On August 1, 2018, Judge Beetlestone (E.D. Pa.) granted Defendants’ motion for sanctions based upon unequivocal evidence that Plaintiffs manipulated and fabricated emails material to the litigation. Although the Court imposed the drastic sanction of dismissing Plaintiffs’ complaint, the Court provided a detailed and instructive analysis supporting its ultimate conclusion. The Court’s analysis, addressed below, can be read in full here.
The underlying matter arises from the sale of Second Opinion, Inc., (“SO”). SO was a service business that connected lawyers representing personal injury plaintiffs with medical professionals who could serve as experts in litigation. Plaintiffs entered into an agreement to purchase the assets of SO and eventually filed a lawsuit alleging fraud, misrepresentation and breach of contract against Howard and Wendy Weiss – the prior owners of SO and Defendants to the lawsuit. The gist of the dispute was that the Defendants made false representations about the nature of SO and the assets the Plaintiffs were to receive pursuant to the purchase agreement.
In response to a letter request by the Defendants, the Court held a hearing on the record in December 2017 to decide a discovery dispute concerning whether Defendants’ interrogatories contained an impermissible number of subparts. At that hearing, the Court was advised of a newly discovered issue – that there were a number of significant discrepancies between emails produced by Defendants and emails produced by Plaintiffs.
A forensic expert was retained to examine each party’s computer(s) and eventually the Defendants moved for sanctions. In late June 2018, the Court received an ex parte fax from Plaintiff requesting dismissal of the suit, including the counterclaims filed by Defendants.
On July 5, 2018 the Court held a conference upon the record to discuss Defendants’ pending motion for sanctions. During that conference Plaintiff – in a radical departure from his faxed letter– represented to the Court he had no knowledge of any counterclaim against him. At the conclusion of the hearing, the Court scheduled another hearing to address the spoliation motion.
At its core, the issue boiled down to 7 emails and which, among them, were authentic.
For example, Email 3 – an email purportedly from Plaintiff to Defendant — stated, “[w]e are interested in cutting off training. We are interested in taking over the business and moving it forward. We believe we can do this.”
Yet, Email 4 — an email sent at the exact same time as Email 3 and also from Plaintiff to Defendant stated, “[we] are not interested in cutting off training. We are interested in taking over the business and moving it forward while still learning. We believe we can do this.”
The forensic examiner testified that Email 3 was found only on Plaintiff’s computer and was a fabrication; and Email 4 was found on both Plaintiff’s and Defendant’s computer. In what the Court observed was the most telling indicia of purposeful fabrication, is that Email 4 (the authentic email) was located in three different locations in Plaintiff’s computer, indicating that he had deleted the file. Plaintiff testified but the Court found his testimony not credible, confused and riddled with inconsistencies.
In order to determine the appropriate sanction, a Court must weigh three factors:
(1) the degree of fault of the person who destroyed or altered the evidence;
(2) the prejudice suffered by the opposing party; and
(3) the existence of alternative sanctions.
In assessing these factors the Court concluded that Plaintiff “intentionally altered and manipulated evidence” and when confronted with the altered emails he “accused the Defendants of having manipulated the authentic emails. [Plaintiff] actively deleted emails and the evidence shows that he continued to delete pertinent files as recently as…after the deposition when he was confronted with the fabricated emails.” And so, the Court determined Plaintiff’s actions were intentional and willful.
The Court then determined that notwithstanding the early discovery of Plaintiff’s actions, the prejudice “was substantial.” Specifically, Defendants had to hire an expert and expend significant sums of money (motion practice, full day of testimony). Additionally, the fabricated emails materially assisted Plaintiff’s case against Defendants. Such actions, said the Court, is a “wrong against the institutions set up to protect the public….fraud cannot be complacently tolerated…” Thus, the Court found Plaintiff’s behavior threatened to undermine the public’s faith in courts and the discovery process.
Finally, the Court assessed the various sanctions available to it inherently and specifically pursuant to Rule 37. The Court chose not to impose an adverse jury instruction as that would not remediate the prejudice to Defendants, would not deter this type of egregious conduct, and would be a minimal sanction where, as here, there was significant effort and costs imposed during the process. In opting not to impose only a financial sanction the Court noted that doing so would convey the wrong message to litigants that money could cure one’s improper actions. And so, according to the Court, based upon well-established law in the Third Circuit, the only remedy available that was proportional to the deleterious and egregious fraudulent conduct involved here was the outright dismissal of Plaintiffs’ claims. Indeed, “[a] party’s resort to fabricated evidence justifies denial of all relief to that party.”
There is little that needs to be said about this decision, as we all understand the egregious and continual conduct that was at play in this matter and the need for swift and severe sanctions. The decision, however, reminds us of the vast discretion a Court has when imposing sanctions.
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