Volcan Grp., Inc. v. T-Mobile USA, Inc.

• Decision Date: 14 March 2012
• Docket Number: Case No. 2:10–cv–00711–RSM.
• Parties: VOLCAN GROUP, INC., d/b/a Netlogix, a California corporation, Plaintiff, v. T–MOBILE USA, INC., a Delaware corporation, as successor by merger to Omnipoint Communications, Inc., Defendant.
• Court: U.S. District Court — Western District of Washington

940 F.Supp.2d 1327

VOLCAN GROUP, INC., d/b/a Netlogix, a California corporation, Plaintiff,

v.T–MOBILE USA, INC., a Delaware corporation, as successor by merger to Omnipoint Communications, Inc., Defendant.

Case No. 2:10–cv–00711–RSM.

United States District Court,

W.D. Washington,

at Seattle.

March 14, 2012.

Dennis Michael Moran, William Arthur Keller, Moran Windes & Wong, Seattle, WA, for Plaintiff.

Cassandra L. Kennan, James C. Grant, Stephen M. Rummage, Davis Wright Tremaine, Michael E. Kipling, Kipling Law Group PLLC, Seattle, WA, for Defendant.

RICARDO S. MARTINEZ, District Judge.

This matter comes before the Court on Defendants' motion to dismiss as a sanction for Plaintiffs' spoliation of evidence. Dkt. # 58. The Court has reviewed the motion, Plaintiffs' response, Defendants' reply, Plaintiffs' supplemental response, Defendants' supplemental reply, along with additional supplemental briefing from each party. The Court also conducted an evidentiary hearing at which counsel examined a relevant witness, Dkt. 158, 160, in addition to hearing oral argument. Having carefully reviewed and considered all of the foregoing, in addition to all documents submitted in support thereof, the Court hereby GRANTS the motion and DISMISSES this action WITH PREJUDICE.

I. BACKGROUND

A. Legal Claims

This case involves a contract dispute between Plaintiff Volcan Group, Inc., d/b/a Netlogix (“Plaintiff”) and T–Mobile USA, Inc. (“Defendant”). Defendant hired Plaintiff to perform services in connection with the build out of Defendant's cellular phone network in California, and the parties entered into a written agreement covering that work. Although Plaintiff contends that Defendant breached the written agreement by failing to pay the amounts due thereunder, Defendant claims that the parties modified the written agreement with respect to pricing, and that pursuant to that modification Plaintiff has been paid all it was owed.

Specifically, even though the written agreement sets forth the amounts that would be due thereunder, the parties engaged in an extensive course of dealing that involved invoicing and payment for Plaintiff's services at rates that were lower than those specified in the contract. While Defendant claims that this course of dealing reflects an oral modification to the agreement, Plaintiff asserts that its agreement to charge lower rates was contingent upon Defendant awarding four additional contracts to it, and that Defendant's failure to do so warranted an upward adjustment to all of the bills previously issued.

On June 8, 2009, Defendant informed Plaintiff that it intended to terminate the agreement between the parties. Plaintiff responded by re-issuing invoices to Defendant at the higher rates specified in the agreement, asserting that Defendant had an outstanding balance, pursuant to the higher billing rates, of over $28 million. When Defendant refused to pay these re-issued invoices, Plaintiff initiated this action, asserting claims for breach of contract, promissory estoppel, and unjust enrichment.

B. Phone Calls Between Jason Dillon and Defendant's Counsel

On August 24, 2011, approximately a year and a half after Plaintiff commenced this action, Plaintiff's former Vice President, Jason Dillon (“Dillon”), contacted Defendant's counsel via email to inform them that he had recently resigned from Volcan, and to express his desire to speak with them regarding “the facts of the case.” Defendant's counsel scheduled a phone call with Dillon for the following day, and arranged for a court reporter to transcribe the call. Although Defendant's counsel informed Dillon that an “assistant” would be “writing stuff down” in lieu of counsel “taking notes,” Defendant's counsel did not explicitly inform him that a court reporter would be transcribing the conversation. During the call, which lasted approximately eighty-one (81) minutes, Dillon made various unsworn statements that, if true, demonstrate spoliation of evidence and other improper behavior.

The Court summarizes the most alarming portions of the call:

• Plaintiff's Financial Condition: T–Mobile employee Daniel Swaine told Plaintiff's principal, Scott Akrie, that T–Mobile would not award the contract at issue to a company that had less than $10–$20 million in assets. Although Plaintiff had “no money” at that time, Akrie and fellow Volcan employee Eric De Versa created “fake books to make it look like they were a bigger company.”

• The Initial Contract: Although Defendant initially told Plaintiff that it would not be awarded the contract at issue, Plaintiff ultimately secured the contract after delivering $7,500 to Swaine and fellow T–Mobile employee Jay Meyer. Dillon described the transaction in detail, including (1) Akrie's deposit of the money into Dillon's personal bank account, (2) Dillon's withdrawal of that money in cash, and (3) Dillon's subsequent meeting with Swaine and Meyer at a restaurant near Defendant's offices in Concord, CA, at which time Dillon “bought” the contract on Plaintiff's behalf.

• The Additional Contracts: The parties discussed entering into four additional contracts, and Swaine demanded that Plaintiff pay him an additional $25,000 to $30,000 in order to secure them. Although Dillon personally delivered $5,000 of this money to Swaine in order to secure one such contract, Defendant awarded it to another company. While Akrie and Dillon were in the process of discussing the possibility of additional payments to Swaine, Defendant terminated Swaine's employment and did not award Plaintiff any additional contracts.

• The Notebook: During Plaintiff's relationship with Defendant, Dillon created a set of handwritten notes reflecting, among other things, conversations with Swaine regarding the four additional contracts. At the direction of Akrie, Dillon copied certain information from those notes into a new notebook, and then threw away the old notes. Dillon told Defendant's counsel that Akrie “wanted nothing in [Dillon's notes] related to any other dealings other than what would support a lawsuit against T–Mobile,” and that Dillon therefore omitted from the new notebook any notes that hurt Plaintiff's case, while including in the new notebook additional notes that helped Plaintiff's case.

• Purged Emails: Akrie reviewed Plaintiff's electronic documents, including emails, prior to Plaintiff's production of such documents in this case. When Plaintiff eventually produced electronic documents, Dillon noticed that certain emails were not included. Dillon stated, for example, that he and Akrie exchanged “quite a few” emails regarding Swaine's demand for a kickback. Although Dillon inquired about those documents, he was told by others at Volcan that the emails in question were “not there” anymore. In addition, although Plaintiff used a third-party web hosting company (Go Daddy) to host its emails during the pendency of the contract, Akrie cancelled that account because he “didn't want anybody to go back [to Go Daddy] and track the emails.”

• California Computers: Through Craigslist, Akrie sold between three and eight computers used by Plaintiff in connection with its work for Defendant. Akrie sold those computers in October or November of 2009, after Plaintiff had begun contemplating a lawsuit against Defendant. Dillon stated that those computers, which were kept in Plaintiff's northern California office, contained relevant information.

• Maintenance of Separate Files; Merging of Files: Plaintiff maintained two separate sets of files in connection with the T–Mobile account: one “active” file based upon the revised (lower) prices, and a separate file based upon the original (higher) prices. After commencement of the lawsuit, and at Akrie's direction, Plaintiff “merged” the two sets of files and discarded documents reflecting the lower pricing.

• Agreement Regarding Litigation Proceeds: In June of 2009, Akrie offered Dillon “10 percent of the profit of this lawsuit” in exchange for his continued “support.”

• Miscellaneous:

* Dillon stated that Plaintiff began contemplating a lawsuit against Defendant in June of 2008.

* Dillon estimated that Plaintiff never performed any work with respect to half of the $28 million that Plaintiff seeks to recover in this case, and that invoices ostensibly reflecting such claims are “just made up.”

* Dillon stated that, during his employment with Volcan, he was coached to say things that were not true in connection with this lawsuit.

* In explaining why he had reached out to Defendant's counsel, Dillon stated that he “just felt it was best I call you guys and clear my conscience so you guys know truly what happened with everything. And, you know, Scott's going to be pissed, and I'm sure he's going to try to sue me, whatever, but he's already made a comment that if I contacted you guys, you know, that's going to be your choice.”

During the August 25 call, Dillon offered to provide Defendant's counsel with a written declaration regarding the various statements he had made. On September 1, 2011, Defendant's counsel provided Dillon with such a draft declaration. Dkt. # 62–15, Ex. FF.¹

Dillon and Defendant's counsel had a second phone call on September 16, 2011 that lasted approximately forty-five (45) minutes, and that call was also transcribed.² During the September 16 call, Dillon stated, among other things, (a) that although Meyer never promised Plaintiff contracts in exchange for money, he was nevertheless “supporting [Swaine's] bribery to us,” (b) that Defendant “definitely didn't get the full story” regarding the claims at issue in the case, and that Defendant “only got the parts that we were kind of coached on telling,” and (c) that Dillon and others were instructed to keep quiet regarding “documents and files and materials that [had been] thrown away,” Akrie's promise to pay Dillon a portion of the litigation proceeds, and the true state of Plaintiff's financial affairs.

During the September 16 call,...