In re Correra
I. Introduction.
Before this Texas bankruptcy court are two, related contested matters (one against an individual Chapter 7 debtor and one against his former, long-time personal assistant), initiated by one of the debtor's alleged creditors, involving: (a) what appears to have been an intentional concealment, then destruction, of electronically stored financial records of the debtor; and (b) a request for various sanctions against each of the two individuals in connection with same. The facts are egregious. The analysis regarding what sanctions may be procedurally and legally appropriate, with regard to each of the two individuals, is somewhat complicated.
The two individuals involved are, again, a chapter 7 debtor ("Mr. Corerra" or the "Debtor") and his former personal assistant, Anita Gianardi ("Ms. Gianardi"). The Debtor describes himself as an unemployed divorced father, with no income
The Debtor filed bankruptcy in early 2016. An alleged creditor of the Debtor-the New Mexico State Investment Council (the "NMSIC"), a State of New Mexico governmental agency-has been very active in the Debtor's bankruptcy case from the very beginning. The NMSIC is highly skeptical of the Debtor's dramatic and sudden reversal of fortune.
A. Who is the NMSIC?
The NMSIC is a State of New Mexico governmental agency that is responsible for investing public trust funds for the benefit of its citizens under the New Mexico Constitution.
Early on in this bankruptcy case, the NMSIC sought authority to take a Bankruptcy Rule 2004 examination of the Debtor
B. The Computer .
During a Bankruptcy Rule 2004 examination of Ms. Gianardi on October 14, 2016,
After more than three months of being unable to work out an informal agreement with Ms. Gianardi to provide access to the Computer (and over objections of the Debtor and Ms. Gianardi-whose attorney's fees, it was later revealed, were being paid by the income-less Debtor), the NMSIC filed a motion to compel access to the Computer to facilitate the creation of a forensic image of it, so as to possibly recover the Debtor's documents from it (the
C. Cat Pictures and Movies.
In these contested matters, the NMSIC now alleges an intentional, bad faith spoliation of evidence that is utterly eye-popping. As further described herein, the NMSIC alleges that, in December 2016-shortly after Ms. Gianardi's Bankruptcy Rule 2004 examination, and just after discussions collapsed regarding a consensual production of the Computer : (a) someone inserted multiple USB drives into the Computer,
The court held a hearing on June 5, 14, & 19, 2018 on: (a) a Motion for Finding of Contempt and Sanctions Against Anita Gianardi for Violation of 2004 Order and Destruction of Evidence (DE ## 264 & 265) (the "Gianardi Sanctions Motion" or "Contested Matter No. 1-Gianardi");
As will be more fully explained below, the court finds that both the Debtor and Ms. Gianardi have concealed and destroyed evidence and concludes that significant sanctions should be awarded.
II. Findings of Fact.
A. The Peripatetic Debtor .
1. On February 22, 2016, the Debtor commenced his Chapter 7 Case. While the Debtor listed a Dallas, Texas rented apartment for his place of residence, the Debtor testified in this contested matter that he has resided in Paris, France
2. As earlier alluded to, the Debtor described his former occupation as providing investment-related services for hedge funds and private equity funds. However, he testified that he is now unemployed with no income and survives off of borrowed funds from family and, specifically, his father. Among other things, he testified that he has borrowed approximately $800,000 from his father to pay legal fees and expenses in connection with his bankruptcy case.
3. The Debtor scheduled a very large number of unsecured creditors in his bankruptcy case-most of which showed "unknown" amounts due. However, only a handful of proofs of claim were filed in the case. The NMSIC-a large disputed creditor
B. The NMSIC Seeks Rule 2004 Examinations.
4. The NMSIC sought permission to take Bankruptcy Rule 2004 examinations from the Debtor's father, former accountants, and other professionals in this case. On July 15, 2016, the NMSIC also filed a motion in the bankruptcy court to take a Bankruptcy Rule 2004 Examination of Ms. Gianardi (the "Gianardi 2004 Motion")
5. Both the Debtor 2004 Motion and the Gianardi 2004 Motion contained a long list of documents that were desired as part of the examinations. The motions and their accompanying instructions made clear that the "documents" being sought included hard copies as well as electronic documents-specifically, defining "documents" as including, among other things: "written, printed, or electronic matter that provide information, including, without limitation, emails, text messages, chats, instant messages, facsimiles, websites, social media entries, databases, calendar entries, spreadsheets, notes, jottings, diaries, communications, and all drafts, alterations, modifications, changes, and amendments of any of the foregoing." With regard to electronic documents, there were instructions about how they were to be extracted and produced.
6. With regard to the Debtor 2004 Motion, after an objection and some controversy and negotiations regarding such things as examination topics and appropriate length of the examination, the bankruptcy court ordered a Rule 2004 examination with regard to the Debtor, including production of essentially all the requested documents (with some limitations), with such examination and production to occur at the Debtor's lawyer's office in Dallas, Texas (the "Debtor 2004 Order").
7. With regard to the Gianardi 2004 Motion, the argument presented was that-given her capacity as a long-time personal assistant to the Debtor-not only might she have access to his financial records and knowledge about his assets, but she had also been involved in bizarre litigation involving the Debtor's now-vanished ex-wife who had obtained the $4 million consensual divorce settlement just a couple of years prepetition. Apparently, both Ms.
8. The NMSIC represented in the Gianardi 2004 Motion (¶ 36) and in the Certificate of Conference thereto that it had spoken with Ms. Gianardi by telephone on July 12, 2016, regarding a mutually agreeable time and place for a Rule 2004 examination, but she had replied that she was not in a position to agree to anything. Ms. Gianardi currently lives in Loveland, Colorado . She had previously lived in Santa Fe, New Mexico and began working for the Debtor when he had a residence and office there. The NMSIC proposed an examination of Ms. Gianardi and the production of documents by her in a Denver, Colorado office of the NMSIC's outside counsel.
9. On July 18, 2016, a process server personally served Ms. Gianardi in Loveland, Colorado with the Gianardi 2004 Motion and a Notice of Hearing in the bankruptcy court regarding same.
10. On August 29, 2016, after a hearing in the bankruptcy court on August 9, 2016, at which no one appeared for Ms. Gianardi, the bankruptcy court ordered a Rule 2004 examination with regard to Ms. Gianardi, including production of all the requested documents (the "Gianardi 2004 Order").
11. The NMSIC did not serve a subpoena on Ms. Gianardi, but, as earlier noted, it is unrefuted that, on July 18, 2016, it personally served, through a process server,
12. On September 7, 2016, after being served with the Gianardi 2004 Order, Ms. Gianardi sent counsel for the NMSIC a letter seemingly acknowledging an obligation and intention to comply with the Gianardi 2004 Order-stating that the "order requires me to turn over any documents that I have in my possession, custody or control," and further stating that she had "not retained nor have any access to any documents pertaining to Mr. Correra." She further added, "I am unable to provide the court with any documents at all. I have no documents in my possession, my custody or my control."
13. On October 14, 2016, Ms. Gianardi, with Colorado legal counsel now representing her-Andrew D. Johnson from the firm Onsager Fletcher Johnson in Denver-appeared for her Rule 2004 examination (the "Gianardi 2004 Examination") in Denver, Colorado at the offices of the private law firm representing the NMSIC.
14. During the Gianardi 2004 Examination, Ms. Gianardi testified that she had spoken with the Debtor by phone on the morning of her examination and "probably" a few times about the Gianardi 2004 Examination.
C. The Previously Undisclosed Computer.
15. Ms. Gianardi then revealed at the Gianardi 2004 Examination that, over the approximately seven years she worked for the Debtor (from October 2007 to January 2014),
16. Ms. Gianardi testified that in the year 2009, the Debtor closed his Santa Fe, New Mexico office and she took the Computer to her home , where she continued to do work for the Debtor and his companies for several years.
Q: And we would ask that you not do anything further to that computer -
A: Okay.
Q: -in the event that there is a request to see if there's some ability to recover information.
A: Okay.
Q: And so will you agree to not delete anything further from the computer?
A: Yes.
Q: Okay. And will you agree not to intentionally damage the computer?
A: Yes.
Q: Will you agree not to give it away or sell it?
A: Yes.53
D. Attempts to Gain Access to the Computer.
18. The Gianardi 2004 Examination started and ended on October 14, 2016. Thereafter, apparently multiple informal discussions took place between Ms. Gianardi's counsel and the NMSIC's counsel regarding inspection/retrieval of the Computer. These informal discussions ultimately were not fruitful. The NMSIC's counsel represented that it conferred with Ms. Gianardi's counsel in Colorado on multiple occasions to see if it was possible to obtain an image of the Computer without the need to file a motion, including by email on November 10, 2016, November 11, 2016, November 21, 2016, and by telephone both before and after November 10, 2016 (offering to pay the entire costs). However, Ms. Gianardi would not agree to allow the NMSIC to obtain an image of the Computer and insisted that any analysis be limited to the work of a third party and any information produced be limited to information recovered by "key word" searches. The NMSIC did not think this would be useful, under the circumstances, since Ms. Gianardi testified that she intentionally deleted numerous documents.
19. Finally, on February 6, 2017, the NMSIC filed in the bankruptcy court a "Motion Pursuant to Bankruptcy Rule 2004 and
20. The Motion to Compel-Computer cited Bankruptcy Rule 2004 and Bankruptcy Code section 105(a) as the underlying authority for the relief sought. Basically, the NMSIC argued that the newest relief it was seeking was a follow-on request to the Gianardi 2004 Order and the Debtor 2004 Order. The Motion to Compel-Computer further explained that Ms. Gianardi had testified that, for many years, she had scanned and archived onto the Computer's hard drive financial documents and other information relating to the Debtor's personal finances and finances of several of his business entities (shredding hard copy originals).
21. The NMSIC also further expressed concern that the Debtor was not being forthcoming with providing documents. In fact-despite Ms. Gianardi's testimony that she at one time copied information from the Computer onto discs and gave them to the Debtor
22. On March 8, 2017, Ms. Gianardi, through her newly retained Texas bankruptcy counsel (not to be confused with her Colorado lawyer who sat in on the Gianardi 2004 Examination), filed an objection to the Motion to Compel-Computer (the "Gianardi Objection to Motion to Compel-Computer").
23. The Gianardi Objection to Motion to Compel-Computer mostly complained that production of the Computer was intrusive and well beyond the scope of what was contemplated by Bankruptcy Rule 2004. It also articulated privacy concerns with regard to the NMSIC or any forensic expert examining the Computer-given that Ms. Gianardi allegedly had a significant amount of her own personal data and pictures on it by this point. Ms. Gianardi sought affirmative relief from the bankruptcy court to protect her personal information on the Computer, in the event the Motion to Compel-Computer was granted. Ms. Gianardi wanted to put restrictions on how the Computer would be searched (with search terms, and the like).
24. The Debtor also separately filed an objection to the Motion to Compel-Computer.
25. On March 13, 2017, the court held a hearing on the Motion to Compel-Computer. Ms. Gianardi appeared there through her Texas bankruptcy counsel (two lawyers), making a regular appearance-not a special appearance, thus seemingly not preserving any arguments of "lack of personal jurisdiction" that she might have had.
26. At one point during the hearing on the Motion to Compel-Computer, Ms. Gianardi's counsel suggested the idea of an independent discovery examiner with regard to the examination of the Computer: "Not to complicate things further, but maybe the Court might want to give some consideration to, and I floated this idea, I didn't get much traction with it, to an independent discovery examiner that both parties could share the cost of. They would report directly to the Court with any issues that arise after the image is copied on what the, you know, search capabilities are, what are the challenges going to be, on getting them the documents that they need while still protecting my client's privacy right. "
E. The Computer Compel Order.
27. The bankruptcy court ultimately approved the Motion to Compel-Computer, but in a slightly modified fashion. The court ordered Ms. Gianardi to produce the Computer to the Chapter 7 Trustee at a mutually agreed-upon location, so that a forensic expert approved by the court could create a forensic image of the hard drive or drives on the Computer.
28. The bankruptcy court deviated from the exact relief sought by the NMSIC in its Motion to Compel-Computer, not only due to the privacy concerns articulated by Ms. Gianardi (for example by injecting an independent fiduciary-the Chapter 7 trustee-into the middle of the process, and also ordering an independent court expert that would not necessarily be the expert the NMSIC wanted), but also because, despite the wording of the Motion to Compel-Computer, invoking Bankruptcy Rule 2004 and Bankruptcy Code Section 105, the court believed the authority for the relief sought certainly seemed to be within certain self-executing obligations in the Bankruptcy Code-including section 542 . The court stated orally at the hearing: "I mean this is-this is property of the estate. Granted, she chose to take it [i.e.,
29. To further understand the original mindset of the court with regard to the Computer, first, the Bankruptcy Code imposes certain self-executing statutory obligations upon a debtor (without the requirement of a motion or order). A debtor must cooperate with any trustee appointed in a bankruptcy case to enable him or her to perform the trustee's duties (
30. Accordingly, not only did the court issue the Computer Compel Order, but-as part and parcel to it-on June 7, 2017, the bankruptcy court approved the Chapter 7 Trustee's retention of Epiq/DTI as a forensic computer analyst (the "Court-Appointed Forensic Expert") to analyze the Computer and seek to recover data from the Computer (the "Epiq Retention Order"),
31. At a May 18, 2017 hearing on the Epiq Retention, Ms. Gianardi did not appear in person or through counsel. However, the Debtor's counsel appeared and argued for a procedure whereby documents extracted by the forensic expert would be provided first to Debtor's counsel-prior to anyone else and reviewed for privileged information. When the court posed the issue of likely waiver of privilege (since any privileged documents of the Debtor had been in the custody and care of Ms. Gianardi for years now on the Computer which the Debtor had essentially abandoned to Ms. Gianardi),
F. The Epiq Report: Previously Undisclosed Documents, Wiping Tools, Cat Pictures, and Massive Movie Downloads.
32. On February 1, 2018, Epiq circulated the report it prepared at the direction of the court pursuant to the Epiq Retention Order (the "Epiq Report").
a. K-1s, account statements, and other documents relating to several of the Debtor's hedge fund investments, including a transfer request dated May 20, 2014 made from Alkeon in connection with the Debtor's divorce settlement;
b. A list of the Debtor's access codes, passwords, and PINs for several bank accounts, credit cards, and subscription services;
c. Bank Statements and wire transfer records relating to several of the Debtor's bank accounts (including accounts with Century, HSB, and Lazard), including for periods during the four years prior to the bankruptcy filing;
d. Various IRA statements and account transfer records relating to several of the Debtor's IRA Accounts (e.g. Merlin,
e. An employment contract with the Debtor's bookkeeper;
f. Email communication in 2014 between Ms. Gianardi and the Debtor relating to litigation between the Debtor's ex-wife and Ms. Gianardi;
g. Loan documents between certain of the Debtor's entities and/or entities in which he held an interest;
h. Wire transfer letters between the Debtor's father and the Debtor (including in 2013);
i. Some of the Debtor's tax returns;
j. An affidavit prepared in connection with the Debtor's divorce in 2012; and
k. Logs of Skype chats between the Debtor, Ms. Gianardi and Anthony Correra's wife on behalf of Anthony Correra.
33. Additionally, the Epiq Report indicated that, on December 8 and 9, 2016-approximately two months after her October 14, 2016 Rule 2004 Examination, and while the attorneys were trying to make amicable arrangements for the consensual examination of the Computer-a "wiping tool" was used on the Computer while in Ms. Gianardi's possession, custody, and control, to overwrite unallocated space with a pattern of useless data.
34. And there was more. Between December 11, 2016 and December 18, 2016-again, just two months after the October 14, 2016 Gianardi Rule 2004 Examination, and after Ms. Gianardi agreed to leave the Computer undisturbed, and soon after the discussions between Ms. Gianardi and the NMSIC regarding a consensual examination of the Computer broke down, someone using Ms. Gianardi's login account copied a total of 101 movie files (approximately 420 gigabytes of data) onto the Computer hard drive.
35. Finally, the examination of the Computer by the Forensic Examiner also revealed that various USB flash drives were inserted into the Computer on, inter alia , the following dates:
March 14, 2016 (20 days after the Petition Date);
October 28, 2016 (two weeks after the Gianardi 2004 Examination);
November 27, 2016 (six weeks after the Gianardi 2004 Examination);
February 8, 2017 (two days after the Motion to Compel-Computer was filed); and
February 9, 2017 (three days after the Motion to Compel-Computer was filed).92
In part, because of the mass copying of useless data and 101 movies to the Computer in December 2016, the court's expert could not determine what data was copied, removed or deleted when the USB flash drives were used. However, the expert was able to conclude that a folder called "Business Stuff" was accessed, along with files named acct.xlsx and CLAUDIA DIVORCE SUIT.pdf.
G. Sanctions Motions.
36. On February 23, 2018, the NMSIC filed its "Motion of New Mexico State Investment Council for Finding of Contempt and Sanctions against Anita Gianardi for Violation of 2004 Order and Destruction of Evidence" (the "Gianardi Sanctions Motion"),
37. Also on February 23, 2018, the NMSIC filed a "Motion of New Mexico State Investment Council Seeking Sanctions Against the Debtor for Spoliation" (the "Debtor Sanctions Motion"),
38. On April 2, 2018, the court held a status conference that both Debtor's counsel and Ms. Gianardi's then-Texas counsel attended.
H. Ms. Gianardi's New Counsel and Eleventh-Hour Strategy Pertaining to "Personal Jurisdiction."
39. On April 3, 2018, Ms. Gianardi's Texas counsel filed a "Notice of Withdrawal as Counsel for Anita Gianardi" [DE # 282], stating that "further inquiries regarding Ms. Gianardi should be directed to her new counsel as follows: Laura A. Menninger" (with an address and other contact information included). Ms. Menninger is a Denver, Colorado criminal lawyer. Then, on April 20, 2018, Ms. Gianardi's Texas counsel filed an Emergency Motion to Withdraw as Counsel
40. Specifically, on April 19, 2018, the NMSIC served Ms. Gianardi with a subpoena duces tecum requesting the production of documents as well as interrogatories relevant to the Combined Sanctions Hearing (the "April 2018 Written Discovery").
41. On April 23, 2018, the bankruptcy court held a hearing on Ms. Gianardi's Texas' counsel's Motion to Withdraw. The court granted the Motion to Withdraw, expressing at the same time a concern that Ms. Gianardi's supposed new Colorado counsel had not filed an appearance substituting
42. On April 23, 2018, Ms. Gianardi, through her Colorado counsel, commenced a miscellaneous proceeding in the Colorado District Court pursuant to Fed. R. Civ. P. 45 (the "Miscellaneous Proceeding"). In the Miscellaneous Proceeding, Ms. Gianardi, again, asserted that the bankruptcy court lacks personal jurisdiction over her.
43. Meanwhile, on May 4, 2018, Ms. Gianardi, through her new Colorado counsel, responded to the April 19, 2018 Written Discovery by invoking her Fifth Amendment privilege against self-incrimination to each and every interrogatory and request for production .
I. The Evidentiary Hearing.
44. On June 5, 14, and 19, 2018, the court held the Combined Sanctions Hearing. Ms. Gianardi and her counsel did not appear. The court heard testimony from: (a) the Court-Appointed Forensic Expert (actually two persons from the Epiq Firm who worked on attempting to extract information from the Computer), (b) a forensic expert hired separately by the Debtor, (c) the Debtor, and (d) certain of the outside attorneys for the NMSIC.
45. At the hearing, Mr. Massoud from Epiq (the Court-Appointed Forensic Expert), with confirmation from the Chapter 7 Trustee, credibly proved up a chain of custody establishing that the Computer (which happened to be an HP Compaq model CQ 5000 computer, serial number 3CR0480YCT) was obtained by the Chapter 7 Trustee from Ms. Gianardi; an image of the Computer was made; and a forensic analysis was conducted.
46. There was compelling evidence presented, and the court does now find, that the Computer (and certainly data thereon) were property and records, respectively, of the Debtor that should have been treated by the Debtor and Ms. Gianardi
47. Next, there was credible evidence and the court now finds that there were mass deletions of Debtor files over time.
48. Next, Mr. Massoud of Epiq credibly testified that he examined the Computer for various artifacts, deletion activity, copying activity, USB activity, and things of that nature.
49. Mr. Massoud also credibly testified, and the court hereby finds, that a couple of days later-during the period of December 11, 2016 through December 18, 2016-someone using Ms. Gianardi's login account copied a total of 101 movie files, approximately 420 gigabytes of data, onto
50. Debtor's counsel attempted to attack the credibility of Epiq and implied at the Combined Sanctions Hearing that Epiq was biased toward the NMSIC because Epiq personnel had communications with the Chapter 7 Trustee and counsel for the NMSIC in connection with preparing its report, and that this somehow tainted Epiq's conclusions and his findings. However, the Debtor's own expert corroborated the findings and conclusions of Mr. Massoud: 101 movies were downloaded onto the Computer in December of 2016 and 420 gigabytes of unallocated space was overwritten as a result. That is not in dispute. The court did not find Epiq to be in any way biased or not credible.
51. Additionally, the court finds from the credible evidence that USB flash drives were inserted into the Computer on, inter alia , the following dates:
March 14, 2016 (20 days after the Petition Date);
October 28, 2016 (two weeks after the Gianardi 2004 Examination);
November 27, 2016 (six weeks after the Gianardi 2004 Examination);
February 8, 2017 (two days after the Motion to Compel-Computer was filed); and
February 9, 2017 (three days after the Motion to Compel-Computer was filed).116
The court can reasonably infer, from the coincidental timing, facts, and circumstances here that those USB flash drives were used to copy records of the Debtor's
52. The court also heard credible evidence, and hereby finds, that dozens of "live" documents were nevertheless found on the Computer pertaining to the Debtor and his financial affairs. These were documents that had not earlier been produced by either Ms. Gianardi or the Debtor and were responsive to the NMSIC's document requests (and despite Ms. Gianardi stating she had no responsive documents).
53. The court finds that the depth of Ms. Gianardi's loyalty to the Debtor is deep. It was most evident from certain Skype logs of conversations between Ms. Gianardi and the Debtor that were recovered from the Computer and presented at the Combined Sanctions Hearing.
Marc Correra: Hi
Anita Gianardi: hi you OK?
Marc Correra: yes
Marc Correra: i think i am going to be dead before this is over
Anita Gianardi: I hope not. I may be in jail
Marc Correra: dont worry
Marc Correra: I will always protect you
...
Anita Gianardi: am i in trouble?
Marc Correra: no
Marc Correra: dont worry
...
Marc Correra: Sorry you have to deal with this BS
Anita Gianardi: Me to but I am in until you no longer want or need me. It is a pain though but you are worth it
Marc Correra: she makes everything so difficult
Anita Gianardi: Yup. I feel for you
...
Marc Correra: I will always have you back
Anita Gianardi: Can I say I have come to love you in a friend sort of way. Does that make sense? (sun)
Marc Correra: Yes you can. I feel the same way towards you. Thanks. That means a lot to me.120
54. The court finds that the Debtor and Ms. Gianardi had a very close relationship-beyond
Q. And you said to her, "I will always have you back." And then she said, "Can I say I have come to love you in a friend sort of way? Does that make sense?" And then your response was, "Yes, you can. I feel the same way towards you. Thanks. That means a lot to me." Did I read that accurately?
A. Yes.
Q. Were you telling the truth when you told Ms. Gianardi that you would always have her back?
A. Yes.
Q. And do you believe that she was telling the truth when she told you that she had come to love you in a friend sort of way?
A. I don't know.
Q. And were you telling the truth when you told her that you felt the same way?
A. Yes.124
55. The Debtor's response to all of this is basically that he did not tell Ms. Gianardi to do anything to the Computer. However, the Debtor admits retaining legal counsel for Ms. Gianardi at his own expense.
56. The Debtor has been evasive. His failure to take steps to preserve information on the Computer or to notify the
57. The Debtor had a responsibility to preserve and produce the Computer which was indisputably property of the bankruptcy estate. And he had an obligation as a debtor in this court to preserve records of his financial affairs. The Debtor's obligations here do not merely arise under Rule 37 of the Federal Rules of Civil Procedure. The Debtor's obligations here arise under the Bankruptcy Code. Moreover, there was a court order telling the Debtor what he had to do and telling Ms. Gianardi what she had to do and what she had to produce. The NMSIC and the Trustee have been prejudiced because they do not have a complete production of information and documents from the Debtor.
58. The Debtor testified that anything that was ever on the Computer was also backed up and available on the cloud-based services he used.
59. The court found the Debtor's testimony regarding having all documents on the cloud that were ever on the Computer to be not at all credible. The Debtor testified in his own Rule 2004 examination that he searched his cloud-housed documents and produced all that were responsive to the NMSIC's document requests
60. The Debtor testified that he had "a few" conversations with Ms. Gianardi in October 2016 because she was just very concerned about getting pulled into this.
61. As a result of Ms. Gianardi's actions, what the Trustee and creditors are confronted with is that: there were records relating to the Debtor's financial affairs that were potentially very important to the creditors, important to the Debtor's estate, which have been forever lost. Unfortunately, there is no way to identify what those all were, but the court knows that they are gone and can never be recovered, at least from the Computer. Only Ms. Gianardi and only the Debtor know what those records were. One would think that if the Debtor still has those records or has them in the
62. It is of critical relevance here that it was the Debtor (through his lawyers), not Ms. Gianardi, that first reached out to retain new counsel for Ms. Gianardi after the Sanctions Motions were filed.
J. Adverse Inferences.
63. The Epiq Report and the information recovered from the Computer are by themselves sufficient to support a finding that Ms. Gianardi intentionally spoliated evidence with the intent to make it unavailable to the NMSIC, the Trustee, and the court, and that she knowingly and willfully refused to comply with the Gianardi 2004 Order and, in bad faith, has intentionally interfered with the administration of this bankruptcy case. As explained further below, the court may also infer Ms. Gianardi's intent to spoliate evidence from Ms. Gianardi's failure to appear and testify and produce evidence that might refute the NMSIC's and Trustee's direct evidence.
III. Conclusions of Law.
A. Bankruptcy Subject Matter Jurisdiction and Venue.
Bankruptcy subject matter jurisdiction exists over these contested matters pursuant to
B. Ms. Gianardi's Eleventh-Hour Argument that the Bankruptcy Court Does Not Have Personal Jurisdiction Over Her.
As earlier mentioned, Ms. Gianardi did not appear for the three-day Combined Sanctions Hearing (personally or through counsel). However, a Colorado lawyer, Laura A. Menninger (not admitted in the Northern District of Texas, either regularly or on a pro hac vice basis) did file, on April 23, 2018 : (a) a "Special Entry of Appearance" on her behalf, "specially to contest this Court's jurisdiction to enforce the Rule 2004 Exam Order dated August 29, 2016 (Doc. 143) and any subsequent discovery pertaining to that Order";
There are a lot of concepts melded into the short pleading of Ms. Gianardi, and this court must unpack them one-by-one:
First, the argument that the NMSIC's failure to obtain a subpoena, way back when it obtained the Gianardi 2004 Order, deprives the bankruptcy court of personal jurisdiction over Ms. Gianardi fails because-at this juncture-we are way beyond compelling attendance or compelling production of documents at a Rule 2004 examination, from a non-party . Ms. Gianardi is now a party in a properly noticed contested matter, not a mere non-party in a discovery dispute.
Second, the personal jurisdiction jurisprudence cited by Ms. Gianardi is in the context of federal diversity jurisdiction and the Fourteenth Amendment, and things are very different in the world of bankruptcy. The proper analysis is not "minimum contacts" with the State of Texas.
Third, even if personal jurisdiction was somehow a viable argument here, waiver of the argument applies. Ms. Gianardi, while represented by counsel, participated for over 20 months in a discovery process mandated by the bankruptcy court, then subsequent litigation regarding examination of the Computer, without any reservation of rights or objection to this court's personal jurisdiction over her.
(i) First, was a subpoena required to be served on Ms. Gianardi, pursuant to Bankruptcy Rule 2004(c)? Restated, can the bankruptcy court now address Ms. Gianardi's violation of either the Gianardi 2004 Order or the Computer Compel Order, when she was not served with a subpoena back at the time of her Rule 2004 Examination?
The court will start by noting a general principle: a bankruptcy court "has abundant legal authority to order the retrieval of information concerning a debtor and his estate from persons and entities who are not parties in a bankruptcy case, i.e., persons or entities who have neither filed a voluntary petition under section 301 of the Bankruptcy Code nor filed a proof of claim or interest under section 501 of the Bankruptcy Code.
By way of background, Bankruptcy Rule 2004 of the Federal Rules of Bankruptcy Procedure is "the basic discovery device in bankruptcy cases."
With this background in mind, it should be obvious that a Rule 2004 examination of somebody like Ms. Gianardi-a long-time personal assistant to the Debtor-is not an unreasonable or impermissible undertaking. Rather, the issue is how is personal jurisdiction within the context of a Rule 2004 exam established over one who resides outside the district where the bankruptcy case is pending and who is not otherwise actually a party to the bankruptcy case? Analyzing the literal wording of Bankruptcy Rule 2004, subsection (a) makes clear that any party in interest who wants to examine any entity who may have information relating to the acts, conduct, property, liabilities or financial condition of the debtor (and the like), may file a motion with the bankruptcy court and obtain an order from the bankruptcy court requiring it. However, subsection (c) goes on to provide that the attendance of an entity for examination and for the production of documents, whether the examination is to occur within or without the district in which the bankruptcy case is pending, may be compelled as provided in Rule 9016 (i.e., the Bankruptcy Rule that incorporates Fed. R. Civ. Proc. 45 -describing subpoenas). It appears to this court (and this is a mere anecdotal observation) that, oftentimes, parties in interest seeking Bankruptcy Rule 2004 examinations (and production of documents) simply go forward with a motion and order and do not bother with obtaining and serving a subpoena. Is this a problem (i.e., not obtaining and serving a subpoena), when a Bankruptcy Rule 2004 witness does not appear, testify and/or produce as ordered? One might wonder why such "belts and suspenders" (i.e., a subpoena as well as an order) would be necessary to enforce compliance? The technical answer is that personal jurisdiction over a non-debtor third party witness in a Rule 2004 context is properly established by serving a subpoena pursuant to under Rule 45. When an order is entered compelling a witness (who is not a debtor and
There are very few cases that deal with subsection (c) of Bankruptcy Rule 2004. Most of the cases seem to suggest or assume that subpoenas should be issued and served, in addition to the Rule 2004 order from the bankruptcy court.
In this case, by filing the voluntary Chapter 7 petition,11 U.S.C. § 301 , the debtor Teknek LLC imposed upon itself a legal obligation to disclose recorded historical data relating to property of the estate to the trustee, § 521(4), Fed. R. Bankr.Pro. 4002. The trustee does not need to subpoena this information, because by virtue of being the "party" who filed and commenced the bankruptcy "case," the debtor has a legal obligation to turn over the information in its custody and control even in the absence of a subpoena. "It is not necessary that the debtor be formally subpoenaed to a Rule 2004 examination; an order of examination is sufficient." 10 Collier on Bankruptcy ¶ 9016.01, at 9016-2 (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev. 2006).154
The court went on to suggest that a subpoena is necessary in the Rule 2004 context to exert personal jurisdiction over a nonparty witness and that "[f]ederal courts do require a certain type of personal jurisdiction over a nonparty witness in order to enforce a subpoena against such a person."
This court believes that, as a technical matter, a subpoena was required here in the case of Ms. Gianardi to compel her attendance at a Rule 2004 examination and to compel production of documents pursuant thereto. But it is not fatal to the NMSIC's current request that Ms. Gianardi be held in contempt of court and sanctioned-for her exercising control over the Computer and intentionally putting Debtor documents beyond the reach of the Trustee and creditors in this case. Why? First, this court believes that Ms. Gianardi waived any right to complain about a lack of subpoena when she sat for the Rule 2004 examination. If one voluntarily sits for a deposition, she waives any argument about the need for a valid subpoena.
But as also mentioned earlier, we are now well beyond the stage of a creditor simply seeking a Rule 2004 examination or production of documents with regard to a non-party . Ms. Gianardi is now a party in a contested matter, not a mere non-party in a discovery dispute . If the NMSIC was, at this point, merely seeking to compel Ms. Gianardi to produce documents, there would be a problem-assuming waiver did not otherwise apply. The NMSIC would need to have served a subpoena and then, if Ms. Gianardi continued to fail to produce, go to the compliance court, in the District of Colorado, to compel compliance.
Then things further evolved. Yet another contested matter was filed with Ms. Gianardi as a party/respondent, on February 23, 2018, when the Gianardi Sanctions Motion was filed.
(ii) Personal Jurisdiction in Bankruptcy Contested Matters and Adversary Proceedings.
To further explain why Ms. Gianardi's personal jurisdiction argument has no merit in the context of the contested matters now before the court, the court will elaborate on Bankruptcy Rule 7004 (which is incorporated into bankruptcy contested matters through Bankruptcy Rule 9014 ), as well as case law addressing personal jurisdiction and due process as it relates to parties against whom relief is sought in bankruptcy cases.
Case law discussing the issue of personal jurisdiction most often arises in the context of adversary proceedings. Bankruptcy Rule 7004 entitled "Process; Service of Summons, Complaint"
...
(d) Nationwide service of process
The summons and complaint and all other process except a subpoena may be served anywhere in the United States.
...
(f) Personal Jurisdiction
If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service in accordance with this rule or the subdivisions of Rule 4 F.R.Civ.P. made applicable by these rules is effective to establish personal jurisdiction over the person of any defendant with respect to a case under the Code or a civil proceeding arising under the Code, or arising in or related to a case under the Code....175
Under these provisions, personal jurisdiction may be established over a defendant in an adversary proceeding (or respondent in a contested matter) if: (1) service is effectuated in accordance with Bankruptcy Rule 7004 or Fed. R. Civ. Proc. 4, (2) the proceeding arises under the Bankruptcy Code or arises in or relates to a bankruptcy case (i.e., the court has subject matter jurisdiction), and (3) the court's exercise of jurisdiction is consistent with the Constitution and laws of the United States.
But what does it mean in the unique world of bankruptcy for the court's exercise of personal jurisdiction to be "consistent with the Constitution and laws of the United States"? Service of process is the physical means by which personal jurisdiction is obtained over a party. And Title 11 employs Rules 4(a), (b), (c)(1), (d)(1), (e)-(j), (l), and (m) for service of process in an adversary proceeding (or for service of a motion in a contested matter). But how does the Constitution potentially constrain a federal court's power to acquire personal jurisdiction via nationwide service of process? This is not focused upon very frequently in bankruptcy jurisprudence.
Other courts have rejected such a "national contacts" test and determined that due process requires more-specifically, that the fairness and reasonableness requirements of the Fifth Amendment must be considered.
In Texas Reds , a Texas resident, Ms. Miller, had entered into an agreement to purchase assets in a New Mexico bankruptcy case. The New Mexico bankruptcy court approved the agreement and then Ms. Miller defaulted. Later, the bankruptcy trustee sued Ms. Miller for breach of contract in an adversary proceeding in the case. Ms. Miller moved to dismiss the adversary proceeding, arguing lack of personal jurisdiction over her. The court denied her motion, finding it had personal jurisdiction over her. The court first stated that a plaintiff in an adversary proceeding bears the burden of establishing the existence of personal jurisdiction. The court noted the plaintiff must satisfy three requirements: (1) service of process had been effectuated in accordance with Bankruptcy Rule 7004 or Fed. R. Civ. Proc. 4, (2) the proceeding arose under the Bankruptcy Code or arose in or related to a bankruptcy case (i.e., in other words, there was federal question bankruptcy subject matter jurisdiction), and (3) the court's exercise of jurisdiction was consistent with the Constitution and laws of the United States. Requirements (1) and (2) were easily met in the case. With respect to requirement (3), the court started by noting that, in the world of bankruptcy, the court does not measure Constitutional sufficiency under a "minimum-contacts" test with the forum state, as described in
Another court that looked beyond the "national contacts" test was the Delaware bankruptcy court in a case called In re DBSI .
To recap, Ms. Gianardi argues that this bankruptcy court lacks personal jurisdiction over her because: (a) she was not properly served (i.e., no subpoena was served on her almost two years ago in connection with the Gianardi Rule 2004 Examination); and (b) she lacks minimum contacts with Texas. Ms. Gianardi's jurisdictional arguments fail. There is no dispute that Ms. Gianardi was properly served, pursuant to Fed. R. Bankr. Proc. 9014 and 7004, with the contested matters initiated by: (a) the Motion to Compel-Computer, and (b) the Gianardi Sanctions Motion. No subpoena, summons or complaint-and no personal service-was required in connection with these contested matters. Moreover, there can be no dispute that Ms. Gianardi has minimum contacts with the United States. Finally, even if due process requires more than a simple application of the "national contacts" test often applied in the unique world of bankruptcy, the court concludes that "traditional notions of fair play and substantial justice"
(iii) Waiver.
Finally, even if the lack of a subpoena early on, or other factors could suggest a personal jurisdiction problem, this court additionally concludes that Ms. Gianardi waived her argument that this court lacks personal jurisdiction over her. Neither Ms. Gianardi nor her counsel ever raised any objection to the court's personal jurisdiction over Ms. Gianardi until she filed, on April 23, 2018: (a) a "Special Entry of Appearance" on her behalf, "specially to contest this Court's jurisdiction to enforce the Rule 2004 Exam Order dated August 29, 2016 (Doc. 143) and any subsequent discovery pertaining to that Order"
First, to be clear, Ms. Gianardi never, for more than a year, objected to the method by which she received the Rule 2004 Order (or the lack of a subpoena therewith). In fact, in a September 7, 2016, letter from her to the NMSIC's counsel, Ms. Gianardi acknowledged receipt of the Rule 2004 Order, simply stating that she had no documents to produce.
Objections to personal jurisdiction may be waived.
C. Section 105 of the Bankruptcy Code as a Basis for Relief with regard to the Gianardi Sanctions Motion.
Having resolved the personal jurisdiction arguments, the court now turns to the merits of, first, the Gianardi Sanctions Motion and, second, the Debtor Sanctions Motion.
As earlier noted, the NMSIC seeks a finding of contempt and imposition of sanctions against Ms. Gianardi for her alleged violation of the Gianardi Rule 2004 Order and, more generally, for her actions taken with respect to the Computer. The Gianardi Sanctions Motion recites that Ms. Gianardi violated the Gianardi 2004 Order when she failed to produce the documents on the Computer that were responsive to the Gianardi 2004 Order and, more importantly, when she intentionally destroyed relevant evidence with a so-called wiping tool and also copied 420 gigabytes of movie files onto the Computer . Ms. Gianardi is alleged to have performed these acts even though she was aware that the NMSIC was seeking to recover the deleted files, had agreed not to take further action to delete files or otherwise compromise the Computer, and knew and understood that parties-in-interest in the Debtor's bankruptcy case were seeking to recover the deleted files. Ms. Gianardi's actions made it impossible to recover deleted data and
The court does not think Rule 37(e) applies here with regard to Ms. Gianardi.
Moreover, Fed. R. Civ. Proc. 45(g) does not apply here. Rule 45(g) permits a
But the court has concluded that it is not without tools here to address what happened to the Computer. As earlier mentioned, this is not a mere discovery dispute at this point. Rather, this dispute involves an act of intentional destruction of property of the estate and an overt effort to make records of the Debtor inaccessible. The court has inherent powers and authority under section 105 of the Bankruptcy Code
There is ... nothing in the other sanctioning mechanisms or prior cases interpreting them that warrants a conclusion that a federal court may not, as a matter of law, resort to its inherent power to impose attorney's fees as a sanction for bad-faith conduct. This is plainly the case where the conduct at issue is not covered by one of the sanctioning provisions.... [I]f in the informed discretion of the court, neither the statute nor the Rules are up to the task, the court may safely rely on its inherent power.209
A decision to invoke the court's inherent power to sanction requires a finding that bad faith or willful abuse of the judicial process occurred.
The court concludes that Ms. Gianardi received reasonable notice and due process with regard to: (a) what the expectations of the parties and the court were in these bankruptcy contested matters, (b) what type of relief was being requested against her, and (c) what might happen to her. She has been aware of the bankruptcy case since at least July, 2016.
The fact that Ms. Gianardi was not a party in the Correra bankruptcy proceedings until the Motion to Compel-Computer was filed and served on her in February 2017 did not permit her to disregard the bankruptcy court process, of which she was fully aware, with impunity. Ms. Gianardi's behavior provides an instance where the court's inherent powers are necessary to address illegitimate conduct that might otherwise slip between the provisions of the Federal Rules. Her bad faith conduct is intertwined with the Debtor's and, therefore, may be addressed by the court's inherent power.
As earlier stated, a federal court has the inherent power to sanction a party who has abused the judicial process.
Ms. Gianardi, although not a "party" in these proceedings until February 2017-approximately two months after she manipulated the Computer to hide Debtor documents (in December 2016)-stated in her October 2016 2004 Examination that she was aware of the litigation between the Debtor and the NMSIC. More importantly, once she was informed at the 2004 Examination and through subsequent communications between the NMSIC and her counsel that the NMSIC desired to recover data she deleted from the Computer, she had a duty to preserve that evidence, particularly in light of the Gianardi 2004 Order and her agreement at the Gianardi 2004 Examination to preserve the Computer. Ms. Gianardi's combined near-simultaneous acts of using the wiping tool and filling the Computer's hard drive with movies demonstrates that Ms. Gianardi acted with the intent to make it impossible to recover data deleted from the Computer. Moreover, given the breadth of the document requests contained in the Gianardi Rule 2004 Order, as well as the NMSIC's requests to recover the Computer in the hopes of retrieving deleted files, Ms. Gianardi knew that the evidence was relevant to matters in the bankruptcy case and likely unfavorable to the Debtor, her close friend and former boss.
(i) The Adverse Inference Request as to Ms. Gianardi, Based on Her Supposed Fifth Amendment Privilege Assertion.
The NMSIC has requested that this court draw adverse inferences against both Ms. Gianardi and Mr. Correra, under relevant circuit-level authority, based upon Ms. Gianardi's invocation of her Fifth
There is ample case authority providing that an individual may not make a "blanket refusal" to answer questions, but instead must affirmatively assert the privilege "with sufficient particularity to allow an informed ruling on the claim."
Similarly, in Malnik , the Fifth Circuit held in dicta that "a blanket refusal to answer all questions is unacceptable" for purposes of asserting a party's right against self-incrimination.
In short, where "a deposition is sought, the availability of the privilege is not a ground for vacating the notice of the deposition," but, rather, "[t]he proper procedure is for the deponent to attend the deposition, to be sworn under oath, and to
(ii) A More General "Adverse Inference" Rule.
Notwithstanding the above analysis, there is a more general "adverse inference" concept in case law that the court believes applies here-separate and apart from the possibility of there being an adverse interest that can be drawn from an assertion of a Fifth Amendment privilege. Specifically, it has been held, more generally, that "[f]ailure of a party to provide evidence peculiarly available to that party supports the inference that the truth would be damaging."
The court believes that the NMSIC absolutely met its initial burden of proof with clear and convincing testimony from the Court-Appointed Forensic Expert, Epiq, that the Computer was tampered with in a big way, shortly after Ms. Gianardi's 2004 Examination, and during which time the NMSIC was trying to negotiate an agreed protocol with Ms. Gianardi's and the Debtor's counsel for its examination. There was abundantly clear evidence that the Computer was tampered with through the use of a wiping tool and through the sudden copying of 101 movies onto the hard drive in a one-week period-so as to make files previously deleted inaccessible. The NMSIC also produced clear and convincing evidence that the Computer was the Debtor's and had been used for many years prepetition to store his files electronically. Thus, the NMSIC met its initial burden of showing an intentional spoliation of Debtor files that should have been produced in the bankruptcy case. The burden then shifted to Ms. Gianardi-with regard to the Gianardi Sanctions Motion-to prove otherwise. She chose not to appear and not to put on a case. She purported to exercise her Fifth Amendment Privilege not to testify. And she, of course, urged an eleventh-hour lack of personal jurisdiction argument (which this court has herein overruled). The court believes it can exercise its discretion to apply an adverse inference here. Ms. Gianardi failed to provide evidence that was "peculiarly available" to her as to the activity on the Computer in December 2016 and to rebut the Epiq Report-this failure to provide evidence can support an inference that the truth would be damaging to her.
The court concludes, based on the abundant direct evidence and these adverse inferences it can draw, that Ms. Gianardi intentionally spoliated evidence-the Debtor's records-by tampering with the Debtor's Computer and making the records inaccessible. To be clear, the court is not so much finding and concluding that Ms. Gianardi violated the terms or spirit of the Gianardi Rule 2004 Order (which likely would require, at least initially, the commencement of an enforcement action in the District of Colorado) but, rather is finding and concluding that her actions taken with respect to the Computer (i.e., property of the estate and records of the Debtor) constituted bad faith, intentional conduct that is worthy of sanctions pursuant to the court's inherent power and section 105 of the Bankruptcy Code .
(iii) Gianardi Sanctions .
As earlier mentioned, when considering an award of sanctions pursuant to its inherent power, a bankruptcy court may look to Rule 37 as a guide to determine the proper level of response to the contemnor's offense.
D. The Debtor's Potential Responsibility for All This: Rule 37(e) as a Basis for Relief with Regard to the Debtor.
Having resolved the issues with regard to the Gianardi Sanctions Motion, the court now turns to the merits of the Debtor Sanctions Motion. Does the evidence and law support holding the Debtor accountable somehow (and imposing sanctions upon him potentially) when the Computer with his data on it was in Colorado-thousands of miles away from him in Paris at all times-and ostensibly under the control of his former assistant?
As earlier noted, the NMSIC urges the court to rule that the Debtor himself spoliated evidence by failing to preserve the Computer. Specifically, it is argued that the Debtor either: (a) allowed his former assistant Ms. Gianardi to run a "wiping tool" on and copy massive amounts of movie
As earlier indicated, spoliation is the "destruction or material alteration of evidence or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation."
The court concludes that, even if the Computer was not in the possession of the Debtor, he absolutely had the practical ability to obtain it from Ms. Gianardi-his close formal personal assistant (i.e., a "key player" in his recent past) who had expressed in the past she would do anything for him. The court additionally concludes
The court believes that the Debtor was fully aware that the Computer contained voluminous amounts of information relating to his personal and business finances, property, assets, and related dealings. He had every reason to know that it contained information relevant not only to the bankruptcy case, but to the Debtor's litigation with the NMSIC. He also knew or should have known that the Computer likely held evidence relevant to the investigation of the transfers between the Debtor and his father and other family members, as well as information about his IRA accounts, his hedge fund activities, and other matters relevant to an objection to exemptions. To be precise, the Debtor had multiple overlapping obligations to preserve documents relating to his finances, business dealings, and related matters going back almost a decade. Since at least 2009, the Debtor has been involved in investigations, civil litigation, and litigation with his ex-wife. All of those investigations and litigation involved, inter alia, his financial dealings and the financial dealings of his businesses. Moreover, since at least early in the Debtor's bankruptcy case, the Debtor-who was at all times represented by sophisticated bankruptcy counsel-was aware, or should have been aware, that, at a minimum, there was the material possibility that there would be litigation in the bankruptcy case relating to his previous financial dealings, transfers to his ex-wife, and transfers of money to his father and mother. Indeed, beginning at the first Section 341 Meeting of Creditors, the Trustee and the NMSIC began requesting documents and other information from the Debtor. The court did not find the Debtor's testimony to be either reliable or credible,
The Debtor, at a minimum, failed to take the necessary steps to ensure the information on the Computer was preserved and, in fact, actively opposed the Trustee's and the NMSIC's efforts to recover the deleted evidence . The Debtor paid for Ms. Gianardi to retain counsel to facilitate her ability to prevent the production and inspection
(i) Appropriate Sanctions Under Rule 37(e).
The NMSIC has asked the court to impose sanctions on the Debtor, including, without limitation, by imposing an adverse inference with respect to a pending exemptions objection and requiring the Debtor to pay the attorneys' fees of the NMSIC and the Trustee. The NMSIC references Fed. R. Civ. Proc. 70(e) as being a potential basis for relief,
As earlier noted, recently amended Rule 37(e) -which would apply to the Debtor since he has been a "party" at all times in his own bankruptcy case (and has been a party with respect to the Debtor 2004 Motion, the Motion to Compel-Computer, and the Debtor Sanctions Motion)
(e) Failure to Preserve Electronically Stored Information . If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:
(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.261
To summarize, Rule 37(e) authorizes courts to issue sanctions where four conditions are met: (1) electronically stored information ("ESI") should have been preserved in the anticipation or conduct of litigation; (2) the ESI is lost; (3) the loss of the ESI is due to a party's failure to take reasonable steps to preserve it; and (4) the ESI cannot be restored or replaced through additional discovery. If those four conditions are met, the next step in the inquiry is to determine whether (1) the non-offending party has been prejudiced from the loss of ESI, and/or (2) the offending party acted with the intent to deprive another party of the information's use in the litigation. If there is prejudice, Rule 37(e)(1) allows the court to "order measures no greater than necessary to cure the prejudice." But if the offending party acted with intent, Rule 37(e)(2) allows the court to (a) presume that the lost information was unfavorable to the party, (b) instruct the jury that it may or must presume the information was unfavorable, or (c) dismiss the action or enter default judgment.
The court concludes that the data on the Computer should have been preserved by the Debtor both pursuant to his duties under sections 521(a)(3), 521(a)(4) and 542 of the Bankruptcy Code and in anticipation of litigation in the bankruptcy case regarding, among other things, his exemptions. Much of the ESI was lost. The loss was significantly due to the Debtor's failure to take reasonable steps to preserve it and likely due to his instructions to Ms. Gianardi to take the actions she did. And it appears the ESI cannot be restored or replaced through additional discovery. While the Debtor testified that he had backed-up all his documents on the Computer "to the cloud," the Debtor never produced an index or any backup documentation from the cloud to establish this. And while Ms. Gianardi testified she had made backup disks of the ESI for the Debtor, no one ever came up with those backup disks and the Debtor testified they did not exist. Thus, the four initial conditions of Rule 37(e) are met.
Next, the court also concludes that the NMSIC and the Trustee have been prejudiced from the loss of data from the Computer. They do not know what they do not know-in other words, there is no way of proving what data was covered up and irretrievably lost on the Computer due to Ms. Gianardi's actions. And neither the Debtor nor Ms. Gianardi are shedding any light on this. However, it is clear from Ms. Gianardi's Rule 2004 Examination testimony, the Skype Logs that were entered into evidence, and some of the live documents that the NMSIC did retrieve that Ms. Gianardi kept track of every detail of the Debtor's life. Thus, had the Computer not been tampered with, the Trustee and the NMSIC would have had plenty of data to piece together answers to major questions they have regarding transfers and validity of exemptions. This constitutes prejudice. Where prejudice exists, even if intent is not found, Rule 37(e)(1) allows the court to "order measures no greater than necessary to cure the prejudice."
(ii) Intent and Adverse Inferences in that Regard.
Finally, the court believes the Debtor acted with the intent to deprive the NMSIC and the Trustee the data for use in litigation. As earlier stated, it strains credulity to assume loyal Ms. Gianardi destroyed data on her own-given the past
(iii) Debtor Sanctions.
The court will likewise impose on the Debtor a sanction of paying the NMSIC's and the Trustee's legal fees and costs-an obligation that will be joint and several with Ms. Gianardi's obligation.
Additionally, the Debtor shall either: (a) produce documents from his cloud account(s) and from disks and from USB storage that have not been previously produced and are responsive to all of the NMSIC's document request within twenty (20) days of the entry of this Memorandum Opinion and Order, or else (b) appear and SHOW CAUSE why the court shall not, as a further sanction under Rule 37(e), infer that the spoliated ESI would have been unfavorable for the Debtor and would have established the invalidity of the exemptions he is claiming, to which the NMSIC and the Trustee have objected.
USB flash drives were inserted into the Computer on, inter alia , the following dates:
March 14, 2016 (20 days after the Petition Date);
October 28, 2016 (two weeks after the Gianardi 2004 Examination);
November 27, 2016 (six weeks after the Gianardi 2004 Examination);
February 8, 2017 (two days after the Motion to Compel-Computer was filed); and
February 9, 2017 (three days after the Motion to Compel-Computer was filed).265
Based on the foregoing,
IT IS ORDERED that a follow-up hearing is set for September 24, 2018, at 1:30 p.m. , at which time the court will hear a presentation regarding attorney's fees and costs of the NMSIC and the Trustee in this matter-which the court will review for reasonableness, so as to liquidate the sanctions the court has herein imposed on both the Debtor and Ms. Gianardi. The NMSIC and the Trustee shall file their written statements of fees and costs by Monday, September 10, 2018, at 5:00 p.m. Central time. Any objection to their reasonableness shall be filed by the Debtor or Ms. Gianardi by Friday, September 21, 2018, at 5:00 p.m. Central time.
IT IS FURTHER ORDERED that within twenty (20) days of the entry of this Memorandum Opinion and Order, the Debtor shall either: (a) produce documents from his cloud account(s) and from disks and from USB storage that have not been previously produced and are responsive to all of the NMSIC's document requests, or else (b) appear before this court on September 24, 2018, at 1:30 p.m., and SHOW CAUSE why the court shall not, as a further sanction under Rule 37(e), infer that the spoliated ESI would have been unfavorable for the Debtor and would have established the invalidity of the exemptions he is claiming, to which the NMSIC and the Trustee have objected.
Notes
See DE # 344 (Transcript from 6/14/18 Hearing, at p. 5 (lines 15-21) ).
The court is reminded of the oft-quoted literary conversation between two characters in Ernest Hemingway's novel The Sun Also Rises : "How did you go bankrupt? Two ways. Gradually, then suddenly."
See DE # 37.
See DE # 107 (filed 7/15/16).
See DE # 109 (filed 7/15/16).
The Debtor's Statement of Financial Affairs filed in his bankruptcy case states that the Debtor transferred over $3.7 million to his father, in the two years preceding the filing of his bankruptcy case. See DE # 58 (SOFA Question 18). The Debtor has previously testified these transfers were repayments of loans from his parents. Although the Debtor and his father have both produced copies of certain notes and loan agreements, according to the NMSIC, they have failed to provide virtually any other documentation supporting the validity of the loan agreements.
See DE ## 143 & 145 (entered 8/29/16).
See Exh. 7.
See DE ## 202 & 203.
See DE ## 224 & 248.
It was undeterminable whether the USB drives were used to copy information or import information to the Computer.
Apparently, when one deletes active files from a computer, those files typically sit on "unallocated" space unless and until new data is copied onto the computer and covers up that space.
The Gianardi Sanctions Motion cites to Fed. Rs. Civ. Proc. 70(e) and 37(e) as the applicable authority at the beginning, but then argues civil contempt case law, section 105 of the Bankruptcy Code -inherent authority to sanction a party for abuse of process-and case law regarding spoliation generically.
The Debtor Sanctions Motion cites to Fed. R. Civ. Proc. 70(e) as the applicable authority at the beginning, but then argues case law regarding spoliation generically.
Statements made in the Part I. Introduction section of this Memorandum Opinion and Order, while mainly set forth to establish context and background for this court's ultimate ruling, should also be considered findings of fact, pursuant to Fed. R. Bankr. Proc. 7052 and 9014. Findings of Fact that should more appropriately be deemed Conclusions of Law should be regarded as such, and vice versa .
The court clarifies Paris, France -since there is a Paris, Texas approximately 100 miles from the Dallas federal courthouse. The court notes, anecdotally, that the two cities bear very few similarities, other than their common name.
See DE # 344 (Transcript from 6/14/18 Hearing, at p. 8 (line 5) through p. 10 (line 25) ). The court takes judicial notice that this area of Paris is sometimes referred to as the "VIII arrondissement of Paris" or huitieme and is situated around the famous Avenue des Champs Elysees.
No one ever questioned venue in this case.
See DE # 344 (Transcript from 6/14/18 Hearing, at p. 10 (line 25) through p. 11 (line 22) ).
Debtor 2004 Motion, DE # 107, ¶¶ 16-22.
See DE # 109.
See DE # 107.
See DE # 145.
Specifically, on May 9, 2013, the Debtor and his entity SDN Advisors, LLC commenced a lawsuit against the Debtor's ex-wife styled SDN Advisors, LLC and Marc Correra v. Claudia Correra , Case No. D-101-CV-201301282 in the New Mexico District Court in Santa Fe. Two days later on May 11, 2013, Ms. Gianardi commenced a lawsuit against the Debtor's ex-wife styled Anita Gianardi v. Claudia Correra , Case No. D-101- CV-201301301 in the New Mexico District Court in Santa Fe. The lawsuits apparently related, in part, to the Debtor's ex-wife's alleged hacking into Ms. Gianardi's email accounts. See DE # 335 (Transcript from 6/5/18 Hearing at p. 240 (line 22) through p. 244 (line 12) ). Meanwhile, the Debtor's ex-wife accused Ms. Gianardi of the same type of hacking in the Correra divorce case. Exh. 65, ¶¶ 24-25.
See DE # 116.
See DE # 143.
FTR court audio recording from 8/9/16 hearing on Gianardi 2004 Motion at 2:33:51-2:34:57.
See DE # 146.
See Exh. 5.
See Exh. 7 (entire Transcript).
See Bankruptcy Rule 2004(c) ("The attendance of an entity for examination and for the production of documents, whether the examination is to be conducted within or without the district in which the case is pending, may be compelled as provided in Rule 9016 for the attendance of a witness at a hearing or trial"; Bankruptcy Rule 9016, in turn, incorporates Fed. R. Civ. Proc. 45, which provides various relevant requirements for subpoenas).
As earlier stated, Ms. Gianardi was served with the Gianardi 2004 Motion and Notice of Hearing (via personal service) and the Gianardi 2004 Order (via Federal Express).
See Exh. 6 (Day 1) at p. 69 (lines 22-24).
See DE # 335 (Transcript from 6/5/18 Hearing). Debtor's testimony at this hearing was that he paid for 2-3 lawyers for her. See also DE # 344 (Transcript from 6/14/18 Hearing, p. 12 (line 15) through p. 13 (line 12) ).
Actually, Ms. Gianardi testified that she worked for the Debtor's investment firm SDN Advisors. Additionally, her email address is associated with the Debtor's entity L2 Capital. See Exh. 7, pp. 13, 26 (lines 17-25) & 28 (lines 6-14).
See Exh. 7, pp. 21-22, 34, 132-133, 138.
See Exh. 6 (Day 1) at p. 24 (lines 5-12); See also DE # 335 (Transcript from 6/5/18 Hearing at p. 228 (lines 2-12) ).
See DE # 344 (Transcript from 6/14/18 Hearing at p. 28 (lines 2-17). When the NMSIC's attorney questioned the Debtor about a Skype log, Exh. 59, between the Debtor and Ms. Gianardi, that reflected a discussion between them regarding back-up discs in a storage unit, the questioning went like this:
Q. From Anita Gianardi. It says, "Do you know she told Rosie that only her things were in there? I would like to let you know that all of your back-up disks are in that unit along with all of your own personal effects. There are two sets of keys, one I will give to Rosie on Saturday and the other your dad has. Be careful when someone opens it, you can only open from one side. If you open from the other side, all of the furniture will fall. When opening the correct side, you must be careful, as the huge M Scott painting to the right is inside the door." Did I read that correctly?
A. Yes.
Q. Ms. Gianardi says here that "all of your back-up disks are in that unit." Is that correct?
A. Yes.
Q. And on direct testimony you testified that she never gave you any back-up disks; is that - is that correct?
A. Yes.
See DE ## 202 & 203.
See DE # 205.
See Exh. 7, p. 21.
See DE # 202 at ¶ 56 (citing Debtor Exh. (Day 1), p. 242).
See Exh. 7, pp. 136-137.
See Exh. 6 (Day 1), p. 24 (lines 5-12).
See DE # 211.
See DE # 210.
See DE # 227 (Transcript of hearing held 3/13/17, p. 3 (lines 6-8) ).
See DE # 224, Order Granting Motion to Compel (the "Computer Compel Order"), entered March 22, 2018.
See DE # 227 (Transcript of hearing held 3/13/17, p. 11 (lines 3-6) ). The court regrets not spelling this out more explicitly to the parties by using Bankruptcy Code section 542(e) in its oral discussion at the hearing.
See Exh. 70 & DE # 344 (Transcript 6/14/18 Hearing, at p. 45 (line 1) through p. 49 (line 21) ). The Debtor has argued at times that the Computer may not have been the Debtor's or SDN Advisors' or at least has tried to call this into doubt. The court found these arguments to be disingenuous and not at all credible.
See In re Schick ,
See Sola Commc'ns., L.L.C. v. Def. Dynamics, L.L.C. (In re Sola Commc'ns., L.L.C.) , Adv. No. 05-5081,
See DE # 248.
See DE # 235.
See DE # 287 (Transcript of hearing held 5/18/17), p. 74 (line 7) through p. 78 (line 12).
See DE ## 271 & 277. See also Exhs. 1-2.
See, e.g. , Exh. 78 and documents referenced therein, including Exhs. 21-69 & 83-87. See also Exhibits 91 and 93.
See Exh. 38.
See Exh. 2, p. 8 (¶ 10).
See DE ## 264 & 265.
See DE # 263.
See DE # 284 (Transcript from 4/2/2018 Status Conference).
See DE # 289.
See DE # 295.
See DE ## 296 & 297.
See Exh. 17.
See DE ## 321 & 327, Exh. 9 thereto.
See Exh. 3. See also DE # 335 (Transcript of 6/5/18 Hearing, at p. 48 (line 21)-p. 58 (line 8) ).
See, e.g.,
Credible evidence was produced in the form of a general ledger of one of the Debtor's businesses (SDN Advisors-the one that wrote Ms. Gianardi's paychecks) that showed the purchase of the Computer on June 29, 2011. See Exh. 70 & DE # 344 (Transcript 6/14/18 Hearing, at p. 45 (line 1) through p. 49 (line 21) ).
See DE # 335 (Transcript of 6/5/18 Hearing, at p. 149 (lines 16-19) & p. 179 (lines 20-23) ).
See Exh. 7, pp. 133 & 136.
See Exh. 19, p. 6.
The Pay-to-Play litigation in New Mexico was filed in 2011. The Debtor's divorce and custody proceedings in Texas and Paris were filed in 2010 and 2011, respectively. Various qui tam and related actions identified in the Debtor's Statement of Financial Affairs were filed in 2008, 2009, 2010, 2011, and 2014. According to the Debtor's separately hired forensic expert, Protegga, the majority of deletions on the Computer occurred December 20, 2015-which the court notes, anecdotally, was less than two months before the Debtor's bankruptcy case was filed. See Exh. 19, p.6.
To be clear, the Debtor ended up retaining another digital forensic expert to examine the Computer, Graciela Rubio of Protegga, LLC. While Ms. Rubio certainly seemed competent in her own right, the court did not hear anything to make it distrust the credibility of the Court-Appointed Forensic Expert. In fact, Ms. Rubio corroborated his testimony that 420 gigabytes of movie file data were written onto the hard drive of the Computer in December 2016 (while only adding that Ms. Gianardi had apparently copied movies onto the Computer at a few other points in time since 2011).
See, e.g. , Exh. 78 and documents referenced therein, including Exhs. 21-69 & 83-87.
E.g. , Exh. 59.
See Exh. 59 for full Skype log.
See DE # 344 (Transcript 6/14/18 Hearing, at p. 19 (line 4) through p. 27 (line 23) ).
See DE # 344 (Transcript 6/14/18 Hearing, at p. 65 (line 6) through p. 67 (line 15). See also Exh. 66 and Exh. 59 (Skype Log, entry of April 8, 2013).
See Exh. 59.
See DE # 344 (Transcript 6/14/18 Hearing, at p. 27 (lines 7-22) ).
E.g., Exh. 81; DE # 344 (Transcript 6/14/18 Hearing, at pp. 42-44).
Ms. Gianardi invoked her Fifth Amendment privilege here, both in connection with her discovery requests and in the Rule 11 agreement that was filed with the court. See Exh. 17 & Exh. 18.
See DE # 335 (Transcript 6/5/18 Hearing at p. 213 (line 7) through p. 217 (line 1); p. 231-239) ) & DE # 344 (Transcript Hearing at p. 49 (line 22) through p. 55 (line 1) ).
See Exh. 6, p. 43 (line 20) through p. 45 (line 24).
See DE # 335 (Transcript 6/5/18 at p. 224 (lines 14-25) ).
See Exh. 5.
See Exh. 7.
This is a follow-up matter relating to, among other things, an order to turn over property of the estate, as referenced in
See DE # 295.
See DE # 297.
In re Teknek, LLC, No.
9 Collier on Bankruptcy ¶ 2004.01[1] (Richard Levin et al. eds., 16th ed.).
The full text of Bankruptcy Rule 2004 reads as follows:
(a) Examination on Motion
On motion of any party in interest, the court may order the examination of any entity.
(b) Scope of Examination
The examination of an entity under this rule or of the debtor under § 343 of the Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge....
(c) Compelling Attendance and Production of Documents
The attendance of an entity for examination and for the production of documents, whether the examination is to be conducted within or without the district in which the case is pending, may be compelled as provided in Rule 9016 for the attendance of a witness at a hearing or trial. As an officer of the court, an attorney may issue and sign a subpoena on behalf of the court for the district in which the examination is to be held if the attorney is admitted to practice in that court or in the court in which the case is pending.
(d) Time and Place of Examination of Debtor
The court may for cause shown and on terms as it may impose order the debtor to be examined under this rule at any time or place it designates, whether within or without the district wherein the case is pending.
(e) Mileage
An entity other than a debtor shall not be required to attend as a witness unless lawful mileage and witness fee for one day's attendance shall be first tendered. If the debtor resides more than 100 miles from the place of examination when required to appear for an examination under this rule, the mileage allowed by law to a witness shall be tendered for any distance more than 100 miles from the debtor's residence at the date of the filing of the first petition commencing a case under the Code or the residence at the time the debtor is required to appear for the examination, whichever is the lesser.
Fed. R. Bankr. Proc. 2004.
In re GHR Energy Corp. ,
In re Ecam Publ'ns., Inc.,
9 Collier on Bankruptcy ¶ 2004.01[8] (Richard Levin et al. eds. 16th ed.).
2435 Plainfield Av. Inc. v. Township of Scotch Plains (In re 2435 Plainfield Av., Inc.),
In re Bennett Funding Group, Inc. ,
In re Drexel Burnham Lambert Group, Inc. ,
In re Enron Corp.,
Compare Fed. R. Civ. Proc. 45(b)(1) to Fed. R. Civ. Proc. 4 and Fed. R. Bankr. Proc. 9014.
See Fed. R. Civ. Proc. 45(c)(1).
See, e.g., Raynor v. Greenlight Capital Qualified, L.P., No. 08-00801,
See In re Teknek, LLC, No.
Teknek ,
As mentioned in footnote 153, supra , the bankruptcy court's decision was reversed and remanded by the Seventh Circuit in In re Teknek, LLC,
See In re Marathe ,
See also In re Mirant Corp. ,
Marathe,
Id. at 853-858.
Judicial Watch, Inc. v. U.S. Dep't of Commerce,
See DE # 211.
See DE # 227 (Transcript of hearing held 3/13/17, p. 3 (lines 6-8) ).
The court would note that Rule 45(f), which was enacted in 2013, states that "when the court where compliance is required did not issue the subpoena, it may transfer a motion under this rule to the issuing court if the person subject to the subpoena consents or if the court finds exceptional circumstances." The advisory notes to Rule 45(f) provide some guidance as to when exceptional circumstances may exist: "The prime concern should be avoiding burdens on local nonparties subject to subpoenas, and it should not be assumed that the issuing court is in a superior position to resolve subpoena-related motions. In some circumstances, however, transfer may be warranted in order to avoid disrupting the issuing court's management of the underlying litigation, as when that court has already ruled on issues presented by the motion or the same issues are likely to arise in discovery in many districts. Transfer is appropriate only if such interests outweigh the interests of the nonparty served with the subpoena in obtaining local resolution of the motion."
Arguably, an adversary proceeding should have been brought for a motion seeking relief under section 542 of the Bankruptcy Code. However, a party's failure to raise the issue of an adversary proceeding being needed results in the issue being waived. Village Mobile Homes, Inc. v. First Gibraltar Bank. FSB (In re Village Mobile Homes, Inc.) ,
See DE # 205. The Certificate of Service shows the Motion to Compel-Computer was served via United States First Class mail upon Ms. Gianardi at her home address, her business address, and to her counsel of record who sat with her during the Rule 2004 Examination. The court concludes this was proper service, pursuant to Bankruptcy Rule 9014 and 7004(b)(1), for the contested matter initiated against Ms. Gianardi via the Motion to Compel-Computer.
See DE # 211.
See DE ## 263 & 263.
See DE ## 264 & 265. The Certificates of Service show that the Gianardi Sanctions Motion was served via United States First Class mail upon Ms. Gianardi at her home address, her business address, to her counsel of record who sat with her during the Rule 2004 Examination and to her Texas counsel who represented her in connection with the Motion to Compel-Computer. The court concludes this was proper service, pursuant to Bankruptcy Rule 9014 and 7004(b)(1), for the contested matter initiated against Ms. Gianardi via the Gianardi Sanctions Motion.
To be clear, Bankruptcy Rule 9013 provides that only a written "motion" is necessary to commence a contested matter (not a summons and complaint), but the motion is served in the same manner as a summons and complaint would be served in an adversary proceeding.
Fed. R. Bankr. P. 7004(d), (f).
See generally Nordberg v. Granfinanciera, S.A. (In re Chase & Sanborn Corp.),
See Int'l Shoe Co. v. Washington ,
See, e.g., Am. Freight System, Inc. v. Temperature Sys., Inc. (In re Am. Freight Sys., Inc.) ,
See, e.g., Travelers Cas. & Surety Co. v. Desselle (In re Fries) ,
See In re Tex. Reds, Inc. , Adv. No. 09-1132,
Int'l Shoe ,
See Peay v. BellSouth Med. Assistance Plan ,
Texas Reds ,
Peay,
Zazzali v. Swenson (In re DBSI, Inc.) ,
Effective April 1, 2016,
DBSI, Inc. ,
See DE # 295.
See DE ## 296 & 297.
See Exh. 5.
See DE # 205. The Certificate of Service shows the Motion to Compel-Computer was served via United States First Class mail upon Ms. Gianardi at her home address, her business address, and to her counsel of record who sat with her during the Rule 2004 Examination. The court concludes this was proper service, pursuant to Bankruptcy Rule 9014 and 7004(b)(1), for the contested matter initiated against Ms. Gianardi via the Motion to Compel-Computer.
See Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee ,
See, e.g., Judicial Watch, Inc. v. U.S. Dep't of Commerce ,
See Hunger U.S. Special Hydraulics Cylinders Corp. v. Hardie-Tynes Mfg. Co., No. 99-4042,
See DE ## 264 & 265, ¶ 3.
Id. at ¶¶ 30-36.
Fed. Rule Civ. Proc. 37(e) -which was part of the amendments to the Fed. Rs. Civ. Proc., which became effective December 1, 2015, and applies in bankruptcy contested matters, by virtue of Fed. R. Bankr. Proc. 7037 and 9014(c) -provides as follows:
(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:
(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
The amended Rule 37(e) authorizes courts to issue sanctions where four conditions are met: (1) electronically stored information ("ESI") should have been preserved in the anticipation or conduct of litigation; (2) the ESI is lost; (3) the loss of the ESI is due to a party's failure to take reasonable steps to preserve it; and (4) the ESI cannot be restored or replaced through additional discovery. If those four conditions are met, the next step in the inquiry is to determine whether (1) the non-offending party has been prejudiced from the loss of ESI and/or (2) the offending party acted with the intent to deprive another party of the information's use in the litigation. If there is prejudice, Rule 37(e)(1) allows the court to "order measures no greater than necessary to cure the prejudice." If the offending party acted with intent, Rule 37(e)(2) allows the court to (a) presume that the lost information was unfavorable to the party, (b) instruct the jury that it may or must presume the information was unfavorable to the party, or (c) dismiss the action or enter a default judgment. Kevin Broughel, et al., The New Federal Rule of Civil Procedure 37(e) : What Have The First Three Months Revealed? (March 2, 2016), http://www.paulhastings.com/publication-items/details/?id=89a3e869-2334-6428-811c-ff00004cbded.
Although never really explained, the court assumes that the NMSIC cited Rule 70(e) in the Gianardi Sanctions Motion (applicable in bankruptcy cases pursuant to Fed. R. Bankr. Proc. 7070, and which simply states that the court may hold a disobedient party in contempt for failure to perform an act that is required) as just one more possible tool to address disobedience herein. The court does not find the rule to be terribly relevant here.
See, e.g., Natural Gas Pipeline Co. v. Energy Gathering, Inc. ,
11 U.S.C.A § 105(a) (West, Westlaw through P.L. 115-223) ("The court may issue any ... judgment that is necessary or appropriate to carry out the provision of this title....").
U.S. v. Int'l Brotherhood of Teamsters,
Chambers ,
Waffenschmidt v. MacKay ,
Waffenschmidt ,
See, e.g., Gruntz v. County of L.A. (In re Gruntz),
Cadle Co. v. Moore (In re Moore) ,
Pereira ,
See DE # 216. See also Exh. 5.
See DE ## 202, 203 & 205.
See Exh. 7, pp. 133-134.
Chambers ,
See, e.g., Exh. 6, p. 69.
See Exh. 7, pp. 133-34.
Ashton v. Knight Transp., Inc.,
U.S. v. Parks (In re Krause) ,
Ashton ,
Id. at 767.
See, e.g., F.D.I.C. v. Fid. & Deposit Co. of Md. ,
See DE # 321.
Toyota Motor Credit Corp. v. Palma , Civ. No. 3:07-CV-1248-B,
Palma ,
Palma,
Palma ,
Palma ,
Palma ,
Palma ,
Malnik ,
Malnik ,
Longoria ,
The court also notes that Ms. Gianardi answered certain written discovery in connection with the Gianardi Sanctions Motion. See Exh. 17 & DE # 327-8 (Ms. Gianardi's May 4, 2018 Objections and Responses to the NMSIC's (A) Subpoena to Produce Documents, Information, or Objects or to Permit Inspection of Premises in a Bankruptcy Case (or Adversary Proceeding) and (B) Interrogatories and Request for Production of Documents). Within her responses to this written discovery, Ms. Gianardi, again, asserted her Fifth Amendment privilege against self-incrimination. The court notes that these responses were signed by Ms. Gianardi's Colorado counsel, Ms. Menninger, and were not specifically sworn under oath by Ms. Gianardi. Accordingly, they were also procedurally improper. See, e.g., Longoria ,
U.S. v. Knox ,
Hammeken v. Hammeken (In re Hammeken) ,
Evangeline Refining,
Floyd v. Option One Mortg. Corp. (In re Supplement Spot, LLC) ,
Floyd ,
U.S. v. Knox ,
Pereira ,
Silvestri v. Gen. Motors Corp. ,
Rimkus Consulting Group, Inc. v. Cammarata,
Toth ,
Silvestri ,
Toth ,
Ronnie Van Zant, Inc. v. Pyle ,
Silvestri ,
Victor Stanley, Inc. v. Creative Pipe, Inc. ,
One of the consistent refrains throughout both the Gianardi 2004 Examination and the Debtor's testimony at the Combined Sanctions Hearing was some variation of "I don't remember" or "I can't recall."
See DE # 263, ¶ 3.
Id. at ¶¶ 47-64.
Rule 37(e) applies in bankruptcy contested matters, by virtue of Fed. R. Bankr. Proc. 7037 and 9014(c).
See Fed. R. Civ. P. 37(e).
Kevin Broughel, et al., The New Federal Rule of Civil Procedure 37(e) : What Have The First Three Months Revealed? (March 2, 2016), http://www.paulhastings.com/publication-items/details/?id=89a3e869-2334-6428-811c-ff00004cbded. It has been further noted that the idea behind recently amended Rule 37(e)"was to reserve severe sanctions for intentional spoliation," but parties still may be held accountable and imposed with sanctions if courts believe it is necessary to cure prejudice from unintended ESI loss. See Frank Harrison, Potential Adverse Interest Instruction for Unintended Electronically Stored Information Spoliation May Suggest Limitations of Recently Amended Rule 37(e), 65 The Federal Lawyer 49 (May 2018).
Particularly since, Ms. Gianardi testified that she had spoken with the Debtor by phone on the morning of her examination and "probably" a few times about the Gianardi 2004 Examination. Id. at p. 9 (line 9) through p. 11 (line 13). The court has little reason to doubt that Ms. Gianardi and the Debtor have been in contact throughout this process.
See DE ## 231 & 232.
Epiq Report at p. 5 (paragraph 6). There was, of course, other testimony that Ms. Gianardi and saved information on disks from time to time.