OmniGen Research v. Wang, No. 6:16-cv-00268-MC, 2017 U.S. Dist. LEXIS 78107 (D. Or. May 23, 2017).
Relying on the Federal Rules of Civil Procedure and its inherent authority, a court recently imposed the extraordinary remedy of default judgment for the plaintiff. The defendant egregiously deleted evidence, disposed of a desktop computer and gave shifting explanations for his actions to earn the harsh judgment.
In this case, OmniGen Research (OmniGen) sued its former employee, Yongqiang Wang (Wang); his wife, Yan Zheng; and their Oregon company, Bioshen. OmniGen alleged Wang committed breach of contract, trade secret misappropriation and unfair competition, among other claims.
The court pointed out that the case suffered from “discovery issues and concerns of spoliation from its inception.” OmniGen had to “seek court intervention regarding discovery on multiple occasions because of the failure of the defense to adequately respond.”
OmniGen first sent a cease-and-desist letter demanding access to documents and data in mid-2015. One week later, “Wang intentionally deleted over 200 files from his Lenovo laptop.” In February 2016, having received no response to its letter, OmniGen filed this lawsuit and requested a preliminary injunction. When he was served, Wang “initially denied his identity and refused to accept service.” The court granted the injunction. Eleven days later, Wang “left for China without producing his laptop as required.” In fact, he took his laptop with him out of the country. During this time, OmniGen sent two separate preservation letters requesting that Wang maintain and produce evidence.
When OmniGen finally received Wang’s laptop, it “found that over 4,000 files had been deleted after th[e] court issued its second Order for production.” Similarly, when OmniGen obtained Zheng’s iPad in September 2016, it initially “showed emails previously downloaded.” However, those emails disappeared once the iPad was connected to the internet, “meaning they had been deleted” after Wang provided the iPad to OmniGen. While many files and emails were unrecoverable, their names made it “clear” that they “would have been relevant.”
Wang’s explanations were conflicting and deceptive as well. For one example, Wang offered an affirmative defense that Omnigen “tricked” him into signing an employee agreement different from the one he had reviewed. However, when he eventually produced what he claimed was “the old agreement,” OmniGen discovered that “the file was modified after this litigation commenced.” Wang had also deleted the “originating metadata” that would establish the document’s creation date.
Finally, Wang and Zheng admitted that they “donated [their desktop] computer to Goodwill” nine days after the court issued its preliminary injunction. Wang argued that they bought that computer for their son and did not use it for work. The court found this “inconceivable” given that their son was “a toddler” at the time of the purchase and the desktop was Wang’s only computer for six years.
The court noted that default judgment for spoliation is appropriate where “a party has intentionally … destroyed evidence to the extent it severely undermines the Court’s ability to render a judgment based on the evidence.” Under Federal Rules of Civil Procedure 37(b)(2) and 37(e), as well as the court’s inherent authority, willfully impeding discovery and “undermin[ing] the integrity of judicial proceedings” would justify terminating sanctions. Rather than the standard five factors, the court focused on “the most critical issue”: “whether the discovery violations threaten to interfere with the rightful decision of the case.”
The court concluded that Wang willfully and intentionally destroyed substantial evidence necessary to resolve the case on its merits. The court therefore granted OmniGen’s motion for default judgment and planned to set a hearing later to determine damages.
Takeaways on discovery violations
Obviously, don’t do anything that the defendant in this case did. But do follow the plaintiff’s excellent example. OmniGen sent a timely and appropriate cease-and-desist letter and two separate preservation letters demanding that Wang maintain evidence. OmniGen also moved for a preliminary injunction immediately, requested a show-cause when Wang violated that injunction and moved for terminating sanctions when the discovery violations continued. Its excellent documentation essentially pushed the court into the rare remedy of default judgment.