A recent Chancery decision is blogworthy due to its analysis of an extreme case of spoliation coupled with other bad faith litigation conduct in NICbyte LLC v. Startop Investments, LLC, C.A. No. 2023-0637-NAC (Del. Ch. April 8, 2026).

Initially, I observe that egregious facts such as those offered in this case shed little light on more common situations where spoliation is more nuanced and: (i) is not intentional; (ii) does not include bad faither actions; and (iii) is not clearly prejudicial in terms of not obviously making dispositive evidence unavailable.

I am avoiding the discussion of the detailed factual background and the merits of the case involving the enforceability of loan documents in this thorough 45-page post-trial decision, so I can highlight the spoliation aspects.

Highlights

• The court described the “vast scale” of the deletion of clearly relevant evidence around the time that discovery requests were served, and also again about the time that a motion to compel was filed. Slip op. at 22-23.
• Importantly, the court referred to Rule 37(e), which only allows the court to assume that the information lost was unfavorable: if the spoliation was reckless or intended to deprive another party of the use of the information in litigation. Slip op. at 37.
• The court recited in great detail the extensive and intentional deletion of voluminous electronic communications, as well as forged documents, and lies to the court by some of the parties involved.
• Fees were shifted as a penalty, in addition to other sanctions such as making adverse inferences.

Although not directly related to spoliation, the court provides a useful recitation of the law relating to actual authority, Slip op. at 31, and apparent authority, Slip op. at 32, as well as the doctrine of in pari delicto at footnote 136, and the difference between void and voidable, footnote 137.