S.D Ind. Ruling in Case on Former Employee's Theft of Trade Secrets and Confidential Information

This past Thursday, Judge Sarah Evans Barker of the United States District Court for the Southern District of Indiana issued a decision, Bioconvergence LLC v. Attariwala, No. 1:19-cv-01745-SEB-MG, 2021 U.S. Dist. LEXIS 147766 (S.D. Ind. Aug. 5, 2021), denying the Plaintiff's motion for sanctions. The Plaintiff alleged that the Defendant had acquired trade secrets prior to her resignation. A state court entered a preliminary injunction requiring the Defendant to turn over data belonging to the Plaintiff, and preventing her from disclosing it. She was also forbidden to delete the data, and required to turn over the data to the Plaintiff's forensic expert within 24 hours.

After the action was removed to federal court, a new protective order was issued enjoining the Defendant from working from her employer and another competitor of the Plaintiff's. The Court found that the Defendant has saved more than 10,000 of her emails to .pst archives, which included more than 5,000 attachments. The Defendant copied the data to her work tablet, and also transferred it to a hard drive, and uploaded it to a cloud account.

In ruling on the motion, the Court found it relevant that the Plaintiff did not bring a motion to compel the production of the data the Defendant made a copy of. "Singota [the Plaintiff] has made no attempt to secure Ms. Attariwala's [the Defendant] compliance with the Preliminary Injunction Order undercuts Singota's stated belief that its trade secret and confidential information continues to be at a significant or imminent risk of misappropriation or misuse." Id. at *25.

The Court also faulted the Plaintiff for continuing to seek a motion for sanctions and to amend the inspection order, after the Defendant entered bankruptcy proceedings, stopped working for one of its competitors, and was unemployed in the same business sector. "It behooves both sides to curtail their prolonged, scorched-earth litigation strategies and move, with the guidance of the Magistrate Judge, to a prompt resolution of the remaining disputes." Id. at *32.

6th Circuit: Metadata Can Be Discovered With Due Diligence

This week, Judge Helene White issued a decision for the Sixth Circuit, United States v. Mehmood, Nos. 19-1243/19-1667/19-1669, 2021 U.S. App. LEXIS 21132 (6th Cir. July 15, 2021), affirming the district court's decision denying the Defendant-Appellant's motion for a new trial based on the discovery of new evidence. Mehmood was convicted of submitting fraudulent claims to Medicare for providing at home physical therapy.

A motion for a new trial based on newly discovered evidence will only be granted if the evidence was discovered after trial and could not have been discovered before trial with due diligence. The evidence must be material and not merely cumulative or impeaching, and must be likely to lead to a reversal of a conviction. Mehmood based his motion on an expert comparison of documents files which showed missing images from a version of the files taken from a cell phone, and the original complete file. The Defendant-Appellant's counsel took photos of patient files with his smartphone. Mehmood's counsel produced the images after the trial and before his sentencing hearing, but the photos and the documents were both in the possession of Mehmood before the trial. There was no question that the document images could be found with due diligence.

Mehmood also argued that metadata generated by a scanner used to image patient files could have aided his defense. Judge White rejected this argument because the metadata was available before trial. "The time to litigate whether Mehmood could access the metadata was before his trial and conviction. Waiting until after conviction to seek a court order for the government to produce evidence that existed long before does not make that evidence newly discovered. Because we agree with the district court that the forensic reports and metadata do not constitute newly discovered evidence that could not have been discovered earlier with due diligence, we find no abuse of discretion in the district court's refusal to hear testimony addressing the substance of that evidence." Id. at *24.

9th Circuit: No Dismissal Under Rule 37 When Accountant's IT Fails to Preserve Emails

Yesterday, the Ninth Circuit issued a per curiam decision, Winecup Gamble v. Gordon Ranch LLP, No. 20-16411, 2021 U.S. App. LEXIS 18062 (9th Cir. June 17, 2021), reversing and vacating a judgment of the United States District Court for the District of Nevada which granted the Defendant's motion for sanctions under Fed. R. Civ. P 37(e). This rule provides for sanctions when a party fails to take reasonable steps to preserve ESI in the anticipation or conduct of litigation. The Court concluded that the district court should not have dismissed the Plaintiff's case since the Plaintiff was not aware that relevant emails were lost until discovery in the action began.

The Ninth Circuit found no intent to deprive the Defendant of relevant ESI where the Plaintiff's accountant had data, "managed by the IT department at his independent accounting firm. At [the accountant's] deposition, he explained that although he alerted his IT department of the preservation order in 2017, the instruction was not followed (for unknown reasons), and the documents therefore could not be recovered. ", Id. at *2. The Court also noted the Defendant's failure to demonstrate the importance of the lost email data. The Plaintiff was able to attest to the fact that other sources provided the accountant's relevant email data.