Worldpay, US, Inc. v. Haydon et al

Filing 109

MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 11/14/2018: For the reasons set forth in the accompanying Memorandum Opinion and Order, Plaintiff Worldpay's motion to compel 80 is granted and its motion for sanctions 87 is denied. Motion to recover fees and costs of filing the motion to compel due 12/4/18; the motion need not be noticed for presentment. Any response will be due by 12/18/18. Filing and briefing of dispositive motions to be conducted per prior order of 10/25/18 105 . Enter Memorandum Opinion and Order. Mailed notice(air, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WORLDPAY, US, INC.,
Plaintiff,
v.
IRINA HAYDON and EUNYT LLC,
Defendants.

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No. 17-cv-4179
Judge John J. Tharp, Jr.

MEMORANDUM OPINION AND ORDER
Plaintiff Worldpay, US, Inc. (“Worldpay”) has brought this suit against defendant Irina
Haydon, a former employee of Worldpay, and defendant Eunyt LLC (“Eunyt”), a corporation
formed by Haydon. Worldpay asserts that at various points throughout the discovery process in
this case, the defendants have failed to live up to their discovery obligations. Accordingly,
Worldpay has filed both a Motion to Compel Discovery and a Motion for Sanctions. For the
following reasons, the Motion to Compel Discovery is granted and the Motion for Sanctions is
denied.
BACKGROUND
Prior to the events at issue in this lawsuit, Haydon was employed as an executive vice
president at Worldpay, a company that operates as a credit card processing service. See Compl. 1,
5, ECF No. 1. Worldpay alleges that, toward the end of her employment at Worldpay, Haydon,
along with several other Worldpay employees, began the process of setting up a separate
corporation called Eunyt. After Worldpay learned of those plans, it fired Haydon in a letter dated
May 11, 2017. See Ex. C, ECF No. 88-1. That letter warned Haydon to “locate and preserve” and
not to “destroy, conceal, or alter” documents relevant to the formation of Eunyt. Id. About three
weeks later, on June 1, 2017, Worldpay filed this lawsuit against both Haydon and Eunyt.

Worldpay made numerous allegations against Haydon, including that she had misappropriated
Worldpay’s trade secrets and confidential information. Worldpay also alleged that Haydon was
liable for breach of contract and tortious interference with business relations. Haydon responded
by filing a counterclaim against Worldpay, alleging that her termination violated the antiretaliation provisions of the False Claims Act and the Sarbanes-Oxley Act.
The discovery process in this litigation has been long and complicated. In March 2018,
Worldpay filed a Motion to Compel Discovery. In it, Worldpay alleged that the defendants’
discovery productions up to that point had been deficient. According to Worldpay, the defendants
had failed to produce responsive documents that were in their possession, and they had overdesignated certain documents as confidential. See Worldpay’s Mot. to Compel Defs.’ Disc. (“Mot.
to Compel”) 5-7, ECF No. 80.
Around the same time, two additional pieces of information came to light. The first was
that an Internet domain that had been created for Eunyt, which included e-mail accounts for Eunyt
employees, had been shut down. The domain had been set up around March 2017, and about five
or six Worldpay employees were provided with Eunyt e-mail addresses. See Written Answers of
Hila Shpigelman ¶¶ 24-26, Ex. E, ECF No. 101-1. The exact date of the domain’s shutdown has
not been determined, but the record evidence indicates that it was active up until at least May 30,
2017, or June 1, 2017. See Mem. of Law in Supp. of Mot. for Sanctions for Spoliation of Evid.
(“Mot. for Sanctions”) 4-5, ECF No. 88. The second piece of information was that in April 2017,
Randy Standish, then a Worldpay employee whom Haydon had hired to do work in connection
with the formation of Eunyt, had copied Haydon’s Worldpay e-mail account, containing about
twenty gigabytes of data, to an e-mail account on the Eunyt domain. See id. at 2. Upon learning
these facts, Worldpay filed a Motion for Sanctions in May 2018, arguing that the defendants were

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responsible for spoliation of evidence, as they had not produced or preserved the electronic data
from the Eunyt domain, including the twenty gigabytes of data that Standish had copied.
Discovery problems persisted throughout the summer. As an attempt to remedy some of
those problems, this Court entered an order on June 29, 2018. That order required that the
defendants produce the entirety of Haydon’s personal Yahoo e-mail account from November 1,
2016, to May 11, 2017, subject only to a privilege review and the protective order governing this
case. See Min. Entry 1, ECF No. 99.
In August 2018, Worldpay filed a Sur-Reply supplementing both its Motion for Sanctions
and its Motion to Compel Discovery with additional information. See generally Pl.’s Sur-Reply in
Supp. of Its Mots. to Compel and for Sanctions (“Sur-Reply”), ECF No. 101. Those motions are
both now before this Court.
DISCUSSION
I.

Motion to Compel Discovery
It is clear that Worldpay never should have had to bring the Motion to Compel Discovery.

As Worldpay argued in that motion, the defendants’ initial discovery productions were missing
significant categories of information. See Mot. to Compel 5-6. They were also over-designated as
confidential, as the entirety of Haydon’s and Eunyt’s productions were marked as either
Confidential or Highly Confidential. See id. at 6-7. The defendants have not even seriously
attempted to contest these points. In fact, the defendants’ motion in response to all of Worldpay’s
various motions is titled “Defendants’ Response to Plaintiff’s Motion for Sanctions”; they do not
even directly respond to the arguments advanced in the Motion to Compel Discovery. See
generally Defs.’ Resp. to Pl.’s Mot. for Sanctions (“Response”), ECF No. 102. They have made
no real attempt to argue that their discovery productions throughout this litigation have been
complete. Indeed, the inadequacy of their productions is underscored by the fact that this Court
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was forced to enter an order on June 29, 2018, requiring that the defendants produce the entirety
of Haydon’s Yahoo e-mail account from November 1, 2016, to May 11, 2017, subject only to the
protective order and a privilege review. See Min. Entry 1, ECF No. 99. Accordingly, the Court
grants Worldpay’s Motion to Compel Discovery.
In its initial Motion to Compel Discovery, Worldpay requested that this Court enter an
order that would compel the defendants to produce additional discovery to make up for what it
argued were deficiencies in the defendants’ original discovery responses. Mot. to Compel 13.
Worldpay reiterated this request in its Sur-Reply in August. Sur-Reply 9. To the extent that this
request is still before this Court, however, it has been overtaken by events. At a hearing in open
court on October 25, 2018, all parties in this litigation agreed that discovery in this matter is closed.
Thus, Worldpay’s request to compel additional production of documents is denied as moot.
Alternatively, Worldpay requests in its final reply for the Court to enter an order that would
limit the production of admissible evidence “to the evidence produced on or before September 24,
2018.” Pl.’s Suppl. Reply in Supp. of Its Mots. to Compel Disc. and Mot. for Sanctions for
Spoliation (“Reply”) 7, ECF No. 103. The basis for this, as Worldpay’s counsel discussed in open
court on October 25, is that Worldpay is concerned that the defendants will attempt to use
documents that were in their possession and responsive to Worldpay’s discovery requests in future
dispositive motions. This request is also denied as superfluous. It is a general proposition of law
that, after discovery is closed, a party may not rely on documents that it had in its possession but
failed to produce during discovery. There is no need for an order that states as much.
Nevertheless, while the Court will not order any additional production of documents or
enter the requested order, it remains the case that Fed. R. Civ. P. 37(a)(5)(A) provides that if such
a “motion is granted—or if the disclosure or requested discovery is provided after the motion was

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filed—the court must” require the party whose conduct necessitated the motion “to pay the
movant’s reasonable expenses incurred in making the motion, including attorney’s fees.” The
Court may not order this payment, however, under three circumstances. These are 1) if “the movant
filed the motion before attempting in good faith to obtain the disclosure or discovery without court
action,” 2) if “the opposing party’s nondisclosure, response, or objection was substantially
justified,” or 3) if “other circumstances make an award of expenses unjust.” Fed. R. Civ. P.
37(a)(5)(A)(i)-(iii).
Because the Court concludes that none of those circumstances is present here, Worldpay is
entitled to an award of attorney’s fees. Worldpay may recover costs and attorney’s fees involved
in preparing and presenting its initial Motion to Compel Discovery. Worldpay may not recover
such fees for all of the subsequent motions, however, nor for other discovery expenses
unconnected to the original motion. The Court is aware that the initial motion has turned into a
much longer saga, and that the discovery process in this case has been long and drawn-out. The
Court concludes, however, that it is sufficient and appropriate to limit its award of costs and
attorney’s fees to those associated with the original motion.
II.

Motion for Sanctions
Worldpay also seeks sanctions based on the defendants’ failure to preserve electronic

evidence. The legal standard regarding when sanctions may be imposed as a consequence of the
spoliation of evidence when that evidence is in electronic form is provided by Federal Rule of
Civil Procedure 37(e). 1 Rule 37(e) was substantially revised in the December 2015 amendments
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The parties disagree as to whether Rule 37(e) is the exclusive means by which the Court
may exercise its authority to order sanctions as a remedy for spoliation of electronically stored
evidence in this case. Worldpay argues that the Court may take such an action under its own
inherent power. See Sur-Reply 7. As the defendants note, however, this interpretation is at odds
with the Advisory Committee Notes to the 2015 amendment to Rule 37(e), which state that the
rule “forecloses reliance on inherent authority or state law to determine when certain measures
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to the Federal Rules. As Magistrate Judge Johnston wrote in Snider v. Danfoss, LLC, No. 15-cv4748, 2017 WL 2973464 (N.D. Ill. July 12, 2017), report and recommendation adopted, 2017 WL
3268891 (N.D. Ill. Aug. 1, 2017), the introductory clause of the current version of Rule 37(e) sets
out five prerequisites that must be met before any sanctions may be imposed. First, the information
at issue must be electronically stored information (ESI). Second, there must be anticipated or actual
litigation. Third, it must be the case that because of the actual or anticipated litigation, the
information should have been preserved. Fourth, the ESI must have been lost because a party failed
to take reasonable steps to preserve it. And fifth, the lost ESI must be unable to be restored or
replaced through additional discovery. See Fed. R. Civ. P. 37(e); Snider, 2017 WL 2973464, at *4.
If all of those prerequisites are met, and the Court also determines that one party was
prejudiced from the loss of the information, the Court “may order measures no greater than
necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1). In addition, if the Court concludes that
the offending party acted “with the intent to deprive another party of the information’s use in the
litigation,” then it may impose more severe sanctions. Fed. R. Civ. P. 37(e)(2). These may include
presuming that the lost information was unfavorable to the party, instructing a jury that it may or
must make that same assumption, and dismissing the action or entering a default judgment. Id.
The central fact that Worldpay points to with respect to its Motion for Sanctions is that the
Eunyt domain—and the e-mail accounts hosted on it—were shut down. Worldpay argues that
those accounts contained information that is relevant to its claims, and that information is now
unavailable because Haydon shut down the domain. Haydon’s story is somewhat different.

should be used.” Fed. R. Civ. P. 37(e), Advisory Committee Notes, 2015 Amendment; Response
3. In any case, the Court need not answer the question definitively here, as the Court declines to
order sanctions under its inherent authority even assuming that such an action would be
permissible. The Court will therefore analyze the issue of whether sanctions should be imposed
exclusively under the heading of Rule 37(e).
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Haydon cites the written testimony of Hila Shpigelman, whom Haydon had hired to do work
related to the formation of Eunyt in early 2017. Shpigelman was one of the people responsible for
setting up the Eunyt domain. Shpigelman states that Haydon did not instruct her to shut down the
entire domain. According to Shpigelman, “Haydon instructed me to only have the email addresses
for all Eunyt employees (except hers) closed. She did not tell me to shut down the entire domain.”
Written Answers of Hila Shpigelman ¶ 36. It is not clear from the record, however, whether this
command was actually carried out as instructed. Nor is it clear, assuming that it was, how exactly
Haydon’s account and the rest of the domain were shut down as well.
In the present case, the five prerequisites in Fed. R. Civ. P. 37(e)’s introductory clause are
all met. The defendants do not dispute that the first three requirements have been satisfied: they
agree that the information stored on the Eunyt domain was ESI; that there was anticipated or actual
litigation; and that as a result of that litigation, the defendants “should have preserved information
on the Eunyt domain.” Response 5. The defendants do, however, deny that Haydon failed to take
reasonable steps to preserve the information. They argue that Haydon’s instructions to
Shpigelman, requesting that the other e-mail accounts be closed but that Haydon’s own account
and the Eunyt domain be preserved, constituted a reasonable step to preserve information. Id. This
argument must fail, however, because even if one accepts that this was actually the instruction that
Haydon gave to Shpigelman, the truth remains that the domain was in fact shut down. Aside from
this instruction, the defendants have cited no other steps—let alone anything that would amount to
a reasonable step—to ensure that the information was preserved.
The defendants also argue that the information that was on the Eunyt domain is otherwise
still available to Worldpay. They make two assertions in this respect. First, they contend that
Worldpay has had the information copied by Standish to the Eunyt domain. See id. While that may

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be true for the subset of information that was copied from Worldpay, it is not true for all of the
other information on the Eunyt domain. Second, the defendants also assert that Haydon’s Yahoo
account “was copied on all matters dealing with Eunyt,” meaning that, because the defendants
were forced to produce the contents of the Yahoo account during the relevant time frame,
Worldpay is able to know how its information was used. See id. at 5-6. It is hardly clear from the
record, however, that this is the case. As Worldpay points out, in one instance, Standish sent an email to both Shpigelman’s and Haydon’s Eunyt accounts; Shpigelman then forwarded it to
Haydon’s Yahoo account. See Ex. B, ECF No. 103-2. This would not have been necessary if
Haydon’s Yahoo account were being automatically copied on all e-mails to her Eunyt account.
Where Worldpay’s claim falters, however, is that the company has not shown that it was
prejudiced by the lack of this information, as required to support sanctions under Rule 37(e)(1), or
that the defendants acted with the requisite intent under Rule 37(e)(2). The primary sanction that
Worldpay has specifically requested is that the Court enter an order including an inference that the
destroyed evidence was unfavorable to the defendants. See Mot. for Sanctions 8; Reply 7. This
requires that the Court determine that the defendants acted “with the intent to deprive [Worldpay]
of the information’s use in the litigation.” Fed. R. Civ. P. 37(e)(2). This is similar to the Seventh
Circuit’s case law, pre-dating the current version of Rule 37(e), which holds that in order to draw
an inference that destroyed information was unfavorable to a party, a court must find that the
evidence was destroyed in bad faith. See, e.g., Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644
(7th Cir. 2008). A document “is destroyed in bad faith if it is destroyed ‘for the purpose of hiding
adverse information.’” Id. (quoting Rummery v. Ill. Bell Tel. Co., 250 F.3d 553, 558 (7th Cir.
2001)).

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Worldpay’s primary argument with respect to intent is straightforward: it is that the
defendants intentionally shut down the Eunyt e-mail accounts containing the relevant ESI. See
Mot. for Sanctions 7. Indeed, Worldpay points out that by the defendants’ own admission, per the
Shpigelman testimony, Haydon ordered Shpigelman to shut down a subset of those e-mail
accounts, including all Eunyt accounts other than her own. See Reply 5. Worldpay also notes that
in Haydon’s own deposition testimony, Haydon appears to state that she told Shpigelman to shut
down the Eunyt e-mail accounts, without making any exception for her own account. See Dep. of
Irina Haydon 183:17–184-10, Ex. 23, ECF No. 96. It is not obvious, however, that an intent to shut
down an e-mail account equates to an intent to ensure that the information on it is permanently
deleted, such that it would never be accessible to anyone again. Nor is it clear, even assuming that
Haydon intended to delete the information permanently, that she did so for the purpose of hiding
adverse information. In all of its various motions, Worldpay has cited no case law that elaborates
on what it means to destroy information with the intent to deprive another party of its use in the
litigation, let alone establishes that the defendants in this case possessed the requisite intent. As a
result, Worldpay has fallen short of demonstrating that the defendants destroyed the information
with the intent to deprive Worldpay of its use in the litigation. Accordingly, the Court declines to
order sanctions under Rule 37(e)(2).
While Worldpay has not explicitly requested any specific sanction less severe than an
adverse inference instruction, the Court could choose to impose one if Worldpay could show that
it was prejudiced by the loss of the information at issue. “To suffer substantive prejudice due to
spoliation of evidence, the lost evidence must prevent the aggrieved party from using evidence
essential to its underlying claim.” In re Old Banc One S’holders Sec. Litig., No. 00-cv-2100, 2005
WL 3372783, at *4 (N.D. Ill. Dec. 8, 2005) (citing Langley by Langley v. Union Elec. Co., 107

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F.3d 510, 515 (7th Cir. 1997)). That means that in order to evaluate whether a party has been
prejudiced, “the court must have some evidence regarding the particular nature of the missing
ESI.” Snider, 2017 WL 2973464, at *5.
In the present case, the “nature of the missing ESI” is that it consisted of information on
the e-mail accounts hosted on the Eunyt domain, presumably including e-mail communications to
and from Eunyt employees. Worldpay argues that it has been prejudiced because the failure to
preserve the Eunyt accounts has prevented it from identifying 1) Worldpay employees that were
involved with the effort to create Eunyt, 2) Worldpay clients that were improperly solicited by
Haydon or Eunyt, and 3) the scope of Worldpay’s proprietary information that the defendants
improperly used. See Mot. for Sanctions 7. The problem, however, is that while Worldpay has
articulated what it hopes that it might have found among the deleted information, it has provided
little reason to be confident that this information actually would have been found had the domain
not been shut down. It has at best an educated guess about what might have been on the domain.
And, once again, throughout all of its motions, Worldpay has failed to cite any case law that
elaborates on what it means to be prejudiced under the meaning of Fed. R. Civ. P. 37(e)(1) or
establishes that it has been so prejudiced. In this context, the Court declines to find that Worldpay
has been prejudiced.
Finally, Worldpay asks that the Court dismiss Haydon’s counterclaims, on the basis that
Haydon has refused to produce information relevant to those counterclaims. See Sur-Reply 5, 9.
This request is likewise denied. The dismissal of a claim (or, here, a counterclaim) is one of “the
most extreme sanctions available pursuant to the Federal Rules of Civil Procedure.” Cohn v.
Guaranteed Rate, Inc., 318 F.R.D. 350, 355 (N.D. Ill. 2016). It is “well settled” in the Seventh
Circuit that “the ultimate sanction of dismissal should be involved only in extreme situations, when

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there is a clear record of delay or contumacious conduct, or when other less drastic sanctions have
proven unavailable.” Rice v. City of Chicago, 333 F.3d 780, 785-86 (7th Cir. 2003) (citations and
internal quotation marks omitted). That standard has not been met here. To the extent that
Worldpay believes that Haydon has failed to produce information sufficient to support her
counterclaims, it may argue as much at summary judgment.
*

*

*

For the reasons stated above, Worldpay’s Motion to Compel Discovery is granted and its
Motion for Sanctions is denied. Worldpay may submit a request to recover costs and attorney’s
fees specifically related to the preparation and initial presentment of its Motion to Compel
Discovery.

Dated: November 14, 2018

John J. Tharp, Jr.
United States District Judge

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