In In re Global Technovations, Inc, 2010 WL 2671706 (July 2 2010), the United States Bankruptcy Court for the Eastern District of Michigan denied requests for sanctions where the alleged spoliation was caused by a lender superseding control of the debtor company following a non-monetary loan default.

There, the court reviewed an acquisition transaction in which the acquired company, OAI, defaulted on a loan almost immediately after the acquisition, causing the lender financing the transaction to take control of the company.  The managers in control of the documents were removed immediately and other creditors in bankruptcy claimed that documents were destroyed following the lender's institution of asset liquidation.  Certain defendants claimed that the acquiring company, GTI, was at fault for failing to preserve relevant documents after the lender's take-over of operations following the loan default.

In reviewing the appropriateness of the full range of sanctions for failing to preserve potentially relevant documents, the court noted that the dismissed managers took the following steps to attempt to find and preserve allegedly destroyed documents:  paying storage vendors personally to preserve documents scheduled to be destroyed for the lender's non-payment; hiring a former employee in possession of a server to personally search the server for any relevant documents; personally purchasing software that would permit the viewing of data found on the former employee's server; hiring an independent forensic computer consultant to open and search e-mail files contained on a CD-ROM; and hiring computer consultants to recover electronic documents and perform a complete system review to assess security concerns.  The Court found that because the missing documents were due to the actions of other parties, including the lender's failure to maintain adequate safeguards to preserve documentary evidence during asset liquidation, GTI and its' ousted managers did not act with a culpable state of mind in destroying, losing or failing to preserve documents, negligently or otherwise.  In doing so, the Court held that no sanctions were appropriate for the alleged spoliation of evidence. 

For a copy of the opinion, which includes an in-depth discussion of federal case law on spoliation sanctions, click here.