Saying that a “lack of frankness in discovery can have unintended and damaging consequences,” a Manhattan federal magistrate judge has sanctioned plaintiffs for failure to preserve evidence in a consolidated securities fraud action against underwriters CIBC and Schroder.
Southern District of New York Magistrate Judge James C. Francis IV said that the plaintiffs, who are purchasers of preferred stock or senior notes of the now-bankrupt WRT Energy Corporation, had an obligation to preserve certain documents that were in the possession of WRT’s successor. He also said the purchasers should have alerted CIBC and Schroder before allowing the successor to destroy the documents in question.
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