Clearone Communications, Inc. v. Chiang, 2008 WL 704228 (D. Utah Mar. 10, 2008)
In this case involving claims of misappropriation of trade secrets, breach of contract and conversion, plaintiff sought sanctions for two claimed wrongs: (1) defendants’ belated production of, and misrepresentations about, source code complete with developer comments; and (2) defendants’ failure to produce “smoking gun” email, which was produced by another party who was the recipient of the email.
The so-called “smoking gun” email was written by defendant Lonny Bowers on September 5, 2005. Bowers was one of the founders and principals of defendant WideBand. The email was only discovered in documents produced by defendant Biamp, the recipient of the email, not in any discovery from the WideBand defendants. The WideBand defendants explained that the computer system used by Bowers did not retain copies of email sent by Bowers. On this point, the court observed:
For any business this is a significant irregularity; almost unimaginable for a technology company; and even more unlikely for a person of Bowers’ importance in such a company. Nonetheless, it does not appear that the September 5, 2005, email was withheld by WideBand Defendants — they did not have any copies of emails sent by Bowers.
The court granted sanctions in the form of an adverse inference instruction and monetary sanctions for the belated production of source code and defendant Yang’s misrepresentations about the existence of other versions of the source code. However, the court found that sanctions were not warranted for defendants’ failure to produce the “smoking gun” email:
WideBand Solutions, Inc., did not maintain an email storage system that would retain a copy of the September 5, 2005 email. No evidence suggests that this was done in bad faith, but is rather the effect of design of the email system WideBand employed. However questionable the design may be, the effect is that the routine operation of the WideBand computer system did not capture the email. No sanction is needed on this point, as ClearOne is free to establish at trial that no one has complete access to or knows the entire contents of Bowers’ sent email. Each party will be free at trial to argue the implications of that fact.