Court Orders Adverse Inference for Spoliation of CEO's Data but Finds No Obligation to Preserve Relevant Data of Third Party Consultants

Goodman v. Praxair Servs., Inc., 2009 WL 1955805 (D. Md. July 7, 2009)

In this case arising from a claim for breach of contract, plaintiff Goodman alleged that defendant Praxair Services, Inc. (formerly Tracer) (“Tracer/PSI”) spoliated relevant data and was deserving of sanctions. Specifically, Goodman alleged that Tracer/PSI violated is duty to preserve when it failed to implement a litigation hold resulting in a significant loss of data, including the contents of relevant hard drives and emails, and where its CEO deliberately deleted data, among other things. Goodman also sought sanctions for the spoliation of Tracer/PSI’s third-party consultants’ files. The court granted in part and denied in part Goodman’s motion and ordered an adverse inference against Tracer/PSI.

Disagreement arose as to Goodman’s payment for his participation in a project to waive testing requirements for certain of Tracer/PSI’s products. The dispute revolved around who was responsible for the success of the project, Goodman, or other third-party consultants. Litigation ensued. Goodman suspected that Tracer/PSI failed to preserve relevant evidence and filed a motion for sanctions. The court’s opinion established the following facts:

• Tracer/PSI failed to institute a litigation hold;
• The hard drives of two “key players” and 43 other hard drives were replaced following Praxair Services acquisition of Tracer, despite a duty to preserve;
• Potentially relevant emails were deleted by Tracer’s CEO;
• Tracer’s email systems were “taken off line” in the conversion to Lotus Notes following Praxair’s acquisition of Tracer and no effort was undertaken to search for relevant emails on disaster recovery back up tapes;
• The hard drive of Tracer’s CEO was re-imaged without preserving the relevant data thereon; and
• The working papers of Tracer/PSI’s third-party consultants were not preserved, among other things.

The court established the three elements a party seeking spoliation sanctions must prove: 1) the party controlling the evidence had a duty to preserve it, 2) the destruction of the evidence was accompanied by a “culpable stated of mind”, and 3) the evidence was relevant to the party’s claims or defenses.

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Source: ediscoverylaw.com