Storz Management Company et al v. Carey et al

Filing 151

ORDER signed by District Judge Troy L. Nunley on 2/9/2021 DENYING 92 Motion for Reconsideration. (Zignago, K.)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10
11
12

STORZ MANAGEMENT COMPANY, a
California Corporation, and STORZ
REALTY, INC.,

13

Plaintiffs,

14
15
16

v.

No. 2:18-cv-00068-TLN-DB

ORDER DENYING PLAINTIFFS’
MOTION FOR RECONSIDERATION OF
THE MAGISTRATE JUDGE’S RULING

ANDREW CAREY, an individual, and
MARK WEINER, an individual,
Defendants.

17
18

This matter is before the Court on Plaintiffs Storz Management Company (“SMC”) and

19
20

Storz Realty, Inc.’s (“SRI”) (collectively, “Plaintiffs”) Motion for Reconsideration of the

21

Magistrate Judge’s Ruling denying Plaintiffs’ motion for sanctions. (ECF No. 92.) Defendants

22

Andrew Carey (“Carey”) and Mark Weiner (“Weiner”) (collectively “Defendants”) filed an

23

opposition. (ECF No. 96.) Plaintiffs filed a reply. (ECF No. 97.) For the reasons set forth

24

below, Plaintiffs’ Motion for Reconsideration is DENIED.

25

///

26

///

27

///

28

///
1

1

I.

FACTUAL AND PROCEDURAL BACKGROUND

2

Plaintiffs allege that Defendants, who were SMC’s Chief Executive Officer and Chief

3

Financial Officer/Chief Operating Officer, secretly started a competing business while employed

4

by SMC. (ECF No. 7 at 2.) Plaintiffs filed a First Amended Complaint (“FAC”) on January 30,

5

2018, stating claims for: (1) violation of the Defend Trade Secrets Act; 2) breach of fiduciary

6

duty; (3) breach of contract; (4) breach of implied covenant of good faith and fair dealing; (5)

7

intentional interference with contractual relationship; (6) fraud; (7) violation of California’s

8

Unfair Competition Law and (8) violation of the Computer Fraud and Abuse Act. (See id.)

9

On June 3, 2019, Plaintiffs filed a motion for terminating, evidentiary, and/or monetary

10

sanctions based on Defendants’ alleged spoliation of evidence. (ECF No. 78.) Plaintiffs alleged,

11

among other things, that Defendants copied files from SMC-issued computers and servers onto

12

USB drives and then deleted the original files. (ECF No. 79 at 2.) Plaintiffs further alleged

13

Defendants subsequently lost the USB drives they used to copy the information from the SMC

14

computers. (Id.) According to Plaintiffs, Defendants’ actions have irreversibly damaged

15

Plaintiffs’ ability to present their case. (Id. at 3.) The magistrate judge denied Plaintiffs’ motion

16

for sanctions on June 25, 2019. (ECF No. 90.) Plaintiffs filed the instant motion for

17

reconsideration of the magistrate judge’s ruling on July 10, 2019. (ECF No. 92.)

18

II.

STANDARD OF LAW

19

A party may seek reconsideration of a magistrate judge’s ruling pursuant to Local Rule

20

303(c). See also Fed. R. Civ. P. 72(a). The request must specify “the ruling, or part thereof,

21

objected to and the basis for that objection.” L.R. 303(c). The district court reviews the

22

magistrate judge’s ruling under the “clearly erroneous or contrary to law” standard set forth in 28

23

U.S.C. § 636(b)(1)(A). L.R. 303(f); see also Fed. R. Civ. P. 72(a). “[R]eview under the clearly

24

erroneous standard is significantly deferential, requiring a definite and firm conviction that a

25

mistake has been committed.” Exxon Co. v. Sofec Inc., 54 F.3d 570, 576 (9th Cir. 1995), aff’d,

26

517 U.S. 830 (1996).

27

///

28

///
2

1

III.

ANALYSIS

2

Plaintiffs argue the Court should reverse the magistrate judge’s denial of sanctions for

3

three reasons. First, Plaintiffs argue that the magistrate judge applied an incorrect legal standard

4

in concluding Plaintiffs failed to prove willful spoliation. (ECF No. 92 at 3.) Second, Plaintiffs

5

argue the magistrate judge erred in concluding there was insufficient evidence that relevant

6

evidence was “lost.” (Id. at 7.) Third, Plaintiffs argue the magistrate judge erred in finding they

7

had not shown prejudice. (Id. at 9.)

8
9

A district court may sanction a party who has despoiled evidence under two sources of
authority: “the inherent power of federal courts to levy sanctions in response to abusive litigation

10

practices, and the availability of sanctions under Rule 37 against a party who ‘fails to obey an

11

order to provide or permit discovery.’” Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir.

12

2006). To determine whether spoliation occurred, courts generally consider a three-part test: “(1)

13

that the party having control over the evidence had an obligation to preserve it at the time it was

14

destroyed; (2) that the records were destroyed with a ‘culpable state of mind;’ and (3) that the

15

evidence was ‘relevant’ to the party’s claim or defense such that a reasonable trier of fact could

16

find that it would support that claim or defense.” Apple Inc. v. Samsung Elecs. Co., 888 F. Supp.

17

2d 976, 989–90 (N.D. Cal. 2012) (citing cases).

18

If spoliation is found, then courts determine whether and what type of sanctions to issue

19

based on several factors: “(1) the degree of fault of the party who altered or destroyed the

20

evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a

21

lesser sanction that will avoid substantial unfairness to the opposing party.” Id. at 992. While a

22

court does not need to make explicit findings regarding each of the following factors in deciding

23

whether to impose the “harsh sanction” of dismissal, it should consider “(1) the public’s interest

24

in expeditious resolution of litigation; (2) the court’s need to manage its dockets; (3) the risk of

25

prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on the

26

merits; and (5) the availability of less drastic sanctions.” Leon, 464 F.3d at 958 (quoting

27

Anheuser-Busch, Inc. v. Natural Beverage Distributors 69 F.3d 337, 348 (9th Cir. 1995)).

28

Additionally, a finding of “willfulness, fault, or bad faith” is required for dismissal to be proper.
3

1

Id. “A party’s destruction of evidence qualifies as willful spoliation if the party has ‘some notice

2

that the documents were potentially relevant to the litigation before they were destroyed.’” Id. at

3

959 (citation omitted) (emphasis in original).

4

The magistrate judge adequately articulated this legal standard. (ECF No. 90 at 5–7.)

5

After weighing the evidence, the magistrate judge concluded there was insufficient evidence that

6

Defendants’ alleged destruction of evidence was willful. (Id. at 7.) More specifically, the

7

magistrate judge found that Defendants put forth an “equally plausible explanation” for their

8

actions that showed a lack of willfulness. (Id.) As will be discussed in more detail below, the

9

Court has reviewed the parties’ evidence and agrees with the magistrate judge.

10

In opposing Plaintiffs’ motion for sanctions, Defendants filed declarations asserting that

11

they took steps to protect personal information they stored on SMC-issued laptops. (ECF No. 85-

12

2 at ¶¶ 58–60; ECF No. 85-3 at ¶¶ 9–10.) Defendants assert SMC had no policy preventing them

13

from using their SMC laptops for personal purposes and they complied with past practices in

14

removing their information from SMC computers upon their termination. (ECF No. 85-2 at ¶¶

15

55–56; ECF No. 85-3 at ¶¶ 6–8.) Carey states that he believed all SMC-related information

16

would be stored on SMC’s computer network such that a factory reset would not cause any harm

17

to SMC. (ECF No. 85-2 at ¶ 59.) He also states that he had no reason to believe SMC would be

18

suing him. (Id. at ¶ 60.) Weiner states that within days of his firing, he purchased a Western

19

external hard drive and backed up the data stored locally on his SMC laptop. (ECF No. 85-3 at ¶

20

9.) He also states that he turned the hard drive over to his counsel and has not had any access to it

21

since that time. (Id.) These plausible explanations undermine Plaintiffs’ argument that

22

Defendants’ actions constitute “uncontroverted” evidence of spoliation. (ECF No. 92 at 4.) As

23

such, the magistrate judge did not err by finding that Plaintiffs failed to establish that Defendants

24

acted with a level of culpability to justify sanctions, particularly the severe sanctions Plaintiffs

25

seek. See Leon, 464 F.3d at 958.

26

Alternatively, the magistrate judge also stated that “aside from vague and conclusory

27

assertions, [P]laintiffs’ motion fails to establish that any evidence relevant to a claim or defense

28

was in fact lost.” (ECF No. 90 at 7 (emphasis added).) The magistrate judge emphasized that
4

1

Plaintiffs failed to execute a forensic plan to examine what might have been stolen, despite

2

asserting that they had designed a plan to do so. (Id.) The magistrate judge also emphasized that

3

Weiner’s data transfer was accomplished via a Western hard drive that was turned over to defense

4

counsel, but the hard drive had yet to be examined as of the date of the magistrate judge’s order.

5

(Id. at 7–8.) Based on this evidence suggesting that at least some of the files may still exist on

6

other devices, it is unclear what files, if any, have been irretrievably lost. Plaintiffs seem to argue

7

that even if all the transferred files still exist, the metadata information (including original file

8

names, file paths, and the dates associated with the files) was permanently lost. (ECF No. 97 at

9

4.) However, Plaintiffs fail to explain how the metadata goes to the “heart” of their claims. See

10

Leon, 464 F.3d at 960. Along those lines, the magistrate judge found that Plaintiffs “provide[d]

11

no information from which the undersigned could determine to what extent, or even if, the ability

12

to reach a rightful decision has been impaired by Defendants’ actions.” (ECF No. 90 at 8.)

13

Without that information, the magistrate judge was unable to ascertain what sanctions might be

14

appropriate. (Id. at 9–10.) The Court agrees that there is insufficient evidence in the current

15

record to establish “the degree of prejudice suffered” by Plaintiffs and impose sanctions

16

accordingly. Apple Inc., 888 F. Supp. 2d at 992; Leon, 464 F.3d at 958. Therefore, the magistrate

17

judge did not err in declining to impose any sanctions for Defendants’ conduct.

18

It appears to this Court that Plaintiffs merely disagree with the magistrate judge’s

19

findings. That is not a proper basis for reconsideration. See Simmons v. Grissom, No. 1:07-cv-

20

01058-LJO-SAB (PC), 2015 WL 6847885, at *2 (E.D. Cal. Nov. 9, 2015) (quoting U.S. v.

21

Westlands Water Dist., 134 F. Supp. 2d 1111, 1131 (E.D. Cal. March 13, 2001)) (“[M]otions for

22

reconsideration are not available to dissatisfied litigants as a vehicle by which to require the same

23

judge or a different judge to rethink a decision, and a Plaintiff’s disagreement with the Magistrate

24

Judge’s does not provide a basis for reconsideration.”).

25

Having carefully reviewed the relevant documents and for the reasons set forth above, the

26

Court is not left with “a definite and firm conviction that a mistake has been committed.” Exxon

27

Co., 54 F.3d at 576. Accordingly, the Court finds the magistrate judge did not err in denying

28

Plaintiffs’ motion for sanctions.
5

1

IV.

2

For the foregoing reasons, the Court DENIES Plaintiffs’ Motion for Reconsideration.

3
4
5

CONCLUSION

(ECF No. 92.)
IT IS SO ORDERED.
Dated: February 9, 2021

6
7
Troy L. Nunley
United States District Judge

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6