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Steves and Sons, Inc. v. Jeld-Wen, Inc.

United States District Court, E.D. Virginia, Richmond Division

May 1, 2018

JELD-WEN, INC., Defendant.


          Robert E. Payne Senior United States District Judge

         This matter is before the Court on DEFENDANT AND COUNTERCLAIMANT JELD-WEN, INC.'S MOTION IN LIMINE FOR SANCTIONS AS TO JOHN PIERCE FOR THE SPOLIATION OF EVIDENCE (ECF No. 1085). For the reasons set forth below, the motion was denied. See ECF No. 1536.


         The factual and procedural background underlying this dispute is described at length in the Court's recent opinion denying summary judgment on JELD-WEN, Inc.'s ("JELD-WEN") federal and state claims for trade secret misappropriation. See Summary Judgment Op. (ECF No. 1424) at 2-7. However, the facts relevant to this motion are provided here for context.

         In or around March 2015, Steves and Sons, Inc. ("Steves") hired John Pierce ("Pierce")-a former JELD-WEN employee-as a consultant to help develop a doorskin manufacturing plant for Steves and to verify the accuracy of JELD-WEN's key input costs for doorskins that it manufactured (which Steves purchased). Some evidence indicates that Steves paid Pierce to obtain information covertly from JELD-WEN in furtherance of these goals. Pierce allegedly did so by traveling to several JELD-WEN doorskin plants and speaking with employees there. Id. at 3-5.

         At some point, Pierce realized that JELD-WEN might seek to interfere with his relationship with Steves given his confidentiality obligations to JELD-WEN. On April 7, 2015, he sent two e-mails to Steves' principal officers, Edward Steves and Sam Steves II (collectively, "the Steves Brothers''), regarding this possibility. In the first, he stated that he was "interested in talking with you some more about the chance that J[ELD-WEN] might try to make trouble for us if they find out I'm assisting you. . . . [W]ould it be time well spent to speak with your attorney about that?" ECF No. 1086-2 (Under Seal). Then, later that day, he sent another e-mail ("the April 7 E-mail") outlining his "thoughts about potential J[ELD-WEN] retaliation." Although Pierce pointed out that he was "not an attorney" and did not "know much of anything about these things, " he explained that he had testified in another proceeding in which JELD-WEN had sued a former plant manager for trade secret misappropriation when he left to work with a foreign competitor. Pierce asserted that any misappropriation claim against him would be hard to prove since he left JELD-WEN several years ago, and that "[t]here really are very few if any trade secrets to the manufacturing process/' but acknowledged that "some of the financial information that I've passed to you might cause us trouble." Consequently, Pierce said, "[e]ven if J[ELD-WEN] could not win any damages, they might distract the three of us with a suit." ECF No. 1086-1 (Under Seal).

         Pierce further noted that, "[i]f J[ELD-WEN] did file a suit, the first things we would see would probably be an order to send to them copies of all correspondence that we have exchanged, and all reports that I have provided." Accordingly, he asked the Steves Brothers whether it would "be wise for us to take precautions to be sure that we are not forced to send them anything that would give them even the most remote basis to continue with proceedings." He proposed the following steps:

• "Delet[ing] from all of our email servers, programs, and folders all copies of every email and document we have exchanged to this point, including every copy that is in the 'SENT' email folder";
• "Delet[ing] all meeting notes";
• "Hav[ing] me re-compose all of the information that I've sent you to remove indications that any of it is verified current information"; and
• "[S]end[ing] you re-drafted versions of all the information that I have provided so far-to eliminate any references that indicate that current informa[ti]on was passed to me by current [JELD-WEN] employees."

         Taking these "inexpensive precautions . . . before a discovery order is received" would allow Pierce and the Steves Brothers to "comply with any such request with reasonable documents that might not be incriminating to anyone." Pierce concluded by saying, "We can't unring a bell, but perhaps we can replace the bell with one that's more attractive to Steves . . ., and less attractive to J[ELD-WEN]." Id.

         Edward Steves called Pierce later that evening, but the substance of their conversation is unknown. Based on a later e-mail from Pierce to Edward Steves, it appears that Edward Steves may have requested-either during that call or some other call-that they communicate only by telephone. See ECF No. 1087-3 (Under Seal). However, because Pierce's e-mail followed a detailed e-mail from Pierce to Sam Steves about molded doorskin manufacturing, it is far from certain that Pierce and Edward Steves ever agreed to change their communications in that way.

         In any event, on June 29, 2016, Steves filed its antitrust and breach of contract claims against JELD-WEN. Summary Judgment Op. at 7-8. JELD-WEN subsequently served a subpoena on Pierce in connection with that action on or around January 12, 2017. See Subpoena Response (ECF No. 1087-5) (Under Seal) at 3.[1] Pierce initially produced only thirty-five documents in response to the Subpoena. He indicated that he had not retained any "analysis, recommendations, communications, and reports" that he prepared for Steves or sent to the Steves Brothers, mostly for security reasons. Pierce also explained that the only responsive documents were on his personal computer, and that

it was my policy to delete all such copies under my control within a couple of weeks after sending them to Edward Steves or Sam Steves. . . . There were never any follow-up questions and all copies of such documents within my control or possession were deleted from my personal computer within no more than 30 days of sending to Edward Steves or Sam Steves. ... I never received any substantial email or physical mail communications from Edward Steves, or Sam Steves on any matter, and I never received any email or other electronic or any paper communication from any other party mentioned anywhere in this subpoena. In the course of my normal practice of keeping my personal email "INBOX" folder clean, the few insignificant emails that I did receive from Edward Steves or Sam Steves were also deleted soon after receipt.[2]

Id. at 3-4. Pierce's document retention approach notwithstanding, most or all communications between him and the Steves Brothers appear to have been obtained through discovery from Steves. Nonetheless, at his deposition on May 1, Pierce produced another sixteen pages of documents, including notes reflecting Pierce's conversations with JELD-WEN employees and summarizing issues to discuss with the Steves Brothers.

         Shortly thereafter, the Court allowed JELD-WEN to amend its Answer to add counterclaims against Steves for, inter alia, misappropriation of JELD-WEN's trade secrets. Although those claims were based in part on Pierce's conduct, only Steves was named as a counter-defendant. The Court later granted separate motions to intervene as counter-defendants by Pierce and the Steves Brothers, and, as a result, Pierce is an intervenor-counter-defendant to both misappropriation claims. Summary Judgment Op. at 8-10. However, JELD-WEN declined to amend its counterclaims to add Pierce as an actual counter-defendant.

         Based on Pierce's failure to retain documents after he sent the April 7 E-mail, JELD-WEN now seeks as a spoliation sanction a jury instruction: (1) that Pierce deleted or failed to retain relevant documents, which the jury may infer that Pierce did because the documents were unfavorable to Pierce; and (2) that the jury may consider Pierce's actions when assessing his intent and knowledge.[3]


         I. Legal Standard

         The parties quibble over the applicable spoliation standard and JELD-WEN's burden of proof, so both issues require some clarification at the outset.

         Spoliation is "the destruction or material alteration of evidence or to the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation." Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001). A court's power to sanction spoliation derives from two sources: (1) Fed.R.Civ.P. 37(e); and (2) its "inherent power ... to redress conduct 'which abuses the judicial process''' Id. (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991)); see also Jenkins v. Woody, No. 3:15CV355, 2017 WL 362475, at *12 (E.D. Va. Jan. 21, 2017); CAT 3, LLC v. Black Lineage, Inc., 164 F.Supp.3d 488, 498 (S.D.N.Y. 2016). Courts have broad discretion when deciding whether to impose spoliation sanctions. Turner v. United States, 736 F.3d 274, 281 (4th Cir. 2013). However, "the applicable sanction should be molded to serve the prophylactic, punitive, and remedial rationales underlying the spoliation doctrine." Silvestri, 271 F.3d at 590 (internal quotations omitted). Appropriate purposes inclprophylactic, punitive, and remedialude: "(1) deter [ring] parties from engaging in spoliation; (2) plac[ing] the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restor[ing] the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party. '" Eshelman v. Puma Biotechnology, Inc., No. 7:16-CV-18-D, 2017 WL 2483800, at *4 (E.D. N.C. June 7, 2017) (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)); see also Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995) (describing similar goals).

         Rule 37(e) governs the spoliation analysis for electronically stored information ...

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