A Lonoke County Circuit judge recently sanctioned K.B.X. Inc. of Benton, which is being sued by farmers who allegedly lost millions dealing with Turner Grain Inc., finding that K.B.X. intentionally deleted employees’ text messages.
Judge Sandy Huckabee ruled from the bench on May 4 that jurors will be allowed to draw an adverse inference from “K.B.X.’s deletion of the subject cellphone data,” according to a transcript obtained by Arkansas Business.
The Little Rock law firm of Campbell & Grooms said that K.B.X.’s text messages were supposed to be saved as evidence that could be used in discovery, according to a news release last month. “But those text conversations were instead intentionally deleted from several K.B.X. … employee phones during company policy data wipes,” the news release said.
In August 2014, Turner Grain Merchandising Inc. of Brinkley, closed after it was discovered that farmers weren’t being paid for crops they sold to Turner Grain. Turner Grain Merchandising filed for bankruptcy protection and listed $13.7 million in assets. Its claims register shows $39.7 million in debts, millions of which are owed to farmers who sold crops to Turner Grain.
About 20 farmers sued Turner Grain and named other defendants, including K.B.X., alleging conversion, fraud, theft by deception and civil conspiracy. K.B.X. buys rice through brokers, farmers and other entities.
The farmers alleged in the lawsuit that K.B.X. bought their rice through Turner Grain and knew it was operating a Ponzi scheme but failed to warn them. Also the farmers allege that they haven’t been paid for the rice that was delivered to K.B.X. K.B.X. has denied all allegations of wrongdoing.
Scott Poynter of the Poynter Law Group of Little Rock, an attorney for K.B.X., told Arkansas Business last week that Huckabee found “there was a cellphone that one of the employees had that for whatever reason the text messages were lost, and there could have been something on there helpful to the plaintiffs.”
Poynter said that one of the employee’s cellphones had a virus on it, and when he replaced it, he “simply forgot” that maybe there were some text messages that needed to be saved.
“We’re talking about one cellphone by one of the employees, and that’s all,” Poynter said.
Attorney Kendel W. Grooms of Campbell & Grooms, who is representing the farmers, said that it wasn’t just one cellphone.
“The Court very clearly stated in open Court that the deleted messages were from ‘cellphones’ by K.B.X. ‘employees,’” Grooms said in a statement to Arkansas Business. “The Court did not single out a specific employee or a specific cellphone.”
One of Turner Grain’s former owners, Jason Coleman, said in his deposition taken in March that he preferred to communicate by text message.
“There are likely hundreds, if not thousands, of text messages that were intentionally deleted from the cellphones of the employees of KBX,” Grooms said in the statement.
The case is set for trial in July 2018.
Poynter said he didn’t think the judge’s instruction to the jury will hurt his case.
“When the jurors hear how much information that we did provide, how much work we went through to find all those documents, assemble them and produce them in the discovery process, this is somewhat understandable that we had one cellphone that we couldn’t get the text off of,” he said.
Law professors, though, said the development isn’t good for K.B.X.’s case, especially when the judge says that the jury is allowed to infer that the text messages were negative toward K.B.X.
“The jury will likely accept this invitation to assume that the material was not benign, and certainly wasn’t helpful to them,” said Alan Trammell, who teaches civil procedure at the University of Arkansas School of Law. “If it was helpful, they would have taken, in all likelihood, efforts to preserve it.”
Still, the jury is probably not going to assume that this missing piece of evidence is the “smoking gun” on which the entire case turns.
William Janssen, a law professor at the Charleston School of Law in South Carolina who teaches civil practice and procedure, said seasoned litigators will agree that “it’s not a good development” when the judge tells the jury that it can consider the missing evidence was unfavorable to the person who had the duty to keep it.
“It doesn’t mean that somebody wins or somebody loses, but it’s an unhappy event,” Janssen said.