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Art Collector Sanctioned for Failure to Comply with E-Discovery (NY)

December 14, 2009

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Federal courts continue to require strict compliance with e-discovery, even in situations where the litigants have seemingly retained copies of all relevant data. This issue recently came to light in an art related lawsuit in <i>Green v. McClendon</i>, venued in the Southern District of New York. The McClendon’s found a nice work of art at the International Fine Art Fair and agreed to pay plaintiff -- a London-based art dealer -- $4.2 million. But the McClendon’s separated shortly thereafter, leaving a balance of $3.7 million.
During discovery, in response to a discovery demand, the defendants produced an Excel spreadsheet with information regarding other art purchases. Plaintiff served a demand for information about the spreadsheet, including dates of modification and the like. When the defendants could not produce this information, plaintiff moved for an order authorizing an inspection of Mrs. McClendon’s computer. It was then revealed that a few months after plaintiff filed suit, the content of Mrs. McClendon’s computer was transferred to a number of CD’s and her hard drive was then wiped clean in order to install a new operating system. Plaintiff then moved for sanctions due to spoliation of evidence.
The Court held that there was “no doubt” that the defendant was obligated to preserve all documents stored on her computer pertaining to plaintiff, and that she and her attorney clearly failed to implement a litigation hold, which constitutes grossly negligent behavior in respect of spoliation.
Because no prejudice was established -- particularly because it appears all relevant information was copied -- plaintiff was not entitled to an adverse inference against the defendant. But the Court agreed to allow plaintiff additional time to complete discovery, including a further deposition of the defendant, and awarded plaintiff costs, including attorney fees.

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