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Gentex Corporation v. Brad Sutter

October 24, 2011

GENTEX CORPORATION, PLAINTIFF,
v.
BRAD SUTTER, PATRICK WALKO, BAE SYSTEMS AEROSPACE & DEFENSE GROUP INC., BAE SYSTEMS AH INC. AND BAE SYSTEMS SPECIALTY DEFENSE SYSTEMS OF PENNSYLVANIA INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Caputo

MEMORANDUM

Presently before the Court is Plaintiff's Motion for Default Judgment. Default judgment against Defendants Brad Sutter and Patrick Walko*fn1 is appropriate based on their intentional destruction of relevant evidence, so the Plaintiff's motion will be granted in part. But because genuine issues of material fact remain as to whether the Defendant Corporations engaged in spoliation, the Plaintiff's motion will be denied in part.

I. Background

Because I write for the parties only, I will only summarize the facts relevant to the instant motion.

Plaintiff Gentex instituted this action against the Defendants on July 13, 2007, alleging violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Pennsylvania Uniform Trade Secrets Act, 12 Pa. C.S.A. § 5301 et seq., as well as breach of contract and tortious interference. Gentex alleges that the Defendant Corporations (which I will refer to collectively as "Armor")*fn2 induced several of its employees to quit Gentex and work for Armor in order to obtain Gentex trade secrets involving its design for an Advanced Combat Helmet ("ACH"). According to Gentex, Defendants Patrick Walko and Brad Sutter copied proprietary files when they left Gentex and shared them with Armor in violation of their non-disclosure agreements with Gentex.

On September 27, 2006, upon learning that Sutter was working on ACH design at Armor, Gentex's attorney wrote a letter to Sutter advising him that he might be violating the terms of his non-disclosure agreement as well as Pennsylvania law. (Ex. 11.) The letter asked Sutter to sign an affidavit swearing that he had not used or disclosed trade secrets, advising that if he did not sign it, Gentex's attorney would recommend that the company "take appropriate action to protect its business and prohibit any further breaches of the Agreement." (Id.) Based on the advice of Armor and counsel, Sutter did not sign the affidavit. (Def.'s Answer ¶ 65.) Gentex sent a similar letter to Walko. (Ex. 15 ¶ 17.)

In a business report dated November 22, 2006, Armor documented Gentex's concerns over Sutter's work on the ACH project, noting, "Our attorney believes they are headed toward filing a lawsuit." (Ex. 16 at 2.) On December 8, 2006, Gentex filed suit against Sutter. Armor implemented a litigation hold on January 26, 2007, suspending the document destruction policy and instructing employees to preserve "all paper documents and electronically stored information concerning the Company's relationship with Brad Sutter and his work while at the Company. . . . from March 2006 until the present." (Ex. 28 at 1.) The litigation hold included instructions to preserve backup tapes (Ex. 28 at 3), home and office computers (Ex. 28 at 2), and removable storage media (id.). Armor's counsel recommended that the litigation hold continue "until the resolution of Gentex's dispute with Brad Sutter." (Id. at 3.)

On February 9, 2007, Armor retained First Advantage Litigation Consulting to assist with evidence preservation and analysis. (Ex. B. at App'x 7.) Armor's forensic investigation involved, inter alia: creating ghost images for Sutter, Walko, Vice-President of Engineering Michael Daly, Senior Vice-President Joe Coltman, and Human Resources Director Taryn Sickels in January 2007; creating an image for Sutter's home computer and for six Armor computers belonging to former Gentex employees Walko, Mary Gowat, Scott Hartley, Cheryl Nolan, Sandy Gambutti, and Deborah Panna on March 14, 2007; creating an image of Sutter's Armor laptop on March 15, 2007; creating an image of Nolan's thumb drive on March 29, 2007 and her home computer on April 2, 2007; creating images of thumb drives belonging to Panna, Walko, and Nolan on May 3, 2007; creating special server backup tapes between May and November of 2007; and creating forensic images for seventeen other employee computers between December 13 and 14, 2007. (Id.)

On July 13, 2007, Gentex filed suit against all Defendants, an action which was consolidated with the December 8, 2006 action against Sutter. In a deposition by Gentex, Sutter testified that he took CDs and thumb drives with Gentex information on them when he left Gentex. (Ex. 10 at 23:9-24:2.) He states that he may have shared these with Armor colleagues. (Id. at 66:20-67:2.) Walko testified that Gentex files were stored on Armor servers and shared over Armor's e-mail system. (Ex. 15 ¶ 4, 6, 15, 16, 45.) Gentex now argues that the Defendants intentionally destroyed or allowed the destruction of evidence in the following ways:

Premature Lift of Litigation Hold: According to Dave Morgan, Armor's Network Administrator, "the litigation hold was taken off" a few months after it was put in place. (Ex. 30 at 29:7-19, 31:23-32:2.) Armor disputes this testimony, arguing that the litigation hold remained in place.

Destruction of Server Back-Up Tapes: Morgan testified that Armor regularly made backup tapes. (Ex. 30 at 36:16-24, 123:14-24.) Gentex's expert analyzed the Armor backup system and determined that in March of 2007, Armor should have had twenty-four sets of backup tapes. (Ex. 31 ¶ 289.) Armor states that although it pulled copies of its backup tapes for production, it has been unable to locate them and assumes they were inadvertently recycled in accordance with company policies. Gentex disputes this for two reasons. First, it cites to testimony of one of Armor's IT employees, who stated that when there is a litigation hold, the company uses software that makes it impossible to inadvertently delete relevant tapes. (Ex. 73 at 247:25-248:18.) Second, Gentex states that even if that software was not used, Armor's regular policy was to keep yearly tapes for seven years (id. at 118:6-7), meaning that the 2006 yearly tape should not have been destroyed. Armor also argues that Gentex suffered no prejudice because it created special backups of the servers on or after May 24, 2007, id., but Gentex argues that these special backups cannot preserve evidence from April 2006 to February 2007, the dates when Sutter, Walko, and the other employees used Armor computers. Armor disputes this, arguing that all the backup tapes contain the information from that time period. Gentex responds that Armor's expert stated that he did not know what was on the servers between April 2006 and May 2007 because there were no backup tapes for those dates, and the backup tapes from after May 2007 do not show what was deleted during the earlier time period. (Ex. 66 at 55:10-19, 281:1-8.) Armor further argues that Gentex has not shown that the backup tapes have relevant information that is not duplicative of the information on the computer images. Gentex responds that Armor's expert stated that the ghost images "did not capture the entirety of the file or e-mail servers from those time periods." (Id. at 88:5-8.)

Erasure of Sutter's Home Computer: Sutter had Gentex files on his home and Armor work computers. (Ex. 10 at 22:9-20.) Sutter had been advised to preserve his home and work computers by Armor in a memorandum about the litigation hold (Ex. 28 at 2) and by Gentex's counsel at a deposition on January 29, 2007 (Ex. 23 at 30:17-20). On January 31, 2007, Sutter ran software on his computer to scrub his hard drive. (Ex. 10 at 55:12-15.) He explained that he did this because he was scared because Gentex had sued him. (Id. at 56:22-57:3.)

Destruction of Portable Storage Devices: Sutter used six removable media devices and eight CD-ROMs on his computer at Armor. (Ex. 36 at 5-6.) Two of the CD-ROMS were labeled with the name of a Gentex employee and three others were dated to the period when Sutter worked at Gentex. (Id. at 6.) Sutter said those devices may have contained Gentex information. (Ex. 10 at 61:8-63:1.) Sutter destroyed all of the CD-ROMs with Gentex information that he had in his possession, though he does not recall when. (Id. at 63:21- 64:12.) Sutter also had two thumb drives with Gentex information on them. (Id. at 23:23-24:2.) Sutter purposely destroyed one after his deposition (id. at 24:6-24) and believes that he left the other at Armor (Ex. 61 at 26:4-18). According to Gentex, Armor has only produced one of Sutter's thumb drives, which has music files on it, and no CD-ROMs. Walko also had a CD-ROM with Gentex information on it. (Ex. 62 at 157:3-10.) Walko stated that he destroyed the disc after a conversation with Daly. (Id. at 158:6-10.) According to Walko, in January 2007, when Walko contacted Daly about the litigation hold and explained that he had Gentex information on his computer, Daly told him, "Do what you think you have to do to clean up. If you need to clean up, clean up." (Ex. 15 ¶ 45.) Gentex's expert determined sixty-five thumb drives, one hard drive, and seventeen CD-ROMs were used by former Gentex employees on Armor computers between April 2006 and March 2007. (Ex. 31 ¶ 282.) According to Gentex, Armor failed to produce any of the CD-ROMs.

Armor requested that all employees turn in portable media devices between March 29 and May 3, 2007. (Ex. B at App'x 7.) Armor states that it collected six: Walko turned in a drive, Nolan turned in two drives, and Panna turned in three. All these were provided to Gentex. Further, Armor states that it did not authorize, condone, or instruct either Sutter or Walko to destroy portable media. Finally, Armor states that there is no ...


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