Rimkus Consulting Group, Inc. v. Cammarata

• Decision Date: 19 February 2010
• Docket Number: Civil Action No. H-07-0405.
• Parties: RIMKUS CONSULTING GROUP, INC., Plaintiff, v. Nickie G. CAMMARATA, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

688 F.Supp.2d 598

RIMKUS CONSULTING GROUP, INC., Plaintiff, v. Nickie G. CAMMARATA, et al., Defendants.

Civil Action No. H-07-0405.

United States District Court, S.D. Texas, Houston Division.

February 19, 2010.

David Allen Ward, Jr., The Ward Law Firm, The Woodlands, TX, for Plaintiff.

Larry E. Demmons, Taggart Morton Ogden Staub, New Orleans, LA, for Defendants.

MEMORANDUM AND OPINION

LEE H. ROSENTHAL, District Judge.

Spoliation of evidence—particularly of electronically stored information—has assumed a level of importance in litigation that raises grave concerns. Spoliation allegations and sanctions motions distract from the merits of a case, add costs to discovery, and delay resolution. The frequency of spoliation allegations may lead to decisions about preservation based more on fear of potential future sanctions than on reasonable need for information. Much of the recent case law on sanctions for spoliation has focused on failures by litigants and their lawyers to take adequate steps to preserve and collect information in discovery.¹ The spoliation allegations in the present case are different. They are allegations of willful misconduct: the intentional destruction of emails and other electronic information at a time when they were known to be relevant to anticipated or pending litigation. The alleged spoliators are the plaintiffs in an earlier-filed, related case and the defendants in this case. The allegations include that these parties—referred to in this opinion as the defendants—concealed and delayed providing information in discovery that would have revealed their spoliation. The case law recognizes that such conduct is harmful in ways that extend beyond the parties' interests and can justify severe sanctions.²

Given the nature of the allegations, it is not surprising that the past year of discovery in this case has focused on spoliation. The extensive record includes evidence that the defendants intentionally deleted some emails and attachments after there was a duty to preserve them. That duty arose because the defendants were about to file the related lawsuit in which they were the plaintiffs. The individuals who deleted the information testified that they did so for reasons unrelated to the litigation. But the individuals gave inconsistent testimony about these reasons and some of the testimony was not supported by other evidence. The record also includes evidence of efforts to conceal or delay revealing that emails and attachments had been deleted. There is sufficient evidence from which a reasonable jury could find that emails and attachments were intentionally deleted to prevent their use in anticipated or pending litigation.

The record also shows that much of what was deleted is no longer available. But some of the deleted emails were recovered from other sources. While some of the recovered deleted emails were adverse to the defendants' positions in this litigation, some were favorable to the defendants. The record also shows that despite the deletions of emails subject to a preservation duty, there is extensive evidence available to the plaintiff to prosecute its claims and respond to the defenses. These and other factors discussed in more detail below lead to the conclusion that the most severe sanctions of entering judgment, striking pleadings, or imposing issue preclusion are not warranted. Instead, the appropriate sanction is to allow the jury to hear evidence of the defendants' conduct-including deleting emails and attachments and providing inaccurate or inconsistent testimony about them-and to give the jury a form of adverse inference instruction. The instruction will inform the jury that if it finds that the defendants intentionally deleted evidence to prevent its use in anticipated or pending litigation, the jury may, but is not required to, infer that the lost evidence would have been unfavorable to the defendants. In addition, the plaintiff will be awarded the fees and costs it reasonably incurred in identifying and revealing the spoliation and in litigating the consequences.

The opinion first sets out the pending motions. Before analyzing the spoliation allegations, related sanctions motions, and the summary judgment motions (which are also impacted by the spoliation allegations), the opinion sets out some of the analytical issues that spoliation sanctions raise. The relevant factual and procedural history is then set out and the evidence on breach of the duty to preserve, the degree of culpability, relevance, and prejudice is examined. The opinion then analyzes the evidence to determine the appropriate response.

The defendants' motion for summary judgment based on claim and issue preclusion arising from the related, earlier-filed, state-law case are then analyzed in detail. That motion is denied in part because of the spoliation and withholding of evidence relevant to that case. Finally, the opinion examines the parties' cross-motions for summary judgment on the defendants' counterclaims for attorneys' fees.

The opinion results in narrowing and defining the issues to be tried. A pretrial conference is set for February 26, 2010, at 10:00 a.m. to set a schedule for completing any remaining pretrial work and a trial date.

I. The Pending Motions

In November 2006, Rimkus Consulting Group, Inc. ("Rimkus") was sued in Louisiana state court by Nickie G. Cammarata and Gary Bell, who had just resigned from the Rimkus office in Louisiana. Cammarata, Bell, and other ex-Rimkus employees had begun a new company, U.S. Forensic, L.L.C., to compete with Rimkus in offering investigative and forensic engineering services primarily for insurance disputes and litigation. In the Louisiana suit, Cammarata and Bell sought a declaratory judgment that the forum-selection, choice-of-law, noncompetition, and nonsolicitation provisions in agreements they had signed with Rimkus were unenforceable. In January and February 2007, Rimkus sued Cammarata and Bell in separate suits in Texas, alleging that they breached the noncompetition and nonsolicitation covenants in their written employment agreements and that they used Rimkus's trade secrets and proprietary information in setting up and operating U.S. Forensic. U.S. Forensic is a defendant in the Cammarata case. The Texas Cammarata and Bell cases were consolidated in this court. (Docket Entry Nos. 211, 216).

Two sets of motions are pending.³ One set is based on Rimkus's allegations that the defendants spoliated evidence. Rimkus moves for sanctions against the defendants and their counsel and asks that they be held in contempt. (Docket Entry Nos. 313, 314). Rimkus alleges that the defendants and their counsel "conspiratorially engaged" in "wholesale discovery abuse" by 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. (Docket Entry No. 313 at 1). Rimkus asks this court to strike the defendants' pleadings and to enter a default judgment against them or give an adverse inference jury instruction. Rimkus also seeks monetary sanctions in the form of the costs and attorneys' fees it incurred because of the defendants' discovery abuses.

In response, the defendants acknowledge that they did not preserve "some arguably relevant emails" but argue that Rimkus cannot show prejudice because the missing emails "would be merely cumulative of the evidence already produced." (Docket Entry No. 345 at 6). Rimkus filed supplements to its motions for contempt and sanctions, (Docket Entry Nos. 342, 343, 410, 414, 429, 431, 439, 445), and the defendants responded, (Docket Entry No. 350, 435).⁴

The second set of motions is based on the defendants' assertion that they are entitled to summary judgment on the merits based on the preclusive effects of the judgment and rulings they obtained in the lawsuit they filed in the Louisiana state court before Rimkus sued them in Texas. (Docket Entry No. 309). The defendants argue that the claims in this Texas suit should be dismissed under res judicata, or in the alternative, that they are entitled to judgment as a matter of law on Rimkus's claims for misappropriation of trade secrets, tortious interference, unfair competition, civil conspiracy, disparagement, and breach of fiduciary duty. (Id.). Cammarata also moved for summary judgment on his counterclaim for attorneys' fees under Texas Business & Commerce Code § 15.51(c). (Id.). Rimkus responded, (Docket Entry Nos. 321, 324), the defendants replied, (Docket Entry No. 349), Rimkus filed a surreply, (Docket Entry No. 353), and several supplemental responses, (Docket Entry Nos. 362, 374, 394, 410, 429, 439, 445), and the defendants filed supplemental replies, (Docket Entry Nos. 376, 377). Rimkus argues that preclusion does not apply and that the summary judgment evidence reveals multiple disputed fact issues that preclude summary judgment on the merits of its claims.

Rimkus moved for partial summary judgment on the defendants' counterclaims for attorneys' fees under Texas Business & Commerce Code § 15.51(c). (Docket Entry Nos. 302, 305). The defendants responded, (Docket Entry Nos. 317, 322), and Rimkus replied, (Docket Entry No. 352). Rimkus also moved to extend the pretrial motions deadline, asserting that an extension is warranted because discovery is incomplete. (Docket Entry No. 306). The defendants responded, (Docket Entry No. 323), and Rimkus replied, (Docket Entry No. 351).

Both sets of motions are addressed in this memorandum and opinion. Based on a careful review of the pleadings; the motions, responses, and replies; the parties' submissions; the arguments of counsel; and the applicable law, this court grants in part and denies in part Rimkus's motions for sanctions. An adverse inference instruction on the deletion of emails and attachments will be given to the jury at trial. The motion for contempt is...