Delaware Supreme Court Sanctions Party for Deleting Unallocated Hard Drive Space

In Genger v. TR Investors, LLC, et. al. [pdf], No. 592 2010 (Sup. Ct. Del. Jul. 18, 2011), the Delaware Supreme Court affirmed the lower court’s spoliation sanction for violating a court order requiring defendant Genger to preserve electronically stored information.

The appeal arose out of a contest for control of Trans-Resources, Inc. The Trump Group, whose members are the appellees, brought an action against Genger to determine which stockholder group possessed the majority voting interest entitled to elect the Trans-Resources board of directors.  The parties settled their dispute and entered into a stipulated court-approved final judgment that granted the Trump Group’s designees a lawful majority of the Trans-Resources board.

However, two weeks later, the Trump Group set aside the judgment and re-opened the case on the grounds that Genger had destroyed documents related to the action in violation of the court’s prior document preservation (“status quo”) order. The Court of Chancery re-opened the case and, at trial, determined that Genger had destroyed documents and then instructed another to use wiping software to permanently delete ESI from his computer.  As a sanction, the court required Genger to satisfy his burden of proof by clear and convincing evidence rather than by a preponderance.  In addition, the court awarded the Trump Group $750,000 in attorneys’ fees in addition to a court award of $3.2 million.  The appellate court affirmed, holding that Genger’s wiping of the unallocated space on his work computer was a deliberate attempt to destroy relevant evidence in violation of the courts’ status quo order.