Electronic Discovery

In Shawe v. Elting, Case No. 487, 2016 (Supreme Court of Delaware, Feb. 13, 2017), the Delaware Supreme Court found that the Court of Chancery followed the correct legal standards and made no errors of law in its sanctions award of over $7 million against the appellant, agreeing with the lower court that his behavior was “unusually deplorable”.

Case Background

The plaintiff appealed an order of the Court of Chancery sanctioning him for misconduct throughout litigation with his current business partner and former romantic partner, where, after an evidentiary hearing, the Court of Chancery found that the plaintiff committed several violations, including:

• Breaking into the defendant’s office, having the President of the company’s forensic technology business image her hard drive, concealing the activities with a write blocker, and replacing the computer to cover his tracks (several times over a two year period);
• Remote accessing the defendant’s computer at least 44 times on 29 different occasions, gaining access to 19,000 emails, including 12,000 privileged communications between the defendant and her attorney;
• Hiring another third party to break into the defendant’s office, take pictures, and remove hard copies of documents;
• Claiming (after the suit was filed) that his niece dropped his phone in a cup of soda and he ultimately threw it away because he found it in a drawer with rat droppings;
• Deleting nearly 19,000 files from his laptop, which was discovered because his computer had made volume shadow copies and his own expert discovered it;
• Lying about his activities in his discovery responses and at his deposition, as well as giving false trial testimony and submitting a false affidavit during post-trial briefing.

The court also found that the plaintiff’s improper conduct impeded the administration of justice, unduly complicated the proceedings, and caused the court to make false factual findings. The Court of Chancery ordered the plaintiff to pay 100% of the fees the defendant incurred in connection with bringing the motion for sanctions, and 33% of the fees the defendant incurred litigating the merits of the case, awarding the defendant a total of $7,103,755 in fees and expenses.

On appeal, the plaintiff argued that the Court of Chancery erred in three respects: (1) by finding that he acted in bad faith when he deleted the files from his laptop and failed to safeguard his cell phone; (2) for failing to afford him criminal due process protections before sanctioning him for “perjury”; and (3) by awarding the defendant an excessive fee.

Judge’s Ruling

With regard to intent, the Court noted that the plaintiff/appellant “deleted 41,000 files from his laptop in December 2014 in the face of two litigation hold notices, one of which he issued, and an expedited discovery order that permitted Elting to conduct forensic discovery of Shawe’s laptop.”  Even though most of those files were recovered due to the laptop’s volume shadow copy system, the Court ruled that “does not negate his illicit intent” and also found that the “Court of Chancery was well within its discretion to sanction Shawe for his litigation misconduct” for throwing out his cell phone.

With regard to the “perjury” sanction, the Court stated: “While Shawe’s conduct may have constituted perjury, the court did not charge or convict him of perjury. Rather, the court imposed a civil sanction against him for his repeated lies under oath in interrogatory responses, at deposition, at trial, and in a post-trial affidavit to cover up what he had done. Shawe’s falsehoods wasted the court’s time, needlessly complicated and expanded the proceedings, and caused the court to find erroneous facts in its Merits Opinion. The Court of Chancery thus acted well within its discretion to sanction him for lying during the litigation.”

With regard to the claim that the defendant was awarded an excessive fee, the Court noted that the “Court of Chancery has broad discretion in fixing the amount of attorneys’ fees to be awarded” and “[a]bsent a clear abuse of discretion”, declined to reverse the award.

As a result, the Court affirmed the award, stating: “After a careful review of the record, we find that the Court of Chancery followed the correct legal standards and made no errors of law in its sanctions ruling. Shawe’s behavior was ‘unusually deplorable,’ and thus the Court of Chancery acted well within its discretion by sanctioning him for his bad faith conduct.”

So, what do you think?  Did the actions merit such a stiff sanction?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine. eDiscovery Daily is made available by CloudNine solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Daily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

In Below v. Yokohama Tire Corp., No. 15-cv-529 (W.D. Wisc. Feb. 27, 2017), Wisconsin District Judge William M. Conley, deciding on several pre-trial motions, granted (to an extent) the defendants’ motion for relief due to spoliation of evidence for failing to preserve the truck involved in a crash, stating that “defendants persuasively argue that the absence of this evidence should at minimum preclude plaintiffs from using it as a sword, even if defendants cannot use it as a shield.”

Case Background

In this product liability case related to a truck crash due to an alleged defective tire produced by the defendants that left the plaintiff severely injured, the defendants contended that the plaintiff’s pickup truck was destroyed at a salvage yard before plaintiffs filed this lawsuit.  The defendants argued that destruction of the truck hampered their defense because they were unable to evaluate, among other things, the suspension and steering systems, the seatbelt, the electronic data recorder and the other three tires.  Asserting that the plaintiffs or their “agents” sold the plaintiff’s pickup truck to a salvage yard with the knowledge that it would be destroyed after inspecting it, taking photographs and preserving the failed tire, defendants moved for a spoliation instruction.  Because of the plaintiffs’ actions, as well as receipt of $22,000 in insurance proceeds from the sale of the truck to the plaintiffs, the defendants argued that the plaintiffs’ bad faith could be inferred.

The plaintiffs asserted that the salvage yard agreed to the request from an investigator (retained by plaintiffs’ counsel) to preserve the truck in October 2013 (about a month and a half after the accident). In May of 2014, another of its investigators (Tom Malone) followed-up with the salvage yard to ask them to continue to preserve the truck and to notify him about any storage charges. Despite these efforts, plaintiffs’ counsel later “discovered” in the fall of 2015 that the truck had been destroyed on October 23, 2014.

Judge’s Ruling

Judge Conley noted that “A spoliation instruction is only obtainable if the proponent shows an intentional act or bad faith by the party in possession of the destroyed evidence.”

With regard to the plaintiffs’ failure to preserve all but the allegedly defective tire from the truck, Judge Conley stated: “Left unexplained is how plaintiffs ended up with the single, allegedly defective tire without preserving the other three; why other steps were not taken to preserve similar evidence, including possible electronic evidence that must be preserved under Fed. R. Civ. P. 37(e); and perhaps most important, why plaintiffs waited another, two full years after the accident without notifying Yokohama of the availability of this piece of key evidence, despite knowing that it was the focus of plaintiffs’ liability claims within months of the accident itself. These questions are all the more troubling because plaintiffs were represented by a sophisticated personal injury law firm, who know full well of their duty to maintain evidence relevant to likely litigation, to provide notice of a possible claim, and notice of ‘the existence of evidence relevant to that claim.’…Plus, Malone’s letter to the salvage yard presents many more questions than it answers, as to timing and whether any agreement ever existed with the salvage yard.”

As a result, Judge Conley ruled, as follows: “Based on this record, plaintiffs’ counsel certainly should have taken additional steps to ensure that the truck (or at least potentially key evidence) was preserved, as well as notified likely defendants timely of the opportunity to inspect it. The failure to do so falls somewhere between negligence and gross negligence, but perhaps short of bad faith or intentional conduct requiring an adverse inference instruction. Even so, defendants persuasively argue that the absence of this evidence should at minimum preclude plaintiffs from using it as a sword, even if defendants cannot use it as a shield. Therefore, the defendants motion is GRANTED to the extent that (1) defendants may explore how information from an inspection of Below’s truck could have affected the experts’ opinions at trial; and (2) plaintiffs may not argue that defendants or their experts failed to explore or prove something if prevented from doing so by plaintiffs’ negligence in preserving evidence. Defendants’ motion is otherwise RESERVED pending a further proffer and argument at the final pretrial conference, including defendants request for a spoliation instruction.”

So, what do you think?  Did the judge go far enough in addressing the spoliation of truck evidence?  Please share any comments you might have or if you’d like to know more about a particular topic.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by CloudNine. eDiscovery Daily is made available by CloudNine solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Daily should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.