The defendants in a fraud case out of Michigan are discovering the harshness of spoliation sanctions. A court has ordered $35,000 in sanctions and an irrefutable adverse inference that the files contained unfavorable information. The case involves three types of files all deleted at different times, and the court’s decision comes down to when the defendant’s actions occurred.

After the plaintiff, Barrette Outdoor Living (Barrette) fired Lemanski, Barrette started to suspect that Lemanski was involved in a pass-through scheme and sued him for fraud. During the litigation, Barrette accused Lemanski of spoliation related to getting rid of files on his work computer, his cell phone, and his personal laptop.

As to the work-computer files, the court concluded that Lemanski’s duty to preserve had not arisen when the files were deleted. Lemanski deleted the work files on the day of his termination, before Barrette even expected any pass-through scheme. The court rejected Barrette’s argument that Lemanski should have reasonably anticipated litigation at the time of his firing, noting that even if Lemanski had engaged in fraud there is no reason to think that he believed his conduct would result in a lawsuit.

As to the cell phone and the personal computer, the court concluded that the duty to preserve had arisen, and ultimately, determined sanctions were appropriate. Lemanski returned the cell phone to the service provider and obtained a new one on the same day that Barrette sent an email informing Lemanski of “grave concerns” and requesting a meeting. The court noted that the timing of Lemanski’s decision to obtain a new phone was “highly suspect.”

Additionally, Lemanski deleted 270,000 files from his personal laptop after Barrette sought an order compelling the production of the laptop for imaging. The court again noted the “temporal proximity” of deleting the files, suggesting that the timing is some evidence of bad faith.

Because of the spoliation, the court ordered Lemanski to pay Barrette $25,000 for the fees incurred in bringing the spoliation motion and $10,000 for increased expenses. Additionally, the court ordered that there would be an adverse inference at trial that Lemanski’s cell phone and personal laptop contained unfavorable information related to the pass-through scheme.

The court rejected Lemanski’s argument that the inference be permissive, focusing on the bad faith and the timing of the spoliation:

Given that Lemanski’s spoliation was substantial, intentional, in bad faith, and occurred during active litigation, the Court finds that the adverse inference must be irrefutable. As noted in Magistrate Judge Michelson’s report, Lemanski’s conduct was in violation of the Court’s order. This behavior requires a harsh sanction.

A link to the full opinion, including the Magistrate Judge’s Report and Recommendation, is available here (via K&L Gates).

Rachel Paxton-Gillilan