Roadrunner Transp. Servs., Inc. v. Tarwater, Nos. 14-55448 & No. 14-55529, 2016 U.S. App. LEXIS 4999 (9th Cir. Mar. 18, 2016).
The Ninth Circuit affirmed the district court’s grant of default judgment for the plaintiff, along with attorneys’ fees, as sanctions for the defendant’s intentional “deletion of data from his laptop computers” after he was “explicitly ordered” to preserve all data.
In this case involving multiple tort claims, intellectual property issues, and the Computer Fraud and Abuse Act, the plaintiff, Roadrunner Transportation Services, a freight transportation company, claimed that its former employee, John Tarwater, had misappropriated trade secrets after going to work for a competitor in August 2010 and filed a lawsuit in October 2010. Upon leaving Roadrunner, Tarwater, who had been a regional vice president of sales, took with him two laptops that he had used for his work there. Within weeks of his departure, Roadrunner sent two letters requesting that Tarwater return the laptops and “preserve, and not delete, view, or alter” any of its confidential data.
In September 2010, Tarwater claimed that the two laptops “were stolen from the back seat of his car.” He began using two new laptops for work, one of which he bought well before the alleged theft. Roadrunner claimed that Tarwater transferred its files onto these computers.
In August 2011, the magistrate judge ordered Tarwater to turn the replacement laptops over for forensic imaging and specifically reminded him of his “obligation to preserve evidence” and the “severe consequences if there was additional evidence of spoliation.” Nonetheless, by his own admission, Tarwater continued using the laptops, “including altering and deleting files,” until October 2011. He claimed he “did nothing different” than he had done for the last 15 to 20 years, including deleting e-mails.
The district court began by noting that in the Ninth Circuit, terminating sanctions “are appropriate when the Court finds ‘willfulness, fault, or bad faith.’” The court also had to weigh the facts using a five-factor test: (1) the public’s preference for quick resolution of cases, (2) the court’s need to manage its dockets, (3) the risk of prejudice due to the spoliation, (4) the public interest in having cases decided on their merits, and (5) the availability of less drastic sanctions.
The district court did not hesitate to find willful spoliation. Tarwater argued that Roadrunner could not prove any spoliation because it could not show that he ever possessed trade secrets. However, his own testimony established that he did not “take any action to preserve data” after being clearly advised by Roadrunner’s letters, and later the court, that the data in his possession was potentially relevant to the litigation. This destruction of potentially relevant information satisfied the court that Tarwater willfully spoliated evidence.
Weighing the five factors, the court observed that Tarwater’s stalling tactics and failure to preserve evidence “caused significant expense . . . and have placed unnecessary burdens on the court.” Moreover, Roadrunner provided circumstantial evidence that Tarwater did possess confidential information, which “would have been the primary evidence” in its case against him, causing substantial prejudice. Nor would any less drastic sanction “adequately redress the harm” of the loss of data. Although the public would still have an interest in seeing the case disposed of on its merits, that factor alone did not outweigh the other four.
The trial court, therefore, ordered default judgment for Roadrunner, including $325,000 in attorneys’ fees, although it did reduce the requested fees “to reflect an appropriate level of staffing for the case.”
On appeal, the Ninth Circuit affirmed the district court’s decision, finding “ample evidence” in support of its conclusions and ruling that the court did not abuse its discretion in imposing the sanctions.
Roadrunner Transp. Servs., Inc. v. Tarwater, Nos. 14-55448 & No. 14-55529, 2016 U.S. App. LEXIS 4999 (9th Cir. Mar. 18, 2016).
Takeaways
At the first notice of litigation, parties should preserve any information that has been identified as potentially relevant and store it in a secure location. Tarwater’s convenient claim that the original computers were “stolen” had no effect on the outcome due to his admission that he made no effort to back up or preserve any data before or after the theft. Complying with his preservation duty required him to alter his ordinary routine of deleting messages; counsel should have advised him of his responsibility and followed up regularly to ensure his compliance.
