In a decision showing the importance of ESI preservation efforts, Ohio’s Court of Appeals has upheld a lower court’s order imposing sanctions against the owner of a nursing home for the unexplained missing hard drive from the computer of its former CEO.  Altercare Inc. v. Clark, 2013 Ohio 2785 (9th Dist. Ohio June 28, 2013). The Court found the facility’s “utter disregard for the preservation of evidence” caused the plaintiff to suffer prejudice.

Following the termination of its former CEO, Lisa Marie Clark, Clark’s attorney sent Altercare a letter notifying it that Clark believed Altercare had breached her employment contract and requesting that Altercare preserve ESI, including Clark’s computer hard drive.  The letter even suggested methods by which it could comply with its obligations.  Altercare then sued Clark, alleging breach of contract, breach of fiduciary duty, fraudulent inducement and conversion.  Thereafter, Clark filed a counterclaim for breach of contract, retaliation, conversion and defamation.

During discovery, Clark learned that the computer she used as CEO “had crashed” and was not available for inspection.  Altercare agreed to review the computer and determine if any of the contents were recoverable.  Shortly thereafter, Altercare provided Clark with access to a hard drive.  Clark determined it was not from her computer.  The court ordered Altercare to verify whether the hard drive belonged to Clark’s computer and, if it did not, to “provide information concerning the location of the correct hard drive and produce it or if not available to explain why it is not.”

Pursuant to the court’s order, Altercare audited its computers and found one that had Clark’s profile and was registered in her name.  Upon inspection, however, Clark found that it did not contain the documents she created and saved on her computer as CEO. Clark then filed a motion to compel production of her hard drive and for sanctions.

The court granted Clark’s motion to compel.  As for her motion for sanctions, although the court did not grant Clark’s request for judgment on her affirmative claims, it dismissed Altercare’s complaint against Clark and found Clark was entitled to an adverse inference jury instruction based on Altercare’s spoliation of ESI.

Altercare appealed.  It argued that the trial court abused its discretion in applying the standards under Fed. Civ. R. 37 (F) (Failure to Participate in Framing a Discovery Plan).  Altercare further argued the dismissal sanction was too harsh because there was no evidence that the loss of Clark’s computer was the result of willfulness or bad faith.  The appellate court affirmed the trial court’s judgment, finding Altercare could not produce Clark’s computer and had “no satisfactory explanation as to where it is or what happened to it.”  It also found Clark suffered prejudice because the loss of her hard drive rendered her incapable of proving her case against Altercare.  For example, Clark could not fully prepare for her own deposition because she did not have access to relevant documents she created while CEO.  Clark also did not have access to her draft employment contracts, which were necessary to rebut Altercare’s claims of misrepresentation and fraudulent inducement.  The Court held Altercare’s actions “showed such extreme carelessness and indifference that Altercare had to bear responsibility for the spoliation of the evidence.” 

When confronted with a preservation demand, it is critical that parties take appropriate steps to preserve information, especially information specifically referenced in the demand.  If the demand is overly broad or unreasonable, the recipient can set forth its objections.