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Brantley v. Handi-House MFG. Co.

United States District Court, S.D. Georgia, Statesboro Division

July 11, 2018

LEROY BRANTLEY, JR.; HAROLD H. RICKS; ROGER SMITH; and SHON BUTLER, on behalf of themselves and all others similarly situated, Plaintiffs,



         On behalf of current and former employees of Defendant Handi-House Mfg. Co. (“Handi-House”), the class action complaint seeks damages from the alleged operation of a payday lending scheme charging weekly interest of 30% and collecting $1.17 million of interest over a five-year class period. (Compl., doc. no. 1, ¶¶ 29-31.) In their Motion for Sanctions for Spoliation of Evidence, Plaintiffs accuse Defendants of intentionally destroying weekly lists of outstanding loans. (Doc. no. 65.) The Court DENIES the motion and FINDS Plaintiffs failed to carry their burden of proving Defendants destroyed loan lists after the litigation commenced or reasonably knew Plaintiffs were contemplating a lawsuit.

         I. BACKGROUND

         The complaint alleges Handi-House employees, primarily General Manager and Director of Sales James Akridge and Plant Manager John Wilkerson, made weekly cash loans to Handi-House employees in advance of their paychecks, charging $6.00 in interest on every $20.00 loaned. (Compl. ¶¶ 25, 31; RICO Statement, doc. no. 1-2, p. 7.) Akridge and Wilkerson allegedly forced Plaintiffs to agree to these loans by verbal threats and shows of authority, and they threatened any Handi-House employee who refused to take a loan would be suspended without pay or terminated. (Compl. ¶ 37.)

         Plaintiffs further allege Defendant Flanders, CEO and CFO of Handi-House, and his wife Stephanie “have overseen the illegal lending operation and have taken steps to ensure that their co-conspirators continue operating it within Handi-House facilities.” (Id. ¶ 38; doc. no. 1-2, p. 7.) However, Akridge and Wilkerson averred they operated the loan program personally and kept all interest and profits. (Doc. no. 65-5, pp. 5, 8; doc. no. 65-7, pp. 5, 8.) Moreover, according to Handi-House employee Charlie Fluellen, Handi-House ran an institutional loan program that allowed employees to obtain interest-free loans. (Fluellen Dep., doc. no. 78-2, 25:18-27:19.)

         The loan repayment procedure for the payday loan program was quite simple. Brenda Williamson, who is the employee responsible for preparing payroll checks for Handi-House, allegedly annotated the paychecks of employees receiving loans with the loan balance and distributed the borrowers' paychecks to Akridge and Wilkerson for collection. (Compl. ¶ 39.) Akridge and Wilkerson required borrowers to endorse the paycheck and hand it back to them. (Johnson Dep., doc. no. 78-1, 67:11-24.) Akridge and Wilkerson cashed the paychecks in the office, kept cash sufficient to cover the loan balance, and gave the remaining cash to the borrower. (Id. at 71:1-7.) At some unidentified point in time, Akridge and Wilkerson started writing the loan balances on a sticky note attached to each pay stub rather than directly on the pay stub. (Johnson Aff., doc. no. 65-4, ¶ 7.)

         Throughout the loan program's existence, on a weekly basis Akridge and Wilson “created a notebook sheet of paper for each personal loan that outlined the amount of the loan and interest associated with the loan, if any.” (Doc. no. 65-5, p. 6; doc. no. 65-7, p. 6.) Akridge and Wilkerson testified they regularly discarded or destroyed the loan lists through termination of the loan program in July 2017. (Wilkerson Aff., doc. no. 69, Ex. A, ¶ 3; Akridge Aff., doc. no. 69, Ex. B, ¶ 4.) However, after litigation commenced, Alfred Johnson, a Handi-House employee and putative class member, produced to Plaintiffs' counsel a photograph he took at work of such a loan list on December 7, 2017. (Doc. no. 65-2, Ex. A; Johnson Aff. ¶¶ 8-12.) This prompted Plaintiffs to file the present sanctions motion alleging Defendants purposefully destroyed this loan list and possibly other loan program documents after actual pendency of this litigation or after they reasonably knew Plaintiffs were contemplating litigation. (Doc. no. 65.)

         Johnson provided the following affidavit and deposition testimony regarding the loan list. Contrary to Defendants' contention, Johnson testified the loan program continued after July 2017 and into December 2017, with the important modification that Akridge and Wilkerson now trusted borrowers to cash their own paychecks and remit the loan balances to them. (Johnson Dep. at 75:6-76:15, 80:4-18, 84:2-17.) On December 7, 2017, co-worker Charlie Fluellen approached Johnson and showed him a loan list. (Johnson Aff. ¶ 8.) Johnson claimed by affidavit he knew the list was from the week of December 4, 2017 because the list accurately reflected he borrowed $20.00 that week and owed $26.00. (Id. ¶ 9.) He later claimed during his deposition the date of December 4, 2017 was written on the reverse side of the list, of which he failed to take a picture. (Johnson Dep. at 134:1-20.) Johnson claimed Fluellen “found” the list “up there by James's office” and later returned the list to Akridge. (Id. at 119:11-13; Johnson Aff. ¶¶ 8, 12.)

         Fluellen testified Johnson is lying and he had never seen the list before his deposition. (Fluellen Dep. at 35:2-14.) Moreover, Fluellen testified he never received a personal loan from Akridge and Wilkerson and instead took advantage of interest-free employee loans offered by Defendant Handi-House. (Id. at 25:18-27:25.) Akridge and Wilkerson state by affidavit the list was created in early July 2017 but later lost. (Wilkerson Aff. ¶¶ 2, 5-6; Akridge Aff. ¶¶ 2, 6-8.) Three Handi-House employees, two of whom were identified as borrowers on the loan list in question, also submitted sworn statements confirming all loan operations ceased in July 2017. (Williams Aff., doc. no. 71-3; R. Woods Aff., doc. no. 71-4; T. Woods Aff., doc. no. 71-5.)

         Pursuant to stipulation of the parties, the Court dismissed all Defendants except Handi-House and Donald Flanders, as well as Counts Seven and Ten of the Complaint. (Doc. nos. 83, 85.) Therefore, the Court will consider the sanctions motion only as to the remaining Defendants, Handi-House and Flanders.


         A. Legal Standards

         “Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” Graff v. Baja Marine Corp., 310 Fed.Appx. 298, 301 (11th Cir. 2009) (quotations omitted). While spoliation is governed by federal law, the Eleventh Circuit has not developed its own specific guidelines but rather has deferred to the spoliation factors enumerated under Georgia law. See Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005) (“Federal law in this circuit does not set forth specific guidelines, therefore, we will examine the factors enumerated in Georgia law.”) (citation omitted).

         In Flury, the Eleventh Circuit identified the following five factors to be considered when determining whether sanctions are warranted and to what extent:

(1) whether the defendant was prejudiced as a result of the destruction of evidence; (2) whether the prejudice could be cured; (3) the practical importance of the evidence; (4) whether the plaintiff acted in good or bad faith; and (5) the potential for abuse if expert testimony about the evidence was not excluded.

Id. at 945; see also Oil Equip. Co. v. Modern Welding Co., 661 Fed.Appx. 646, 652 (11th Cir. 2016) (identifying five spoliation factors from Flury).

         The presence of bad faith is a threshold requirement for spoliation sanctions. See Bashir v. Amtrak, 119 F.3d 929, 931 (11th Cir. 1997) (“In this circuit, an adverse inference is drawn from a party's failure to preserve evidence only when the absence of that evidence is predicated on bad faith.”) (citation omitted); see also Woodard v. Wal-Mart Stores E., LP, 801 F.Supp.2d 1363, 1371-72 (M.D. Ga. 2011) (noting tension between Flury and Bashir). Indeed, “‘[m]ere negligence' in losing or destroying the records is not enough for an adverse inference, as ‘it does not sustain an inference of consciousness of a weak case.'” Bashir, 119 F.3d at 931 (quoting Vick v. Texas Emp't Comm'n, 514 F.2d 734, 737 (5th Cir. 1975)[1]). If warranted, a court may impose the following sanctions: “(1) dismissal of the case; (2) exclusion of expert testimony; or (3) a jury instruction on spoliation of evidence which raises a presumption against the spoliator.” Flury, 427 F.3d at 945 (citing Chapman v. Auto Owners Ins., 469 S.E.2d 783, 784 (Ga.App. 1996)).

         B. Plaintiffs Failed to Prove Akridge and Wilkerson Continued the Loan Program After Service of the Complaint, and They Also Failed to Prove Akridge and Wilkerson Destroyed the Loan List At Issue

         Plaintiffs base their spoliation contention on (1) a picture of the loan list taken by Johnson on December 4, 2017; (2) Johnson's testimony that Fluellen “found” the list in Akridge's work area and presented it to him; and (3) Johnson's testimony the loan list concerned loans issued the week of December 4, 2017. After careful consideration of the entire record, however, the Court finds Johnson's testimony is not credible for at least four reasons.

         First, Fluellen testified Johnson is lying when he says Fluellen “found” the list “up there by James's office” on December 7, 2017, showed it to him, and returned it to Akridge. (Fluellen Dep. p. 35:2-14; Johnson Dep. p. 119:11-13; Johnson Aff. ¶¶ 8, 12.) Indeed, Fluellen testified he had never seen the list before his deposition. (Fluellen Dep. p. 35:2-14.)

         Second, Johnson's contradictory description of their supposed encounter is implausible. According to Johnson, he and Fluellen were not friends, and Fluellen did not know Johnson had retained Plaintiffs' counsel to represent him in connection with this lawsuit. (Johnson Dep. p. 107:1-7.) Given these facts conceded by Johnson, it is highly unlikely Fluellen would approach Johnson out of the blue and present the list. Furthermore, Johnson testified Fluellen also showed the list to “a few other folks” but did not identify any of them. (Id. at 77:22-24.) The record contains no identification of these “other folks, ” much less testimony from them affirming Fluellen showed them the list.

         Third, Johnson claims the list had to represent loans issued the week of December 4, 2017, because he borrowed $20.00 that week and the list specifies this same amount for him. (Johnson Aff. ¶ 9; Johnson Dep. p. 131:5-12.) But when the questioning suggested this conclusion is faulty since Johnson borrowed $20.00 on other occasions, Johnson suddenly recalled there being a date of December 4, 2017, on the reverse side of the list. (Johnson Dep. p. ...

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