Coan et al v. Dunne et al

Filing 383

ORDER DENYING TRUSTEE'S MOTION FOR CONTEMPT AND IMPOSING SANCTIONS PURSUANT TO FED. R. CIV. P. 37(e)(1). For the reasons stated in the accompanying ruling, the Trustee's motion for contempt (Doc. # 70 ) is DENIED. The Court finds that Dunne 's loss of electronic records was negligent, and so imposes curative measures pursuant to Fed. R. Civ. P. 37(e)(1) as described in this order. Dunne shall also furnish the documents over which he asserts the attorney-client privilege to Judge Sp ector for in camera review as described in this order. The Trustee shall furnish an itemized statement of costs and fees to counsel for Dunne on or before May 7, 2019, and Dunne shall pay within thirty days thereafter. Dunne shall continue to use an IT consultant to produce remaining responsive documents, and shall bear the costs of doing so.Signed by Judge Jeffrey A. Meyer on 4/16/2019. (Rubin, N.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

RICHARD M. COAN,
Plaintiff-Trustee,
No. 3:15-cv-00050 (JAM)
Adv. Proc. No. 15-5019 (JAM) (consol.)

v.
SEAN DUNNE et al.,
Defendants.

ORDER DENYING TRUSTEE’S MOTION FOR CONTEMPT
AND IMPOSING SANCTIONS PURSUANT TO FED. R. CIV. P. 37(e)(1)
Plaintiff-Trustee Richard M. Coan has moved for contempt and discovery sanctions
against debtor-defendant Sean Dunne. Doc. #70. In essence, the Trustee accuses Dunne of
willful failure to preserve and produce emails from certain email accounts as well as other
discovery misconduct.
I referred the Trustee’s motion to U.S. Magistrate Judge Robert M. Spector, who
pursuant to 28 U.S.C. § 636(e)(6)(B) entered an order certifying facts to support a finding of
contempt and recommended a range of sanctions including an award of attorney’s fees and costs,
an adverse inference instruction, and a finding of waiver of privilege. See Doc. #225. Now
before me are Dunne’s objections to the Magistrate Judge’s ruling, as well as objections from the
remaining defendants. For the reasons I explain below, I will deny the Trustee’s motion for
contempt but I will impose sanctions on Dunne for his discovery misconduct pursuant to Federal
Rule of Civil Procedure 37 and the Court’s inherent authority.
BACKGROUND
This is a financial fraud case that is related to bankruptcy proceedings in Connecticut and
the Republic of Ireland involving real estate developer Sean Dunne. See Coan v. Dunne, 2019

1

WL 302674, at *1-*2 (D. Conn. 2019) (generally describing the history of this case). The facts
and posture of this case are well-known to the parties. The pertinent facts laid out here are
generally taken from those certified by Judge Spector to which the parties have not objected but
as supplemented by consideration of additional factual submissions that have been filed
subsequent to Judge Spector’s ruling.
Since 2010, Dunne has maintained several email accounts. Dunne claims that in 2011 or
2012 he stopped using two of these accounts: [e-mail] and
[e-mail]. Doc. #225 at 17. Dunne swears that he stopped using the
[e-mail] account because his personal assistant had stopped working for him, and
that he closed the [e-mail] account because the Mountbrook server had been
functioning poorly while he was in the United States, consequently frustrating his email use.
Doc. #274-1 at 36 (¶¶ 8-9).
Dunne and his agent James Ryan both swear that the Mountbrook server did not provide
for cloud-based email access; these emails were stored on a private server, and Ryan abandoned
the server in a Dublin building that Dunne gave up to a creditor in June 2013. Doc. #274-1 at 37
(¶¶ 9-11), 86-87 (¶¶ 1-3). Dunne does not possess the server and does not have access to the two
Mountbrook email accounts that were stored on the server. Id. at 37 (¶ 10).
Dunne transitioned from the private-server Mountbrook email service to Google email.
Id. at 36-37 (¶ 9). Google’s “Gmail” service is a web-based email service that does not involve
storage of emails exclusively on private servers. The first Gmail account that Dunne opened, in
approximately May 2011, was [e-mail]. Id. at 37 (¶ 9). According to
documents obtained by the Trustee from third party sources, Dunne used the
[e-mail] account to communicate with Seamus Reddan, his agent for the sale

2

of Walford, a large property in Ireland that the Trustee alleges Dunne fraudulently transferred.
Doc. #225 at 19; see Doc. #189 at 32 (¶¶ 145-50) to Coan v. Killilea, No. 15-05019 (Bankr. D.
Conn. 2016).
In June 2013, Google informed Dunne that there had been an attempt to hack the account,
and so Dunne closed this account and created a second Gmail account:
[e-mail]. Id. at 37 (¶ 11). According to Dunne, concerns and notifications
about hacking continued, which caused him to close this second account in approximately
December 2013 and then to open a third Gmail account that he continues to use to this day. Ibid.
To corroborate his claim about hacking concerns, Dunne has produced a copy of a
Google notification that was sent to him in June 2013 advising him that his
[e-mail] account had been locked because of too many log-in attempts and his
contemporaneous forwarding of this advisory to a colleague stating: “Vinny, call me later as
somebody trying to hack my email account. May need to close it down:” Doc. #274-1 at 89.
Similarly, he received another warning from Google to the [e-mail] account
on December 16, 2013. Id. at 91.
In short, Dunne had four email accounts that were either discarded or closed by Dunne by
the end of 2013. By that point in time, Dunne had been sued in 2012 in Connecticut state court
by NALM and had also filed for bankruptcy in Connecticut in March 2013. In June 2013, Dunne
was subject to formal, on-the-record interrogation by the Trustee at which time he was asked and
answered questions about his email accounts. Doc. #274-1 at 17-27. He was questioned again in
December 2013 at which time he expressed concern that “somebody was hacking my e-mail
account.” Id. at 31.

3

Despite the pendency of the NALM state court action, the federal bankruptcy, and formal
questioning in 2013 about the emails by the Trustee, neither the Trustee nor any other creditor
made any request to Dunne in 2012 or 2013 to preserve his emails. It was not until several years
later in 2016 that the Trustee first served a discovery demand for Dunne’s emails.
On July 25, 2016, the Trustee subpoenaed Dunne for a wide range of documents
including his emails. Doc. #225 at 14. In addition, this was the first discovery request for
documents related to Walford. Id. at 20. When Dunne did not comply with the July 2016
subpoena, the Trustee moved to compel production of documents that the July 2016 subpoena
requested, and by February 2017, the Bankruptcy Court had ordered Dunne to produce
responsive documents and file an affidavit certifying that all responsive documents in Dunne’s
possession and control had been produced to the Trustee. Id. at 14-15. Dunne then certified in
February 2017 that he had conducted a good faith search to find all responsive documents, and
that he had provided them for production. Id. at 15. It stands to reason that, because the email
accounts at issue here were either closed or unavailable to Dunne by the end of 2013, it was not
false as to these email accounts for Dunne to have certified in February 2017 that he had
conducted a good faith search to locate and produce documents responsive to the subpoena but
without producing these emails.
The Trustee renewed his motion to compel and for contempt in July 2017, and in August
2017, the Bankruptcy Court found Dunne in contempt and ordered him to produce all documents
responsive to the July 2016 subpoena, including a list of all email accounts he had used since the
start of 2010. Ibid. The Bankruptcy Court also ordered the Trustee to serve a copy of the order on
Google and AT&T so that those companies could produce emails from two of Dunne’s email
accounts with Dunne’s cooperation. Ibid. Dunne then appealed the Bankruptcy Court’s contempt

4

order. Ibid. While Dunne’s appeal was pending, Google informed the Trustee in November 2017
that its users could obtain and produce account content themselves or by using the Google
Takeout feature. Ibid.
The record, however, is not clear whether this feature existed in 2013 at the time that
Dunne closed two of his Gmail accounts or whether this feature would have allowed Dunne in
2017 to recover email accounts that had been closed many years before. To the contrary, Google
further advised the Trustee in January 2018 that “[t]he [e-mail] account was
deleted by the user and purged by Google in 2013.” Id. at 18-19. The reasonable inference from
this record is that Dunne could have done nothing at the time he was served with the July 2016
subpoena or later to recover the [e-mail] and [e-mail]
accounts that he had closed in 2013. Nevertheless, in December 2017, the Trustee moved in the
Bankruptcy Court for further contempt against Dunne on the ground that Dunne had neither used
Google Takeout, nor executed a consent order that Google had provided him, nor taken any
further steps to produce email account content. Id. at 15-16.
In January 2018, the Bankruptcy Court entered an order finding Dunne in further
contempt, ordering him to submit a sworn affidavit or declaration regarding the document
requests he had not yet complied with, and to file a privilege log of any withheld documents or
communications that would allow the parties to assess Dunne’s claims of privilege. Id. at 16.
Dunne filed an unsworn certification on February 9, 2018, listing his email accounts at
[e-mail]; [e-mail]; [e-mail];
[e-mail]; and [e-mail]. Ibid. He claimed he only had access
to the [e-mail] account, from which he produced 1,800 pages of email. Ibid.

5

On February 23, 2018, Dunne produced to opposing counsel but did not file with the
Bankruptcy Court a privilege log listing 2,518 documents as privileged. Ibid. Although it appears
that Dunne was supposed to and should have filed this log with the Bankruptcy Court, it is hard
to understand the Trustee’s claim of prejudice in light of the fact that the Trustee timely received
a copy of this privilege log.
The District Court affirmed the Bankruptcy Court’s contempt findings on September 27,
2018. Ibid.; see In re Dunne, 2018 WL 4654698 (D. Conn. 2018) (Shea, J.). Judge Shea affirmed
the finding that Dunne had failed to comply with the July 2016 subpoena, 2018 WL 4654698 at
*5, affirmed the finding that Dunne was unable to show why he was unable to produce records
from all of his email accounts, id. at *7, *9, and affirmed the Bankruptcy Court’s order directing
the Trustee to subpoena Google and AT&T, id. at *9. Judge Shea remanded for consideration
whether Dunne had acted in bad faith to warrant an award of attorney’s fees. Id. at *8-*9.
In fall 2018, Dunne hired an IT consultant to ensure that the [e-mail]
account had been fully searched. Doc. #225 at 21. The parties have since disputed the
appropriate search terms for the IT consultant to use. See Doc. #304 at 24-25; Doc. #329 at 10.
On January 2, 2019, other defendants produced numerous emails from the
[e-mail] account that Dunne had not produced. Doc. #225 at 21. The Trustee
has also learned that Dunne regularly communicates via text, and Dunne has conceded that while
the July 2016 subpoena requests text messages, he automatically deleted his texts and so has only
produced texts that postdate September 1, 2018. Ibid. On January 18, 2019, Dunne filed revised
and supplemental privilege logs with the Court. Id. at 22.
Judge Spector concluded that Dunne’s production continued to be incomplete, that his
privilege logs continued to list nonprivileged material, and that Dunne had unacceptably delayed

6

in retaining an IT consultant. Id. at 24. Judge Spector then concluded that on this basis Dunne
should be held in further contempt, and went on to consider appropriate sanctions. Judge Spector
recommended that Dunne be held responsible for attorney’s fees involved with the Trustee’s
contempt motion, the cost of searching Dunne’s remaining electronically stored information for
responsive and nonprivileged documents to the July 2016 subpoena, an adverse inference about
Walford arising from Dunne’s deleted emails, and a waiver of Dunne’s privilege as to any new
documents discovered between now and trial. Id. at 25-30.
Since both Judge Shea’s and Judge Spector’s prior rulings, Dunne retained new counsel
who has substantially supplemented the factual record to shed light on on Dunne’s actions and
his state of mind with respect to his closing of the email accounts. Docs. #274, #329. It is this
additional information that leads me in this ruling not to view Dunne’s actions quite as
unfavorably as they may have been viewed by both Judge Shea and Judge Spector. This is not to
excuse Dunne for his prior failure to comply with discovery demands, but my focus remains on
evaluating Dunne’s actions and state of mind in light of the current record before me.
DISCUSSION
The Trustee has moved for the Court to hold Dunne in contempt pursuant to Federal
Rules of Civil Procedure 37 and 45 as well as under the Court’s inherent powers. Doc. #70 at 1.
Federal Rule of Civil Procedure 37(b)(2)(A) empowers the Court to issue discovery sanctions in
its discretion “[i]f a party . . . fails to obey an order to provide or permit discovery.” Among the
permissible sanctions a court may impose are treating as a contempt of court the failure to obey a
discovery order. Id. at 37(b)(2)(A)(vii). Similarly, “a valid subpoena is a legal instrument, noncompliance with which can constitute contempt of court.” Daval Steel Prods. v. M/V Fakredine,
951 F.2d 1357, 1364 (2d Cir. 1991).

7

Dunne has objected to Judge Spector’s certified facts and recommendations on numerous
grounds. The remaining defendants, who were not the subject of the Trustee’s contempt motion
and who Judge Spector does not recommend finding in contempt, have objected principally on
the ground that they would be prejudiced by the Trustee’s request for a mandatory adverse
inference instruction at trial. Doc. #275.
Contempt
I will deny the Trustee’s motion for contempt. A court may sanction a party’s failure to
obey a discovery order as a contempt under Federal Rule of Civil Procedure 37(b)(2)(A)(vii),
while the appropriate court “may hold in contempt a person who, having been served, fails
without adequate excuse to obey [a] subpoena or an order related to it,” Fed. R. Civ. P. 45(g).
Under 28 U.S.C. § 636(e)(6), a magistrate judge may certify facts constituting civil contempt to
the district judge. The district judge must then “make an independent determination of the facts
certified and consider any additional evidence.” Sistem Muhendislik Insaat Sanayi Ve Ticaret,
A.S. v. Kyrgyz Republic, 2018 WL 5629900, at *1 (S.D.N.Y. 2018). “To establish contempt for
failure to obey a court order, the movant must show (1) the order the alleged contemnor failed to
comply with is clear and unambiguous, (2) the proof of noncompliance is clear and convincing,
and (3) the alleged contemnor has not diligently attempted to comply in a reasonable manner.”
Marcel Fashions Grp., Inc. v. Lucky Brand Dungarees, Inc., 779 F.3d 102, 111 (2d Cir. 2015).
In view of the expanded record I have before me, I am not satisfied that the Trustee has
proven by clear and convincing evidence that Dunne knowingly and willfully failed to comply
with a court order. Indeed, as I discuss below, Dunne has introduced evidence that makes it
inconclusive at this stage whether he willfully spoliated his emails. Similarly, Dunne has since
diligently attempted to purge the noncompliance with prior orders to produce privilege logs and

8

other documents, making a finding of contempt unnecessary here, especially in light of the
prejudice that finding would cause to the remaining defendants who are not responsible for
Dunne’s compliance with court orders.
But while Rule 45 sanctions begin and end with contempt, a contempt sanction is only
one form of discovery sanction available under Rule 37. And although the Trustee has not
proven by clear and convincing evidence that Dunne acted contumaciously, it is still clear that
Dunne negligently failed to preserve relevant electronic information and that he should be
subject to appropriate sanctions as allowed under Rule 37. Accordingly, while I will deny the
Trustee’s motion to hold Dunne in contempt, I will impose measures under Rule 37 to cure the
prejudice the Trustee has suffered. 1
Rule 37 spoliation sanctions
Federal district courts have “broad discretion” in deciding whether and how to sanction
parties for spoliation of evidence. See West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779
(2d Cir. 1999). To obtain sanctions based on the spoliation of evidence, the movant must show
“(1) that the party having control over the evidence had an obligation to preserve it at the time it
was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the
destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier of
fact could find that it would support that claim or defense.” Residential Funding Corp. v.
DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002).

1

The Trustee moved for contempt in part under Rule 37. Both the Trustee and Dunne have argued that their
preferred version of Rule 37(e) governs the alleged spoliation at issue in this case. See Doc. #274 at 27-30; Doc.
#304 at 17-18. While Judge Shea ruled that Rule 37(a)(5) sanctions were not appropriate in response to Dunne’s
actions surrounding the July 2016 subpoena in the adversary proceeding to which Dunne was not a party, In re
Dunne, 2018 WL 4654698, at *8, that is because Rule 37 generally only applies to the parties to a case, ibid.
Because Dunne is a party to the consolidated proceedings before me now, the question of Rule 37(e) sanctions
involves Dunne’s duty to preserve documents in anticipation of that litigation, and because the parties have both
argued for and not objected to the application of Rule 37 to Dunne, I find it appropriate to consider Rule 37 as
applied to Dunne here.

9

Rule 37 was amended in 2015 to address the potential consequences when a party
destroys electronically stored information such as emails:
(e) Failure to Preserve Electronically Stored Information. If electronically stored
information that should have been preserved in the anticipation or conduct of litigation is
lost because a party failed to take reasonable steps to preserve it, and it cannot be restored
or replaced through additional discovery, the court:
(1) upon finding prejudice to another party from loss of the information,
may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive
another party of the information’s use in the litigation may:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was
unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
Fed. R. Civ. P. 37(e).
As Judge Bolden has observed, the 2015 amendment to Rule 37(e) “made a significant
change to the standards governing spoliation issues” by now requiring a court to conclude that
“the destroying party ‘acted with the intent to deprive another party of the information’s use in
the litigation’” before the court may impose the most severe of sanctions such as entry of an
adverse inference instruction or entry of default judgment. See Learning Care Grp., Inc. v.
Armetta, 315 F.R.D. 433, 439-40 (D. Conn. 2016). Prior to the 2015 amendment, a party need
only have shown that the destroying party was negligent in order to have the benefit of an
adverse inference instruction. Id. at 440.
Seeking the benefit of the prior lower standard, the Trustee argues that the 2015
amendment does not apply here. I do not agree. When the Chief Justice transmitted to Congress
the proposed amendments to the Federal Rules in April 2015, he included an order providing that
the amendments would govern all actions commenced after December 1, 2015, as well as all
actions commenced before that date insofar as doing so would be just and practicable. 2015 U.S.
Order 0017; see also 28 U.S.C. § 2074(a). In deciding whether it would be just and practicable to
10

apply the current Rule 37(e) to cases like this one that were commenced before the Rule’s
effective date, courts look to when the actions underlying the putatively sanctionable conduct
took place, when the parties first raised the issue of discovery misconduct, and whether a party
would be punished more harshly or would receive inadequate relief under one version of the rule
or another. See, e.g., Learning Care, 315 F.R.D. at 440; CAT3, LLC v. Black Lineage, Inc., 164
F. Supp. 3d 488, 496 (S.D.N.Y. 2016).
Here, I conclude it is just and practicable to apply the current version of Rule 37(e). It is
true that Dunne failed to preserve his email accounts in 2012 and 2013, which was before the
new version of the Rule came into effect. But because the new Rule 37(e) “does not attempt to
create a new duty to preserve,” Fed. R. Civ. P. 37 cmte. note (2015), I am not persuaded that
there is any injustice in applying the amended version of the Rule to Dunne’s conduct that took
place before the amended Rule became effective.
Several other factors also favor applying the updated version of the rule. Although the
Trustee previously filed motions to compel and for contempt in the bankruptcy proceeding
underlying this case in 2013 and 2014, see Doc. #225 at 2, the Trustee first raised the issue of
Dunne’s emails in the wake of the July 2016 subpoena. See Doc. #225 at 3-4. Finally, because
the amended version of the rule provides adequate relief to the Trustee, he too will not be subject
to any inequity under the revised version of Rule 37(e). Accordingly, I will apply the post-2015
version of the Rule.
I understand the amended version of Rule 37(e) to set forth a three-part inquiry. The first
is to decide if the rule applies at all—that is, if a party failed to take “reasonable steps” to
preserve electronically stored information “that should have been preserved in the anticipation or
conduct of litigation.” Fed. R. Civ. P. 37(e). If so, then the second step is to decide if there has

11

been “prejudice to another party from loss of the information,” in which case the Court “may
order measures no greater than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1). Lastly,
the third step to consider—regardless of prejudice to any other party—is whether the destroying
party “acted with the intent to deprive another party of the information’s use in the litigation,” in
which event a court may consider whether to impose the most severe of measures such as
mandatory presumptions or instructions that the lost information was unfavorable or the entry of
default judgment. Fed. R. Civ. P. 37(e)(2).
I will first consider whether Dunne should have preserved his emails. According to
Dunne, although he destroyed the emails after the state court lawsuit and bankruptcy litigation
was pending against him, his emails had not been requested from him (and would not be
requested from him until about three years after they had been destroyed). He also argues that the
initial litigation of 2012 and 2013 did not put Walford at issue, and it was not until the Trustee
filed a claim in the adversary proceeding about Walford in 2015 that Walford became relevant.
I am not convinced. It seems clear that Dunne used the email accounts for his business
purposes, and as a sophisticated (formerly very wealthy) businessman Dunne should have known
that his business-related emails could be of significant consequence to pending or anticipated
litigation. Moreover, as to Dunne’s claim that he could not reasonably have known as early as
2012 or 2013 that Walford would be at issue in litigation, this argument is contradicted by
Dunne’s sending and receiving numerous emails at his [e-mail] account in late
2012 discussing Walford and the possibility that NALM would seek to assert a claim on the
property. See Doc. #303-4; Doc. #303-5; Doc. #303-6.
Determinations about what properties constitute a debtor’s assets are often disputed,
including disputes about those assets’ scope, such as whether a fraudulent transfer has taken

12

place. See, e.g., Geron v. Seyfarth Shaw LLP (In re Thelen LLP), 736 F.3d 213, 216-18 (2d Cir.
2013). Setting aside the bankruptcy proceedings that Dunne was undergoing in Ireland or the
state court case against him, Dunne still should have reasonably anticipated that by putting the
scope of his assets at issue by filing for bankruptcy in the United States, communications
relevant to determining whether Walford was within that scope would eventually prove relevant
to the bankruptcy case. Accordingly, to the extent his emails were relevant to determining
whether Walford was one of his assets, he had a duty to preserve them.
Dunne fell short of this duty. While Dunne takes issue with Judge Spector’s conclusions
about his state of mind in doing so, there is no dispute that Dunne failed to preserve emails that
were relevant to his bankruptcy case. “Once the duty to preserve attaches, any destruction of
documents is, at a minimum, negligent.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 220
(S.D.N.Y. 2003). Dunne failed to take “reasonable steps” to preserve electronically stored
information “that should have been preserved in the anticipation or conduct of litigation.” Fed.
R. Civ. P. 37(e).
This brings me to the second step of analysis under Rule 37(e)—whether the Trustee has
been prejudiced. Dunne claims that even if he improperly failed to preserve his email accounts,
doing so caused no prejudice to the Trustee. Doc. #274 at 36-38. I do not agree. To show it has
been prejudiced, a discovering party typically needs to show that destroyed evidence would have
not only been probative, but also would affirmatively support that party’s claim. See Ungar v.
City of New York, 329 F.R.D. 8, 15 (E.D.N.Y. 2018).
The Trustee has done so here. The Trustee claims that Dunne fraudulently transferred
Walford and concealed the transfer. Doc. #189 at 32-33 (¶¶ 145-56) to Coan v. Killilea, No. 1505019 (Bankr. D. Conn. 2016). To establish that claim, the Trustee seeks to show that Dunne

13

owned Walford and concealed that ownership. See Doc. #225 at 19. The Trustee has produced
evidence to show that Dunne communicated from his deleted [e-mail] and
[e-mail] accounts to discuss Walford-related issues with Seamus Reddan, and
that Dunne used his [e-mail] account to express concerns that NAMA might try
to assert a claim over Walford. Id. at 19-20; Doc. #303-4; Doc. #303-5; Doc. #303-6. This partial
evidence suggests that the contents of Dunne’s email accounts would support the Trustee’s
efforts to show that Dunne controlled and directed the transfer of Walford.
Dunne argues that, for all the evidentiary value his email accounts may have had, the
Trustee still is unable to demonstrate prejudice because the Trustee has successfully obtained
some of Dunne’s emails through discovery on third parties. But this argument merely turns the
question of prejudice from one of kind to one of degree. There can be no assurance that the
Trustee has received from third-party sources all of the meaningful emails that could and should
have been obtained in the first instance from Dunne. It is equally plausible to conclude that the
emails received from third parties are but the tip of a proverbial iceberg of other powerfully
probative email communications by Dunne during time periods that are critical in this litigation
and that have not emerged from third parties in discovery. As Judge Glasser has observed,
“where a party destroys the only evidence that might vindicate their opponent’s claims and
thereby assures victory for themselves, the deterrent purposes of the spoliation doctrine may well
be served by an appropriate sanction, even without affirmative proof as to whether the evidence
would have been advantageous to the movant,” because “it is well-established that, as between a
negligent party and an innocent party, the former has no right to retain the fruits of their
misconduct.” Ungar, 329 F.R.D. at 15.

14

Accordingly, as to the second step under Rule 37(e), I conclude that there has been
prejudice to the Trustee, such that it is appropriate to consider what measures are necessary to
cure this prejudice. 2 To help cure the prejudice, the Trustee requests that the Court overrule any
authenticity challenge to the email evidence from Dunne’s unpreserved email accounts that the
Trustee has obtained from third-party sources and may introduce at trial. This seems sensible to
me. If the Trustee had received these emails in the first instance from Dunne, then the Trustee
would have had little difficulty authenticating them at trial. This measure is therefore fully
appropriate to help cure the prejudice occasioned by Dunne’s failure to preserve his email
accounts. See Leidig v. Buzzfeed, Inc., 2017 WL 6512353, at *14 (S.D.N.Y. 2017).
The Trustee, of course, seeks not just this authentication relief, but also the benefit of a
sweeping and mandatory adverse inference that “precludes the Debtor and the other Defendants
from refuting the facts that the Debtor concealed his ownership of Walford from 2005 through
2013 and that on March 29, 2013, i.e., the Debtors’s bankruptcy petition date, he transferred
Walford to an insider entity in a shall transaction to defraud his creditors.” Doc. #304 at 5 n.3. In
order for me to evaluate this request for a mandatory adverse inference, I must consider the third
step under Rule 37(e)(2)—whether Dunne “acted with the intent to deprive another party of the
information’s use in the litigation,” such that the most severe form of sanctions like a mandatory
adverse inference instruction would be warranted. See generally Mali v. Fed. Ins. Co., 720 F.3d
387, 393 (2d Cir. 2013) (discussing distinction between mandatory and permissive adverse
inference instructions).
I am not persuaded that Dunne failed to preserve his emails for the bad faith purpose of
depriving his adversaries from using them in this or related litigation. Although there is some

2

Although the Trustee also complains that Dunne failed to preserve his text messages, see Doc. #304 at 21-23, the
Trustee has not shown resulting prejudice.

15

evidence that would support this inference, I think the evidence now before me is inconclusive
on the issue of Dunne’s spoliative intent.
The Trustee suggests that Dunne’s intent to destroy the emails may be inferred from
evidence of his overall intent to effectuate fraudulent transfers. I agree that the two inquiries are
somewhat related but my focus must remain on what Dunne intended specifically as to the
preservation of his emails. Here, I conclude that the Trustee’s evidence falls short on the present
record.
In an effort to show Dunne’s intent to destroy damaging email evidence, the Trustee
relies on an email string from February 2013 involving the [e-mail] account.
The email exchange is between Dunne and a senior surveyor agent who was involved with a
failed effort to sell Walford. Dunne emailed the surveyor to say that “[a]s this matter is not
therefore proceeding can you please compile and return all material which was provided to you
in relation to our dealing on the proposed sale/purchase as Gayle wishes to have it in her
possession,” and “[a]s you know all documents were provided on a confidential basis and Gayle
does not wish to have any documents on the matter in third parties possession.” Doc. #303-8 at 2.
The surveyor responded that “[t]he only information/documentation I got was from Seamus
Redden and from recollection it was all via email (unless he can confirm otherwise).” Id. at 1.
Dunne then replied in relevant part that “[c]an you confirm that you will delete all emails and
check your files for hard copies and if you have any, we will collect same today or when ever
suits this week.” Ibid. 3

3

The Trustee also relies on an email interchange from 2010 about insurance for Walford between Dunne and
Reddan in which Dunne stated “It’s Queenstown!! Delete ref to W. Tks.” Doc. #303-7 at 1. Even if I accept the
Trustee’s argument that “W” refers to “Walford,” because the context for this email is unclear and its occurrence on
a date in 2010 that long pre-dated any litigation in this case, this email tells me little about whether Dunne intended
at some later time to delete any of his emails to make them unavailable for litigation in this case.

16

Although the Trustee interprets this email exchange to suggest that Dunne was brazenly
devoted to the destruction of emails, I think the exchange is less telling. The issue of the
surveyor deleting emails was raised only after Dunne requested the surveyor to return to him the
transaction documents and after the surveyor then responded that the only records he had were in
email form. Dunne’s follow-up reply that requested the surveyor to delete his emails is as
consistent with a showing of Dunne’s general concern for business confidentiality as it is with a
showing of Dunne’s intent to make any emails (much less his own emails) unavailable for
litigation. All in all, this email exchange may be powerful evidence of Dunne’s involvement with
Walford but is far less powerful evidence of his state of mind with respect to the destruction of
any of his own emails.
Had Dunne actually been subject to a litigation request for any of his emails at the time of
this email exchange with the surveyor in February 2013, I might ascribe a more sinister intent to
Dunne’s “delete all emails” request to the surveyor. But the Trustee waited more than three
additional years until July 2016 before seeking any of Dunne’s emails.
In my view, there is nothing otherwise implausible about Dunne’s stated reasons why his
Mountbrook emails were not available (having been left on a server in a building after he was no
longer using these email accounts) and why he closed his first two Gmail accounts (having
concerns he stated at the time about hacking). These claims have been reasonably corroborated
by Dunne in his latest factual submissions. All in all, the present record does not compel me to
conclude by a preponderance of the evidence (much less by clear and convincing evidence) that
Dunne failed to preserve his email accounts because of an intent to make these email accounts
unavailable to his adversaries in litigation.

17

Accordingly, because the Trustee has not proved Dunne’s spoliative intent, I will deny
the Trustee’s request for a mandatory adverse inference instruction, especially the sweepingly
broad inference that the Trustee requests that would effectively direct judgment in the Trustee’s
favor on the Walford fraudulent conveyance claim, not only as to Dunne but also as to his codefendants. As his co-defendants point out, the Trustee’s requested mandatory adverse inference
instruction would exact a crushing penalty on the co-defendants with respect to the single largest
asset at issue in this litigation for discovery misconduct that has not been attributed to any of the
co-defendants. This is still an additional reason for the Court to reject as unwarranted and
disproportionate the Trustee’s request for a mandatory adverse inference instruction as to the
transfer of Walford. Cf. SerVaas Inc. v. Mills, 661 F. App’x 7, 9 (2d Cir. 2016) (district court
abused discretion by imposing contempt order on additional party without adequate notice).
All that said, however, it is my duty to consider what additional measures are appropriate
to cure the prejudice from Dunne’s negligent spoliation of his email accounts. In addition to
overruling any authentication objections as discussed above, I further conclude that the Trustee is
entitled to the benefit of a permissive adverse inference instruction at trial. That is, if the Trustee
chooses to present evidence at trial concerning Dunne’s failure to preserve his emails, the Court
will be prepared to instruct the jury that Dunne was under an obligation to have preserved these
emails, that he failed to do so, and that, if the jury concludes on the basis of all the trial evidence
and testimony that Dunne acted with intent to deprive the Trustee or creditors from access to his
emails, then the jury may conclude that this intent is evidence of his intent to defraud with
respect to transactions at issue in this litigation. See See Fed. R. Civ. P. 37 cmte. note (2015)
(allowing court to determine that Rule 37(e)(2) intent finding should be made by jury with
instruction that jury may find lost evidence unfavorable with finding of intent to deprive); see

18

also Mali, 720 F.3d at 391-93 (affirming permissive adverse inference instruction); Cahill v.
Dart, 2016 WL 7034139, at *4 (N.D. Ill. 2016) (jury may determine inference to be drawn from
lost law enforcement video to evaluate malicious prosecution claim).
Privilege waiver
Dunne objects to Judge Spector’s recommendation that he be found to have waived his
privilege as to any documents produced between now and trial, arguing that his privilege log
meets the criteria set forth in the District of Connecticut’s Local Rules. Doc. #274 at 24-25. It is
true that the Bankruptcy Court ordered Dunne to file a privilege log describing the nature of any
withheld documents, and that while Dunne timely produced the log to opposing counsel, he did
not file a log with the Court until January of 2019. See Doc. #225 at 29.
Dunne’s privilege log is imperfect, but not contumaciously so. A privilege log should
allow a court to make an intelligent decision about whether a privilege exists, and must describe
the type of electronically stored information the privilege is asserted over, the general subject
matter of the information, the date of the information, and the author and recipient of the
information. See Davis v. Hunt Leibert Jacobson P.C., 2016 WL 3349629, at *3-*4 (D. Conn.
2016) (citing D. Conn. L. Civ. R. 26). Dunne’s privilege log accordingly includes descriptions of
communications as emails, the subject line of those emails, their dates, and the correspondents
on those communications. See Doc. #186-1. Although Dunne’s privilege log does appear to mark
as privileged some communications that involved non-lawyer parties, see, e.g., Doc. #186-1 at
16 (designating as privileged email between Sean Dunne, his son John Dunne, and architect Alex
Esposito), “courts in some instances have protected communications made by (or to) agents of
individuals for the purposes of giving or seeking legal advice.” La Suisse, Société d’Assurances
Sur La Vie v. Kraus, 62 F. Supp. 3d 358, 364-65 (S.D.N.Y. 2014) (collecting cases).

19

Dunne’s log appends a list of correspondents and describes how non-lawyers were
“copied on emails containing legal advice.” Doc. #186-3. While the parties have not fully briefed
or discussed whether or not each communication in the privilege log with a non-lawyer is or is
not privileged, it is clear to me that for purposes of determining whether Dunne is in contempt or
should be sanctioned, the Trustee has not clearly or convincingly shown that any deficiencies in
the privilege log fall short of what Dunne needed to produce.
Dunne should have filed his privilege log with the Court in February 2018. Still, he
nonetheless produced it to the Trustee at that time, has filed one with the Court now, and should
continue to produce documents and log whether any of his continued production is privileged.
“Perfect compliance is not required” to avoid a finding of contempt, Heritage of Pride, Inc. v.
Matinee NYC Inc., 2014 WL 3703871, at *1 (S.D.N.Y. 2014), and Dunne’s compliance—though
belated—is reasonable enough under the circumstances here not to warrant a finding of
contempt.
By the same token, I do not find Dunne’s conduct to warrant a waiver of privilege even
absent contempt. See Fed. R. Civ. P. 26(b)(5) cmte. note (1993) (noting that “[t]o withhold
materials without [notice of a privilege claim] . . . may be viewed as a waiver of the privilege”).
Unlike the offending party in Davis, Dunne produced a privilege log, even though he did not
timely file it with the Court. See 2016 WL 3349629 at *3-*4. Moreover, I am concerned that to
the extent Dunne engaged in privileged communications with and acted as an agent of other
defendants in this action, a finding that Dunne waived his privilege could adversely affect their
privilege claims even if they did not engage in any discovery misconduct. See Doc. #275 at 15 &
n.5. Accordingly, I will not find that Dunne has waived the attorney-client privilege as to any
documents at this time.

20

Nevertheless, I have concerns about documents for which Dunne has claimed the
attorney-client privilege but that were sent by or received by non-lawyers. As to any documents
in the privilege log that Dunne claims to be subject to protection under the attorney-client
privilege and which were copied to any non-lawyer (not including any person working as an
employee of a law firm), Dunne shall disclose each such document to Judge Spector for in
camera review within 7 days of this order. For each such document provided to Judge Spector,
Dunne’s counsel shall furnish on a separate cover page an individual and detailed description for
Judge Spector’s consideration of (1) who the non-lawyer is, (2) why the non-lawyer’s sending or
receipt of the document was necessary to the giving or receiving of legal advice, (3) how the
communication at issue reflects the giving or receiving of legal advice (as distinct from business
advice), and (4) a certification that the document has not been otherwise disclosed to any other
third party in a manner that defeats an expectation of confidentiality.
Remaining deficiencies in production
The Trustee takes issue with Dunne’s remaining production in response to the July 2016
subpoena, which the Trustee maintains is insufficient. See Doc. #70 at 18-23; Doc. #304 at 2126. The gravamen of the Trustee’s grievance is that—as numerous orders from the Bankruptcy
Court found and as the District Court affirmed—Dunne has continued to fail to comply with the
subpoena, insofar as his production remains incomplete and insofar as Dunne waited to retain an
IT consultant to search his email for responsive documents. Doc. #304 at 21-26. The fact that the
Trustee has found what he considers to be additional responsive emails that Dunne did not
produce, as well as that that the Trustee has learned about text messages falling within the scope
of the subpoena, suggests that Dunne had not fully complied with the terms of the subpoena

21

when the Trustee filed his motion, and may still not have fully complied. See Doc. #225 at 2021.
All the same, I am unconvinced that Dunne’s attempts at compliance are unreasonable
given the circumstances. Although the July 2016 subpoena requested 131 categories of
documents, see Doc. #274-1 at 47-56, the Trustee moved for further contempt just over a month
after the District Court affirmed the Bankruptcy Court’s contempt ruling. See Doc. #70; In re
Dunne, 2018 WL 4654698 (D. Conn. 2018). The Trustee has since essentially received the relief
he initially requested: the work of a forensics discovery consultant to review Dunne’s available
emails from the [e-mail] account and other documents for responsiveness and
privilege. See Doc. #70 at 31. Dunne has agreed that this work should take place at his expense,
see Doc. #274 at 41; Doc. #329 at 11, and the continued use of and payment for an IT consultant
in production will ensure that Dunne’s prior noncompliance does not financially prejudice the
Trustee. While Dunne and the Trustee dispute the search terms that Dunne has used to canvass
for responsive documents, see Doc. #304 at 24-25; Doc. #329 at 10, based on Dunne’s counsel’s
willingness to confer with the Trustee about search terms, it is far from clear to me that any
disagreement in this regard constitutes willful noncompliance with the July 2016 subpoena that
would amount to contempt. See Doc. #274-1 at 101. As such, while it is not impermissible to
apply discovery sanctions to a party that has only belatedly complied with its obligations, see
Klipsch Grp., Inc. v. ePRO E-Commerce Ltd., 880 F.3d 620, 631 (2d Cir. 2018), because Dunne
has made reasonable efforts at compliance at his own expense in the wake of the affirmance of
the previous contempt rulings, I am unpersuaded that further punitive sanctions are required
here. Dunne shall continue to employ the IT consultant and cooperate in good faith with
requested searches of his [e-mail] account.

22

Attorney’s fees and costs
The Trustee has requested an award of fees and costs associated with his motion for
contempt. See Doc. #225 at 8. Rule 37(e)(1) allows relief necessary to cure prejudice to another
party from the loss of electronically stored information. Insofar as the Trustee was economically
prejudiced by the need to litigate this motion in response to Dunne’s negligent destruction of
electronic records and his dilatory compliance with email-related discovery demands, the Trustee
may recover from Dunne for the Trustee’s attorney’s fees and costs not to exceed $10,000 total
that are attributable to his renewed motion for further contempt (Doc. #70) and subsequent
related filings before Judge Spector and me stemming from this motion. See Lokai Holdings LLC
v. Twin Tiger USA LLC, 2018 WL 1512055, at *17 (S.D.N.Y. 2018); Best Payphones, Inc. v.
City of New York, 2016 WL 792396, at *7 (E.D.N.Y. 2016). The Trustee shall furnish an
itemized statement and verification of these fees and costs to counsel for Dunne within 21 days,
and Dunne shall pay these costs within 30 days. If the parties disagree about any of these costs,
then Dunne shall nonetheless pay those costs about which he does not disagree, and the parties
should contact Judge Spector concerning their remaining differences.
CONCLUSION
For the foregoing reasons, the Trustee’s motion for contempt (Doc. #70) is DENIED. The
Court finds that Dunne’s loss of electronic records was negligent, and so imposes curative
measures pursuant to Fed. R. Civ. P. 37(e)(1) as described in this order. Dunne shall also furnish
the documents over which he asserts the attorney-client privilege to Judge Spector for in camera
review as described in this order. The Trustee shall furnish an itemized statement of costs and
fees to counsel for Dunne on or before May 7, 2019, and Dunne shall pay within thirty days

23

thereafter. Dunne shall continue to use an IT consultant to produce remaining responsive
documents, and shall bear the costs of doing so.
It is so ordered.
Dated at New Haven this 16th day of April 2019.
/s/ Jeffrey Alker Meyer
Jeffrey Alker Meyer
United States District Judge

24