Arkeyo LLC v. Saggezza, Inc., No. 25-1577 (7th Cir. July 30, 2026), full opinion (PDF)
The Seventh Circuit held on July 30 that a spoliation motion fails at the threshold unless the movant offers some indication that the lost evidence existed in the first place. A gap in a production does not supply that indication, and neither does a theory about what the missing material would have shown.
The published decision carries a second lesson for any litigant whose sanctions motion is still pending when the case ends. An appellate court may affirm an unexplained denial of sanctions where the record on its face settles whether sanctions were warranted, and that is what happened here.
What Happened
Arkeyo LLC and Saggezza both wrote software for the coin-counting machines at Metro Bank PLC. Metro hired Arkeyo first, then employed Saggezza UK, a subsidiary of Saggezza, Inc., to develop a more modern replacement. Arkeyo sued for copyright infringement and trade secret misappropriation, among other claims.
The district court granted summary judgment for Saggezza, Inc. and terminated the case without addressing Arkeyo's then-pending motion for spoliation sanctions. That motion identified two items. The first was an Arkeyo touchscreen computer that Metro had shipped to Saggezza, Inc. The second was a purported alternate version of the source code for Saggezza's software, a version Arkeyo claimed would show that its own code had been copied.
The Court's Analysis
Arkeyo invoked Rule 37(e)(2), which authorizes sanctions against parties who destroy evidence "with the intent to deprive another party of the information's use in the litigation." The Seventh Circuit reviewed the denial for abuse of discretion.
The district court had denied the motion without discussing it or offering any reasoned explanation. That did not require a remand. A summary denial of sanctions can be affirmed where the record settles on its face whether sanctions were appropriate.
Reading that record, the court found that Arkeyo's spoliation claims "consist entirely of unfounded speculation." Saggezza's project manager testified that the touchscreen computer went unproduced because Saggezza had returned it to Metro after finishing with it, not because Saggezza destroyed it. Arkeyo offered no evidence calling that account into question.
The source code argument failed a step earlier. Arkeyo's assertion that a second version of the Saggezza code existed, and that the second version contained evidence of copying, had no support in the record. The Seventh Circuit held that a movant cannot obtain sanctions for the destruction of evidence "without at least some indication that the spoliated evidence existed in the first place." Both arguments rested on conjecture, so the panel affirmed the denial, rejecting Arkeyo's remaining challenges as well.
Why It Matters
Prove existence before you draft the motion. Custodian and 30(b)(6) testimony, system inventories, retention schedules, backup catalogs, and metadata from surrounding productions are the ordinary ways to show that a file or a device was there. What a party believes should have been produced carries no weight without one of them.
Ask where a device went before arguing that it is gone. The touchscreen computer turned on its disposition, and the answer came from the opposing party's own project manager. A single deposition question about the chain of custody would have surfaced that answer long before the sanctions motion was written. An unrebutted account of hardware returned to the party that sent it ends the inquiry.
Test an inference about missing source code against what the record can prove. Alleging that a different build of the software once existed, and that the different build would have proved copying, asks a court to infer both the evidence and its contents. Rule 37(e) does not reach information that was never shown to exist.
Get the sanctions motion decided while the case is live. Arkeyo's motion was still pending when summary judgment ended the litigation, and it drew a denial with no reasons attached. A silent denial remains reviewable. Review takes the record as it stands, and nothing in this one favored the movant.
The full opinion is available as a PDF.
