United States District Court, D. Delaware
Theodore A. Kittila, James G. McMillan, III, Halloran Farkas
Kittila LLP, Wilmington, DE - attorneys for Plaintiff
Christopher P. Simon, David G. Holmes, Cross & Simon,
LLC, Wilmington, DE - attorneys for Defendants
NOREIKA, U.S. DISTRICT JUDGE
before the Court is the motion of Defendant Lam Research
Corporation (“Defendant” or “Lam”)
for a finding of spoliation and for sanctions against
Plaintiff CIGNEX Datamatics, Inc. (“Plaintiff or
“CIGNEX”). (D.I. 54). For the reasons set forth
below, the Court DENES Lam's motion.
is a consulting company that provides “services and
products such as open source enterprise portals, content
management, big data analytics, and e-commerce
solutions.” (D.I. 1 ¶ 5). On October 28, 2014,
CIGNEX and Lam entered into a Contract for Independent
Contractor or Consultant Services (“the
Agreement”), whereby CIGNEX agreed to provide software
development services for Lam's MyLam/PK redesign project.
(Id. ¶ 6; see also D.I. 1, Ex. A). The
Agreement provided that, in exchange for CIGNEX's work on
the MyLam/PK redesign project, Lam would pay certain fees to
CIGNEX according to the relevant Statement(s) of Work. (D.I.
1 ¶ 6, see also D.I. 1, Ex. A ¶¶
1-2). The Agreement also provided that Lam would pay CIGNEX
within thirty days of each undisputed invoice for the
project. (D.I. 1, Ex. A ¶ 4). In January 2015, both
parties signed a Statement of Work prepared by CIGNEX, which
outlined the scope and cost of the work on the MyLam/PK
redesign project. (See D.I. 55 at 2; D.I. 61 at 5).
point after CIGNEX began work on the project, problems
developed. CIGNEX was unable to meet certain deadlines
(including completion by July 2015), and the cost of the
project apparently exceeded the initial proposal. (See,
e.g., D.I. 55 at 3). In August 2015, Lam stopped paying
CIGNEX, but CIGNEX nevertheless continued to work on the
MyLam/PK redesign project. (See id.; see also D.I. 1
¶ 11; D.I. 61 at 9-12). Although CIGNEX continued
working, the relationship between the parties deteriorated as
the problems persisted. By late April or early May of 2016,
Lam had suggested it may seek “legal recourse” if
CIGNEX was unable to deliver as promised under the Agreement.
(See D.I. 62, Ex. 1 at CIGNEX00043
(“Legal Option - CIGNEX will not be
able to respond favorably if the options are ‘Deliver
or Legal recourse.'”); D.I. 68, Ex. F at LAM 70
(“Final Delivery Milestone Dates Must Be Met or Legal
Recourse Will Be Required - CIGNEX Response - Under the given
circumstances going thru legal option is not
advisable.”)). A few months later, on or around August
5, 2016, Lam issued a stop work order to CIGNEX for the
MyLam/PK redesign project. (See D.I. 63, Ex. C at
LAM 0113523). On March 24, 2017, CIGNEX filed the present
action, alleging that Lam breached the Agreement. (D.I. 1
¶¶ 15-19). In particular, CIGNEX alleges that it
performed all of its obligations under the Agreement and Lam
has refused to pay the remainder of the amount due for work
that CIGNEX performed - i.e., $434, 096.71. (D.I. 1
On May 15, 2017, Lam answered and filed counterclaims for,
inter alia, breach of contract and unjust
enrichment, seeking recovery of all payments rendered to
CIGNEX over the course of the project. (See, e.g.,
D.I. 8 ¶¶ 25-47). Discovery proceeded.
August 20, 2018, Lam filed the present motion, which seeks a
finding of spoliation and sanctions for CIGNEX's failure
to preserve email documents from certain former CIGNEX
employees involved in the MyLam/PK redesign project.
(See D.I. 54, 55). The motion was fully briefed as
of September 25, 2018 (see D.I. 61, 62, 63, 68), and
the Court heard oral argument on December 13, 2018 (D.I. 78).
At the hearing, the Court ordered CIGNEX to make one of its
employees - Mr. Srinivas Tadeparti - available for deposition
on issues relating CIGNEX's failure to preserve certain
email accounts of former employees. (D.I. 78 at 68:5-15). The
Court also directed Lam to file Mr. Tadeparti's
deposition transcript, and the parties were permitted to
submit letters regarding their views of the importance of Mr.
Tadeparti's testimony. (Id. at 68:16-21). After
the transcript and letters were filed (see D.I. 85,
86, 87), the Court received further submissions regarding
CIGNEX's document retention policies (see D.I.
89, 90, 91, 93).
occurs where: the evidence was in the party's control;
the evidence is relevant to the claims or defenses in the
case; there has been actual suppression or withholding of
evidence; and, the duty to preserve the evidence was
reasonably foreseeable to the party.” Bull v.
United Parcel Serv. Inc., 665 F.3d 68, 73 (3d Cir.
2012). Historically, in the Third Circuit, “a finding
of bad faith [has been] pivotal to a spoliation
determination.” Id. at 79.
court finds that spoliation occurred, it must then determine
an appropriate sanction for the suppression or withholding of
evidence. The sanctions analysis focuses on “(1) the
degree of fault of the party who altered or destroyed the
evidence; (2) the degree of prejudice suffered by the
opposing party; and (3) whether there is a lesser sanction
that will avoid substantial unfairness to the opposing party,
and, where the offending party is seriously at fault, will
serve to deter such conduct by others in the future.”
Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79
(3d Cir. 1994).
37(e) of the Federal Rules of Civil Procedure addresses
sanctions available for a party's loss (or destruction)
of electronically stored information
(“ESI”). Rule 37(e) provides:
If electronically stored information that should have been
preserved in the anticipation or conduct of litigation is
lost because a party failed to take reasonable steps to
preserve it, and it cannot be restored or replaced through
additional discovery, the court:
(1) upon finding prejudice to another party from loss of the
information, may order measures no greater than necessary ...