Sanctions: Litigant Recently Testified That He Did Not Know What a “Litigation Hold” Was

Sanctions were imposed in DG BF LLC v. Ray, No. 2020-0459 (Del. Ch. Nov. 19, 2021).[1] The court dismissed a fraud and retaliation lawsuit for discovery abuse.  Among other issues, plaintiff testified that he did not know what a “litigation hold” was, even though defendants sent a preservation demand to him.

It “appears that this litigation was conducted in an Inspector Clouseau-like fashion. However, unlike a Pink Panther film, there was nothing amusing about this conduct and it did not conclude neatly.”

Coquina Invs. v. Rothstein, 2012 WL 3202273, at *1 (S.D. Fla. Aug. 3, 2012), aff’d sub nom. Coquina Invs. v. TD Bank, N.A., 760 F.3d 1300 (11th Cir. 2014).

The Delaware court chronicled a number of failures, acts, and omissions, including failure to collect or image a plaintiff’s cell phone, laptop, server, and email accounts, as well as failure to provide “a comprehensible hit report,” and destruction of data.  It wrote:

Plaintiffs’ repositories of electronic documents proved elusive. [Plaintiff,] Menashe testified he did not know what a litigation hold was, and did not advise his Demeter colleagues to preserve documents or collect their data when they left Demeter. [Emphasis added].

It noted that, in sharp contrast, plaintiffs issued a detailed preservation demand to defendants.

The court was obviously concerned by facts such as: “Menashe testified that he did not text about business matters, but that testimony was undermined by texts Defendants produced; when confronted, Menashe then testified he deleted all such messages.”

After citing a pattern of contemptuous behavior and violation of three discovery orders, the court wrote that: “Trial courts should be diligent in the imposition of sanctions upon a party who refuses to comply with discovery orders, not just to penalize those whose conduct warrants such sanctions, but to deter those who may be tempted to abuse the legal system by their irresponsible conduct.”

It wrote: “Plaintiffs have nobody to blame but themselves. Plaintiffs’ failure to meet their discovery obligations began with their early partial collection and failure to preserve Demeter repositories, and ended with Menashe’s spoliation of his text messages and attempt  to thwart this Court’s orders regarding his cell phone.”

Blame was placed on plaintiff and his attorney:

While Defendants have generously characterized this state of affairs as “a Menashe problem,” I believe his counsel’s approach of prioritizing bluster over substance has compounded the problem. It is clear that no sanction short of dismissal has been or would be meaningful. [Emphasis added].

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[1] The decision was highlighted in M. Leonard, “Cannabis Investor Loses Fraud Lawsuit After Destroying Evidence” (Bloomberg Nov. 22, 2021).