American Health Inc. et al v Chevere et al.
Filing
74
OPINION AND ORDER granting in part and denying in part 65 Motion for Default Judgment. The court hereby ORDERS the Defendants to pay the Plaintiffs the amount of $2,500.00 in attorneys' fees BY NO LATER THAN August 22nd, 2014. Follow Up Deadline due by 8/22/2014. Signed by Judge Juan M. Perez-Gimenez on 8/14/2014. (PMA)
UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF PUERTO RICO
AMERICAN HEALTH INC., ET AL.,
Plaintiffs,
v.
CIV. NO. 12-1678 (PG)
SERGIO CHEVERE, ET AL.,
Defendants.
OPINION AND ORDER
Before the court is the plaintiffs’ motion for default judgment. See
Docket No. 65. For the reasons set forth below, the court GRANTS IN PART AND
DENIES IN PART the plaintiffs’ motion.
A. BACKGROUND
On August 20, 2012, plaintiffs American Health, Inc. (hereinafter “AHI”
or “American Health”), Socios Mayores en Salud, Inc. and Socios Mayores en
Salud Holding, Inc. (collectively hereinafter “Plaintiffs”) filed a complaint
(Docket No. 1) against defendants Dr. Sergio Chevere (“Dr. Chevere”), his wife
Iraida del Rio and the conjugal partner composed by them (hereinafter
“Defendants”) alleging violations to the Computer Fraud and Abuse Act, 18
U.S.C. § 1030; the Stored Wire and Electronic Communications and Transactional
Records Access Act, 18 U.S.C. § 2701, et seq.; and the Wire and Electronic
Communication and Interception of Oral Communications Act, 18 U.S.C. § 2510,
et seq.. The Plaintiffs also invoked supplemental jurisdiction over their
state law claims for breach of contract, damages and violations to the Puerto
Rico Commercial and Industrial Secrets Protection Act, P.R. LAWS ANN. tit. 10,
§ 4131, et seq.. The Plaintiffs then filed an amended complaint on September
25, 2012. See Docket No 4.
According to the Plaintiffs, AHI hired defendant Dr. Chevere as Senior
Vice President on February 7, 2011. Id. at ¶ 9. His position gave him access
to “Confidential Information,” as the term is defined in the Employment
Agreement. Id. at ¶¶ 11, 17. On or around October 1, 2011, Dr. Chevere ceased
being Senior Vice President, and entered into a Consultant Agreement, under
which he agreed to keep confidential and not disclose or use the “Confidential
Information” to which Dr. Chevere had access. Id. at ¶ 21. Unbeknownst to AHI
CIV. NO. 12-1678(PG)
Page 2
at the time, between May 12 and May 14, 2012, Dr. Chevere allegedly
downloaded,
retrieved
and
sergiocheverepmg@yahoo.com,
sent
AHI’s
to
his
personal
Confidential
email
Information
address,
without
its
knowledge and express authorization. Id. at ¶ 21. According to AHI’s records,
Dr. Chevere made 54 wire transmissions to his personal email from AHI’s
information computer system, containing AHI’s proprietary information and
trade secrets, i.e. the Confidential Information. Id. at ¶ 30. In the process
of such unauthorized downloading, retrieval, and transmission, the Plaintiffs
now claim that Dr. Chevere exceeded the limited authorization he had to access
certain
Confidential
Information
within
AHI’s
premises
and
offices
in
violation of the aforementioned statutes. Id. at ¶ 31.
On November 26, 2012, the court granted the unopposed request for a
preliminary injunction, thereby ordering Defendants to return the Confidential
Information in question to Plaintiffs and enjoining them from its use and
disclosure. See Docket No. 11. An Opinion and Order in support was entered on
September 19, 2013. See Docket No. 29. On that same date, the court also
ordered defendants to finally answer the complaint and warned them that
failure to comply would result in the entry of default. See Docket No. 26.
Shortly thereafter, on October 29, 2013, the Plaintiffs filed a motion
requesting that this court find the Defendants in civil contempt for failing
to return to AHI the information subject to the preliminary injunction in
contravention of this court’s orders. See Docket No. 43. Once again, the
Defendants failed to timely oppose this request and on December 2, 2013, the
court found Dr. Chevere to be in contempt of this court and liable in the
amount of $500 per day of non-compliance upon the issuance of the order. See
Docket No. 52. On the next day, the Defendants filed a motion notifying
compliance with this order. See Docket No. 54.
Now pending is the Plaintiffs’ motion requesting that this court find the
Defendants in contempt of court and enter a default judgment against them for
willful
spoliation
of
evidence.
See
Docket
No.
65.
According
to
the
Plaintiffs, the Defendants deleted emails containing AHI’s Confidential
Information, which were pivotal evidence in this case. Id. at pages 1-2. This
alleged spoliation took place despite AHI’s letters notifying Dr. Chevere
before and at the beginning of this litigation of his duty not to tamper or
destroy such evidence. The Plaintiffs also sustain that the spoliation is in
contravention of this court’s orders. Id.
CIV. NO. 12-1678(PG)
Page 3
On August 10, 2012, the Plaintiffs first sent a letter to Dr. Chevere’s
attorney notifying him of his client’s misappropriations of Confidential
Information and resulting violations to several statutes, and requesting that
Dr. Chevere deliver to Plaintiffs’ counsel all Confidential Information
“existing in either paper or electronic format … ” that had been retrieved.
See Docket No. 65-2. Plaintiffs’ counsel also requested therein that Dr.
Chevere state under oath that he had not kept or reproduced such information
and that no other copies existed, regardless of their format. See id.
In the
motion now before this court’s consideration, the Plaintiffs also attached a
letter dated October 30, 2012 advising the Defendants’ attorney of their duty
to appropriately preserve and retain all relevant information in this case,
including all emails sent between his professional and personal electronic
mail accounts. See Docket No. 65-3.
The main dispute at present stems from the allegation that Dr. Chevere
only produced the “bare e-mail threads; it did not include any of the
Confidential Information attached to the emails,” see Docket No. 65 at page
6. In support of Plaintiffs’ position that the Defendants failed to heed the
warning, they make reference to Dr. Chevere’s statement under penalty of
perjury dated December 5, 2012, wherein he admits erasing the emails in
question in October of 2012 (Docket No. 13-1). See Docket No. 65 at page 5.
The Plaintiffs also attach a statement under penalty of perjury from Dr.
Chevere dated December 19, 2013 stating that the documents in question, “if
they were attachments to the e-mails transferred to [his] personal e-mail
account, were deleted” from his account. See Docket No. 65-6. The Plaintiffs’
alleged predicament, as stated in their motion, is that “[w]ithout this
crucial evidence, American Health has been irreparably harmed as it is now
precluded from ascertaining the full extent of Chevere’s misappropriation of
its Confidential Information … .” Docket No. 65 at page 2.
In response, the Defendants timely opposed the Plaintiffs’ request for
entry of default (Docket No. 69) and the Plaintiffs replied thereto (Docket
No. 71). In their opposition, the Defendants suggest that the deletion was
prompted by the Plaintiffs’ request in their letter of August of 2012 and
their request for an injunction enjoining the Defendants from directly or
indirectly possessing these documents. See Docket No. 69.
CIV. NO. 12-1678(PG)
Page 4
B. DISCUSSION
1. Spoliation of Evidence
“Spoliation can be defined as the failure to preserve evidence that is
relevant to pending or potential litigation. Through the court’s inherent
power to manage its own affairs, it may sanction a party for spoliation.”
Jimenez-Sanchez v. Caribbean Restaurants, LLC, 483 F.Supp.2d 140, 143 (D.P.R.
2007). “Relevant evidence is that which may prove or disprove a party’s
liability theory.” Velez v. Marriott PR Management, Inc., 590 F.Supp.2d 235,
258 (D.P.R. 2008). “Litigants have the responsibility of ensuring that
relevant evidence is protected from loss or destruction. ‘A litigant has a
duty to preserve relevant evidence.’” Id. (citing Perez-Velasco v. Suzuki
Motor Co. Ltd., 266 F.Supp.2d 266, 268 (D.P.R.2003)). The obligation to
preserve relevant evidence “arises once litigation is reasonably anticipated.”
Perez v. Hyundai Motor Co., 440 F.Supp.2d 57, 60 (D.P.R. 2006).
[T]his obligation predates the filing of the complaint
and arises once litigation is reasonably anticipated.
… The duty to preserve material evidence arises not
only during litigation but also extends to that period
before the litigation when a party reasonably should
know that the evidence may be relevant to anticipated
litigation … If a party cannot fulfill this duty to
preserve because he does not own or control the
evidence, he still has an obligation to give the
opposing party notice of … the possible destruction of
the evidence if the party anticipates litigation
involving that evidence.
Velez, 590 F.Supp.2d at 258 (citing Perez-Velasco, 271 F.3d at 591) (internal
citations and quotation marks omitted).
Pursuant to the applicable caselaw, before an inference of spoliation may
be drawn, “the party urging that spoliation has occurred must show that there
is evidence that has been spoiled (i.e., destroyed or not preserved).” Gomez
v. Stop & Shop Supermarket Co., 670 F.3d 395, 399 (1st Cir.2012) (citing
Tri–County Motors, Inc. v. Am. Suzuki Motor Corp., 494 F.Supp.2d 161, 177
(E.D.N.Y.2007)). To that effect, the Plaintiffs have undoubtedly established,
by way of Dr. Chevere’s own admissions, that he deleted the very emails that
according to Plaintiffs evinced his violations to the statutes under which
they now seek relief. It is also uncontested that Dr. Chevere deleted these
emails after physically producing them without the attachments they contained,
and that this destruction took place in October of 2012, some weeks after this
litigation had commenced. Therefore, the court finds that the Plaintiffs have
CIV. NO. 12-1678(PG)
Page 5
successfully established that relevant evidence that was admittedly in the
hands of co-defendant Dr. Chevere was not produced during discovery because
it was deleted and destroyed after litigation had already ensued.
Regardless of the Defendants’ justifications for deleting these emails,
as set forth in their reponse, the Plaintiffs suggest in their reply that Dr.
Chevere should have instead delivered the attachments to the emails in
question or forwarded the emails to AHI or its attorney, as opposed to
deleting them. See Docket No. 71 at page 4. The court agrees with the
Plaintiffs. The Defendants could have complied with the Plaintiffs’ request,
their duty to preserve relevant evidence and this court’s orders by either
printing out and producing the entire content of the emails in question,
including their attachments, or forwarding them back unaltered to
the
Plaintiffs’ attorney. Only after taking either course of action should Dr.
Chevere have deleted them.
As a result of Dr. Chevere’s failure to produce or preserve all of the
relevant materials, the Plaintiffs are now unfairly disadvantaged. In essence,
the Plaintiffs are now hindered in their ability to establish that Dr. Chevere
in fact misappropriated Confidential Information by means of these electronic
messages to his personal email account. In addition, as a result of the
destruction of these emails, the Plaintiffs may not be able to adequately
challenge Dr. Chevere’s testimony denying the violations to the statutes under
which the Plaintiffs now seek relief. As a result of the foregoing, the court
must sanction the Defendants for the prejudice Dr. Chevere’s actions have
caused the Plaintiffs. The court thus moves on to determine what is the
appropriate sanction to impose for the spoliation of evidence in this case.
“Once spoliation has been established, the Court enjoys considerable
discretion over whether to sanction the offending party.” Calderon v.
Corporacion Puertorriquena de Salud, No. 12–1006, 2014 WL 171599, at *2
(D.P.R. January 16, 2014) (citing Booker v. Mass. Dep’t. of Pub. Health, 612
F.3d 34, 46 (1st Cir.2010)). “If the court finds that a party is accountable
for the spoliation it may impose sanctions to avoid unfair prejudice to the
opposing party.” Velez, 590 F.Supp.2d at 258. In fact, a court may impose
sanctions even “[i]f such evidence is mishandled through carelessness … .”
Trull v. Volkswagen of America, Inc., 187 F.3d 88, 95 (1st Cir.1999) (citing
Sacramona v. Bridgestone/Firestone, Inc., 106 F.3d 444, 447, 446 (lst
Cir.1997)).
CIV. NO. 12-1678(PG)
Page 6
“Sanctions for spoliation range from dismissal of the action, exclusion
of evidence or testimony or instructing the jury on a negative inference to
spoliation whereby jury may infer that party that destroyed evidence did so
out of realization that it was unfavorable.” Hyundai Motor, 440 F.Supp.2d at
62.
The intended goals behind [sanctions] are to rectify
any prejudice the non-offending party may have suffered
as a result of the loss of the evidence and to deter
any future conduct, particularly deliberate conduct,
leading to such loss of evidence … Therefore, of
particular
importance
when
considering
the
appropriateness of sanctions is the prejudice to the
non-offending party and the degree of fault of the
offending party.
Velez, 590 F.Supp.2d at 258 (internal citation omitted). “The measure of the
appropriate sanctions will depend on the severity of the prejudice suffered.”
Hyundai Motor, 440 F.Supp.2d at 61. “Prejudice will be measured by the degree
in which [a party’s] ‘ability to mount an adequate defense’ has been
hampered.” Id. (citing Perez-Velasco, 266 F.Supp.2d at 269).
In the case at hand, the Plaintiffs seek that this court enter default
against Defendants for the spoliation of evidence, coupled with their pattern
of disobedience of this court’s orders so far. See Docket No. 65 at page 16.
In regards to this sanction, the First Circuit has repeatedly held that
although entry of “default may be a condign sanction when a court is
confronted with a persistently noncompliant litigant,” Hooper-Haas v. Ziegler
Holdings, LLC, 690 F.3d 34, 38 (1st Cir.2012), it is also “strong medicine,
… , and should be prescribed only in egregious cases, … .” Id. at 37-38
(internal citations omitted). The appropriateness of a default sanction must
be evaluated on a case by case basis in light of the totality of the
circumstances. Id. at 38. In the analysis, a court must “balance the
desirability of resolving cases on the merits against the importance of ‘the
orderly and efficient administration of justice.’” Id. at 38 (citing Remexcel
Managerial Consultants, Inc. v. Arlequín, 583 F.3d 45, 51 (1st Cir.2009)).
In the case at hand, the court finds that entry of default may be too
harsh a punishment and that a lesser sanction, such as an adverse inference
instruction, is both available and adequate. “A ‘spoliation’ instruction,
allowing an adverse inference, is commonly appropriate … where there is
evidence from which a reasonable jury might conclude that evidence favorable
to one side was destroyed by the other.” U.S. v. Laurent, 607 F.3d 895, 902
(1st Cir.2010) (emphasis ours).
CIV. NO. 12-1678(PG)
Page 7
In their complaint, the Plaintiffs allege that Dr. Chevere made 54 wire
transmissions to his personal email from AHI’s information computer system,
containing AHI’s proprietary information and trade secrets, see Docket No. 1
at ¶ 30, and that in so doing Dr. Chevere exceeded his authorization to
access, copy, transfer, download, store or remove from the premises any of
AHI’s Confidential Information, id. at ¶¶ 31, 33. The emails that the
Defendants failed to produce and deleted aided to prove these allegations and
would have supported the Plaintiffs’ version of events. Thus, in the context
of the evidence before the court now, we find that an adverse-inference
instruction makes sense here. As a result, the trier of fact in this case will
be instructed to infer that the emails in question did in fact contain
Confidential Information, as defined by the relevant employment and consultant
agreements between Dr. Chevere and AHI, and that the content of these emails
would have been unfavorable to Dr. Chevere.
2. Contempt Sanctions
In addition to the entry of default against Defendants, the Plaintiffs
also
request
an
award
of
attorney
fees
in
light
of
the
Defendants’
contemptuous conduct. See Docket No. 65 at pages 16-17. In order to protect
the due and orderly administration of justice and maintain the authority and
dignity of the court, federal courts are empowered to issue sanctions for
civil contempt. See Goya Foods, Inc. v. Wallack Management Co., 290 F.3d 63,
78 (1st Cir. 2002) (citing Roadway Exp., Inc. v. Piper, 447 U.S. 752, 764
(1980)). “[A] monetary sanction, assessed for the purpose of compensating the
complainant for losses sustained by reason of the contemnor’s acts, is within
the universe of permissible sanctions. … Thus, make-whole relief is a
commonplace sanction for civil contempt. So too are normal embellishments such
as attorneys’ fees and costs.” Goya Foods, 290 F.3d at 78 (internal citations
and quotation marks omitted).
In view of the Defendants’ conduct, which resulted in the Plaintiffs
having to seek this court’s intervention and aid by means of an extensive
motion, in addition to the letters Plaintiffs’ attorneys sent the Defendants’
prior to the filing of such motion, the court hereby ORDERS the Defendants to
pay the Plaintiffs the amount of $2,500.00 in attorneys’ fees BY NO LATER THAN
August 22nd, 2014.
CIV. NO. 12-1678(PG)
Page 8
C. CONCLUSION
Pursuant to the foregoing, the Plaintiffs’ motion (Docket No. 65) is
hereby GRANTED IN PART AND DENIED IN PART.
IT IS SO ORDERED.
In San Juan, Puerto Rico, August 14, 2014.
S/JUAN M. PEREZ-GIMENEZ
JUAN M. PEREZ-GIMENEZ
U.S. DISTRICT JUDGE
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