e-Lessons Learned

This case involves evidence spoliation where one party made an amazing gaffe during the information discovery part of litigation, often called “discovery.” Kucala Enterprises and its owner, John Kucala (collectively “Kucala”), filed a lawsuit against Auto Wax Company (“Auto Wax”) in 2001 to invalidate a patent owned by Auto Wax. Auto Wax countersued for patent infringement. After entry of a protective order, Auto Wax, through a court order, sought to inspect Kucala’s computer files for information relating to the manufacture of Kucala’s products. After delaying this inspection for over two months, Kucala allowed Auto Wax to inspect Kucala’s desktop computer on February 28, 2003.

However, on the eve of inspection, Kucala installed a computer program called “Evidence Eliminator” to Kucala’s desktop computer.

As the program’s name suggests, Evidence Eliminator is a hard drive-cleaning or scrubbing program that deletes and overwrites computer files to make sure that information from such files can never be recovered. Evidence Eliminator’s website billed the product as “data destruction technology” that will “defeat EnCase and other Forensic Analysis equipment.” Kucala Enterprises, 2003 WL 21230605 at *2. Kucala had learned on February 25, 2003 that Auto Wax had planned on using forensic imaging software called “EnCase” to inspect Kucala’s computer. Against the advice of his attorney, Kucala installed and began using Evidence Eliminator that day.

Ironically, while able to eliminate evidence of any damning computer files on Kucala’s computer, Evidence Eliminator was not able to eliminate the evidence of the program’s actual use. On the day of inspection, Auto Wax learned that Kucala had used Evidence Eliminator to delete and overwrite over 15,000 computer files on Kucala’s computer. Auto Wax subsequently filed a motion for sanctions against Kucala, claiming that Auto Wax had been severely prejudiced by Kucala’s deletion of relevant discoverable information, and asked that default judgment be rendered against Kucala.

Kucala tried to defend his conduct by claiming that he only deleted documents that he deemed to be irrelevant. He also claimed that he deleted documents because he was afraid that Auto Wax would not honor the protective order in place, even though Kucala could not point to any evidence suggesting that Auto Wax might do so. He further tried to excuse his conduct by explaining that he had never been involved in litigation before.

The judge was not convinced. In the court’s view,

Any reasonable person can deduce, if not from the name of the product itself, then by reading the website, that Evidence Eliminator is a product used to circumvent discovery. Especially telling is that the product claims to be able to defeat EnCase, the forensic imaging program used by Auto Wax to inspect Kucala’s computer. Kucala knew that Auto Wax planned on using the EnCase software, and he proceeded to install Evidence Eliminator anyway, even after he was advised by counsel not to use it.

Id. at *5. As for Kucala’s excuses, Kucala’s own testimony had revealed that he knew of the importance of discovery and evidence preservation, and he also knew that only the court had the authority to determine what information was relevant and what information was not. Further, the court found no basis to believe that Auto Wax would not honor the protective order already in place.

Default judgment is a pretty severe remedy: it causes the defending party to lose its entire case. As such, the Court of Appeals for the Seventh Circuit has directed its lower courts to use default judgment as a sanction “only in extreme scenarios or when lesser sanctions have proven futile.” Id. at *4 (citing Ellingsworth v. Chrysler, 665 F.2d 180, 185 (7th Cir. 1987). However, the court in this case found such an extreme scenario to be present, as the spoliation of what could have been (and likely was) relevant evidence prevented Auto Wax from adequately proving its case and severely limited the fact-finder’s ability to do its job. The court ruled in favor of Auto Wax, entered default judgment against Kucala, and awarded Auto Wax all costs and attorney’s fees related to the issue of sanctions.

So what’s the moral of the story? Do not destroy electronic documents during a lawsuit. Preserve all electronic documents the moment you learn that litigation may be imminent, and for the love of God, listen to your attorney when he tells you not to install a hard drive-cleaning program to your computer. It is far better to allow your attorney the opportunity to explain away what could be damning evidence than to delete such evidence and give the appearance of impropriety. Doing the latter will cost you in court.

Article posted on February 28, 2009 at 9:20 PM |              More... 
Tagged as: Sanctions, Spoliation.
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