Court Grants Motion for Terminating Sanctions Against Defendants for Intentional Spoliation: eDiscovery Case Law

by CloudNine

In Omnigen Research et. al. v. Wang et. al., No. 16-00268 (D. Oregon, May 23, 2017), Oregon District Judge Michael J. McShane granted the plaintiffs’ Motion for Terminating Spoliation Sanctions and agreed to issue an Order of Default Judgment in favor of the plaintiffs (while dismissing the defendants’ counterclaims) due to the defendants’ intentional destruction of evidence on several occasions.

Case Background

In this case (for breach of contract, intentional interference with economic relations, misappropriation of trade secrets, copyright infringement, false advertising and unfair competition, and breach of fiduciary duty filed against a former employee of the plaintiff, Yongqiang Wang), the plaintiffs alleged that in 2012, while still employed by the plaintiff, he stole trade secrets and created two rival businesses, including the defendant company Bioshen.  The plaintiffs, concerned in part about the possible destruction of evidence early in the case, filed a Motion for Preliminary Injunction, which was granted in May 2016, to force the defendants to “immediately produce to Plaintiffs all electronic media in their custody, possession or control for purposes of verifying that they do not contain Plaintiff’s confidential and/or copyrighted material.”

Eleven days later, the plaintiffs filed a Motion for Order to Show Cause because Wang had left for China without producing his laptop as required by the Preliminary Injunction. A hearing on the issue was held and, in addition to other requirements, the defendants were ordered to “download all of the contents of the computer in China on a portable hard drive and have it mailed to defense counsel within 7 days, and deliver any computers or portable storage data to defense counsel by 5/27/2016.”

The plaintiffs were required to seek court intervention regarding discovery on multiple occasions because of the failure of the defense to adequately respond to their requests for production.  Ultimately, the plaintiffs filed their Motion for Terminating Spoliation Sanctions on 3/3/2017, with oral arguments heard on the motion on 4/18/2017.

Judge’s Ruling

Before detailing all of the instances where the defendants “intentionally” deleted or destroyed evidence, Judge McShane stated:

“As stated during oral arguments on 4/18/2017, the Court finds the destruction of evidence by the defendants was intentional. The plaintiffs’ Motion for Terminating Spoliation Sanctions describes in full detail the many ways the defendants intentionally hid or destroyed evidence in this case. In summary, Plaintiffs allege that the defendants made their desktop computer unavailable by “donating” it to Goodwill, that the defendants intentionally deleted thousands of documents from Wang’s personal Lenovo computer, that the defendants intentionally deleted and refused to produce relevant emails from multiple email accounts, and that the defendants intentionally destroyed metadata. These actions have deprived the Plaintiffs of evidence central to their case and undermined the Court’s ability to enter a judgment based on the evidence. For these reasons, default judgment and terminating sanctions for the spoliation of evidence is warranted FRCP 37(b)(2), Rule 37(e), and the Court’s inherent authority to sanction abusive litigation practices.”

As a result, Judge McShane granted the plaintiffs’ Motion for Terminating Spoliation Sanctions and agreed to issue an Order of Default Judgment in favor of the plaintiffs while dismissing the defendants’ counterclaims.

So, what do you think?  With the new Rule 37(e) (since December 2015), do you think it takes this level of intent to obtain significant sanctions?

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