N.V.E., Inc. v. Jesus J. Palmeroni, et al., Civil Action No. 06-5455 (ES), 2011 U.S. Dist. LEXIS 107600 (D.N.J., September 21, 2011)
On September 21, 2011, a new ruling out of New Jersey highlighted the intolerance of the courts for improperly implemented litigation holds. In N.V.E. v. Palmeroni, U.S. District Judge Esther Salas imposed monetary sanctions and an adverse inference instruction in her opinion that stated “[N.V.E] did not destroy records deliberately but was grossly negligent in failing to preserve them.”
The case began when N.V.E., a nutritional supplement company, sued its former vice president of sales Jesus Palmeroni who they had fired the previous January under the RICO Act. They accused Palmeroni of making deals with brokers for kickbacks on commissions. N.V.E. also added a claim that Palmeroni had conspired with other employees to buy products at less expensive international prices and resell them in the U.S. rather than export them. In response, Palmeroni filed a counterclaim accusing N.V.E. of firing him in response to his complaint of and refusal to participate in deceptive activities.
It’s interesting to note the timeline of events: Palmeroni was fired in January 2006. In May 2006 N.V.E. retained Pashman Stein of Hackensack, NJ. The lawsuit was not filed until November 2006. Pashman Stein admits that the firm failed to issue a litigation hold. The Chief Financial Officer of N.V.E. Erling Jensen, testified that counsel prior to Pashman Stein had sent out an email telling staff not to destroy documents, but there was no proof to back up this claim. Sometime after January 2006 N.V.E. deleted Palmeroni’s emails and destroyed all electronic records and papers. The electronic records had been on a computer system that N.V.E. was in the process of upgrading. The company stated that it could not “…have predicted we would not be able to get to our old computers.”
Also noteworthy is the comment by Aidan O’Connor of Pashman Stein who has since asked for reconsideration or an interlocutory appeal. He stated that from the time the case was filed until present time there has been a “sea change” in the law regarding litigation holds. He says, litigation holds are “now done as a matter of course.”
Isn’t that the truth? With a collaborative approach enabled by Legal Hold Pro, attorneys can now support clients in a way not possible only five short years ago in 2006. When faced with the possibility of litigation in 2011, counsel (both inside and out) need to imagine how they will demonstrate their preservation efforts if that case eventually goes to trial in 2014, 2015, or beyond – and then act accordingly.
Further Reading:
- Download the full opinion in N.V.E. v. Palmeroni
- Gallagher, Mary Pat, “N.J. Company Faces Sanctions Over Failed Litigation Hold,” New Jersey Law Journal, September 27, 2011
