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Jail Time for Spoliation?

By Sean T. Carnathan, Litigation News Associate Editor – November 29, 2010

Serious spoliation can carry serious consequences, including the possibility of jail time for the culpable party. In a recent order, Magistrate Judge Paul W. Grimm, of the U.S. District Court for the District of Maryland, provided an exhaustive review of what the court found to be a four-year campaign of spoliation of evidence in a case involving alleged violations of copyrights and patents, and unfair competition. Victor Stanley, Inc. v. Creative Pipe, Inc. [PDF]. The court also painstakingly detailed its various options when imposing sanctions.

Extreme Sanctions
As a result of the defendants’ spoliation of evidence, the court not only awarded the plaintiff a partial default judgment but also determined that the defendants’ willful acts of spoliation constituted civil contempt. These actions included the “permanent deletions of countless” pieces of electronically stored information by one of the individual defendants.

As a sanction, the court ordered the culpable individual defendant to “be imprisoned for a period not to exceed two years,” unless and until he paid the plaintiff’s attorney fees and costs “allocable to spoliation.” The sanctions included all attorney fees and costs the plaintiff incurred in bringing the motion for sanctions as well as “all efforts expended throughout this case to demonstrate the nature and effect” of the spoliation. The court stated that it would determine when to commence confinement after the amount of attorney fees and costs were quantified.

After further proceedings, U.S. District Judge Marvin J. Garbis modified the sanctions to eliminate the potential for jail time. Judge Garbis ruled [PDF] that it was not appropriate to order the individual defendant incarcerated “for a future possible failure to comply” with his obligation to make payment “of an amount to be determined in the course of future proceedings.” Instead, he ordered [PDF] the defendants to pay an “agreed minimum amount” of sanctions, totaling $337,796.37, to the plaintiff within four days or appear in court to show cause why they should not be further held in civil contempt.

A Scholarly Order
The Victor Stanley decision is notable not only for the extremity of the conduct and the harshness of the sanctions but also for the comprehensive survey it provides of prior spoliation decisions. The decision includes a valuable chart [PDF] summarizing important spoliation decisions from federal district courts and circuit courts of appeals.

As part of his analysis of potential avenues for sanctions, Magistrate Judge Grimm also lamented that the court lacked “any effective means,” other than separate criminal contempt proceedings, to order defendants to pay a fine to the clerk of the court to recapture the hundreds of hours of time that he, his law clerk, and his staff had spent on the motion for sanctions. He noted that, “[i]f such a sanction were reasonably available, however, this case would be the poster child demonstrating its appropriateness.”

The court ultimately rejected a possible criminal contempt proceeding or referral of the matter to the U.S. Attorney for criminal prosecution because it was concerned with the additional judicial time and resources associated with such proceedings. Magistrate Judge Grimm noted that the dispute had consumed “far too much” of the court’s resources already.

But Jail Time?
Some members of the legal community cheer the intensity of original sanction. “Even more unique [than the extreme nature of the spoliation], and laudably so, is Magistrate Judge Grimm’s willingness to see justice done by imposing a sanction commensurate with the misconduct, that is, incarceration of the primary wrongdoer until the plaintiff is made whole,” says Mark S. Davidson, Seattle, cochair of the ABA Section of Litigation’s Business Torts Litigation Committee.

Others worry that it was too harsh. “While it would appear severe sanctions were appropriate, I question whether a two-year prison sentence would comport with basic due process protections absent a formal criminal proceeding with all attendant procedural safeguards,” says James A. Brown, New Orleans, cochair of the Section’s Professional Liability Litigation Committee.

Should the Lawyers Have Been Sanctioned Too?
When reviewing Magistrate Judge Grimm’s order, one must wonder how the defendants’ attorneys avoided censure. “For me, one of the most interesting aspects of the decision is that the sanctions are limited to the defendant and its president—the lawyers aren’t punished,” says John C. Martin, Chicago, cochair of the Section’s Ethics and Professionalism Committee. “The opinion suggests, in a pair of footnotes, that this is because the defendants’ current counsel weren’t involved in the misconduct, and the court believed that a separate action was necessary to impose punishment on the defendants’ prior counsel.”

The Technology Perspective
The Victor Stanley decision provides a detailed examination of the many ways an unscrupulous party can destroy ESI. “The facts underlying the Victor Stanley case are a virtual soap opera themed to ESI discovery abuses,” says Richard S. Stockton, Chicago, cochair of the Section’s Technology for the Litigator Committee. “They include everything from eve-of-hearing file deletions to shadowy ‘consultants’ scrubbing servers,” he says. “The case underscores how important ESI has become to modern litigation,” Stockton concludes, “and it is yet another reminder of the paramount importance of preserving it and resisting the easy temptation to just hit ‘delete.’”

Keywords: litigation, spoliation, sanctions

Related Resources

  • » Victor Stanley, Inc. v. Creative Pipe, Inc., 2010 U.S. Dist. LEXIS 93644 (D. Md. Sept. 9, 2010) [PDF].
  • » SonoMedica, Inc. v. Mohler, 2009 U.S. Dist. LEXIS 65714 (E.D. Va. July 28, 2009) (referring matter to U.S. Attorney to investigate criminal contempt proceedings against third party witnesses).

  • December 9, 2010 – ESI - Electronic.....?

  • December 9, 2010 – This is an excellent article, but it is important to note that U.S. District Judge Marvin Garbis overruled that portion of Judge Grimm's opinion that imposed the threat of incarceration in the event of nonpayment of the monetary sanction. Judge Garbis, however, did note that, on a show cause for failure to pay, further civil and even criminal sanctions might be appropriate.


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