Sixth Circuit Analyzes Standards for Sanctions for Failing to Preserve Evidence

n Automated Solutions Corp. v. Paragon Data Systems, 2014 U.S. App. LEXIS 11918 (6th Cir. June 25, 2014), the United States Court of Appeals for the Sixth Circuit provided a close examination of the standards required for the imposition of severe sanctions for failing to preserve evidence. The case involved a dispute between two software companies over the development of software code. Essentially, the plaintiff Automated Solutions (“Automated”) accused Paragon Data Systems (“Paragon”) of utilizing Automated’s code to develop a competing software program. Automated filed a motion for sanctions seeking a default judgment against Paragon for Paragon’s failure to preserve a server and two hard drives utilized in the development of the competing software as well as computer backup tapes. The district court concluded that Paragon was negligent in failing to preserve the materials, but that there was no evidence indicating that Paragon acted with any willful or malicious behavior. Instead of imposing sanctions, the court indicated that it would consider the issuance of an adverse inference instruction against Paragon at trial. After Paragon prevailed on summary judgment, Automated appealed to the Sixth Circuit.



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