In Worldplay, US, Inc. v. Haydon and Eunyt LLC, No. 17-cv-4179 (N.D. Ill. Nov. 14, 2018), the United States District Court for the Northern District of Illinois denied Plaintiff’s Motions for Sanctions on the grounds that Plaintiff had not suffered prejudice under Rule 37(e)(1) due to allegedly destroyed electronically stored information and that Defendants had not acted with requisite bad faith intent under Rule 37(e)(2).
Before the litigation commenced, Plaintiff Worldplay employed Defendant Haydon as an executive vice president. Plaintiff alleged that towards the end of Haydon’s employment, she began forming a separate company called Eunyt. After learning of Haydon’s plans, Plaintiff fired Haydon in a letter dated May 11, 2017, and warned Haydon to “locate and preserve” and not to “destroy, conceal or alter” documents relevant to the formation of Eunyt. Three weeks later, on June 1, 2017, Plaintiff Worldplay filed suit against Haydon and Eunyt for misappropriation of trade secrets and confidential information.
During discovery, two significant pieces of information came to light. First, Defendants had created an internet domain with e-mail addresses for Eunyt in March 2017 and then shut down the site around June 1, 2017. Second, in April 2017, Randy Standish, then an employee of Plaintiff, had been hired by Haydon to copy Haydon’s Worldplay e-mail account, containing twenty gigabytes of data, onto the Eunyt domain (which was then subsequently destroyed). Upon learning these facts, Plaintiff filed a Motion for Sanctions, arguing that Defendants had spoliated evidence.
In ruling on the motion, the court held that Plaintiff met the five prerequisites of Fed.R.Civ.P. 37(e)’s introductory clause. First, the information at issue is (“ESI”). Second, anticipated or actual litigation existed at the time of destruction. Third, due to the actual or anticipated litigation, the information should have been preserved. Fourth, the ESI was lost because a party failed to take reasonable steps to preserve it. Fifth, the lost ESI must be unable to be restored or replaced through additional discovery.
Having met the prerequisites of Rule 37(e), the court turned to the thrust of the plaintiff’s motion, which sought the most severe sanctions under Rule 37(e)(2), either an unfavorable jury instruction or a complete dismissal of the action. Having already established that the five prerequisites were met, the court stated that in order to impose the more severe sanctions, the court must find that the offending party acted “with the intent to deprive another party of the information’s use in the litigation.”
The intent prong requires the court to determine that Defendants acted “with the intent to deprive [Plaintiff Worldplay] of the information’s use in the litigation.” Fed.R.Civ.P. 37(e)(2). Plaintiff argued that Defendants intentionally shut down the Eunyt e-mail accounts containing the relevant ESI. The court rejected Plaintiff’s argument, stating that “it is not obvious, however, that an intent to shut down an e-mail account equates to an intent to ensure that the information on it is permanently deleted, such that it would never be accessible to anyone again. Nor is it clear, even assuming that Haydon intended to delete the information permanently, that she did so for the purpose of hiding adverse information.” The court further noted that Plaintiff’s motions lack any citation to case law that elaborates on what it means to destroy information with the intent to deprive another party of its use in the litigation, let alone establish that Defendants, in this case, possessed the requisite intent. As such, the court declined to order the severe sanctions under Rule 37(e)(2).