Gypsum Res. v. Clark Cnty.

• Decision Date: 15 November 2022
• Docket Number: 2:19-cv-00850-GMN-EJY
• Parties: GYPSUM RESOURCES, LLC, a Nevada limited liability company, Plaintiff, v. CLARK COUNTY, a political subdivision of the State of Nevada; and CLARK COUNTY BOARD OF COMMISSIONERS, Defendants. CLARK COUNTY, a political subdivision of the State of Nevada; and CLARK COUNTY BOARD OF COMMISSIONERS, Counterclaimant, v. GYPSUM RESOURCES, LLC, a Nevada limited liability company, Counterdefendant.
• Court: U.S. District Court — District of Nevada

GYPSUM RESOURCES, LLC, a Nevada limited liability company, Plaintiff,
v.
CLARK COUNTY, a political subdivision of the State of Nevada; and CLARK COUNTY BOARD OF COMMISSIONERS, Defendants.

CLARK COUNTY, a political subdivision of the State of Nevada; and CLARK COUNTY BOARD OF COMMISSIONERS, Counterclaimant,
v.
GYPSUM RESOURCES, LLC, a Nevada limited liability company, Counterdefendant.

No. 2:19-cv-00850-GMN-EJY

United States District Court, D. Nevada

November 15, 2022

ORDER

ELAYNA J. YOUCHAH UNITED STATES MAGISTRATE JUDGE

Pending before the Court is Gypsum Resources, LLC's Motion to Convene Evidentiary Hearing for Imposition of Sanctions for Destruction of Evidence.^[1] ECF Nos. 55 and 56. The Court has considered the Motion, the Opposition filed by Clark County and the Clark County Board of Commissioners^[2] (ECF No. 59), the Opposition filed by non-party Clark County Commissioner Justin Jones^[3] (ECF No. 60), the Declaration of Brian R. Hardy (counsel for Commissioner Jones) in Support of Commissioner Jones' Opposition to Gypsum's Motion (ECF No. 61), the Declaration of Commissioner Jones in Support of his Opposition to Gypsum's Motion (ECF No. 62), Gypsum's Reply in Response to Defendants' Opposition to Gypsum's Motion (ECF No. 65), and Gypsum's

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Reply in Response to Commissioner Jones' Opposition to Gypsum's Motion (ECF No. 67). The Court held an evidentiary hearing regarding Gypsum's Motion on October 20, 2022. The presentations at that hearing were also considered by the Court.

I. Background

The instant Motion does not ask the Court to grant sanctions, but argues the Court should convene an evidentiary hearing so that Plaintiff can “prove” spoliation-the destruction of evidence was “intentional, prejudicial and designed to interfere with this Court's lawful adjudication of Gypsum's rights.” ECF No. 56 at 21. See also ECF No. 76 at 66 (stated by counsel for Gypsum: “We're here today to decide whether or not the Court should hold an evidentiary hearing.”). Nonetheless, Gypsum tells the Court that at the hearing it will ask the Court “to strike the County's answer and enter a finding of liability” while imposing monetary sanction against the County, the CCBC, and Commissioner Jones. Id. at 21-22. Gypsum contends that a hearing is the best method for determining “the appropriate sanctions while protecting a parties' due process rights.” Id. at 16 citing Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 592 (9th Cir. 1983). Gypsum further offers that an evidentiary hearing will allow the Court to “make appropriate inferences and credibility determinations [that] will establish the intentional destruction of evidence,” done for purposes of concealing Commissioner Jones' “and others in the County” desired “actions against Gypsum, including the illegal quid pro quo to deprive Gypsum of a vote.” Id.

Based on the title of Gypsum's Motion, its contents and conclusions, the Oppositions filed, the Reply, and statements made by counsel for Plaintiff, the Court concludes the Motion seeks only an order setting an evidentiary hearing, not an order applying the legal paradigms to case specific facts for purposes of ruling on a request for sanctions.^[4] To the extent, in the absence of an evidentiary hearing, Gypsum seeks the imposition of sanctions, the Court finds additional briefing is necessary. While Gypsum discusses Commissioner Jones' conduct supporting Gypsum's spoliation argument in depth, Gypsum treats the discussion regarding Defendants in a far more summary fashion.^[5] Thus,

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Nevertheless, Defendants respond to Gypsum's Motion arguing the text messages on Commissioner Jones' personal cell phone, which are no longer available, were in the “sole custody” of Commissioner Jones who is not a defendant in this action. ECF No. 59 at 3. Albeit not in one place, Defendants contend that the allegedly destroyed text messages could never have included relevant evidence relating to the claims asserted by Gypsum. Id. at 2, 10-11, 15-17. Defendants state Commissioner Jones' subjective intent is irrelevant to the issues presented by Plaintiff. Id. at 18-23. Defendants argue that their duty to preserve electronically stored information (“ESI”) was not triggered because they could not divine Plaintiff would file suit immediately following a CCBC vote on April 17, 2019 or that Commissioner Jones' personal cell phone held information relevant to the CCBC's vote on that date. Id. at 13. Finally, Defendants make an unclean hands argument. Id. at 23-25.

Commissioner Jones argues the Court cannot exercise jurisdiction over him with respect to sanctions and, therefore, there is no reason to convene an evidentiary hearing. ECF No. 60 at 8. Further, if Rule 37 is applied by the Court, Mr. Jones contends Plaintiff's request for sanctions fails because Plaintiff suffered no prejudice. Id. at 10. Commissioner Jones ignores well settled case law regarding the Court's inherent authority to sanction a non-party “for abuse of the judicial process.” Arrowhead Capital Finance, Ltd. v. Picturepro, LLC, Case No. MC 21-0300-GM (JPRx), 2022 WL 1843136, at *1 (C.D. Cal. Apr. 11, 2022), citing Pennwalt Corp. v. Durand-Wayland, Inc., 708 F.2d 492, 494 (9th Cir. 1983) (as amended).

In Reply, Gypsum argues that by repeatedly referring to Commissioner Jones' destruction of ESI as “alleged,” provides additional support for the evidentiary hearing requested. ECF No. 65 at 2. Gypsum further argues Defendants' assertion of legislative privilege is overbroad. Id. at 2, 1011. Gypsum contends Defendants' undisputed failure to take any steps to preserve evidence until August 7, 2020, a year after this case commenced, demonstrates a violation of its legal duties. Id. at 4-5. Gypsum contends Commissioner Jones' ESI destruction is properly imputed to Defendants. Id. at 5-6.

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Gypsum also argues litigation was reasonably foreseeable upon the 2:56:12 p.m. conclusion of the April 17, 2019 vote (ECF No. 56 at 248 (Ex. 23)) denying Gypsum's request for reconsideration because of the long history of litigation between the parties and because Commissioner Jones, approximately three hours after the vote (sometime before 6:09:34 p.m. that day), deleted every text message on his personal cell phone. ECF No. 56 at 501 (Ex. 38). Those communications, as they pertained to County business, were public records Defendants had a legal duty to preserve. ECF No. 65 at 5-6. Gypsum takes issue with Defendants' contention that the information destroyed by Commissioner Jones was irrelevant to any claim before the Court because, of course, it is impossible to know what was contained in the destroyed information. Id. at 6.^[6]

Gypsum replies to Commissioner Jones' Opposition to its Motion reiterating that Mr. Jones has interjected himself into these proceedings as well as proceeding before the Bankruptcy Court pertaining to the imaging of his phone. ECF No 67 at 3-4. Gypsum argues what it characterizes as Commissioner Jones' failure to be candid with the federal courts through careful wordsmithing and shifting arguments. Id. at 5-6. Gypsum stresses the Court's inherent authority to sanction a nonparty who has abused the litigation process and caused litigants to incur unnecessary expenses. Id. at 7-8. Gypsum concludes that Commissioner Jones' deletion of his text messages is spoliation subject to Fed.R.Civ.P. 37 sanctions. Id. 9-12.

II. Discussion

A. The Court is Not Required to Hold an Evidentiary Hearing.

What is before the Court is not whether sanctions are appropriately granted against the County, CCBC, and/or Commissioner Jones, but whether an evidentiary hearing is appropriately held in order to facilitate a determination of what sanctions should be granted. Thus, the Court is not deciding if the disappearance of all text messages on Commissioner Jones' personal cellular telephone within hours of an April 17, 2019 vote, which went against Plaintiff, is spoliation and sanctionable, but whether an evidentiary hearing is needed to determine if spoliation occurred.

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There is no doubt that “[w]hen necessary, the district court may hold an evidentiary hearing on a motion for sanctions.” Wyle, 709 F.2d 592. This language demonstrates the district court has discretion, but is not required, to hold an evidentiary hearing prior to imposing...