Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_03-cv-01968/USCOURTS-caed-2_03-cv-01968-2/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

COMMUNICATIONS CENTER, INC.,

NO. CIV. S-03-1968 WBS KJM

Plaintiff, 

v. MEMORANDUM AND ORDER RE:

DISCOVERY SANCTIONS

MATTHEW J. HEWITT, and PACIFIC

CREST RESEARCH CORPORATION,

Defendants.

----oo0oo----

The assigned magistrate judge in this case issued

findings and recommendations on April 5, 2005 in which she

recommended sanctioning defendants for their violation of a

discovery order. The magistrate judge recommended that the

sanction be in the form of an order striking defendants’ answer

and entering a default against defendants on certain causes of

action of the complaint. The magistrate judge also ordered

defendants to pay plaintiff’s attorneys’ fees incurred in

bringing the motion for sanctions in the amount of $145,811.75. 

This court now reviews those findings pursuant to Rule 72 of the 

Federal Rule of Civil Procedure.

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I. Factual and Procedural Background

Defendant Hewitt was formerly employed by plaintiff

Communications Center, Inc. (“CCI”). After his departure, Hewitt

started his own business, defendant Pacific Crest Research

Corporation. (“PCRC”). Plaintiff alleges that defendants

committed fraud, misappropriated trade secrets, interfered with

prospective economic advantage, engaged in unfair competition,

illegally intercepted communications, and breached

confidentiality and confidence. (Compl.).

On May 20, 2004, the magistrate judge ordered

defendants to 

provide, for copying and inspection, a compact disc

containing mirror images of any hard drives of the computers

in defendants’ possession that contain documents responsive

to plaintiff’s request for production of documents. Said

production initially will be identified for “Attorney’s Eyes

Only” and subject to the protective order previously entered

in this action. Following the production, the parties will

cooperate in good faith to eliminate entirely from documents

relevant to this action the “Attorney’s Eyes Only”

designation, or to redesignate such documents as

“Confidential,” to the extent possible and consistent with

the protective order.

(May 20, 2004 Order at 1-2). “Mirror images” replicate “bit for

bit, sector for sector, all allocated and unallocated space,

including slack space, on a computer hard drive.” (April 5, 2005

Findings and Recommendations at 3).

Defendants do not dispute that they did not produce

mirror images as ordered. Instead, defendants produced three

compact discs on May 28, 2004 representing some of the

information on the relevant computers. Defendants produced ten

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more CDs on July 6, 2004. (Id.).

On or about July 13 through July 16, 2004, defendant

Hewitt installed a program called Evidence Eliminator on three of

the four computer hard drives at issue in this case. Hewitt

reformatted the fourth hard drive. (Id.). Hewitt claims he ran

Evidence Eliminator on the three hard drives to eliminate

internet histories containing pornographic images and also to

eliminate any evidence of an on-line dalliance with a woman other

than his wife. (Id.). Subsequently, defendant Hewitt produced

mirror images of all four hard drives. (Id.). Plaintiff’s

computer forensic expert testified before the magistrate judge

that Hewett’s actions prevented mirror images of the hard drives

as they existed on May 20, 2004 from being produced. (Id. at 4). 

On April 5, 2005, the magistrate judge issued her

findings and recommendations regarding sanctions for defendants’

disobeying her order. The magistrate judge applied the five

factors in Malone v. United States Postal Service, 833 F.2d 128

(9th Cir. 1987), to arrive at the recommendation that a default

judgment be entered against defendants on all of plaintiff’s

causes of action except for breach of the employment agreement

and fraud. Defendants timely filed objections.

II. Discussion

A. Recommended Sanction

The court reviews de novo the magistrate judge’s

recommendation that default judgment be entered against

defendants. Fed. R. Civ. P. 72(b). 

1. Hewitt’s Willfulness, Fault, or Bad Faith

The sanction of default may only be imposed when the

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1 A “mirror image” recreates the hard drive as it is,

including files removed from easy accessibility. 

4

sanctioned party’s noncompliance was due to willfulness, fault,

or bad faith. Henry v. Gill Indus., Inc., 983 F.2d 943, 946 (9th

Cir. 1993). 

Defendants argue that Hewitt’s conduct was

unintentional and that therefore the Henry requirements are not

met. Hewitt claims that he did not know that a “mirror image”

was something more than a mere copy of all the readily accessible

documents on the hard drive, and that therefore he provided in

good faith that which he thought the court had ordered.1 Hewitt

further argues that he was just trying to prevent embarrassing

information from being made public. (Defs.’ Separate Statement

of Objections to Findings and Recommendations ¶ 4). 

Hewitt presented the same theories to the magistrate

judge and she found Hewitt not credible. (April 5, 2005 Findings

and Recommendations at 4). This court agrees. If the magistrate

judge had intended to simply order copies of files that were

easily accessed on the hard drive to be produced, she could have

done so. Instead, the order required defendants to produce

mirror images of the hard drives. “Mirror images” is not an

obscure term: there are several well-known computer programs

available to create these mirror images, and an internet search

using the terms “mirror image hard drive” identifies numerous web

sites that make these programs available. Defendants would have

the court believe that both defendants’ counsel and defendants

not only did not know what a “mirror image” was, but that they

did not bother to find out. The magistrate judge had good reason

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to find this explanation not credible. Further, a person acting

in good faith would not have purchased and run the aptly named

program “Evidence Eliminator” on hard drives which are central to

the opposing party’s case, which that person was ordered to

produce, and which he had not yet produced. At the time Hewitt

ran the Evidence Eliminator program, he knew that he had not yet

complied with the order and would have to produce true mirror

images of the relevant hard drives. (See Defs.’ Separate

Statement of Objections to Findings and Recommendations ¶

4)(stating that Hewitt purchased and ran Evidence Eliminator

after realizing he had not yet provided “mirror images” to

opposing counsel).

As to defendants’ argument that Hewitt was only seeking

to prevent embarrassing personal information from being made

public, Hewitt knew that all information on the hard drives was

for “attorneys’ eyes only” and would not be made public, and

therefore this argument fails. (Daponde Supp. Decl. Ex. Q

(Hewitt deposition) at 51-52). The magistrate judge properly

found that Hewitt acted willfully in disobeying her discovery

order. 

2. The Malone Factors

Under Malone, five factors must be weighed in

determining whether the sanction of default for noncompliance

with discovery is appropriate: “(1) the public’s interest in

expeditious resolution of the litigation; (2) the court’s need to

manage its docket; (3) the risk of prejudice to the [opposing

party]; (4) the public policy favoring disposition of cases on

their merits; and (5) the availability of less drastic

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sanctions.” 833 F.2d at 130. When a party violates a court

order, the first and second factors will favor sanctions and the

fourth factor will weigh against sanctions. Computer Task Group,

Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir. 2004). Whether the

default sanction is appropriate in this case therefore depends on

the third and fifth Malone factors. See id.

a. The Risk of Prejudice to CCI

Defendants argue that “Hewitt has not destroyed or

withheld one single document on computer hard drive numbers one,

two or three that in any way relate[s] to any of CCI’s claims.” 

(Defs.’ Separate Statement of Objections to Findings and

Recommendations ¶ 7). However, Hewitt himself testified at his

deposition and at the hearing before the magistrate judge that he

has no idea how many files or what files he destroyed. (Daponde

Supp. Decl. Ex. Q (Hewitt deposition) at 430; Transcript of

February 22, 2005 Proceedings Before Magistrate Judge Mueller at

126). The files that were wiped away by Hewitt are unrecoverable

by even forensic software. (Transcript of February 22, 2005

Proceedings Before Magistrate Judge Mueller at 18). Therefore,

it is unknowable whether those files, which Hewitt was ordered to

produce as part of a mirror image, are prejudicial. Severe

sanctions in such a situation are warranted.

b. The Availability of Less Drastic Sanctions

Less drastic sanctions than default are available. The

case of Kucala Enterprises, Ltd. v. Auto Wax Company, Inc.,

although not binding precedent, is persuasive. See 2003 WL

22433095 (N.D. Ill. Oct. 27, 2003). In that case, the plaintiff

used Evidence Eliminator on software that the opposing party was

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scheduled to inspect. Id. at *2. The court observed that

although “the magistrate judge was unable to conclude that in

fact Evidence Eliminator destroyed relevant files,” the

plaintiff, in using Evidence Eliminator, had “arrogated to

himself the decision as to whether documents were relevant to the

litigation.” Id. at *5 In addition, the Kucala court found that

the plaintiff had committed other discovery misconduct. Id. at

*6. The magistrate judge in that case had found the plaintiff’s

conduct to be “egregious” and “in flagrant disregard of a court

order.” Id. at *5. Nevertheless, the district court rejected

the magistrate judge’s recommendation of dismissal. Instead, the

court held that the jury would be permitted to hear testimony

regarding the plaintiff’s use of Evidence Eliminator and draw

negative inferences from that conduct. Id. at 7.

This court will follow the approach taken by the Kucala

court. The court has an interest in deciding cases on the

merits. Olvera v. Giurbino, 371 F.3d 569, 573 (9th Cir. 2004). 

Although the court will not order that defendants’ answer be

stricken or that default be entered against them, it will allow

plaintiff to present evidence of all the circumstances

surrounding Hewitt’s use of Evidence Eliminator and his

reformating of the hard drive. The jury will be allowed to form

its own opinions about the credibility of his explanation,

including the sordid details of his alleged cyber-affair. The

jury will also be instructed to the effect that if it finds

Hewitt intentionally destroyed evidence it may infer that the

evidence was damaging to Hewitt and favorable to plaintiff.

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2 Defendants neither objected in their papers nor at oral

argument to the in camera nature of the magistrate judge’s review

of the billing records.

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B. Attorneys’ Fees

A magistrate judge’s order awarding attorneys’ fees as

a sanction for discovery abuse is reviewed by a district court

under Rule 72(a) since the sanction is nondispositive. Grimes v.

City and County of San Francisco, 951 F.2d 236, 239 (9th Cir.

1991). Therefore, the court reviews the magistrate’s order of

attorneys’ fees as a sanction under the “clearly erroneous or

contrary to law” standard of Rule 72(a). 

The magistrate judge found that, after in camera

review, “the billing records are sufficiently detailed and the

amount billed reasonable so as to support plaintiff’s request for

fees and costs in the amount of $145,811.75.” (April 5, 2005

Findings and Recommendation at 6).2 Plaintiff’s counsel has

provided the court with a detailed accounting of the time spent

to prepare this motion, and after in camera review, the court

finds that the magistrate judge’s order is not clearly erroneous

or contrary to law. See Fed. R. Civ. P. 72(a). The amounts

charged per attorney and the time spent on the motion were

reasonable.

IT IS THEREFORE ORDERED THAT: 

(1) the parties may present evidence to the fact-finder

concerning defendant Hewitt’s use of Evidence Eliminator and his

reformatting of a hard drive;

(2) the fact-finder may form a negative inference

against defendants on all plaintiff’s causes of action except

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breach of the employment agreement and fraud, based on Hewitt’s

use of Evidence Eliminator and his reformatting of a hard drive;

(3) the magistrate judge’s award of attorneys’ fees in

the amount of $145,811.75 be, and the same hereby is, AFFIRMED.

DATED: June 24, 2005

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