Willful Destruction of Electronic Evidence Can Lead to Jail Time
In Victor Stanley, Inc. v. Creative Pipe, Inc., 2010 U.S. Dist. LEXIS 93644 (D. Md. Sept. 9, 2010), Magistrate Judge Paul Grimm sanctioned Defendants CPI and Mark Pappas, its president – and threatened to imprison Pappas – for the willful destruction of evidence and violation of his discovery orders. The Court’s lengthy decision gives a comprehensive analysis of preservation and spoliation issues across the federal circuits that will benefit every practitioner and corporate litigant.
Plaintiff sued CPI for violations of copyrights and patents, and unfair competition, based on CPI’s alleged use of copyrighted design drawings and specifications from plaintiff’s website. Certain information initially produced by CPI supported the claims. As the decision chronicles in detail, CPI’s discovery violations persisted from the time Plaintiff’s Complaint was filed, including the following:
- Failure to implement a litigation hold;
- Deletions of electronically stored information (“ESI”) after Plaintiff filed suit;
- Failure to preserve Pappas’ external hard drive after demande for preservation;
- Failure to preserve files and emails after demand for preservation;
- Deletion of ESI after the Court issued its first preservation order;
- 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;
- Failure to preserve ESI when the company’s server was replaced; and
- Use of programs to permanently delete ESI after the Court issued numerous production orders.
Based on this willful destruction of ESI, the Court presumed the destroyed ESI was relevant, and that it prejudiced Plaintiff’s efforts to prove its claims against CPI. The Court recommended entry of a permanent injunction and default judgment on liability. Indeed, CPI consented to the default judgment. The Court also held that, as the prevailing party, Plaintiff was entitled to attorney’s fees and costs allocable to the spoliation. The Court declined for the moment to pursue criminal sanctions, but held that Pappas’s individual violations warranted civil contempt sanctions so that Pappas would be imprisoned for two years unless and until he pays the attorney’s fees and costs awarded to Plaintiff. Notably, the decision also includes an invaluable 12-page chart entitled, “Law of Spoliation,” that identifies the prevailing standards for preservation and spoliation issues by jurisdiction. This benchmark decision is a must read for anyone involved in e-discovery issues.