“Win-At-All-Costs” Litigation Using Illegal e-Discovery Leads to Dismissal of a Billion Dollar Case

Last week I mentioned the mean streets of litigation and my guess that most judges do not know how bad it has become. Two federal judges in South Florida know: District Court Judge Patricia A. Seitz and Magistrate Judge John J. O’Sullivan. Leor Exploration & Production LLC v. Aguiar, 2010 WL 3782195 (Sept. 28, 2010, S.D.Fl.). They have seen and responded to some real Dr. Evil type of conduct by the defendant in this case over One Billion Dollars. <Dr. Evil laugh goes here.> The misconduct culminated in illegal e-discovery where defendant hacked into the opposing party’s email and read his lawyers’ advice and strategies for the case. Judge O’Sullivan found, and Judge Seitz agreed, that defendant had a “win-at-all-costs mentality regarding this litigation.” Leor, supra at *4.

Leor Exploration & Production LLC v. Aguiar is the name here given to a group of interrelated commercial litigation cases arising out of a multi-billion dollar oil and gas discovery. There were multiple claims and counter-claims, including fraud, breach of contract, and negligence. It also involved a bitter family rivalry. When Judges O’Sullivan and Seitz were shown clear and convincing evidence of what the individual defendant had done, they responded as they needed to do to protect the American legal system. They threw out his claims. Assuming this sanction order is upheld on appeal to the Eleventh Circuit, it will stand as the largest e-discovery sanction case in history.

Judge Seitz affirmed and adopted the Magistrate’s 54 page Report and Recommendation. The report contains the details of the facts. These facts illustrate what I mean by mean streets, not to mention bizarre; somewhat like an Austin Powers movie. These two often go hand in hand. For instance, to evaluate the defendant’s intent as required to impose sanctions, Judge O’Sullivan heard testimony and ultimately concluded that he was bipolar, psychotic, and his “… psychosis manifested itself in both grandiose and paranoid delusions. In the spring of 2008, Aguiar expressed the grandiose belief that he is or could be the Messiah.” When in his manic mode he “experienced racing thoughts, insomnia, talkativeness, rapid speech and irritability.” Sound like anyone you know? A lovely person to be litigating against, especially when he has millions to burn.

Judge O’Sullivan heard testimony, including forensic evidence, which proved that defendant engaged in illegal self-help e-discovery. He illegally accessed his main adversary’s AOL account and read his email. This illegal discovery of electronic communications was detected when third parties received return receipts showing their email had been read by someone unknown to them. Leor Exploration supra at *5. Based on the email hacking, and other actions, primarily bizarre forms of witness intimidation, Judge O’Sullivan concluded:

The record shows that Aguiar had the subjective intent to “win at all costs” including through the hacking of Kaplan’s confidential attorney-client communications and the intimidation of witnesses.

Yes, South Florida is a tough neighborhood, but in my experience it is nearly as bad everywhere, maybe even worse in some places I could mention. Not all cases are like this, of course. These are rare exceptions and most case are conducted properly. But there are not rare enough.

Eleventh Circuit on Win-At-All-Costs Litigation

The controlling precedent on bad faith sanctions in the Eleventh Circuit is Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298 (11th Cir. 2009). In Eagle Hospital, the Eleventh Circuit affirmed a district court’s imposition of sanctions and the entry of a default judgment against the defendants where one defendant, Dr. Gerst, “had been secretly monitoring [the plaintiff] Eagle’s confidential email communications.” Id. at 1301. The defendant in Leor Exploration attempted to distinguish Eagle Hospital by arguing that his monitoring of confidential email communications was a result of a psychotic delusion, and not intentional bad faith. The argument was rejected by Judge O’Sullivan, and affirmed by Judge Seitz:

The record shows that Aguiar had the subjective intent to “win at all costs” including through the hacking of Kaplan’s confidential attorney-client communications and the intimidation of witnesses. Although Aguiar has shown that he suffers from a mental illness, for the reasons discussed below, Aguiar has not demonstrated that his mental illness precluded him from forming subjective bad faith. Accordingly, the Leor parties have shown by clear and convincing evidence that Aguiar possessed the requisite bad faith for unlocking the Court’s inherent power.

Magistrate’s Report and Recommendation at page 28.

Defendant also attempted to distinguish Eagle Hosp. by arguing that, unlike the conduct by the hacking doctor in Eagle Hosp., there  was no proof that the email hacking in Leor Exploration was done to gain a litigation advantage. This argument was also rejected:

The Court finds that the Leor parties have presented clear and convincing evidence of Aguiar’s intent to “win at all costs” and that Aguiar’s actions of hacking into Kaplan’s AOL account and intimidating witnesses were specifically aimed at gaining a litigation advantage in the instant case. The fact that Aguiar may not have ultimately gained an advantage from his actions is of no consequence.

Magistrate’s Report and Recommendation at page 30.

One of defendant’s many other arguments was that there is nothing wrong with wanting to win a law suit. Here is how Judge Seitz ruled on these objections:

Furthermore, while there is no evidence that Aguiar actually used any of the information in the emails in this litigation, other than forwarding the contents of many emails to his attorneys, there is also no evidence that he has not and there is nothing stopping him from using the information as the litigation progresses. Finally, while there is nothing wrong with wanting to win, there is something wrong with doing anything, whether legal or not, to win. Consequently, this objection is overruled.

Leor Exploration supra at *4. Note the reference to forwarding many of these emails to his attorneys. He was represented by several prominent law firms. There is no explanation given in the opinions as to their reaction, and no criticism of their conduct. Obviously they did not know what their client had been doing.

Defendant also made a number of constitutional arguments, including that the dismissal sanction violated his right to a jury trial. Here is Judge Seitz’ rejection of that argument:

Aguiar first argues that the sanctions violate his right to a jury trial and that a court cannot impose such case ending sanctions for misconduct that does not affect the court’s management of its docket or does not violate a court order. However, the Report found, not only that Aguiar had violated Court orders, but that Aguiar had also gained an unfair advantage in this litigation by obtaining unauthorized access to Kaplan’s email, which contained hundreds of privileged emails that included counsel’s mental impressions, thought processes, legal recommendations, and trial strategy. Knowledge is power. Access to this protected information gives an oppenent an unfair advantage that strikes at the heart of the adversarial system. Furthermore, Aguiar’s actions more than disrupted the litigation of these two cases, bringing both cases to a standstill while the Court dealt with the Motions for Contempt and for Sanctions. Thus, Aguiar demonstrated bad faith by disrupting the litigation through his hacking and threatening of witnesses. Based on the evidence in this case, the holding in Eagle Hospital, and as discussed below, the imposition of case ending sanctions under these circumstances is not unconstitutional.

Id. at *10.

Defendant also argued for lesser sanctions, but here Judge Sietz correctly held that:

None of these remedies, individually or combined, can remedy the disruption to the litigation process or the lack of respect to the judicial process exhibited by Aguiar.

Id. at *13.

The defendant did have one victory. The motion for taxation of fees and costs as an additional sanction was denied.

The Leor Parties’ only objection to the Magistrate Judge’s Report is to the recommendation that the Court deny their request for an award of attorneys’ fees and costs made in conjunction with the Motions for Sanctions and Contempt. The Report found that striking Aguiar’s pleadings in case no. 09-60136 and dismissing Aguiar’s claims in case no. 09-60683, which Aguiar asserts are worth $1 billion, was sufficient redress for Aguiar’s actions and would also serve as a future deterrent. The Leor Parties argue that Aguiar’s defense against the Motions for Sanctions and Contempt was unreasonable, which increased their burden in litigating the Motions, and that if the Court does not award them their fees and costs they will not be made whole.

A court has discretion “to fashion an appropriate sanction for conduct which abuses the judicial process.” Chambers, 501 U.S. at 44-45. In doing so, a court must exercise restraint. Id. at 44. Dismissal of Aguiar’s claims and his pleadings is a sufficient sanc-tion under the circumstances. To impose additional sanctions would show a lack of restraint and would impose excessive sanctions on Aguiar. See id. at 45 (noting that dismissal of a lawsuit, while within a court’s discretion, is a particularly severe sanction). Consequently, the Court finds that assessing attorneys’ fees and costs against Aguiar in addition to the dismissal of his claims and pleadings would amount to an abuse of the Court’s discretion and would not be an appropriate sanction under the circumstances.


Here is Judge Sietz’ final conclusion:

Having carefully reviewed, de novo, Magistrate Judge O’Sullivan’s Report and Recommendation, the record, and the parties’ objections, the Court finds that Aguiar violated Judge O’Sullivan’s orders regarding witness tampering and intimidation and thus is in contempt of Court. The Court also finds that Aguiar acted with bad faith when he hacked into Kaplan’s email and thus sanctions are appropriate.

Id. at *14.

The motions for sanctions were granted, the defendant was held in contempt of court and his answer and claims were stricken. I assume an appeal to the Eleventh Circuit will follow.


Leor Exploration & Production LLC v. Aguiar shows the right way for a party to respond to Dr. Evil types on the other side. They called him on it and presented evidence to the court of bad faith win-at-all-costs litigation. When this is done properly, as in this case, most courts will respond as necessary to protect the integrity of the judicial process. Do not allow yourself to be bullied by maniacs. Man up and protect our system of justice. Our descendants will be glad you did.

One final thing, I am noticing a significant increase in public and private reports of self-help e-discovery by illegal hacking of opposing parties email. See Eg. Van Alstyne v. Electronic Scriptorium, _F.3d_, 2009 WL 692512 (4th Cir. March 18, 2009). Be on the look out for this. It is a crime and you should take pains to make sure your client understands the difference between legal and illegal informal e-discovery.

I leave you with one of my favorite scenes from Austin Powers.

2 Responses to “Win-At-All-Costs” Litigation Using Illegal e-Discovery Leads to Dismissal of a Billion Dollar Case

  1. […] E-Discovery Team – ”Win-At-All-Costs” Litigation Using Illegal e-Discovery Leads t… MORE: ED.IT Blog Posting | e-Discovery | ESI | Ralph Losey | sanctions […]

  2. […] “Win-At-All-Costs” Litigation Using Illegal e-Discovery Leads to Dismissal of a Billion Dollar … […]

%d bloggers like this: