Opinion ID: 4294629
Heading Depth: 3
Heading Rank: 1

Heading: The JPM

Text: The bankruptcy court found that including discovery misconduct as a factual issue for trial in the JPM was a clear warning to Fustolo that his failure to comply with the December 31 Order would be a triable issue. Fustolo, 563 B.R. at 107. But, the discovery misconduct alleged in the JPM included spoliation of evidence, relevant to and actionable under Patriot's § 727(a)(3) claim. Assuming discovery misconduct refers to Fustolo's refusal to provide Patriot non-privileged documents required by the December 31 Order, that contention was addressed at the March 17, 2016 hearing on Patriot's motion for sanctions, during which the bankruptcy court found it inescapable that they have not been produced intentionally or have been deleted. Moreover, Patriot argued in its second Rule 37 motion -- filed only nine days prior to filing the JPM -- that Fustolo's invocation of the Fifth Amendment when asked to produce financial documents referenced in the December 31 Order should lead to an inference of spoliation. Thus, this discovery misconduct was relevant to whether Fustolo concealed, destroyed, or failed to preserve books and records under Patriot's existing § 727(a)(3) claim, and, because it was not solely relevant to the § 727(a)(6) claim, was insufficient for a finding of implied consent. -20- Patriot points to Fustolo's violation of the Protocol as an independent act of discovery misconduct at issue for which Fustolo was provided notice through the JPM. Apart from his refusal to turn over non-privileged documents, this violation involved Fustolo's failure to provide the court with emails and financial records that he asserted were shielded from production by the Fifth Amendment in order for the court to conduct an in camera inspection. Yet, this too cannot amount to adequate notice as this transgression also related to Patriot's § 727(a)(3) claim. At the March 17 hearing, the bankruptcy court announced its belief that Fustolo's defiance and changes of position as to why he was not providing emails were in furtherance of a scheme to delay this litigation and legitimate discovery, and not as a result of the reasons that Fustolo previously stated to court. In its posttrial proposed findings of fact and conclusions of law, Patriot pointed to Fustolo's invocation of the Fifth Amendment privilege in relation to its § 727(a)(3) claim, and further argued that Fustolo's contrary representations about the emails supported an inference that he destroyed them. Additionally, the documents which Patriot alleges that Fustolo failed to provide to the bankruptcy court through his Protocol violation were the same documents that Patriot alleged were destroyed in its subsection
-21- At the very least, the statements in the JPM were sufficiently broad as to not reasonably be perceived as germane exclusively to a new § 727(a)(6) claim rather than a pleaded issue.