North American Science Associates, LLC v. Conforti

Background

North American Science Associates, LLC and NAMSA Holdco, LLC, collectively called the NAMSA entities, moved for sanctions against Michael Conforti and Pamela Conforti for destroying electronically stored information, meaning digital information such as files, emails, texts, and data on electronic devices. NAMSA sought adverse inferences against Michael and Pamela and a terminating sanction against Michael, which would have been default judgment.

The dispute followed NAMSA’s acquisition of American Preclinical Services in 2021. Michael had owned and led that business, and Michael and Pamela later worked for NAMSA. NAMSA alleged claims involving trade secrets, confidentiality agreements, and Michael’s restrictive covenant. The court considered alleged destruction or loss of information on USB devices, Michael’s phones and computers, and external hard drives.

Duty to Preserve Evidence

The court held that the duty to preserve relevant evidence did not arise in August 2023. At that time, NAMSA had communicated concerns about possible competition and Michael’s restrictive covenant, but its letter described a rumor, said it would monitor the Confortis’ activities, and did not indicate that litigation was imminent.

The court found that Michael and Pamela reasonably foresaw litigation by December 2023. NAMSA issued a preservation notice to certain employees on December 12, Michael and Pamela spoke with people connected to NAMSA that day, and they consulted their lawyer about potential litigation on December 13. They then worked on draft declarations for which they claimed protection as materials prepared for litigation. The court concluded that their duty to preserve evidence relevant to NAMSA’s noncompetition, confidentiality, and trade-secret claims began no later than December 13, 2023.

January USB Devices

The court denied sanctions based on the USB devices destroyed in January 2024. It found no sufficient evidence that the USB devices destroyed by Michael contained information that should have been preserved or that he destroyed them intending to deprive NAMSA of their use in the lawsuit. The court also found insufficient evidence that Pamela knew about NAMSA’s January 10 town-hall meeting or investigation when she accessed and destroyed USB devices on January 11.

Some information associated with Pamela’s USB devices was potentially related to NAMSA, including older folders and a file resembling information on NAMSA’s servers. But the court noted that the folders and file were created in 2012, that NAMSA appeared to possess the same or very similar information, and that an older APS marketing video remained publicly available on YouTube. The court found the record insufficient to establish the intent required for an adverse inference under Rule 37(e)(2). It also found that a request for lesser sanctions under Rule 37(e)(1) was premature because NAMSA had not adequately shown prejudice or that the information could not be restored or replaced through additional discovery. The denial as to the USB devices was without prejudice.

Michael’s External Drives and Lenovo Computers

The court found that Michael intentionally destroyed evidence during the weekend of February 2, 2024, after NAMSA filed the lawsuit. Michael wiped the Michael Seagate Drive, transferred information to the Western Digital Passport Drive, wiped much of that drive, reset a Lenovo computer, and disposed of that computer. The court found that this conduct was intended to prevent NAMSA from using the information in the litigation. The court also treated the destruction or wiping of the two Lenovo computers and the external drives as covered by its finding.

Because Michael acted with the intent to deprive NAMSA of the information’s use in the litigation, the court determined that an adverse inference was an appropriate sanction under Rule 37(e)(2). An adverse inference permits the court or factfinder to treat lost information as unfavorable to the party that destroyed it, subject to the court’s later wording of the inference. The court rejected NAMSA’s request for default judgment, explaining that the severe sanction was not warranted on this record and that the cases NAMSA cited involved additional violations of court orders.

Pamela and Phoenix Preclinical

The court found no legal or factual basis at that stage to attribute Michael’s intentional destruction to Pamela or Phoenix Preclinical. NAMSA had not provided evidence that Pamela instructed Michael to destroy or wipe the devices, knew about the conduct when it occurred, or agreed to it. The court also found that NAMSA had not established an agency theory that would support extending Michael’s sanction to Pamela or Phoenix Preclinical.

Text Messages and Inherent Authority

The court declined to impose sanctions based on Michael’s deleted text messages. The evidence showed that approximately 25 chat threads had been deleted on or after December 13, 2023, but the deletion date was not known precisely. Michael testified that regularly deleting texts had long been his practice, and the forensic evidence did not show that he deleted messages during the February 2–4 period when he wiped the other evidence. NAMSA also had not shown that the messages could not be obtained from the people who sent or received them or that their loss caused prejudice.

The court also declined to impose sanctions under its inherent authority. It concluded that Rule 37(e) addressed the loss of electronically stored information and that the incomplete discovery record did not justify using inherent authority instead.

Order

Judge Elizabeth Cowan Wright ordered that NAMSA’s motion was GRANTED IN PART AND DENIED IN PART. The motion was granted insofar as Michael should be sanctioned under Rule 37(e)(2) with an adverse inference for destroying evidence relating to the Michael Seagate Drive, Western Digital Passport Drive, and the 2861 and 5951 Lenovo computers over the weekend of February 2, 2024. The court deferred deciding the inference’s language and the parties and claims to which it would apply until discovery was complete and the parties had an opportunity to brief the issue. The motion was otherwise DENIED WITHOUT PREJUDICE.