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February 28, 2018 Practice Points

Spoliation on a "Staggering Scale" Leads to Sanction of Default Judgment

A recent case shows the harm clients can do to themselves if not clearly instructed about their discovery obligations or if they choose to ignore their lawyer's advice.

By Andrew M. Toft

An administrative law judge (ALJ) did not abuse his discretion when he entered default judgment as a sanction for spoliation of evidence. Organik Kimya, San. Ve Tic. A.S. v. ITC, 122 U.S.P.Q. 1281, 848 F.3d 994 (Fed. Cir. 2017).

Under 19 C.F.R. § 210.33(b), the ALJ in an International Trade Commission (ITC) investigation has the authority to issue non-monetary sanctions for failure to comply with an order compelling discovery. The list of possible sanctions includes “any other non-monetary sanction available under Rule 37(b) of the Federal Rules of Civil Procedure.” 19 C.F.R. § 210.33(b)(6). Rule 37(b) states that a court may “render[] a default judgment against the disobedient party” if the party fails to obey a discovery order. Fed. R. Civ. P. 37(b)(2)(A)(vi).

The sanctions imposed were the result of what the court described as “spoliation of evidence on a staggering scale.” Four days before a forensic examination of one laptop, and three days after the ALJ issued a discovery order authorizing examination of the computer, Organik Kimya (OK) began overwriting the laptop’s hard drive and backdated the computer’s internal clock so the metadata on the copied files would hide the fact that the overwriting took place just before the forensic inspection. In a second circumstance, a forensic examination revealed evidence of a plan by OK to purge certain emails to cover up some of OK’s activities. The owner of a laptop who had done work for OK and whose activities OK sought to hide, smashed the hard drive on his personal computer with a hammer and destroyed a bag full of zip drives. Finally, one day after the ALJ ordered another individual’s computer files to be preserved and four days prior to the scheduled forensic examination of the computer, 2,742 user-created files and folders were deleted. Many of these files and folders were recovered and found to be responsive to previously identified search terms. The forensic examination also uncovered the existence and use of numerous undisclosed and unproduced USB storage devices. Before this information could be acted on the owner of the laptop and storage devices “accidentally” left them in the bathroom of a highway rest stop.

The ALJ’s order stated in part:

[T]his is an extreme case, for Organik Kimya flouted its obligation to preserve evidence, deliberately destroyed evidence, and then actively attempted to deceive the undersigned as to what it had done. Given: (1) the grave damage Organik Kimya’s deliberate conduct potentially could have on the administration of justice; (2) the need to deter such egregious conduct in the future; and (3) the certain prejudice to Dow, only the strongest remedy available is sufficient.

Affirming the sanctions imposed, the Federal Circuit agreed that although entry of a default judgment for failure to comply with a discovery sanction may seem harsh, the most severe sanctions must be available in appropriate cases.

Attorneys cannot control the actions of clients. This case shows the harm clients can do to themselves if not clearly instructed about their discovery obligations or if they choose to ignore their lawyer’s advice. The issue for lawyers is how best to meaningfully communicate the severity of the available sanctions to clients to prevent sanctionable conduct.

Andrew M. Toft is an attorney in Denver, Colorado.

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