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Court Denial of Spoliation Sanction Motion – Moving Party Failed to Show ESI Irrevocably Lost or Relevant

Posted on March 15th, 2017

court denied sanctions motionAir Products and Chemicals, Inc. v. Wiesemann et. al., Case No. 14-1425 (D. Delaware, Feb. 27, 2017) is a breach of contract case also alleging fraud elements. Plaintiff buyer acquired EPCO Carbon Dioxide Products and Louisiana Leasing, Ltd. (“EPCO”) from Defendants, who were stockholders of EPCO. Based upon information garnered from EPCO’s compliance with government regulations, Plaintiff filed suit against Defendants alleging breach of contract, unjust enrichment, securities fraud, common law fraud and negligent misrepresentation. In December 2015, Defendants filed a Motion for Sanctions against Plaintiff for spoliation of evidence, alleging that Plaintiff spoliated ESI stored on EPCO’s server, shredded documents stored in an off-site warehouse, and wiped computers belonging to former EPCO employees. The Motion was held over for trial because of the fact-intensive nature of the allegations.

With respect to the ESI spoliation alleged, the court noted that Rule 37 applies. With respect to the electronically stored logs lost from the server, the court found that Defendants had failed to show that any were actually lost. Defendants’ argument was based upon mischaracterization of a letter sent by Plaintiff’s counsel regarding document retention. The court in fact found that the electronically scanned copies of the logs were still on the server, as the retention policy stated that ESI must not be deleted.

The allegations as to the computers arose after Plaintiff, during initial disclosures and search term discussions, indicated that it had wiped the computers of eight former EPCO employees after their termination. However, the court found that Defendants had not shown that the employees in question had maintained any relevant ESI, as seven of the eight employees were named as records custodians, and Defendants only deemed the ESI important after learning it had been destroyed. With respect to one employee, Worley, the court found that relevant ESI was likely on his computer, as he maintained EPCO’s logistics, fleet maintenance and driver compliance. However, there was no evidence that the ESI could not be restored or replaced through additional discovery, which is required for a finding of spoliation. Additionally, Worley’s emails were found in other places.

Court denied the sanctions motion.  After the trial was conducted, the court further ruled against Plaintiff on its claims and against Defendants on their counterclaims.

ILS – Plaintiff Electronic Discovery Experts

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