TRUCKSTOP.NET, L.L.C., Plaintiff, v. SPRINT COMMUNICATIONS COMPANY L.P., Defendant Case No. CV-04-561-S-BLW United States District Court, D. Idaho Signed February 17, 2005 Filed February 18, 2005 Counsel Amanda K. Brailsford, Andersen Schwartzman Woodard Brailsford, PLLC, Steven B. Andersen, Andersen Schwartzman Woodard Dempsey, PLLC, Boise, ID, Jeffery D. Ubersax, Pro Hac Vice, Jeffrey Robert Manghillis, Pro Hac Vice, Robert S. Faxon, Pro Hac Vice, Jones Day, Cleveland, OH, Stephen G. Masciocchi, Pro Hac Vice, Holland & Hart, Denver, CO, Timothy P. Getzoff, Holland & Hart, Boulder, CO, for Plaintiff. Stephen R. Thomas, Tyler J. Anderson, C. Clayton Gill, Hawley Troxell Ennis & Hawley LLP, Boise, ID, Dane H. Butswinkas, Pro Hac Vice, Heidi K. Hubbard, Pro Hac Vice, Juli Ann Lund, Pro Hac Vice, R. Harrison Smith, III, Pro Hac Vice, Tyler Paul Francis, Pro Hac Vice, Richard Hackney Wiegmann, Pro Hac Vice, Williams & Connolly LLP, Washington, DC, for Defendant. Boyle, Larry M., United States Magistrate Judge ORDER *1 Currently pending before the Court is Plaintiff's Motion for a Preservation Order (Docket No. 29). Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this Court without a hearing. I. BACKGROUND A. Procedural Plaintiff filed a Complaint on November 15, 2004 together with a Motion for Temporary Restraining Order. (Docket Nos. 1 and 3). A Temporary Restraining Order (TRO) was entered by the Hon. B. Lynn Winmill on November 16, 2004 which, among other things, ordered “that both parties shall preserve all information related to this action including, without limitation, all documents, Emails, or other electronic information, reports, evaluations, test results, and any other information that may have any bearing on the parties' dispute.” TRO, p. 3 (Docket No. 9). On November 22, 2004, Plaintiff advised the Court that it intended to allow the TRO to lapse, which it has done. Defendant has since filed a counterclaim alleging material breach and unjust enrichment. (Docket No. 31). B. Factual Plaintiff Truckstop.net and Defendant Sprint Communications Company, L.P. entered into a contractual agreement in 2003 under which Defendant was to design, install, and test wireless local area networks (“WLANs”) at truck stops identified by Plaintiff, and to provide data circuits that would allow Plaintiff's customers to access the internet. Plaintiff alleges that Defendant breached the contract by failing to adequately design, install, and test the system, and by delivering an allegedly defective system. II. STANDARD Rule 26(c) of the Federal Rules of Civil Procedure authorizes the entry of protection orders “upon motion by a party ... any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”[1] Fed. R. Civ. P. 26(c). The standard for protective orders is well settled and may issue only “for good cause shown.” Id. For good cause to exist the party seeking protection bears the burden of showing “specific prejudice or harm will result if no protective order is granted.” Phillips ex rel. Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1211 (9th Cir. 2002). The standard for preservation orders is not so well defined. The Supreme Court has ruled that the inherent powers of federal courts are those which “are necessary to the exercise of all others,” Roadway Express, Inc. v. Piper, 447 U.S. 752, 764 (1980), though, there does not appear to be a clear test for granting preservation orders. Without directly referencing either the Court's inherent powers or Fed. R. Civ. P. 26, this Court has granted an order to preserve evidence when both parties agreed. Harris v. Roderick, 933 F.Supp. 977, 989 (D. Idaho 1996). In so ruling, the United States Court for the District of Idaho ordered that “no party shall purposely destroy alter, or abandon any original or nonduplicative documents or physical evidence that relate to this action.” Id. *2 There is persuasive guidance offered by a thoughtful and extensive analysis of this exact issue by District Judge Gibson in the United States District Court for the District of Western Pennsylvania. Capricorn Power Company, Inc. v. Siemens Westinghouse Power Corp., 220 F.R.D. 429 (W.D. Penn. 2004). Judge Gibson proposes a three fold balancing test to determine the propriety of preservation orders: (1) the level of concern the court has for continuing existence and maintenance of integrity of evidence in question absent an order directing preservation of evidence; (2) any irreparable harm likely to result to the party seeking preservation of evidence absent order directing preservation; and (3) the capability of the individual, entity or party to maintain evidence sought to be preserved, not only as to evidence's original form, condition or contents, but also physical, spatial, and financial burdens created by ordering preservation. Id. at 433-434; Fed. R. Civ. P. 34. Under the first prong of the test, the absence of any significant past, present, or future threat to the continuing integrity or existence of evidence renders the order superfluous. Id. at 434. Under the second prong, where the need expressed by the moving party for a preservation order is based upon an indefinite or unspecified possibility of the loss or destruction of evidence, rather than a specific, significant, imminent threat of loss, a preservation order usually will not be justified. Id. at 435. The burden of preservation must be considered, but the court notes that each such analysis will be factually specific to the case at hand. Id. at 436. In sum, that court ruled that motions for the preservation of evidence should be restricted to those circumstances which raise significant concern that discovery lawfully sought by a party will be lost indefinitely without immediate court action in the form of an order of preservation. Id. at 438. Beyond the specific grounds for the granting of a preservation order, there also exists a duty to maintain evidence generally. At least one District in the Ninth Circuit Court of Appeals and the Second and Fourth Circuits Courts of Appeals have adopted a plain statement of the duty to preserve evidence in all litigation. The United States District Court for the Central District of California, citing Roadway and an Indiana District Court case,[2] ruled that: [W]hile a litigant is under no duty to keep or retain every document in its possession once a complaint is filed, it is under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request. Wm. T. Thompson Co. v. General Nutrition Corp., 593 F.Supp. 1443, 1455 (C.D. Cal. 1984). The Second Circuit Court of Appeals states the duty more plainly: “the obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.” Fujitsu Limited v. Federal Express Corp., 247 F.3d 423, 436 (2nd Cir. 2001). The Fourth Circuit Court of Appeals cites to the Second Circuit with approval and also plainly states that “the duty to preserve material evidence arises ... during litigation.” Silvestri v. General Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001). Each of the referenced cases dealt with the propriety of sanctions for abusive practices, rather than the propriety of a preservation order prior to any alleged malfeasance. Though, the duty certainly attaches prior to any action for sanctions. The Ninth Circuit Court of Appeals has stated the consequences for the destruction of evidence prior to trial: “Generally, a trier of fact may draw an adverse inference from the destruction of evidence relevant to a case.” Akiona v. U.S., 938 F.2d 158, 161 (9th Cir. 1991). The court cited two bases for the adverse inference: that the party who destroys the evidence is more likely to have been threatened by the document, and the potential punitive action taken by the court if the evidence is destroyed. Id. Beyond the adverse inference, more drastic sanctions may also be available. The sanction of default judgment is particularly appropriate where a party destroys discoverable evidence, thereby making that evidence irretrievably unavailable to the opposing party and the trier of fact. Wm. T. Thompson Co., 593 F.Supp. 1443, 1456 (C.D. Cal. 1984)(citing National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976); Professional Seminar Consultants, Inc. Sino American Technology Exchange Council, Inc., 727 F.2d 1470 (9th Cir. 1984)). Sanctions may be imposed against a litigant who is on notice that documents and information in its possession are relevant to litigation, or potential litigation, or are reasonably calculated to lead to the discovery of admissible evidence, and destroys such documents and information. Id. III. ANALYSIS *3 Plaintiff asserts that “since there is no controlling preservation order from the Court at this time, another order is necessary to ensure that no documents are inadvertently or intentionally destroyed.” Reply, pp. 1-2, (Docket No. 36). Plaintiff argues that a preservation order is necessary based on the asserted behavior of Defendant beginning in May 2004. Plaintiff asserts that Defendant made untrue statements in reference to the performance of the WLANs, falsely stated that Defendant had tested the system adequately, that a Sprint employee had posted a message on the internet falsely attributed to Plaintiff, and that the Court need not wait to enter a preservation order until there is proof of document spoliation or destruction. Id. at 2-3. Defendant argues that a preservation order is unnecessary because there is no proof offered that any destruction or spoliation of evidence has occurred. Memorandum in Opposition, p. 4 (Docket No. 32). Under the basic guidance of Fed. R. Civ. P. 26(c), a protective order must be based on “good cause.” The burden of showing good cause requires proof that a specific prejudice or harm will result if no protective order is granted. Phillips ex rel. Estates of Byrd, 307 F.3d at 1211. A careful review of the record before the Court leads to the conclusion that Plaintiff has failed to assert any specific prejudice or harm that may result without a preservation order. The general assertions of untruths are not analogous to a willingness to destroy evidence either intentionally or inadvertently. Under the scant guidance offered by Harris and the other cited authorities, this Court has the power to grant preservation orders when there is a mutual agreement that the order is appropriate. As there is no such agreement, this Court will not invent a rationale for such when there is an extant duty to retain evidence regardless of the existence of an order as noted below. Though this Court is not expressly accepting the test offered in Capricorn as controlling legal authority, the guidance of that standard is instructive. The absence of any significant past, present, or future threat to the continuing integrity or existence of evidence in this case renders the order superfluous under the first prong. Under the second prong, as the need expressed by Plaintiff for a preservation order is based upon an indefinite or unspecified possibility of the loss or destruction of evidence, rather than a specific, significant, imminent threat of loss, a preservation order is not justified. Finally, under the third prong, the burden of maintaining the evidence does not appear to be heavy for Defendant as they are on notice of what may be discoverable, and exactly what has been requested in the initial stages of discovery so far in this case. Regardless of which analysis is used for the propriety of a preservation order, based on the existing record, this Court does not find a reasonable basis to grant such at this point in the process. Without a particularized threat based on identifiable facts alleging and establishing good cause from the plaintiff, there is no basis or need to craft a protective order under Fed. R. Civ. P. 26(c). Further, though there is clearly the power to grant a preservation order when both sides agree to its propriety, that situation does not exist here. Finally, the persuasive guidance from Capricorn does not provide grounds for the entry of a preservation order under the facts and circumstances existing here. Rather, this Court is inclined to remind the parties that the TRO operated as express notice to both parties that they are each under a duty to preserve “all information related to this action including, without limitation, all documents, Emails, or other electronic information, reports, evaluations, test results, and any other information that may have any bearing on the parties' dispute.” TRO, p. 3 (Docket No. 9). The TRO operates as notice, which in turn invokes the continuing duty as defined by the Second and Fourth districts, and the Central District of California regardless of the expiration of the original Order. *4 It is undisputed, based on the knowledge and notice the parties have of their respective claims against each other, that both parties arc under a duty to preserve what it knows, or reasonably should know, is relevant in the action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request. Wm. T. Thompson Co., 593 F.Supp. at 1455. The risk of ignoring this duty is obviously grave. Beyond the adverse inference that may be applied in trial, the sanction of default judgment is particularly appropriate where a party destroys discoverable, relevant evidence, thereby making that evidence irretrievably unavailable to the opposing party and the trier of fact. Id. at 1456. This is particularly true with the notice each party has received. While the Court will not grant the motion at this time, it denies it without prejudice should Plaintiff find specific evidence of the spoliation or destruction of evidence at a later date. IV. ORDER NOW THEREFORE IT IS HEREBY ORDERED: 1. Plaintiff's Motion for a Preservation Order (Docket No. 29) is DENIED without prejudice. 2. The hearing scheduled to be conducted on February 23, 2005 is VACATED. Footnotes [1] The protective orders referred to in Rule 26 normally deal with a party attempting to curb the scope of discovery executed by the other party. A preservation order limits the ability of a party to destroy evidence. [2] Bowmar Instrument Corp. v. Texas Instruments, Inc., 25 Fed. R.Serv.2d 423 (N.D. Ind. 1977).