In Asher Assoc., LLC, et. al.  v. Baker Hughes Oilfield Operations, Inc., 2009 U.S. Dist. LEXIS 40136 (D. Colo. May 12, 2009), U.S. Magistrate Judge Craig B. Shaffer granted (in part) plaintiffs' motion for a determination of spoliation of evidence and sanctions related to defendant's failure to preserve and improper destruction of an electrical submersible pump (ESP) system that represented "[t]he central piece of evidence in th[e] litigation."

Plaintiffs filed this action in April 2007 and served the complaint in June 2007 alleging claims including breach of contract, breach of warranty, fraudulent misrepresentation, concealment and negligent misrepresentation in connection with plaintiffs' lease of allegedly defective ESPs and related equipment from defendant.

Prior to commencing litigation, plaintiffs and their counsel sent several letters to defendant alleging a defect in the ESPs.  On September 8, 2006, plaintiffs' counsel sent a letter threatening litigation in the absence of immediate payment of plaintiffs' damages.  Five days later, defendant sent part of one of the allegedly defective ESPs to be destroyed.  After the lawsuit was filed, the motor of that same ESP was shipped to another job site and dismantled.   There was no evidence that employees were notified of the potential litigation or were told to preserve the ESP's component parts. The court held that the duty to preserve evidence arose, at the latest, on September 8, 2006 when plaintiffs' counsel wrote a letter to defendant characterizing earlier attempts at informal resolution as a "failed" attempt to resolve the dispute "without litigation."  The letter further identified specific claims for relief and demanded immediate payment and imposed a five-day deadline for compliance before plaintiffs initiated "such legal or other actions to enforce its rights."  The court distinguished the case from its earlier decision in Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 623 (D. Colo. 2007) holding that defendant was on notice that future litigation was reasonably foreseeable and substantially more than a possibility.

However, the court did not find that the defendant acted willfully or in bad faith. In the absence of bad faith, the 10^th Circuit does not authorize dispositive sanctions or an adverse inference instruction at trial.  As a lesser sanction, the court precluded defendant from offering opinion testimony as to the "working condition" of the ESP and conditions of an oil well that was serviced with the ESP to the extent that such testimony was derived from defendant's disassembly and inspection of the ESP's component parts.  Plaintiffs were also permitted to re-open discovery to depose defendant's employees who were directly involved in the evaluation and disposition of the ESP's component parts. Defendant was also ordered to pay the court reporter costs associated with the depositions and pay $5,000 to defray attorneys fees incurred by plaintiffs in taking the additional depositions.