Jon Domanus, et al. v. Derek Lewicki, et al.

Introduction

The Plaintiffs, shareholders in Krakow Business Park SP. ZO.O. (“KBP”), brought suit against the Defendants, Derek Lewicki, Richard Swiech, and Adam Swiech. Plaintiffs asserted claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 (“RICO”). In the instant action, the Plaintiffs claimed that the Defendants participated in the spoliation of evidence by intentionally destroying a computer hard drive belonging to the Defendants, which contained potentially discoverable, relevant evidence.

The Plaintiffs filed a motion for sanctions with the Court asking that the Defendants be compelled to obtain and produce: 1) all relevant email communications from their email service providers, and 2) bar the Defendants from introducing into evidence any of the documents produced from the hard drive.

Background

During the course of discovery, Defendants produced documents to the Plaintiffs alleging that the documents were recovered from a hard drive of one of the Defendants. After reviewing the documents, Plaintiffs’ counsel requested that the Defendants submit the hard drive for forensic testing. Defendants’ counsel refused, stating that the Plaintiffs’ concerns were unfounded and all relevant documents from the hard drive had been produced. A short time later, Defendants’ counsel retracted her statement and said that additional documents had been found on the hard drive.

The parties later addressed the hard drive issue at a status hearing. During that hearing, the Court reminded the parties, and their counsel, of the duty to preserve any evidence. Defendants’ counsel eventually produced the additional documents from the hard drive, but the Plaintiffs were still concerned that the production was incomplete, and, therefore, renewed their request for forensic testing of the hard drive. In response, Defendants’ counsel informed the Plaintiffs that the hard drive could not be submitted to testing because it had been disassembled and was no longer available. The Plaintiffs filed this subsequent motion for spoliation sanctions.

In responding to the motion, the Defendants alleged that the hard drive had crashed in May 2009, some two years before the Defendants’ initial document production. Defendant Richard Swiech attested that he took the hard drive to be repaired in May 2009. After learning of the costs for repair, Defendant Derek Lewicki said that he might be able to repair it. Lewicki retrieved some files from the hard drive, but otherwise found it useless and inoperable.

In granting the Plaintiffs’ motion in part and denying it in part, the Court evaluated five main considerations in determining whether to issue sanctions for spoliation of evidence: sanctions for spoliation, duty to preserve evidence and breach of that duty, culpability, prejudice to the requesting party, and remedies.

Sanctions for Spoliation

“Spoliation refers to the destruction or material alteration of evidence or to the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Pension Comm. Of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 685 F. Supp. 2d 456, 465 (S.D.N.Y. 2010). Even without a directive from the court, a party has a duty to preserve evidence. The court’s authority for sanctions are both inherent and statutory, and generally courts have broad discretion over the types of sanctions that will be issued, including, further discovery, cost-shifting, fines, special jury instructions, preclusion, and the entry of default judgment or dismissal. See Fed. R. Civ. P. 37(b)(2). In determining which possible sanction is appropriate, the court is guided by three general principles: 1) a breach of the duty to preserve, 2) the level of culpability for the breach, and 3) the prejudice that resulted from the breach. See Jones v. Bremen High Sch. Dist., WL 2106640, at *5 (N.D. Ill. May 25, 2010).

Duty to Preserve Evidence and Breach of that Duty

A person or entity has an ongoing duty to preserve evidence within its control and reasonably knows or can foresee would be material to a current or potential legal action. Generally, this duty to preserve is satisfied as long as the party acts reasonably. As the Court iterated, “more than good intentions are required; those intentions must be followed up with concrete actions reasonably calculated to ensure that relevant materials are preserved.” (Internal citations omitted) Danis v. USN Commc’ns, Inc., 2000 WL 1694325, at *35 (N.D. Ill. Oct. 23, 2000).

Culpability

To determine the appropriate level of sanctions, the Court must first determine whether the Defendants acted willfully, in bad faith, or if they were simply at fault. Bad faith sanctions imply that the destruction occurred for the purpose of hiding adverse information. In contrast, fault sanctions imply that the party was either negligent or had flagrant disregard for the duty to preserve relevant evidence. Fault, as opposed to bad faith, goes to a party’s reasonableness rather than their subjective motivation.

Prejudice

While prejudice to the non-offending party is not an element for sanctions, courts often consider prejudice when determining the level of sanctions to impose. In cases where the nonproducing party was found to be at fault, rather than bad faith, the court used prejudice as a balancing tool to “tip the scales in favor or away from severe sanctions.” In re Kmart Corp., 371 B.R. 823, 842 (Bankr. N.D. Ill. 2007).

Remedy

Additionally, the remedy, or sanction, must be proportionate to the harm caused and the circumstances of the case. In this case, despite the Plaintiffs’ request for harsher sanctions, the Court found that a “spoliation charge” to the jury would be more appropriate. A spoliation charge is different from an adverse inference charge in that a spoliation charge permits, but does not require, the jury to consider the misconduct of the spoliating party as well as proof that the lost evidence is relevant and favorable to the innocent party.

Conclusion

The Court found that the Defendants had a duty to preserve the hard drive and were grossly negligent in failing to do so. As a result, the Defendants’ culpability amounted to fault, and not bad faith. Due to the Defendants’ gross negligence, the Plaintiffs were deprived of the opportunity to have the hard drive forensically examined to determine whether it contained relevant evidence. Accordingly, the Court found that a spoliation charge to the jury was appropriate.

This outcome of this case is still pending.