Manufacturing Automation and Software Systems, Inc. v. Kristopher Hughes et al

Filing 194

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: DEFENDANTS MOTION TO DISMISS FOR INTENTIONAL SPOLIATION 154 . The Court hereby DENIES defendants motion to dismiss for spoliation of evidence. All further matters concerning compliance with this order shall be referred to Judge Stevenson. The following dates shall be continued sixty (60) days: 1. Fact Discovery Cut-Off is extended to June 29, 2018 for the limited purposes of the discovery permitted herein;2. Pretrial Conference/Hearing on Motions in Limine (11:00 A.M.) iscontinued from June 18, 2018 to August 20, 2018; and 3. Jury Trial (9:30 A.M.) is continued from July 10, 2018 to September 11, 2018. (lc)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

Present: The Honorable 

CHRISTINA A. SNYDER 

Attorneys Present for Plaintiffs: 

N/A 

Tape No.

Attorneys Present for Defendants: 

Kirk Hallam

Bethany Stevens

Jun Kwon 

Wyley Proctor

Catherine Jeang 
Deputy Clerk 

Laura Elias 
Court Reporter / Recorder

Greg Nylan
Proceedings:  

DEFENDANTS’ MOTION TO DISMISS FOR INTENTIONAL
SPOLIATION (Dkt. 154, filed March 30, 2018)

I.

INTRODUCTION

On December 2, 2016, plaintiff Manufacturing Automation & Software Systems,
Inc. (“MASS Group”) filed a complaint against defendants Kristopher Hughes, James
Huysentruyt, Informatrac, Inc., PcVue, Inc., Edward Nugent, and Does 1–10
(collectively, “defendants”). Dkt. 1. On January 31, 2017, plaintiff filed the operative
first amended complaint. Dkt. 27 (“FAC”). Plaintiff asserts the following claims: (1)–(8)
copyright infringement of eight copyrighted works against all defendants; (9) violations
of the Computer Fraud and Abuse Act, 18 U.S.C. §§ 1030 et seq., against Hughes and
Huysentruyt; (10) violations of California’s Computer Data Access and Fraud Act, Cal.
Penal Code § 502, against Hughes and Huysentruyt; (11) misappropriation of trade
secrets in violation of California’s Uniform Trade Secrets Act, Cal. Civ. Code §§ 3426 et
seq., against all defendants; (12) breach of contract against Hughes and Huysentruyt; (13)
interference with prospective economic advantage against Hughes, Huysentruyt, and
InformaTrac; (14) fraud and deceit against Hughes and Huysentruyt; (15) conversion
against Hughes, Huysentruyt, and Does 1–10; (16) diversion of corporate opportunities
against Hughes and Huysentruyt; and (17) accounting against all defendants. Id.
Plaintiff alleges that defendants copied plaintiff’s software to produce, market, and sell a
counterfeit version to plaintiff’s current or potential customers.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

On March 28, 2017, PcVue and Nugent filed a motion to dismiss plaintiff’s
complaint for lack of personal jurisdiction and for failure to state a claim. Dkt. 50. On
May 8, 2017, the Court denied the motion to dismiss. Dkt. 53.
On October 25, 2017, defendants filed a motion to compel discovery relating to
plaintiff’s investigator, Alan Davis. Dkt. 83. On December 1, 2017, Magistrate Judge
Karen L. Stevenson granted defendants’ motion in part and denied the motion in part, and
ordered plaintiff to produce certain documents and to submit documents identified in a
privilege log for in camera review. Dkt. 106. On December 20, 2017, Judge Stevenson
concluded that certain documents contained in the privileged logs were not privileged,
and ordered plaintiff to produce those documents. Dkt. 118.
On March 30, 2018, defendants filed the instant motion for terminating sanctions,
contending that plaintiff violated the December 1 discovery order, and alleging spoliation
of evidence. Dkt. 154 (“Mot.”). Plaintiff filed its opposition on April 9, 2018, dkt. 168
(“Opp’n”), and defendants filed a reply on April 16, 2018, dkt. 184 (“Reply”).
On April 30, 2018, the Court held oral argument. Having carefully considered the
parties’ arguments and supporting declarations, the Court finds and concludes as follows.
II.

BACKGROUND
A. Plaintiff’s Factual Allegations
Plaintiff alleges the following facts.

Plaintiff developed, produced, marketed, and licensed a series of internet-based
software programs that allow customers to track or trace quantities and precise locations
of inventories, equipment, materials, documents, or people. FAC ¶ 1. These programs
are protected by copyright. Id. Eight of those copyrighted works, referred to as the
“MASS Software,” are at issue in this matter. Id.
Plaintiff alleges that beginning in 2015, and while they were still employed by
MASS Group, defendants Hughes and Huysentruyt formed a business partnership with
Ed Nugent and PcVue with the primary purpose of “copy[ing] the Mass Software, along
with the source and object codes from which that Software is exclusively derived,” and
that they “copied MASS Software in order to produce and market that Software as their

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

own.” Id. ¶¶ 4–5. Plaintiff asserts that while Hughes and Huysentruyt were still officers
and managers of MASS Group, they used MASS Software in collaboration with Nugent
and PcVue to provide integrated software services to the Miami Dade Airport. Id. ¶ 8– 9.
This project was allegedly within plaintiff’s core competency and was well suited for
MASS Software. Id. ¶ 9.
Plaintiff further alleges that Hughes and Huysentruyt subsequently resigned in
March of 2016 to launch a partnership under the name “InformaTrac,” which they
allegedly used to deliberately induce plaintiff’s customers to discontinue their use of
plaintiff’s software and either terminate or fail to renew licenses with Plaintiff. Id. ¶¶ 8–
14.
In the year prior to their resignations, plaintiff alleges that Hughes and Huysentruyt
were responsible for promoting, licensing, and servicing the MASS Software and that
they had the most contact with plaintiff’s current and potential customers. Id. ¶ 41.
However, plaintiff alleges that in the final six months before their resignations, Hughes
and Huysentruyt brought in virtually no new customers for plaintiff as part of their plan
to copy the MASS Software and eliminate plaintiff as an effective competitor to
InformaTrac. Id. ¶ 42. Plaintiff further alleges that after their resignation, defendants
continued to access and exploit MASS Group’s confidential customer contact
information. Id. ¶ 47.
B. The Davis Investigation and Subsequent Discovery Dispute
During discovery, plaintiff identified its investigator, Alan Davis, as a witness in
its initial disclosures. Accordingly, defendants pursued fact discovery with respect to
Davis, which eventually culminated with defendants’ motion to compel discovery related
to Davis on October 25, 2017. Dkt. 93. In their motion to compel, defendants sought
documents they had subpoenaed from Davis concerning his communications with
plaintiff. Dkt. 93 at 1. Plaintiff objected to production of these documents on the
grounds of attorney-client privilege and attorney work product. Id.
In a declaration supporting plaintiff’s opposition to the motion to compel, Davis
explains that in November 2016 he was hired by plaintiff to investigate the allegations

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

against defendants and to view the allegedly infringing InformaTrac software.1 Davis
Decl. ¶ 3–6. Davis and plaintiff’s Vice President of Business Development, Shaunna
Balady, concluded that the best way for Davis to conduct his investigation would be
through a covert operation, where Davis would pose as a potential InformaTrac customer.
Id. ¶ 6. Accordingly, Davis contacted Huysentruyt and arranged to see an online
demonstration of the software. Id. ¶ 7. With respect to production of documents, Davis
stated in his declaration that he reviewed all documents in his possession and provided
responsive documents to plaintiff’s counsel, and that he was willing to search again for
additional responsive documents. Id. ¶ 9.
On December 1, 2017, Judge Stevenson granted in part and denied in part
defendants’ motion to compel discovery.2 Dkt. 106 (“December 1 Order”). Accordingly,
plaintiff was ordered to (1) produce documents responsive to the subpoena of Davis; (2)
produce supplemental responses to the subpoena; (3) produce documents responsive to
defendants’ requests for production of documents concerning Davis; (4) lodge documents
identified in plaintiffs’ privilege log evidencing communications between David and
plaintiff’s counsel, Kirk Hallum, for in camera review; and (5) serve supplemental
responses to defendant’s requests for production. Id.
On December 18, 2017, this Court granted defendants’ ex parte application for an
extension of discovery until January 12, 2018 for the limited purpose of deposing Davis
and Balady. Dkt. 116.

1

Davis’s retainer agreement indicates that Davis would evaluate the similarities
between plaintiff’s and InformaTrac’s software and sales processes; determine the details
of InformaTrac’s business approach towards new clients; understand InformaTrac’s
background and how the company started; investigate details of how, when, and for
which customers InformaTrac’s software has been deployed; prepare a detailed report
regarding his investigation; and support litigation as required. Davis Decl. & Ex. 1 ¶ 1.
2
Judge Stevenson determined that plaintiff holds the attorney-client privilege—not
Davis—and thus this privilege was not applicable to Davis’s subpoenaed
communications; that material from Davis’s investigation did not constitute attorney
work product; that in the event the work product privilege is applicable, this privilege
was otherwise waived when plaintiff listed Davis as a percipient witness; and that the
Court had “serious concerns” about whether a breach of the no-contact rule occurred
when Davis contacted defendants, who were represented parties. Dkt. 106 at 18–23.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

On December 20, 2017, Judge Stevenson determined that certain documents
plaintiff submitted for in camera review were not covered by attorney-client privilege or
the work product doctrine, and plaintiff was ordered to produce these documents
identified in the privilege log to defendants by December 22, 2017. Dkt. 117.
C. The Current Dispute
In early January, defense counsel deposed Davis and Balady. See Mot. & Foley
Decl. Exs. A, B, D. Defendants allege that during the depositions they became aware of
documents that were not included in plaintiff’s December production.3 Id.
In response to a joint mutual statement from the parties, Judge Stevenson held a
telephonic conference on February 14, 2018 regarding defendants’ allegations that
plaintiff had not produced all responsive documents as required by the December 1
Order, and had otherwise spoliated evidence. Dkts. 126; 166 (“Transcript”). Judge
Stevenson declined to rule on either issue, indicating that defendants would need to seek
ex parte relief to extend the fact discovery cut-off to enable her to hear another discovery
dispute, and directing defendants to bring any dispositive motion concerning spoliation
before this Court. Id. at 4, 6.
III.

LEGAL STANDARDS

Spoliation is “the destruction or significant alteration of evidence, or the failure to
preserve property for another’s use as evidence, in pending or future litigation.” Kearney
v. Foley & Lardner, LLP, 590 F.3d 638, 649 (9th Cir. 2009). Rule 37(e) of the Federal
Rules of Civil Procedure establishes the necessary findings to support certain curative
measures for spoliation of electronically stored information. This Rule was amended in
2015 to “foreclose[] reliance on inherent authority or state law to determine when certain
measures should be used” to address spoliation of electronically stored information. See
Fed. R. Civ. P. 37(e), Advisory Committee Note to 2015 Amendment. Rule 37(e)
provides the following:

3

In response to defense counsel’s assertions during Davis’s deposition that Davis
did not produce all documents in compliance with the Court order, plaintiff’s counsel
asserted that plaintiff provided more discovery than was required by the December 1
Order. Foley Decl. & Ex D at 219:6–20.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

(e) Failure to Preserve Electronically Stored Information. If electronically stored
information that should have been preserved in the anticipation or conduct of litigation is
lost because a party failed to take reasonable steps to preserve it, and it cannot be restored
or replaced through additional discovery, the court:
(1) upon finding prejudice to another party from loss of the information, may order
measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of
the information’s use in the litigation may:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable
to the party; or
(C) dismiss the action or enter a default judgment.
Fed. R. Civ. P. 37(e). This version of Rule 37(e) applies to civil cases commenced
after December 1, 2015, “and, insofar as just and practicable, all proceedings then
pending.” See 2015 U.S. Order 0017; 28 U.S.C. § 2074(a).
Moreover, a court adjudicating a request for terminating sanctions pursuant to Rule
37(e)(2)(C) must consider the following factors:
(1) the public’s interest in expeditious resolution of litigation;
(2) the court’s need to manage its dockets;
(3) the risk of prejudice to the party seeking sanctions;
(4) the public policy favoring disposition of cases on their merits; and
(5) the availability of less drastic sanctions.
Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d 337, 348 (9th Cir. 1995);
Leon v. IDX Systems Corp., 464 F.3d 951, 958 n.4 (9th Cir. 2006).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

IV.

DISCUSSION

Defendants request the Court to order terminating sanctions because plaintiff
“intentionally, selectively, and systematically destroyed material evidence, both while
investigating this case and for seven months after the case was filed.”4 Mot. at 1.
Defendants assert that they “did not learn of the spoliation until after fact discovery
closed” during the January 2018 depositions of Davis and Balady. Id. n.1.
A. The Alleged Spoliation
Defendants allege that plaintiff suspected on or about March 2016 that defendants
had allegedly copied its software, and that plaintiff tried to build its case over the
remaining months. Id. at 2–3. During this period, Balady testified in her deposition that
plaintiff enacted a retention policy in which emails were purged from its server after 90
days. Id. at 3. In particular, defendants allege that Balady admitted that since April
2016, plaintiff maintained this 90-day e-mail retention policy, which it subsequently
reduced to 30 days between August 2016 and November 2016. Id. at 3–4. Defendants
allege that plaintiff’s retention policy continued until the summer of 2017. Id. at 4.
Therefore, defendants argue that from the time plaintiff first anticipated litigation until
the filing of the instant action, plaintiff was actually accelerating the rate at which e-mail
evidence was being deleted from its servers, and that it continued to delete emails until
the summer of 2017, seven months after litigation began. Id. at 4.
Next, defendants contend that Balady, who supervised the investigation and this
litigation, admitted in her deposition that she used her personal email account to
communicate with Davis about his investigations. Id. at 5. Defendants further argue that

4

Plaintiff contends that the Court should strike defendants’ motion from the record
for failure to meet and confer as required by Local Rule 7–3. Opp’n at 11–12. The Court
declines to strike defendants’ motion for failure to comply with L.R. 7–3, and (1)
admonishes all parties to abide by the Local Rules in future proceedings, and (2) warns
all parties that failure to meet and confer prior to filing motions constitutes grounds for
denial of a motion or imposition of other monetary or non-monetary sanctions. See id.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

Balady admitted to deleting emails from this account on a daily basis, and they allege that
the “Davis emails were likely deleted.” Id.
Defendants also claim that during Davis’s January deposition, he discussed various
e-mail reports and handwritten notes that he made during the course of his investigation
that have not been produced to defendants. Id. at 7. Defendants assert that Davis “failed
to preserve his notes and other evidence,” and that despite Davis’s promise that he would
search for additional relevant documents in November, Davis never conducted that search
and testified in his January deposition that he forgot to follow up on the promised search.
Id. at 7–8. Defendants believe that the documents from Davis’s investigation “would
likely contradict MASS Group’s allegations,” and they contend that certain memoranda
were never produced to defendants. Id. at 9.
Concerning other evidence of spoliation, defendants claim that plaintiff’s
“production was very small for a litigation of this type,” and that Balady’s deposition
testimony demonstrates that Balady asked plaintiff’s employees to collect documents that
support plaintiff’s claims, which demonstrates why “at least some communications did
survive the company-wide deletion policy.” Id. at 10. Defendants assert that plaintiff
produced “few emails” from nine employees concerning their communications with
customers from 2015 to 2017, and that plaintiff produced no emails with customers or
potential customers from two employees responsible for customer sales. Id. at 10–11.
B.

Whether Terminating Sanctions Are Appropriate

Defendants request terminating sanctions and argue that plaintiff willfully
destroyed evidence in light of its duty to preserve potentially relevant evidence once it
reasonably anticipated litigation in early 2016. Mot. at 12–15, 18. In addition,
defendants contend that the destroyed documents are relevant to this case because
Davis’s investigation is a “cornerstone” of plaintiff’s allegations and because plaintiff’s
customer emails from January 2015 until the summer of 2017 are missing. Id. at 15–16.
Defendants contend that the only appropriate sanction is dismissal, as there is no way to
“know just how many documents MASS Group destroyed, or what those documents
would have proven (or disproven).” Id. at 17.
Defendants also request that the Court issue sanctions against plaintiff for violating
the December 1 Order under Fed. R. Civ. P. 37(b)(2)(c), and issue sanctions against
Davis for failing to comply with a subpoena. Id. at 23–24 (citing Corder v. Howard

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

Johnson & Co., 53 F.3d 225, 232 (9th Cir. 1994)). Defendants argue that appropriate
sanctions “include legal fees incurred both in raising this issue and this motion practice,”
and fees and costs incurred in deposing Davis and Balady. Id. at 24.
In opposition, plaintiff asserts that the instant motion is an untimely discovery
dispute. Opp’n at 3–10. Plaintiff notes that Judge Stevenson ruled during a February 14
telephonic conference that without further extension of the discovery cut-off, she could
not take any action on the dispute concerning plaintiff’s alleged violation of the
December 1 Order. Id. at 4–5. Plaintiff argues that defendants may not now ask this
Court, four month after the discovery cut-off, to resolve any fact discovery disputes. Id.
at 10–11.
With respect to the merits of defendants’ motion, plaintiff argues that dismissal is
inappropriate because (1) the undisputed evidence is that plaintiff did not deliberately
destroy any evidence in this case; (2) the deleted emails, if any were relevant to this case,
would be available from other individuals who were served with subpoenas and deposed
in this case; and (3) a panoply of less severe remedies would eliminate or diminish any
purported prejudice to defendants. Id. at 15.
First, plaintiff asserts that it implemented its email retention policy to protect itself
from Hughes’s and Huysentruyt’s alleged theft of plaintiff’s emails and confidential data,
and that Balady also used a personal email for business communications for this reason.5
Id. at 15–18, 20–21. Moreover, plaintiff argues that employee and customer emails from
2015 to 2017 were never produced because Hughes and Huysentruyt deleted “large
swaths” of emails from 2014 to 2016, before their resignation. Id. at 18–20.
Plaintiff next argues that any information contained in missing MASS Group
emails is accessible through alternative sources, such as plaintiff’s prior customers. Id. at
23. Plaintiff further asserts that any deleted emails are neither relevant nor exculpatory,

5

Plaintiff’s allegations of hacking echo its claims that are pleaded in the FAC for
violations of the federal Computer Fraud and Abuse Act and the California Computer
Data Access and Fraud Act. See FAC ¶¶ 195–201, 202–11. Plaintiff also submits a
declaration from Balady with a supporting exhibit that allegedly reflects Hughes’s
hacking attempts. Opp’n, Balady Decl. & Ex. A.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

and argues that Davis’s produced communications support defendants’ alleged liability.
Id. at 24.
Finally, plaintiff contends that its counsel obtained all of the documents provided
by Davis that reflect his communications with plaintiff and plaintiff’s counsel, and that
counsel produced all of these documents to defendants after Judge Stevenson’s in camera
review and partial redaction of certain privileged documents. Id. at 24–25.
In reply, defendants argue that “fear of hacking” is no excuse for intentional
spoliation, and that they are severely prejudiced by plaintiff’s alleged spoliation. Reply
at 2–7. Defendants also assert that the instant motion is timely because Judge Stevenson
clarified that case dispositive motions must be filed before this Court. Id. at 10. Finally,
defendants argue that Davis produced “only a handful” of documents in response to the
December 1 Order, and that plaintiff produced none. Id. at 13. In Davis’s deposition,
defendants argue that he admitted that he had additional documents and handwritten
notes that were responsive to defendants’ subpoena, and that most of these documents
were never subsequently produced. Id. at 13–14.
1.

Defendants’ Request for Sanctions under Rule 37(b)(2)(C)

As an initial matter, the Court concludes that plaintiff’s alleged non-compliance
with the December 1 Order and defendants’ request for sanctions pursuant to Rule
37(b)(2)(C) is a discovery dispute that should have been set before Judge Stevenson.
This Court’s procedures are identified on the Court website, which provide that “[u]nless
the Court has issued a contrary order, all discovery motions should be set before the
Magistrate Judge to whom this case is assigned.” Moreover, Judge Stevenson stated
during the February 14 telephonic hearing that defendants needed to seek an extension of
the discovery cut-off before this Court in order for her to rule on any discovery dispute.
The record demonstrates that defendants did not seek ex parte relief to extend the fact
discovery cut-off, and thus did not attempt to resolve this discovery dispute before Judge
Stevenson.
Given the above considerations, and in light of the allegations of plaintiff’s lack of
production in response to the December 1 Order, the Court hereby ORDERS the
extension of fact discovery for the limited purposes of determining compliance with the
December 1 Order and for recovery of plaintiff’s missing emails, as discussed infra. For
this reason, the Court continues the pretrial conference and trial dates for sixty (60) days.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

Alan Davis shall submit a declaration under penalty of perjury on or before May 4, 2018,
stating (1) whether he has produced all documents required to be produced by the
December 1 Order; (2) whether he determined any documents were not covered by the
December 1 Order, and what these documents are; and (3) whether he has destroyed any
handwritten notes, communications, or other documents concerning his investigation of
defendants. On or before May 4, 2018, plaintiff and Davis shall provide, in camera to
Judge Stevenson, all documents that heretofore have not been produced.
2.

Defendants’ Request for Terminating Sanctions

With respect to defendants’ motion for terminating sanctions, the Court concludes
that this request is procedurally premature. The first step in requesting discovery
sanctions is to seek a court order compelling the discovery sought—and the only sanction
available at that point is an award of reasonable expenses on the motion. See Judge
William W. Schwarzer et al., California Practice Guide: Federal Civil Procedure Before
Trial ¶ 11:377 (The Rutter Group 2017). Importantly, “once a court order is obtained, if
the discovery is still not forthcoming, the whole panoply of Rule 37 sanctions becomes
available.” See id. (emphasis added).
Although Judge Stevenson ordered production of certain communications from
Davis in response to defendants’ motion to compel, defendants have failed to file a
motion before Judge Stevenson concerning plaintiff’s compliance with the December 1
Order. Given the Court’s extension of fact discovery for an additional 60 days, any
further dispute concerning plaintiff’s compliance with the discovery order shall be
addressed before Judge Stevenson.
Regarding the deleted MASS Group and Balady emails, the proper procedure with
respect to requesting Rule 37(e) sanctions would have been for defendants (1) to file a
motion to compel any missing electronically store information and (2) in the event they
could not obtain the missing emails from plaintiff or through a court order, to subpoena
missing emails from alternate sources.6 Because defendants have failed to engage in

6

The requisite procedural steps that are properly navigated before bringing a motion
for terminating sanctions are demonstrated by the record at issue in Anheuser-Busch. 69
F.3d 337. After noting “significant discrepancies” in defendant’s testimony and
documents, the district court reopened discovery and ordered defendant to produce copies
of certain tax records and to provide plaintiff with supporting documentation of these

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

these procedural steps with respect to plaintiff’s alleged spoliation, defendants did not
bring this motion as last a resort for which a motion for terminating sanctions is properly
reserved.
In light of the above considerations, the Court DENIES defendants’ motion to
dismiss for intentional spoliation. Plaintiff is hereby ORDERED to retrieve all deleted
emails through forensic retrieval, subpoena, or other possible means, and produce all
recovered emails responsive to defendants’ discovery requests on or before June 14,
2018.
V.

CONCLUSION

In accordance with the foregoing, the Court hereby DENIES defendants’ motion
to dismiss for spoliation of evidence. All further matters concerning compliance with this
order shall be referred to Judge Stevenson.
The following dates shall be continued sixty (60) days:
1. Fact Discovery Cut-Off is extended to June 29, 2018 for the limited
purposes of the discovery permitted herein;
2. Pretrial Conference/Hearing on Motions in Limine (11:00 A.M.) is
continued from June 18, 2018 to August 20, 2018; and

records. 69 F.3d 337 at 342. In response, defendant “repeatedly claimed that every
single document … had been destroyed in [a] fire.” Id. Afterwards, it came to light that
the defendant had “long known” that the documents survived the fire and had repeatedly
lied about their alleged destruction. Id. at 343. As a result, the district court dismissed
defendant’s counterclaim with prejudice. In affirming the district court’s dismissal, the
Ninth Circuit noted that “the district court implemented alternative sanctions before
ordering dismissal.” Id. at 352.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No. 
Title 

CIVIL MINUTES – GENERAL
‘O’
2:16-cv-08962-CAS(KSx)
Date April 30, 2018
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS,
INC. V. KRISTOPHER HUGHES, ET AL.

3. Jury Trial (9:30 A.M.) is continued from July 10, 2018 to September 11,
2018.
IT IS SO ORDERED.
Initials of Preparer

CV-8962 (04/18)

CIVIL MINUTES - GENERAL

: 
00 
                       CMJ 

28 

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