Introduction
In May of 2020, PDV USA, Inc. v. Interamerican Consulting Inc., PDV brought a breach of contract complaint against Interamerican in the United States District Court, S.D. New York. for a failure to provide contracted services to their satisfaction. This case addresses the obligation to turn over evidence during discovery and the preservation of evidence.
Facts
After contracting Interamerican to provide explicit consulting services, PDV made initial payments of $15 million to Interamerican as agreed, before any contracted services were provided. After the receipt of initial reports PDV claimed Interamerican's failure to provide services, and did not pay the remaining $35 million due on July 15th, 2017 as required by the contract. They made known to Interamerican that the amount would be paid only if the agreed upon services were fulfilled.
In December of 2017 Interamerican sought legal advice in anticipation of litigation, which the court upholds as the point at which Interamerican should have reasonably inferred that they were under an obligation to preserve evidence. However, documentation obtained from Interamerican showed that they failed to implement a litigation hold until late 2018.
During discovery, Interamerican failed to provide messages in the form of emails, WhatsApp messages, and other mobile messages to PDV, and PDV was only made aware of a large portion of existing communication when the documents were produced by the government and other third parties. At this point, PDV sought sanctions against Interamerican for their failure to preserve clearly relevant evidence.
The court found that Interamerican engaged in selective deletion of messages, encryption of messages that where known to be relevant to the case, that Interamerican gave shifting explanations as to why some messages where produced while others where not, gave contradictory testimony, and engaged in obfuscation and obstruction wherein Interamerican downplayed the significance of the missing documentation.
Ruling
In January of 2026, the court ruled that Interamerican failed in their duty to preserve, spoliated relevant evidence, that PDV USA had been prejudiced, and that Interamerican acted in bad faith. The court found a failure to preserve evidence and awarded partial sanctions of an adverse inference instruction and attorney's fees in favor of PDV USA.
Response
Question: At what point does the obligation to preserve evidence arise?
Hypothetical: Suppose Interamerican had not sought legal advice in 2017 - would this have changed the courts finding of a failure of a duty to preserve?
Citations
PDV USA, Inc. v. Interamerican Consulting Inc., No. 20-CV-3699 (JGK) (RWL), 2026 WL 203036 (S.D.N.Y. Jan. 27, 2026) https://www.westlaw.com/Document/I310e18c0fbc211f093a3f9604e31fef9/View/FullText.html?transitionType=Default&contextData=(sc.Default)&VR=3.0&RS=cblt1.0
Caitlin Oyler, ESI Spoliation Sanctions & Discovery Misconduct: Court Finds Intent to Deprive and Imposes Adverse Inference in PDV USA v. Interamerican, CODISCOVR (Feb. 12, 2026), https://codiscovr.com/esi-spoliation-sanctions-discovery-misconduct-court-finds-intent-to-deprive-and-imposes-adverse-inference-in-pdv-usa-v-interamerican/.
PDV USA, Inc. v. Interamerican Consulting Inc., No. 20-CV-3699 (JGK) (RWL), 2026 WL (S.D.N.Y. Jan. 27, 2026) (Lehrburger, M.J.), https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2020cv03699/537042/297/.
Rule 37 Failure to Make Disclosures or to Cooperate in Discovery; Sanctions
Rule 34 Producing Documents, Electronically Stored Information, and Tangible Things, or Entering onto Land, for Inspection and Other Purposes
Great post!
ReplyDeleteI think this case shows perfectly well how Rule 37(e) hits back against those who want to engage in games around ESI. Coming back to your question on the timing of the preservation obligation, it surely occurs when the litigation is “reasonably anticipated” according to the case and the judge has correctly stated that it began already in December 2017 as Interamerican contacted a lawyer because of the unpaid $35 million.
As for your hypothetical, I believe that the lack of consultation with a lawyer in 2017 would not have helped the company in avoiding spoliation finding. In fact, I think the rule applied here is objective, meaning that the judge looks into the objective situation and what a reasonable person would do. Since the company is holding back tens of millions of dollars in response to the breach of contract, there is no doubt that any reasonable company would foresee imminent litigation despite having or not having a lawyer.
Great post, Kendra!
ReplyDeleteIn her comment above, Evelin nailed the application of Rule 37(e). You have to preserve your ESI as soon as the litigation is "reasonably" expected. My first thought when reading this is that there may be a dispute about when a reasonable expectation would apply in this case. Maybe the Defendant would have some wiggle room here? However, after reading the full case, I discovered that Interamerican is actually a consulting firm consisting of one employee, David Rivera, a former U.S. congressman. If a company's sole employee is contacting a lawyer, it is reasonable to expect a legal dispute. This case is fascinating and full of examples of what not to do when it comes to properly preserving data. The primary source of ESI in this case was Rivera's cell phone, which the FBI seized at one point. It seems he also deleted a chat app. Overall, he did not present as a very credible witness, and they were still in the discovery phase.
For the hypothetical, it seems that Rivera would still have some expectation of a legal dispute whether or not he contacted his lawyer. And since he was also under investigation by the FBI, there may be other legal reasons why he would be expected to preserve his data.
I mostly agree with Evelin, and with the court, that Interamerican's duty to preserve arose no later than December 2017, when it contacted counsel. This seems “reasonable”.
ReplyDeleteOn the hypothetical, however, I do think the outcome could have changed if Interamerican had never sought legal advice. The duty to preserve is triggered when a party reasonably anticipates litigation, an objective standard that doesn't depend on hiring a lawyer. I think the date that triggers this duty was on July 15, 2017 or as soon as PDV claimed Interamerican failure to provide contracted services and refused to pay. Interamerican was on notice of a substantial dispute over the core of the contract. This was clearly an issue that may lead to litigation.
Especially as the unpaid party, a reasonable position should have anticipated litigation and preserved contract-related records and communications from that point forward. Under Rule 37(e), the loss of ESI that should have been preserved in anticipation of litigation can support sanctions if reasonable steps weren't taken to preserve it.
This post was great and made me think about my current work, especially over the past three years as new legislation has increased scrutiny around the work we do and the information we maintain. I believe the obligation to preserve evidence can begin as soon as business activities occur, although the specific duty to preserve for litigation may depend on when litigation is reasonably anticipated and on the circumstances and individuals affected by potential harm. I appreciated the information you shared about litigation holds because preserving data, reports, communications, and other documentation has become a high priority for our team. Although maintaining this level of documentation can be tedious and time consuming, it has also been one of the most important ways we have been able to advocate for our center, demonstrate compliance with the law, and respond when information has been requested. There has been a real sense of relief when we have been asked to provide data or documentation and have been able to produce the necessary details. In any type of business or professional exchange, I think documentation is essential, while the appropriate length of time to retain records should be determined by applicable laws, mandated retention policies, and best practices based on the nature and scope of the work.
ReplyDeleteFor your question, I do agree with the previous comments that the reasonable expectation was established no later than when Interamerican sought legal advise. However, I could absolutely see potential for an argument that states that duty to preserve began at the breach of contract. For the sake of Interamerican, they would likely consider that the refusal to pay the $35 million to complete the contract. Again, I do agree with the previous opinions, but I could absolutely see an argument for both. I do believe this also covers your hypothetical :) thanks for the post!
ReplyDelete