Summary of a Recent
Judicial Development in
Alternative Dispute Resolution

Court Declines to Impose Sanctions for Destruction of Evidence

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Ahcom, Ltd. v. Smeding, No. C-07-1139 SC, 2009 WL 102851 (N.D. Cal. Jan. 14, 2009), the United States District Court for the Northern District of California held that there was insufficient evidence to support a defendant's claim that the plaintiff had willfully destroyed evidence, and thus denied the defendant's motion to impose sanctions on the plaintiff.

Background

The defendants were brokers of dried fruits and nuts. Id. at *1. They entered Chapter 7 bankruptcy after defaulting on a number of delivery contracts, including contracts for delivery of almonds to the plaintiff. Id. The parties subsequently arbitrated their dispute, and a German arbitrator issued an award to the plaintiff. Id. There was no signed contract containing an enforceable arbitration agreement; the only documents produced by the plaintiff were unsigned contracts. Id. The plaintiff sought to enforce the arbitration award, and the defendants moved for sanctions against the plaintiff for destruction of evidence because the plaintiff had failed to produce copies of the signed contracts between the parties. Id. The district court then considered and ruled on the defendants' motion for sanctions. Id.

Arguments

The plaintiff argued that it had already produced all the relevant documents it possessed, and that it had not wrongfully destroyed evidence because it was simply following its own three-year document retention policy. Id. at *2.

The defendants argued that the plaintiff willfully destroyed relevant evidence and requested sanctions. Id. at *2-3.

Analysis and Holdings

The court found that the plaintiff had no duty to retain completed contracts that were not in dispute, considering that its standard policy was to destroy all documents other than "contracts in dispute" after three years. Id. at *3. The court noted that the plaintiff had preserved and produced the disputed contracts as required. Id. The court further found that, contrary to the defendants' assertion, there was no indication that the plaintiff still had copies of the signed contracts between the parties but had purposely withheld them. Id. at *4. The court added that it was hesitant to impose sanctions on the plaintiff for destroying records that the defendant itself had in its own possession and also destroyed because that would serve to punish the plaintiff for having the more conservative document retention policy while simultaneously rewarding the defendants' practice of immediately destroying documents in its possession. Id. Therefore, the court denied the defendants' motion for sanctions. Id.

The case was decided on January 14, 2009.