Dismissal of Anti-Trust Case: Spoliation Of Computer Evidence


Ken Sutak, of counsel to our firm, recently oversaw the successful completion of nearly five years of complex litigation between the publisher of Antique Doll Collector magazine and a banned advertiser in the magazine who filed suit under the anti-trust laws, only to find herself and her company being sued in turn for fraud, among other claims. 

The litigation ranged across multiple fronts, beginning in the state courts and then shifting to the federal courts of both New York and Pennsylvania.  Ultimately, however, the combined cases turned on the former advertiser’s destruction, or spoliation, of her computer during the earliest stages of the litigation, resulting in the dismissal of the advertiser’s entire lawsuit and the advertiser’s settlement of the publisher’s lawsuit.

Antique Doll Collector, a monthly magazine published out of Northport, New York, has been in existence since 1997.  The magazine is directed to antique doll collectors and dealers.  Antique dolls are old, artful, and lifelike bisque dolls produced in various European countries which have become rare and very expensive within a specialty market comprised of collectors who can afford to purchase them.  Typically, collectors pay several thousand dollars for an antique doll in excellent condition and, often, tens of thousands of dollars for a very rare doll in top condition and original doll wardrobe.  Auction prices for the rarest antique dolls sometimes exceed one hundred thousand dollars, up to a present day high of over two hundred fifty thousand dollars.

Nancy Kvitka, once one of the best known antique doll dealers in the country, began placing advertisements in Antique Doll Collector under her Nikel Enterprises’ logo in 1998.  In August 2005, she was informed by a letter from the publisher that the magazine would no longer run her advertisements because of “the many and various complaints” that had been received about her business practices, which were claimed to include “disparagement of other advertisers and other advertised merchandise that have appeared in the magazine.”   Kvitka hired counsel to threaten the publisher with a lawsuit, and claimed a “right to advertise” in the magazine.  The publisher responded to this litigation threat with a legal letter from Ken, which informed Kvitka’s attorneys that the magazine maintained a file with several written complaints about Kvitka from other advertisers and readers, plus fifteen pages of emails written by Kvitka that disparaged other antique doll dealers who advertise in the magazine.

Kvitka renewed her lawsuit threat in December 2005 through the Harrisburg-based law firm of Kirkpatrick  & Lockhardt Nicolson Graham LLP which demanded to be shown her emails.` Ken fired back  another letter to Kvitka’s new attorneys, which rejected their demand for the Kvitka emails and advised them in no uncertain terms that her computer, particularly her computer hard drive, and all her accumulated email account message files going back several years, must be preserved as potential material evidence.    This written notice, sent prior to any actual litigation, would later prove critical to the federal court’s determination of the appropriate sanctions to impose for the ensuing destruction of Kvitka’s computer and hard drive.

Shortly after receiving this warning, Kvitka and Nikel Enterprises filed a Praecipe to Issue Writ or Summons in the Court of Common Pleas of Dauphin County, Pennsylvania, and the requested Writ of Summons was issued in January 2006.  In Pennsylvania, the writ procedure starts a state court adversarial proceeding that enables a plaintiff to obtain discoverable documents and testimony that are claimed to be necessary to draft a complaint.  In the course of this preliminary litigation, the plaintiffs requested that The Puffin Company produce the written complaints and copies of Kvitka emails that had been received by Antique Doll Collector magazine.  They were produced to Kvitka’s attorneys on February 28, 2006.

Meanwhile, Kvitka would later claim, she was having problems with her laptop computer.  She notified a computer technician, and without examining the old laptop he informed her that she should purchase a new one.  The new laptop was ordered on February 27 and shipped on or about March 7.  Within another week Kvitka’s new laptop was set up by her computer technician.  Then Kvitka’s old laptop was discarded with her household trash.  Although the computer technician later testified that he had advised Kvitka that email files were  recoverable even from a broken hard drive, Kvitka would later claim that no emails had been recovered from the old laptop and transferred to the new laptop before the old laptop was trashed.

Several days later, on March 16, 2006, the Court of Common Pleas held a case conference in which the Daulphin County trial court judge inquired about the status of the original emails.  Unaware of their client’s destruction of the old laptop, Kvitka’s attorneys failed to inform the judge that the old laptop had been discarded, either at the conference or in subsequent written correspondence with the court.  Instead, plaintiffs opted to discontinue the pending state court case.  Shortly afterward, on April 25, 2006, they then filed a federal  lawsuit against The Puffin Company, its advertising director, and one of the complaining advertisers, alleging that they had conspired along with  unnamed other advertisers in the magazine to deny plaintiffs’ their “right to advertise” in Antique Doll Collector magazine, in violation of the federal anti-trust laws.  Kvitka’s federal complaint also failed to disclose that she had spoliated the determinative computer evidence before filing her federal complaint.  Instead, it suggested that the disparaging Kvitka emails in the possession of the magazine had been tampered with—in effect, altered—either by the defendants or by the unnamed co-conspirators.

In the meantime, Ken had prepared a state court complaint on behalf of The Puffin Company against Nancy Kvitka, her husband Richard Kvitka, and Nikel Enterprises, which was filed in the New York Supreme Court for Suffolk County in June 2006.  The publisher’s complaint alleged causes of action for breach of the covenant of good faith and fair dealing (a distinct cause of action from breach of contract in New York), fraud upon the magazine for placing false and deceptive advertising, indemnification of the publisher’s consequential legal expenses under the magazine’s published  advertising policy, and RICO violations.  The publisher’s complaint also sought injunctions against Nancy Kvitka and Richard Kvitka to prevent them from harassing the magazine’s other advertisers and readers by pretending to be licensed professionals.  This action subsequently was removed to a New York federal court, from which it was then transferred to the federal court in Harrisburg for joinder with Kvitka’s Pennsylvania case, as counterclaims plus a third-party action.

On October 27, 2007, eighteen months after the Pennsylvania federal lawsuit was filed by the plaintiffs and assigned to longtime district court judge Sylvia H. Rambo of the Middle District of Pennsylvania, Nancy Kvitka finally disclosed under written questioning that she had disposed of the tell-tale laptop computer and its hard drive back in March 2006.  However, she maintained up until January 2008—and her computer technician implied during deposition testimony—that no email files had been recovered from the old laptop before it was trashed.  Whereupon the publishing defendants and counterclaimants moved for an order of inspection of the new laptop, plus spoliation-specific depositions of the Kvitkas and the computer technician.

In response, Kvitka’s attorneys disclosed that “some” emails had indeed been recovered from the old laptop and had just been located by Kvitka on the new laptop. The recovered emails turned out to be unrelated to the ones in the magazine’s possession, but they were dated as late as March 2006.  Hence, upon the conclusion of Nancy Kvitka’s deposition, a motion for summary judgment prepared by Ken and Jeffrey McGuire of Caldwell & Kearns, the publisher’s local counsel, seeking dismissal of the Kvitka and Nikel Enterprises complaint and other sanctions for willful spoliation of computer evidence, followed.  So did an application for withdrawal from the case by the Kirkpatrick firm, which was granted, along with time for plaintiffs to retain new counsel to respond to the motion.

On February 13, 2009, Judge Rambo issued a scathing decision and related order on the publisher’s spoliation motion, which dismissed the plaintiffs’ complaint with prejudice, granted an adverse inference jury charge to the defendants at the time of trial of the counterclaims, and precluded Kvitka and Nikel Enterprises from arguing that anyone had tampered with the copies of the Kvitka emails possessed by the magazine.

Judge Rambo deemed Nancy Kvitka’s explanation of how some email files from her old laptop could turn up on her new laptop without having been transferred by her or her computer technician, “absurd” and “outlandish.”  The Judge found that there was “no question that Kvitka intentionally discarded the laptop despite instructions not to dispose of it,” and emphasized that the discarding of the laptop “that contained the emails relevant to her claims” had been done in “direct defiance of instructions provided to her attorney.”   Judge Rambo also deemed it significant that, “After discarding the old laptop, [Kvitka] failed to inform the judge presiding over her first lawsuit that she had engaged in such conduct despite the judge’s direct inquiries and, instead, discontinued that litigation and filed the instant complaint in federal court,” where “she…has attempted to mislead the court by withholding evidence that she now claims was transferred without explanation from her old laptop to her new laptop.”  Consequently, applying the Third Circuit’s threefold criteria for setting appropriate sanctions for spoliation of evidence generally, Judge Rambo found that Kvitka had acted “with the highest degree of fault”; that her actions had “severely prejudiced defendants” because “to properly defend or prosecute this case, defendants would need access to Kvitka’s old laptop to inspect and investigate her email programs and hard drive”; and that no lesser sanction than dismissal of Kvitka’s lawsuit would avoid substantial unfairness to the opposing party and serve to deter such serious misconduct by others in the future.

Moreover, as if to make this spoliation decision one of the most dramatic on record in the federal district courts, Judge Rambo decreed that, “Kvitka has attempted to avoid…reality.”  The Judge then cited with more than a hint of titular irony to the famous play A Doll’s House while opining: “she would have done well to heed the words of the great playwright Henrik Ibsen who wrote, ‘Many a man can save himself, if he admits he’s done wrong and takes his punishment.’”

Instead of heeding these words, Kvitka and Nikel Enterprises moved for leave to file an interlocutory appeal pursuant to 28 USC 1292 (b), mainly on the ground that the Third Circuit Court of Appeals has not yet ruled on the appropriate sanctions for spoliation of electronic evidence.  Although the appellants were right about that, Judge Rambo gave this “case of first impression” argument short shrift.  In denying Kvitka’s motion, she ruled that, “Spoliation is spoliation regardless of the form of the evidence.  ….  The Third Circuit is not a stranger to the spoliation issue.”

Facing concurrent trial management deadlines on the counterclaims against them, the Kvitkas and Nikel Enterprises then consented to the entry of the requested injunctions against themselves, and agreed  to waive their post-trial right of appeal of the order dismissing the anti-trust case, in return for discontinuance of the rest of the publisher’s lawsuit against them.  A final order effectuating this pre-trial settlement was entered on July 14, 2010.

According to Ken, the educational significance of these combined, crushing  outcomes—apart from the expansion of the ultimate sanction of dismissal for spoliation of computer evidence to the Third Circuit from the Second Circuit, where such a legal consequence has been endorsed by the Court of Appeals and applied by the district courts for several years now—arises from three factors that do not always appear together in spoliation decisions, but did converge here.

First, clients must recognize that electronic email files are potential evidence, and that it is universally the rule in the federal courts (and most state courts as well) that a party which reasonably anticipates litigation has an affirmative duty to preserve all  evidence that may be relevant to possible as well as pending litigation.

Second, any party that actually or implicitly threatens litigation should be provided with written notice, preferably in the form of a lawyer’s letter, immediately, instructing that party to preserve its computer(s), particularly its hard drive(s), or face serious consequences in any ensuing litigation for the failure to do so.

Third, in the event that litigation ensues and it is learned that the opposing party has disposed of its computer(s) and/or hard drive(s) despite a written notification not to, or even before then, counsel should never take the opposing party’s claim that the disposal was innocent or that no email files were saved at face value.  Always apply for an order of inspection of the opposing party’s replacement computer(s) and/or hard drive(s).  As this case illustrates, there is a good chance that what your specialist will find there will constitute incontrovertible proof of willful spoliation of computer evidence, which is “the highest degree of fault” justifying the ultimate sanction of dismissal.


If you have any questions about taking strategic advantage of spoliation of computer evidence in a lawsuit, or about avoiding the possible consequences of failing to preserve your computer evidence prior to or during a lawsuit, please feel free to contact Ken at our New York City office where he is headquartered, at 212-725-3131.