Finding an attorney’s destruction of email evidence was “planned, repeated and comprehensive,” a Southern District judge has sanctioned the lawyer by awarding judgment to his adversary.
Greg V. Wood, who has worked as a structured finance and derivatives attorney, founded a business that helped financial institutions meet regulatory requirements. When he and his business were sued for copyright infringement, emails that he was asked to produce in discovery were destroyed.
“Wood deleted every relevant email he could find,” said Judge Katherine Forrest (See Profile) said in Regulatory Fundamentals v. Governance Risk Management, 13 Civ. 2493. She said the evidence made it clear that “Wood purposefully destroyed documents to avoid liability. He did so knowingly and intentionally, and then tried to cover it up. This clearly constitutes bad faith.”
In an email to the Law Journal, Wood said, “I did nothing intentionally wrong and was as open, honest and forthright as I could have been. I don’t know what more I could have done, so I am surprised and disappointed by the court’s ruling.”
The Regulatory Fundamentals Group, which provides consulting and business solution services to clients, sued Wood and his businesses, Governance Risk Management Compliance and Manhattan Advisers in April 2013.
Regulatory produces “a substantial amount of original material that is protected under copyright” about evolving financial regulations, Forrest said.
Regulatory entered into a marketing agreement with Governance Risk, which was to market Regulatory’s product line to compliance professionals at hedge funds, private equity funds and financial services firms.
Regulatory alleged Wood and his business breached the agreement by copying Regulatory’s works, posting a modified version on Manhattan Advisers’ website and distributing the material to hundreds of third parties.
Wood claimed he acted in accordance with the agreement, Forrest said.
In May 2013, Regulatory asked the defendants for documents both relating to its copyright-protected materials and referring to any entities that received Regulatory’s material from Wood and his companies.
But in a telephone conference with Regulatory’s counsel in March 2014, Wood’s counsel at the time—Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow—said Wood had terminated his account with MacHighway, a third-party vendor that had hosted the corporate defendants’ websites and email domains. Platzer indicated that although Wood thought the emails stored by the vendor had been downloaded on his computer, they had not, and the emails were destroyed.
Platzer also informed Regulatory that Wood had contacted the vendor but was told the electronic files were not recoverable.
Later in March, the Platzer firm moved to withdraw as counsel, and two other law firms subsequently withdrew from the case.
Following additional discovery about deleted files, Regulatory moved for a finding of spoliation and the imposition of sanctions.
At a June evidentiary hearing, Forrest ruled from the bench that Wood had engaged in willful and malicious spoliation.
In her decision issued last Tuesday, she provided her rationale and the nature of the sanction.
Based on the evidence, Wood’s demeanor and his lack of credibility while testifying, Forrest said she found Wood intentionally manually deleted emails, terminated the MacHighway account and then, realizing he was caught, reactivated his account so he could upload certain emails and produce them to Regulatory.
He intentionally instructed MacHighway to allow his account to expire again, Forrest said.
“When he realized the spoliation would not go unnoticed or be easily overlooked, Wood created a fictitious record and engaged in additional misconduct in an attempt to cover his tracks,” she said.
The evidence was clear and convincing that Wood’s knowing and intentional spoliation was done in bad faith, the judge found. That determination, she said, was based on chronology of events and relies on her belief that Wood lied during his testimony.
Wood offered contradictory explanations about why he originally deleted the account, Forrest said. His former counsel said he could not afford to pay for it, but in later court papers, Wood said that wasn’t true and he deleted the account as part of the process of shutting down his business.
“Neither explanation is credible,” Forrest said.
Wood conceded he also regularly deleted individual emails and he did not change this practice when the suit was filed. Forrest said as many 4,000 to 10,000 emails were deleted based on Wood’s own estimate. But the judge said Wood’s own testimony undermined the court’s attempt to get a clear picture of the scope of deletions.
“He deleted items from his email archives, from his sent mail, from his deleted mail, and just to ensure there was no way to recover the materials, from the server on which relevant emails were stored, twice,” Forrest said.
Following the second deletion, Wood exchanged several emails with MacHighway, which Forrest said was an attempt to create a false record and transfer blame to the vendor.
Until recently, Forrest said, Wood claimed he didn’t know that he wasn’t supposed to destroy documents related to pending litigation.
Forrest noted in her ruling that Wood earned a J.D., L.L.M. and M.B.A. from Cornell. According to a transcript of a hearing, Wood said he practiced at Orrick, Herrington & Sutcliffe; now dissolved firm Thacher Proffitt & Wood, and Linklaters.
“While not a litigator, the court finds that Wood had at least a basic understanding of the moral, ethical, and legal responsibilities of parties and their counsel not to destroy the very documents opposing counsel has requested in a pending lawsuit,” Forrest said.
She said monetary sanction or the imposition of adverse inference would not be sufficient.
“Wood’s deletion of emails and his attempted cover-up put [Regulatory] in an untenable litigation position—the evidence of the scope of defendants’ alleged misconduct is gone forever,” Forrest said. “Any sanction short of a terminating sanction would fail to account for the prejudice or to sufficiently penalize Wood or deter others from engaging in such misconduct.”
The judge granted Regulatory’s request for a terminating sanction and entered judgment in its favor. She said she will also consider an award of reasonable attorneys fees and ordered Regulatory to provide billing records.
David Spears, Regulatory’s attorney and a partner at 12-attorney firm Spears & Imes, said that he anticipates attorneys fees to be in the hundreds of thousands of dollars. He said he and his client are considering whether to request statutory damages. “The terminating sanction was appropriate because the defendants’ conduct was egregious,” Spears said.