HMS Holdings Corp. v. Arendt, 2015 N.Y. Slip Op. 50750(U) (Sup. Ct. May 19, 2015).

In this lawsuit, HMS alleged that the defendants – former employees – misappropriated confidential information, including trade secrets, on behalf of their new employee, Public Consulting Group (“PCG”).  When the lawsuit began, PCG promptly issued a legal hold notice to certain of its employees, including two of the defendants – each of whom were licensed attorneys.

During discovery, the parties entered into a discovery stipulation requiring defendants to make forensic images of their computers and certain other sources of electronically stored information.  Defendant Sean Curtain produced images of his work and personal computers; defendant Danielle Lange imaged her work laptop and personal iPhone.  HMS’ expert promptly inspected those images and found that both attorney defendants had destroyed relevant information.  The Court agreed.*

The Court found both lawyers “engaged in egregious misconduct for which they bear a high degree of culpability” and their misconduct caused “substantial prejudice” to HMS.  Given the intentional and willful spoliation, the Court presumed the lost evidence was both relevant and supportive of HMS’ claims.  Neither Lange nor Curtain could rebut this presumption.

Having established spoliation, the issue left for the Court was one of sanctions.  The Court declined to impose an Order of preclusion because HMS could establish its claims through avenues other than the lost evidence.  However, the Court found a mandatory adverse inference  was appropriate given the “willful and deliberate” misconduct perpetrated by the defendants.  Specifically, the Court found “the trier of fact should be permitted to draw the strongest possible adverse inference from defendants’ bad faith and intentional destruction, deletion and failure to produce relevant evidence.”  The Court also ordered defendants to pay HMS’ attorneys’ fees, costs and all expenses stemming from their willful misconduct.  Finally, the Court forwarded its decision to the Committee on Professional Standards for the Third Department.  According to the Court, given the nature of the conduct undertaken by Danielle Lange, her “honesty, trustworthiness, and fitness to practice law” was severely called into question.

 *Please consult the Court’s full opinion for a detailed description of the egregious misconduct the individual defendants engaged in, including repeated use of  data wiping tools and affirmative misrepresentations of fact.