, the Court ordered the production of certain documents or portions of documents sought by defendants and the attorney-client privilege “lost” with respect to those documents or portions of documents. Id. at 35-36.