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Default Judgment Entered as Sanction for Intentional Spoliation of ESI

Posted on June 9th, 2017

sanction for intentional spoliation of esiIn Omnigen Research et. al. v. Wang et. al., Case No. 16-00268 (D. Oregon, May 23, 2017), Plaintiffs sued Defendants 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. Defendants brought counterclaims for promissory estoppel and unjust enrichment, bringing in a Third Party Defendant, Neil Forsberg.

Plaintiff Omnigen was formed by Forsberg and partner Steve Puntenney in 2002; the company was sold to Plaintiff Prince Agri in 2012. Forsberg was Defendant Wang’s professor at Oregon State University; Wang worked as assistant professor in Forsberg’s lab after obtaining his PhD until 2005, when he was hired to work at Omnigen. Plaintiffs allege that in 2012, while still employed by Omnigen, he stole trade secrets and created two rival businesses, including Defendant Bioshen.

Early in the case, Plaintiffs filed a motion for preliminary injunction to require Defendants to preserve all material and provide such material to Plaintiffs, requesting the Defendants produce all electronic media. The court granted the request, but Plaintiffs requested a Show Cause less than two weeks later after discovering that Wang had gone to China without producing his laptop. Defendants were ordered to download all the contents of the laptop to a portable hard drive and have it mailed to counsel by May 27, 2016. Numerous further discovery disputes plagued the case, and in March 2017, Plaintiffs filed a Motion for Sanctions requesting default judgment against Defendants as sanction for intentional spoliation of ESI.

The court found that on July 14, 2015, they sent Defendants a cease and desist letter demanding access to Defendants’ ESI; however, on July 22, 2015, Wang intentionally deleted over 200 files from his laptop. After Wang took his laptop to China in spite of the court’s May 2016 order, he did not send the laptop to Plaintiffs as required by the order, complaining that Chinese law prohibited its shipment. Instead, he transferred the files to zip drives and emailed them. The computer itself was not inspected by Plaintiffs until June 2016, at which time Plaintiffs discovered that over 4,000 files had been deleted therefrom after the entry of the court’s order.

The court also found that Defendant Zheng intentionally deleted emails from her iPad and that Wang intentionally deleted files and emails linking him to the new Chinese company he allegedly formed. Finally, the court found that Wang deleted the original file with his employment agreement, which he alleged was false, and thus the metadata showing any alterations was lost. Defendants also donated their home desktop computer to Goodwill after the court’s orders and the preservation letters received giving the explanation that the computer was for their son; however, their son was only three years old when the computer was purchased.

The court found that Defendants’ spoliation was intentional and done in bad faith, and therefore, terminating sanctions were appropriate. Judgment was entered in favor of Plaintiffs and dismissed Defendants’ counterclaims.

ILS – Plaintiff eDiscovery Experts

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