Court Rejects “Hack”neyed Excuse
February 28, 2010Tech-savvy business owner Dmitri Nikitin received a judicial tongue-lashing and an adverse inference instruction after he destroyed emails potentially relevant to a pending lawsuit brought by a Korean corporation. Not buying Nikitin’s “hackers” defense, the Court said that Plaintiff Optowave was entitled to an adverse jury instruction at trial against Nikitin’s company Precision Technology Group. “This sanction,” the Judge wrote, “will serve to cure the unacceptable actions of Nikitin, while allowing the case to be decided on the merits.”
The e-discovery mishap arose out of a lawsuit involving a contract dispute between the two companies. Basically, Optowave believed that Nikitin failed to live up to the terms of the contract. One way to get to the bottom of this dispute would be to look at the dozens of emails exchanged between the Vice President of Sales and Marketing at PTG and Optowave. There was only one problem: After firing the Vice President of Sales and Marketing, Nikitin had the company hard drives reformatted. Whether by intentionally deleting the emails, or failing to preserve them prior to reformatting, dozens of documents relating to the contract went missing. The timing, according to the court, was “too coincidental and highly dubious.” Moreover, Nikitin claimed that he preserved all the relevant emails, but that hackers subsequently attacked the company and that all of its emails were lost.
As it turns out, Nikitin probably should have known better. Beyond being a businessman, Nikitin is a bit of a computer wiz. The court noted that he built his own computer from scratch.
There is nothing wrong with reformatting company hard drives as part of a business’ routine document management protocol. The lesson to be learned is NOT to do that when you have notice of a lawsuit or that one appears imminent. At that point, Nikitin had a duty to preserve, especially because he had explicit notice of the duty to preserve evidence.
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Tagged as: Accessibility, Computer Forensics Protocols, Cost Sharing & Shifting, Good Faith, Legal Hold/Preservation, Procedure, Production of Data, Spoliation.
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Dmitri Nikitin sounds like the classic case of tech-savvy but not business-savvy.
I wonder if Dmitri’s career will recover from his hard drive faux pas…
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Frank [eLL Editor-in-Chief] Reply:
March 3rd, 2010 at 11:32 PM
@uk visa law,
Ehh, one never really knows. But he seems to be resilient, doing business under PTG Inc, Fonon Technology International Inc, C3 Laser Inc, and Laser Photonics LLC. He is responsible for inventing some pretty serious laser equipment. Unless his breach of contract was so egregious as to deter clients from dealing with the company anymore, I doubt he is going to suffer from the slip up in the long run. Seeing as none of his companies are traded publicly and that he is the owner of all of them, he won’t be getting any backlash from shareholders either. However, he won’t be getting that new Lexus this year, either, if the judgment goes against him as it now seems aligned to do.
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This is one example of a situation where a party’s computer saavy seems to work in his disfavor. It appears that, at the very least, the court will take notice when a party has some type of special technical knowledge and fails to use it wisely to preserve documents in anticipation of litigation. Is there such a thing as a heightened standard of care for parties who are more computer saavy? And is it REALLY ok to reformat business hard drives as part of routine document management protocol, or is a party expected to put a freeze on that routine when litigation is imminent? While this situation seemed suspicious to the court, it would be interesting to see how it turned out if his actions were found to be the result of negligence (rather than intentional).
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The duty to preserve evidence is so important in these cases. I question whether executives know how damning an adverse inference instruction can be. While the court noted that the timing of the hard drives being reformatted was “too coincidental,” Nikitin’s “hackers” defense seems to add to the unrealistic nature that the evidence was somehow inadvertantly lost. Regardless of why or how the evidence was destroyed, the duty to preserve exists. By not preserving, Nikitin all but eliminated any chance he had of winning the case.
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Nikitin did not invent the laser equipment - that was by Academician Kondratenko.
Nikitin also managed to ruin various businesses in Russia, before running to Austria and then the USA.
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