The opinion of the court was delivered by: Honorable Esther Salas, United States Magistrate Judge
This matter comes before the Court on the motion of Plaintiff for spoliation sanctions, specifically seeking that Defendants' Answer be stricken and default entered or, alternatively, seeking an adverse inference in Plaintiff's favor. For the reasons set forth herein, Plaintiff's motion seeking the entry of default judgment is hereby DENIED; Plaintiff's motion seeking an adverse inference and costs is hereby GRANTED.
On November 7, 2006, Plaintiff TelQuest International Corporation ("TelQuest") instituted this action against Defendants Jason Hines and Dedicated Business Systems, Inc. ("DBSI"), asserting claims of fraud, misappropriation of confidential and proprietary information, breach of fiduciary duties, and breach of contract. According to Plaintiff, Hines, a former TelQuest employee, incorporated DBSI immediately after leaving his position at TelQuest. (Am. Compl. ¶ 36.) The Complaint charges Hines with stealing confidential company information from TelQuest computers and using such information in direct competition with TelQuest, in violation of a non-compete provision that was part of Hines' employment agreement. (Id. ¶¶ 24-26.)
Specifically, Plaintiff alleges that Hines stole a list of customers and vendors developed by TelQuest over the course of more than fifteen years. In support of this claim, TelQuest claims to have obtained a copy of a DBSI email allegedly sent by Hines to a former TelQuest employee, which included as an attachment a computer printout containing the TelQuest customers and vendors obtained by Hines during his employment with TelQuest.
The instant dispute regards the alleged lack of production and spoliation of materially relevant paper and electronic files during the course of this litigation.
As part of its discovery requests, TelQuest sought copies of documents evidencing communications between Hines and TelQuest customers and vendors, as well as emails evidencing communications with current and former TelQuest employees. After incomplete production of paper documents by DBSI, TelQuest sought access to DBSI computers in order to have a forensic copy of the hard drive made and analyzed. After continued resistance by Hines, TelQuest obtained a Court Order, dated March 27, 2008, directing Hines to produce "any and all computers used by Hines and or DBSI in connection with the sale, purchase or marketing of telecommunications equipment since January 2006," in addition to other outstanding discovery requests, by March 31, 2008. (Docket Entry No. 21).
Defendants failed to produce any computers by March 31, 2008, and, during a June 17, 2008 telephone conference before the Honorable Esther Salas, Defendants were again ordered to produce the computers. On June 19, 2008, Hines appeared pro se and delivered a computer to TelQuest's forensic consultant, The Intelligence Group ("TIG"). TIG's forensic analysis revealed the following:
* On June 17, 2008, two days before the delivery of the computer to TIG, a "defrag" program, which overwrites deleted data and undermines it recovery, had been run.
* Files potentially containing information about DBSI operations had been deleted and were at that point unrecoverable.
* Secure Clean, a program that "wipes" data from the hard drive so that it may not be recovered using conventional computer forensic tools, had been run on June 19, 2008.
* Secure Clean software had been uninstalled on June 19, 2008.
(Decl. of Michael Grennier ¶¶ 14-28.) ("Grennier Decl.")
It having been revealed during the July 11, 2008 deposition of Jason Hines that Hines routinely deleted business emails and other records, this Court entered an Order dated August 12, 2008, directing DBSI and Hines to "maintain any and all records, to the extent they exist, relating to the business of DBSI and Hines in their possession and control, including, hard copies of any and all business records . . . ." (Docket Entry No. 35). It was further ordered that DBSI and Hines were to "maintain ...