Judge Kimba M. Wood found for the first time in the Second Circuit in Dorchester Financial Holdings Corp. v Banco BRJ, S.A. that a party must not destroy a “crashed” computer, or it will be subject to a punitive adverse   inference.  One of the issues in the case was the propriety of certain documents which the defendant claimed were forged.  In 2002, before plaintiff filed its lawsuit, its principal collected all of the materials the plaintiff had on the hard drive of his personal computer.  Sometime between 2002 and 2012 this principal transferred the files to the hard drive of a new personal computer.  Then tragedy struck.

After filing suit, while the dismissal of the complaint was on appeal, the hard drive of the personal computer “crashed.”  The principal asked his brother in law “who lacked any formal computer training to examine the computer.”  The brother in law advised that the computer “was basically gone.”  Instead of then consulting a computer specialist (or advising the opposing party or the court) the principal destroyed the computer.  Because the plaintiff had never made a back-up of the hard drive, all metadata and all files which had not been printed out were lost entirely.

The Magistrate Judge assigned to the litigation reviewed the spoliation dispute and suggested issuing a preclusion order.  Upon review, the District Judge modified that finding to a mandatory adverse inference, holding that spoliation had definitely occurred in a grossly negligent manner relating to relevant information.

Specifically, the Court found that, at the time the computer was destroyed, the plaintiff was under a duty to preserve because it was actively litigating the appeal of the dismissal of its complaint.  The court further found (for the first time in the Second Circuit) that the “fact that a personal computer stops functioning is by no means a death knell for the data it contains.”  Therefore, the plaintiff had an obligation to preserve the “crashed” computer.  The Court’s sanction not only included a mandatory adverse inference that will compel the factfinder “to infer that [the plaintiff] destroyed electronic evidence, including emails and metadata, favorable to [defendant’s] claim that it did not participate in the transaction at issue in this action” but also required the plaintiff to pay the defendants “reasonable attorney’s fees and costs in connection with the spoliation dispute.”

While it might seem obvious to a computer savvy person, not everyone understands that information can be retrieved from a “crashed” computer.  Once a party is under an obligation to preserve discovery it must make sure that it preserves electronic devices that it believes are inoperable or face a possible spoliation motion.