## Facts

- Time-Share Systems, Inc. provided computer-related services to Gary W. Schmidt’s retail business, including software creation and arranging purchase or lease of computer equipment.
- The parties agreed Schmidt owned the computer hardware, but disputed ownership of certain software (the “Ease” software).
- After the business relationship deteriorated and Schmidt terminated the arrangement, Time-Share sued and Schmidt counterclaimed.
- The trial court ordered replevin of the “Ease” software and required Schmidt to turn it over, with a show-cause provision for contempt if he did not comply.
- At a later hearing, the court entered a preservation order to allow Time-Share access to obtain a full file save of Schmidt’s computers, prohibited Schmidt from deleting any data or programs before the file save, and required production of the most recent file save if deletions had already occurred.
- After a file save was performed, the trial court found Schmidt deleted, or allowed deletion of, certain files in violation of the no-deletion order.
- The trial court held Schmidt, related companies, and certain officers in civil contempt and imposed fines, costs and attorney’s fees, and $2,500 in damages for deletion of protected material.
- Schmidt appealed the contempt adjudication and monetary sanctions.

## Issues

1. Whether the trial court properly found civil contempt based on violation of a clear order prohibiting deletion of computer data/programs before a court-ordered file save.
2. Whether the trial court properly awarded attorney’s fees and costs, and whether the $2,500 compensatory damages award was supported by sufficient evidence of actual loss caused by the contempt.

## Decision

- The appellate court affirmed the civil contempt finding for violating the no-deletion preservation order.
- The appellate court affirmed the award of attorney’s fees and costs as remedial sanctions connected to the contempt.
- The appellate court reversed the $2,500 damages award and remanded for proof and findings of actual damages attributable to the deletion.

## Legal Principles

- Civil contempt is remedial: it is used to enforce compliance with court orders and to compensate an aggrieved party for losses caused by disobedience, not to impose punishment disconnected from remediation.
- A contempt finding requires violation of a clear and specific court order that gives fair notice of what conduct is required or prohibited.
- Attorney’s fees and costs may be awarded as a remedial contempt sanction when reasonably incurred because of the contempt.
- Compensatory damages for contempt must be supported by evidence of actual loss causally attributable to the contemptuous conduct; if the record does not support the amount awarded, reversal and remand for proof of damages is appropriate.

## Conclusion

The court upheld civil contempt and related fees and costs for violating a computer-data preservation order, but required evidentiary support for compensatory damages by reversing the set $2,500 amount and remanding for proof of actual damages caused by the deletion.


Time-Share Sys., Inc. v. Schmidt, 397 N.W.2d 438 (Minn. Ct. App. 1986)