IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

STATE OF DELAWARE , ) ex rel. Kathleen Jennings, Attorney ) G eneral of the State of Delaware, ) ) Plaintiff, ) ) C.A. No. N 19 C

- 0 5

- 323 FWW v. ) ) CONCRETE TECHNOLOGY ) RESURFACING & DESIGN, INC. , ) GUINEVERE M. KUNKEL, and ) PAUL E. R ANDALL , ) ) Defendant s . )

Submitted: August 25 , 2022 Decided: October 10 , 2022 Upon Plaintiff State of Delaware’s First Motion for Sanctions for Spoliation of Evidence , GRANTED . Upon Plaintiff State of Delaware’s Second Motion for Sanctions for Spoliation of Evidence , GRANTED. Upon Plaintiff S tate of Delaware’s Third Motion to Compel Discovery, MOOT . MEMORANDUM OPINION AND ORDER2

Michael Clarke, Esquire , Deputy Attorney General, Consumer Protection Unit, DELAWARE DEPARTMENT OF JUSTICE, 820 North French Street, 5 th Floor, Wilmington, DE 19 8 01, Atto rney for Plaintiff State of Delaware. John v. Work, Esquire, LAW OFFICE OF JOHN V. WORK, 800 North King Street, Suite 303, Wilmington, DE 19 8 01, Attorney for Defendants Concrete Technology Resurfacing & Design, Inc., Guinevere M. Kunkel, and Paul E. Randal l.

WH ARTON, J.3 I. INTRODU C TION Plaintiff, the State of Delaware, ex rel. Kathleen Jennings, Attorney General of the Sta t e of Delaware (“State”) initiated this action against Defendants Concrete Resurfacing Technology & Design, Inc. (“CT R D”), Guinevere M. Kunkel (“Kunkel”) and Paul E. Randall (“Randall”) (collectively “Defendants”) alleging violations of Delaware’s Consumer Fraud Act and Uniform Deceptive Trade
Practices Act. T he State alleges that CT R D, which was in the busines s of providing concrete resurfacing services, and its co

- owners Kunkel and Randall : (1) misled consumers regarding thew nature of its services and its affiliation with a third

- party manufacturer; (2) misrepresented that its projects were backed by a manufa cturer’s warranty; and (3) fraudulently substituted cheaper materials for the name

- brand products it claimed to be using. The State seeks a cease and desist order, civil monetary penalties, disgorgement of profits, restitution, attorney fees , investigativ e
costs , and pre

- and post

-

judgment interest. The Defendants answered and the Court entered a trial scheduling order, all in due course. Then, as discovery commenced, the case quickly went off track. The first hint of trouble was when a stipulated amen ded scheduling order was presented to the Court due to the Defendants ’ failure to respond to the State’s first set of interrogatories and requests for production more tha n nine months after they were served. The n, the State’s continued difficulty in securing relevant and necessary4

discovery , including depositions of the individual defendants, resulted in multiple amendments to the trial scheduling order , three motions to compel discovery , and two motions for sanctions for spoliation of evidence . The Court held a hearing on th e sanctions motions and the third motion to compel discovery. The State’s First Motion for Sanctions for Spoliation of Evidence (“Fi r st Motion”) alleges that Kunkel and Randall dumped documents , including paper customer files, customer complaints, warranty documents, emails, and other discoverable information, into a large outdoor storage unit when the Defendants abandoned their business in Wilmington. At their depositions, they testified that when they returned to empty the unit six months later, they found it had been penetrated by rain and snow destroying much of its contents. As a result, they discarded virtually everything, including documents the State’s alleges are critical
to its case. In the State’s view , t his conduct was worse that reckless

– it was intentional. As a result, the State asks the Court to enter a default judgment, or, alternatively, to strike the Defendant’s defenses and order a trial on damagers only. At a minimum, th e State asks for an adverse inference instruction. The State’s Second Motion for Sanctions for Spoliation and Discovery Abuse (“Second Motion”) also seeks a default judgment based on new discovery abuse and newly demonstrated spoliation of evidence. The Second Motion is based on Kunkel’s testimony that sh e withheld from the storage unit hardcopies of5

customers’ files within the last two years of CT R D’s operations where the work was still under warranty. Those files were requested by the State in discovery, but were not produced, or if they were produced, they were embedded in an unsearchable 38 gigabyte hard drive. In the Second Moti o n the State asks for a default judgment and attorney fees. The State’s Third Motion to Compel Discovery (“Motion to Compel”) seeks three things. The State wants the defendan ts to produce: (1) the materials Kunkel testified she withheld from the storage unit ; (2) material Kunkel states she has been storing on a hard drive in her kitchen drawer ; and (3) a letter Kunkel sent to CT R D’s Delaware clients announcing that the company would be moving to New Jersey but would continue to service its Delaware clients. After carefully considering the Motions, the testimony at the hearing , and the parties post

- hearing submissions, the Court has determined that the D efendants recklessly enga ged in spoliation of evidence. The Court also finds that defense counsel is largely to blame for the persistent failure of the Defendants to comply with the S tate’s legitimate discovery requests , although the Defendants themselves also are significantly b lameworthy . Accordingly, the Motions for Sanctions are GRANTED. The Court will not impose the most serious sanction of entering a default judgment at this juncture . Instead, it will deem certain disputed evidence related to the spoliated evidence established and/or preclude the defense from6

introducing evidence related to the spoliated evidence. Additionally, the Court will give appropriate adverse inference instruction s to the jury

. The State’s Third Motion to Compel Discovery is also GRANTED. The Court will award the State reasonable attorney ’s fees for the amount of time it has spent litigating two meritorious motions for sanctions.

II. FACTS AND PROCEDURAL HIS TORY. The following facts are taken from the State’s Complaint. CTRD is a defunct Delaware corporation, having been incorporated in 2003 and having operated in Delaware through 2014. 1 It has not declared bankruptcy or filed a certificate of
dissolution

. 2 Kunkel was the president a nd 50% owner of CTRD. 3 Randall was the vice president and owner of the other 50 % of CTRD. 4 CTRD held itself out to customers as able to restore and repair a variety of concrete surfaces, including driveways, patios, deck s, floors, and countertops, using what it claimed were products supplied by Concrete Technology, Inc. (“CTI”) , a Florida corporation, for its resurfacing projects. 5 The Com plaint alleges that CTRD violated Delaware’s Consumer Fraud Act by engaging in misleading advertising in a variety of ways (Counts I, II, and III) as well as violating Delaware’s Uniform Deceptive Trade

1 Compl., at ⁋ 9, D.I. 1. 2 Id., at ⁋ 10. 3 Id.,. at ⁋ 11. 4 

### Id., at ⁋ 12. 5 Id., at ⁋⁋ 15

- 17.7

practices Act Counts IV, V, and VI). 6 The Defendant s filed an Answer denying the State’s allegations of wrongdoing and requesting that the Court dismiss the Complaint. 7 On September 24, 2019, the Court issued a Trial Scheduling Order (“TSO”) , setting trial for March 1, 2021. 8 The Court’s docket detai ls the following history of motion practice related to discovery. On June 17, 2020, the State submitted a stipulated mo tion to amend the TSO. 9 The stipulated reason necessitating an amendment to the TSO was the Defendants failure to respond to discovery requests made on September 13, 2019, nine months earlier. 10 Next , t he State moved to compel discovery for the first time on July 2, 2020 because the Defendants had failed to respond to the State’s discovery requests despite repeated promises by counsel t hat they would

. 11 That motion was granted on August 26, 2020. 12 Responses purportedly were served in compliance with the Court’s Order on September 11, 2020. 13 On October 10, 2020, the State submitted its second stipulated motion to amend the TSO because the responses were not provided in

6 Id. 7 Ans., D.I. 5. 8 D.I. 11. 9 D.I. 14. 10 Id. 11 D.I. 16. 12 D.I. 18. 13 D.I. 20.8

fact until the State picked up a flash drive from defense counsel on September 28 th

. 14
The third motion to amend the TSO wa s filed by the State on March 22, 2021. 15 This motion was occasioned by a need to postpone the individual Defendants’ depositions due to deficiencies to the Defendants’ document production. 16 The State filed its second motion to compel discovery on May 5 , 2021 as a result of the Defendants’ failure to produce requested discovery responses despite a promise by defense counsel to provide them. 17 On May 28 th , the Court held its second scheduling teleconference and set a new trial date of March 21, 2022. 18 On July 26, 2021, the Court granted the State’s second motion to compel and directed the Defendants to further respond to the State’s first set of requests for production within 10 days

. 19 On August 17, 2021 the State moved for a rule to show cause as

a result of the failure of the Defendants to comply with the Court’s July 26 th Order. 20 On August 20 th , the Defendants served their supplemental responses to the State’s first set of requests for production, 21 causing the State to withdraw its motion for a rule to show cause. 22 On September 13, 2021, the State submitted another stipulated

14 D.I. 21. 15 D.I. 23. 16 Id. 17 D.I. 33. 18 D.I. 41. 19 D.I. 48. 20 D.I. 49. 21 D.I. 51. 22 D.I. 52.9

amended TSO to allow for additional time to take the individual Defendants’ depositions. 23 T he Court granted the motion on September 15 th

. 24 On November
1 2 , 2021, the S tate moved to amend the TSO as a result of what it described as it being “stonewalled” in its attempts to secure critical discovery from the
Defendants. 25 On December 6 th , Defense counsel failed to appear for the scheduled presentation of the State’s moti on causing the Court to suspend the TSO then in place. 26 It was at this point that the State filed two of the pending motions. On December 9 th , it filed its t hird motion to compel discovery 27 and its First Motion for
S anctions for S poliation of E vidence. 28 On December 14 th , the Court held a teleconference at which it directed the D efendants t o respond to the State’s motions by December 31 st

. 29 The Court also set a new trial date of July 5, 2022. 30 On January 10, 2022, the State wr ote to the Court requesting a status conference because the Defendants had not filed their responses to the State’s motions by
December 31 st as ordered by the Court. 31 The Court held a teleconference on

23 D.I. 59 24 D.I. 62. 25 D.I. 68. 26 D.I. 69. 27 Pl.’s Third Mot. to Compel, D.I. 74. 28 Pl.’s (First) Mot. for Sanctions, D.I. 75. 29 D.I. 76. 30 D.I. 77. 31 D.I. 78.10

January 19, 2022 and permitted the Defendants to fil e their response by noon the next day. 32 The responses were filed as ordered. 33 On February 15, 2022, the State filed the third motion now under consideration

– its Second Motion for S anctions for S poliation of E vidence. 34 After as teleconference, the C ourt set a hearing date on the pending motions for April 22, 2022. 35 On April 21, 2022, the State filed a March 17 th letter it wrote to defense counsel

. 36 In it the State stated that it was returning the hard drive the Defendants had provided because the State was concerned about reviewing “ irrelevant, personal and privileged material.” 37 The State also declined to do what it described as the Defendants’ job of making a proper production for them. 38 The State further inquired whether Defendants intended to make a proper production of the hardcopy customer files Kunkel testified she withheld from the storage container. Apparently in response, o n April 22 nd , prior to the hearing, the Defend ants filed a supplemental discovery response. 39 That response purported to produce a copy of

a scanned “letter from New Castle Artisan to clients” which the Defendants claimed

32 D.I. 81. 33 D.I. 82 (Defs.’ Resp. to Mot. for Sanctions); D.I. 83 (Defs.’ Resp. to Mot. to Compel.). 34 Pl.’s Second Mot. for Sanctions, D.I. 90. 35 D.I. 94. 36 D.I. 95. 37 Id. 38 Id. 39 D.I. 97.11

to have found in the hard drive it produced to the State which the State declin e to review. 40 The production also stated that the Defendants had produced “all other relevant documents which remained in their possession.” 41 On April 22 nd , the Court heard testimonial evidence from three witness es on behalf of the State and also re ceived 13 exhibits offered by the State. 42 During argument on the motions, a disagreement arose between counsel as to whether the Defendants had already produced the files Kunkel had testified she withheld from the storage unit and which the State was seeking. To resolve that dispute, the Court ordered defense counsel to reproduce to the Court what he produced to the State. 43 On April 25 th , the Defendants produced to the Court their lease, advertising and

contract materials , certain database entries, and seven customer contracts for six

customers. 44 The same day, the State wrote to the Court disputing the adequacy of the Defendants’ production, especially regarding the approximately 22 customers
for whom the Defendants did work in 2013 and 2014 and whose files the State believes were wit hheld from the storage unit. 45

40 Id. 41 Id. 42 Tr. Evid. Hrg., Apr. 22, 2022, D.I. 105. 43 Id., at 98

- 100. 44 D.I. 100

- 09. 45 D.I. 111.12

Following argument by counsel, the Court directed the parties to submit post

hearing briefs. 46 The State submitted its brief on May 13, 2022. 47 The Defendants filed their brief on June 3 rd

. 48
On June 27 th , the Court ent er ed the current TSO. 49 Trial now is scheduled for January 17, 2023. 50 On July 6 th , t he State wrote to the Court advising it that the Defendants had not provided it with overdue discovery defense counsel had promised he would produce by June 21 st during a teleconference with the Court. 51 The Defendants served supplemental discovery responses on August 5 th

. 52 On August 18 th , the Court directed the parties to advise the Court what effect, if any, those responses had on the State’s T hird M otion to C ompel D iscovery and its
S econd M otion for S anctions. 53 The State’s re sponse details the Defendants’ production and characterizes it as including some new , not particularly relevant documents respons ive to the State’s Request for P roductio n, and other unre sponsive and irrelevant documents. 54 Thus, it is the State’s position that the August 5 th

46 Id. , at 101

- 03. 47 D.I. 113. 48 D.I. 116. 49 D.I. 119. 50 Id. 51 D.I. 120. 52 D.I. 125. 53 D.I. 127. 54 D.I 128.13

production has no bearing on the pending motions. 55 The Defendants describe their latest production as including “promotional, business, and marketing materials

sou ght by Plaintiff, documentation to associated and related business efforts of Defendants, photographs of various work done by defendants, and other documents which may be of use during defense at trial.” 56 The Defendants maintain that they have provided “ all information and documents still in their possession.” 57 They do not address the Court’s inquiry as to what effect this production has, if any, on the Second M otion for Sanctions and the Third Motion to Compel Discovery. 58 With that procedural histo ry, the Court turns to the facts necessary to resolve the pending motions for sanctions for spoliation of evidence. Those facts come principally from the individual Defendants’ depositions and are not complex. Defendants K u nkel and Randall testifie d tha t they were forced on short notice to vacate their rented space at First S tate P laza in Wilmington due to adverse financial circumstances. 59 Their landlord permitted them to use a large outdoor container at the back of the property for storage. 60 The Defendants put documents, including paper customer file folders, customer complaints, warranty documents, emails, and

55 Id. 56 D.I. 129. 57 Id. 58 Id. 59 Pl.’s (First) Mot. for Sanctions, at 2, D.I. 75. 60 Id.14

other information into the container along with equipment, and other company property. 61 There was no log, and Kunkel described their actions as “simply heave
ho

- ing” materials into the container. 62 Kunkel testified that she withheld from the storage unit paper files for customers who had signed their contracts in 2013 and 2014 because those customers’ jobs would still have been within CTRD’s two

- year warranty. 63
The individual Defendants testified that in the spring of 2015, at least six months after they put the materials into the container, they returned to empty it. 64 They testified that rain and snow had penetrated the unit and destroyed or damaged much of the contents causing them to discard virtually everything, including all of the documents. 65
III. THE PARTIES’ CONTENTIONS.
In its First Motion for Sanctions , the St ate allege s that the Defendants intentionally destroyed critical document s despite being on notice of their legal duty to preserve them. 66 The First Motion cites a number of named c ustomers who complained to the Better B usiness Bureau (“BBB”), to the Cons umer Protection

61 Id. 62 Id., at 3. 63 Id. 64 Id., at 4. 65 Id. 66 Pl.’s (First) Mot. for Sanctions, at 17, D.I. 75.15

Unit of the Delaware D epartment of J ustice (“CPU”) , and to the Defendants themselves. 67 The First Motion contends that, “despite having firsthand knowledge of numerous customer complaints

– to the BBB, to the CPU, and to the Defendants the mselves

- [Kunkel and Randall] cast critical and relevant customer files into an outdoor storage bin and ignored them for at least six months, while they shut down their business in Delaware. ” 68 The State argues these actions were reckless, at least , but , when coupled with the defendants consistent refusal to provide discovery, w ere intentional in fact

. 69 T he State allowed at the evidentiary hearing that one could argue that placing the documents in a storage container was not evidence that the
Defendan ts inten ded to destroy them

. 70 B ut , at the very least the Defendants met the recklessness standard for spoliation when they failed to make a single effort to salvage anything upon return ing to the container in the spring. 71 While maintain ing that positi on in its post

- hearing submission, the State argues strongly that in the context of this case, it was not the D efendants’ intent to preserve the documents. 72
Instead , the Defendants planned to abandon their Delaware customers and move to New Jersey. 73 Th e State posits that the Defendants would have taken the documents

67 Id., at 9

- 16. 68 Id., at 5

- 6

. 69 Id. 70 Tr. Evid. Hrg., Apr. 22, 2022, at 89, D.I. 115. 71 Id. 72 Pl.’s Mem. in Support of Mots. f or Sanctions, at 5

- 9, D.I. 113. 73 Id., at 6

- 7.16

back to New jersey if they intended to preserve them, just as Kunkel claimed she did with the files of customers whose work was still under warranty. 74
The State’s Second Motion for Sancti ons alleges what it describes as the Defendants’ continued misconduct since the Court held a status conference on January 19, 2022. 75 It claims newly demonstrated spoliation of evidence and discovery abuse. 76 In particular, the Second Motion focuses on files Kunkel claims she withheld from the storage container. The State represents that those documents do not appear to be included in an approximately 38 gigabyte flash drive the Defendants “du m

ped” on the State , nor have the Defendants explained what happened to those files. 77 The State references the Defendants’ “history of dilatoriness in this litigation” and their “willfulness and bad faith in failing to provide discovery” and argues that nothing less than default would be a meaningful
sanction. 78 Based on Kunkel’s deposition testimony, the State’s Third Motion to Compel Discovery seeks: “(1) files that Defendant Kunkel avers that she withheld from the storage container; material the Defendant Kunkel states that she has been storing on a hard drive in her kitchen drawer; and (3) a letter that Defendant Kunkel claims to

74 Id., at 7. 75 Pl.’s Second Mot. for Sanctions, D.I. 90. 76 Id., at 1. 77 Id., at 4. 78 Id., at 7.17

have provided in discovery and that cuts to the heart of the iss ues in this case.” 79 The “letter” is the so

- called “exciting news” letter that Kunkel testified went out to all current customers advising them that CTRD would be moving to New J ersey, but would continue to service them. 80 The State represents that none of these materials have been produced as of the date of the motion (December 9, 2021) despite defense counsel’s repeated broken pledges to retrieve the hard drive, review it for production, and produce discoverable the materials on it. 81 As noted, the D efendants did not respond to the State’s First Motion for Sanctions and its Third Motion to Compel by December 31, 2021 as ordered by the
Court. 82 Finally, after another conference with counsel, the Defe ndants responded to both motions on January 20, 2022

. 83 In response to the First Motion for Sanctions, the Defendants maintain that they did not intentionally or recklessly cause the destruction of evidence. 84 Instead, they argue that the undisputed fact that they placed the items in a storage container to which they intended to return refutes the conclusion that they intended the

79 Pl.’s Third Mot. to Compel, at 2, D.I. 83. 80 Id., at 4. 81 Id, at 2

- 3. 82 D.I. 79. 83 Defs.’ Resp to Pl.’s Mot. for Sanctions, D.I. 82; Defs.’ Resp. to Pl.’s Third Mot. to Compel, D.I. *3. 84 Defs.’ Resp. To Pl.’s Mot. for Sanctions, at 2

- 3, D.I. 82.18

documents to be destroyed. 85 Further, their actions were not reckless because t hey were unaware that the storage container was subject to leaking. 86 Finally, they argue that the destroyed materials were not relevant to an existing legal dispute at the time of their destruction, nor did the Defendants have any duty to preserve them. 87 The Defendants’ Response to the State’s Third Motion to Compel Discovery argues that while they may have been poor record keepers, their actions do not show that they are resisting the discovery process. 88 With respect to the particular items the S tate seeks, the D efendants argue that items that were destroyed cannot be produced; the hard drive is in the possession of counsel and will be produced no later than January 21, 2022; and the “exciting news” lett er would have been in documents already produced if they retained a copy. 89
The State’s Second Motion for Sanction s was filed on February 15, 2022. 90 The Defendants did not file a response to that motion

. Instead , the Court scheduled an evidentiary he aring on both motions for sanctions and the State’s Third Motion

85 Id. 86 Id. 87 Id., at 3. 88 Defs.’ Resp to Pl.’s Third Mot. to Compel, at 1

- 2, D.I. 83. 89 Id., at 2

- 3. 90 Pl.’s Second Mot. for Sanctions, D.I. 90.19

to Compel Discovery. 91 At the hearing, the Defendants maintained that they have already produced everything they retained from the storage unit. 92 In their post

- hearing submission, the De fendants acknowledge that documents destroyed by water damage likely would have been relevant to this litigation, but they reiterate their position that they did not intentionally or recklessly destroy evidence. 93 They also dispute the State’s argument th at their failure to parse through the water damaged materials to attempt to salvage relevant documents is evidence of the ill intent necessary for spoliation. 94 Finally, on the issue of spoliation, the Defendants maintain that, if the Court were to impose sanctions for spoliation, the proper sanction would be appropriate adverse inference instructions. 95 Lastly, with respect to document production, defense counsel accepts responsibility for slow and delayed production, and for his failure to “properly rec ord the mailing” of the Defendants’ supplemental production. 96

IV. S TANDARD AND SCOPE OF REVIEW Sanctions for spoliation of evidence are appropriate “where a litigant intentionally or recklessly destroys evidence, when it knows that the item in

91 D.I. 94. 92 Tr. Evid. Hrg, Apr. 22, 2022, at 69

- 70. 93 Defs.’ Resp. to Pl.’s Mem. in Support of Mots. For Sanctions, D .I. 116

. 94 Id., at 3

- 4. 95 Id., at 4. 96 Id., at 5.20

question is relevant to a legal dispute or it was otherwise under a legal duty to preserve the item.” 97 On ce the Court determines that spoliation has occurred, the Court looks to the following factors approved in Minna v. Energy Coal S.p.A. 98 to determine an appropriate sanction :

(1) the extent of the party’s personal responsibility; (2) the prejudice to the adversary caused by the failure to meet scheduling orders and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails an analysis of alternate sanctions; and (6) the meritoriousness of the claim or defense. 98 “When faced with a motion to compel discovery, the Court determines
whethe r the discovery sought is reasonably calculated to lead to admissible, non

privileged evidence.” 99 The scope of permissible discovery is “broad” and objections to discovery requests, in general, will not be allowed. 100 The objecting party bears the burden to show why the information is improperly requested. 101 Once an objection is lodged, “the party seeking the information must provide some minimal explanation as to why the discovery satisfies the requirements of relev ance

97 Sears, Roebuck & Co. v. Midcap, 893 A.2d 542, 552 (Del. 2006); Foreman v. Two F arms, 2018 WL 4846341 (Del. Super. Ct. 2018) 98 984 A .2d 1210, 1215 (Del. 2009). 99 Henlopen Hotel, Inc. v United National Ins. Co., 2019 WL 3384843 (Del. Super. Ct. July 26, 2019) (citing Del. Super. Ct. Civ. R. 26(b)(1) )

. 100 Id., ( citing Hunter v. Bogia, 2015 WL 5050648, at *2 (Del. Super. Ct. July 29, 2015). 101 Id.21

and conditional admissibility.” 102 Superior Court Civil Rules 16(f) and 37 authorize the Court to sanction a non - compliant party by : (1) requiring the party or attorney to pay the moving party “reasonable expenses in obtaining the order;” 103 (2) “deem[ ing] the disputed facts to be established, prohibit[ing] the party from introducing evidence on the disputed facts, strik[ing] all or portions of the pleadings, or enter[ing] a default judgment against the disobedient party; 104 and (3) require[ing] the part y or the attorney representing the party, or both, to pay the reasonable expenses on any noncompliance with [the ] the Rule” for failing to obey a scheduling order. 105 The trial court has discretion in selecting the appropriate sanction, but the sanction o f dismissal should not be applied except as a last

resort. 106 In exercising its discretion in choosing an appropriate sanction, the Court considers the same six factors it considers when imposing sanctions for spoliation of evidence. 107
V. DI SCUSSION A. The State’s First Motion for Sanction s for Spoliation of Evidence.

102 Id. (citing Hunter

, at *6, n.54). 103 Super. Ct. C. R. 37(a)(4)(A)

. 104 Super. Ct. C. R. 37(b)(2). 105 Super. Ct. C. R. 16(f). 106 Drejka v. Hitchens Tire Service, Inc. 15 A.3d 1221, at 1224 (Del. 2010).

107 Id. (citing Minna , at 1215).22

The State’s First Motion for Sanctions concerns materials the Defendants put in the storage container when they lost their lease. Most of the facts are not in dispute. It appears that when the Defendants lost their lease and ceased Delaware operations they simply “heave ho

- ed” documents, including paper file folders for each customer, customer complaints, warranty documents, emails, equipment, product, and other company property into an outside storage container. 108 Kunkel and Randall were in a rush and did not document, log, or otherwise inventory what they put in the container. It is obvious that relevant, discoverable materials were among the items the Defendants put into the container. W hen they returned to the
container the next spring, the Defendants discovered that snow and rain had penetrated container causing extensive water damage to the contents. Instead of making any attempts to salvage any of the documents or materials relevant to their Delaware business, the Defendants simply discarded virtually everything, includ ing all of the documents. There was no attempt made to salvage anything , nor did the Defendants ma k e any effort to document what they discarded.

108 Attached to the State’s First Motion for Sanctions is a photograph of three virtually identical storage containers. The Court assumes one of them is the one into which the Defendants put the materials. The contain er s appear to be the type used for shipping on cargo vessels or on trains. Pl.’s (First) Mot. for Sanction s, at Ex. 1, D.I. 75.23

Despite the Defendants’ tepid contention to the contrary, 109 there is more than ample evidence in the rec ord for the Court to conclude that the Defendants knew that documents they put in the storage container were relevant to legal disputes or that they were otherwise under a legal duty to preserve them. The First
M otion for Sanctions identifies a number of customers who had complained to the
BBB , to the CPU, and/or to the Defendants, and who either threatened or initiated legal action. 110 Notably, the Defendants were aware of most if not all of these complaints because they responded to them in one form or a nother. 111 Further, the First Motion for Sanctions identifies credible reasons to believe that documents related to these complaints were in the storage container. 112

109 See, Defs.’ Resp. to Pl.’s Mot. for Sanctions, at 3

- 4, D.I. 82. 110 Pl.’s ( First ) Motion for Sanctions, at 9

- 16 , D.I. 75 (citing customers Joseph Crawley who complained to the BBB and the CPU; Charles Johnson who complained to the BBB and the CPU; William T. Johnson who complained Defendant Randall, CTRD, threatened legal action, and filed an action in JP Court, although the Defendants were unable to be served; Rosemary and John Peden who complained to CTRD and the CPU; Kim Calvett i who complained to the BBB, threatened legal action, and filed an action in JP Court ; Velma Masto who complained to Defendant Randall in writing, copying the BBB, and directly to the BBB; Thomas Shrewsbury who complained to CTRD, saying he would complain to the BBB and consult an attorney; Bill and Donna Gunkel who complained to CTRD and the BBB; Irene Shestock who complained to CTRD; and Stephen Davis, whom Defendant Kunkel knew was an attorney, who complained to CTRD and threatened to escalate his compla int. ) 111 Id. 112 Id.24

All of the foregoing brings the Court to the most substantially controverted issue

– the Defendants intent. The State claims the Defendants intentionally destroyed relevant documents, if not by the manner in which they discarded them, then certainly by their failure to make any salvage attempts after discovering the damage the snow and water damage had caused. The Defendants contend that they would not have put the documents in the container in the first place if they intended to destroy them. Further, since the documents were destroyed without ill intent, discarding the destroyed documents is immaterial to the Defendants intent. In the spoliation context, Delaware courts have defined recklessness as a conscious awareness of the risk that on e’s action or inaction may cause evidence to be despoiled. 113 Intentional destruction means that the spoliator acted “with purpose.” 114 The Court is not persuaded by the State’s arguments that the
Defendants intentionally destroyed discoverable materials. There were obvious options available to the Defendants to destroy the documents if that was the i r intent. Keeping them in a storage container was not one of them. C ontra the State’s contention, the Court finds that the Defendants’ failure to take steps to preserve the

113 TR Investors, LLC v. Genger, 2009 WL 4696062 at *1 (Del. Ch. Dec. 9, 2009) (citing Beard Research v. Kates, 981 A.2d 1175, 1192 (Del. Ch. May 29, 2009) (“Reckless conduct reflects a knowing disregard of a substantial and unjustifiable risk. It amounts to an ‘I don’t care attitude.’”)

. 114 Id. , at 1191.25

documents does not demonstrate the same purposeful state of mind as affirmatively intending to destroy them. Nevertheless, the Court does conclude that the
Defendants did act recklessly

. It is difficult to imag in e a clearer demonstration of an “I don’t care attitude” than that demonstrated by the Defendants when the y cavalierly “heave ho’ed” important documents relevant to legal disputes or that they otherwise were under a legal duty to preserve into an outdoor metal storage container. T hey made no record or log of the documents, and, apparently the files were not in any sort of cabinet or container which might have withstood the leaks that later occurred. The Defendants exacerbated their reckless behavior when, some six months later, a fter discovering that snow and rain had penetrated the storage container, they made no effort to salvage any potentially salvageable documents. Accordingly, the State’s First Motion for Sanctions for Spoliation of Evidence is GRANTED.

B. The State ’ s Second Motion for Sanctions for Spoliation of Evidence and Discovery Abuse. The State’s S e cond Motion for Sanctions for Spoliation of Evidence and for Discovery Abuse addresses discoverable materials purportedly withheld from the storage container by Defendants. Specifically, the Motion recites that defendant Kunkel “testified, repeatedly, that she withheld from the storage container hardcopy files of customers within the last two years whose work was still within26

warranty.” 115 According to the S tate, none of these files, save one, have ever been produced. 116 In their response to the Court’s inquiry concerning the Defendants’ August production, the Defendants do not dispute that they have not produced the files purportedly withheld from th e storage container. 117 They also advise the Court that they have provided all information and documents in their possession. 118 The Defendants do not attempt to reconcile Defendant Kunkel ’s previous testimony that she withheld files with their failure to produce those files. T he files obviously exist ed at one time , but where they are now, or what happened to them is unknown.

Seve r al hypothetical possibilities present themselves , all of which point to spoliation

. 119 First, Defendant Kunkel either mistakenly or falsely testified that the files were withheld from the storage container when in fact they were among the documents put in the container. In that instance, the Court’s determination that the defendants recklessly des poiled relevant, discove rable materials appl ies to these files as well. Second, the files were withheld from the container, but were lost

115 Pl.’s Second Mot. for Sanctions, at 2, D.I. 90. 116 See, D.I. 125. 117 See, D.I. 129. In fact, t he response does not speak directly to the question of whether the withheld files have been produced, but it does describe what was produced and the files are not identified in the description of the production . Nor do the Defend ants contest the State’s assertion that the files have not been produced. 118 Id. 119 The fact that the Court has identified certain hypothetical possibilities should not be taken as an expression of a conclusion by the Court that any one of them is the true explanation for the Defendants’ failure to produce the files.27

somehow or intentionally destroyed. In that instance, the Defendants either recklessly or intentionally despoiled the evidence. Finally, th e files were not destroyed and re main in the Defendants’ possession. In that instance, the Court would consider the failure to produce the files despoliation, at a minimum. Therefore, in the absence of any other explanation proffered by the Defendant’s, the State’s Second Motion for Sanctions and Discovery Abuse is GRANTED.

C. The State’s Third Motion to Compel Discovery. The State’s Third Motion to Compel Discovery seeks an order compelling
the D efendants to “further respond to the State’s First Requests for production of Documents Directed to Defendants.” 120 In particular, the State seeks to compel production of: (1) the files that Defendant Kunkel testified she withheld from the storage container; (2) additional materials from a hard drive defendant Kunkel testified she kept in her home kitchen drawer; and (3) the so called “exciting news”
letter sent to customers advisi ng them that CTRD would be moving to New Jersey and that it would continue to service their warranties. 121 After considerable motion practice, a hearing, and a directive from the Court , 122 the Defendants served on the State supplemental discovery responses. 123 The Defendants maintain that they have

120 Pl.’s Third Mot. to Compel, D.I. 74. 121 Id. 122 See, D.I. 124. 123 D.I. 125.28

no more information or documents in their possession. 124 The State represents that the August 5 th production did not include what it considers the most important
documents it seeks

- the files purportedly withheld from the storage container. 125 Those files apparently are irretrievably missing. The Court considers the other materials that were produced in th e August 5th suppleme ntal production to have been produced in response to the State’s Third M otion to Compel Discovery , rendering that motion MOOT.

D. Sanctions. The Court next turns to the imposition of appropriate sanctions. The State ask the Court to grant it a def ault judgment and award it attorney’s fees for its motions. With respect to spoliation, the Court has considered the six Minna factors : (1) the extent of the Defendants’ personal responsibility; (2) the prejudice to the State caused by the failure to meet scheduling orders and respond to discovery; (3) the Defendants’ history of dilatoriness; (4) whether the Defendants’ conduct was willful or in bad faith; (5) the effectiveness of sanctions other that dismissal after analyzing alternate sanctions; and (6) the meritoriousness of the defense.

124 D.I. 129. 125 D.I. 128.29

First, t he Defendants bear full individual responsibility for despoiling the evidence. The evidence was in their exclusive custody and control and it was their reckless actions or lack of action that resulted in deprivi ng the State of material evidence to which it was entitled.
Second, t he State has suffered considerable prejudice cause d by the Defendants’ failure to meet scheduling orders and deadlines as evidenced, for example, by the need to file two motions for sanctions and three motions to compel discovery

. Additionally, depositions of the defendants were postponed due to untimely discovery production. The TSO had to be amended repeatedly due to the defense’s inability to meet deadlines. Further, the manner in which the defense provided discovery was prejudicial to the State. Instead of responding to specific, itemized requests for production, the defense “dumped” an unedited hard drive on
the State that contained irrelevant, personal, and privile ged material. Finally, the spoliation of evidence has prejudiced the State in the presentation of its case. The
State has been unable to obtain customer files (which include records of complaints, complaint dispositions, and warranty information), produc t records related to the State’s allegation that the Defendants substituted inferior product for the brand30

name product from CTI promised to customers, and bank records. The State deems these records “critical to the heart of [its] case” and “irreplaceabl e.” 126
Third, t he extensive history of dilatoriness on the part of the Defendants and/or defense counsel is set out in Section II, above, and need not be repeated here.
Fourth, t he Court makes no determination as to whether the conduct of the Defend ants or defense counsel was willful or in bad faith . At a minimum, their conduct failed to meet the expectations the Court has for litigants and attorneys.
Fifth, sanctions other than d efault the Court has analyzed include: ( 1) monetary sanctions; (2) dee ming the disputed facts to be established or prohibiting the defense from introducing evidence on the disputed facts ; and (3) giving appropriate instructions to the jury that it should draw certain inferences adverse to the defense. Here, the Court finds that the extreme remedy of default can be avoided for now , and the defense can be effectively sanctioned , by a combination of all three of these lesser sanctions. With respect to monetary sanctions, the Court orders the Defendants and/or defense counsel to pay the State’s attorney’s fees incurred in connection with litigating the State’s First and Second Motions for Sanctions for Spoliation of
E vidence. The Court directs the Defendants and defense counsel to attempt to

126 Tr. Evid. Hrg., Apr. 22, 2022, at 93

- 97, D.I

. 115.31

apportion their respective responsi bilities for the monetary sanction. Should the Defendants and defense counsel fail to agree on their respective portions of the defense’s obligation for the State’s attorney’s fees , the Court will conduct a hearing after the case is resolved. The Court does not order attorney’s fees in connection with the State’s Third Motion to Compel Discovery because the Court deems that motion moot. By imposing monetary sanctions, the Court intends to deter future misbehavior by the defense and to compensate t he State for its efforts in seeking sanctions.
As an additional sanction, the Court is prepared to deem certain contested facts related to the spoliated evidence to be established and/or to prevent the defense
from introducing evidence on certain disputed facts related to the spoliated evidence. The Court also will give th e jury appropri ate adverse inference instructions related to the spoliated evidence. The parties are directed to meet and
confer so as to submit with the pretrial stipulation : (1) a stipulation of facts deemed established and/or evidence the defense is precluded from i ntroducing; and (2) proposed adverse inference jury instructions. If the parties are unable to agree on a stipulation of facts and adverse inference jury instructions, they shall submit their respective proposals along with the pretrial stipulation requir ed by the TSO. In this way, the defense will be prevented from benefitting from its spoliation and the State will not be disadvantaged by it.32

Sixth, the defense represents that its defense is twofold

– first, that certain allegedly injured parties were out of warranty, both as to time and scope, and second, CTRD sought to remedy problems at every turn. 127 But it appears that the Defendants have caused any records that might support those defenses to be unavailable to the State for inspection and/or cross

- examination of the Defendants.

VI. CONCLUSION

THEREFORE , Plaintiff State of D e laware, ex rel. Kathleen Jennings, Attorney G eneral o f the State of Delaware’s First and S econd M otions for Sanctions for Spoliation of Evidence are GRANTED

. The Court imposes the following sanctions against Defendants Concrete Technology Resurfacing & Design, Inc., Guinevere M. Kunkel, Paul E. Randall, and/or John V. Work, Esquire : 1. The Defendants, an d/or John V. Work, Esquire shall pay the State its reasonable attorney’s fees incurred in connection with litigating State’s F irst and
S econd Motions for Sanctions for Spoliation of Evidence. The State shall submit the amount of attorney’s fees it request s together with appropriate supporting information no later than 15 days from the date of th is Order. The defense shall submit any objections to the State’s request no later than 15 days after the State’s
submission.

127 Id., at 82

.33

2. The Court will deem certain disputed e vidence related to the spoliated evidence established and/or preclude the defense from introducing evidence related to the spoliated evidence after receiving submissions from the parties along with the pretrial stipulation.
3. The Court will give the jury app ropriate adverse inference instructions related to the spoliated evidence after receiving proposed instructions from the parties along with the pretrial stipulation.
4. The State’s Third motion to Compel Discovery is MOOT.

IT IS SO ORDERED.

/s/ Ferris W. Wharton Ferris W. Wharton, J.