Occasionally, we discuss non-Northern District of Texas cases of importance to litigators in federal court. The court’s recent decision (pdf copy here) in Victor Stanley v. Creative Pipe (D. Md.) is one that all litigators should be familiar with. The court’s decision is notable for at least six reasons.
First, the Court found that the Mark Pappas, the President of Defendant Creative Pipe, committed pervasive and willful violations of several Court orders to preserve and produce electronically stored information (“ESI”), and ordered that he be imprisoned for a period of time not to exceed two years, unless and until he pays to Victor Stanley the attorney’s fees and costs that will be awarded to Victor Stanley as the prevailing party under Rule 37. The court found that Pappas had committed eight discrete violations:
(1) failed to implement a litigation hold;
(2) deleted ESI soon after [plaintiff] filed suit;
(3) failed to preserve his external hard drive after Plaintiff demanded preservation of ESI;
(4) failed to preserve files and emails after Plaintiff demanded their preservation;
(5) deleted ESI after the Court issued its first preservation order;
(6) continued to delete ESI and used programs to permanently remove files after the Court admonished the parties of their duty to preserve evidence and issued its second preservation order;
(7) failed to preserve ESI when he replaced the [a] server; and
(8) further used programs to permanently delete ESI after the Court issued numerous production orders.
The court’s 89 page decision summarizes the violations in great detail, and concludes by stating: “Collectively, they constitute the single most egregious example of spoliation that I have encountered in any case that I have handled or in any case described in the legion of spoliation cases I have read in nearly fourteen years on the bench.”
Second, the court noted that Creative Pipe had “acquiesced” in the entry of a default judgment with regard to Victor Stanley’s flagship copyright claim (Victor Stanley basically asserted that Creative Pipe, its competitor, downloaded Victor Stanley’s copyrighted material for use in Creative Pipe’s business).
Third, the court noted that it could initiate criminal contempt proceedings against a party for spoliation of ESI in a civil case.
Fourth, the court painstakingly summarizes spoliation law as it exists in the various circuits, including the potential spoliation sanctions that can be imposed.
Fifth, the court noted that Victor Stanley had requested that the court refer the matter to the United States Attorney to evaluate whether perjury or other criminal charges should be brought against Pappas. The court noted that this avenue was available to it, but ultimately declined to refer the matter, writing:
I have given serious thought to doing this, because I have concluded that Pappas, and through him, CPI, engaged in multiple willful acts of destruction of evidence and lied under oath in affidavits, deposition testimony, and before the Court during the hearings it held. Knowing, however, the existing demands on the U.S. Attorney’s office to prosecute very serious crimes, as well as their available resources, I do not think it probable that they would agree to initiate a criminal case arising out of a factually-complicated civil case involving an inordinately voluminous record, and concerning highly technical issues that will necessitate expert testimony.
Sixth, the court found that Pappas had committed civil contempt of court which was established by clear and convincing evidence. The court’s sanction, as noted above, was that Pappas should be imprisoned for a period of time not to exceed two years, unless and until he pays to Victor Stanley the attorney’s fees and costs that will be awarded to Victor Stanley. With respect to the sanctions being civil as opposed to criminal, the court stated:
Despite the fact that, if Pappas refuses to pay the attorney’s fees and costs ordered by the Court, he will be imprisoned for two years, it is quite clear that this is a civil—not a criminal—contempt sanction, because the relief is compensatory and the sanction will be imposed to coerce Pappas’s compliance with this Court’s order to pay attorney’s fees and costs to Plaintiff; Pappas can avoid imprisonment by promptly paying the fees and costs. This result is absolutely essential as a civil contempt sanction because, without it, I am convinced that Pappas will do all that he can to avoid paying any money judgment or award of attorney’s fees that is in the form of a civil judgment alone. Without the threat of jail time, Pappas’s future conduct would be predicted by his past, and Plaintiff will receive a paper judgment that does not enable it to recover its considerable out-of-pocket losses caused by Pappas’s spoliation. To avoid jail time, all that is required of Pappas is to pay Plaintiff the attorney’s fees and costs that will be awarded to Plaintiff for prevailing on this motion.
Victor Stanley is represented by Randell Ogg, of Bode and Grenier LLP, and Robert Wolinsky, of Hogan Lovells.
Creative Pipe is currently represented by Jeffrey Orenstein, of Goren, Wolff & Orenstein, and Orenstein LLC, and Joshua Kaufman, of Venable LLP. (Note that the court specifically remarked that such counsel did not represent Creative Pipe during the times when the conduct resulting in spoliation of evidence took place.)
