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HP Tuners, LLC v. Sykes-Bonnett

United States District Court, W.D. Washington, Tacoma

September 16, 2019

HP TUNERS, LLC, Plaintiff,
v.
KEVIN SYKES-BONNETT, SYKED ECU TUNING INCORPORATED, JOHN MARTINSON, Defendants.

          REPORT AND RECOMMENDATION ON PLAINTIFF'S MOTION FOR SANCTIONS FOR SPOLIATION OF EVIDENCE

          THERESA L. FRICKE UNITED STATES MAGISTRATE JUDGE

         Plaintiff has moved for sanctions concerning spoliation of evidence. Dkt. 156. The evidence that plaintiff argues was destroyed is a portable flash drive. Plaintiff's Motion for Sanctions for Spoliation of Evidence, Dkt. 156 at 2, 156-3: Ex. 3 (plaintiff's demand to defendants and request for preservation of evidence, dated 3-27-2017); Dkt. 147, 147-1 at p. 139 (Sealed) Ex. A. The defense admits that the flash drive contained confidential and proprietary information relevant to this lawsuit, and admits that defendant Sykes-Bonnett destroyed the flash drive, but the defense opposes the motion. Defendant's Response, Dkt. 173. Plaintiff requests either default judgment against the defendants, or other relief the Court determines to be appropriate. Plaintiff's Reply, Dkt. 156 at 1, Dkt. 174 at 2.

         Plaintiff and defendants agree: Defendant Sykes-Bonnett destroyed evidence, i.e. the flash drive and electronic contents of the flash drive, the defendant had notice that the evidence he destroyed had potential relevance to the litigation, and he knew this before he destroyed the flash drive. Therefore, the Court finds plaintiff has met its burden of proof by a preponderance of evidence, that spoliation has occurred. Ryan Editions Ltd. West, 786 F.3d 754, 766 (9th Cir. 2015); Apple Inc. v. Samsung Elecs. Co., 888 F.Supp.2d 976, 989 (N.D. Cal. 2012).

         The questions for the Court, under Fed.R.Civ.P. 37(e), are: Whether the ESI from that flash drive is “lost”; and under both Rule 37(e) and the Court's inherent authority to control the discovery process and uphold the integrity of litigation -- if the ESI is lost -- then should the Court issue an order of default, or some other sanction, in response to the spoliation?

         Legal Standard

         The spoliation of electronic discovery is covered by Fed.R.Civ.P. 37(e), “which essentially functions as a decision tree”. Oracle America, Inc. v. Hewlett Packard Enterprise Company, 328 F.R.D. 543, 549 (N.D. Cal. 2018). As amended December 1, 2015 to clarify when United States District Courts should use certain measures to respond to allegations of spoliation of ESI, Fed.R.Civ.P. 37(e) provides:

         If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court:

(1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information's use in the litigation may:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.

         The decision tree starts with an inquiry of whether the data is forever gone: The Court must consider three questions to determine whether ESI has been “lost” - (a) did the discoverable ESI exist at the time a duty to preserve arose, (b) did the party fail to take reasonable steps to preserve the ESI, and (c) is the evidence irreplaceably lost? Oracle America, Inc. v. Hewlett Packard Enterprise Company, 328 F.R.D. at 549. If the answer to any of these questions (a)-(c) is “no”, then a motion for spoliation sanctions must be denied. If all the questions are answered “yes”, then the Court proceeds to determine whether the moving party has been prejudiced and whether the party subject to potential sanctions had an intent to deprive.

         The moving party is not required to prove the likely contents of destroyed evidence; information is not “lost” under Fed.R.Civ.P. 37(e) unless the moving party shows there are categories of irreplaceable relevant documents. See e.g., Leon v. IDX Sys. Corp., 464 F.3d 951, 959 (9th Cir. 2006); Neely v. Boeing Co., 2019 U.S. Dist. LEXIS 68726 (W.D. Wash. April 23, 2019) (information was not lost - plaintiff did not show that allegedly spoliated data could not be restored or re-constructed by making discovery requests of other potential custodians of data); Alabama Aircraft Industries, Inc. v. Boeing Company, 319 F.R.D. 730, 742-43 (N.D. Alabama, Southern Division 2017) (ESI was “lost” under circumstances where the defendant could not even identify some of the lost data, other ESI that could be identified was nevertheless not preserved, and the allegedly spoliated data could not be restored or found by conducting additional discovery).

         District courts have inherent power to take action when a party destroys evidence, yet the Court must carefully determine whether a case-dispositive sanction is warranted, or a lesser remedy should be imposed. Valley Eng'rs v. Electric Eng'g Co., 158 F.3d 1051, 1057 (9th Cir. 1998). “Courts may sanction parties responsible for spoliation of evidence in three ways. First a court can instruct the jury that it may draw an inference adverse to the party or witness responsible for destroying the evidence. See Glover v BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993) […]. Second, a court can exclude witness testimony proffered by the party responsible for destroying the evidence and based on the destroyed evidence. See, Glover, 6. F.3d at 1329; Unigard Sec. Ins. Co. v. Lakewood Eng'g Mfg. Corp. 982 F.2d 363, 368 (9th Cir. 1992). Finally, a court may dismiss the claim of the party responsible for destroying the evidence.” UMG Recordings, Inc. v. Hummer Winblad Venture Partners (In re Napster, Inc. Copyright Litig.), 462 F.Supp.2d 1060 (N.D. Cal. 2006); Fed.R.Civ.P. 37(e).

         Dismissal or default is an appropriate sanction if a party acted deliberately, used deceptive practices, and thereby undermined the integrity of the judicial process. Leon v. IDX Sys. Corp.,464 F.3d 951, 958-59 (9th Cir. 2006). The District Court must make a finding that the party's acts were willful, the party was at fault, or there is a showing of bad faith. Id. And, the trial court must consider five factors when evaluating whether a case-dispositive sanction should be imposed: (1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring ...


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