• March 6, 2012

A business called British Confectionary (“BC”) in Newfoundland makes Canadian lottery or “pull-tab” tickets (and other “games of no chance” for casinos, apparently).  Multifeeder (“MF”) is a Minnesota company that makes machines used in the printing process.

BC allegedly agreed to buy an $800,000+ system, then added some features, made on-the-fly design changes (increasing the cost), paid MF about $400,000, but then the whole transaction fell apart, with MF seeking the balance owed ($633,428.12) and BC answering that it got nothing for the $400,000+ that it paid MF and suing for its money back.

So MF’s maximum exposure is $400,000+ (that is, the amount BC is claiming) and BC’s maximum exposure is about $633,000 (how much MF claimed), right? Wrong.  Wrong for a lot of reasons.  (For one thing, MF’s maximum exposure would not only be the amount of BC’s claim but the cost of all the labor and materials for the system BC would not have to reimburse it for.  BC’s maximum exposure, on the other hand, would presumably have been less than $633,000 because, if it had paid the $633,000 in the first place it would have been entitled to own the system (which presumably had some value if only as scrap)).

So, maybe this case, at the start presented potential liability of about $500,000 for each side at the outset.  Now each side may have paid close to twice that in this hard-fought litigation.  (Note: This is speculation (but based on general knowledge of the cost of civil litigation)). But the court-appointed computer forensics expert fees, alone, in this case suggest that these litigants will walk away from this lawsuit with “negative equity.”  

For over a year now, MF and BC have been involved in an e-discovery death-match (covered here and here, previously on Minnesota litigator) in which fees for the court-appointed computer forensics expert alone (not counting any lawyers fees) appears to exceed $500,000 (See MF brief in support of sanctions, p. 16).

To hear BC tell it, this is a wildly out of control e-discovery witch-hunt, where the only wrong-doing was one executive’s not particularly incomprehensible or heinous desire not to share his adult movie choices (saved onto his hard drive) with his lawyers and litigation adversaries.

MF (and CFS, the court-appointed forensics expert) argue that BC’s actions in this litigation are breathtakingly brazen, repeated, and systematic destruction of evidence (and they go after not only BC but also its outside counsel for failing to supervise the allegedly spoliating client (see MF brief at p. 25-29).

No matter who is telling the truth, the costs of this litigation have likely exceeded any probable recovery by anyone.  Like far too many U.S. homeowners (50% of mortgaged homes nationwide as of November 2011?), these litigants seem to be seriously “under water” no matter who prevails in the end…

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