Archive: June 15, 2009

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Finding Plaintiffs’ Ex-Employee and his New Employers Culpable for the Spoliation of Ex-Employee’s Laptop, Court Orders Adverse Inference and Monetary Sanctions

Finding Plaintiffs’ Ex-Employee and his New Employers Culpable for the Spoliation of Ex-Employee’s Laptop, Court Orders Adverse Inference and Monetary Sanctions

Beard Research, Inc. v. Kates, 981 A.2d 1175 (Del. Ch. 2009)

In this case, arising from plaintiffs’ claims that defendants interfered with business relationships and misappropriated trade secrets, plaintiffs sought sanctions against defendants for the destruction of information on a laptop computer which belonged to defendant Michael Kates, a former employee of plaintiffs.  The court refused to award default judgment, as requested, but ordered an adverse inference against Kates and ordered monetary sanctions against Kates and defendants Advanced Synthesis Group (“ASG”) and ASDI, Inc. (“ASDI”) resulting from Kates’s destruction of a relevant hard drive and ASG’s and ASDI’s failure to take reasonable steps to prevent that destruction.

Dr. Michael Kates was employed by plaintiffs between 1997 and February 2004.  In mid-2003, while still employed by plaintiffs, Kates purchased a Gateway laptop for business purposes.  Between 2003 and early 2004, Kates’s relationship with plaintiffs deteriorated.  In December 2003, Kates resigned from plaintiff C&B Research & Development, Inc. (“CB”) and on February 13, 2004, Kates also resigned from plaintiff Beard Research, Inc. (“BR”).  Kates began working at ASG three days later and eventually went to work for ASDI; he continued to use the Gateway laptop.  ASDI provided management services for ASG and both plaintiffs and defendants were involved in the sale of chemical compounds through a catalog, among other things.  On May 4, 2005, CB and BR filed suit against Kates, ASDI, ASG and others.

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