Justice Paul Grimm has released his decision in Victor Stanley II, confirming that severe spoliation sanctions are escalating in the United States.
In this unfair competition action, the defendant’s president, Mark Pappas, was accused of destroying (directly and indirectly) thousands of emails relevant to the case and of intentionally deleting relevant electronically stored information from his computer the night prior to its discovery. For good measure, Pappas also ran ‘”defragging” software. He alleged that the emails had been moved to a deleted items folder for “storage purposes”. The court rejected his story, calling Pappas’ conduct “clearly contemptuous”.
The court entered a permanent injunction and default judgment regarding the liability against the defendant with respect to the plaintiff’s copyright claim. However, the balance of the claims were permitted to proceed, as the court held the plaintiff had yet to prove irreparable or substantial prejudice.
The plaintiff was held to be entitled to its legal fees and costs related to the spoliation, violations of court orders relating to discovery, and the plaintiff’s seeking of sanctions. As a result, Pappas was ordered to “be imprisoned for a period not to exceed two years, unless and until he pays to the plaintiff the attorney’s fees and costs that will be awarded.” These costs were substantial at $1,049,850.04.
This must-read case will be to 2011 what the Pension Committee case was to 2010. Of particular interest is the 12 page chart drafted by the court that provides spoliation sanctions by court circuit to assist counsel in avoiding similar results. It’s only the third week of January. Stay tuned.