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Spanish Peaks Lodge, LLC, et al v. Keybank National Association

March 15, 2012

SPANISH PEAKS LODGE, LLC, ET AL, PLAINTIFF,
v.
KEYBANK NATIONAL ASSOCIATION, ET AL, DEFENDANTS.



The opinion of the court was delivered by: Ambrose, District Judge

OPINION and ORDER OF COURT

KeyBank National Association and KeyBanc Capital Markets, Inc. ("KeyBank") have filed a Motion for Spoliation Sanctions against Voyager Group, L.P., Voyager Investments, L.P., Spanish Peaks Lodge, LLC and Spanish Peaks Holdings II, LLC ("Voyager"). See ECF Docket No. [8]. KeyBank contends that Voyager instituted a document retention policy*fn1 for the sole and express purpose of destroying documents relevant to this litigation. As movant, KeyBank bears the burden of proof in establishing spoliation. See Gentex Corp. v. Sutter, Civ. No. 7-1269, 2011 WL 5040893 at * 5 (M.D. Pa. Oct. 24, 2011), citing , Byrnie v. Town of Cromwell, 243 F.3d 93, 108 (2d Cir. 2001) and Culler v. Shinseki, Civ. No. 9-305, 2011 WL 3795009 at * 3 (M.D. Pa. Aug. 26, 2011).

To prevail on its motion, KeyBank must first demonstrate that Voyager spoliated evidence. Only if Voyager meets this threshold burden would I then consider the imposition of sanctions. The Third Circuit Court of Appeals recently clarified this two-step process in Bull v. UPS, 665 F.3d 68, 73-74 (3d Cir. 2012).*fn2 Thus, turning first to the issue of spoliation, I must consider whether KeyBank has demonstrated that:

(1) The evidence was in Voyager's control;

(2) The evidence is relevant to the claims / defenses in the case;

(3) There has been actual suppression or withholding of the evidence; and

(4) A duty to preserve the evidence was reasonably foreseeable to Voyager.

See Bull, 665 F.3d at 73. Assuming for the sake of argument only, that KeyBank could meet its burden of proof with respect to the first three factors, I find that it has not demonstrated that, at the time Voyager contemplated implementing its data retention policy, or when it actually implemented it, the duty to preserve evidence was reasonably foreseeable.

The question of reasonable foreseeability is both flexible and fact-specific. See Bull, 665 F.3 at 77-78, citing , Micron Technology, Inc. v. Rambus, Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011). Accordingly, I must closely examine the facts in the record before me. Nevertheless, I find helpful the "Guidelines" set forth in The Sedona Conference Commenting on Legal Holds:

The Trigger & The Process, 11 Sedona Conf. J. 265 (Fall 2010). The Sedona Conference Working Group on Electronic Document Retention & Production suggests that:

A reasonable anticipation of litigation arises when an organization is on notice of a credible probability that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation.

11 Sedona Conf. J. at 271. The first clause -- "on notice of probability that it will become involved in litigation" -- speaks to a defendant's duty. It informs Voyager's duty here. Simply stated, KeyBank has not proffered any compelling evidence that it had put Voyager on notice that it should reasonably anticipate litigation prior to the implementation of the documentation retention policy in August of 2009.*fn3 The record is devoid of anything akin to a receipt of summons or complaint, the issuance of a subpoena, a formal notice that Voyager was the target of an investigation, or the filing of an EEOC charge. There are no items which would ordinarily put a defendant "on notice" that it should "reasonably anticipate" litigation. See 11 Sedona Conf. J. at 271. Indeed, KeyBank never indicated in any conversations, letters or emails, that it was considering litigation. As a Defendant, the first notice of a credible probability that Voyager had that it would become involved in litigation was when it was served with a complaint in this action on September 14, 2009. The very next day Voyager altered its document retention policy so as to create a litigation hold. See ECF Docket No. [84-3], p. 4, ¶ 12.

Instead, KeyBank focuses upon a few emails*fn4 that Voyager authored -- emails KeyBank contends reveal that Voyager itself understood that litigation was imminent and in fact demonstrate that Voyager was contemplating litigation. Yet the evidence KeyBank offers is more of the type one would normally associate with a party initiating litigation. Again, I find a critical distinction here in the fact that Voyager did not initiate litigation. The Sedona Conference Guidelines suggest that a reasonable anticipation of litigation arises with respect to an organization on the plaintiff's side -- when it "seriously contemplates initiating litigation, or when it takes specific actions to commence litigation." 11 Sedona Conf. J. at 271. In other words, "seeking advice of counsel, sending a cease and desist letter or taking specific steps to commence litigation may trigger the duty to preserve." Id. As illustrated below, the evidence offered by KeyBank in this regard does not rise to this level.

Specifically, KeyBank offers an email from Michael Zanolli, Voyager's Managing Director of Real Estate Financing, dated April 24, 2009, which reads: I left you a voicemail, we should discuss. In addition to a number of things, within your discussion document, in light of KeyBank's failure to deliver on the Lodge construction loan and associated potential lender liability, the ask for $1 mm principal down payment is out of ...


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