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Bankruptcy Debtor’s Discharge Denied for Failing to Produce Emails Per Court Order

Posted on January 30th, 2017

failing to produce emailsThe Patriot Group, LLC v. Steven C. Fustolo (In re Fustolo), Case No. 13-12692, Adv. No. 14-1193 (Bankr. D. Mass., Jan. 11, 2017) is an adversary proceeding filed within an involuntary Chapter 7 bankruptcy case. Defendant owned a company that borrowed millions from Plaintiff; ultimately, Plaintiff sued Defendant and obtained a judgment in excess of $20 million. Plaintiff, along with other creditors, initiated an involuntary Chapter 7 against Defendant, and Plaintiff filed the adversary proceeding to render its judgment nondischargeable and/or to deny Defendant his entire Chapter 7 discharge under several subsections of 11 U.S.C. Section 727.

After a hotly contentious discovery period and one denied motion for summary judgment, a six-day trial was conducted, and the parties filed their post-trial briefs. Plaintiff indicated it would file a Motion to Conform, seeking to amend its Complaint to add an extra count under Section 727(a)(6) for Debtor’s failure to obey a lawful court order. Plaintiff did file its Motion to Conform and Defendant objected.

The order in question was the court’s order compelling Defendant to produce certain emails and bank statements. With respect to the emails, Defendant asserted that the emails requested were not reasonably accessible because they had been deleted by AOL and that other emails were protected by his Fifth Amendment privilege. Defendant provided the court with a purported copy of AOL’s email retention policy, which Plaintiff argued was misrepresented.

Plaintiff sought all non-privileged documents and emails, including AOL and Hushmail emails. Defendant testified that he never catalogued his AOL emails and simply read them, moved them to an Old Mail folder and printed the ones he needed. Plaintiff argued this to be patently false, and provided the court with a current copy of AOL’s policy, which did not state emails would be deleted after 30 days as Defendant asserted. The court ordered production of non-privileged emails with in camera review to protect Defendant’s Fifth Amendment rights. Defendant did not comply with the order, even after asking for an extension, and it came about that he lost his laptop. Plaintiff filed a Motion for Sanctions seeking a speedy trial date, which the court granted.

The court found that Defendant did not comply with the order compelling production of the emails and that he provided no defense to his failing to produce emails. The court granted the Motion to Conform and, based upon Defendant’s actions, denied his Chapter 7 discharge.

ILS – Plaintiff ESI Discovery Experts

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