All’s “Well” for Halliburton: No Sanctions Result from BP’s Spoliation Claims

United States District Judge Carl Barbier recently affirmed Magistrate Judge Sally Shushan’s denial of BP’s motion for spoliation sanctions against Halliburton Energy Services, Inc. BP alleged that Halliburton “intentionally destroyed evidence” and “violated the Court’s orders regarding the production of documents.” For these violations, BP sought sanctions including an adverse finding against Halliburton, attorneys’ fees, and an order compelling Halliburton to deliver a computer used in producing 3D modeling results. Judge Shushan refused to make an adverse finding and refused to award attorneys’ fees but ordered Halliburton to deliver the modeling computer for forensic testing. 

            By way of background, one of Halliburton’s main defenses in this multi-district litigation included the assertion that foam cement that Halliburton pumped into the Macondo well on April 19, 2010 was stable. Access to Halliburton’s testing results was integral to prove or disprove this defense. Another of Halliburton’s main defenses involved BP’s alleged engineering decisions to use fewer centralizers than Halliburton had recommended inside the well. Halliburton’s proprietary Displace 3D Simulator (“Simulator”) allowed engineers to predict with accuracy the possibility of channeling. Halliburton employees conducted an analysis of the April 19 cementing operation using the Simulator that allegedly indicated that there was no channeling at the Macondo well.

            BP asserted that Halliburton intentionally destroyed the results of physical slurry testing as it related to foam cement used in the wells because “it wanted to eliminate any risk that this evidence would be used against it at trial.” Judge Shushan, however, determined that BP failed to establish the three elements necessary to secure an adverse inference: 1) Halliburton’s duty to preserve; 2) Halliburton’s bad faith breach of the duty; and 3) that BP was prejudiced. Judge Shushan determined that BP had not demonstrated prejudice and refused BP’s request for an adverse finding as to the cement tests. 

            Similarly, BP sought Halliburton’s post-incident Simulator modeling. BP argued that the proprietary nature of the model rendered it unavailable to BP or other litigants. Halliburton, however, revealed that the results of the Simulator modeling were “gone.” BP then argued that Halliburton should transfer the computer on which the Simulator modeling had been completed to a third party for forensic testing. Halliburton agreed to submit the computer to a third-party and to make its software available to BP pursuant to a software escrow agreement. Judge Shushan ordered Halliburton to produce the computer for forensic testing and ordered the parties to split the costs. 

            The mysterious disappearance of evidence in most cases would result in a plethora of sanctions. How, then, did Halliburton fare so well? One possible reason might be Halliburton’s contention that the cement testing that BP referenced used off-the shelf materials that had little or no relevance to the case. Perhaps this fact contributed to Master Shushan’s finding that BP was not prejudiced. Another likely reason includes Halliburton’s willingness to cooperate with BP to conduct forensic testing of its computer. In contentious cases, a little cooperation goes a long way. In all cases, especially in the e-discovery context, sound record-keeping and cooperation with all parties remains essential to avoiding costly and embarrassing sanctions. 

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