CAROL E. JACKSON, District Judge.
This matter is before the Court on the motion of plaintiff American Builders & Contractors Supply Co., Inc. for sanctions against defendants Bernard Miller and Roofers Mart, Inc. for spoliation of evidence. Defendants oppose plaintiff's motion and the issues have been fully briefed.
Plaintiff is a national distributor of construction supplies. Defendant Miller was employed by plaintiff as manager of its Cape Girardeau, Missouri branch. Miller's employment was subject to a contract that restricted him from competing with plaintiff's business.
In October 2010, defendant Roofers Mart approached Miller about the possibility of coming to work for Roofers Mart. Roofers Mart is also a distributor of construction supplies and competes with plaintiff in the Cape Girardeau area. On January 21, 2011, Miller abruptly quit his job with plaintiff and immediately went to work for Roofers Mart as a manager in its Marion, Illinois location.
Prior to his resignation, Miller copied approximately 1,400 files from one of plaintiff's computers onto a portable flash drive which he took with him. On January 25, 2011, after learning that Miller had taken the files, plaintiff sent Miller a letter demanding the return of its proprietary information.
Plaintiff filed this lawsuit on February 2, 2011. On February 15, 2011, plaintiff filed a motion for a temporary restraining order to prevent Miller's use, transmission, or retention of its files. On February 22, 2011, the parties stipulated to the entry of a temporary restraining order requiring Miller to turn over all of plaintiff's proprietary information in his possession to his attorney, who would then return it to plaintiff's counsel.
After receiving the flash drive, plaintiff had it examined by computer forensic expert John Clingerman. Clingerman found that Miller had copied 1493 items, including pricing formulas and historical sales data, from plaintiff's computer to the thumb drive on January 10, 2011. He also found that seventy of these files had been accessed and/or modified between January 25, 2011 and February 10, 2011. Two of these files—identified as "/Stan's ABC/2010 Colors.xls" and "/Stans' ABC/!M.XLS"—were found to have been deleted. However, Clingerman was able to recover them. Clingerman was unable to determine from his examination of the flash drive whether the files had been printed or copied to another device.
At a deposition on July 26, 2011, plaintiff's counsel asked Miller about the flash drive and about his use of its contents. Plaintiff's counsel also informed Miller and his attorney that a formal request for electronically-stored information was forthcoming. In interrogatories submitted on August 10, 2011, plaintiff asked Miller to identify every device used to access the flash drive. Miller identified a personal laptop as the only device he had used to access the flash drive. However, he refused to produce the laptop, arguing that its hard drive could not contain any relevant information because he had recently reinstalled the operating system. Miller was ordered produce the laptop on November 28, 2011.
Plaintiff's computer expert, Clingerman, conducted a forensic analysis of Miller's laptop and found that the operating system had been reinstalled on July 28, 2011—two days after Miller's first deposition. He also determined that the laptop was not used again after the reinstallation. Clingerman opined that the reinstallation overwrote some—but not all—of the laptop's hard drive. This, according to Clingerman, "took away ABC Supply's ability to fully understand the extent of the use of the laptop computer prior to the reinstallation of the operating system and prohibited ABC Supply's ability to fully understand the access of the flash drive on the laptop computer." (Doc. #83-4 at p. 2).
In the portion of the hard drive that was not overwritten by the reinstallation, Clingerman was able to locate a fragment of an email chain regarding a vendor pricing arrangement that plaintiff had established for one of its customers. The pricing arrangement allowed the customer to purchase windows from a vendor at a special price. After Miller began working for Roofers Mart, a special pricing arrangement was established for the same customer allowing him to purchase windows from the same vendor, but this time through Roofers Mart. The emails, which are dated between January 28 and January 31, 2011, show that Miller received confirmation that the customer's new arrangement with Roofers Mart had been established.
At a second deposition on January 12, 2012, Miller testified that one of the reasons he reinstalled the operating system on his laptop was "[t]o get it to run better." [Doc. #83-5 at p. 72]. The other reasons for the reinstallation were "to insure that ABC could not later claim that Miller improperly retained copies of ABC's confidential information" and "so there could be no doubt that he would no longer have access to ABC's confidential information."
Plaintiff asks that the Court enter default judgment against Miller and Roofers Mart as a sanction for the loss of evidence caused by Miller's reinstallation of the laptop's operating system. In the alternative, plaintiff requests that the Court give an adverse inference instruction to the jury. Plaintiff also seeks an award of attorneys' fees and costs.
District courts have the inherent power to "fashion an appropriate sanction for conduct which abuses the judicial process."
A party seeking sanctions for spoliation bears the burden of showing prejudice resulting from an opposing party's breach of its duty to preserve relevant evidence within its possession or control.
"The requisite element of prejudice is satisfied by the nature of the evidence destroyed."
Miller's laptop was identified as the only device used to access the flash drive containing plaintiff's data. Due to Miller's reinstallation of the operating system, the portion of the laptop's hard drive that would show what was done with respect to the data was overwritten. As plaintiff's computer expert concluded, the reinstallation deprived plaintiff of the best—and perhaps only—way to conclusively determine whether and how plaintiff's data was used by Miller.
Defendants argue that plaintiff was not prejudiced because it could seek discovery from other sources that might be helpful in determining whether Miller printed, copied, accessed or transmitted plaintiff's files. As examples of these alternative sources, defendants point to a forensic examination of Roofers Mart's computer system, an examination of plaintiff's own computer system, and email data in the possession of Miller's or Roofers Mart's email providers. While it is theoretically possible that plaintiff could systematically eliminate many of the most likely avenues through which Miller would have used its files, this is beside the point. The alternative sources identified by defendants would not provide the same information—i.e., if and how Miller used plaintiff's confidential data—that could have been obtained from examination of the laptop before the reinstallation. Nor does the fact that plaintiff's computer expert was able to locate a fragment of a relevant email chain on the unallocated portion of the hard drive that was not overwritten diminish the prejudice resulting from those portions that were overwritten. The Court finds that plaintiff has demonstrated prejudice resulting from the loss of data caused by Miller's reinstallation of the laptop's hard drive.
"The ultimate focus for imposing sanctions for spoliation of evidence is the intentional destruction of evidence indicating a desire to suppress the truth."
Miller states that he reinstalled the operating system on his laptop so that he could be sure that he no longer possessed any of plaintiff's files. This explanation is indistinguishable from plaintiff's contention that the reinstallation was done so that plaintiff could not prove that Miller improperly used or possessed proprietary information.
The Court finds unpersuasive Miller's argument that he could not have purposefully destroyed relevant evidence because he did not know whether his laptop contained plaintiff's confidential data. Miller's suspicion that such data might be present was strong enough to prompt him to reinstall the hard drive. That same degree of suspicion should have compelled him to turn over the laptop without alteration.
Finally, this was not the first time Miller sought to delete electronic data before plaintiff had the opportunity examine it. Plaintiff's forensic expert was able to recover two files that had been deleted from the flash drive Miller used to store plaintiff's data. This deletion occurred on January 28, 2011—after Miller had received plaintiff's demand letter and had spoken with counsel, but before Miller turned over the flash drive to his attorney. Although plaintiff suffered no prejudice from the flash drive deletion, Miller's conduct in that instance is consistent with his conduct with respect to the laptop. The evidence establishes that Miller acted with the intention of suppressing the content of the laptop's hard drive.
In evaluating what sanctions are available to remedy spoliation, the Court looks at the culpability of the offending party and the timing of the actions that caused the evidence to become unavailable.
In choosing between the available sanctions, the Court "is not constrained to impose the least onerous sanction available, but may exercise its discretion to choose the most appropriate sanction under the circumstances."
Miller's conduct, even if done in bad faith, is not so egregious as to warrant the entry of default requested by plaintiff. "The sanction of striking pleadings should be used sparingly because in this system of justice `the opportunity to be heard is a litigant's most precious right.'"
The Court does find, however, that the imposition of a rebuttable adverse inference instruction is warranted to address the seriousness of Miller's conduct and to remedy the prejudice suffered by plaintiff. The loss of evidence here was not due to a routine retention policy but done on an ad hoc basis and in response to this suit.
"A permissive inference is subject to reasonable rebuttal."
The Court also finds that it is appropriate to require Miller to pay the attorneys' fees and costs incurred by plaintiff in connection with this motion for sanctions.
Plaintiff also requests that the Court impose sanctions against Roofers Mart for based on Miller's conduct that resulted in spoliation. It must be noted that there is no evidence that anyone employed by Roofers Mart (other than Miller) ever possessed or received the lost evidence, nor is there evidence that Roofers Mart knew of or directed Miller's reinstallation of the laptop's operating system.
As to whether Roofers Mart is vicariously liable for Miller's acts, however, the parties have not cited to, and the Court is unable to find, Eighth Circuit precedent addressing this issue. Other courts have applied general agency principals in determining whether spoliation by an employee could be imputed to the employer.
In Missouri, "an employer is liable under the theory of respondeat superior for damages attributable to the misconduct of an employee or agent acting within the course and scope of the employment or agency."
This same analysis was employed to determine whether an employer is liable for an employee's spoliation in
The Court finds that the spoliation at issue here cannot be imputed to Roofers Mart. The reinstallation was done on Miller's personal laptop and there is no evidence suggesting that Roofers Mart knew of or had control over the laptop at the time of the reinstallation. Further, it is evident from Miller's testimony that the reinstallation was done for his personal benefit—not for the benefit of Roofers Mart. Also, the reinstallation of the operating system of a personal computer does not strike the Court as naturally arising out of the "usual, customary and expected" activities associated with an individual's employment.
Further, whatever harm may have been done to plaintiff's case against Roofers Mart through Miller's spoliation is adequately addressed by the adverse inference instruction imposed against Miller. This is because, as a practical matter, the wrongful acts alleged against Miller—misappropriation of trade secrets and breach of noncompete covenants—are the sort that could be considered within the scope of his employment with Roofers Mart or extended to Roofers Mart through plaintiff's conspiracy and tortious interference claims.
Finally, the Court notes that the circumstances of this case make it distinguishable from
For the foregoing reasons,