So begins the searing opinion of District Judge Katherine B. Forrest of the Southern District of New York, in Regulatory Fundamentals Group LLC v. Governance Risk Mgmt Compliance, LLC, (8/8/14) which started out as a copyright infringement case and ended with a very serious spoliation order – striking the defendants’ defenses and entering judgment for the plaintiff because of intentional, bad faith destruction of emails. And that individual defendant is a member of the New York Bar. Judge Forrest said that he, of all people, should have known better. It is a lesson for us all.
Greg V. Wood is a member of the New York Bar who had worked as a structured finance and derivatives attorney for white-shoe firms in New York, leaving active practice to form businesses which were to help financial institutions comply with regularity requirements. He and his companies entered into a contract with plaintiff RFG, a company which provides consulting services and business solutions to investment funds. Wood’s companies were to obtain customers to whom RFG would then provide access to its copyrighted newsletters through its “white-label” website. RFG also emailed the copyright-protected content to Mr. Wood. RFG alleges in its suit that Wood started to copy and distribute the material as his company’s own, without permission. The opinion states that Wood sent a total of 4,000 to 10,000 emails containing RFG’s copyrighted content. He should have just defended the infringement suit, but the Court says he went far beyond that effort.
From the beginning of the lawsuit, says Judge Forrest, Wood began deleting emails which would have shown the nefarious activity. When this came to light, Judge Forrest held several hearings, at least one in chambers, finding that Wood terminated his outside document and email storage vendor, which conduct resulted in the loss of his saved emails. The Court found that he then reinstated the account and populated it with some emails he still had access to, in an attempt to cover up his first cover up, and then terminated the vendor again. He then tried to blame the vendor.
This was too much for Judge Forrest. She lambasted Wood for taking affirmative steps to ensure that the relevant emails and documents were permanently destroyed, and when RFG learned about it, he took steps to create a false record of mere negligence. “The steps were insufficient and his culpability is clear. Indeed, there is no room for doubt.” The Court made these findings “by far more than a preponderance of the evidence (indeed, the evidence is clear and convincing).” Judge Forrest also found that Mr. Wood was not truthful at the hearings.
Reviewing the case law holding that the spoliated evidence must be relevant, Judge Forrest ruled that in the case of a bad-faith intentional destruction, relevance is presumed. So is the prejudice to RFG, since it will never see the emails that may well have made their case. Judge Forrest issued the harshest of spoliation sanctions – a “terminating sanction” – granting judgment to RFG without any need to prove the copyright infringement, and ordering Wood and his companies to pay RFG’s reasonable attorneys’ fees.
So when your lawyer implores you, perhaps annoyingly, not to lose or destroy evidence, even inadvertently, it is this kind of case that is pressing on the lawyer’s mind.
© August, 2014, Law Offices of John C. Lane