Coleman (Parent) Holdings, Inc. v. Morgan Stanley

What happened

Ron Perelman brought a fraud claim against Morgan Stanley arising from the sale of Sunbeam. During the litigation, Morgan Stanley failed to produce relevant email from backup tapes and misrepresented to the court the extent of its email production efforts. The court found that Morgan Stanley had not complied with its discovery obligations and issued an adverse-inference instruction shifting the burden of proof to Morgan Stanley to demonstrate it had not committed fraud. The jury, operating under that instruction, awarded $604.3 million in compensatory damages and $850 million in punitive damages, one of the largest fraud verdicts in US history to that point. The verdict was later reversed on substantive grounds, but the spoliation sanctions and the adverse-inference instruction have remained a landmark example in e-discovery jurisprudence of how failures in centralised email production can shift the entire evidentiary burden in a case.