The Grimm Truth About Spoliation

Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497 (D. Md. 2010)

For willful, bad faith discovery violations, including failure to implement a litigation hold, attempted deletion of ESI, actual deletion of ESI, and misrepresentations regarding the completeness of discovery, the Court recommended default judgment and a permanent injunction as to plaintiff’s copyright claim and ordered monetary sanctions and that defendants’ acts of spoliation be treated as contempt such that an individual defendant, the President of Creative Pipe, be jailed for not more than two years “unless and until” he pays the attorney’s fees and costs awarded.

The Court’s opinion also offers extensive analysis of the spoliation laws in each circuit.

Specifically, in addition to defendants’ attempted deletion of certain ESI, the Court identified eight discreet preservation failures:

(1) Pappas’s* failure to implement a litigation hold; (2) Pappas’s deletions of ESI soon after [Plaintiff] filed suit; (3) Pappas’s failure to preserve his external hard drive after Plaintiff demanded preservation of ESI; (4) Pappas’s failure to preserve files and emails after Plaintiff demanded their preservation; (5) Pappas’s deletion of ESI after the Court issued its first preservation order; (6) Pappas’s continued deletion of ESI and use of programs to permanently remove files after the Court admonished the parties of their duty to preserve evidence and issued its second preservation order; (7) Pappas’s failure to preserve ESI when he replaced the CPI server; and (8) Pappas’s further use of programs to permanently delete ESI after the Court issued numerous production orders.

[*Per the Court’s footnote, “because Pappas controlled [Creative Pipe, Inc.] at all times relevant to this case, his conduct is attributable to him individually as well as to his company, CPI.”]

Based on defendants’ “willful, bad faith conduct”, the Court presumed the relevance of the destroyed ESI, as well as the prejudice to the plaintiff, as is permitted in the Fourth Circuit.

Regarding plaintiff’s request for sanctions, the Court found that “the facts amply demonstrate the intentional, bad-faith permanent destruction of a significant quantity of relevant evidence” such that default judgment on liability was “clearly appropriate” as to Count I, plaintiff’s copyright claim.  Notably (and somewhat surprisingly), defendants “admit spoliation, relevance, and prejudice, and consent to default judgment….”  As to the same count, the Court recommended a permanent injunction which was also unopposed by the defendants.

The Court also ordered monetary sanctions, specifically reasonable attorney’s fees and costs, including “fees and costs associated with all discovery that would not have been undertaken but for Defendants’ spoliation….”  Further, the Court ordered that “[Defendants’] acts of spoliation be treated as contempt of this court, and that as a sanction, [Pappas] be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney’s fess and costs that will be awarded….”

Beyond the relatively straightforward spoliation facts of the present case, the Court took its opportunity in this opinion to acknowledge the “collective anxiety” among lawyers and institutional clients regarding “the lack of a uniform standard governing when the duty to preserve commences, the level of culpability required to justify sanctions, the nature and severity of appropriate sanctions, and the scope of the duty to preserve evidence and whether it is tempered by the principles of proportionality….”  Accordingly, the Court indicated that in this opinion, it would “attempt to synthesize not only the state of the law in [the District of Maryland and the Fourth Circuit], but also to put it within the context of the state of the law in other circuits as well” in hopes that this opinion would provide “an analytical framework that may enable [counsel] to resolve preservation/spoliation issues with a greater level of comfort that their actions will not expose them to disproportionate costs or unpredictable outcomes of spoliation motions.”  In furtherance of that goal, the Court undertook an extensive and comprehensive analysis of the law of spoliation, including a 12-page chart identifying the relevant standards for the most common spoliation issues/questions in each circuit e.g., the scope of the duty to preserve.

Far too detailed to be comprehensively summarized here, the case is a must-read for anyone seeking guidance on the state of spoliation in their jurisdiction or any other.

A copy of the full 101-page opinion is available here.

A copy of the Court’s order is available here.