In the case Kosher Ski Tours Inc. v. Okemo Limited Liability Co., Kosher Ski Tours Inc. (KST) initiated a lawsuit against Okemo Limited Liability Company (Okemo), alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and racial discrimination under 42 U.S.C. §§ 1981 and 1982, as well as the Vermont Fair Housing and Public Accommodations Act (VPAA). KST claimed Okemo violated a lodging agreement due to disruptions caused by COVID-19, and trial was set to commence in September 2024. A key issue in this case is KST's motion for spoliation sanctions, which centers around Okemo's failure to preserve certain electronically stored information (ESI).

KST argued that Okemo's failure to preserve emails of two key employees, Wendy Ackerman and Amy Morgan, who attended management meetings leading to the termination of the lodging agreement, was prejudicial. Okemo claimed it implemented a litigation hold three days too late, allowing the deletion of relevant emails due to their 90-day retention policy. The court agreed that the loss of this ESI was significant and granted KST’s motion in part. It allowed the parties to present evidence on the lost ESI and its likely relevance and instructed the jury to consider this evidence in its decision-making process.

Rule 37(e) states when a party fails to take reasonable steps to preserve ESI that should have been preserved in anticipation of litigation, and that ESI is lost and cannot be restored or replaced through additional discovery, a 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.

The court found that Okemo did not act with intent to deprive KST of the evidence, but it did fail to take reasonable steps to preserve relevant information after receiving notice of the potential litigation. Although the court acknowledged the suspicious timing of Okemo’s actions, it stopped short of attributing the loss of emails to bad faith. Thus, while KST demonstrated prejudice due to the absence of key communications, the court declined to issue harsher sanctions such as an adverse inference instruction.

Ultimately, the court permitted KST to introduce evidence related to the spoliation issue and the gaps left by the missing emails, but denied requests for more severe sanctions like attorney’s fees or barring Okemo from presenting contrary evidence on certain claims. The case highlights the importance of timely preservation of ESI in litigation and the consequences of failing to do so, especially when relevant evidence is permanently lost.

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