In GMS Indus. Supply, Inc. v. G&S Supply, LLC, No. 2:19-cv-324 (RCY) (E.D. Va. March 22, 2022), Virginia District Judge Roderick C. Young, finding intent to deprive over the defendant’s use of the file deletion software File Shredder after being advised of his duty to preserve evidence, granted the plaintiff’s motion for sanctions and awarded adverse inference sanctions against the defendants, as well as ordering the defendants to “pay Plaintiff’s reasonable attorneys’ fees and costs incurred in preparing its Motion for Sanctions.” Judge Young also denied the defendant’s motion for sanctions pursuant to Rule 11 for the plaintiff’s lawsuit against one of the defendants that was subsequently dismissed, finding the plaintiff filed a motion to dismiss their claims within the 21-day period protected by the safe harbor provision of Rule 11.

Case Discussion

In this case involving a former director of sales of the plaintiff who formed a competing company while still employed by the plaintiff, the plaintiff discovered the existence of the new company and sent a letter to eventual defendant Westly Greer on April 3, 2019, informing him of his legal obligation to preserve all potentially relevant information. In a subsequent letter on April 17, the plaintiff directed Greer to return its property, including a laptop computer, a desktop computer and a computer tablet. When they received the equipment, they discovered that all user-created files had been deleted from the desktop and the computer tablet was password protected, with the password provided by Greer not working. A subsequent forensic examination of the desktop and laptop found the following:

• Over 43,000 files and folders were deleted from the laptop computer, 7,075 of which were deleted after Greer was terminated and received the litigation hold letter.
• Over 24,000 files and folders were deleted from the desktop computer, 11,791 of which were deleted after Greer was terminated and received the litigation hold letter.
• Beginning in May 2017, seven unique data storage devices had been attached to the laptop computer.
• Beginning in October 2015, seven unique data storage devices had been attached to the desktop computer.
• On April 19, 2019, after Greer received the second letter, he attached a USB storage device to the desktop computer and accessed documents on the device. He also ran a Google search for the term “fileshredder,” visited the File Shredder website, and downloaded and installed File Shredder. After the installation, Greer ran the file shredding program, permanently deleted 3,397 files from the computer, and then uninstalled the shredding program, which led to the plaintiff’s motion for sanctions against him.

Judge’s Ruling

Judge Young began his analysis by rejecting the defendants’ claim that the plaintiff’s motion was untimely, having been filed after the deadline for fact discovery, stating: “Not only did Plaintiff attempt to gather pertinent information via written discovery requests, it was also forced to wait until Greer’s deposition to again ask Greer about the allegedly incorrect tablet password… Here, Plaintiff filed the instant motion weeks before the dispositive motion deadline and months before trial, and additionally, the relief sought will not entail reopening discovery or delaying trial. As such, the Court finds that Plaintiff’s spoliation motion is timely.”

Noting that “Defendants agree that Plaintiff can establish the first and third elements—that ESI should have been preserved and that the loss was due to Greer’s failure to take reasonable steps to preserve the ESI”, Judge Young addressed only the second and fourth elements. Observing that “Greer downloaded twenty-one files from the DLA Internet Bid Board System (“DIBBS”) onto the laptop, and the file names indicated that the downloaded files likely concerned competitive sales made by G&S to customers or potential customers of GMS” and that there were 481 of the 3,397 files destroyed by File Shredder for which the forensic examination was unable to even recover the names of the files, Judge Young stated: “As such, the Court finds that the DLA documents and the 481 permanently deleted files are both lost and irreplaceable.”

Judge Young also stated: “Greer’s actions demonstrate an intent to deprive Plaintiff of use of the information stored on his desktop. Defendants do not dispute that Greer received an April 3, 2019 letter from Plaintiff in which Greer was instructed to ‘preserve any potentially relevant documents and information relating to’ Plaintiff’s breach of contract allegations stemming from Plaintiff’s discovery of G&S…On April 17, 2019, Greer received another letter from Plaintiff, reiterating that Greer was obligated to ‘preserve any and all potentially relevant information’ and to return all Computer Equipment in his possession to Plaintiff…Despite the clear instructions to preserve potentially relevant documents and information—as discovered by the forensic examination conducted by BDO—on April 19, 2019, Greer proceeded to download File Shredder onto his desktop and destroyed all of the user-created files.” Therefore, he granted the plaintiff’s motion and awarded the adverse inference sanction against the defendant, also stating “Once an intent to deprive has been established, Rule 37(e)(2) does not require an additional finding of prejudice”.

Judge Young also denied the defendants’ motion for sanctions against the plaintiff for its claims against former defendant Sky Spires, citing the Rule 11’s safe-harbor provision that prohibits sanctions “if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service.” Observing that “Plaintiff filed a motion dismissing the claims against Sky Spires within the 21 days provided under the safe-harbor provision and two days before Defendants filed their Motion for Sanctions”, Judge Young stated: “Accordingly, Defendants’ failure to comply with the procedural requirements of Rule 11 ‘precludes the imposition of the requested sanctions.’”

So, what do you think? Do you agree that a finding of intent to deprive doesn’t require an additional finding of prejudice?  Please share any comments you might have or if you’d like to know more about a particular topic.

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