World Courier v. Barone, 2007 WL 1119196 (N.D. Cal. Apr. 16, 2007)
In this misappropriation of trade secrets case, plaintiff moved for sanctions for spoliation of evidence based upon the admitted destruction of a hard drive containing a copy of plaintiff’s data by defendant Barone's husband, Jay Barone. Plaintiff sought an adverse inference instruction and monetary sanctions consisting of compensation for the time and expense involved in the forensic examination of computer files, the time and costs associated with developing deposition testimony and document discovery, and attorney's fees associated with litigating the motion. The court granted in part and deferred in part the motion.
The court rejected defendants’ argument that they could not be sanctioned because the spoliator, Mr. Barone, was not a party to the action. The court stated that the argument lacked merit because it overlooked a party’s affirmative duty to preserve evidence. The court stated the duty to preserve extends to evidence not directly within the party's custody or control so long as the party has access to or indirect control over such evidence. The court found:
Here, the record indicates that while Jay Barone destroyed the hard drive, Defendant Doneen Barone was in regular contact with her husband about this matter during the relevant time period and the hard drive was kept at the Barone residence. Indeed, it is difficult to imagine a scenario in which a husband would secretly create a copy of, and subsequently destroy, a hard drive relating to his spouse's pending legal matters and professional career without any knowledge, support or involvement of his wife. As such, Defendant Barone at least had access to or maintained indirect control over the hard drive, and therefore she had an affirmative duty to preserve it.
The court observed that several district courts in California had adopted the Second Circuit’s three-part test to decide whether the specific sanction of an adverse inference instruction is appropriate. Citing Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 105 (2d Cir. 2002), the court stated: “This test requires that a party seeking such an instruction establish that (1) the party having control over the evidence had an obligation to preserve it; (2) the records were destroyed with a culpable state of mind; and (3) the destroyed evidence was relevant to the party's claim or defense.”
The court found that plaintiff had established each element and that an adverse inference instruction was appropriate. Regarding culpability, the court found that defendant Barone “was at least negligent, and more likely knowingly willful, in failing to prevent the spoliation of relevant evidence by her husband.” However, because the record was not fully developed, the court deferred ruling on the specific terms of the instruction and invited plaintiff to submit a proposed instruction when it submitted its other proposed jury instructions to the court before trial.
The court also deferred ruling on plaintiff’s request for monetary sanctions until trial, “so that the Court may better evaluate the level of bad faith conduct at issue in this case.” It directed plaintiff to submit a declaration prior to trial as to the precise amount of monetary sanctions it sought to recover.