Court Awards Plaintiff Terminating Sanctions for Defendant’s “Shell Game” Regarding Audio Recording: eDiscovery Case Law

Last week, we covered a case where CBS was ordered to produce audio/video recordings related to a § 1983 civil rights action (which is a great reason to have a webinar on the topic!).  In this case, an audio recording played a prominent role again.

In Talbot v. Foreclosure Connection, Inc., No. 2:18-cv-169, (D. Utah July 29, 2020), Utah District Judge Clark Waddoups granted the plaintiff’s Motion for Sanctions on the ground that the defendants engaged in discovery abuses, awarding default judgment to the plaintiff in the amount of $18,657.49, as well as attorney’s fees to be determined and a sanction amount of $2,500 to be paid by defense counsel to the plaintiff.

Case Background

In this case involving a former employee of the defendant and 600 alleged unpaid overtime hours, the defendants were also defendants in a lawsuit for violating the Fair Labor Standards Act (“FLSA”). The United States Secretary of Labor initially sued the defendants in 2015 for matters (including failure to pay overtime) involving other employees.  A Preliminary Injunction was issued and the defendants were enjoined from (1) retaliating against employees, (2) “altering, editing, and/or destroying Defendants’ time records and records reflecting payments made to employees of or workers for Defendants,” (3) obstructing the Department of Labor (DOL) investigation, and (4) falsifying documents.  Despite this, the defendants continued to defy the DOL investigation, terminating another employee and impeding litigation by failing to produce documents and denying they had such documents.

Five months after the Permanent Injunction issued, the dispute with the plaintiff started. During a meeting on October 16, 2017 between the plaintiff and defendants, one of the defendants’ representatives recorded the meeting (unbeknownst to the plaintiff at the time).  After the Company terminated the plaintiff, she filed for unemployment, which the defendants opposed payment of unemployment on the ground that she had been terminated for cause, leading to an administrative hearing.  When the plaintiff learned about the recording, she requested that the defendants provide her a copy (they only provided excerpts), then subsequently sent an email to defendants requesting it again, stating: “I do not want this new found evidence to slip away like so many other[ ] things do. Or be corrupted, or changed”.  Despite that request, the defendants did not produce the recording for her hearing, nor did they produce it for the pro se Complaint she filed in February 2018.  Eventually, the defendants attested that the recording was deleted after the unemployment matter concluded (even though the complaint had been filed by then), leading to the plaintiff’s motion for sanctions. 

The court held a hearing on the sanctions motion on October 9, 2019, where Defendants’ counsel argued the defendants could not have known they needed to preserve the recording because he did not tell them to do so, which “troubled” the Court because the “Defendants are not unsophisticated litigants”.  Based on the posture of the case, the court informed Defendants the issue was “not whether sanctions will be imposed against Defendants for spoliating evidence again, but what those sanctions will be.” It was only then that the defendants produced the entire recording.

Judge’s Ruling

Judge Waddoups observed: “Defendants engaged in a pattern of non-production in the case before Judge Kimball and appear to have continued that pattern in this case. Based on the totality of Defendants’ actions, there simply is no credible evidence that they provided Ms. Talbot a copy of the recording in December 2017. Thus, their purported deletion of the recording in June 2018 was egregious. Most notably, however, after the court informed Defendants they would be sanctioned and the only issue that remained was what the sanction would be, Defendants were able to produce a copy of the recording they had withheld for almost two years.”  He also noted the following:

“‘Discovery is not supposed to be a shell game, where the hidden ball is moved round and round and only revealed after so many false guesses are made and so much money is squandered.’ Lee v. Max Int’l, LLC. For reasons that are inexplicable, neither Defendants nor Defendants’ counsel seem to recognize how serious their discovery abuses are despite being under an injunction from past discovery misconduct.”

As a result, Judge Waddoups issued a default judgment against the defendants and awarded the amounts noted above.

So, what do you think?  Should the court have ordered the default judgment given that the defendants finally produced the recording?  Or was it too late at that point?  Please share any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

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