On May 29, 2020, the U.S. Court of Appeals for the Second Circuit affirmed our client Kal Tire’s two victories in the U.S. District Court for the Southern District of New York. In the underlying action, the plaintiff, ComLab Corp., a New York information technology company, sued Kal Tire, a Canadian tire company, for breach of contract. During discovery, Kal Tire learned that ComLab’s CEO fabricated emails and invoices to support ComLab’s claims and then intentionally destroyed the native versions of the fake documents to hide the fraud. Armed with this evidence, Kal Tire moved for sanctions seeking dismissal of the lawsuit and an award of its attorney’s fees and costs. Following an evidentiary hearing, on September 11, 2018, Judge Katherine B. Forrest granted Kal Tire’s motion, finding that ComLab perpetrated a fraud on the court and spoliated critical evidence. Judge Forrest dismissed the action with prejudice and awarded Kal Tire its reasonable attorney’s fees and costs incurred in defending the action.
Judge Forrest retired from the court on the same day that she issued the decision, and the case was reassigned to Judge P. Kevin Castel. Kal Tire then filed a motion to set the amount of its fee award. On April 18, 2019, Magistrate Judge Ona T. Wang issued a Report & Recommendation (“R&R”) granting the motion in full and setting the amount of Kal Tire’s fee award at $313,138. On May 16, 2019, Judge Castel adopted the R&R in full. ComLab appealed Judges Forrest’s and Castel’s decisions.
The Second Circuit affirmed Judge Forrest’s holding that ComLab committed a fraud on the court because there was overwhelming evidence that the company’s CEO willfully fabricated evidence to support his claims and then intentionally purged his computer to prevent the discovery of the fraud. The court further held that even though dismissal is a “drastic remedy,” Judge Forrest did not abuse her discretion in dismissing the case “under these extraordinary circumstances” involving willful deception of the court and destruction of important evidence.
As for the second appeal, the Second Circuit held that ComLab waived its right to appeal Judge Castel’s decision because it did not object to Judge Wang’s R&R. The Court therefore affirmed Judge Castel’s decision awarding Kal Tire $313,138 in attorney’s fees and costs. A link to the decision can be found here.
Eric Goldberg briefed and argued the appeals for Kal Tire with assistance from Collin Crecco.
