We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.
In Rimkus Consulting Group, Inc., 688 F. Supp. 2d 598, a case decided in February 2010, an executive left his company with a few other employees to start a competing enterprise. Initially, the ex-employees sought a declaratory judgment that their noncompetition and nonsolicitation agreements with their former employer, Rimkus Consulting Group, were unenforceable. Rimkus then sued the ex-employees for breach of these agreements, as well as use of trade secrets and proprietary information. In this action, Rimkus alleged that the defendants (the ex-employees) spoliated evidence, and moved for sanctions against them.
The spoliation allegations included “destroying evidence, failing to preserve evidence after a duty to do so had arisen, lying under oath, failing to comply with court orders, and significantly delaying or failing to produce requested discovery.”
In a lengthy and meticulously detailed opinion, Judge Rosenthal addressed the “grave” concern that spoliation and sanctions motions essentially threaten to derail the civil discovery process. Judge Rosenthal, in the context of explaining the framework to be applied in examining spoliation allegations, stressed that (a) there are no litmus tests or “negligence per se” rules that can be quickly applied in this area, and (b) what a party must do to preserve information is proportional to the case at hand:
[A]pplying [the general rules regarding preservation] to determine when a duty to preserve arises in a particular case and the extent of that duty requires careful analysis of the specific facts and circumstances. It can be difficult to draw bright-line distinctions between acceptable and unacceptable conduct in preserving information and in conducting discovery, either prospectively or with the benefit (and distortion) of hindsight. Whether preservation or discovery conduct is acceptable in a case depends on what is reasonable, and that in turn depends on whether what was done—or not done—was proportional to that case and consistent with clearly established applicable standards. FN 8 As Judge Scheindlin pointed out in Pension Committee, that analysis depends heavily on the facts and circumstances of each case and cannot be reduced to a generalized checklist of what is acceptable or unacceptable.
Id. at 613 (emphasis and footnote added)(footnote 8 in original text cited THE SEDONA PRINCIPLES: SECOND EDITION, BEST PRACTICES RECOMMENDATIONS & PRINCIPLES FOR ADDRESSING ELECTRONIC DOCUMENT PRODUCTION 17 cmt. 2.b. (2007) (“Electronic discovery burdens should be proportional to the amount in controversy and the nature of the case. Otherwise, transaction costs due to electronic discovery will overwhelm the ability to resolve disputes fairly in litigation.”)).
Before proceeding to the remainder of the opinion, Judge Rosenthal also recognized that “sanctions (as opposed to other remedial steps) require some degree of culpability.” Id.