chevron-down Created with Sketch Beta.
December 21, 2018 Practice Points

Spoliation of Evidence: The Surest Road to Sanctions

An order recently issued by the U.S. District Court for the Southern District of Florida in FTC v. Dluca illustrates how sanctions for failure to preserve ESI can be imposed.

By Matthew C. Plant

Although there are potential pitfalls at every step of the discovery process that parties and their counsel need to consider and avoid, spoliation of electronically stored information (ESI) ranks at the top of the list, subjecting the noncompliant party to a substantial likelihood of sanctions. An order recently issued by the U.S. District Court for the Southern District of Florida in FTC v. Dluca illustrates how sanctions for failure to preserve ESI can be imposed. Case No. 0:18-cv-60379-KMM (S.D. Fla. Oct. 29, 2018) (Doc. No. 145).

Dluca: Case Details
In Dluca, the Federal Trade Commission (FTC) brought a claim against three defendants alleging that they created a cryptocurrency-investment pyramid scheme. In April 2018, the court entered a preliminary injunction that required the defendants to turn over to the FTC ESI regarding their “promotion of money-making opportunities since January 1, 2014” and to further “preserve certain business records relevant to the instant cause.”

Following the entry of the preliminary injunction, and despite actual notice of its preservation provisions, one of the defendants, Dluca, deleted all of the emails that were stored in his Gmail account prior to May 2018. The court found that Dluca violated the preliminary injunction by deleting his emails and that the FTC was prejudiced as a result. Therefore, the court sanctioned Dluca by (1) permitting the introduction of a rebuttable adverse inference at trial or in connection with a summary judgment motion “that the deleted emails would have supported the factual allegations of the Complaint . . . [and] that the deleted emails would tend to negate the factual allegations underlying [Dluca’s] purported ‘Affirmative Defenses,’” (2) barring Dluca from “introducing any evidence of the contents of the deleted emails,” and (3) striking Dluca’s “Good Faith” and “Mootness” affirmative defenses.

Interestingly, the sanctions motion was a joint motion filed by the FTC and Dluca based on a stipulation as to the spoliation violation. It might be assumed that Dluca joined in the motion because he was concerned that the sanctions would have been worse if he had opposed the motion.

The court’s sanctions in Dluca relate to the violation of a preliminary injunction requiring the preservation of ESI; however, even absent a preliminary injunction, parties are under an obligation by court rules and case law to preserve relevant documents, including ESI, once litigation is reasonably contemplated. Practitioners need to be mindful of this obligation and counsel their clients accordingly. To that end, counsel should, at a bare minimum, (1) communicate with clients and client personnel to identify all possible data sources and repositories, whether hard copy or ESI; (2) ensure that the client issues appropriate litigation hold letters to the correct custodians; and (3) follow up with the client to ensure that any litigation holds have been followed. If these minimal steps are not taken, the chance of relevant documents and ESI being destroyed is greatly increased—as is the risk of sanctions for spoliation.

Matthew C. Plant is a principal with Bressler, Amery & Ross, P.C. in New York, New York.

Copyright © 2018, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).