Delaware Business Litigation Report

Spoliation of Email and Texts Leads to Adverse Inferences and Fee Shifting

Gener8 LLC v. Castanon, 2022-0246-LWW (Del. Ch. Sept. 29, 2023)
This dispute concerned a non-compete agreement that the plaintiffs alleged the defendant breached by establishing a competing business. The defendant denied the existence of relevant texts and email communications, when in fact he intentionally withheld and deleted them. In discovery, he claimed no relevant communications existed on his phone, citing that he was not a “big texter.” The defendant testified to this at trial, and pled ignorance of both the operations of the competing enterprise and any discussions or communications to that effect. However, other parties produced text messages including the defendant, making clear that he had in fact sent many texts concerning these subjects. 

The Court of Chancery found that defendant had engaged in spoliation by failing to preserve and intentionally or recklessly deleting emails and texts while aware of his duty to preserve. While the Court declined to impose the ultimate sanction of default judgment, it granted adverse inferences that the lost evidence would further tend to support that the defendant solicited the plaintiffs’ customers and employees. The Court also found the defendant in contempt of Court and awarded fee shifting to cover the plaintiffs’ attorneys’ fees incurred in bringing the deception to the Court’s attention. The Court noted that monetary sanctions were also appropriate given the spoliation.

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