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June 7, 2005.

RACEWAY PETROLEUM, INC., Defendant/Third Party Plaintiff, v. M.M. WERTHEIM, INC., POWERTEST REALTY, CO., LTD., and JOHN DOES 1-10, Third Party Defendants. M.M. WERTHEIM, INC., Fourth Party Plaintiff, v. HUDSON ENVIRONMENTAL SERVICES, INC. and ADR TANK & ENVIRONMENTAL SERVICES, INC., previously d/b/a A. RIVERS BACKHOE SERVICES. Fourth Party Defendants.

The opinion of the court was delivered by: DENNIS CAVANAUGH, District Judge


This matter comes before the Court upon motion for sanctions by Plaintiff Getty Properties Corp. and Third-Party Defendant Power Test Realty, Co., Ltd. (collectively, "Getty") and cross-motion for sanctions by Defendant Third Party Plaintiff Raceway Petroleum, Inc. ("Raceway"). No oral argument was heard pursuant to Federal Rule of Civil Procedure 78. After carefully considering the submissions of all parties, it is the finding of this Court that Getty's motion is denied. Additionally, Raceway's motion is denied.


  This matter involves a dispute between Getty and Raceway over a parcel of land which Raceway leased from Getty ("the Property"), located in Freehold, New Jersey. There is no dispute that there is significant gasoline contamination at the Property. From 1975 to 1992, Getty operated a gasoline station at the Property. In July 1992, Getty and Raceway entered into a five-year lease agreement of the Property including an option to purchase. At that time, both Getty and Raceway acknowledged that the Property was contaminated. Pursuant to the terms of the lease, Getty was responsible for the remediation of any contamination existing at the site prior to Raceway's occupation. Raceway has operated a gasoline station at the Property since 1993. In 1996, the New Jersey Department of Environmental Protection ("NJDEP") contacted Raceway to notify it of a discharge of gasoline at the Property. In response, Getty asserted that Raceway was the source of contamination at the Property, and as such, had failed to comply with all terms of the lease agreement.

  To initiate this litigation, Getty filed a complaint against Raceway alleging that it was responsible for the contamination in September 1999, and seeking the remediation and return of the Property. In December 1999, Raceway filed a counterclaim against Getty seeking substantially similar relief. Subsequently, numerous third and fourth parties have been added to the lawsuit, which has been proceeding in discovery for over three years. In the instant motions, both Getty and Raceway seek sanctions against one another for various alleged discovery abuses, pursuant to Federal Rule of Civil Procedure 37. Specifically, Getty argues that it is entitled to the following relief: 1) Raceway's defenses to Getty's environmental claims should be stricken, and judgment be entered in favor of Getty; 2) this Court should order certain facts deemed established; 3) this Court should draw an adverse inference based upon Raceway's alleged failure to preserve certain evidence; 4) Raceway should be ordered to pay all of Getty's attorney fees; and 5) Raceway should establish a $4 million fund to remedy contamination at the Property. Raceway, in turn, seeks an order of this Court requiring Getty 1) to produce certain information Raceway has requested, or 2) to provide a certification as to why such information is not available. Raceway also seeks payment of attorney fees and costs associated with conducting any additional discovery based on the production of the information, as well as fees and costs in connection with the instant motions.


  A. Rule 37

  Federal Rule of Civil Procedure 37(c)(1) provides, in relevant part:
A party that without substantial justification fails to disclose information required by Rule 26(a) or 26(e)(1), or to amend a prior response to discovery as required by Rule 26(e)(2), is not, unless such failure is harmless, permitted to use as evidence at a trial, at a hearing, or on a motion any witness or information not so disclosed.
  For violation of this subsection, the court may impose sanctions listed under subsection 37(b)(2), as follows:
(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order; (B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from introducing designated matters in evidence;
(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party . . .
A district court must make factual findings sufficient to support its decision to impose sanctions. Naviant Marketing Solutions, Inc. v. Larry Tucker, Inc., 339 F.3d 180, 185 (3d Cir. 2003) (citation omitted).

  It is true that Rule 37 is written in mandatory terms, and is designed to provide a strong inducement for disclosure of Rule 26(a) material. Nonetheless, the rule expressly provides that sanctions should not be imposed if substantial justification exists for the failure to disclose, or if the failure to disclose was harmless. Thus, the rule does not leave district courts without discretion. Newman v. GHS Osteopathic, Inc., Parkview Hosp. Div., 60 F.3d 153, 156 (3d Cir. 1995) (internal quotations omitted). Before precluding a party from presenting evidence at trial, a court must find that the party: 1) revealed previously undisclosed evidence when trial was imminent; or 2) acted in bad faith, which is more than a lack of diligence. Velez v. QVC, Inc., 2004 WL 1175726 *1 (E.D.Pa. May 25, 2004).

  Additionally, a party may violate discovery rules by destroying or failing to preserve certain evidence. In determining whether sanctions are an appropriate remedy for the alleged destruction of evidence, the Court must consider three factors: 1) the degree of fault of the party who altered or destroyed the evidence; 2) the degree of prejudice suffered by the opposing party; and 3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party, and where the offending party is seriously at fault, will serve to deter conduct in the future. In re DaimlerChrysler AG, 2003 WL 22951696, *1 (D.Del. 2003) (citing Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)).

  B. Getty's Motion

  Getty alleges that Raceway has failed to preserve documents, computer evidence, and a portion of repaired pipe. It further alleges that Raceway failed to timely produce certain evidence such that the information was not available to Getty during critical stages of discovery. Getty contends that these actions constitute serious violations of the discovery rules, severely prejudicing Getty's case and warranting the imposition of significant sanctions. On the other hand, Raceway has offered justifications and responses to Getty's allegations. Raceway asserts that it has acted in good faith at all times to comply with discovery requests and Orders of this Court. As Getty cites very ...

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