Default Sanction Suggested for Computer Spoliation
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A magistrate judge in Brooklyn has recommended entering a default judgment against the defendants as a sanction for the extreme measures they took to destroy and falsify electronic documents in a federal fraud and RICO action.
If confirmed by an Eastern District of New York judge, the case will mark the first time a judge within the 2nd U.S. Circuit Court of Appeals has awarded a default judgment on the basis of tampering with electronic evidence.
“Under such exceptional circumstances, the only appropriate non-monetary sanction is a default judgment in plaintiffs’ favor, pursuant to Federal Rule of Civil Procedure 37(b)(2)(A)(vi) and the court’s inherent powers,” Magistrate Judge Robert M. Levy wrote in Gutman v. Klein, 03-cv-1570.
“First, lesser sanctions would not adequately deter misconduct of this severity. … This is especially true where, as here, the court has previously imposed lesser sanctions on the responsible party for other discovery misconduct. … Second, the most serious forms of spoliation merit the harshest sanctions, and in this case, the destruction of evidence was of the worst sort: intentional, thoroughgoing, and (unsuccessfully) concealed.”
Eastern District of New York Judge Brian Cogan will now consider the recommendation.
Plaintiff Aryah Gutman filed the present action in April 2003, accusing his longtime real estate business partner Zalman Klein and others of misappropriating millions of dollars.
In August 2008, Gutman filed a motion seeking “a default judgment or similar terminating sanctions,” based on Klein’s destruction of electronic evidence.
Gutman charges in his complaint that Klein’s “discovery games” began in 2004, when he “furtively” replaced a laptop containing documents evidencing his role as “the kingpin of the conspiracy to rob” Gutman.
An expert’s report said Klein also backdated the installation of the replacement computer’s operating system to make it appear older, and then uploaded thousands of files while the computer’s clock was set to a date months earlier. The report said he also deleted “hundreds if not thousands” of files, then ran a data recovery program to determine if he had “covered his tracks.”
The plaintiff’s counsel, Darren Oved of Oved & Oved, in a memo in support of a default judgment, noted that the 2nd Circuit had yet to address the appropriate remedy for such “duplicitous spoliation and subsequent cover-up.”
“Plaintiffs have incurred, at a minimum, hundreds of thousands of dollars in costs investigating Mr. Klein’s misdeeds, seeking the Court’s intervention in vain attempts to obtain Klein’s compliance with reasonable and relevant discovery requests, and engaging in seemingly never ending motion practice because of Defendants’ recalcitrance,” according to the plaintiff’s memo.
The defendants conceded many of the allegations, though they contested the sanction.
“Dismissal is imposed only in extreme circumstances where any alternative or less drastic sanctions would be inappropriate or futile,” the defense noted in a memo opposing the motion.
In a report issued last week, Magistrate Judge Levy recommended granting Gutman’s motion.
“While defendants’ understanding of computer processes may be faulty, their admissions that [an expert hired by Klein] searched the internet for the Kill Disk and Get Data Back programs; reinstalled the Klein laptop’s operating system; copied files onto the Klein laptop from an external source; and altered the Klein laptop’s system clock are unmistakable,” Magistrate Judge Levy concluded.
He recommended a default judgment, citing the Federal Rules of Civil Procedure and the court’s discretionary powers.
Oved, Gutman’s attorney, could not be reached for comment.
Barry Feerst of Brooklyn has represented the defendants since 2006. He said his clients intend to file objections to the report.
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