Court Partially Grants Plaintiff’s Motion for Sanctions for Spoliation in a Breach of Contract Dispute

23 Feb 2018

In Hefter Impact Techs., LLC v. Sport Maska, Inc., No. 15-13290-FDS (D. Mass. Aug. 3, 2017), the Plaintiff Hefter Impact Technologies, LLC (“HIT”) sold its ice-hockey helmet design to the Defendant, Sport Maska, Inc., d/b/a Reebok — CCM Hockey (“CCM”). CCM agreed to pay HIT royalties on its helmets based on the original HIT design. In September 2014, HIT sent a letter to CCM demanding royalties. This breach of contract lawsuit alleged that CCM failed to pay the requisite royalties. CCM issued a legal hold but refused to produce it, claiming it was privileged. CCM’s in-house counsel testified that he spoke with some of the people who received the legal hold but did not take any other measures to ensure compliance with the hold.

6 years earlier, CCM changed the system the company used for emails. During the transition to the new system, stored emails that were sent and received before the switch were destroyed. Under CCM company policy, employees manage their email storage. Once their storage capacity runs out, employees must delete messages to free up space.  CCM also only kept back-ups of old emails for three months and then destroys them. Also, under Canadian law, when a woman goes on Maternity leave, she is technically no longer employed by the company during the leave, and most companies wipe all computers as part of protocol (relevant because one CCM employee had more than one maternity leave from 2005 to the present but only had email from 2014 forward on her laptop).

The court observed that the scope of documents in question was not wide. HIT contends that CCM destroyed emails due to its unorthodox management and destruction of ESI.  The Court disagreed, finding it could impose no sanctions for spoliation of evidence because CCM did not act in bad faith. While the Court agreed that CCM’s document production was very far from ideal and that its ESI destruction policy was particularly aggressive, CCM’s actions did not rise to the level of bad faith to warrant sanctions, although the court did order CCM to pay HIT’s attorneys fees and costs.