Thank You, Captain Obvious — It Is Improper To Throw Your Records In A Dumpster In Advance Of A Lawsuit

 by:  Peter J. Gallagher (@pjsgallagher)

When most litigators hear the term “spoliation” nowadays, they probably think of emails, servers, document retention policies, and back-up tapes. But the Appellate Division recently reminded us that old-fashioned spoliation is still alive and well (and improper).

In Hess Corporation v. American Gardens Management Company, plaintiff sued various single-purpose entities with which plaintiff had contracted to sell oil and gas. Plaintiff also sued the individual owner of all of these entities, which were essentially judgment proof, arguing that it was entitled to pierce the corporate veil and hold him liable because he had co-mingled funds and fraudulently conveyed and diverted assets from the various corporate entities for his personal use.

During discovery, plaintiff served the individual defendant with a document request. The individual defendant failed to respond and his answer was stricken. He later moved to reinstate his answer, first arguing that he could not answer the discovery request without implicating his Fifth Amendment right against self incrimination (which the court rejected) and then claiming that he did not have many of the documents requested. Based on the latter, the court vacated its prior order and reinstated his answer.

 

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Digging Behind The Veil: New Jersey Supreme Court Decision Threatens To Impose Increased Liability On Home Improvement Contractors

Eric L. Probst represented several non-profit home improvement associations as amicus curiae on an important issue of first impression before the New Jersey Supreme Court.  The question before the Court was whether a homeowner has to pierce the corporate veil to hold individual shareholders of home improvement contractors personally liable for violations of New Jersey’s Home Improvement Practices regulations under the State’s Consumer Fraud Act.  In his article,  New Jersey Supreme Court Hears Oral Argument On Whether To Impose Personal Liability Against Corporate Shareholders Of Home Improvement Company For Violating New Jersey’s Home Improvement Practices Regulations, published in Community Builders and Remodelers Association newsletter, Eric reviews the oral argument from the case, Allen v. V and A Brothers, Inc., and predicts that the Supreme Court will likely uphold the Appellate Division's decision imposing personal liability against individual shareholders.  Eric further predicts that such a decision will cause an increase in lawsuits against corporate shareholders for violations of the CFA and HIP.  Stay tuned to the blog for more information about the Supreme Court's decision in this case, which should be handed down in the next 60-90 days.