Commercial Litigation and Arbitration

Environmental Remediation as Spoliation

The defendant in Weyerhaeuser v. Petro-Hunt LLC, 2008 U.S. Dist. LEXIS 84329 (W.D. La. Sept. 29, 2008), an environmental action, denied any legal obligation to remediate yet did so in the face of an imminent state environmental audit and this pending federal litigation:

The Court finds evidence that the circumstances of Petro-Hunt's remediation of conditions on the Tremont Lease property constituted a deliberate spoliation of relevant evidence. Petro-Hunt absolutely knew that the condition of the various sites on the lease associated with hydrocarbon production was relevant to the issue of environmental damage in this suit. In destroying evidence of the land's condition in the face of ongoing legal proceedings in this Court, not to mention an impending visit by the Louisiana Office of Conservation, all this despite Petro-Hunt's insistence that they were under neither legal nor contractual duty to perform thorough remediation of the land at this point, they acted in bad faith. If concerns of fulfilling their legal obligations of prudent operation—obligations about which this Court makes no ruling at this time—compelled this lease-wide cleanup, Petro-Hunt ought simply to have contacted opposing counsel or this Court and expressed their concerns. Not having done this in the context of ongoing litigation Petro-Hunt's actions are deemed, and axe understood by this Court to be, entirely inappropriate.

Pursuant to this finding we grant, in limited part, Plaintiff's motion to the extent that the Court permits Plaintiff its requested adverse evidentiary inference that there existed environmental damage on those areas of the Tremont Lease remedied, cleaned, or otherwise ameliorated by Petro-Hunt from the beginning of litigation until September 16, 2006. This is not to say that such an inference may not be controverted by Petro-Hunt's evidence at trial or Plaintiff's lack thereof. Petro-Hunt has simply started off on an evidentiary bad foot as a result of its conduct. Rather than deciding this entire issue against it--perhaps effectively deciding the entire case against it--the Court has chosen a moderate evidentiary sanction that balances the degree of spoliation against the importance of the issue to the whole proceeding.

With that in mind, inferring the existence of environmental damage is not the same as inferring the extent of that environmental damage. As to the degree of environmental damage that was present, or is present, the Court makes no determination at this time. Cf. Bouzo v. Citibank, 96 F. 3d 51, 60 (2d Cir. 1996) ("[T]he district court acted well within its discretion in concluding that an appropriate adverse inference might be drawn against [a party who fails to provide evidence he has undertaken to produce] .... The precise nature and extent of the allowable inference or inferences to be drawn are matters submitted to the discretion of the district court in the first instance.") (citations omitted). *** The extent or degree of environmental damage appears to be the crux of what Plaintiff must prove at trial and is too closely intertwined with the issue of Petro-Hunt's obligations as an alleged reasonable, prudent, operator for us to explore that territory at this point. The parties remain free to engage in reasonable discovery or expert investigation necessary to ascertain the extent of environmental damage to remediated and unremediated areas of the Tremont Lease so as to present the issue of environmental damage more fully to the jury at trial. In that regard, the matter of adverse inference presentation to the jury will be handled by appropriate jury instruction.

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