                             UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                             No. 13-2500


BLUE SKY TRAVEL AND TOURS, LLC; MAHMOUD RIAD MAHMOUD,

                Plaintiffs - Appellees,

           v.

NASSER AQEEL AL TAYYAR; AL TAYYAR GROUP,

                Defendants - Appellants.


Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.     Anthony J. Trenga,
District Judge; Ivan D. Davis, Magistrate Judge.    (1:12-cv-
01142-AJT-IDD)


Argued:   January 28, 2015                 Decided:   March 31, 2015


Before SHEDD, DUNCAN, and KEENAN, Circuit Judges.


Affirmed   in  part,   vacated in  part,   and  remanded  with
instructions by unpublished opinion.   Judge Keenan wrote the
majority opinion, in which Judge Duncan joined.    Judge Shedd
wrote a dissenting opinion.


ARGUED: Christopher M. Curran, WHITE & CASE LLP, Washington,
D.C., for Appellants.     Warner Franklin Young, III, ALLRED,
BACON, HALFHILL & YOUNG, PC, Fairfax, Virginia, for Appellees.
ON BRIEF: Nicole Erb, Matthew S. Leddicotte, WHITE & CASE LLP,
Washington, D.C., for Appellants. Matthew C. Indrisano, ALLRED,
BACON, HALFHILL & YOUNG, PC, Fairfax, Virginia, for Appellees.


Unpublished opinions are not binding precedent in this circuit.
BARBARA MILANO KEENAN, Circuit Judge:

      In this appeal concerning the breach of an oral contract,

we   consider   whether     the   district   court    erred   in   denying   the

defendants’ motion for judgment as a matter of law asserting a

defense of the statute of frauds.            We also consider whether the

district court abused its discretion in affirming the magistrate

judge’s imposition of an evidentiary sanction after determining

that the defendants spoliated evidence.

      Upon our review, we conclude that the district court did

not err in rejecting the defendants’ defense of the statute of

frauds.   However, on the sanction issue, we hold that the court

applied   an    incorrect    legal   standard    in    concluding    that    the

defendants spoliated evidence, and we remand the matter to the

district court for application of the correct legal standard and

further factual development.           Accordingly, we affirm in part,

and vacate in part, the district court’s judgment, and remand

the case for further proceedings.



                                      I.

      This case involves a breach of contract dispute between two

travel agencies and their respective principals.                    Dr. Nasser

Aqeel Al Tayyar (Nasser) is the founder and vice chairman of the

“Al Tayyar Group” (ATG), a large travel agency based in the

Kingdom of Saudi Arabia (Saudi Arabia).              ATG has a contract with

                                       2
the Ministry of Higher Education of Saudi Arabia (the Ministry),

under which ATG facilitates the travel of Saudi students outside

Saudi Arabia whose travel arrangements are paid by the Ministry.

To provide ATG greater access to the airline ticketing market in

the United States, ATG sought to work together with a travel

company     in        the   United     States    accredited       by    the     Airlines

Reporting Corporation (ARC).

       In March 2011, an ATG representative contacted Mahmoud Riad

Mahmoud (Riad), the owner of “Blue Sky Travel and Tours, Inc.,”

a     travel     agency       holding    ARC     accreditation,         concerning    a

potential business relationship.                Nasser traveled to the United

States in June 2011 to meet with Riad and, over the course of

several days, discussed forming a partnership to service ATG’s

contract with the Ministry.

       During these meetings, Riad and Nasser entered into an oral

agreement        to     facilitate      ATG’s    contract     with      the    Ministry

involving      Saudi        students    traveling      to   and   from    the    United

States.        Under the oral agreement, Riad and Nasser agreed to

form a new entity, “Blue Sky Travel and Tours, LLC” (Blue Sky). 1

The    parties’        contract   provided      that   Blue   Sky      would    receive,

       1
       Riad also agreed to cease operating Blue Sky Travel and
Tours, Inc. in exchange for $850,000 from Nasser, which amount
the parties later agreed to reduce to $661,000.     After that
company ceased operating, Riad transferred its ARC license to
the new entity that he formed with Nasser.



                                            3
through ATG, requests from the Ministry for airline tickets for

students.           Blue     Sky    was    required      to    search    for     the        least

expensive       available          tickets,     purchase       such     tickets        on     the

students’ behalf, and send the invoices to ATG for reimbursement

and payment to Blue Sky of an additional $100 fee per ticket.

In turn, ATG agreed to “resell” the tickets to the Ministry at a

greater price than Blue Sky had paid for the tickets.

       Riad     alleged       that     Nasser        agreed    to     provide     Blue       Sky

additional          compensation          in   the      form     of     shared     profits.

According to Riad, Nasser promised that around December 2012,

ATG would calculate its profits from reselling the tickets to

the Ministry and would pay Blue Sky 50 percent of those profits.

Riad stated that Nasser told him that he would earn between $5

million       and    $6     million       in   profits        under    the   arrangement.

Nasser, however, denied that he agreed to share ATG’s profits

with Blue Sky.            The parties did not memorialize their agreement

in writing.

       In   May      2012,    Blue    Sky      began    issuing       tickets    for        Saudi

students under its contract with ATG.                      In less than two months,

Blue    Sky     had        purchased       airline      tickets       for    about          8,500

passengers, at a total cost to Blue Sky of around $18 million.

However,       ATG     quickly       became         dissatisfied      with      Blue        Sky’s

performance.          ATG particularly was concerned with Blue Sky’s

documentation practices, which caused significant problems with

                                                4
ATG’s ability to resell the tickets to the Ministry.                        Around the

end of June 2012, ATG ceased sending Blue Sky ticket requests

from the Ministry.

      In October 2012, Blue Sky and Riad (collectively, Blue Sky)

filed a complaint in the district court against ATG and Nasser

(collectively,      ATG),     alleging        among    other       things    that       ATG

breached its contract with Blue Sky by failing to pay money owed

under the agreement.           As set forth in its amended complaint,

Blue Sky asserted that ATG breached the oral agreement by: (1)

failing     to   reimburse    Blue   Sky      for     the   cost    of     tickets      and

service fees in the amount of $1,976,412.72; and (2) refusing to

pay any portion of the profits ATG earned after reselling the

tickets to the Ministry. 2         ATG responded to the amended complaint

by   raising     numerous    affirmative       defenses,     including        that      the

oral agreement was unenforceable under the statute of frauds.

      The allegations in the complaint related almost entirely to

ATG’s     relationship      with   Blue   Sky,      and,    as   relevant        to   this

appeal,    did   not   mention     any    other     companies       used    by    ATG    to

purchase tickets for the Ministry.                  During discovery, Blue Sky

      2
        The complaint contained numerous additional claims
asserted against ATG and Nasser.     Of these additional claims,
only Riad’s personal claim against Nasser for breach of contract
relating to the closure of his previous travel agency was
decided by the jury, which found in favor of Riad and awarded
him $661,000.    Neither that claim nor any of the additional
claims alleged in the complaint are at issue in this appeal.



                                          5
requested     documents     concerning      ATG’s     relationship       with     the

Ministry, which requests were limited to ATG’s business with

Blue Sky.      ATG produced to Blue Sky all invoices sent to the

Ministry for tickets purchased by Blue Sky.

      Blue Sky first directly raised the issue of ATG’s invoices

involving vendors other than Blue Sky on June 18, 2013, in a

deposition taken of ATG’s chief accountant, Hany Ragaie.                         Blue

Sky’s counsel requested during that deposition “documents that

reflect what the Ministry has paid in calendar year 2012 and

what the cost of the goods was, the tickets that were delivered

to the Ministry” involving all ATG vendors.                    ATG did not agree

to produce the documents sought at the deposition regarding the

other vendors.

      Thereafter, Blue Sky filed a motion to compel discovery

concerning     Blue    Sky’s    original    request      for    documents,      which

related only to ATG’s business with Blue Sky.                    The motion also

requested     the   documents      discussed     during   Ragaie’s       deposition

showing the prices paid by the Ministry for tickets purchased by

all twenty-eight vendors used by ATG.

      During a July 2013 hearing on the motion to compel, Blue

Sky   asked   the     magistrate    judge   to   order    ATG    to    produce    the

invoices that ATG sent to the Ministry for all ATG’s vendors.

Counsel   explained      that    Blue   Sky’s     purpose       in    seeking    that

information was to test the validity of ATG’s claim that it had

                                        6
charged a markup of only five percent on all its airline tickets

purchased     on   behalf       of    the   Ministry.          The   magistrate      judge

issued an order requiring ATG to produce the documents requested

in Blue Sky’s motion.                After ATG did not produce any documents

to Blue Sky in response to the magistrate judge’s order, Blue

Sky filed a motion requesting sanctions.

      The magistrate judge held a hearing on Blue Sky’s motion

for sanctions on August 2, 2013.                        Upon deciding that invoices

and other documents dealing with all the ATG vendors could be

relevant to Blue Sky’s theory of damages, the magistrate judge

ordered     ATG    to   produce       copies       of     invoices   ATG    sent   to   the

Ministry for tickets purchased by all the vendors.

      ATG    did    not   produce        any       invoices     in   response      to   the

magistrate judge’s order.                Instead, ATG produced around 5,000

pages of computer spreadsheets containing pricing information on

ATG’s resale of tickets from the twenty-eight vendors to the

Ministry.

      In response, Blue Sky filed a renewed motion for sanctions.

At a hearing on that motion, the magistrate judge again ordered

ATG   to    produce     the   invoices.             The    magistrate      judge   imposed

several sanctions on ATG at that time, including prohibiting ATG

from arguing that it received only a five-percent profit from

the Ministry for reselling tickets purchased by ATG’s vendors.

The   magistrate        judge        further       warned    that    he    would   impose

                                               7
additional    sanctions    if   ATG    did    not   comply     with    the   court’s

order.

      ATG did not produce any additional documents in response,

and instead filed a motion for limited reconsideration of the

sanctions order.       In that motion, ATG represented for the first

time that it no longer retained the invoices from the other

vendors.     ATG attached to its motion an affidavit from Ragaie,

in which he attested that ATG transcribed information concerning

the   invoices   paid     by    the    Ministry     onto   a    Microsoft        Excel

worksheet, and stated that “ATG does not retain copies of the

original invoices submitted to the [Ministry] after they are

submitted and paid by the [Ministry].”                 In response, Blue Sky

filed a motion requesting that the court enter default judgment

against ATG.

      At a hearing held in September 2013 to determine whether

ATG spoliated evidence, the magistrate judge admonished counsel

for   ATG,   stating    that     “when       this   litigation        started,    the

defendants    were   required     by    law    to   preserve.         Any    document

retention policy you had had to be stopped.”                     The magistrate

judge further informed counsel for ATG that “[o]nce you are put

on notice that there is litigation pending or once litigation

starts, you are required . . . to stop [your] normal document

retention policies and to preserve all documents because you

don’t know what may or may not be relevant.”                     The magistrate

                                         8
judge rejected ATG’s argument that Blue Sky’s complaint did not

put ATG on notice that invoices relating to vendors other than

Blue    Sky    could      be    relevant        in       the    case.        Additionally,         the

magistrate          judge      did       not     make          any     credibility          findings

concerning Ragaie’s affidavit.

       At     the    conclusion         of     the       hearing,      the       magistrate    judge

determined       that     additional           sanctions         were       appropriate     because

ATG “completely failed to fulfill [its] obligation[] to preserve

documents subsequent to the initiation of this litigation.”                                        The

magistrate judge held that entry of default judgment was not

warranted,          but   that         the     jury       would       be     given    an    adverse

instruction permitting the jury to presume that ATG made $20

million     in      profits       in    reselling         to    the     Ministry      the   tickets

originally purchased by Blue Sky.

       ATG filed exceptions in the district court to the September

2013 sanctions order, under Rule 72 of the Federal Rules of

Civil    Procedure.            The      district         court       held    a    hearing     on   the

motion, and later issued an order denying ATG’s exceptions and

affirming the adverse jury instruction sanction imposed by the

magistrate judge.              The district court concluded that the relief

imposed by the sanction was “necessary to address effectively

the prejudice to the plaintiffs caused by defendant’s failures.”

       Thereafter,          the    parties        consented           to     ATG’s    request      to

bifurcate a portion of the trial.                           Under the proposal accepted

                                                     9
by   the   district   court,    the   jury   would   determine   whether      the

parties    formed   an   oral   agreement    requiring    ATG   to   split    the

profits ATG earned upon reselling the tickets to the Ministry.

If the jury found that there was such an agreement, the district

court rather than the jury would determine the amount of lost

profit damages to which Blue Sky was entitled.             With the jury no

longer determining the amount of lost profit damages, the court

construed the adverse jury instruction sanction as creating an

evidentiary presumption applicable at the damages hearing.

      The case proceeded to trial.           After Blue Sky presented its

evidence, ATG moved for judgment as a matter of law, arguing

among other things that the Virginia statute of frauds barred

any action based on the oral agreement.                  The district court

denied the motion at that time.

      At    the   conclusion     of   the    three-day    trial,     the     jury

determined that ATG breached its agreement to compensate Blue

Sky for the costs and service fees for the airline tickets at

issue.     The jury entered a verdict awarding Blue Sky damages of

$1,940,050.89.      The jury also concluded that there was, in fact,

an oral agreement between ATG and Blue Sky to split the profits

earned by ATG upon its resale of the airline tickets to the

Ministry.

      The case was submitted to the district court to determine

the amount of profits to which Blue Sky was entitled.                The court

                                       10
held a hearing at which the parties made arguments regarding

lost    profit    damages,    as   well    as   arguments   on   ATG’s   renewed

motion concerning the statute of frauds.              The court did not hear

testimony or receive other evidence at this hearing.

       Following    the      hearing,     the    district     court   issued     a

memorandum opinion, in which the court denied ATG’s defense of

the statute of frauds.         The court concluded that it was possible

for Blue Sky to have completed its performance within one year

of the contract’s formation in June 2011, and that, therefore,

the Virginia statute of frauds did not apply.                    The court next

held that because ATG did not produce evidence rebutting the

presumption that ATG made $20 million in profits from its resale

of tickets to the Ministry, Blue Sky’s 50-percent share of those

profits entitled Blue Sky to $10 million in damages.                      After

denying ATG’s additional motions for judgment as a matter of law

and for a new trial, the district court entered final judgment

in favor of Blue Sky.         ATG timely filed a notice of appeal.



                                         II.

       ATG raises two arguments on appeal.            ATG first asserts that

the    district    court   erred    in    rejecting   ATG’s    defense   of    the

statute of frauds.           ATG also contends that the district court

abused its discretion in imposing sanctions on ATG for failing



                                          11
to retain invoices of vendors other than Blue Sky.                        We discuss

these arguments in turn.

                                          A.

        We first address ATG’s contention that the district court

erred in rejecting ATG’s defense of the statute of frauds.                        ATG

asserts    that   full    performance      of    the    parties’      oral   contract

could not be accomplished within one year and, thus, that any

action based on the oral contract was barred under Virginia law

by the statute of frauds.                In support of this argument, ATG

relies    primarily   on    Blue    Sky’s      allegation      that    the   parties’

contract required ATG to calculate and distribute its profits,

at the earliest, in December 2012, which date was more than one

year after the contract was formed in June 2011.                             ATG also

contends that Blue Sky was required to provide ticket exchange

services under the contract, and that full performance of that

obligation could not be made until more than one year after the

date of the contract.       We disagree with ATG’s arguments.

     We review de novo the district court’s denial of ATG’s Rule

50 motion addressing the statute of frauds.                      See Fontenot v.

Taser    Int’l,   Inc.,    736    F.3d    318,    333   (4th    Cir.     2013).    In

conducting this review, we consider the evidence in the light

most favorable to Blue Sky, the nonmoving party.                   Id.

     The parties agree that Virginia law applies in considering

whether     the   statute    of     frauds       barred   the      present     action

                                          12
concerning the parties’ oral contract. 3                             The Virginia statute of

frauds    provides         in    relevant          part       that    “[u]nless      a    promise,

contract, agreement, representation, assurance, or ratification,

or some memorandum or note thereof, is in writing and signed by

the   party     to    be    charged          or    his     agent,      no   action        shall   be

brought . . . [u]pon any agreement that is not to be performed

within a year.”        Va. Code § 11-2(8).

      Critically, the Supreme Court of Virginia has held that the

statute    of    frauds         applies       only       if    both    parties      to     an   oral

contract        are    incapable             of      performing          their      contractual

obligations       within         one     year       of        the     contract’s     formation.

Silverman v. Bernot, 239 S.E.2d 118, 121 (Va. 1977) (stating

that the statute of frauds is inapplicable if the contract can

be    fully      performed             “on        one     side”        within       one     year).

Additionally, courts examining whether an agreement falls within

Virginia’s statute of frauds do not examine the actual course of

contract      performance,             but        rather       undertake        a   theoretical

approach to determine whether the contract is capable of being



      3
       See United States v. Rosen, 487 F. Supp. 2d 721, 729 (E.D.
Va. 2007) (holding that the Virginia statute of frauds applies
to all disputes concerning unwritten contracts when Virginia is
the forum state in which the dispute is adjudicated); see also
Cosey v. Prudential Ins. Co. of Am., 735 F.3d 161, 169 n.7 (4th
Cir. 2013) (applying law of forum state, as agreed by the
parties, in interpreting the terms of the contract).



                                                   13
fully     performed      by   either    party   within      one     year. 4     See    id.

(“[W]hen by its terms, or by reasonable construction, such a

contract    can     be   fully   performed      on    one    side    within     a    year,

although it can be done by the occurrence of some improbable

event, . . . the contract is not within the statute and need not

be in writing.”) (emphases added).

      Applying the holding in Silverman to the present matter, we

conclude that it was possible for Blue Sky to fully perform its

obligations under its oral contract with ATG within one year of

the contract’s formation in June 2011.                      As the district court

observed,     the    contract     was    premised     on    ATG     receiving       ticket

requests from the Ministry.             Although Nasser predicted, and Riad

hoped, that Blue Sky would receive many ticket requests through

the   end    of     2012,     there    remained      the    possibility       that    the

Ministry would cease funding student travel through ATG or would

order only a small number of tickets. 5


      4
       See also Rosen, 487 F. Supp. 2d at 729 (holding that
employer’s agreement to advance legal fees to employees for an
indefinite period in connection with criminal investigation was
not within statute of frauds, because of the possibility the
investigation and prosecution could have been completed within
one year of the agreement).
      5
       The district court concluded that it was uncertain when
and under what circumstances ATG’s contract with the Ministry
expired.   The court additionally observed that the ATG-Ministry
contract was “silent as to any commitment or obligation on the
part of the Ministry to actually order any tickets or use any
other services of ATG,” and that the court could not rule out
(Continued)
                                          14
      Under the circumstances of the parties’ agreement, it was

therefore   possible   that   there    could   have   been     only   a   single

ticket request made to Blue Sky through ATG and the Ministry,

and that such a request could have been made within one year of

the agreement between Blue Sky and ATG in June 2011.                  Blue Sky

could have purchased the ticket, issued it to the student, and

sent the invoice to ATG within that one year.                If Blue Sky did

not   receive   another   ticket   request     because   the    Ministry     had

terminated its relationship with ATG, Blue Sky would have fully

performed its obligations under the agreement within one year of

the contract’s formation. 6    In that hypothetical situation, it is




the possibility that “the contract continued as a contract
terminable for cause or for the convenience of the Ministry.”
ATG does not argue on appeal that the district court erred in
reaching these conclusions.
      6
       In asserting the opposite conclusion, our colleague in
dissent misreads the decisions in Silverman and Falls v.
Virginia State Bar, 397 S.E.2d 671 (Va. 1990). In neither case
did the Supreme Court of Virginia announce a per se rule that
any contingency must be specified in the oral contract as
constituting full performance to remove the contract from the
statute of frauds.   The dissent notes correctly that the court
in Falls held that death, resignation, or discharge for cause
could not constitute full performance in an oral employment
contract unless the parties so specified.    See 397 S.E.2d at
672-73. However, the Falls holding stands for the unremarkable
position that events not otherwise considered to be full
performance may be considered as such upon the parties’
agreement.   This was the case in Silverman, in which the terms
of   the   agreement  provided  that   death  constituted  full
performance. See 239 S.E.2d at 122-23. Otherwise, as explained
in Falls itself, an oral employment contract terminates by
(Continued)
                                      15
immaterial whether ATG could perform its obligation to calculate

and   distribute   profits       within     one    year   of    the   agreement’s

formation   in   June    2011,    because     it    is    not   necessary    under

Virginia law that both parties are able to fully perform within

one year.   See Silverman, 239 S.E.2d at 121.

      We are not persuaded by ATG’s arguments to the contrary.

ATG attacks the hypothetical situation posited by the district

court, in which the court observed that it was possible under

the   contract   for    Blue    Sky   not   to     have   received    any   ticket

requests whatsoever. 7         ATG asserts that such a situation would

eliminate the need for any performance, and would constitute

non-performance    rather      than   the   full    performance       required   to



operation of law upon the employee’s death or resignation, and
terminates by breach upon the employee’s discharge for cause.
See 397 S.E.2d at 673.     In the present matter, however, the
contract would not terminate upon Blue Sky receiving only one
ticket request through ATG and the Ministry.         Rather, as
explained above, Blue Sky’s fulfillment of that ticket request
would have constituted full performance if the Ministry had
ended its relationship with ATG after that one ticket had been
purchased.    Further, we are not persuaded by the dissent’s
recitation of non-Virginia precedent in support of the view that
the duration of Blue Sky’s potential obligation to ATG places
the agreement within the statute of frauds. Cf. Southern States
Life Ins. Co. v. Foster, 229 F.2d 77 (4th Cir. 1956) (applying
South Carolina law); Martocci v. Greater N.Y. Brewery, Inc., 92
N.E.2d 887 (N.Y. 1950) (applying New York law).
      7
       The district court also observed that even if Blue Sky had
received ticket orders, Blue Sky “might have completely
performed all of its duties within a year in order to receive
its share of [the] profits.”



                                       16
remove       the       agreement    from    the     statute    of   frauds.       See    id.

However,          we     do   not    rely     on     the    “zero    tickets      ordered”

hypothetical set forth by the district court, but rather the

hypothetical possibility that one ticket would be ordered, which

situation would allow Blue Sky to perform under the agreement.

       We also do not agree with ATG’s argument that Blue Sky

could not have performed its contractual obligations within one

year because Blue Sky purportedly was required to accommodate

ticket exchange requests through the end of 2012.                         ATG relies on

a statement from Sherin Noor, a Blue Sky employee, who testified

that       Blue    Sky    was   doing      “exchanges”      until   January      2013    for

students          who    needed     to     change    the    dates    of   their    travel

arrangements.            Noor stated during his testimony that “because we

issued the ticket, we need to make the exchange.”

       Even assuming that Blue Sky had a contractual obligation to

process       ticket      exchange       requests, 8   we     conclude    that    such    an


       8
       Although we need not reach the issue, we observe that it
would be tenuous, at best, to conclude that the evidence
supports a finding that Blue Sky had a contractual obligation to
provide ticket exchange services.     Riad discussed during his
testimony the obligations assumed by Blue Sky under the oral
agreement without mentioning any servicing requirement.   Nasser
also did not testify about any obligation on the part of Blue
Sky to provide exchange services.    In light of the absence of
such testimony from the contract principals, we do not think
that Noor’s ambiguous statement of a “need” to service the
tickets constitutes sufficient evidence that servicing was a
contractual obligation.



                                               17
obligation        does    not    require           application      of    the    statute    of

frauds.       It     would      be    possible,       particularly        under     the   “one

ticket” hypothetical discussed above, for Blue Sky to receive

and    process      any    exchange           request     within     one     year    of    the

contract’s        formation.          Absent       any    further    exchange       requests,

Blue Sky thus would have fully performed its obligations within

one year.         Accordingly, we affirm the district court’s denial of

ATG’s defense of the statute of frauds. 9

                                                B.

       We    next    address         ATG’s    argument      that    the    district       court

abused      its    discretion         by     upholding     the     evidentiary      sanction

issued against ATG on the ground of spoliation. 10                               ATG asserts

that   the    magistrate        judge        and    the   district       court   applied    an

incorrect legal standard concerning ATG’s document preservation

obligations in concluding that ATG destroyed documents that it

had a duty to preserve.                    Blue Sky argues in response that the

       9
       Because the defense of the statute of frauds in this case
presents a pure question of law, we need not address ATG’s
argument that the district court erred by placing the burden of
proof on ATG with respect to its defense.     Application of the
undisputed facts under the hypothetical analysis required by
Silverman mandates the conclusion that the oral agreement in
this case does not fall within the statute of frauds.
       10
         “Spoliation refers to the destruction or material
alteration of evidence or to the failure to preserve property
for another’s use as evidence in pending or reasonably
foreseeable litigation.”    Silvestri v. Gen. Motors Corp., 271
F.3d 583, 590 (4th Cir. 2001) (citation omitted).



                                                18
sanction        was     imposed    on     the       basis    of     general     discovery

violations       rather     than    spoliation,        and       that   ATG   waived   any

objections to the magistrate judge’s holdings.                          We disagree with

Blue Sky’s arguments.

      We find no merit in Blue Sky’s argument that the sanction

at issue was imposed for general discovery abuses rather than

for spoliation of evidence.               The magistrate judge stated in the

order imposing the adverse jury instruction that the sanction

was being imposed “[f]or reasons stated from the bench” at the

September 2013 hearing.             Unmistakably, the reasons given by the

magistrate       judge     from    the     bench      at    that    hearing      addressed

spoliation.           The magistrate judge stated that the hearing was

being    held     to    determine       whether      ATG    spoliated     evidence,    set

forth his view of the legal standard applicable to spoliation,

and applied that standard in concluding that ATG “completely

failed    to     fulfill       [its]     obligation[]        to    preserve      documents

subsequent to the initiation of this litigation.”                               (Emphasis

added).     It was on that basis, rather than on the mere failure

to   produce      the    documents       or    because      of    any   other    discovery

failures,       that     the    magistrate         judge    decided      to   impose   the

sanction at issue.

      Similarly, we find no merit in Blue Sky’s argument that the

district court’s affirmance of the magistrate judge’s sanction

order     was    not     based     on    the       magistrate      judge’s      spoliation

                                              19
holding.      In affirming the adverse jury instruction sanction,

the district court noted the possibility that ATG’s actions may

have “entirely eliminated” Blue Sky’s ability to establish its

damages      for   lost   profits.         The    court’s     use    of   the     term

“eliminated” indicates that it was ATG’s failure to preserve the

documents,     rather     than   ATG’s    mere     failure   to     timely   produce

them, that justified the extreme sanction in the court’s view.

Moreover, the district court did not make an express statement

that the court was affirming the sanction on a basis independent

from   the    magistrate    judge’s      analysis.      To    the    contrary,    the

court grounded its holding on the magistrate judge’s decision,

concluding     that   ATG   failed    to      show   that    “the    Order   of   the

Magistrate Judge with respect to damages was clearly erroneous

or contrary to law.”        Accordingly, we conclude that the district

court affirmed the sanction order for the reason provided by the

magistrate judge, namely, spoliation of evidence.

       We also disagree with Blue Sky’s argument that ATG waived

its appeal of the sanction order.                Although a party’s failure to

file timely exceptions under Rule 72 to a magistrate judge’s

order waives the party’s right to appeal that order, Wells v.

Shriners Hosp., 109 F.3d 198, 201 (4th Cir. 1997), ATG timely




                                         20
filed       such     exceptions       to   the       magistrate     judge’s       spoliation

finding and imposition of the adverse jury instruction. 11

       We proceed to analyze for abuse of discretion the sanction

imposed on ATG for spoliation.                    Silvestri v. Gen. Motors Corp.,

271 F.3d 583, 590 (4th Cir. 2001).                     Among other circumstances, a

court       abuses    its    discretion         when   it   bases     its   ruling    on   an

erroneous principle of law.                 Georgia Pac. Consumer Prods., LP v.

Von Drehle Corp., 710 F.3d 527, 533 (4th Cir. 2013).

       A party may be sanctioned for spoliation if the party (1)

had   a     duty     to    preserve    material        evidence,    and     (2)   willfully

engaged in conduct resulting in the loss or destruction of that

evidence, (3) at a time when the party knew, or should have

known, that the evidence was or could be relevant in litigation.

Turner v. United States, 736 F.3d 274, 282 (4th Cir. 2013).                                In

the present case, neither the magistrate judge nor the district

court made the crucial finding whether ATG destroyed or failed

to    preserve       the    evidence       at    issue,     despite    having      known   or

should have known that the evidence could be relevant in the

case.       See Silvestri, 271 F.3d at 591; see also Turner, 736 F.3d

at 282.

       11
       Blue Sky asserts that ATG did not file exceptions to the
magistrate judge’s previous orders that the invoices were
relevant and should be produced, but those conclusions do not
constitute the spoliation finding or the resulting sanction that
is at issue in this appeal.



                                                21
      Instead,     the     magistrate       judge      held   that    once     litigation

began, ATG had a duty to stop its document retention policies

“and to preserve all documents because you don’t know what may

or   may   not    be     relevant.”         (Emphasis      added).       The     standard

applied     by    the     magistrate        judge       constituted      an    abuse      of

discretion, because a party is not required to preserve all its

documents    but       rather     only    documents      that   the    party     knew    or

should have known were, or could be, relevant to the parties’

dispute.     See Turner, 736 F.3d at 282.                     Further, the district

court’s imposition of the sanction based on spoliation created

severe      prejudice,           because        the      evidentiary          presumption

effectively relieved Blue Sky of its burden to prove its damages

claim for lost profits.

      Accordingly, applying the principles expressed in Turner,

we   conclude     that     two    unresolved      issues      are    essential      to   the

spoliation       analysis        and     should   be     addressed      in    the    first

instance    by    the     district       court.        First,   the    district      court

should ascertain the date by which ATG knew or should have known

that invoices relating to other vendors could be relevant in the

case.      Second,       the    district    court      should   establish       when     ATG

destroyed        the     invoices        from     the     other       vendors.           The

determination          whether    ATG     committed      spoliation     will     rest    in

large part on the district court’s findings regarding these two

questions.

                                             22
       On remand, therefore, the district court should determine

whether      ATG    spoliated     evidence,       what     sanctions,      if   any,    are

appropriate, and whether a new trial on lost profits damages is

necessary.          However, because the spoliation sanction did not

have a material impact on the liability proceedings before the

jury,    a    new    trial      will   not    be     required      on    the    issue   of

liability,     or    on    the    jury’s     award    of      $1,940,050.89     in   other

damages.



                                           III.

       For these reasons, we affirm the district court’s judgment

with    respect      to   the    court’s     denial      of    ATG’s    defense   of    the

statute of frauds.               We affirm the district court’s liability

determination and damages award in the amount of $1,940,050.89,

vacate the court’s profit-based damages award, and we remand

this    matter      to    the    district     court      for     further    proceedings

consistent with this opinion.

                                             AFFIRMED IN PART, VACATED IN PART,
                                                 AND REMANDED WITH INSTRUCTIONS




                                             23
SHEDD, Circuit Judge, dissenting:

     I disagree with the majority’s conclusion that the oral

agreement in this case is not within the Virginia statute of

frauds. See Va. Code Ann. § 11-2(8) (no action may be brought on

an oral contract if the contract is based on an “agreement that

is not to be performed within a year”). The Supreme Court of

Virginia has explained that when “it appears by the whole tenor

of an agreement not in writing that it is to be performed after

the first year, then the contract is within the statute and must

be in writing.” Silverman v. Bernot, 239 S.E.2d 118, 121 (Va.

1977).   However,    when    “by    its     terms,     or   by   reasonable

construction, such a contract can be fully performed on one side

within a year, although it can be done by the occurrence of some

improbable event, . . . the contract is not within the statute

and need not be in writing.” Id.

     Looking   at   the   “whole   tenor”   of   the   oral   contract,   as

described by Mr. Riad, it clearly falls within § 11-2(8). Formed

in June 2011, the contract obligated both parties to perform

through the end of 2012, some 18 months later. Specifically, the

contract obligated Blue Sky to purchase airline tickets at ATG’s

request through the end of 2012, and it obligated ATG to share

its profits with Blue Sky at the end of 2012. The contract did

not contain any contingency that, upon its occurrence, could

constitute full performance before the 18-month period expired.

                                    24
Therefore, there is simply no way that either party could fully

perform its obligations within one year of June 2011. 1

       Finding      to     the   contrary,    the    district      court    interpreted

Virginia law in an extraordinary manner, stating that if a court

could “conjure up some contingency, no matter how improbable,

that would allow either Blue Sky or ATG to completely perform

all of its contract obligations within one year of June 2011,”

then the oral agreement is not within the statute of frauds.

J.A.       1309    (emphasis     added).     The     court    then      concluded    that

because, within one year of June 2011, the Ministry could have

stopped       ordering      airline   tickets        from    ATG   or     the   Ministry

contract with ATG could have been terminated, either Blue Sky or

ATG    “might       have     completed       their       performance       under    their

contract”         during    that   period.        J.A.   1310.     In    affirming    the


       1
       The “whole tenor” of the oral contract makes clear that
the parties contracted for Blue Sky to purchase airline tickets
at ATG’s request until the end of 2012. Among other things, Mr.
Riad testified that ATG handled approximately “$120 million a
year” in United States tickets for the Saudi Ministry, and that
Dr. Al-Tayyar told him that his profit “would be between 5 to 6
million.” J.A. 829. See Rizoti v. Plemmons, 91 Fed. Appx. 793,
796-97 (4th Cir. 2003) (holding that testimony regarding the
anticipated duration of the agreement established that the
defendant’s performance would extend beyond one year). Moreover,
Mr. Riad testified that he kept his business open until January
18, 2013, “after the last student used his ticket.” J.A. 841.
See Volvo Constr. Equip. N.A., Inc. v. CLM Equip. Co., 386 F.3d
581, 598 (4th Cir. 2004) (noting that “courts commonly look to
evidence of the course of dealing . . . in assessing ambiguous
contract terms”).



                                             25
district court’s decision, the majority asserts that Blue Sky

could    have    fully     performed           its    contractual        obligations       by

purchasing a single airline ticket within one year of June 2011.

       The district court and the majority misread Virginia law.

In    Silverman,    upon    which       the     majority       primarily      relies,     the

state supreme court held that the oral employment contract was

not within the statute of frauds because it was capable of being

performed by either party within one year; however, the court

did not adopt a standard allowing for any contingency to be

“conjured up” to remove a contract from the statute. Instead,

the    court    concluded        that    the        contract       itself    provided     for

“alternative       performances,          that        is,      .    .    .   the    parties

contemplated       that    the    agreement          would    be    fully    performed     if

either (1) the plaintiff remained in Silverman’s employ until

she reached the age of 62, or (2) the plaintiff remained in

Silverman’s     employ     until       his     death.”       239    S.E.2d   at    121.   The

court reasoned that because “the death of the employer could

have    occurred    within       the    first        year    of    the   agreement,”      the

contract was not within the statute of frauds. Id. In reaching

this     conclusion,        the        court        specifically         emphasized       the

distinction in service-contract cases between the termination of

a contract by operation of law and by completion of performance,

and it noted that the termination of a party’s contractual duty



                                               26
is     not    the     same          as     a     party’s       full       performance     of     the

contemplated work. Id. at 121-22. 2

       The court reiterated this point in Falls v. Virginia State

Bar, 397 S.E.2d 671 (Va. 1990), in which it held that the oral

employment       contract,               which    was     indefinite         in   duration       but

contingent       on       the       employee’s           satisfactory        performance,        was

within the statute of frauds. The court rejected the employee’s

argument that the contract could be fully performed within one

year because he could have died, resigned, or been discharged

for    cause    during         that       period.        Applying     Silverman,        the    court

explained       that       “[a]lthough            occurrence         of    any    of   the     three

contingencies         .    .    .        would    have     terminated        [the      employee’s]

performance          during         the     first       year    of    his     employment,       the

parties’ contract did not expressly provide that the occurrence

of     any      of        these          contingencies          would        constitute         full

performance.” Id. at 672-73. Continuing, the court noted that

because the contract “contains no such provision providing for

full       performance         in    the       event      of   those       contingencies,       the

statute of frauds is applicable.” Id. at 673.


       2
       The district court and the majority read too much into the
Silverman court’s statement that the occurrence of an improbable
event can constitute a party’s full performance of an oral
agreement. Certainly, an improbable event may lead to a party’s
full performance, but the event itself must be expressed in the
contract.



                                                    27
       As   noted,      the       oral   contract        in    this        case       obligated      the

parties to perform for a period of 18 months, and it did not

contain     a    contingency         that,       upon    its        occurrence,         would     have

constituted full performance. Thus, like the contingencies in

Falls, the contingencies conjured up by the district court might

have terminated Blue Sky’s performance under the oral contract,

but    they      would       not     have       led      to     the        “full       performance”

contemplated by the parties when they made the contract. See

also Lee’s Adm’r v. Hill, 12 S.E. 1052 (Va. 1891) (holding that

an    agreement       for    one    year’s       service,       made        in    August       and    to

commence        in     October,      was        within        the     statute          because       the

employee’s promise could only be performed by service for the

full year).

       Moreover,        although         Blue    Sky’s        purchase           of    any     airline

tickets     during          the    12-month       period        after        June       2011     would

constitute           partial       performance          of     Blue        Sky’s        contractual

obligations, partial performance is insufficient to remove this

contract      from      §    11-2(8).      Because       Blue        Sky    was       contractually

obligated to purchase tickets at ATG’s request until the end of

2012, it could not fully perform its obligations within one year

after June 2011. See generally Southern States Life Ins. Co. v.

Foster, 229 F.2d 77, 81 (4th Cir. 1956) (“Until the arrival of

each of those months, the waiver for that month could not be

tendered; until then, neither the appellant, nor the appellees,

                                                 28
could perform their agreement for that month. . . .”); Martocci

v. Greater N.Y. Brewery, Inc., 92 N.E.2d 887, 889 (N.Y. 1950)

(“The endurance of defendant’s liability is the deciding factor.

The mere cessation of orders from Lorillard to defendant would

not alter the contractual relationship between the parties; it

would not constitute performance; plaintiff would still be in

possession   of    his   contractual    right,   though    it    may   have   no

monetary value, immediately or ever.”).

     For   these   reasons,   I   believe   that   the    oral   contract     is

within the statute of frauds. Accordingly, the defendants are

entitled to judgment as a matter of law. 3




     3
       Although unnecessary for my resolution of this appeal, I
agree that the district court abused its discretion regarding
spoliation of evidence. The magistrate judge applied an
incorrect, overly broad standard, and the district judge applied
an excessively prejudicial evidentiary presumption during the
damages proceeding.



                                       29
