1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
90899954.v1
JOHN J. SHAEFFER (SBN 138331)
JShaeffer@FoxRothschild.com
JEFF GRANT (SBN 218974)
JGrant@FoxRothschild.com
CHARLIE NELSON KEEVER (SBN 322664)
CNelsonKeever@FoxRothschild.com
FOX ROTHSCHILD LLP
Constellation Place
10250 Constellation Blvd, Suite 900
Los Angeles, CA 90067
Telephone: (310) 598-4150
Facsimile: (310) 556-9828
Attorneys for Defendants JASON HUANG, an individual;
RULONG CHEN, an individual; JIANPING HUANG a/k/a
JAMES HUANG, an individual
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CTC GLOBAL CORPORATION, a
Delaware corporation,
Plaintiff,
v.
JASON HUANG, an individual;
RULONG CHEN, an individual;
JIANPING HUANG a/k/a JAMES
HUANG, an individual; and DOES 1-15,
inclusive,
Defendant.
Case No. 8:17-CV-02202-AG (KESx)
Judge Andrew J. Guilford
OPPOSITION TO PLAINTIFF’S
MOTION DEFAULT JUDGMENT
[DKT. NO. 168]
JASON HUANG, an individual,
Counterclaimant,
v.
CTC GLOBAL CORPORATION, a
Delaware Corporation,
Counterdefendant.
Complaint Filed: December 18, 2017
Date: April 15, 2019
Time: 10:00 a.m.
Place: Courtroom 10-D
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 1 of 26 Page ID #:12592
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
i
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
TABLE OF CONTENTS
I. BACKGROUND ............................................................................................. 2
A. The Timing of the Alleged Misconduct ................................................ 2
B. Plaintiff Has an Enormous Record at Its Fingertips ............................. 3
1. Jason Huang’s Work Laptop ...................................................... 3
2. Jason Huang’s iPhone and the WeChat Messages ..................... 4
3. The iPad ...................................................................................... 5
4. USB Drives ................................................................................. 6
5. Jason Huang’s Dropbox Account ............................................... 8
6. JASON PC .................................................................................. 8
II. EVIDENTIARY OBJECTIONS ..................................................................... 9
A. Andrew Crain ........................................................................................ 9
B. Michael Kunkel ................................................................................... 10
III. LEGAL STANDARD ................................................................................... 11
IV. ARGUMENT ................................................................................................ 12
A. CTC Failed to Meet its Burden to Establish that Relevant
Evidence Was Destroyed .................................................................... 12
B. CTC Failed to Meet its Burden to Establish that it Suffered
Prejudice .............................................................................................. 16
C. CTC Cannot Establish the Bad Faith Needed for Drastic
Sanctions ............................................................................................. 18
D. CTC Failed to Show an Entitlement to Terminating Sanctions ......... 20
V. CONCLUSION ............................................................................................. 21
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 2 of 26 Page ID #:12593
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
ii
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
TABLE OF AUTHORITIES
Page(s)
Federal Cases
Bautista v. L.A. County,
216 F.3d 837 (9th Cir. 2000) ............................................................................... 20
Coburn v. PN II, Inc.,
2010 WL 3895764 (D. Nev. Sept. 30, 2010) ................................................ 11, 16
Computer Task Group, Inc. v. Brotby,
364 F.3d 1112 (9th Cir. 2004) ............................................................................. 12
In re Delta/Airtran Baggage Fee Antitrust Litig.,
770 F.Supp.2d 1299 (N.D. Ga. 2011) ................................................................. 17
E.I. DuPont de Nemours & Co. v. Kolon Indus., Inc.,
2011 WL 1597528 (E.D. Va. Apr. 27, 2011) ...................................................... 16
Eaton Corp. v. Appliance Valves Corp.,
790 F.2d 874 (Fed. Cir. 1986) ............................................................................. 16
FMC Techs. Inc. v. Edwards,
2007 WL 1725098 (W.D. Wash. June 12, 2007) ................................................ 17
Frey v. Gainey Trans. Servs.,
2006 WL 2443787 (N.D. Ga. Aug. 22, 2006) ..................................................... 17
Goodman v. Staples The Office Superstore,
644 F.3d 817 (9th Cir. 2011) ............................................................................... 11
Hardwick Bros. Co. II v. United States,
36 Fed. Cl. 347 (Fed. Ct. Cl. 1996) ..................................................................... 17
Henry v. Gill Indus., Inc.,
983 F.2d 943 (9th Cir. 1993) ............................................................................... 11
Ingham v. United States,
167 F.3d 1240 (9th Cir. 1999) ........................................................... 11, 14, 15, 16
Kelly v. Echols,
2008 WL 4163221 (E.D. Cal. 2008) (in accord) ................................................ 10
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 3 of 26 Page ID #:12594
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
iii
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Kinnally v. Rogers Corp.,
2008 WL 4850116 (D. Ariz. Nov. 7, 2008) ...................................... 11, 12, 16, 17
United States v. Kitsap Physicians Serv.,
314 F.3d 995 (9th Cir. 2002) ............................................................................... 14
Lampi Corp. v. Am. Power Prods., Inc.,
No. 93 C 1225, 2004 WL 1656547 (N.D. Ill. July 22, 2004) ............................. 16
Leon v. IDX Systems Corp.,
464 F.3d 951 (9th Cir. 2006) ............................................................. 12, 18, 19, 20
United States v. Maxxam, Inc.,
2009 WL 817264 (N.D. Cal. Mar. 27, 2009) ...................................................... 14
Med. Lab. Mgmt. Consultants v. Am. Broad. Cos.,
306 F.3d 806 (9th Cir. 2002) ............................................................................... 18
In re Napster, Inc. Copyright Litig.,
462 F.Supp.2d 1060 (N.D. Cal. 2006)................................................................. 12
In re Nat’l Century Fin. Enters., Inc. Fin. Inv. Litig.,
2009 WL 2169174 (S.D. Ohio July 16, 2009) .............................................. 16, 17
Pitney Bowes Government Solutions, Inc. v. United States,
94 Fed. Cl. 1 (2010) ....................................................................................... 14, 15
Porter v. Martinez,
941 F.2d 732 (9th Cir. 1991) ............................................................................... 20
Samaritan Health Center v. Simplicity Health Care Plan,
459 F.Supp.2d 786 (E.D. Wis. 2006) .................................................................. 10
Smith v. City of Oakland,
2007 WL 2288328 (N.D. Cal. Aug. 9, 2007) ...................................................... 10
Travelers Cas. & Sur. Co. of Am. v. Telstar Const. Co., Inc.,
252 F.Supp.2d 917 (D. Ariz. 2003) ..................................................................... 10
Wanderer v. Johnston,
910 F.2d 652 (9th Cir. 1990) ............................................................................... 11
United States ex rel. Wiltec Guam, Inc. v. Kahaluu Constr. Co.,
857 F.2d 600 (9th Cir. 1988) ............................................................................... 20
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 4 of 26 Page ID #:12595
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
iv
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Other Authorities
Fed. Rule Civ. Proc. 43 ............................................................................................. 10
Fed. Rule Civ. Proc. 56 ............................................................................................. 10
Fed. Rule of Evid. 801(d) ......................................................................................... 10
Local Rule 7-7 .......................................................................................................... 10
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 5 of 26 Page ID #:12596
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Defendants Jason Huang, Rulong Chen, and Jianping Huang aka James
Huang (“Defendants”) oppose Plaintiff CTC Global Corporation’s (“CTC”) Motion
for Default Judgment (“Motion”) (Dkt. No. 168). As set forth below, CTC has
unprecedented access to the electronic record. When CTC suspended Jason Huang
and walked him out of the company, they seized both his laptop and his iPhone.
Jason Huang did not know this suspension would occur, and CTC does not even
allege that Jason Huang spoliated anything in anticipation of CTC’s action. CTC
therefore had unfiltered access to everything on those devices, irrespective of
whether the material was relevant to this dispute, related to CTC’s business or
highly personal family and health information. CTC has it all.
The relief requested by CTC – a default judgment – is extraordinary and,
here, entirely unwarranted. Indeed, CTC failed to establish spoliation, much less an
entitlement to terminating sanctions because of spoliation. At best, CTC alleges
that Defendants may have had copies of files otherwise available to CTC that it
could not retrieve. Here, CTC has access to all relevant evidence, including all
evidence (relevant or otherwise) from 2014 and 2015, when the alleged bad acts
occurred. Other than conjuncture backed by inadmissible evidence,1 nothing
suggests that any relevant materials are missing (much less any critical documents).
Further, CTC has failed to put forward any evidence of bad faith destruction, much
less establish bad faith destruction with clear and convincing evidence as is
required for a finding of spoliation. Finally, all of the factors courts consider when
assessing an entitlement to terminating sanctions militate against such a remedy.
CTC’s claims lack substantive merit. As set forth in Defendants’ Motion for
Summary Judgment or, in the Alternative, Partial Summary Judgment, there is no
genuine issue of material fact supporting any of their claims or defenses.
1 CTC’s Motion is founded entirely on inadmissible evidence in the form of a non-
sworn expert report and testimony from an individual that CTC disclosed as neither
a percipient nor an expert witness. See Section II, infra.
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 6 of 26 Page ID #:12597
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
2
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Acknowledging the fact that it cannot achieve a jury verdict in its favor, CTC seeks
to prevail on his claims through other mechanisms. In another motion, CTC asked
the Court to terminate Jason Huang’s employment claims as a sanction. Here, CTC
asks the Court to award CTC judgment on its own claims as a sanction. Both of
CTC’s prayers are groundless.
I. BACKGROUND
A. The Timing of the Alleged Misconduct
CTC has unfiltered access to all of the evidence (relevant, irrelevant,
business, or personal) during the relevant time. Considerations of spoliation must
start and end with an understanding of whether the purportedly missing materials
are relevant and whether the absence of this material prejudices the moving party.
All of the venom set forth in CTC’s Motion ignores the fact that – at least insofar as
the relevant time is concerned – CTC has it all.
While CTC complains that it was not provided with unfiltered access to
certain evidence (including WeChat messages) created in late 2016, the wrongful
activity CTC alleges occurred well prior. Specifically, CTC alleges that Defendants
engaged in wrongful conduct by supposedly sharing information with Xinbo in the
Summer of 2014 (Dkt. No. 1, ¶¶ 34-47), failing to inform CTC of a business
opportunity in September of 2014 and “late 2014” (Dkt. No. 1, ¶¶ 48-52, 55-56)
and engaging in self-dealing from September 2014 (Dkt. No. 1, ¶¶ 58). Indeed, the
thrust of CTC’s complaint is that Jason Huang improperly shared confidential
information with his brother James Huang, which was then used by his brother to
file a provisional patent application in September 2014.
CTC’s complaint is predicated on conduct occurring in 2014 and 2015. As
set forth below, CTC – as Jason Huang’s former employer – has unadulterated
access to mountains of evidence generated during those years. CTC’s Motion,
however, seeks a default for the supposed destruction of evidence dated well after
the relevant period. CTC’s Motion is a red herring, meant to distract from the fact
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 7 of 26 Page ID #:12598
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
3
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
that the relevant evidence – i.e., material from 2014 and 2015 – does not support its
claim. Its request for a default is simply a mechanism for CTC to achieve what it
certainly cannot do at trial – judgment in its favor.
B. Plaintiff Has an Enormous Record at Its Fingertips
CTC’s request for sanctions must be judged against the voluminous record
CTC enjoys, a subject CTC carefully avoids. By any measure, that volume of
information is enormous and includes a wealth of information far beyond what
would be permissible under governing discovery rules. As set forth herein, CTC
has unfiltered, carte blanche access to the electronic devices and accounts most
likely to have relevant evidence. The reality is that none of these mountains of
evidence contained evidence to support CTC’s claims, so CTC is instead left to
claim that there must be some other evidence, which it does not have, to support its
claims.
1. Jason Huang’s Work Laptop
CTC issued Jason Huang a laptop to use in conjunction with his work for
CTC and a joint venture of which CTC is a member. Jason Huang used the laptop
to conduct business. He also used it for personal matters, and it contained personal
photographs, communications with his family and highly confidential health
records. The laptop was seized from him on December 6, 2016, when Jason Huang
was told he was going to be put on probation (and was later fired). It could be and
was immediately accessed and reviewed by CTC and its investigators.
CTC’s computer forensic expert, Andrew Crain, conducted deletion analysis
to determine whether Jason Huang had deleted anything from the laptop. See
concurrently-filed Declaration of Jeff Grant (“Grant Decl.”), Exhibit “Ex.” A,
Transcript from Deposition of Andrew Crain (“Crain Depo.”), at 12:7-10. When
files are deleted from a device, there is system data that can identify what was
deleted and, often, allows the recovery of the deleted material itself. Crain Depo. at
10:6-24. While CTC’s expert testified that he could not recall the results of those
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 8 of 26 Page ID #:12599
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
4
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
efforts, he critically does not opine that anything – whatsoever – was deleted from
the computer. Crain Depo. at 12:7-13:1. Furthermore, while evidence can be
concealed by physically damaging a storage device and/or by encryption, there is
no such evidence of either in this case. Crain Depo. at 10:25-12:2.
2. Jason Huang’s iPhone and the WeChat Messages
CTC also seized Jason Huang’s iPhone when it forced him out of the
company. This was Jason Huang’s primary communication device – business and
personal. CTC’s forensic expert was able to analyze both an image of the device
and the device itself. Crain Depo. at 13:23-14:6. Mr. Crain conducted an analysis
to determine whether anything was deleted from the device. Crain Depo. at 14:7-
15:11. Crain opined that one application, WeChat, was removed from the phone,
but does not assert that anything else was deleted or removed. Id.
In addition to a copy of the device as it existed when Jason Huang was
booted, CTC also had at least one additional image, or backup, of the device dated
June 2016. The iPhone was “backed up” or “synced” with Jason Huang’s work
laptop. On that laptop was a version of the iPhone that reflected the contents of the
iPhone as of June 2016. That backup did have a copy of the WeChat application,
as well as a copy of all of Jason Huang’s WeChat messages from 2013 through
June 2016. Crain Depo. at 75:13-20. Further still, CTC was able to find another
backup of the WeChat messages dated September 2016, enabling CTC to access all
of Jason’s WeChat’s through that date. Grant Decl., Ex. B, Transcript from the
Deposition of Jason Huang (“Jason Huang Depo.”), at 97:18-98:3. In other words,
CTC has unfiltered access to all of Jason Huang’s WeChat messages (business,
personal and otherwise), except for those messages dated September 2016 to
December 2016. This haul amounted to approximately 28,000 messages. Grant
Decl., Ex. C, Transcript from the Deposition of Rulong Chen (“Rulong Chen
Depo.”), at 97:18-98:3; 3/4/19 Goodman Decl., Ex. A, Dkt. No. 168-3, at p. 13.
Further, while Mr. Crain testified that the WeChat application was removed
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 9 of 26 Page ID #:12600
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
5
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
from Jason Huang’s iPhone sometime between June of 2016 and December 2016,
he pointedly does not asserted that any WeChat messages were actually deleted.
Crain Depo. at 78:9-79:23. WeChat is a cloud-based messengering service. It
syncs messages from the cloud to all connected devices. Id. Deleting the
application on one device does not delete the account or the messages themselves.
Id. The messages still exist, they are just not on the specific device that no longer
has the WeChat application. Id.
As conceded by CTC’s expert, the nature of CTC’s complaint with respect to
the WeChat messages is that CTC was, itself, not provided unfettered access to the
material. That material still exists. There is no evidence that any messages were
actually deleted by Jason Huang, any of the other Defendants, or anyone else.
3. The iPad
CTC’s Motion features vitriolic language regarding an iPad that Defendants
returned to CTC. CTC’s hyperbole is, however, nothing more than smoke and
mirrors. Jason Huang and Rulong Chen, who are husband and wife, purchased an
iPad in 2012 for their own personal use. Grant Decl., Ex. C, Transcript from the
Deposition of Rulong Chen (“Rulong Chen Depo.”), at 97:12-21. They did so with
their own money, and produced documents establishing that they used their own
money, in 2012, to purchase the device. Id. Jason Huang used the device
sparingly, and for a short time. Rulong Chen Depo. at 92:20-93:24. His use was
limited to reading CTC-related emails and Skype. Id. CTC has a copy of this
device too, as it was “backed up” onto Jason Huang’s work laptop on August 15,
2013. 3/4/19 Goodman Decl., Ex. A, Dkt. No. 168-3, p. 9, § 8.e. and fn. 6.
The iPad was given to Rulong Chen’s parents years before Jason Huang was
terminated and the iPad was handed over to CTC. Rulong Chen Depo. at 95:1-
97:2. The iPad was reset and configured for Ms. Chen’s parents to use and was
initialized with her family’s Apple ID. Id. It contained family pictures, medical
records and social security numbers about her parents and her daughter. Id. The
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 10 of 26 Page ID
#:12601
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
iPad did not contain any business information relevant to this dispute. Id.
Despite the fact that Jason Huang and Rulong Chen purchased the iPad with
their own money, and the fact that it was being used by Rulong Chen’s parents for
personal reasons, CTC demanded that Defendants hand over the device. Rulong
Chen Depo., at 98:6-21. To get the iPad, CTC engaged in a shakedown. CTC
withheld a $2,800 check to reimburse Jason Huang for travel expenses incurred in
conjunction with his work for CTC. Id. CTC stated that it would not reimburse
Jason Huang for those travel expenses – as it was legally obligated to do – unless
Defendants gave CTC the iPad. Id. Jason and Rulong relented to CTC’s tactics as
the value of the reimbursement check for $2,800 far exceed the value of the four-
year old iPad. Id. Therefore, Rulong Chen took the iPad from her parents, wiped it
clean of confidential information about her parents and daughter, and delivered the
device to CTC. Id.
CTC complains vociferously about Rulong Chen’s decision to delete highly
confidential information about her parents and daughter prior to returning the iPad
to CTC. Of course, CTC was not entitled to such information. CTC’s assertions of
spoliation and/or the improper destruction of relevant evidence are baseless.
4. USB Drives
Jason Huang used USB drives in connection with his work for CTC,
including his work as the General Manager for the JV in China. 12/2/18 Huang
Declaration, Dkt. 127-1, ¶ 3. He occasionally had to upload large files to USB
devices (flash drives) so that he could share files with his colleagues in the JV and
CTC – as was his obligation as General Manager and acting CTO at CTC. Id.
Often, there was no other reasonable way for him to share the files. They were
sometimes too large to email. Id. At other times, Jason Huang did not want to
include the confidential documents in an email, as the recipient at the JV did not
have a corporate email account. Id. CTC’s own expert conceded that Jason acted
wisely, as such accounts pose security risks. Crain Depo. at 42:19-43:2.
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 11 of 26 Page ID
#:12602
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
7
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Additionally, CTC does not argue that Defendants did anything but copy
information to these drives. There is no allegation whatsoever that anything copied
from these drives includes information that is not otherwise already in the
possession of CTC.
CTC does not argue that Jason Huang’s use of USB devices to share files in
accordance with his responsibilities was inappropriate. Rather, CTC points to
testimony from Rulong Chen regarding CTC-branded promotional USB drives,
which contained CTC marketing material. Motion at p. 11 (citing Rulong Chen
Depo. at 75:21-76:19). The portions of testimony not referenced by CTC tell the
complete story. Rulong Chen Depo. at 75:21-77:9. Shortly after being forced out
of the company, having his electronic devices stripped from his person, and being
shaken down to hand over the aforementioned iPad, Jason and Rulong Chen
understandably sought to distance themselves from the company. Id. They threw
away all of the CTC branded items in their home, including mugs, promotional
sample conductors and CTC branded USB drives. Id. There is, however, no
evidence that these promotional USB drives contained anything other than the
promotional information that CTC included on the drives. There is no evidence
that any of these drives were the USB drives that Jason Huang used for work.
CTC also asserts that Rulong deleted material in anticipation of litigation.
Motion at 9 (citing Rulon Chen Depo. at 122:20-123:6). Again, CTC has pulled
segments of testimony from their context and mischaracterized their import.
Rulong Chen Depo. at 122:3-124:7. The files about which the testimony concern
were in a CTC shared drive – i.e., a folder that synced with CTC’s own system. Id.
Consequently, this conduct could not, by definition, resulted in the deletion of non-
duplicative documents. Instead, and as appropriate, Defendants removed their
access to CTC’s own servers so there could be no allegation that they copied CTC
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 12 of 26 Page ID
#:12603
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
8
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
information from those servers after they had been suspended.2 Similarly, CTC
does not even attempt to show that any Defendant copied anything from CTC’s
servers, which they then deleted from the servers, information that could easily be
obtained, if it existed, from CTC’s own server logs.
5. Jason Huang’s Dropbox Account
Jason Huang’s work laptop was configured to “sync” with the cloud-based
file repository Dropbox. Crain Depo. at 61:9-62:16. In other words, all of the files
that were stored on Jason Huang’s Dropbox account were automatically copied
over to this work laptop. Id. There is no evidence that there were any files in Jason
Huang’s Dropbox account that were not also included in his work laptop. Id.
Again, CTC has carte blanche access to all of those files – irrespective of whether
they are relevant to this litigation or, for that matter, whether they were of a
business or personal nature. A simple review of the logs on Jason Huang’s laptop
would show whether any file uploaded to the Dropbox account was removed
thereafter from the laptop, and CTC has not come forward with any such evidence.
6. JASON PC
Finally, CTC’s Motion points to Jason Huang’s personal laptop, a Microsoft
Surface Pro, commonly referred to as “JASONPC.” Jason Huang obtained this
device in August of 20153 by using credit card reward points. Concurrently-filed
Declaration of Jason Huang, ¶ 2 and Ex. 1. This was a device that Jason Huang
used for his personal business and was not “synced” with his CTC iPhone. 1/2/19
Huang Decl., Dkt. 127-1, ¶ 7. However, the computer routinely overheated. Id., ¶
2 Indeed, had other CTC representatives put additional material into the shared
drive after termination, those materials would have been synced to Rulong Chen’s
laptop. There is little doubt that, had additional CTC materials appeared on Rulong
Chen’s devices after the date of her termination, CTC would be seeking all manner
of sanctions against her for the same.
3 Significantly, Jason Huang did not even own this device during the period that
CTC contends he engaged in nefarious conduct with his brother and other entities
in China. As set forth supra, the alleged misconduct occurred before the date that
the laptop was acquired.
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 13 of 26 Page ID
#:12604
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
9
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
8. He spent a substantial time with Microsoft in an effort to find a solution to the
problem. Concurrently-filed Declaration of Jason Huang, ¶ 3. Eventually, Jason
Huang simply gave up trying to get the machine to work. Id., ¶ 4. He donated it to
charity on January 17, 2017 with the hopes that someone might be able to fix it or
use it for parts.4 Id. and Ex. 2.
While Jason Huang would use this computer to check his emails, including
personal email accounts with both Google and Yahoo, both of these email accounts
still exist and there is no allegation that Jason Huang deleted anything from these
personal accounts. Moreover, to the extent CTC does not believe Jason Huang, it
could have easily served subpoenas on either of these third-party hosts for any
email correspondence relating to its allegations in this case. CTC’s decision not to
pursue this available avenue is telling.
II. EVIDENTIARY OBJECTIONS
CTC’s Motion is predicated on assertions made by two computer forensic
experts – Andrew Crain and Michael Kunkel. However, none of this constitutes
evidence that is properly before the Court. As set forth below, this “evidence”
should be ignored and, for that reason alone, the Motion should be denied.
A. Andrew Crain
CTC’s Motion relies primarily on the unsworn expert report of Mr. Crain.
Goodman Decl., Dkt. No. 168-3, Ex. A. Mr. Crain’s unsworn expert report does
not constitute admissible evidence necessary to support CTC’s Motion.
CTC must, of course, proffer admissible evidence to support its Motion.
4 CTC’s Motion screams that there is no “verifiable evidence” that the device was
donated, but in the next sentence acknowledges that Defendants produced a receipt
from Goodwill reflecting the donation of two computers. Motion at 10:15-22. The
Motion further argues that the receipt reflects the donation of two computers, and
that “there has been no disclosure of the second computer.” This is simply not true.
Rulong Chen testified under examination by CTC’s own counsel that the second
computer was an old HP device that was used for personal purposes prior to 2010.
Rulong Chen Depo. at 152:5-153:12.
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 14 of 26 Page ID
#:12605
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
10
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Local Rule 7-7 (“Declarations shall contain only factual, evidentiary matter and
shall conform as far as possible to the requirements of F.R.Civ.P. 56(c)(4).”);
Travelers Cas. & Sur. Co. of Am. v. Telstar Const. Co., Inc., 252 F. Supp. 2d 917,
923 (D. Ariz. 2003) (evidence submitted in connection with dispositive motion to
dismiss “must comply with Federal Rules of Evidence”). A declaration is a
document by which facts that are not part of the record may be submitted to the
Court in conjunction with a motion. See F.R. Civ. P. 43(e). “A declaration is a
substitute for oral testimony and, therefore, must conform to the same requirements
of competency that would apply if the declarant were to testify.” Rutter Group
Prac. Guide, Fed. Civ. Pro. Before Trial, Ch. 12-B, 12:58.
Here, the Mr. Crain’s expert report is unsworn. It is well established that
unsworn expert reports are inadmissible hearsay and cannot, therefore, support
CTC’s Motion.5 Smith v. City of Oakland, 2007 WL 2288328, at *4 (N.D. Cal.
Aug. 9, 2007) (“The Court agrees with Defendants that the report should be stricken
because it is hearsay. Although the report was signed by Mr. Clark and attached to
a declaration of Plaintiffs’ counsel . . . the report was not sworn to by Mr. Clark.”);
see also Kelly v. Echols, 2008 WL 4163221 (E.D. Cal. 2008) (in accord). The
report must, therefore, be ignored.
B. Michael Kunkel
CTC also relies on, to a lesser extent, a declaration from Michael Kunkel that
was filed in this case on December 5, 2018. Dkt. No. 111. However, Mr. Kunkel is
not properly a witness that can provide testimony in this case. He wass not
identified in CTC’s Rule 26 disclosures and was not identified by CTC as an expert
5 While the expert report is inadmissible for the purposes of providing a basis for
CTC’s Motion, the report is admissible as a party admission by Defendants.
Federal Rules of Evidence Rule 801(d); see also Samaritan Health Center v.
Simplicity Health Care Plan, 459 F.Supp.2d 786, 799 (E.D. Wis. 2006) (expert
report is self-serving hearsay if offered by party retaining expert, but admissible as
admission if offered by opponent).
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 15 of 26 Page ID
#:12606
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
11
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
witness. Grant Decl., ¶ 5. As such, CTC cannot rely upon his testimony either as a
percipient or expert witness. “If a party fails to provide information or identify a
witness as required by Rule 26(a) or (e), the party is not allowed to use that
information or witness to supply evidence on a motion, at a hearing or at trial,
unless the failure was substantially justified or is harmless.” Fed. R. Civ. Proc.
37(c)(1); Goodman v. Staples The Office Superstore, 644 F.3d 817, 827 (9th Cir.
2011) (striking untimely expert disclosures and barring expert testimony at trial).
The two pieces of “evidence” relied upon by CTC are both inadmissible and
its Motion should be rejected as unsupported. However, as set forth below, CTC’s
Motion should be denied even if the Court were to consider and weigh this
inadmissible evidence.
III. LEGAL STANDARD
A party seeking spoliation sanctions bears the burden of proof on several key
points. First, the movant must prove “that relevant evidence has indeed been
destroyed.” Kinnally v. Rogers Corp., 2008 WL 4850116, *5-6 (D. Ariz. Nov. 7,
2008). Second, the movant must establish substantial prejudice to its case: the
“spoliation of evidence must damage the right of a party to bring an action.”
Ingham v. United States, 167 F.3d 1240, 1246 (9th Cir. 1999). Third, where, as
here, the movant seeks terminating sanctions, the movant must show that the
records were destroyed “with a culpable state of mind.” Kinnally, 2008 WL
4850116, at *3. “To warrant sanctions for spoliation under Rule 37, clear and
convincing evidence is required. Coburn v. PN II, Inc., 2010 WL 3895764, at *3, n
(D. Nev. Sept. 30, 2010). Whether Plaintiffs can show prejudice is a “key factor”
in evaluating sanctions. Henry v. Gill Indus., Inc., 983 F.2d 943, 948 (9th Cir.
1993); see also Wanderer v. Johnston, 910 F.2d 652, 656 (9th Cir. 1990).
Further, a request for the most severe sanction available – a default judgment
– imposes an even higher burden. This drastic remedy is appropriate only where a
party has “engaged deliberately in deceptive practices that undermine the integrity
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 16 of 26 Page ID
#:12607
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
12
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
of judicial proceedings ... willfully deceived the court and engaged in conduct
utterly inconsistent with the orderly administration of justice.” Leon v. IDX Systems
Corp., 464 F.3d 951, 958 (9th Cir. 2006). Thus, in addition to the factors identified
above, the court must consider:
(1) the existence of certain extraordinary circumstances, (2) the
presence of willfulness, bad faith, or fault by the offending party, (3)
the efficacy of lesser sanctions, and (4) the relationship or nexus
between the misconduct drawing the default sanction and the matters
in controversy in the case.
In re Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060, 1070 (N.D. Cal. 2006)
(citing Halaco Eng'g Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988)). Finally,
appellate courts consider whether, before entering a default judgment for alleged
spoliation, the trial court “(1) explicitly discussed the alternative of lesser sanctions
and explained why it would be inappropriate; (2) implemented lesser sanctions
before ordering the case dismissed; and (3) warned the offending party of the
possibility of dismissal.” Computer Task Group, Inc. v. Brotby, 364 F.3d 1112,
1115 (9th Cir. 2004).
IV. ARGUMENT
A. CTC Failed to Meet its Burden to Establish that Relevant
Evidence Was Destroyed
CTC cannot meet the first standard for spoliation sanctions because any
relevant evidence that was deleted was maintained on other devices or in the cloud.
“In cases where courts have found spoliation, there was a clear showing of
destruction of evidence.” Kinnally, 2008 WL 4850116, at *6 (citing cases). Here,
CTC seized, copied, and reviewed Jason Huang’s laptop and his iPhone at a time
when Jason Huang had no expectation that such a seizure was forthcoming.6
6 While CTC will likely point its investigation concerning James Huang’s
provisional patent filing, which included CTC’s counsel interviewing Jason Huang,
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 17 of 26 Page ID
#:12608
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
13
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Additional “backups” of that iPhone, dated June 2016, were also available to CTC,
and apparently CTC found another backup of his WeChats on another device
through September 2016. CTC had all of Jason Huang’s WeChats up to that period
(around 28,000) to review – irrespective of whether those messages related to CTC
business or constituted communications between a husband, on the one hand, and
his wife and family, on the other. Critically, CTC’s own expert conceded that there
was no evidence that any of the WeChat messages were deleted. WeChat is a
cloud-based service and the deletion of the application from one device does not
result in the destruction of the messages themselves. Moreover, all of the WeChats
tied to James Huang’s CTC email account are still available from a third-party –
i.e., WeChat. Finally, but without limitation, CTC also had a copy of everything
stored on Jason Huang’s Dropbox account.
CTC makes hay out of the fact that Rulon Chen reset an iPad before giving it
to CTC. Again, this is pure smoke and mirrors. The iPad was a personal device
that was purchased with Defendants’ personal funds. Jason Huang admittedly used
it to read emails and conduct Skype meetings. CTC, however, does not and cannot
assert that it does not have those emails as it has a copy of all of the emails to and
from Jason Huang’s CTC email account on its own servers. Additionally, the most
that would have been available with respect to any Skype call would be the parties
participating in the call and the time of the call. Again, this basic information also
remains available from third parties.
Prior to 2015, this iPad was reset and given to Rulong’s parents to use.
Nothing suggest that any of the Defendants anticipated being sued by CTC at that
time (2015) or that the iPad may have included relevant information in a case that
Jason Huang understood that this investigation was completed in September 2016,
and had turned up nothing. CTC did not suspend Jason Huang until three months
after this investigation was completed and, tellingly, the cited reason for his
termination had nothing to do with his brother’s patent filing.
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 18 of 26 Page ID
#:12609
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
14
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
CTC might bring in 2017. The Defendants only gave CTC the personal device
after being strong armed by CTC. As noted above, CTC refused to reimburse Jason
Huang for travel expenses of approximately $2,800 unless and until CTC received
the device. Given the value of the years-old iPad, Defendants handed it over to get
the reimbursement check. While Rulong reset the device again before she turned it
over to CTC, there is no evidence that the device had any discoverable information
on it at that time since it had been reset years before in conjunction with it being
turned over to Rulon Chen’s parents.
CTC also claims spoliation concerning Jason Huang’s personal computer,
JASONPC. However, the unrebutted testimony in the record establishes that it was
used for personal business, was never “synced” with Jason’s iPhone, was
overheating and was donated for parts. There is no evidence that it contained any
material relevant to this action that is not available from other sources.
CTC would have the Court ignore this testimony because it came from the
Defendants, but that is not the law. The fact that the moving party makes
accusation of spoliation does not undermine the testimony of those involved with
the alleged spoliation. In other words, the accusations leveled by CTC’s lawyers do
not magically invalidate the sworn testimony from witnesses with personal
knowledge. See, e.g., Ingham, 167 F.3d at 1246 (relying on testimony of alleged
spoliator’s employee that he was “not aware of any documents” that were not
produced); Pitney Bowes, 94 Fed. Cl. at 8-9 (despite movant’s speculation about
loss of evidence, court accepted government’s explanation that it had produced true
and accurate copies of files that had been deleted from another computer); United
States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002) (affirming
finding of no spoliation where movant offered no evidence to rebut defense
testimony that documents were innocently destroyed pursuant to retention policy);
United States v. Maxxam, Inc., 2009 WL 817264, at *11 (N.D. Cal. Mar. 27, 2009)
(denying sanctions and rejecting opinion of movant’s expert as “speculation” in
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 19 of 26 Page ID
#:12610
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
15
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
light of accused spoliator’s explanation that files were deleted in ordinary course of
business).
Rulong Chen’s deletion of a CTC “shared folder” does not constitute the
destruction of evidence. Instead, it blocked Defendants access to CTC servers –
consistent with the request made to them by CTC in connection with their
suspension. As noted above, upon learning that Jason Huang had been pushed out
of the company, Rulong Chen deleted a folder on her laptop that contained CTC
information and was “synced” to CTC’s system. Ms. Chen did so given that she
understood that her work with the company was concluding, and did not want or
need CTC’s documents any longer – and certainly did not want additional
documents to be “shared” to her computer. In any event, it was a “shared” or
“synced” folder, and CTC therefore, and by definition, has whatever material was
set forth therein.
Of course, no destruction of evidence occurs when a copy of evidence
deleted from one source has been saved and is available from another source. In
Ingham, for example, the plaintiff sought spoliation sanctions against the United
States because an IRS “disclosure officer” had shredded certain audit reports. 167
F.3d at 1243, 1246. The Ninth Circuit affirmed the district court's refusal to impose
sanctions because the “shredded materials were merely copies of original reports”
that had been produced to the plaintiff. Id.
Likewise, in Pitney Bowes Government Solutions, Inc. v. United States, 94
Fed. Cl. 1, 8-9 (2010), the plaintiff sought spoliation sanctions because the
defendant’s contracting officer had destroyed relevant rating sheets from his
personal computer. The court refused to impose sanctions, however, because the
scoring sheets were recovered from computer backup tapes and produced in
discovery. Id. Axiomatically, because the documents had been produced from
another source, there was “no longer a question of spoliation because the
documents were never in fact destroyed.” Id. at 9. The “fundamental issue
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 20 of 26 Page ID
#:12611
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
16
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
concerns the existence of the [documents], not the continued presence of those
sheets on [a particular person’s] computer.” Id. Decisions reaching a similar result
are legion. See, e.g., Coburn v. PN II, Inc., 2010 WL 3895764, at *3 (D. Nev. Sept.
30, 2010) (no spoliation sanctions where plaintiff deleted relevant emails, because
emails had been saved to another device; “[t]o warrant sanctions for spoliation
under Rule 37, clear and convincing evidence is required”); Eaton Corp. v.
Appliance Valves Corp., 790 F.2d 874, 878 (Fed. Cir. 1986) (no spoliation
sanctions because the “evidence destroyed had been produced”); Lampi Corp. v.
Am. Power Prods., Inc., No. 93 C 1225, 2004 WL 1656547, at *2 (N.D. Ill. July 22,
2004) (no sanctions for deleting relevant sales summary reports, because the
defendant produced the underlying raw data for the reports); In re Nat'l Century
Fin. Enters., Inc. Fin. Inv. Litig., 2009 WL 2169174, at *11-12 (S.D. Ohio July 16,
2009) (although relevant notes were destroyed, spoliation sanctions were denied
because the party produced other documents containing the same content).
There is no showing that any relevant, non-duplicative material was deleted.
CTC’s claims of deletion rely on a “fertile imagination” rather than “concrete
evidence.” See E.I. DuPont de Nemours & Co. v. Kolon Indus., Inc., 2011 WL
1597528, at *12 (E.D. Va. Apr. 27, 2011); Kinnally, 2008 WL 4850116, at *5-6
(party may not obtain spoliation sanctions by “simply cit[ing] facts that suggest
evidence may have been destroyed”).
B. CTC Failed to Meet its Burden to Establish that it Suffered
Prejudice
CTC’s motion should be denied for the further reason that CTC cannot show
any significant prejudice to its case. Spoliation sanctions are warranted only if
deletions substantially damaged CTC’s ability to bring or prove up its trade secret,
breach of contract or breach of fiduciary claims. See, e.g., Ingham, 167 F.3d at 1246
(rejecting sanctions where there was no prejudice). While CTC may not be able to
substantiate any of its claims against Defendants now that discovery is closed, it
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 21 of 26 Page ID
#:12612
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
17
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
cannot in any way tie that failing to anything other than speculation that evidence of
liability must have existed but was deleted.
CTC’s claims of prejudice ring hollow. CTC offers only unsubstantiated
speculation that Defendants deleted or destroyed files that were not otherwise
available on other devices or in the cloud. But even if CTC had evidence that any
files are now missing, CTC has not shown that any missing evidence is “critical” or
even important to CTC’s claims. See In re Delta/Airtran Baggage Fee Antitrust
Litig., 770 F. Supp.2d 1299, 1308, 1310 (N.D. Ga. 2011) (“Where ... the moving
party is not able to establish that the allegedly destroyed evidence is critical to the
case, courts have consistently refused to impose spoliation sanctions.”); Frey v.
Gainey Trans. Servs., 2006 WL 2443787, at *8 (N.D. Ga. Aug. 22, 2006) (no
prejudice because missing evidence “not crucial” to plaintiff’s claims); Hardwick
Bros. Co. II v. United States, 36 Fed. Cl. 347, 417-18 (Fed. Ct. Cl. 1996) (no
spoliation where movant submitted no reliable evidence to show deleted files were
“critical or controlling in the resolution of issues” and declining to “speculate on the
nature or content” of missing documents); Kinnally, 2008 WL 4850116, at *5
(spoliation sanctions presume that “relevant” evidence has been destroyed); In re
Nat'l Century, 2009 WL 2169174, at *12 (movants must show prejudice and
“corroborating” evidence showing that the missing evidence would have been
favorable).
Here, CTC had unfettered access to Jason Huang’s iPhone, his laptop, and
had all of his WeChat messages through September 2016. CTC has a copy of every
document in his Dropbox account. While CTC complains that it was not given
unfettered access to WeChat messages from September 2016 to December 2016,
there is no evidence that any messages were deleted and, in any event, none of
those messages are relevant, much less critical. The acts CTC complains of
occurred in 2014 and 2015. Communications that occurred years later are plainly
not critical to a fair resolution of this matter. See, e.g., FMC Techs. Inc. v.
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 22 of 26 Page ID
#:12613
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
18
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
Edwards, 2007 WL 1725098, at *10 (W.D. Wash. June 12, 2007) (distinguishing
Leon and denying sanctions because “[p]laintiffs’ allegations regarding the
destruction of computer files are anything but clear and this Court cannot find
Plaintiffs’ assertion any more or less credible than Defendants’ explanations”). In
this case, CTC gained access to information far beyond anything permitted by
Federal Rules of Civil Procedure and, while readily available, CTC took no action
to seek discovery from third party cloud-based hosts that retained copies of the
Defendants’ personal communications.
C. CTC Cannot Establish the Bad Faith Needed for Drastic Sanctions
“A determination of bad faith is normally a prerequisite to the imposition of
dispositive sanctions for spoliation... and must be made with caution.” Micron,
2011 WL 1815975 at *13; see also Med. Lab. Mgmt. Consultants v. Am. Broad.
Cos., 306 F.3d 806, 824 (9th Cir. 2002) (affirming denial of sanctions because no
“bad faith or intentional conduct”). “The fundamental element of bad faith
spoliation is advantage-seeking behavior by the party with superior access to
information necessary for the proper administration of justice.” Micron, 2011 WL
1815975, at *12.
As an initial matter, CTC ignores that no litigation at all had been filed at the
critical time. To be sure, courts have held that the duty to preserve may begin
earlier, but the fact that there was no ongoing litigation is relevant to the existence
of bad faith and whether there was any intent to suppress evidence. Litigation began
on December of 2017. The conduct that is the subject of CTC’s Motion occurred at
least one year prior. Cf. Leon, 464 F.3d at 959 (spoliation occurred well after
litigation commenced and after the spoliator was on notice that the evidence was
relevant).
A good example of the requisite culpable mental state can be found in Leon,
the primary case authority submitted by CTC. Dr. Leon worked as the Director of
Medical Informatics for a healthcare software technology company. Leon, 464 F3d
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 23 of 26 Page ID
#:12614
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
19
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
at 955. Dr. Leon complained of mismanagement and false reporting in a federally-
funded project of his employer called SAGE. Id. After being placed on unpaid
leave, Dr. Leon asserted under various laws that he had been retaliated against. Id.
Shortly after the commencement of the litigation, the employer requested that Dr.
Leon return his company laptop. Id. at 956. Dr. Leon asked to retain the laptop
while on leave, given that he was still interacting with auditors on the SAGE
project. Id. The employer’s attorneys granted this request, but stated clearly in two
separate letters that Dr. Leon needed to “preserve all data” on the laptop and
“ensure no data on the laptop is lost or corrupted.” Id.
Despite being on notice after receiving these exhortations, Dr. Leon
nevertheless intentionally deleted the entirety of the data on his laptop’s hard drive
prior to later returning it to the employer. Id. In addition to deleting all of the files
on the hard drive, Dr. Leon then “wrote a program” and employed it on his laptop
one week before returning it that was designed to “‘wipe’ any deleted files from the
unallocated space in the hard drive.” Id. The court characterized these efforts to
destroy records as “extraordinary.” Id. at 957. Moreover, Dr. Leon then declined to
appear at the court's evidentiary hearing on spoliation, and also appeared to “be
without remorse” and “extremely evasive” in his written submissions. Id. at 956.
As a result, the court approved the sanction based on Dr. Leon's “very egregious”
conduct relating to his laptop.
The present case involves conduct that is distinguishable and unrelated. CTC
seized Jason Huang’s laptop and iPhone when it pushed him out of the company.
He did not retain the electronic devices and, obviously, could not have deleted any
material therefrom. Defendants did not “wr[i]te a program” to “wipe” any device.
Jason Huang and Rulong Chen threw away all CTC-branded promotional material
when CTC turned on Jason, including mugs, conductor samples, and CTC-branded
USB sticks that contained CTC marketing material. However, they did so because
CTC had made the couple into archenemies and no longer wanted additional
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 24 of 26 Page ID
#:12615
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
20
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
reminders of the company. Given the unrebutted fact that these USB devices may
or may not have ever even contained a single work-related document, such conduct
is hardly “extraordinary.”
D. CTC Failed to Show an Entitlement to Terminating Sanctions
Even if CTC could satisfy the three prongs set forth above, which would
entitle it to some spoliation remedy, it cannot meet the high bar required for
obtaining terminating sanctions. The Ninth Circuit follows a five-factor test to
determine whether a terminating sanction is warranted: (1) the public’s interest in
expeditious resolution of litigation; (2) the court’s need to manage its docket; (3)
the risk of prejudice to the party seeking sanctions; (4) the public policy favoring
disposition on the merits; and (5) the availability of less drastic sanctions. Bautista
v. L.A. County, 216 F.3d 837, 841 (9th Cir. 2000); Porter v. Martinez, 941 F.2d
732, 733 (9th Cir. 1991). None of these factors weigh in favor of a terminating
sanction here.
As to the first two factors, the sanctions issue has not consumed significant
court resources (until this motion), nor has it caused any delay in the proceedings.
Moreover, CTC has come forward with no evidence that its ability to go to trial has
been impaired or that this issue threatens to “interfere with the rightful decision of
the case.” Leon, 464 F.3d at 959. Given its unfettered access to all of Jason
Huang’s materials – business and professional – CTC cannot seriously contend that
it has been forced to rely on “incomplete or spotty” evidence at trial. Id. The
fourth factor – the public policy favoring a disposition on the merits – necessarily
“weighs against the sanction.” United States ex rel. Wiltec Guam, Inc. v. Kahaluu
Constr. Co., 857 F.2d 600, 604 (9th Cir. 1988). Given the mountain of evidence in
the record, there can be no question that the parties’ claims can, and will, be
decided on the merits.
Finally, there are clearly sanctions available that are less drastic than
terminating sanctions, such as every other type of sanction. As set forth above,
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 25 of 26 Page ID
#:12616
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
21
OPPOSITION TO PLAINTIFF’S
MOTION FOR DEFAULT JUDGMENT [DKT. NO. 168]
however, Defendants submit that, as CTC cannot meet its burden to establish
spoliation in the first instance, no sanctions are appropriate.
V. CONCLUSION
For all of the foregoing reasons, the Court should deny CTC’s Motion.
Dated: March 18, 2019 Respectfully Submitted,
FOX ROTHSCHILD LLP
By:/s/ John Shaeffer
John J. Shaeffer
Jeff Grant
Charlie Nelson Keever
Attorneys for Defendants JASON
HUANG, an individual; RULONG
CHEN, an individual; JIANPING
HUANG a/k/a JAMES HUANG,
an individual
Case 8:17-cv-02202-AG-KES Document 178 Filed 03/18/19 Page 26 of 26 Page ID
#:12617
