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United States v. Sum of $70

United States District Court, District of Columbia

March 6, 2015

THE SUM OF $70, 990, 605, et al., Defendants in rem.


ALAN KAY, Magistrate Judge.

Pending before the undersigned is Claimants' Motion for Protective Order and Preservation Order ("Original Motion") [29], as well as several related filings, including Claimants' Motion for Leave to File Supplemental Evidence in Support of Motion for Protection and Preservation ("First Motion for Leave") [107]; Claimants' Motion for Leave to File Supplemental Evidence in Support of Motion for Protection and Preservation ("Second Motion for Leave") [117]; Claimants' Supplemental Memorandum to Motion for Leave to File[1] ("Supp. Mem.") [122]; Claimants' Motion for Extension of Time to File Response/Reply as to Motion for Leave to File ("Motion for Extension of Time") [127]; Plaintiff United States' Motion to Strike Notice of Supplemental Authority ("Motion to Strike") [146]; and Claimants' Motion for Order to Gather and Preserve Evidence and Protect Witnesses ("Motion for Order") [166]. The Original Motion was referred to the undersigned on July 7, 2014; on August 21, 2014 all remaining and future discovery disputes were referred to the undersigned. See [96] (order referring resolution of [29] to the undersigned); August 21, 2014 scheduling order [119] (referring all discovery disputes to the undersigned). For the reasons set forth herein, Claimants' Original Motion [29], First Motion for Leave [107], Second Motion for Leave [117], and Supplemental Memorandum [122], and Motion for Order [166] are DENIED. Claimants' request for a hearing on the Original Motion [29] is also DENIED. Claimants' Motion for Extension of Time [127] is DENIED as MOOT. Finally, the United States' Motion to Strike [146] is GRANTED in part and DENIED in part.

I. Background

The underlying case stems from a civil action in rem for the forfeiture of the defendant assets pursuant to 18 U.S.C. §§ 981(a)(1)(C), 981(k), and 984. The United States filed its Second Amended Verified Complaint for Forfeiture in rem ("Complaint") [15] seeking the forfeiture of the defendant assets. The United States alleges that these assets are the proceeds of a conspiracy to commit wire fraud in violation of 18 U.S.C. § 1343, through which Mr. Hikmatullah Shadman and his associates allegedly obtained more than $77 million in payments from the United States. (Complaint at ¶10). Hikmatullah Shadman, Everest Faizy Logistics Services, Faizy Elham Brothers, Ltd., Hekmat Shadman, General Trading, LLC, Hikmat Shadman Logistics Services Company, Yaser Elham ("Najibullah") and Rohullah (collectively, "Claimants") filed their Verified Claim and Statement of Interest or Right in Property Subject to Forfeiture in Rem [24] on August 27, 2013, in which they asserted their rights against the forfeited funds.

Shortly thereafter on September 16, 2013, Claimants filed their Motion for Protective Order and Preservation Order [29] ("Original Motion"). The United States filed its Opposition [32] ("Opposition to Original Motion") on September 20, 2013 and Claimants filed their Reply [34] ("Reply to Original Motion") on October 4, 2013. In their Original Motion, Claimants alleged that the U.S. Special Inspector General for Afghanistan Reconstruction ("SIGAR") was failing to preserve evidence pertinent to this case and that SIGAR had threatened potential witnesses on Claimants' behalf. (Original Motion at 5). Claimants' Original Motion cited no legal authority. Instead, the bulk of the Original Motion consisted of a several pages of questions aimed at SIGAR. (Id. at 5-8). Claimants requested that the Court hold a status conference, as they were in "immediate need of Court protection of witnesses, and to discuss" the list of questions that Claimants had for SIGAR set forth in the Original Motion. (Id. at 5). The Original Motion consisted of only two exhibits: email correspondence between Claimants' counsel, Mr. Bryant Banes, and counsel for the United States, Ms. Elizabeth Aloi, regarding the potential release of the forfeited funds [29-1], and a Proposed Order granting Claimants' Original Motion [29-2]. The proposed request for relief included:

1. An Order granting protection for U.S. Special Forces witnesses and requiring any interrogation relating to the facts alleged in this case by either party be conducted under Court supervision with counsel for both parties present.
2. A government-wide Order requiring the U.S. Government to gather and preserve any evidence in its possession relating to the facts alleged in this case, including any evidence in any form reference in pleadings by Claimants, at a central location in Washington, D.C., and that it grant undersigned counsel access for inspection and copying of the same.
3. A Protective Order regarding the taking and preservation of testimony and evidence that may impact National Security or contain classified information.[2] (Id. at 9).

The undersigned found that this requested relief was both overly broad and vague, and that none of the supplemental filings clarified the relief that Claimants sought. Therefore, a Minute Order was issued on January 29, 2015, following a telephone status conference on the same day, ordering Claimants to propose itemized, specific relief. ( See Minute Order, January 29, 2015). Claimants filed their Motion for Order to Gather and Preserve Evidence and Protect Witnesses (Re: Doc 29) [166] and a proposed order ("Proposed Order") [166-1] on February 5, 2015. The Government filed its Opposition in Response to Claimants' Motion for Entry of Protective and Preservation Order [170] ("Response to Motion for an Order") on February 19, 2015 [170]. Claimants filed a Reply on February 26, 2015 [172].[3]

II. Legal Standards

A. Preservation Order

There is a split of authority regarding the precise standard that a party seeking a preservation order must satisfy. Some courts treat a preservation order as an injunctive remedy, while others require a showing that it is "necessary and not unduly burdensome." Al-Anazi v. Bush, Civil Action No. 05-0345 (D.D.C. Oct. 28, 2005) (order) at 1-2 "the Court is not predisposed to assume that the government would alter or destroy records in its possession absent a court order, and is therefore inclined to require that, at the very least, a party seeking a preservation order against the government make a credible showing of a significant risk of alteration or destruction." Id.

Once a party anticipates litigation, there is a clear duty to preserve potentially relevant evidence. Williams v. Court Services and Offender Supervision Agency for D.C., 937 F.Supp.2d 41, 43 (D.D.C. 2013) (quoting Zhi Chen v. District of Columbia, 839 F.Supp.2d 7, 12 (D.D.C. 2011)). Each party has an "obligation to preserve and also to not alter documents it knew or reasonably should have known were relevant to the [litigation] if it knew the destruction or alteration of those documents would prejudice the plaintiffs." Shepherd v. Am. Broad Cos. Inc., 62 F.3d 1469, 1481 (D.C. Cir. 1995). Even a negligent failure to preserve evidence "can support an adverse inference instruction." Mazloum v. District of Columbia Metro. Police Dept., 530 F.Supp.2d 282, 292. If a party has consciously disregarded its obligation to preserve evidence, either punitive or penal sanctions can apply. Clarke v. Wash. Metro Area Transit Auth., 904 F.Supp.2d 11, 20-21 (D.D.C. 2012) (citing Shepherd, 62 F.3d at 1481). While the Federal Rules of Civil Procedure do not contain a specific remedy for the failure to preserve evidence, the trial court has broad discretion in crafting a remedy or sanction. Sanctions available to a court, under its inherent power, include dispositive sanctions, awards of attorneys' fees and expenses, contempt citations, disqualifications or suspensions of counsel, and drawing adverse evidentiary inferences or precluding the admission of evidence. Shepherd, 62 F.3d at 1475.

B. Protective Orders

Federal Rule of Civil Procedure 26 authorizes discovery "regarding any non-privileged matter that is relevant to any party's claim or defense..." Fed.R.Civ.P. 26(b)(1); In Re Denture Cream Products Liab. Litig., 292 F.R.D. 120, 123 (D.D.C. 2013). Rule 26(c), however, further provides that upon motion by a party and for good cause shown, "the court... may issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense. This rule "confers broad discretion on the trial court to decide when a protective order is appropriate and what degree of protection is required." Seattle Times Co v. Rhinehart, 467 U.S. 20, 36, 104 S.Ct. 2199 (1984). The court may "limit the conditions, time, place, or topics of discovery." Burka v. United States Dep't of Health and Human Servs., 87 F.3d 508, 518 (D.C. Cir. 1996). As noted, the district court has wide discretion in managing discovery, and with respect to a protective order issued pursuant to Rule 26(c), the Court is to "undertake an individualized balancing on the many interests that may be present in a particular case." Klayman v. Judicial Watch, Inc., 247 F.R.D. 19, 22 (D.D.C. 2007) (quoting Diamond Ventures, LLC v. Barreto, 452 F.3d 892, 898 (D.C. Cir. 2006)).

The party seeking the protective order bears the burden of making the showing of good cause contemplates by the rule. Alexander v. Fed. Bureau of Investigation, 186 F.D.R. 71, 75 (D.D.C. 1998). In order to do this, the party "must articulate specific facts to support its request and cannot rely on speculative or conclusory statements." Friends of the Earth v. United States Dep't of the Interiori, 236 F.R.D. 39, 41 (D.D.C. 2006) (quoting Low v. Whitman, 207 F.R.D. 9, 10-11 (D.D.C. 2002)).

C. Supplemental Filings

"A request for a court order must be made by motion." Fed.R.Civ.P. 7(b). The Local Rules of this Court contemplate that there ordinarily will be at most three memoranda associated with any given motion: (i) the movant's opening memorandum; (ii) the non-movant's opposition; and (iii) the movant's reply. See LCvR 7. See also Crummey v. Social Sec. Admin., 794 F.Supp.2d 46, 64 (D.D.C. June 30, 2011). "Courts also have the discretion to determine whether parties are allowed to supplement the record of a case." Jerez v. Republic of Cuba, 777 F.Supp.2d 6, 10 (D.D.C. 2011), objections overrules, 964 F.Supp.2d 52 (D.D.C. 2013), aff'd, 775 F.3d 419 (D.C. Cir. 2014).

III. Analysis

Claimants filed three motions for leave to supplement their Original Motion, as well as two notices of supplemental authority. [107, 117, 122, 134, 139]. Therefore, before addressing the substance of the Motion for Preservation and Protective Orders, the undersigned will address each of these requests to supplement the Original Motion, in order to establish what information was considered in making a determination.[4]

A. First Motion for Leave to File Supplemental Evidence

On July 31, 2014, Claimants filed the first of two ex parte Motions for Leave to File Supplemental Evidence in Support of Motion for Protection and Preservation [107] ("First Motion for Leave"). The United States filed its Opposition on August 8, 2014 [115], and Claimants filed their Reply on August 18, 2014 [118].

In their First Motion for Leave, Claimants requested permission to file supplementary evidence that purports to include evidence of SIGAR manufacturing charges against the Claimants in the form of a Declaration from Major Jerry "Rusty" Bradley.[5] (First Motion for Leave at 1). The Court finds this evidence unnecessary for two reasons: (1) the witness who purports to have this evidence admitted his lack of first-hand knowledge about the matter in an earlier statement ([28-21], Exh. 59, at 51) and (2) it is untimely. See Jerez v. Republic of Cuba, 777 F.Supp.2d 6, 10 (D.D.C. 2011) (denying motions to supplement the record where the contents of the supplements did not contain new authority); Williams v. Glickman, Civil Action No. 95-01149 (TAF), 1997 WL 31106 at *1 (D.D.C. Jan. 21, 1997) (denying a motion to supplement a pending motion with "newly discovered evidence, " since this evidence was "similar to documents already before the Court").

First, the declarant admits in an earlier statement that he was "not involved in the contracting or logistics but was informed that he never overcharged us." ([28-21] at 51). In light of this, it is unclear to the Court how this witness can purport to have first-hand knowledge of manufactured charges. Even so, this information speaks to the on-going criminal investigation- a related but separate inquiry from the present civil forfeiture action. This information does not assist Claimants in satisfying the standard for either a Preservation or Protective Order. Upon review of Major Bradley's declaration, he appears to be a character witness who lacks personal knowledge as to the Claimants dealings with the government.

Moreover, Major Bradley's declaration does not present any new evidence that addresses the protection and preservation issues raised in the Original Motion. Indeed, the Court finds no further indication of the government's alleged failure to preserve evidence, nor is there any revelatory information regarding Major Bradley's need for a protection order that was not already set forth in his original declaration. ( Compare [28-21] at 51 with [107-1] at 4). Therefore, any information in the proffered supplemental evidence is unnecessary and irrelevant to the resolution of the Original Motion.

Second, Claimants state that the supplemental evidence is "newly obtained." (First Motion for Leave at 2). The Court is unconvinced that this information was not available to Claimants when they filed their Original Motion. The same witness supplied a similar declaration when Claimants filed their Motion for a Preliminary Injunction [28-21], and it is unclear why this information could not have been submitted at the time that the Original Motion was filed.

For these reasons, the Motion for Leave to File Supplemental Evidence in Support of Motion for Protection ...

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