News & Updates: Spoliation and the $9 Billion Verdict

In April 2014, a Louisiana jury awarded $1.4 million in compensatory damages and $9 billion – that’s right, billion – in punitive damages against Takeda, a Japanese pharmaceutical company and manufacturer of Actos, a drug used to combat diabetes. The plaintiff, a diabetic, alleged that Actos caused him to develop bladder cancer, and the jury overwhelmingly agreed.

I don’t know enough about this case, or any other case alleging that Actos causes cancer, to know whether the jury got it right here. The punitive damage award is obviously too large – it’s roughly 6,100 times the amount of the compensatory award – and it won’t stand.

The $9 billion award, however, followed a jury instruction that Takeda had destroyed evidence in bad faith. Judge Rebecca F. Doherty of the United States District Court for the Western District of Louisiana instructed the jury that she concluded spoliation had occurred, and further instructed that the jury was “free to infer those [destroyed] documents and files would have been helpful to the plaintiffs or detrimental to Takeda.” What is interesting to me is not the size of the award that followed this instruction, but the evidence relied on by Judge Doherty to justify the instruction.

The key to Judge Doherty’s ruling was her conclusion that Takeda had destroyed files belonging to 46 custodians. These 46 custodians had been employed by Takeda in Japan, United States, and Europe. Each of them had left Takeda in 2011 or earlier. The breakdown of the 46 custodians by year of departure is as follows:

The destruction of files of one custodian, in particular, drew the judge’s ire.  That custodian, Katsuhisa Saito, had held the position of Senior Director, Pharmaceutical Development Division at Takeda Japan.  Judge Doherty cited the “select and methodical destruction” of documents belonging to Mr. Saito and those who reported directly to him as evidence of Takeda’s bad faith.

But consider this:  Mr. Saito left Takeda in 2004.  In contrast, the very first lawsuit against Takeda alleging that Actos causes bladder cancer was not filed until 2011.

Unfortunately for Takeda, it had been the target of other product liability lawsuits involving Actos before 2011.  The earliest such lawsuit was filed in 2002, and in response, Takeda had issued a broadly worded litigation hold, stating:

Until further notice, you are instructed to preserve any and all documents and electronic data which discuss, mention, or relate to Actos®.  This means do not destroy, delete, throw away or otherwise discard any such documents or electronic data.

The 2002 lawsuit did not allege that Actos caused bladder cancer.  Nevertheless, in light of the 2002 litigation hold, Judge Doherty ruled that Takeda should have preserved all documents, including the documents belonging to Mr. Saito and the other custodians who left Takeda after 2002.

There is no question that Takeda failed to take adequate steps to implement the litigation hold.  Judge Doherty’s decision does not explain whether Takeda’s failure to implement the litigation hold was intentional or negligent, apparently because Takeda did not provide an explanation.  But the opinion does raise the following questions, among many others.

1. Is a finding of “bad faith” appropriate in this case when the document hold was issued in response to a different case?
   At the time Mr. Saito left the company in 2004, Takeda did not know that 7 years later, it would be the subject of lawsuits alleging that Actos causes bladder cancer.  Is it fair to say in this lawsuit, filed in 2011, that Takeda’s destruction of Mr. Saito’s files in 2004 was done in “bad faith”?  How can Takeda “selectively and methodically” have destroyed documents if it did not know that those documents would become an issue in this lawsuit, filed 7 years after the destruction?  Or is the “bad faith” finding justified because Takeda itself recognized the need to preserve documents but ignored its obligations?  Does it matter – or should it matter – that both cases allege product liability claims?
2. What if the 2002 hold had not been issued?
   The key to Judge Doherty’s “bad faith” finding is the 2002 litigation hold.  What if Takeda hadn’t issued that hold?  Would Judge Doherty have had a basis for ruling that Mr. Saito’s documents should have been subject to a hold in 2004?  Alternatively, what if the litigation hold issued in 2002 had not been so broadly worded, but specifically limited to the malady at issue in the 2002 lawsuit?
3. How broadly – or narrowly – should you craft a litigation hold?
   The decision in 2002 to put a litigation hold on all documents related to Actos was a logical one.  But going forward, will companies err on the side of drafting litigation holds that are more narrow in scope to avoid a similar outcome?

No doubt mistakes were made.  But a spoliation instruction to the jury allows the jury to infer that had these documents been available, they would have shown that Takeda knew of the causal connection between Actos and bladder cancer.  As proven by the $9 billion verdict, the ability to draw such an inference is powerful.  The question is whether such a powerful tool should have been handed to the jury in this instance.

A copy of Judge Doherty’s amended ruling dated June 23, 2014, regarding her finding of spoliation can be found here.