CACI, Inc. - Fed. v. Ngo (In re Ngo)

• Decision Date: 02 July 2021
• Docket Number: Case No. 20-12224-BFK,Adversary Proceeding No. 21-01011-BFK
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re: BAO-TRAN XUAN NGO, Debtor. CACI, INC. - FEDERAL, Plaintiff, v. BAO-TRAN XUAN NGO, Defendant.

In re: BAO-TRAN XUAN NGO, Debtor.CACI, INC. - FEDERAL, Plaintiff, v. BAO-TRAN XUAN NGO, Defendant.

Case No. 20-12224-BFK

Adversary Proceeding No. 21-01011-BFK

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA Alexandria Division

July 2, 2021

Chapter 7

MEMORANDUM OPINION

This adversary proceeding involves the dischargeability of legal fees and costs incurred by the Plaintiff, CACI, Inc. - Federal ("CACI"), in pre-petition arbitration proceedings in which the Defendant, Bao-Tran Xuan Ngo ("Ms. Ngo"), was found to have misappropriated CACI's trade secrets. Specifically, the matter comes before the Court on the Defendant's Motion to Dismiss the Complaint and on the Plaintiff's Motion for Summary Judgment. Docket Nos. 7, 12. The Plaintiff's Motion for Summary Judgment included its Opposition to the Defendant's Motion to Dismiss. Docket No. 12. The Defendant filed an Opposition to the Plaintiff's Summary Judgment Motion. Docket No. 17. The Plaintiff filed a Reply Memorandum. Docket No. 18. The Court heard the parties' arguments on May 4, 2021. For the reasons stated below, the Court will grant the Plaintiff's Motion for Summary Judgment and will deny the Defendant's Motion to Dismiss.

Findings of Fact

The Court finds that the following facts are not genuinely in dispute.

A. Ms. Ngo's Employment with CACI.

1. Ms. Ngo is an individual residing in Loudoun County, Virginia.

2. In October 2014, Ms. Ngo accepted a position as a Director with CACI, a large government contracting firm with offices in Northern Virginia. Pl. Ex. A at 6.¹

3. At the time she accepted her employment with CACI, Ms. Ngo entered into an Employment Agreement. Pl. Ex. D. The Employment Agreement provided in part:

My Duties as a CACI Employee: Fiduciary Duties. I understand that as an employee the law places upon me certain fiduciary responsibilities to CACI including, the duty to place the interests of CACI and its shareholders above my own personal interest in any case where they might conflict. I will fully perform my fiduciary responsibilities to CACI as required by law both during and after the period of my employment.

Id. at 3.

4. In May 2017, Ms. Ngo was appointed as Division Vice President, Secure Tactical Communications. Pl. Ex. A at 6.

5. On August 11, 2017, CACI terminated Ms. Ngo's employment. Id. at 9.

B. The District Court Action.

6. On September 5, 2017, CACI filed a Complaint against Ms. Ngo in the U.S. District Court for the Eastern District of Virginia, alleging the misappropriation of its tradesecrets and seeking monetary and injunctive relief. CACI, Inc. - Federal v. Ngo, 1:17-cv-00988-CMH-MSN ("the District Court action").

7. The District Court entered a Temporary Restraining Order at CACI's request, enjoining Ms. Ngo from "accessing, using, copying, divulging, disseminating, disclosing, altering, destroying or deleting" any trade secrets. Id., Docket No. 14.

8. The District Court entered a Preliminary Injunction against Ms. Ngo on October 24, 2017. Id., Docket No. 54.

9. Ms. Ngo, who was represented by counsel, filed a motion to dismiss the Complaint, or in the alternative, to compel arbitration. Id., Docket No. 51.

10. The District Court stayed the case pending arbitration on November 17, 2017. Id., Docket No. 58.

C. The Arbitration Proceeding.

11. CACI then instituted arbitration proceedings against Ms. Ngo with the American Arbitration Association. CACI, Inc. - Federal v. Ngo, Case No. 01-18-0001-0633.

12. Ms. Ngo was represented by counsel throughout the arbitration proceedings until her counsel withdrew in April 2019.

13. The Arbitrator conducted a three-day evidentiary hearing on June 10, 11, and 12, 2019, which Ms. Ngo did not attend.

14. On September 9, 2019, the Arbitrator issued an Interim Award. Pl. Ex. A ("the Interim Award").

15. In the Interim Award, totaling 96 pages, the Arbitrator made the following factual findings:²

• Ms. Ngo was employed in "senior positions" with CACI, including on federal contracts involving classified or sensitive information. Id. at 1.

• She worked at the "highest levels of the company." Id. at 6-7.

• On August 7, 2017, CACI placed Ms. Ngo on administrative leave. The company terminated her employment on August 11, 2017. Id. at 9.

• Ms. Ngo transferred to herself a substantial amount of internal information, most of which was labeled "CACI Proprietary Information." Id. at 2.

• While CACI was moving for a Preliminary Injunction in the District Court, and while the parties were negotiating the terms of that Injunction, Ms. Ngo applied the PrivaZer and Secure Eraser programs to her laptop. Id. at 13.

• She later used the programs USB Oblivion, PrivaZer, Secure Eraser, Shellbag Analyzer & Cleaner and PrivaZer Remover. Id. at 15, 60-69.

• She also downloaded the information at issue on to two portable hard drives, which she kept in a safe-deposit box at Wells Fargo bank. Id. at 23, 89.

• In April 2019, Ms. Ngo's counsel withdrew from the arbitration proceedings. She did not participate in the arbitration thereafter. Id. at 24, 26.

• The information transferred by Ms. Ngo constituted trade secrets within the meaning of the Defend Trade Secrets Act (DTSA) and the Virginia Uniform Trade Secrets Act (VUTSA). Id. at 32, 41, 50. Further, the information had independent economic value, actual or potential, from not being generally known. Id. at 41.

• CACI made reasonable efforts to keep the information secret. Id. at 35.

• Ms. Ngo acquired the information by improper means, including the breach of her Employment Agreement. Id. at 39-40.

• Ms. Ngo's retention of the trade secrets violated her Employment Agreement, as well as her fiduciary duties to the company. Id. at 51.

• Ms. Ngo had a duty to preserve the information. Id. at 57-59.

• Ms. Ngo destroyed and altered the information "with the intent to deprive CACI of metadata and other information critical [to] the resolution of central issues in [the] arbitration [and] she acted with the intent to deprive CACI of this information's use in the civil action and in [the] arbitration." Id. at 60. Ms. Ngo "acted with the intent to deprive CACI of the use of information she should have preserved." Id. at 70-71.³

• By adverse inference, Ms. Ngo "intentionally targeted the electronic information stored on her computer comprising CACI's trade secrets by using this information [for] her own purposes as a professional in the competitive field of government contracting in the communications and intelligence community." Id. at 78-79.

• There was, on the other hand, no evidence that Ms. Ngo gained any financial benefit from her acquisition of CACI's trade secrets. Id. at 82.

• Ms. Ngo's conduct demonstrated "willfulness." Id. at 86.⁴

• Ms. Ngo's undisclosed copying of her computer, compounded by her lack of candor about it, "strongly bespeaks an intention to cause injury or harm to CACI." Id. at 92.

• Ms. Ngo's keeping secret copies of the information on the portable drives "shows an intent to cause injury or harm." Id. at 93.

• "Ms. Ngo's misappropriation of CACI's trade secrets was done willfully and maliciously." Id. at 93.

16. The Arbitrator concluded, among other things, in the Interim Award:

• "Ms. Ngo's misappropriation of the 24 trade secrets . . . was willful and malicious within the meaning of the DTSA and the VUTSA." Id. at 95.

• "Ms. Ngo breached her Employment Agreement with CACI and her fiduciary duties to CACI by failing to return to CACI at the end of her employment the Confidential Information of CACI comprising the 24 trade secrets. . . ." Id. at 96.

• CACI was entitled to an award of attorney's fees and costs "for willful and malicious misappropriation, as provided by the DTSA and the VUTSA. . . ." Id.

• CACI also was entitled to an award of attorney's fees and costs "incurred as a result of Ms. Ngo's intentional deprivation of CACI of use in the arbitration of electronically stored information that Ms. Ngo should have preserved. . . ." Id.

On February 21, 2020, the Arbitrator issued a Final Award. Pl. Ex. B ("the Final Award").

18. In the Final Award the Arbitrator made the following factual findings.

• Ms. Ngo's continuing possession and control of CACI's trade secrets caused CACI to suffer irreparable injury. Id. at 8-9.

• CACI demonstrated that the remedies available at law were inadequate. Id. at 9.

• The balance of hardships favored CACI. Id. at 11.

• The public interest weighed in favor of a permanent injunction. Id. at 12.

• CACI was entitled to an award of attorney's fees and costs, both as a result of Ms. Ngo's misappropriation of CACI's trade secrets and as a result of her spoliation of the evidence. Id. at 13-14.

19. The Arbitrator awarded the following relief in the Final Award:

• Ms. Ngo shall pay $683,845.70 in attorneys' fees to CACI within 14 days of the Final Award. Id. at 42.

• Ms. Ngo also shall pay $67,022.37 in expenses to CACI within 14 days of the Final Award. Id.

• Ms. Ngo also shall pay $2,940.75 in costs to CACI within 14 days of the Final Award. Id.

• A Permanent Injunction prohibiting Ms. Ngo from "[d]isclosing, using, altering or copying, directly or indirectly," and from "[d]estroying, altering or otherwise failing to preserve" all of CACI's trade secrets. Id. at 43-44.

• A Mandatory Injunction requiring Ms. Ngo to return to CACI all of its trade secrets. Id. at 44-45.

D. The District Court Confirms the Arbitration Award.

20. On June 12, 2020, the District Court entered an Order lifting the stay that it previously imposed and confirmed the Arbitration Award. Civil Action No. 1:17-cv-00988-CMH-MSN, Docket No. 83.

21. CACI issued post-judgment Interrogatories and Requests for Production of Documents in Aid of Execution to Ms. Ngo. Id. at 85.

22. On September 18, 2020, the District Court entered an Order granting a Motion to Compel filed by CACI. Id., Docket No. 90.

23. On October 9, 2020, CACI filed a Motion for an Order to Show Cause and for Civil Contempt. Id., Docket Nos. 91, 92.

E. Ms. Ngo Files for Bankruptcy.

24. On October 3, 2020, Ms. Ngo...