Virginia Lawyers Weekly VA Lawyers Weekly
Where a former employee accused of improperly competing with his employer destroyed electronic documents that he had an obligation to preserve, and the documents could not be restored or replaced, an adverse inference instruction will be given to the jury.
Background
GMS Industrial Supply Inc. is an industrial sales company. GMS hired Westly L. Greer as a sales agent in 2011. In June 2017, Greer and another sales agent, Gregory Spires, started a new company, G&S Supply LLC, through which they sold standard industrial products to GMS customers.
GMS has filed a multi-count complaint against Greer, G&S and others. GMS now seeks to impose sanctions against G&S and Greer for the alleged spoliation of evidence housed on Greer’s laptop, desktop and tablet. Defendants have filed their own motion for sanctions.
Timing
Defendants argue that plaintiff’s spoliation motion was untimely filed. While plaintiff’s instant motion is governed by Rule 37, it is not a discovery motion as argued by defendants. It is important to note “that spoliation sanctions motions often follow only where extensive ESI recovery efforts have failed, or after forensic review gives the movant a much better idea of the quantity and nature of unproduced, deleted ESI.” Not only did plaintiff attempt to gather pertinent information via written discovery requests, it was also forced to wait until Greer’s deposition to again ask Greer about the allegedly incorrect tablet password.
Plaintiff filed the instant motion weeks before the dispositive motion deadline and months before trial, and additionally, the relief sought will not entail reopening discovery or delaying trial. As such, the Court finds that plaintiff’s spoliation motion is timely.
Merits
A movant must establish four threshold requirements “before a court decides if any spoliation sanction is appropriate: (1) ESI should have been preserved; (2) ESI was lost; (3) the loss was due to a party’s failure to take reasonable steps to preserve the ESI; and (4) the ESI cannot be restored or replaced through additional discovery.” Defendants agree that plaintiff can establish the first and third elements.
Regarding the second element, plaintiff had Greer’s laptop forensically examined, issued a subpoena to the Defense Logistics Agency or DLA, and sent discovery requests encompassing the documents in an effort to recover what Greer destroyed. It is apparent that plaintiff has made a “good-faith attempt” to explore alternatives for replacing or restoring the destroyed DLA documents. Additionally the plaintiff’s forensic expert was unable to restore the names of 481 files destroyed by Greer. As such, the court finds that the DLA documents and the 481 permanently deleted files are both lost and irreplaceable.
Greer’s actions demonstrate an intent to deprive plaintiff of use of the information stored on his desktop. Despite the clear instructions to preserve potentially relevant documents and information — as discovered by the forensic examination conducted by BDO — on April 19, 2019, Greer proceeded to download File Shredder onto his desktop and destroyed all of the user-created files.
Plaintiff requests that the court also find G&S liable for Greer’s spoliation. Greer is a partial owner of G&S and was employed by G&S at the time of the spoliation. Greer also used the plaintiff-issued laptop for work related to G&S. Because the laptop was clearly used in the course of his employment with G&S, and in “furtherance of the master’s business,” the court finds that Greer was an agent of G&S at the time of the spoliation. As such, G&S is also liable for Greer’s spoliation.
The court finds that Greer’s blatant and intentional disregard for his obligation to preserve ESI on his desktop warrants an adverse inference instruction. The court further instructs that Greer and G&S shall pay plaintiff’s reasonable attorneys’ fees and costs incurred in preparing its motion for sanctions.
Defendant’s motion
Defendants claim that plaintiff failed to make a reasonable inquiry to determine that the complaint “stood well-grounded in fact and was warranted by existing law.” However, defendants’ claim violates Rule 11’s safe-harbor provision. Defendants’ failure to comply with the procedural requirements of Rule 11 “precludes the imposition of the requested sanctions.”
The court finds that plaintiff engaged in a reasonable and adequate investigation before filing its complaint. Furthermore, the court finds that plaintiff’s messages to defendants airing grievances regarding defendants’ conduct does not evidence an improper purpose to the extent required for Rule 11 sanctions.
Plaintiff’s motion for sanctions against Greer and G&S granted. Defendants’ motion for sanctions denied.
GMS Industrial Supply Inc. v. G&S Supply LLC, Case No. 2:19-cv-324, March 22, 2022. EDVA at Norfolk (Young). VLW 022-3-137. 21 pp.
