United States District Court, W.D. Washington, Seattle
ORDER ON MOTION FOR SANCTIONS AND EVIDENTIARY
L. ROBART, UNITED STATES DISTRICT JUDGE.
the court is Plaintiff Kische USA LLC's
("Kische") motion for sanctions and evidentiary
inference at trial regarding spoliation of evidence. (Mot.
(Dkt. # 116).) Defendants Ali Simsek, Diane Walker, and JD
Stellar, LLC ("JD Stellar") (collectively,
"Defendants") filed a response to Kische's
motion, (Resp. (Dkt. # 125)), Kische filed a reply (Reply
(Dkt. # 132)), and Defendants filed a surreply to strike
materials that Kische filed in support of its reply (Surreply
(Dkt. # 144)). The court has considered the parties'
submissions in support of and in opposition to the motions,
the relevant portions of the record, and the applicable law.
Being fully advised,  the court GRANTS in part and DENIES in
part Kische's motion.
court has extensively detailed the factual and procedural
background of this case in numerous prior orders. (See,
e.g., 6/29/16 Order (Dkt. # 39); 12/13/16 Order (Dkt. #
65); 2/22/17 Order (Dkt. # 74); 9/6/17 Order (Dkt. # 95);
11/2/17 Order (Dkt. # 115); 11/29/17 Order (Dkt. # 130).)
Thus, in this order, the court recounts only the facts
salient to the instant motion.
case involves allegations that Ali Simsek and Diane Walker
abused their positions with Kische to misappropriate
Kische's assets and form JD Stellar, a competing
business. (See SAC (Dkt. # 75); id. f 4.4,
Ex. 3 ("OA") (Dkt. # 75-1) at 11.) During the
relevant period, Kische-formed by Mehmet Uysal, who resided
in Turkey-"engaged in the business of importing high
quality and widely known wom[e]n's apparel to the United
State[s] since its formation in 2007." (SAC 11.1.)
Kische brings claims for trademark infringement in violation
of Section 32 of the Lanham Act, 15 U.S .C. § 1114(1);
common law trademark infringement; common law unfair
competition; breach of contract; breach of fiduciary duty;
tortious interference with business relations; conversion;
and unjust enrichment. (Id. fl 5.1-12.4.) On
September 6, 2017, the court granted summary judgment in
Kische's favor on the duty and breach elements of the
contract and fiduciary duty claims against Mr. Simsek.
(See 9/6/17 Order.) On November 29, 2017, the court
denied summary judgment in Kische's favor on its claims
that Defendants infringed its trademarks. (See
midst of these summary judgment motions,  the court
received briefing and held a hearing to resolve a discovery
dispute between the parties. (See 10/31/17 Order
(Dkt. #111); Defs. Disc. Br. (Dkt. # 112); Kische Disc. Br.
(Dkt. # 113); 11/2/17 Min. Entry (Dkt. # 114).) The court
ordered Defendants to produce electronic data interchange
("EDI") records, QuickBooks files,  passwords to
those files, and sales data for JD Stellar if those documents
are relevant to the remaining claims. (11/2/17 Order at 4.)
In response to the court's order, Defendants produced two
printed pages of Kische's QuickBooks records and 18, 000
pages of JD Stellar's "entire EDI records, and JD
Stellar's QuickBooks reports showing sales and profit
data." (Mot. at 3; see Resp. at 2.) Kische also
requested that the court order Defendants to produce
additional documents, computers, and passwords. (See
Kische Disc. Br at 2-5; 11/2/17 Order at 5.) After extensive
questioning from the court, Defendants' counsel
maintained that Defendants do not have any of the items
Kische sought. (11/2/17 Order at 5.) The court, therefore,
informed Kische that the court cannot order Defendants to
produce materials that do not exist and that the appropriate
remedy was for spoliation of evidence. (Id. at 5-6.)
The court granted the parties leave to file appropriate
discovery motions while encouraging the parties to resolve
their remaining discovery disputes without the court's
intervention. (Id. at 6, n.6.) Eight days later, on
November 10, 2017, Kische filed the instant motion for
sanctions and for an evidentiary inference at trial regarding
spoliation of evidence. (See Mot.)
argues that Defendants refuse to produce relevant business
records. (See generally id.) Specifically, Kische
relies on the findings of its forensic expert, Gordon
Mitchell,  to claim that: (1) Defendants did not
produce one of Kische's computers, which holds some of
Kische's QuickBooks files; (2) the computers Defendants
have produced include QuickBooks files that were deleted; (3)
Defendants did not give Kische some of the user IDs and
passwords for online QuickBooks files; and (4) some of
Defendants' produced materials show "last
accessed" dates of as recent as June 2016, meaning that
Defendants improperly altered the files before producing
them. (Id. at 4; see 11/10/17
Mitchell Decl. at 2, Exs. F, G.) June 2016 coincides with the
time that Kische collected documents and computers from
Defendants. (See Resp. at 3-4 ("Defendants
handed over possession of these computers on June 22, 2016[,
] and July 12, 2016.").) According to Kische, Defendants
have not explained how the requested information went
missing, what steps Defendants took to maintain the requested
information, or whether Defendants inquired to find the
necessary user IDs and passwords. (Mot. at 4.) In addition,
Kische argues that Defendants have not provided it with
enough information to calculate JD Stellar's profits.
Defendants maintain that the only non-moot issue is
Kische's QuickBooks records because Defendants already
produced 18, 000 pages of JD Stellar's business records
in response to the court's discovery order and because
Defendants have disclosed all of Kische's property, user
IDs, and passwords that were in Defendants' possession.
(Resp. at 2-3; see 11/2/17 Order.) Further,
Defendants argue that Mr. Uysal had access to Kische's
records until mid-2013 and that Mr. Uysal could have audited
his business records at any time, thus negating
Defendants' obligation to produce any missing records.
(Resp. at 4-6.)
requests that the court enter an order: (1) striking
Defendants' counterclaims and affirmative defenses that
relate to the despoiled evidence (id. at 10-11); (2)
issuing a jury instruction that the despoiled evidence would
have weighed against the Defendants (id. at 12); or
(3) excluding certain evidence (id.). In response,
Defendants request that the court exclude the testimony and
opinions of Mr. Mitchell. (Resp. at 12.) Defendants have
since filed a motion to exclude Mr. Mitchell's testimony,
as well as the testimony of Kische's other expert,
Douglas McDaniel. (See Mot. to Exclude (Dkt. #
148).) The court therefore withholds ruling on
Defendants' motion to exclude at this time and will
instead address the matter when deciding Defendants'
pending motion to exclude. The court notes, however, that
considering Defendants' exclusion argument as presented
in their response brief (see Resp. at 12), the court
finds that Mr. Mitchell's testimony is relevant and
reliable for the instant motion. See Kumho Tire Co., Ltd.
v. Carmichael, 526 U.S. 137, 147 (1999); Daubert v.
Merrell Dow Pharm., 509 U.S. 579, 589 (1993). The court
now addresses the issue of spoliation.
initial matter, Defendants filed a surreply requesting that
the court strike materials that Kische filed in support of
its reply brief. (See Surreply.) Defendants argue
that, pursuant to LCR 7(b)(1), Kische can only file
supporting documents with its original motion because
Defendants must have an opportunity to substantively respond
to all evidence. (Surreply at 2); see Local Rules
W.D. Wash. LCR(7)(b)(1).
Local Civil Rules limit the filing of a surreply.
See Local Rules W.D. Wash. LCR 7(g). A party
"may file a surreply requesting that the court
strike" "material contained in or attached to a
reply brief." Id. The surreply "shall be
strictly limited to addressing the request to strike, "
and "[e]xtraneous argument or a surreply filed for any
other reason will not be considered." Id. LCR
to Defendants' assertion, the Local Civil Rules expressly
contemplate submitting new evidence with a reply brief.
See Local Rules W.D. Wash. LCR 7(b)(3) ("The
moving party may ... file ... a reply brief in support of the
motion, together with any supporting material of the type
described in subsection (1)."). Additional evidence can
be presented in support of a reply brief where "[t]he
Reply Brief addressed the same set of facts supplied in
[respondent's] opposition to the motion but provides the
full context to [respondent's] recitation of the
facts." Terrell v. Contra Costa Cty., 232
Fed.Appx. 626, 629 n.2 (9th Cir. 2007). In other words,
"[evidence submitted in direct response to evidence
raised in the opposition is not 'new.'"
Crossfit, Inc. v. Natl Strength & Conditioning Ass
'n, Case No. 14-CV-1191 JLS (KSC), 2017 WL 4700070,
at *3 n.3 (S.D. Cal. Oct. 19, 2017).
Defendants move to strike evidence that they claim is
"new" (see Surreply): (1) a declaration by
Kische's counsel, Dubs Herschlip, that attaches
deposition excerpts from Mr. Simsek and Ms. Walker showing
that Kische's bookkeeper, Ester Aure, kept passwords on
the computers, and that Mr. Simsek order Kische's
computers to be decommissioned (12/01/17 Herschlip Decl.
(Dkt. # 133)); (2) a declaration from Mr. Mitchell supporting
his credibility and expertise (12/01/17 Mitchell Decl. (Dkt.
# 134)); (3) an affidavit by Ms. Aure alleging that Mr.
Simsek and Ms. Walker had possession and control of
Kische's business records and passwords (Aure Aff. (Dkt.
# 135)); and (4) a declaration of Mr. Uysal discussing his
amount of access to and control over Kische's business
records (Uysal Decl. (Dkt. # 136)). The court grants
Defendants' motions to strike as to the first and third
entries, but denies their motion as to the second and fourth.
response does not posit that they did not have access or
control over Kische's computers or passwords, nor does it
contest that Mr. Simsek decommissioned Kische's
computers. (See generally Resp.) Therefore, Mr.
Herschlip's declaration and Ms. Aure's affidavit
constitute improper "new" evidence. See
Terrell, 232 Fed.Appx. at 628-29. However, Mr.
Mitchell's declaration explains his collection
methodologies, which Defendants attacked (id. at
12), and Mr. Uysal's declaration explains his level of
access to and control over Kische's documents, which
Defendants raised (id. at 10). These declarations
are therefore not "new" evidence and are allowed by
the Local Civil Rules. See Terrell, 232 Fed.Appx. at
628-29, n.2; Provenz v. Miller, 102 F.3d 1478, 1483
(9th Cir. 1996); Local Rules W.D. Wash. LCR 7(b)(3). Thus,
the court strikes Mr. Herschlip's declaration (Dkt. #
133) and Ms. Aure's affidavit for the purposes of this
motion (Dkt. #135),  but will consider the declarations from
Mr. Mitchell and Mr. Uysal (Dkt. ## 134, 136).