ENVIRONMENTAL WORLD WATCH, INC., et al., Plaintiffs, v. THE WALT DISNEY COMPANY, et al., Defendants No. CV 09-4045-DMG (PLAx) United States District Court, C.D. California, Western Division Filed May 11, 2016 Counsel C. Brooks Cutter, Ian Hunter, John R Parker, Jr., Kershaw Cutter and Ratinoff LLP, Sacramento, CA, Jack Silver, Jack Silver Law Offices, Sebastopol, CA, for Plaintiffs. Charity M. Gilbreth, Garrett L. Jansma, Latham & Watkins LLP, Costa Mesa, CA, Gene A. Lucero, Kirk A. Wilkinson, Latham and Watkins LLP, Los Angeles, CA, for Defendants. Abrams, Paul L., United States Magistrate Judge REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE RE: ISSUE OF MONETARY SANCTIONS AS TO DENNIS BECVAR *1 This Report and Recommendation is submitted to the Honorable Dolly M. Gee, United States District Judge, pursuant to 28 U.S.C. § 636 and General Order 05-07 of the United States District Court for the Central District of California. For the reasons discussed below, the Magistrate Judge recommends that Dennis Becvar (“Becvar”) be found to have acted in bad faith during the pendency of this action and that defendants' motion for monetary sanctions against Becvar be granted. I. BACKGROUND On May 11, 2012, defendants The Walt Disney Company, Disney Enterprises, Inc., and Disney Worldwide Services, Inc. (“defendants”) filed a motion for sanctions (“Motion” or “Mot.”), including terminating sanctions, for discovery abuse and misconduct against plaintiff Environmental World Watch, Inc. (“EWW”), and its then-current and former officers and directors, including William Dunlap (“Dunlap”) and Becvar. (Dkt. No. 177). On July 2, 2012, the District Judge issued an order denying defendants' Motion for terminating sanctions and, among other things, referred the Motion to the undersigned Magistrate Judge for a determination as to whether monetary sanctions were appropriate. (Dkt. No. 279). After a hearing held on August 7, 2012, the Magistrate Judge on August 10, 2012, issued a Report & Recommendation (“R&R”) in which it recommended that the District Judge, among other things, impose sanctions against Dunlap and Becvar in the amounts of $20,000 and $10,000, respectively. (Dkt. No. 308). On August 24, 2012, Becvar filed his Objections to the R&R. (Dkt. No. 312). On August 2, 2013, the District Judge issued an order adopting the R&R, including the recommended sanctions, with minor revisions (“Order”). (Dkt. No. 369). Becvar and Dunlap filed appeals to the Ninth Circuit Court of Appeals, in which they challenged the District Judge's imposition of monetary sanctions on them. On November 13, 2015, the Ninth Circuit vacated the District Judge's August 2, 2013, Order sanctioning Becvar and remanded the matter to the District Court “to make factual findings, before re-imposing any sanction, as to whether Becvar's conduct violated a court order or amounted to bad faith,” pursuant to Rule 37(b)(2) of the Federal Rules of Civil Procedure, or pursuant to the Court's inherent power to levy sanctions in response to abusive litigation practices. (Dkt. No. 466). On December 11, 2015, the District Judge referred the matter to the undersigned Magistrate Judge “for a report and recommendation on the issue of sanctions as to Dennis Becvar.” (Dkt. No. 468). On December 18, 2015, the Court ordered Becvar to show cause why the conduct discussed in the R&R does not constitute “bad faith,” and why that conduct did not violate any court order (“OSC”). (Dkt. No. 469). Specifically, the conduct Becvar was directed to address was to include, but was not necessarily limited to, the following three categories: (1) Becvar's awareness of Dunlap's conduct: R&R at 10:12-19 and note 7: (a) Becvar, while an EWW officer, was well aware of Dunlap's actions; and (b) Becvar took no steps to disavow any of Dunlap's actions “such as sending an email to him to cease his actions on EWW's behalf, or admonishing [him] that he had no authority to act for EWW”; *2 R&R at 12 note 8: Becvar made unbelievable statements disavowing knowledge of Dunlap's actions on behalf of EWW; (2) Becvar's failure to preserve evidence: R&R at 5:13-24 (see also R&R at 6:11-7:2): Becvar admitted that (a) he deleted and did not keep reports and emails; (b) he “didn't save” “a lot of the stuff” but instead “threw it away”; and (c) he did not save emails or documents he received from Dunlap and other third parties because they “had no relevant credible evidentiary value to the EWW case” and because documents he received from Dunlap “were of no evidentiary value and frankly useless as evidence in the EWW chrome VI contamination matter”; R&R at 6:18-20: Becvar “usually discarded, ‘without even reading, any unsolicited, unauthenticated documents received from Mr. Dunlap or others, as such documents had no relevant, credible evidentiary value to the EWW case’ ”; R&R at 11:1-6: “[Becvar's] response [at his June 8, 2011, deposition] that he did not think he had been asked to search for responsive documents is troubling, especially since defendants' third request for production of documents was served while he was the only officer of EWW and only a few months prior to his deposition.... Equally troubling are Mr. Becvar's statements about deleting an email and discarding documents”; R&R at 12:4-18: (a) Becvar wilfully destroyed documents based on his unilateral determination as to what was relevant to this action; (b) Becvar inconsistently asserted both that he did not read documents he received, and that he deleted documents that were “useless” and not relevant to this action and his “recent statements that communications from Dunlap were unsolicited and that Dunlap's actions were unknown to him until after the fact ... are in direct conflict with the evidence that Dunlap was acting on behalf of EWW with Becvar's knowledge”; (c) Becvar had a duty to preserve all relevant documents once this litigation was filed and failed to do so; and (d) Becvar's “actions are all the more egregious given the fact that he was the officer of the party that instituted these proceedings[,] [t]here is no justification for his conduct, [and] his actions are not harmless (both as to the expense incurred by defendants in searching for deleted documents and the harm to the judicial system) ...” (citations omitted); and (3) Becvar's shifting roles to hinder discovery: R&R at 10:6-9 & n.7: discovery in this action was described as a “lengthy, difficult, and costly process,” which, “at a minimum, has been hindered by the shifting roles of Dunlap, Becvar and Nichols at EWW, among other things,” and it appears that Becvar (like Dunlap and Nichols) moved in and out of his position with EWW “based on a desire to avoid being deposed (or to make the taking of depositions more complicated), and/or a desire to avoid the discovery of and liability for his actions.” (See OSC at 3-4). On January 18, 2016, Becvar filed his Response to the OSC (“Response”), along with his declaration (“Becvar Decl.”), and attached exhibits, and the declaration of attorney Michael Martin (“Martin Decl.”). (Dkt. No. 470). On January 29, 2016, defendants filed their Reply to Becvar's Response (“Reply”), along with the declaration of Garrett L. Jansma (“Jansma Decl.”), and attached exhibits. (Dkt. Nos. 471, 472). On February 9, 2016, Becvar filed his “Objections and Motion to Strike Portions of Reply Brief ...”[1] (“Objections” or “Obj.”). (Dkt. No. 474).[2] II. DISCUSSION A. LEGAL STANDARD *3 As recited in the original R&R, this Court may impose sanctions of issue or evidence preclusion pursuant to Rule 37(b)(2)(A)(i)-(ii) and (c)(1) (“Rule 37”) of the Federal Rules of Civil Procedure. “If a party or a party's officer, director, or managing agent ... fails to obey an order to provide or permit discovery,” Rule 37(b)(2)(A)(i)-(ii) permits the Court to impose sanctions “directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims,” or “prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence.” No argument is being put forth by defendants at this time that Becvar violated a court order. Thus, sanctions are not warranted pursuant to Rule 37. Moreover, the Court can sanction a non-party under its inherent powers. See, e.g., Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006); In re Rainbow Magazine, Inc., 77 F.3d 278, 282 (9th Cir. 1996) (acknowledging that sanctions can be “imposed against a nonparty and nonattorney under the court's inherent powers”); Corder v. Howard Johnson, 53 F.3d 225, 232 (9th Cir. 1995) (“a court may impose attorney's fees against a non-party as an exercise of the court's inherent power to impose sanctions to curb abusive litigation practices”). The Court's inherent powers come from the “control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.” Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991) (quotation marks omitted); see also The Sunrider Corp. v. Bountiful Biotech Corp., 2010 WL 4589156, at *6 (C.D. Cal. Nov. 3, 2010). “Because of their very potency, inherent powers must be exercised with restraint and discretion.” Chambers, 501 U.S. at 44. This power is “both broader and narrower than [statutory and rule-based] means of imposing sanctions.” Id. at 46. It is broader in that it “extends to a full range of litigation abuses and reaches conduct both before the court and beyond the court's confines.” Anchondo v. Anderson, 2011 WL 4549279, at *2 (D.N.M. Sept. 29, 2011) (citing Chambers, 501 U.S. at 46, 57). But the power is more narrow in that before awarding sanctions pursuant to its inherent power, the Court “must make an express finding that the sanctioned party's behavior ‘constituted or was tantamount to bad faith.’ ” Haeger v. Goodyear Tire & Rubber Co., 813 F.3d 1233, 1244 (9th Cir. 2016) (en banc) (quoting Leon, 464 F.3d at 961)). “Bad faith” includes conduct that is vexatious, wanton, or for oppressive reasons, and may be found where a party practices a fraud upon the court, delays or disrupts the litigation, or hampers enforcement of a court order. Chambers, 501 U.S. at 46 (citations omitted). In the Ninth Circuit, “bad faith” has been found to include “a variety of conduct stemming from a full range of litigation abuses.” Haeger, 813 F.3d at 1244 (quoting Chambers, 501 U.S. at 47)). Such conduct includes delaying or disrupting the litigation, or actions constituting a fraud upon the court, for instance through the “use of misleading, inaccurate, and incomplete responses to discovery requests, the presentation of fraudulent evidence, and the failure to correct the false impressions created.” Id. (citations omitted). Other courts have found “bad faith” based on various types of willful actions, “including recklessness when combined with an additional factor such as frivolousness, harassment, or an improper purpose.” Fink v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001). Thus, recklessness coupled with “knowledge of the rule and the applicable law” is “tantamount to bad faith” and sanctionable under the Court's inherent power.” B.K.B. v. Maui Police Dept., 276 F.3d 1091, 1106, 1108 (9th Cir. 2002). Furthermore, “ ‘to be subject to the Court's inherent power to sanction, a non-party not subject to court order must (1) have a substantial interest in the outcome of the litigation; and, (2) substantially participate in the proceedings in which he interfered.’ ” Bartos v. Pennsylvania, 2010 WL 1816674, at *7 (M.D. Penn. May 5, 2010) (quoting Helmac Prods. v. Roth, 150 F.R.D. 563, 568 (E.D. Mich. June 15, 1993)); see Anchondo, 2011 WL 4549279, at *4 (quoting Bartos); ANZ Advanced Tech., LLC v. Bush Hog LLC, 2012 WL 715099, at *9 (S.D. Ala. Feb. 7, 2012) (same). B. BECVAR'S OBJECTIONS TO DEFENDANTS' REPLY AND MOTIONS TO STRIKE PORTIONS OF DEFENDANTS' REPLY 1. Objections *4 In his Objections, Becvar generally objects to certain of the statements made by defendants in their Reply on the basis that defendants are (1) asserting new and improper reasons to impose additional sanctions; (2) improperly introducing new evidence in the form of Becvar's trial testimony “collected” after the Opposition to the Motion for sanctions was filed; (3) relying on unsupported hearsay evidence -- specifically the Court's “vacated” R&R[3] -- that must be stricken; and (4) relying on other evidence that should have been included in their Motion for sanctions that Becvar did not have an opportunity to respond to at that time.[4] (Obj. at 2). Becvar requests that the Court strike new evidence and argument improperly filed in defendants' Reply; exclude statements that are inadmissible under the Federal Rules of Evidence; and “disregard unsupported and baseless statement [sic] by Counsel on Mr. Becvar [sic] which are wholly unsupported by reference to any admissible evidence.” (Obj. at 3). Becvar moves to strike twenty statements contained in defendants' Reply. The Court rules as follows on Becvar's general and specific Objections: a. Additional Sanctions The Court sustains Becvar's objection to any reference by defendants suggesting that the Court should impose additional sanctions not previously raised in the original Motion. Such sanctions, even if warranted, are beyond the scope of the Ninth Circuit's remand order. Becvar's objection that the Court not consider defendants' suggestion to impose additional sanctions not sought in the original Motion, or ordered following the issuance of the original R&R, is sustained. b. Evidence Submitted After the Opposition to the Motion for Sanctions Was Filed Becvar objects to defendants using his March 28, 2014, trial testimony to support their “bad faith” arguments against him, because that testimony was not previously before the Court when it considered the Motion. (Obj. at 5). By way of background, Becvar now claims that in November 2010, EWW's former counsel, Martin, informed Becvar that Dunlap -- who had resigned from his position with EWW in 2009 (Response at 6, Becvar Decl. ¶ 2; see also Discussion infra Part II.C.2) -- was continuing to purport to act as an agent of EWW and that Martin recommended that Becvar send a cease and desist letter to Dunlap, “which counsel helped [him] draft.” (Becvar Decl. ¶ 2, Ex. A). In the resulting December 2, 2010, letter to Dunlap, Becvar stated that its “purpose” was “to memorialize my recent telephone conversations with you in which I told you to stop purporting to be an officer, director or agent of any kind of [EWW].” (Becvar Decl. Ex. A (emphasis added)). The letter also ordered Dunlap to cease and desist from such actions. (Id.). Becvar also included a copy of this letter in his declaration that accompanied his March 17, 2014, Opening Informal Brief to the Ninth Circuit on appeal of the sanctions Order. (Reply at 8 (citations omitted)). During the briefing and oral argument[5] on the Motion for sanctions that led to this Court's August 10, 2012, R&R, and the District Judge's August 2, 2013, Order substantially adopting the Court's recommendations, Becvar did not alert the Court as to the existence of the December 2010 “cease and desist” letter addressed to Dunlap, which purportedly was prepared with the assistance of Graham & Martin, or of the fact that it was but the “first of a number” of such letters, as he now submits, or that prior to sending the letter he had one or more telephone conversations with Dunlap on this issue as stated in the letter, or that he hand-delivered the letter to Dunlap, as he now submits.[6] (Response at 3, 6, Becvar Decl. ¶ 2 & Ex. A). Nor did Becvar alert the Court to these “facts” in his August 24, 2012, Objections to the R&R (Dkt. No. 312), or at any time prior to August 2, 2013, when the District Judge issued the Order adopting the R&R. (Dkt. No. 369). *5 Defendants provide evidence that on March 28, 2014, just two weeks after he signed his declaration to the Ninth Circuit in support of his Opening Informal Brief containing this letter and the related information regarding its preparation and transmittal, Becvar testified in open court in a related Proposition 65 action that he did not ever tell Dunlap to cease and desist from making communications on behalf of EWW, and did not ever send him any such communication: Q: At some point did you actually ask Mr. Dunlap to cease and desist from representing EWW? A: I don't think so. Q: Did you tell him that he shouldn't be sending communications on behalf of EWW when he was no longer with the company? A: I did not. Q: Did you tell him that he could be harming the claims of EWW by doing so? A: I don't recall. .... Q. Do you recognize Exhibit 889,[7] Mr. Becvar. A. I don't remember this letter. This is a letter that you are saying that I wrote to Dunlap. Q. Is that your signature there? A. No. Q. This is a forgery? A. It's not my signature. Q. Did you ever prepare a cease-and-desist letter and provide it to Mr. Dunlap? A. I certainly don't recall. It might be possible that with Martin and Graham, that maybe one of the lawyers wrote that on my behalf and submitted it to Dunlap, because we did have discussions like this. .... Q. Did you authorize Exhibit 889 to be written on your behalf? A. I don't recall. Q. Did you authorize somebody to sign it? A. I don't recall. Q. Did you deliver it to Mr. Dunlap? A. No. Q. Did you send it to him in any way? Fax? E-mail? Hand delivery? Anything? A. No. (Jansma Decl. Ex. 1 at 6-8; see also Becvar Decl. Ex. A). Later during the Proposition 65 action, when Becvar was presented with the declaration he had signed just two weeks prior in connection with his Informal Opening Brief to the Ninth Circuit, he stated that the cease-and-desist letter was developed during the course of several telephone conversations between himself and attorney Martin, as they both believed that Dunlap needed to be notified by Becvar that he should not be contacting any agencies or acting on behalf of EWW in any way. (Jansma Decl. Ex. 1 at 9). And, as noted, and directly contrary to his testimony in the Proposition 65 action, Becvar claimed in his declaration to the Ninth Circuit prepared two weeks earlier, as well as in his declaration herein, that he hand-delivered the letter to Dunlap. Becvar argues in his Objections that defendants may not rely on Becvar's March 28, 2014, trial testimony to support their “bad faith” arguments against him, because that testimony was “gathered after the Appeal of the Sanctions Order was filed,”[8] and “a moving party is not permitted to offer new evidence or arguments in its reply.” (Obj. at 5 (citations omitted)). Becvar also notes that the March 28, 2014, testimony happened while he was represented by an attorney “who utterly failed to protect his interests or prepare him for trial.”[9] (Id.). He then submits that “the Appellate Court upheld [Becvar's] argument that he was represented by counsel with an irreconcilable actual unwaived conflict of interest”[10] (id.), and that this “fact” was “acknowledged by the Appellate Court when it granted Respondent's appeal.” (Obj. Nos. 11(d), 12(d), 13(d), 19(f)). In his Objections, Becvar specifically objects that defendants' reliance on his March 2014 testimony “[d]irectly contradicts the decision of the Court of Appeal in this case which upheld Respondents [sic] appeal on the grounds that the faulty and ambiguous ‘evidence’ presented by Defendants was collected when Mr. Becvar was represented by counsel with an irreconcilable actual unwaived conflict of interest, and thus was not competently represented, since conflicted counsel made no attempt to protect his interests.” (Obj. Nos. 13(d), 19(f)). However, Becvar's allegations that he was not adequately represented during earlier proceedings do not excuse bad faith misconduct. See, e.g., Philips Elecs. N. Am. Corp. v. BC Tech., 773 F. Supp. 2d 1149, 1156 n.7 (D. Utah 2011) (legal malpractice rejected as a defense to sanctions because malpractice claims were not before the court). *6 As previously discussed, the Court sustains Becvar's objection to the March 28, 2014, trial testimony, as it was not before this Court at the time that it determined sanctions were appropriate, or even “after the Appeal of the Sanctions Order was filed,” and the Court will not consider that testimony in considering whether Becvar's conduct as presented to the Court in connection with the sanctions Motion constituted “bad faith.”[11] For the same reasons as with Becvar's March 2014 trial testimony, however, the Court will also not consider the newly submitted (by Becvar) unauthenticated December 2010 letter,[12] as it was not before the Court at the time of the sanctions Motion. In any event, even assuming it was actually prepared in 2010, that letter in fact provides additional clear evidence that Becvar as an officer of EWW was aware of Dunlap's conduct, and flatly contradicts his statement that there is “no ... evidence at all” to support a finding that as an EWW officer he had knowledge of that conduct. (Response at 2, Becvar Decl. ¶ 4). *7 Becvar's objection that the Court should not consider evidence that was not before it at the time of the original Motion is sustained. c. Exhibits Do Not Reflect What Defendants State They Reflect Becvar generally objects that certain exhibits cited to by defendants are not what they purport to be. (Obj. Nos. 5(d), 6(d), 6(e), 7(d), 8(d), 8(e), 18(h)). To the contrary, each of those exhibits is attached to the Jansma Declaration (Dkt. No. 472), and each is as described in the Reply. Becvar's objection on this ground is overruled. d. The “Vacated” R&R Is Hearsay Becvar objects that defendants may not rely on the “vacated” R&R “since it is nothing more than hearsay.”[13] (Obj. at 6; Obj. Nos. 2(f), 4(e), 9(d), 10(d), 14(d), 15(d), 16(d), 17(e)). Becvar's objection that the “vacated R&R” is hearsay is sustained and the Court will refrain from simply adopting any statements in the R&R as true. Instead, the Court will examine whether there was sufficient evidence to support a finding of bad faith as to Becvar based on the evidence before it at the time of the hearing. (See also Discussion supra part II.B.1.b). By the same token, however, the Court will not accept as true any statements in the R&R relied on by Becvar in his Response. (See, e.g., Response at 4 (“The Court expressly determined, in deciding not to sanction EWW, that Defendants were not prejudiced by loss of any relevant evidence” (citing R&R at 11) and “[T]he Report acknowledges that all allegedly withheld information (not evidence) was either irrelevant or already available to defendants”); see also Response at 11 (same), 13-14 (“[A]s this Court already found, ‘Becvar represents that he turned over all relevant, responsive EWW documents in [his] possession which were not duplicates of documents already produced .... Any deleted email was simply either a copy of what was produced earlier in the litigation or was an unsolicited, irrelevant, unauthenticated and non-evidentiary document sent to [him] (or copied to [him]) by Mr. Dunlap after he left EWW.’ That finding by the Magistrate[14] is correct.” (internal quotation mark omitted)). 2. Becvar's Motion to Strike Portions of Defendants' Reply Based on its analysis of Becvar's Objections, the Court grants Becvar's motion to strike numbers 3, 4 (to the extent it seeks additional sanctions), 9, 10, 11, 12, 14, 15, 16, 17 (as to the first two sentences), and 20, as contained in Becvar's Objections. (Obj. at 7-21). Becvar's remaining requests to strike certain evidence and assertions are denied. C. ANALYSIS The Court turns now to its analysis of whether there is sufficient evidence for the Court to explicitly find that Becvar's conduct “constituted or was tantamount to bad faith,” to support the Court's imposition of monetary sanctions as to Becvar. 1. Awareness of Dunlap's Conduct *8 In the R&R, the Court noted that Becvar was well aware of Dunlap's actions, took no steps to disavow any of those actions, and made unbelievable statements disavowing knowledge of Dunlap's actions on behalf of EWW. (R&R at 10, 12, nn.7, 8). The Court finds that there is ample evidence to explicitly find that Becvar's conduct as described constituted bad faith. Becvar first contends that there is “no ... evidence at all” to support a finding that “while an EWW officer[15] Becvar was well aware of Dunlap's actions,” and that he (Becvar) made unbelievable statements disavowing knowledge of Dunlap's actions on behalf of EWW.[16] (Response at 2, Becvar Decl. ¶ 4). He contends that the “sole document cited in the [R&R] does not in fact speak to this issue.” (Response at 2). However, the record, including the “sole document cited in the [R&R]” (excerpts from Becvar's April 27, 2012, deposition[17]) provides ample evidence that Becvar was indeed aware of Dunlap's conduct well after Dunlap's resignation from EWW, and highlights the inconsistencies in Becvar's contentions. For instance, after being shown a March 2011 email attaching test results sent by Dunlap to various government agencies, which Dunlap sent using an EWW email account, Becvar testified at his deposition as follows: Q. And you were aware that [Dunlap] was still providing this type of information concerning the Disney claims to the agencies on EWW's behalf at that time? A. I assume so, yes. I wasn't necessarily copied on everything that he may have sent to those agencies but I was aware that information was being provided to them by Dunlap. Q. And it says here, it starts “Dear sirs, [a]fter careful evaluation of the circumstances, EWW has decided to allow regulatory agencies another piece of the ... core files.” [¶] Do you see that? A. Yes. Q. So did Mr. Dunlap discuss with you that EWW was sharing additional information with the agencies as reflected here? A. He may have mentioned it. (Jansma Decl. Ex. 8 at 43 (Becvar Depo. p. 377) (emphasis added)). At that same deposition, Becvar also admitted that Dunlap forwarded him a February 12, 2011, email sent by Dunlap from the EWW email account to the State Water Board. (Id. at 36 (Becvar Depo. pp. 351-52); Ex. 79). Additional emails between February 2011 and April 2011 further demonstrate that Becvar was routinely copied on Dunlap's emails to state agencies, or that he received emails directly from Dunlap detailing test results, and that in all but two[18] Dunlap was still using an EWW email address. (See, e.g., Jansma Decl. Ex. 18 (February 27, 2011, email from Dunlap to Becvar forwarding the February 26, 2011, email that “Bishop” sent to agencies the night before); Ex. 20 (March 9, 2011, email from Dunlap to Becvar attaching “File AA.pdf” and enclosing “the new Dec 2010 CR VI test results from Polliwog and Dennis Jackson House”); Ex. 43 (February 17, 2011, email from Dunlap to the State Water Board, copying Becvar, summarizing “Misc Disney new revelations”); Ex. 80 (March 9, 2011, email from Dunlap to agencies and copying Becvar, attaching “file B Sup.pdf”); Ex. 99 (April 21, 2011, email from Dunlap to the EPA and Water Board staff, copying Becvar, summarizing evidence concerning the allegation that defendants were using Cr VI-contaminated groundwater as make-up water in their cooling towers)[19]). Additionally, in January 2011, Becvar personally emailed files directly to agency representatives and spoke with some of them, after coordinating a conference call that he and Dunlap joined for the purpose of discussing defendants and hexavalent chromium. (Jansma Decl. Exs. 8 at 47 (Becvar Depo. pp. 395-96 (Becvar confirmed at his April 27, 2012, deposition that he and Dunlap had a conference call with Andrew Taylor of the EPA from Becvar's office)), 136, 137, 158[20]). Thus, even after being copied on emails sent by Dunlap -- using the EWW email address -- to various state agencies, and after joining him in a conference call with the EPA, Becvar did nothing to inform those agencies that Dunlap was not authorized to “speak” on behalf of EWW; by his silence, he impliedly ratified that conduct. *9 Becvar also attempts to justify his alleged disavowal of knowledge regarding Dunlap's actions on behalf of EWW by portraying Dunlap's actions as “not those of a rational person.” (Response at 18). He states that “after 2010, [Dunlap] appeared to act and speak in a bizarre and paranoid manner, which is the primary reason Becvar resigned from EWW [in 2012] (... concerned for his own safety), and why prior counsel had to withdraw [in May 2012], since counsel could no longer rely upon statements made to them by Mr. Dunlap, or in any manner control his unilateral actions.” (Response at 18, Becvar Decl. ¶ 2; Martin Decl. ¶ 5). The Court fails to see, given Becvar's observations of Dunlap's allegedly bizarre conduct from November 2010 to April 2012, how this “explanation” in any way refutes the fact that Becvar made, and continues to make, unbelievable statements disavowing knowledge of Dunlap's actions on behalf of EWW. On the one hand, Becvar claims he had no knowledge of Dunlap's conduct and that there is no evidence to support a finding that he had any such knowledge, and on the other hand he admits he has been copied on emails sent by Dunlap from an EWW account and now contends that he was aware of Dunlap's conduct from November 2010 until Becvar himself resigned from EWW in 2012, but that said conduct was “bizarre and unstable.”[21] Becvar cannot have it both ways. What is clear is that Becvar was well aware of Dunlap's conduct and took no action -- even when copied on emails from Dunlap to various agencies purporting to be from an EWW email account that were sent after Dunlap was no longer with EWW and, in fact, sent after Becvar had taken Dunlap's position at EWW -- to otherwise disavow the actions Dunlap was taking on behalf of EWW. In short, Becvar was well aware of Dunlap's actions, took no steps to disavow any of those actions, and made unbelievable statements, including to this Court, disavowing knowledge of Dunlap's actions on behalf of EWW. Such conduct constitutes bad faith. 2. Failure to Preserve Documents In its R&R, the Court noted that Becvar admitted that “he did not save emails or documents he received from Dunlap and other third parties because [he believed] they ‘had no relevant credible evidentiary value to the EWW case’ ” and “because documents he received from Dunlap ‘were of no evidentiary value and frankly useless as evidence in the EWW chrome VI contamination matter.’ ” (Mot. Ex. 5 (Becvar June 7, 2011, Depo.) at 48-49, 102-04; Becvar Decl. in Opp'n to Mot. (Dkt. No. 242) ¶¶ 6-7). Backing away from any implication that this was solely his own determination, Becvar does an about face and now tries to convince this Court that his determinations as to the responsiveness and relevance of the material in his possession were “entirely appropriate” and “always” made “in consultation with counsel.” (Response at 10, Becvar Decl. ¶ 4). In the group of counsel on whose advice he now claims to have “always” relied in determining responsiveness and relevance, Becvar specifically includes Dunlap -- “when Mr. Dunlap was at EWW” -- as Dunlap “had for many years claimed falsely he was an attorney,” a representation on which Becvar argues he justifiably relied.[22] It appears to this Court that Becvar -- just as the District Judge previously found true of Dunlap (Dkt. No. 369 at 3 n.5) -- is playing “fast and loose with the facts.” In the August 2, 2013, Order, the District Judge specifically found that Dunlap, “EWW's founder, served as President, Director, and a Board member of EWW when this action was filed in 2009,” but that he left those positions in June 2009 and has not occupied a director or officer position at EWW since then, except for the month of September 2010.”[23] (Id. at 3 (citations omitted)). Thus, Dunlap's “formal affiliation with EWW, including his consulting relationship, ended in September 22, 2010.” (Id. at 3-4 (citations omitted)). Accordingly, Becvar's alleged reliance on Dunlap's purported “advice” regarding responsiveness and relevance of material in his possession, by Becvar's own statement, had to have “ended” as of September 2010, coinciding with the end of Dunlap's “formal” affiliation with EWW. Although Becvar also states that as an officer of EWW he “had the right, in consultation with former counsel to make a relevance determination,” as to whether emails and documents that he failed to preserve were “wholly irrelevant to any issue in this action,” he does not specify who, aside from Dunlap, is the “former counsel” with whom he consulted. In fact, Becvar's current counsel appears to be the law firm of Graham & Martin, LLP, who was “former” counsel for EWW from December 2010 until June 2012, during Becvar's tenure as president and while this litigation was pending.[24] Becvar provides no evidence that someone at Graham & Martin gave him advice to delete emails and other documents, nor does attorney Martin admit to providing such advice in his declaration. Counsel confirms only that “[a]t the time of the analysis of the computers[25] by Defendants [sic] expert I personally read every recovered email and provided to Defendants a privilege log, as well as a handful of potentially relevant documents, all of which Defendants had already received from EWW or other sources years before.” (Martin Decl. ¶ 3). Martin also states that he “can confirm that the vast majority of the documents [he] viewed literally had nothing whatever to do with this matter, and the handful which referenced it were either privileged or contained nothing of substance.” (Id.). While this may be true as to those documents that were found in Becvar's possession, custody, or control,[26] it certainly does not provide any such certainty with respect to documents Becvar allegedly deleted without ever reading and which were never recovered. *10 Additionally, there are inconsistencies in Becvar's assertion, on the one hand, that “he did not read documents he received,” and on the other hand, “that he deleted documents that were ‘useless’ and not relevant to this action.” (Compare Becvar Decl. in Opp'n to Mot. (Dkt. No. 242) ¶ 6 with id. ¶¶ 5, 7). Similar inconsistencies are raised by Becvar's declaration here. For instance, although he previously admitted that he did not read documents he received, that he deleted documents that were lengthy, and that he “wasn't that interested in keeping a historical file[27] ... [so a] lot of the -- older documentation that I received from EWW and from Bill Dunlap ... I did not keep” (Jansma Decl. Ex. 5 at 48, 103-04), he now claims that he “always relied upon advice of counsel when determining the relevance of responsiveness of documents,” when serving as an officer of EWW. (Response Becvar Decl. ¶ 4 (emphasis added)). He does not, however, indicate that he in any way provided counsel with such documents for review prior to taking their alleged “advice” to delete them. Moreover, Becvar himself relies on the Court's allegedly “vacated” R&R when he contends that defendants were not prejudiced by his failure to preserve such documents, noting the Court's statement that defendants have “not yet convinced the Court that any evidence was destroyed by EWW that was clearly relevant to any of the issues involved in this litigation” (Response at 4 (quoting R&R at 11)), and arguing that “the fact that Becvar deleted unsolicited emails from Dunlap, during a period when Mr. Dunlap was displaying signs of mental instability,” “after [Dunlap] resigned from EWW is not sanctionable since such emails had no relevance to this case.” (Response at 5, 12 (citing R&R at 5, 6),[28] Becvar Decl. ¶ 2). According to Becvar, Dunlap was displaying signs of mental instability from November 2010 onward. (Response at 6, 18, 20). Thus, Becvar appears to be arguing that because he saw “signs of mental instability” in Dunlap, any emails sent by Dunlap after his September 2010 resignation from EWW ipso facto rendered those documents irrelevant. Such an argument is nonsensical. “As soon as a potential claim is identified, a litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action.” In re Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1067 (N.D. Cal. 2006). Additionally, Becvar's statement that “there is no evidence that anything deleted was relevant to any issue in this action,” raises a red flag as to the glaring inconsistencies in Becvar's statements that he deleted Dunlap's emails without ever reading them in contrast with his blanket assertions that anything he deleted was not relevant. Becvar may not benefit from a presumption that the evidence he destroyed, allegedly without even reviewing, was not relevant. See Apple Inc. v. Samsung Elecs. Co., 888 F. Supp. 2d 976, 998 (N.D. Cal. 2012) (“[S]poliation of evidence raises a presumption that the destroyed evidence goes to the merits of the case, and further, that such evidence was adverse to the party that destroyed it.”) (citations omitted). As an officer of EWW aware of the existing litigation, Becvar's wholesale and wanton deletion of documents from Dunlap ultimately resulted in motion practice before this Court and an order permitting defendants to forensically examine EWW's and Becvar's computers, causing significant delay and disruption in this litigation. See Zubulake v. UBC Warburg LLC, 220 F.R. D. 212, 216 (S.D.N.Y. 2003) (there is a duty to preserve all relevant documents once litigation is filed). Such willful conduct constitutes “bad faith.” *11 Finally, Becvar now contends that the reason he stated at his June 8, 2011, deposition that “he did not think he had been asked to search for responsive documents” is simply because he was “an unrepresented layman” with a “faulty memory” and did not understand the question posed. (Response at 17). He also now claims that he “was asked to search for responsive documents but had no further responsive documents other than those which had already been produced.” (Id. (citing Becvar Decl. ¶ 5) (emphasis added)). These statements are as inconsistent and unpersuasive as almost all of Becvar's other statements. Defendants note that at the June 8, 2011, deposition where Becvar made the statement that “he did not think he had been asked to search for responsive documents,” he was not an “unrepresented ‘layman’ ” and, in fact, he was represented by his current counsel, Mr. Graham, at that deposition.[29] (Reply at 17 & n.14; see also Mot. Ex. MM at 283, 285 (indicative of Mr. Graham's presence at the deposition)). Defendants also point out that Mr. Graham did not ask any questions of Becvar that might have rehabilitated his testimony. (Reply at 17 & n.14). Becvar's misrepresentations regarding his status at the June 8, 2011, deposition, as well as his shifting and amorphous contentions regarding whether he was asked to search for responsive documents, are yet more examples of Becvar's “bad faith” conduct that delayed and hampered discovery, thereby prejudicing defendants, during the course of this litigation. 3. Shifting Positions Finally, the Court finds that discovery in this action was hindered by the shifting roles of Dunlap, Becvar and Nichols at EWW, among other things, and that it appears that Becvar (like Dunlap and Nichols) moved in and out of his position with EWW based on a desire to make discovery and the taking of depositions more complicated. Becvar argues here that he was deposed “four times, three times without counsel,” which he contends is inconsistent with someone avoiding deposition. (Response at 14). However, of the three depositions that took place after November 2010, defendants represent that Becvar was actually represented by Graham at two of them, on June 7, 2011, and June 8, 2011. (Reply at 16-17 & nn.11-13). Graham apparently did not attend the deposition on April 27, 2012, because he had recently withdrawn from representing EWW shortly before that court-ordered deposition. (Reply at 16-17 & n.13). Furthermore, the problem is not that Becvar was trying to avoid being deposed, but that his part in the “shifting roles” made the taking of Dunlap's and Nichols' depositions far more complicated. (See Reply at 17 (citations omitted)). Of note, the Ninth Circuit specifically observed that “the district court ... found that Dunlap and Becvar had misrepresented their status with respect to EWW to avoid discovery responsibilities” and found that that finding was “well-supported by the record.” (Dkt. No. 466 at 5 (emphases added); see also Dkt. No. 369 at 8). Thus, the fact that there is ample support in the record for finding that Becvar misrepresented his status with respect to EWW in order for Dunlap or Nichols to avoid their discovery responsibilities, thereby making the taking of depositions more complicated and delaying and disrupting the litigation, is an additional ground for finding Becvar acted in “bad faith” and that sanctions are warranted. Chambers, 501 U.S. at 46; Fink, 239 F.3d at 994; see Brown v. Stroud, 2012 WL 2709058, at *6 (N.D. Cal. July 6, 2012) (applying the inherent power to sanction based on a finding of bad faith due to “conduct designed to obfuscate, delay, and avoid responding to valid discovery requests”). D. CONCLUSION As detailed above, Becvar's (1) inconsistent statements, misrepresentations, and attempted obfuscation as to (a) his awareness of Dunlap's conduct; and (b) the extent to which he disavowed Dunlap's conduct; (2) willful failure to preserve evidence; and (3) complicity in the “shifting roles” at EWW such that discovery was hindered and the litigation disrupted, support finding that Becvar's actions were wanton and willful and for an improper purpose, and resulted in prejudice to defendants. Therefore, there is ample support for the Court to explicitly find that Becvar -- who had a substantial interest in the outcome of the litigation, and who substantially participated in the proceedings in which he interfered -- engaged in conduct that “constituted or was tantamount to bad faith” (Haeger, 813 F.3d at 1244), and that monetary sanctions are warranted. III. RECOMMENDATION *12 IT IS THEREFORE RECOMMENDED that the District Judge issue an Order: (1) accepting this Report and Recommendation; (2) granting defendants' Motion for monetary sanctions (Dkt. No. 177) against Becvar, based on the Court's finding that Becvar's conduct as described herein constituted bad faith; and (3) ordering Becvar to pay defendants, within ten days of the entry of an Order by the District Judge, the sum of $10,000. NOTICE Reports and Recommendations are not appealable to the Court of Appeals, but are subject to the right of any party to file Objections as provided in the Local Rules Governing Duties of Magistrate Judges, and review by the District Judge whose initials appear in the docket number. No Notice of Appeal pursuant to the Federal Rules of Appellate Procedure should be filed until entry of the Judgment of the District Court. Footnotes [1] Although the caption of this document indicates that it includes declarations of Becvar and attorney Michael J. Martin of Graham & Martin, LLP, no declarations were included. [2] The Order to Show Cause (Dkt. No. 469) is hereby discharged. [3] Although Becvar repeatedly argues that defendants are relying on the Court's “vacated” R&R, which constitutes unsupported hearsay evidence, the R&R itself was not vacated -- instead, the Ninth Circuit vacated that portion of the District Judge's August 2, 2013, Order sanctioning Becvar. (Dkt. No. 466 at 7 (“[We] ... VACATE the district court's order sanctioning Becvar ....”). [4] Becvar provides no additional information or discussion on this issue in his Objections. Accordingly, this objection is overruled. [5] Becvar was in attendance at the hearing on the Motion for sanctions and consented to have David R. Ring of Bamieh and Erickson, the attorney of record for EWW, appear on Becvar's behalf at that hearing. (Dkt. No. 313 at 3, 20). [6] There is no indication in the letter as to its means of transmittal. [7] Exhibit 889 is the December 2, 2010, cease and desist letter. [8] The Court notes that although Becvar captioned this issue “Defendants May Not Reply [sic] On Testimony Collected After the Opposition to the Motion Was Filed” (i.e., June 1, 2012 (Dkt. No. 234)), he tries to argue that the cut-off for “reliance” on such evidence is “after the Appeal of the Sanctions Order was filed.” (Obj. at 5; see also Dkt. No. 370 (Notice of Appeal filed on August 30, 2013)). As discussed herein, however, the Court limits its consideration on remand to the evidence that was before it at the time of the Motion hearing. [9] This appears to have been an attorney from the same law firm that represented him at the hearing on the sanctions Motion herein. (See Jansma Decl. Ex. 1 at 4, 9). [10] Although unclear and ambiguous, it appears that Becvar is referring here to counsel who represented him at the sanctions hearing on August 7, 2012, Mr. Ring, and not to counsel who represented him in March 2014 at trial, Mr. Bamieh -- although, as noted, those counsel are from the same law firm. (Compare Dkt. No. 313 at 4 with Jansma Decl. Ex. 1 at 4, 9). [11] Notwithstanding the fact that Becvar's objection is sustained, the Court observes that despite Becvar's representations to the contrary, there is absolutely nothing in the Ninth Circuit order that “acknowledges” or “upholds” Becvar's assertion that he was ever represented by conflicted counsel, let alone states that “fact” as a basis for either considering the appeal or for issuing the remand order. In fact, the sole basis for the remand was the Ninth Circuit's finding that the sanctions Order did not make an “explicit finding that Becvar's actions constituted or were tantamount to bad faith.” (Dkt. No. 466 at 6-7). Moreover, while the Court believes that these inaccurate representations to this Court, as well as Becvar's March 2014 trial testimony, which itself stands in stark contrast to his declarations to the Ninth Circuit and to this Court regarding the purported December 2010 letter to Dunlap, would certainly provide additional evidence that Becvar's testimony cannot be trusted and that his conduct constitutes “bad faith,” the Court will not -- and need not -- consider that March 2014 trial testimony, or the misrepresentations in the Objections as to the Ninth Circuit's consideration of his appeal and/or its reason for remand, or the authenticity of the December 2010 letter itself, given the ample evidence of “bad faith” that was before this Court at the time of the original R&R. [12] The declarations of Becvar and Martin shed no light on why this letter is only “surfacing” now, especially in light of the previous forensic review of Becvar's and EWW's computers. Counsel merely states in his declaration that Becvar “asked me to assist him in drafting [a cease and desist letter] and I did so. This was the first of several sent to Mr. Dunlap.” (Response Martin Decl. ¶ 2). Left unanswered are the issues of why this letter was not discovered during the forensic review; why someone else may have signed Becvar's name to the letter given that Becvar allegedly hand-delivered the letter to Dunlap; or why the other cease and desist letters that purportedly followed were also not submitted to the Court to further support Becvar's contention that he took action to disavow Dunlap's conduct. Because the Court is not going to consider this letter since it was not before the Court at the time of the sanctions Motion, these questions may remain unanswered. [13] As previously discussed, the R&R was not vacated by the Ninth Circuit; instead, the Ninth Circuit vacated that portion of the August 2, 2013, Order sanctioning Becvar. [14] This last statement was not a finding of the Court -- the Court was merely summarizing Becvar's arguments to the Court. (See R&R at 11; see also infra n.28). [15] Becvar, who for “several relatively brief periods ... was an officer and director” of EWW, at other times acted as EWW's scientific consultant. (Response at 6, Becvar Decl. ¶ 2). Becvar states that on April 1, 2012, he resigned his position at EWW “due to Mr. Dunlap's increasingly erratic, bizarre and paranoid statements and actions.” (Response at 6, 18, Becvar Decl. Ex. B). In his April 1, 2012, resignation letter, Becvar stated that he would “no longer serve as President, Chief Executive Officer or as a member of the corporate governing board of EWW,” and would be “surrendering all shares of stock (if any) in the corporation.” (Response Becvar Decl. Ex. B). [16] As previously discussed, although Becvar now states that Martin informed him in November 2010 that Dunlap, “who had resigned from EWW a year earlier, was telling people and agencies that he was still part of EWW and that his words and actions were those of EWW” (Response at 2-3), that information was not before the Court at the time of the hearing. And, if the Court were to consider it, it would certainly belie Becvar's contention that there was “no ... evidence at all” to support a finding that he was aware of Dunlap's actions. (Response at 2). [17] This transcript was included as Exhibit 153 of the Supplemental Compendium of Exhibits submitted in support of defendants' Reply in support of the Motion for sanctions (Dkt. Nos. 256, 264), and was the document referred to in the R&R to support the Court's finding -- contrary to Becvar's adamant assertion that it does not support that finding -- that “Becvar, while an EWW officer, was well aware of Dunlap's actions.” (R&R at 10). [18] The only two emails Dunlap sent to Becvar from a non-EWW email address were the February 27, 2011, and March 9, 2011, emails attaching test results, which Becvar received directly from Dunlap, and that were not sent to anyone else. (Jansma Decl. Ex. 20). [19] Each of these emails was submitted to the Court with defendants' Motion. (See Dkt. No. 188). [20] Each of these exhibits was submitted to the Court with defendants' Motion. (Dkt. No. 188). [21] Becvar has woven an extremely tangled web as to his knowledge, or lack of knowledge, of Dunlap's conduct. In fact, given Becvar's current statement that Martin informed him in November 2010 that Dunlap “was acting as if he was still in control of EWW” (completely apart from the fact that Becvar also now claims to have sent more cease and desist letters after that, which itself shows that Becvar was well aware that Dunlap was representing himself as still being a part of EWW), the Court fails to see how he can represent to this Court in the next breath that there is “no ... evidence at all” to show that while an officer of EWW he had knowledge of Dunlap's conduct. (Response at 15). [22] Specifically, Becvar states that “when he was an officer of EWW, [he] had the right, in consultation with counsel, to make a relevance determination. He did so. Additionally, he was entitled to rely on representations from Dunlap, when Dunlap was an officer of EWW, that Dunlap was an attorney (which he had so falsely claimed for many years to a number of persons and agencies, but as to which falsity Becvar had no knowledge) and to rely upon that advice.” (Response at 12 (citing Becvar Decl. ¶ 4 (emphasis added))). [23] The District Judge's finding in the August 2, 2013, Order that Dunlap and Becvar were alter egos of EWW, and vice versa, was affirmed by the Ninth Circuit on appeal. (Dkt. No. 466 at 3-5). The monetary sanction imposed against Dunlap in that Order was also affirmed by the Ninth Circuit. (Id. at 5-7). [24] In the R&R the Court stated that “Becvar had a duty to preserve all relevant documents once this litigation was filed and failed to do so”; and Becvar's “actions are all the more egregious given the fact that he was the officer of the party that instituted these proceedings.” (R&R at 12). Becvar states that this latter statement “is false since Becvar was not in fact an officer of EWW when it filed the Disney matter.” (Response at 18 (Order to Show Cause at 4) (emphasis added)). During the pendency of these proceedings, however, Becvar was an officer of the party that instituted the proceedings and, therefore, he had a duty to preserve all relevant documents and failed to do so. [25] On November 3, 2011, the Court granted in part defendants' motion to compel production of documents against EWW. (Dkt. No. 94). Based in part on defendants' evidence that Dunlap and Becvar had deleted emails and discarded documents, the Court required, among other things, that EWW search various computers and electronic devices in its possession, custody, or control, and allow defendants to conduct forensic review of its computers, including Becvar's. (Dkt. No. 94 at 5-7). [26] But see supra note 12. [27] Deleting historical records and documents simply because they were “lengthy,” is troubling given Becvar's background and training as a scientist, and as a scientific consultant for EWW. (Response Becvar Decl. ¶ 2). In fact, Becvar claims that one of the reasons he took the position as CEO of EWW was because he believed “the case at issue, involving Chrome six contamination, had a solid scientific case.” (Response at 9). [28] Becvar's citation to the Court's R&R to support this statement is yet another example of Becvar's attempted obfuscation and tortuous attempts to extricate himself from the imposition of sanctions. In fact, the portions of the R&R cited by Becvar -- R&R at 5:21-24 and 6:11-25 -- reflect only Becvar's representations to this Court in connection with the Motion for sanctions and are not in any way reflective of findings made by this Court. [29] Becvar's objection to this statement on the ground that “Mr. Graham was not counsel for EWW or Mr. Becvar in 2012,” does not in any way refute defendants' assertion that Becvar was represented by Graham at his June 8, 2011, deposition at which Becvar testified that he did not think he had been asked to search for responsive documents. (Reply at 17 & n.14; Obj. No. 19(e)). Becvar's objection is overruled.