A corporation will be held accountable for its lawyer having removed from its accountant’s office records that were about to be produced under subpoena.

U.S. Magistrate Judge Michael Hammer had “little difficulty” deciding the plaintiff in Fairview Ritz Corporation v. Borough of Fairview, 09-cv-0875, had committed spoliation, stating “it is clear that Plaintiff and its counsel acted intentionally or knowingly in keeping the document from Defendants.”

As a sanction, the defendants are entitled to an adverse inference about the missing evidence and to their legal fees in pursuing it, Hammer ruled on Tuesday.

The lawyer who scooped up the records was Michael Simitz, of Kologi Simitz in Linden. He represents Fairview Ritz Corporation, which formerly did business as Fairview Fitness Center/Ritz Day Spa, offering nontherapeutic massage services. On Jan. 17, 2008, Fairview police conducted an undercover sting operation that led to prostitution charges against employees and the seizure of assets under civil forfeiture law.

The charges were dropped or reduced but the assets were never returned and the business never reopened. Fairview Ritz, in its Feb. 25, 2009, complaint, calls the raid the culmination of an extended campaign of harassment to shut it down through selective, unfounded enforcement of building and health code violations.

The company claims the Fairview Police Department violated its constitutional rights, for which it seeks compensatory and punitive damages. That made the valuation of the business a “key issue,” wrote Hammer.

During 2009, the police department twice asked for valuation documents in discovery and was told none existed.

At a 2010 deposition, however, a Fairview Ritz witness testified that its accountant, Michael Condosta, and attorney, Scott Finckenauer, might have financial records and corporate files that had not been produced. In April 2011, the department served a subpoena on Condosta, a Ridgefield C.P.A., without objection from Simitz.

Condosta said in an affidavit that the lawyer arrived at his office while he was putting responsive documents into boxes, saying he wanted to review them. Simitz removed two file folders from the box and left with them, saying they contained medical and legal bills and other personal records of another Simitz client, Ron Stone, who had done work for Fairview Ritz, Condosta said.

Simitz then wrote to defense counsel saying he was withholding privileged materials, described as 32 pages of correspondence between Fairview Ritz and Finckenauer and another law firm.

A few days later, when Condosta dropped off the subpoenaed records, he told defense counsel about the removed files, resulting in repeated and failed defense attempts to get hold of them.

On Aug. 9, 2011, after two prior magistrate judges demanded a privilege log, Fairview Ritz provided a more detailed description of the legal correspondence but said the records included a 20-page document relating to another client. On Sept. 9, 2011, Hammer found the log deficient and ordered a more complete one.

By that point, Simitz had dropped the privilege claim for the 20-page document, saying it was a contract belonging to Pinetree Holistics Corporation, a massage parlor in Springfield owned by Stone which the defense alleged was connected with Fairview Ritz through commingled employees and accounts.

At a December 2011 hearing, Simitz explained that he had mailed the document to Stone, who he described as a former client, because it was related to Pinetree, and that he did not keep a copy.

Simitz, when ordered to provide contact information so Stone could be subpoenaed, first provided a post office box where service could not be made. Then, he agreed to accept service as Stone’s attorney.

Hammer ordered the document produced by Jan. 30, 2012. Stone filed an affidavit saying he’d lost it.

In finding spoliation, Hammer said there was no direct evidence of purposeful destruction but that Fairview Ritz had control of the document, that it was relevant, that Simitz purposefully removed it from the records being produced under the subpoena and sent it to Stone without keeping a copy in the event it was later deemed discoverable and that now it was apparently lost.

While finding the conduct here “more egregious than failing to implement proper litigation holds,” he declined to impose the most severe sanction: precluding Fairview Ritz from recovering economic loss based on its financial condition. There was no finding of actual bad faith, the probative value of the document was unknown and the defense had obtained other evidence of Fairview Ritz’s finances, Hammer reasoned.

Simitz says his client will appeal the decision to U.S. District Judge Jose Linares. He says he did not realize he had to keep a copy of the document and also did not expect Stone to lose it. And he disagrees that he gave inconsistent explanations, attributing the confusion to the length of time the issue was pending before three different magistrate judges.

Police department attorney Ruby Kumar-Thompson says “this type of behavior should not be condoned by the courts” and is “inimical to open discovery and good practice.”

Fairview Ritz never challenged the forfeiture and likely would have been able to set it aside, points out Kumar-Thompson, who works for a River Edge firm headed by Thomas Hanrahan.