Case Law Summaries by ZapprovedU.S. Commodity Futures Trading Comm’n v. Gramalegui, No. 15-cv-02313-REB-GPG (D. Colo. June 14, 2017).

For over two years, the defendant, Gregory Gramalegui, in this case (see ruling 1 and ruling 2) made excuses for his repeated discovery missteps. After penalties failed to abate these flagrant discovery abuses, the magistrate judge recommended significant financial and evidentiary sanctions for his late disclosures and spoliation of evidence.

This long-running case began in 2015, when the Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against Gregory Gramalegui. That lawsuit alleged that Gramalegui fraudulently represented his business, the Emini Trading School, in advertising and marketing materials.

The current case addressed the CFTC’s motions for sanctions for Gramalegui’s continued discovery violations and spoliation of evidence. Specifically, the CFTC requested a finding of criminal contempt, default judgment, evidentiary waivers, and adverse inference instructions.

The magistrate noted that, to date, this case’s “discovery disputes have been extensive, unnecessary, extremely consumptive of an inordinate amount of time and resources and, most importantly, [Gramalegui’s] fault.”

In the first of two orders, the magistrate addressed Gramalegui’s late disclosure of more than 2,500 emails. Gramalegui explained that he disclosed those emails at the close of discovery because he was unaware of them and found them “by serendipity.” He further blamed his discovery failures on “his disorganization and forgetfulness” as well as “technical difficulties that defy explanation.”

The magistrate relied entirely on case law rather than on the rules of discovery to assess the appropriateness of sanctions. In doing so, he considered the degree of prejudice created, interference with the judicial process, culpability, previous warnings, and the efficacy of lesser sanctions. Here, the magistrate concluded that prejudice is difficult to measure, as “it is impossible to know what we don’t know.” Nonetheless, the violations created significant interference, for which Gramalegui was “highly culpable.” Nor did the court’s previous warning — a $22,000 fine for earlier discovery violations — have any positive effect on Gramalegui’s conduct.

As to other available sanctions, the magistrate denied default judgment. He found that despite the late disclosures, “the CFTC can proceed … probably very effectively” with its case. However, the late disclosure of emails had deprived the CFTC of ways to authenticate them. Therefore, the magistrate recommended that the CFTC be allowed to use those emails in its case without any evidentiary objections.

Finally, the magistrate found Gramalegui’s behavior “contemptuous” and recommended “a substantial financial penalty” for criminal contempt, in addition to the CFTC’s costs and attorneys’ fees.

In a second opinion issued the same day, the magistrate recommended additional sanctions for Gramalegui’s spoliation of other evidence. Gramalegui argued that he did not destroy evidence in bad faith. Rather, he claimed that his “inability to understand and comply” with discovery obligations caused his errors. The magistrate rejected this assertion as one in a series of “excuse[s] of the moment.” He found that Gramalegui engaged in a bad faith, “pervasive, continuous and intentional pattern of discovery violations … that can equate to nothing other than an intentional plan to deprive the CFTC of discovery.” The suggested sanctions included presumptions of authenticity, adverse inference jury instructions, and the CFTC’s costs and fees in bringing the motion.

Takeaways for requesting sanctions during ediscovery

Think broadly about how to earn sanctions for an opponent’s discovery violations. Here, the CFTC asked the court for creative, useful evidentiary sanctions. If late disclosure or loss of evidence has impeded your ability to prove your case, consider asking for sanctions that will help you use the evidence you do have.

Additionally, don’t make Gramalegui’s mistake of claiming ignorance in discovery where your underlying actions reveal that you are indeed competent or even shrewd.

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