E-Mail Destruction Leads to Adverse Inference and Fee-Shifting Sanctions (Telequest Int'l v. Dedicated Business Systems)

Few cases implicate discovery sanctions and spoliation of evidence like claims of unfair competition against an ex-employee. With most evidence of trade secrets theft and customer solicitation documented and proven electronically, it is far easier for plaintiffs to trace unfairly competitive activity.

For whatever reason, employees seem to think that computer forensics is still a dark ages novelty. It is routine to read cases where hard-drives are deleted are scraper programs are used to wipe files during litigation. Employees think they are helping their cause by covering their tracks.

They're not.

The recent decision in Telequest International v. Dedicated Business Systems is a good example of what discovery sanctions will be imposed for destruction of evidence. During the course of a protracted discovery dispute about production of documents, one of the defendants ran a "defrag" program just two days before he was under court order to produce a forensic copy of his hard-drive to the plaintiff's expert witness. He installed Secure Clean software, rendering certain key documents untraceable. Though some cases involve e-mail or hard-drive deletion prior to litigation, this occurred well into the dispute. As such, there was no issue the employee was under a duty not to destroy relevant evidence.

Therefore, the primary question was the appropriate level of sanctions. The court discussed the plaintiff's request for a default judgment and concluded this was too severe of a sanction. Instead, the court held an adverse inference instruction to the finder of fact, coupled with a fee award related to the discovery dispute, was a sufficient sanction under the circumstances.

The adverse inference sanction is intended to level the playing field with respect to the discovery violation, since the defendant will be unable to benefit in any way from the deletion activity. Indeed, the fact-finder is instructed that the spoliation is evidence the party did so out of the well-founded fear the contents would harm him.

In a non-compete dispute, this generally means a fact-finder is able to presume improper customer solicitation or wrongful retention of confidential information.

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Court: United States District Court for the District of New Jersey
Opinion Date: 3/11/09
Cite: Telequest Int'l. Corp. v. Dedicated Business Systems, Inc., 2009 U.S. Dist. LEXIS 19546 (D. N.J. Mar. 11, 2009)
Favors: Employer
Law: Federal