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Protecting Against the Spoliation of ESI

This month's American Bankruptcy Trustee Journal features “Litigating Against Bad Debtors: Protecting Against the Spoliation of ESI,” written by Jean Lewis and Dave Shuster, litigation attorneys who have served as special litigation counsel to bankruptcy trustees in several adversary proceedings.  

Jean and Dave were recently engaged by Chapter 11 Trustee Roger Schlossberg to pursue claims against a debtor, his estranged wife, and scores of companies and family members who were involved in concealing the debtor's assets. In the course of their investigation, the litigation team uncovered the use of a wiping program used by the debtor and his wife to delete untold amounts of electronically stored information. Following a one-week trial in the United States Bankruptcy Court for the District of Maryland, the court concluded that the spoliation in the case was so egregious that terminating sanctions were justified and entered a judgment that required the turnover of dozens of properties and bank accounts to the Trustee.

In the article, the authors emphasize two key points:

• “Bad debtors” present an increased risk of spoliation.
• Trustees should familiarize themselves with steps they can take to protect the estate, including developing an understanding of the Court's authority to prevent or punish spoliation and working with a forensic consultant to assess anomalies in a production.