UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

GLOBAL MATERIAL TECHNOLOGIES, INC., 

Plaintiff, 

v. 

DAZHENG METAL FIBRE CO. LTD.,

DAZHENG METAL FIBRE CO. LTD. d/b/a 

ChuanGuPing a/k/a TRU GROUP, and 

DONG JUE MIN,

Defendants. 

No. 12 CV 1851 

Judge Manish S. Shah 

MEMORANDUM OPINION AND ORDER

 For years, Global Material Technologies maintained a close business 

relationship with Dazheng Metal Fibre Co. (DNZ), a Chinese company. The 

relationship eventually disintegrated, however, and in 2011 GMT sued DNZ in both 

the United States and China. The Chinese court entered judgment before the 

domestic case was transferred to this district, and several of GMT’s claims were 

dismissed at the pleadings stage. But its trade-secrets claim remained, and the 

parties engaged in discovery on that issue. Citing repeated abuses of the discovery 

process by defendants (which include DNZ’s general manager, Dong Jue Min, and 

its wholly-owned subsidiary, Tru Group), GMT moved for a default judgment. 

Defendants opposed the motion, and filed their own motion for summary judgment. 

For the reasons discussed below, GMT’s motion for default is granted, and 

defendants’ motion for summary judgment is denied as moot. 
2 

I. Legal Standard 

 The district court may sanction a party that has failed to take reasonable 

steps to preserve electronically stored information if that information should have 

been preserved during the litigation, but it has been lost and cannot be restored or 

replaced through additional discovery. Fed. R. Civ. P. 37(e). If another party was 

prejudiced by the loss of the information, the court may order measures necessary 

(but no greater than necessary) to cure the prejudice. Fed. R. Civ. P. 37(e)(1). 

Alternatively, if the court finds that the party that lost the information did so 

intentionally in order to deprive the other party of the information’s use, the court 

may: presume that the information was unfavorable to the first party; instruct the 

jury that it may (or must) presume that the information was unfavorable to the first 

party; or dismiss the action or enter a default judgment. Fed. R. Civ. P. 37(e)(2).1

Default judgment is an appropriate sanction where: (1) there is “a clear record of 

delay or contumacious conduct”; (2) less drastic sanctions have proven ineffective; or 

(3) a party has demonstrated willfulness, bad faith, or fault. Domanus v. Lewicki, 

742 F.3d 290, 301 (7th Cir. 2014) (quoting Maynard v. Nygren, 332 F.3d 462, 467 

(7th Cir. 2003); In re Thomas Consol. Indus., Inc., 456 F.3d 719, 724 (7th Cir. 

2006)). 

 

1 The current version of Federal Rule of Civil Procedure 37, as cited above, took effect on 

December 1, 2015. The current version of the Rule is applied to pending cases unless it 

would not be “just and practicable” to do so. See April 29, 2015 Order of the Supreme Court 

of the United States, available at https://www.supremecourt.gov/orders/courtorders/ 

frcv15(update)_1823.pdf (last visited September 12, 2016); cf. Manez v. Bridgestone 

Firestone N. Am. Tire, LLC, 533 F.3d 578, 583 (7th Cir. 2008). As no such concerns are 

present here, and defendants have not objected to the application of the Rule as amended, I 

refer in this opinion only to the current version of Rule 37. 
3 

II. Background 

1. GMT’s Suits Against DNZ 

 GMT is an American company that manufactures and sells metallic-wool 

products, including steel fibers. In February 2011, GMT sued DNZ—a Chinese 

company with whom GMT had contracted for the supply of such fibers—in both the 

United States Court for the Middle District of Tennessee and the Zhuhai People’s 

Court of Guangdong Province, China. In the Chinese action, GMT alleged that DNZ 

had breached the parties’ supply agreement by shipping to GMT (or to GMT’s 

customers) rusted product, product that did not otherwise comply with GMT’s 

purchase orders, and product that GMT had never ordered. GMT included similar 

allegations in the United States litigation, but added claims concerning the 

purported use of GMT’s confidential information. According to GMT, it had shared 

with DNZ the former’s pricing strategies, confidential customer list, and internal 

operating procedures—but with the clear understanding that DNZ would not 

disclose this information to third parties or use it to GMT’s disadvantage. GMT 

believed that DNZ had violated this understanding, and had created in secret a 

subsidiary, Tru Group, through which DNZ had attempted to take over GMT’s 

customer base. GMT named Tru Group and DNZ’s general manager, Dong Jue Min, 

as additional defendants to the United States action. 

 The latter was ultimately transferred to the Northern District of Illinois. 

Before the transfer, however, the Chinese trial court entered judgment in the 
4 

lawsuit there.2 The Chinese trial court concluded that GMT had failed to prove 

there were any quality issues with DNZ’s shipments, and that DNZ also was not 

liable for shipping product that did not adhere to GMT’s orders. DNZ had agreed to 

the return of certain goods, though, and so was obligated to refund the cost of those 

goods. But DNZ’s obligations would be offset—and then some—by GMT’s own 

obligations. The trial court agreed with DNZ that the American company owed 

some $1 million in outstanding balances in related costs. The Chinese court of 

appeals affirmed in large part the lower court’s judgment, making only small 

adjustments to the damages calculation. 

 Back in the United States, DNZ sought to enforce the Chinese judgment and 

preclude GMT (under principles of res judicata) from pursuing its claims in the 

Northern District of Illinois. That motion was granted as to the recognition and 

enforcement of the judgment rendered by the Chinese intermediate court, and 

granted as to preclusion of GMT’s contract-based claims, but denied as to GMT’s 

trade-secrets claim. See [208].3 Discovery thus proceeded on that claim.4 

2. GMT’s Motions to Compel and for Default 

 

2 For a more detailed account of the Chinese court’s findings, see Memorandum Opinion and 

Order (May 1, 2015), [208]. 

3 Bracketed numbers refer to entries on the district court docket. To the extent this opinion 

references any document previously filed under seal, the seal is lifted and the party that 

originally filed that document must file on the court’s docket an unredacted, public version 

of the same. See City of Greenville, Ill. v. Syngenta Crop Prot., LLC, 764 F.3d 695, 697 (7th 

Cir. 2014). 

4 GMT had also asserted in the United States action a civil-conspiracy claim and intentional 

interference with business relations. These claims were dismissed in a ruling by Judge 

Dow. [136] at 16–17. 
5 

 In October 2014, GMT filed with Magistrate Judge Kim a motion to compel 

the production of materials concerning a Hong Kong company named Seamarky 

Industrial, Ltd. [173]. GMT believed that DNZ had established Seamarky on the 

sly—much as GMT believed DNZ had secretly created Tru Group—for the purpose 

of taking over GMT’s customers without its knowledge. In response to GMT’s 

discovery requests, however, defendants denied any connection with Seamarky, 

and, accordingly, having any documents concerning that company. Id. at 1–2, 5–6. 

GMT was skeptical of these answers, because it had obtained through subpoenas to 

some of its former customers: (1) documents linking Seamarky to Alex Chan, a DNZ 

sales director; and (2) records tying Seamarky to Delano Mok, a person previously 

identified by defendants as a Tru Group employee. See id. at 7–8. GMT also 

believed that defendants had produced an implausibly small number of documents, 

and questioned whether defendants had conducted a proper search for electronically 

stored information. See id. at 12–13. 

 Judge Kim granted the motion to compel and ordered the defendants to 

describe, first, the efforts they had made to date in searching for responsive records, 

and, second, where those records were being kept. [190]. Defendants explained in a 

March 2015 letter to Judge Kim that neither DNZ nor Tru Group had operated an 

electronic data network, server, or other storage system, and that neither had ever 

hosted a company e-mail system. See March 10, 2015 Letter to Judge Kim, [197] at 

2–3. Instead, employees and “independent sales representatives” were asked to 

register individually for DNZ and Tru Group e-mail accounts with a cloud-based e-
6 

mail provider in China. Id. at 2. Defendants did not in general have access to those 

accounts; however, following the production by GMT’s third-party customers of emails referring to Alex Chan and Delano Mok, DNZ had obtained the log-in 

information for Chan’s account. Id. at 4. When DNZ accessed that account, all of the 

e-mail folders were empty. Id. And Tru Group was never given access to Mok’s email account. Id. Dong Jue Min had a Yahoo!-hosted e-mail account, but those 

messages were likewise inaccessible because Yahoo! had stopped providing e-mail 

service to China in August 2013, and had at that time deleted all of its customers’ 

accounts. See id. at 2. 

 As for other records, defendants stated that DNZ had issued some computers, 

but only to a select number of employees working in DNZ’s “general office” and its 

warehouse and finance departments. See id. at 3. DNZ had not issued computers to 

any independent sales representatives (like Chan); and Tru Group had not issued 

any computers, period. Id. at 2–3. 

 Beginning in March 2011, said defendants, they began to wind down their 

business operations and, as part of that process, instructed their employees to 

preserve in hard copy any electronic information needed to comply with relevant 

record-keeping obligations in China. Defendants said that some electronic data 

were also transferred to a USB flash drive. Id. at 3. According to defendants, after 

the “relevant” information was printed or transferred to the flash drive, DNZ 

liquidated all of its computers. Id. In response to GMT’s discovery requests 

(propounded in November 2011), defendants claimed that they had searched the 
7 

flash drive and all physical records. Id. at 4. The companies had also directed their 

remaining employees to search their e-mail accounts for responsive information, 

and had asked their former independent sales agents to do the same. Id. To the 

extent responsive records were found, said defendants, they had saved them to the 

flash drive or printed and retained hard copies. Id. at 4. 

 Judge Kim ordered that the flash drive be imaged by a discovery vendor and, 

once imaged, searched for additional responsive information. [199]. The drive was 

imaged and reviewed by defendants, but in an April 2015 teleconference, 

defendants’ attorney told counsel for GMT that everything on the drive had already 

been produced. See [201] at 3; [206] at 4. 

 Based on, among other things, the lost computers and missing e-mail 

evidence, GMT moved for a default judgment under Rule 37(e) of the Federal Rules 

of Civil Procedure. [299]. Defendants opposed the motion and filed their own motion 

for summary judgment. [367]. 

III. Analysis 

A. GMT’s Motion for Default Judgment 

 Default judgment may be awarded under Rule 37(e) only where a party that 

lost or failed to preserve electronically stored information did so intentionally in 

order to prevent an opposing party from using that information in the litigation. 

Fed. R. Civ. P. 37(e)(2). Negligent or even grossly negligent conduct is insufficient to 

warrant such a severe sanction. Advisory Committee Note to 2015 Amendment to 

Fed. R. Civ. P. 37(e). See also Domanus, 742 F.3d at 301 (willfulness or bad faith is 
8 

required); Aura Lamp & Lighting Inc. v. Int’l Trading Co., 325 F.3d 903, 909 (7th 

Cir. 2003) (citing In re Golant, 239 F.3d 931, 936 (7th Cir. 2001)) (same). GMT 

argues that default is appropriate here because, among other reasons, defendants: 

destroyed evidence (DNZ’s computers) and refused to search other sources of 

electronic information (Dong Jue Min’s e-mail account) until it was too late to do so; 

lied to GMT and to the court about defendants’ (lack of) relationship with Seamarky 

in order to explain the absence of records concerning that company; and otherwise 

obstructed GMT’s discovery of relevant information. 

1. Destruction or Loss of Electronic Information 

a. DNZ’s Computers 

GMT first points to the liquidation of DNZ’s computers, which defendants say 

were sold after the businesses started winding down their operations in March 

2011. That was the explanation given to Judge Kim in March 2015, at any rate. See

[197] at 3; see also id. at 1, 3 (stating that DNZ stopped exporting manufactured 

products in March 2011, Tru Group ceased all export sales six months later, and all 

manufacturing operations ended in 2013). In September 2015, however, Tru Group 

represented (again to Judge Kim) that both companies were still doing some 

business and might later resume full production. See Tru Group’s Opposition to 

GMT’s Motion to Remove “Attorneys’ Eyes Only” Designations, [245] at 4–5; see also

id. at 5–9 (arguing against disclosure of defendants’ commercial information to 

GMT employees because the parties were still competitors). Tru Group insisted to 

Judge Kim that nothing in defendants’ March 2015 letter had suggested that they 
9 

“d[id] not intend to re-start their operations upon resolution of [the] litigation” with 

GMT. Id. at 5. But as Judge Kim later observed, [271] at 10, that is exactly the 

impression that the letter gave (and, presumably, that it was meant to give). 

 Defendants now contend, as they did before Judge Kim in March 2015, that 

the sale of the computers can make no difference to GMT, because the computers 

did not contain any information material to GMT’s claims. See [352] at 10, Tr. at 

9:10–:13 (stating that the computers were issued only to custodians not relevant to 

this case); [367] at 31 (similar). But this assertion is contradicted by statements in 

Dong Jue Min’s declaration, which defendants have filed in opposition to GMT’s 

current motion (and in support of their own motion for summary judgment). In his 

declaration, Dong says that before the computers were discarded, DNZ staff 

reviewed their contents and saved to a “digital storage device” copies of any 

documents relevant to the litigation. See [368-2] at 17 ¶ 49. This device, he explains, 

is the same one that Judge Kim ordered defendants to have imaged in March 2015. 

Id. Recall, however, that after the imaging was complete, defendants told GMT that 

everything on the drive had already been produced in discovery—meaning that the 

computers must have contained information responsive to GMT’s discovery 

requests. 

b. Dong Jue Min’s E-mail Account 

 GMT also complains that defendants failed to search the Yahoo!-hosted email accounts of Dong Jue Min and his wife (the latter of whom used her account to 

contact potential customers for DNZ, see November 19, 2008 E-mail, [353] at 2). 
10 

Defendants do not dispute that they did not search these accounts, but argue that 

the messages in them were unavailable because Yahoo! had deleted data after 

discontinuing its e-mail services in China. See [367] at 31; see also March 10, 2015 

Letter to Judge Kim, [197] at 2. GMT propounded its initial discovery requests in 

November 2011; the e-mail accounts were not shut down until August 2013. See

[197] at 1–2, 6. Defendants have not explained why the accounts were not searched 

during the intervening 21 months. 

 Moreover, defendants expressed to Judge Kim complete surprise that Yahoo! 

had pulled out of China. See Transcript of March 12, 2015 Proceeding, [203] at 8, 

Tr. at 8:19–:24 (“[N]o one anticipated this situation with Yahoo!. No one foresaw 

that they would all of a sudden pick up and leave China. That was a surprise to 

everyone, . . . [s]o it would have been impossible for us to have anticipated that 

would occur.”). But it is incredible that Yahoo! would not at least have warned its 

Chinese customers of an intent to erase the customers’ information. Indeed, 

publicly-available news stories indicate that the termination of Yahoo!’s services in 

China was not the total shock defendants claim it was.5 If news of the termination 

 

5 See, e.g., Channel NewsAsia, “Yahoo China to end email service,” 

http://www.channelnewsasia.com/news/technology/yahoo-china-to-end-email/644094.html 

(stating that “[u]sers of the service were informed that they must register with AliCloud . . . 

to prevent emails and other information from being deleted when Yahoo’s mail service 

stops”) (posted April 19, 2013) (last visited September 12, 2016); Phys.org, 

http://phys.org/news/2013-04-yahoo-china-email.html (same) (also posted April 19, 2013) 

(last visited September 12, 2016); Yahoo! News, https://www.yahoo.com/news/yahoos-emailchina-close-august-184221844.html?ref=gs (advising that Yahoo!’s e-mail service in China 

would end on August 19, 2013) (posted April 22, 2013) (last visited September 12, 2016). 
11 

broke in April 2013 (see note 5, below), defendants had plenty of time in which to 

preserve the information in the affected accounts. 

C. Other E-mail Accounts 

 In their March 2015 letter to Judge Kim, defendants explained that they had 

been unable to search other company e-mail accounts because those accounts had 

been registered (with a third-party provider) by the individuals who had used them, 

and those individuals—including, in particular, Alex Chan and Delano Mok—no 

longer worked for defendants. [197] at 3–4. In other words, the e-mail records were 

now out of defendants’ control. While defendants had eventually been given access 

to and had searched Chan’s DNZ account in September 2014 (only to find that no 

data remained), defendants told Judge Kim that they had never accessed Mok’s emails. Id. at 4. This last statement stands in stark contrast to those made by Julia 

Wu, Tru Group’s sales manager. In a declaration dated November 3, 2014, Wu 

swore under penalty of perjury that Tru Group had “searched Mr. Mok’s assigned 

Trugroup [sic] email account” after GMT’s customers had produced certain records 

in response to a subpoena. [183-2] at 2 ¶ 6; id. at 3. There is also evidence, discussed 

below, that Mok and Chan did not actually stop working for defendants in 2011, as 

defendants claim. 

2. False Statements 

 Defendants have maintained repeatedly, both in statements to GMT and to 

the court, that none of them is affiliated with, or has had any kind of a business 

relationship with, Seamarky Industrial, Ltd. See, e.g., DNZ’s Amended Responses to 
12 

GMT’s November 8, 2011 Discovery Requests, [348] at 3 ¶ 13 (“DNZ . . . does not 

[have], and [has] never had, a business relationship with Seamarky.”); DNZ’s 

Amended Responses to GMT’s July 2014 Discovery Requests, [313] at 16 ¶ 13 

(same); id. at 10 ¶ 14 (“DNZ has no affiliation with Seamarky and is unaware of any 

documents which may relate to Seamarky’s business other than those previously 

produced by third-parties pursuant to subpoena.”); Shi Declaration, [183-1] at 2 ¶ 5 

(“DNZ is not affiliated with, and has no ownership interest in, Seamarky . . . . DNZ 

has never had a business relationship with Seamarky . . . .”); November 3, 2014 

Declaration of Julia Wu, [183-2] at 2 ¶ 5 (same, but concerning the absence of a 

connection between Seamarky and Tru Group); Transcript of February 11, 2015 

Proceeding before Judge Kim, [204] at 11, 11:6–:12 (stating that none of the 

defendants, including Dong Jue Min, had had a relationship with or had done 

business with Seamarky); Defendants’ Opposition to GMT’s Motion for Default 

Judgment, [367] at 31–32 (arguing that GMT has no proof of any connection 

between defendants and Seamarky). GMT argues, and I agree, that defendants’ 

claims about Seamarky are belied by the evidence obtained from some of GMT’s 

former customers. 

 One such customer was Federal-Mogul. GMT originally sold to Federal-Mogul 

steel-fiber products made in GMT’s own factory in Illinois, but around 2005 began 

to supply them with product manufactured by DNZ in China. See October 21, 2015 

Deposition of Stanley Kulis, [309] at 3, Tr. at 20:6–:16. The change in manufacturer 

necessitated a product-quality audit by Federal-Mogul so that Federal-Mogul could 
13 

make sure its requirements would continue to be met. See id. at 4, Tr. at 21:3–

23:12. In late December 2009, Delano Mok (one of Tru Group’s sales agents) began 

communicating with Federal-Mogul representatives about purchasing its steel 

fibers directly from DNZ, through Tru Group. See E-mail Exchange between Mok 

and Chris Wilde, [315] at 3–6. Mok explained that Tru Group was authorized by 

DNZ to sell the latter’s products overseas because DNZ had terminated its exclusive 

supply agreement with GMT in late 2008 (due to GMT’s failure to meet its 

minimum-purchase obligations), and that DNZ had materials proving DNZ had 

been manufacturing Federal-Mogul’s fibers all along. See id. at 2–3. In March 2011, 

Federal-Mogul executed a supply agreement with Tru Group. See [320]. Because 

there would be no change in product,6 Federal-Mogul did not perform a quality 

audit or notify its customers of the switch. See Kulis Deposition, [309] at 8, Tr. at 

55:1–:11; October 14, 2015 Deposition of Allen Cleveland, [308] at 10, Tr. at 70:9–

:14. 

 A few months later, Federal-Mogul learned—one may assume from Mok—

that Tru Group had established a business entity in Hong Kong called Seamarky. 

See July 1, 2011 E-mail from Derek Milliean to Allen Cleveland et al., [307] at 2. 

“The intent,” Federal-Mogul was told, was “to eliminate [Tru Group] and replace it 

 

6 As it turned out, Federal-Mogul had never actually certified as compliant the 

manufacturing facility at issue, because Federal-Mogul was never told (when GMT was its 

supplier) that production of its fibers had moved from DNZ’s plant in Zhuhai to DNZ’s 

facility in Ma’anshan. Why Federal-Mogul was not informed of this change, or who was 

ultimately responsible for failing to provide this notice, is unimportant. Relevant here is 

that, before switching suppliers from GMT to Tru Group, the latter reassured FederalMogul (through Mok) that it would be receiving the same fiber product, as manufactured by 

DNZ, that Federal-Mogul had been using since the beginning. See [315] at 2–3. 
14 

with Seamarky” because customs fees and taxes were lower in Hong Kong than in 

mainland China, where Tru Group operated. Id. So Federal-Mogul exchanged its 

supply contract with Tru Group for one with Seamarky, effective August 1, 2011, 

and continued to work with Delano Mok (who continued to use his Tru Group e-mail 

address) as its point of contact. See September 15, 2011 E-mail from Mok to Susi 

Rivers et al., [321] at 2; September 2011 E-mails between Mok and Andrea 

Meyerpeter et al., [325] at 2–3 (noting that shipments made before August 31, 2011, 

were supplied by Tru Group, but subsequent shipments had been and would in the 

future be made using the company name “Seamarky Industrial Limited”); April and 

June 2014 E-mails between Mok and David Klemz et al., and attachments, [336] 

(addressing, through Mok’s Tru Group e-mail account, problems with Seamarky 

shipments of DNZ product). 

 Tru Group claims that Mok left its employ in September 2011, and that Tru 

Group had no idea Mok was continuing to use his company e-mail account to 

perform work on behalf of Seamarky, a company with which Tru Group claims to 

have no connection. But several invoices from Mok (Dated August 14, August 29, 

and September 14, 2011, respectively) directed Federal-Mogul to pay Seamarky, a 

Hong Kong company, through Tru Group’s bank account in mainland China. See

[321] at 3–8. These instructions would have made no sense at all if Tru Group and 

Seamarky were truly unrelated. 

 And Mok is not the only one of defendants’ “former” agents connecting 

defendants to Seamarky’s activities. On June 17, 2011, Alex Chan sent 
15 

representatives at Honeywell, another of GMT’s customers, an e-mail entitled, 

“Seamarky Info.” [343] at 2. Chan sent the e-mail using his DNZ e-mail account, 

and included a signature block representing that he was a sales director of that 

company. He wrote: 

Enclosed please find our Hongkong [sic] company information for your 

documents . . . . I will be your first contact for the material supply. 

Id. (The enclosure or attachment was never produced.) Defendants claim that DNZ 

terminated its relationship with Chan in June 2011, and that Chan, too, continued 

to use his company e-mail address without defendants’ knowledge. But there is 

evidence indicating that, in 2013, Chan visited one of Federal-Mogul’s facilities on 

behalf of both DNZ and Seamarky. See January 12, 2013 E-mail from David Klemz 

to Alex Chan et al., [334] at 2; see also Kulis Deposition, [309] at 17, Tr. at 125:7:–

:19. And when Federal-Mogul asked Chan—also in 2013—to clarify his role at DNZ, 

Chan replied that he was a “sales manager” for that company. See March 16, 2013 

E-mail from Randall Gibbs to Chan et al., [335] at 2; March 17, 2013 E-mail from 

Chan to Gibbs et al., id. 

 The evidence produced by Federal-Mogul further suggests that the product 

Federal-Mogul was receiving through Seamarky was indeed manufactured by DNZ. 

See Attachments to April and June 2014 E-Mails, [336] at 4–8, 11–22, 25–26 

(showing DNZ-marked packaging with Seamarky shipping labels attached); Kulis 

Deposition, [309] at 13–14, Tr. at 80:19–22, 81:24–84:23 (stating that in July 2012, 

a Federal-Mogul employee completed a product-quality audit at a DNZ 

manufacturing plant in Ma’anshan, China); 2012 Product Process Audit Report, 
16 

[332] at 2 (listing Seamarky Industrial as the supplier for product made at the 

Ma’anshan DNZ plant).7 And still more names from DNZ’s purported past 

continued to pop up in Federal-Mogul’s document production. A 2012 audit report 

listed Federal-Mogul’s “[s]upplier contact” (i.e., Seamarky contact) as Xie Ying—

otherwise known as Grace Xie—DNZ’s marketing manager and Tru Group’s 

manager of operations. See [332] at 1; DNZ’s Amended Responses to GMT’s July 

2014 Discovery Requests, [313] at 12 ¶ 1; Dong Declaration, [368-2] at 8 ¶ 20; id. at 

11–12 ¶¶ 31–32. Defendants say that Xie resigned from DNZ and Tru Group on 

June 25, 2011. Dong Declaration, [368-2] at 14 ¶ 38. But Xie was still using her 

DNZ e-mail address and DNZ’s fax number more than a year later. Compare [332] 

at 1 (listing Xie’s fax number in 2012) with June 17, 2011 E-mail from Alex Chan, 

[343] at 2 (providing DNZ’s fax number in June 2011) and http://www.dnzinc.com/ec1.html (listing the same, but as DNZ’s telephone number) (last visited 

September 12, 2016). 

 The evidence from GMT’s customers clearly connects defendants to Seamarky 

Industrial, such that defendants’ claims to the contrary are not credible. Defendants 

 

7 DNZ maintains that it cut ties with the Ma’anshan facility in May 2011. See Dong 

Declaration, [368-2] at 14 ¶ 38. But the fiber products sent to Federal-Mogul through 

Seamarky (and thus from Ma’anshan) were packaged in bags marked with DNZ’s website. 

Compare, e.g., [336] at 6 with http://www.dnz-inc.com/ (last visited September 12, 2016); see 

also September 17, 2012 E-mail from Delano Mok to Kenney York et al., [344] at 2 

(directing a potential customer to look at www.dnz-inc.com for more information about 

DNZ’s fiber products). Moreover, Dong Jue Min agreed at his deposition that the person 

who had completed various “quality analysis reports” appended to Seamarky shipping 

notices in 2011, 2012, and 2013, see [326] at 8–13; [327] at 8–10; [328] at 7–10, was a DNZ 

employee, [304] at 27, Tr. at 154:18–:22. (Though Dong also stated that he believed this 

employee, like Chan, had left DNZ within 12 months of when GMT filed suit. Id., Tr. at 

154:23–155:8.) 
17 

say that they have broken ties completely with each individual (and the 

manufacturing facility) potentially linking defendants to Seamarky’s activities, but 

offer no documentary proof in support of this assertion. Nor does their explanation 

of what happened—that defendants’ former employees and agents set up Seamarky 

themselves and used the “DNZ” mark to sell product from the Ma’anshan plant 

without any continued connection to or permission from DNZ—make sense. 

Defendants claim that these “former” employees stole the DNZ brand, and also 

claim that defendants were shutting down DNZ because of GMT’s accusations. But 

the DNZ brand would not have been worth stealing if, as defendants claim, their 

reputations had been so damaged by GMT’s accusations that in early 2011 they 

were forced to start closing down their operations. See March 2015 Letter to Judge 

Kim, [197] at 1, 3; Dong Declaration, [368-2] at 13–14 ¶ 38.8 In addition, Tru Group 

is a defendant here and its claim to have no connection to Seamarky is flatly 

contradicted by the instructions to a customer to send money for Seamarky to a Tru 

Group bank account. The simpler, and more likely true, explanation is that DNZ 

and Tru Group had some relationship with Seamarky, and defendants falsely 

denied the relationship’s existence. 

 

8 Defendants’ claim that they have ceased all manufacturing operations is also suspect. In 

addition to the evidence discussed above, DNZ’s website—last updated in October 2015, see

[346] at 2—indicates that the company is still making product. See also http://www.madein-china.com/showroom/dnzfibre/companyinfo/Dazheng-Metal-Fibre-Co-Ltd-.html (showing 

February 2016 as the most recent log-in date for DNZ’s account with Made-in-China.com, 

an online facilitator of trade between Chinese suppliers and buyers worldwide) (last visited 

September 12, 2016). 
18 

3. Other Discovery Violations 

 GMT contends that defendants DNZ and Tru Group have also violated 

Federal Rule of Civil Procedure 30(b)(6) by selecting as a representative deponent 

only Dong Jue Min, who was either unprepared to answer, or in certain instances 

refused to answer, questions relating to the noticed deposition topics—topics to 

which neither defendant company ever objected. 

 Some of Dong’s deposition testimony was indeed bizarre.9 When asked if 

there existed written records or minutes of DNZ board meetings, Dong responded 

that he had no obligation to provide GMT’s counsel with any such information, 

because GMT was not one of DNZ’s shareholders. Deposition of Dong Jue Min, [304] 

at 17, Tr. at 106:6–:19.10 Although Dong ultimately gave an answer to the question 

(no, there were no meeting minutes), he then clarified that the reason he had 

answered “no” was because GMT was not a shareholder of DNZ. See id. at 18, Tr. at 

109:6–110:8. Dong gave similar responses to questions concerning DNZ’s production 

of documents to GMT, see id. at 26, Tr. at 150:16–151:4, and about the creation of 

Tru Group, see id. at 20, Tr. at 116:2–:10 (“Q. [W]hen did [the board] resolution 

 

9 In response to GMT’s motion for default, and in support of their own motion for summary 

judgment, defendants have filed errata sheets for Mr. Dong’s deposition. See [368-81]. GMT 

moves to strike these errata as untimely, and because they change substantially the 

meaning of Dong’s testimony. See [369]. The motion is denied. Whether or not the errata 

were timely, I refer in this opinion to only four lines of the testimony affected by the 

proposed revisions (those at transcript pages 57, 110, and 116), and those changes are 

minor. They do not alter in any significant way the import of what was transcribed at the 

deposition. Cf. Patton v. MFS/Sun Life Fin. Distribs., Inc., 480 F.3d 478, 488 (7th Cir. 

2008) (explaining that the district court should consider whether a change in testimony is 

plausible). 

10 GMT claims that it does own a part of DNZ. Defendants disagree based on a December 

2014 ruling by the Chinese court, which is not at issue here. 
19 

occur for the approval of TruGroup . . . ? A. This is internal information of DNZ. 

Like I said many times before, . . . you have no rights [sic] to ask a question in 

regards to our internal operations[, and] I have no . . . obligations [sic] to answer 

these questions.”). Whether GMT has an ownership interest in DNZ does not inform 

the parties’ rights or obligations at a deposition. And having neglected to object to 

the scope of any of the noticed deposition topics—which included the subjects just 

discussed, see [354] at 8 ¶¶ 1, 10; id. at 11 ¶ 44—Dong was required to speak to 

those issues unless the information sought was either privileged or subject to a 

work-product protection (and defendants make no such argument here). 

 Dong was also unable to answer questions about Jenny Shi and Julia Wu, the 

declarants for DNZ and Tru Group, respectively (as discussed earlier); nor could he 

speak to the contents of the declarations. See Dong Deposition, [304] at 7–8, Tr. at 

51:24–53:12, 57:8–:17; id. at 13, Tr. at 78:18–80:16. These topics, too, were covered 

by GMT’s 30(b)(6) deposition notices. See [354] at 8 ¶¶ 6–7; [355] at 8 ¶¶ 6–7. Dong 

claimed to be unfamiliar with Alex Chan. Compare Dong Deposition, [304] at 27–28, 

Tr. at 152:2–:6, 156:16–158:2 (stating that Dong did not know who that person was) 

with GMT’s Amended Rule 30(b)(6) Deposition Notice to DNZ, [354] at 11 ¶¶ 47–48 

(listing as 30(b)(6) topics all communications by and between DNZ and Alex Chan, 

and communications sent by Alex Chan on DNZ’s behalf) and id. at 8 ¶ 6 (listing as 

a topic all information contained in Jenny Shi’s declaration); Shi Declaration, [183-

1] at 2 ¶¶ 3–4, 6 (discussing Chan’s relationship with DNZ and the search of his 

DNZ e-mail account). And Dong said he had little to no information about Tru 
20 

Group’s operations or related documents, because Tru Group had “contracted out” 

its management to another party. See Dong Deposition, [304] at 22–23, Tr. at 

125:5–131:6. 

 That Tru Group (the defendant for whom Dong testified as a 30(b)(6) 

representative) had absolutely no knowledge of or control over its own documents is 

improbable—especially considering that the individual to whom Tru Group claims 

to have entrusted its management was not a disinterested third party, but Grace 

Xie, the DNZ marketing manager (and a DNZ employee). See id. Moreover, as Dong 

stated in his March 2016 declaration (filed in response to the present motion and in 

support of defendants’ motion for summary judgment), Tru Group did have 

possession of some of its operational records. [368-2] at 15–16 ¶ 45. Both Tru Group 

and DNZ, explained Dong in his declaration, had had policies of preserving in hard 

copy all “important” information, including all documents concerning the export of 

DNZ’s products. Id. The physical records had been maintained at the companies’ 

respective offices until the businesses purportedly ceased operations, at which time 

those documents were moved to an archive room at DNZ. Id. According to the 

defendants’ March 2015 letter to Judge Kim, Tru Group stopped exporting goods for 

sale in September 2011, and both Tru Group and DNZ discontinued all operations 

in 2013. See [197] at 1, 3. So defendants had possession of Tru Group’s records no 
21 

later than 2013. Dong Jue Min was not deposed until 2015—at which time he 

claimed to be totally in the dark on this point.11

 As for Dong’s ignorance of Alex Chan and the rest, defendants argue that 

Dong did not speak English (and so did not recognize any of the English names that 

DNZ or Tru Group representatives may have adopted). He was the person most 

qualified to represent those companies at the deposition, argue defendants, and he 

answered GMT’s questions as best he could. Defendants confuse the deposition of a 

business entity with the deposition of an individual. Individuals may testify only to 

their personal knowledge; but company representatives designated under Rule 

30(b)(6) must also be prepared to testify about any information “known or 

reasonably available to the organization.” Fed. R. Civ. P. 30(b)(6). If a single person 

is unfamiliar with such information, or cannot be so educated before the deposition, 

the company must select additional designees to testify. See id. (“The named 

organization must . . . designate one or more officers . . . or designate other 

 

11 GMT also complains that it still has not received all of defendants’ financial documents, 

which Dong testified that the defendants did have (and the production of which GMT 

requested on more than one occasion). See Dong Deposition, [304] at 23, Tr. at 130:1–:2, 

131:7–:24; October 19, 2014 E-mail from Jonathan Goodman to Eugene Meyers et al., [356] 

at 4. (At one point in his deposition, Dong testified that there was only one record 

documenting the financial relationship between Tru Group and DNZ, which had already 

been produced. See [304] at 19, Tr. at 113:11–114:1. But Dong later referred to accounting 

records, plural, addressing that issue. See id. at 23, Tr. at 131:15–:20.) In addition, says 

GMT, defendants have refused to produce copies of all of the documents Dong had with 

him, and to which he referred, during his deposition. See October 22, 2015 E-mail from 

Goodman to Meyers et al., [356] at 4 (reiterating GMT’s request for production of those 

documents). Defendants did turn over a copy of one such document, see id. at 3, but GMT 

maintains that the copy produced was not a copy of the document actually used by Dong, 

and in any event he had more than one document with him at the deposition, see id. at 2. 

Dong’s evasiveness on these points undermines defendants’ credibility, and lends more 

support to the notion that defendants willfully dodged the facts being explored in discovery. 
22 

persons . . . to testify on its behalf.”) (emphasis added). The rule is structured in this 

way to prevent the kind of “bandying” that may occur when the officers or agents of 

a business entity are deposed in turn and each disclaims knowledge of facts that are 

clearly known to persons in the company (and, thus, to the company itself). 

Advisory Committee Note to 1970 Amendment to Fed. R. Civ. P. 30. 

 Someone at DNZ definitely knew who Alex Chan was, because they provided 

information about him in a sworn declaration submitted to the court. And there is 

no excuse for Dong’s professed unawareness of the contents of that declaration, or 

its declarant, as DNZ was given notice that these subjects would be addressed at 

the deposition. The declaration submitted by Tru Group was similarly included as a 

topic for discussion with that company’s 30(b)(6) designee. Dong may not have 

spoken English, but the deposition notices were sent on June 29, 2015, see [354] at 

4; [355] at 4—four months before the first of two 30(b)(6) deposition sessions. (Dong 

was first deposed as a 30(b)(6) witness on September 29, 2015; he was deposed 

again under Rule 30(b)(6) on December 9 of that year.) There was plenty of time in 

which to have had the notices translated, to have investigated the noticed topics, 

and, if Dong was unfamiliar with some of the names or terminology contained in 

those topics, to have filled him in or selected additional representatives to testify if 

needed. Cf. Black Horse Lane Ass’n, L.P. v. Dow Chem. Corp., 228 F.3d 275, 304 (3d 

Cir. 2000) (“[T]he purpose behind Rule 30(b)(6) . . . is frustrated [when] a corporate 

party produces a witness who is unable [or] unwilling to provide the necessary 

factual information on the entity’s behalf. . . . [P]roducing an unprepared witness 
23 

[under Rule 30(b)(6)] is tantamount to a failure to appear that is sanctionable under 

Rule 37(d).”) (citations and internal quotation marks omitted). 

4. The Appropriate Sanction 

 “Default judgment is strong medicine for discovery abuse.” Domanus, 742 

F.3d at 301. But there are some types of misconduct that place too high a burden on 

allowing the case to continue, see Dotson v. Bravo, 321 F.3d 663, 665 (7th Cir. 2003) 

(quoting Barnhill v. United States, 11 F.3d 1360, 1368 (7th Cir. 1993)); and 

defendants’ conduct here is egregious enough to warrant the requested sanction. 

 Defendants disposed of DNZ’s computers while the lawsuit was pending, and 

neither the claim that the information on those computers was irrelevant to the 

litigation, nor defendants’ explanation for having liquidated the computers in the 

first place, is credible—the defendants acknowledged that relevant information 

existed on the computers at some point and the defendants did not truly cease 

operations.12 Defendants also sat on the e-mail account of a key custodian (and 

named defendant), Dong Jue Min, until GMT complained about the paucity of 

defendants’ production; then they pointed to the “surprise” deletion of the account 

as an excuse for not having searched it. This is no excuse at all. Not only was the 

erasure of the e-mail messages not a surprise—Yahoo! had informed its customers 

of the pending deletion months in advance—but defendants had had nearly two 

 

12 Magistrate Judge Kim was slightly more charitable when he characterized defendants’ 

explanations about whether they in fact stopped doing business as “disturbingly murky” 

and “vague and shifting.” Glob. Material Techs., Inc. v. Dazheng Metal Fibre Co., 133 F. 

Supp. 3d 1079, 1086 (N.D. Ill. 2015). But he also noted that defendants misled him by 

conveying a false impression in their March 2015 letter. Id. 
24 

years in which to search Dong’s account before it disappeared. As to Delano Mok’s email account, defendants swore in a filing with the court that they had searched the 

account, then reversed course and represented to Judge Kim that in fact they had 

never searched it at all because they had never been given access. 

 In short, defendants lied. Their dishonesty leads me to conclude that, when 

defendants discarded one source of electronic evidence and failed to preserve others, 

they did so deliberately and in order to prevent GMT from obtaining that evidence 

and using it against defendants in the litigation. That defendants were acting in 

bad faith is further demonstrated by their stubborn failure to comply with their 

30(b)(6) obligations, and by their assertions about Seamarky. All three defendants 

have disclaimed any kind of relationship with the Hong Kong-based supplier—

seemingly in an effort to explain (or justify) the lack of references to that company 

in the materials defendants did produce to GMT—but the records and deposition 

testimony provided by GMT’s former customers sing a different tune. And, contrary 

to defendants’ assertion, evidence tying defendants to Seamarky is relevant to 

GMT’s trade-secrets claim—so lying about the connection is a willful act directed at 

this litigation. 

 To prevail on the trade-secrets claim, GMT must show that defendants 

misappropriated a “trade secret”—that is, information that: (1) was sufficiently 

secret that its holder could derive economic value from its not being generally 

known to others; and (2) was “the subject of efforts that [were] reasonable under 

the circumstances to maintain its secrecy or confidentiality.” Learning Curve Toys, 
25 

Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721 (7th Cir. 2003) (quoting 765 ILCS 

1065/2(d)). The second requirement is satisfied only where the plaintiff has taken 

affirmative measures to prevent others from using its proprietary information. See 

id. at 722 (citing Jackson v. Hammer, 274 Ill.App.3d 59, 653 N.E.2d 809, 816 

(1995)); see also Alpha School Bus Co., Inc. v. Wagner, 391 Ill.App.3d 722, 740 (1st 

Dist. 2003) (explaining that, in determining whether a plaintiff’s information was a 

“trade secret,” the most important consideration is whether and how the 

information was kept secret). GMT maintains that it did take such measures, which 

included obtaining from DNZ an agreement of confidentiality and a corresponding 

promise not to approach any of GMT’s customers. The parties never executed a 

written confidentiality contract, however, so the agreement, if there was one, was 

oral. 

 Direct evidence of an oral confidentiality agreement—the recollection of 

GMT’s representative that he reached such an agreement with Dong Jue Min—is 

disputed by Dong, who says the agreement never happened. But circumstantial 

evidence, too, may be used to show that an agreement existed, and such evidence 

could include proof of a connection between DNZ and Seamarky. According to GMT, 

DNZ secretly created Tru Group—and then, once GMT learned of that connection, 

secretly created Seamarky—in order to snatch up GMT’s customers and sell to them 

products manufactured using GMT’s techniques. There would be no reason to do 

these things in secret, however, unless defendants thought by engaging in such 
26 

conduct they were crossing a line they were not supposed to cross—a line created, 

for instance, by a promise of confidentiality to GMT.13

 Defendants make little argument in response to GMT’s evidence of 

misconduct, except to say that Judge Kim has already resolved this issue (he has 

not); that defendants did satisfy their discovery obligations (they did not, as just 

explained); and that GMT has not shown any prejudice from the alleged loss of 

evidence. A specific finding of prejudice is not required under Rule 37(e)(2) once the 

court has found, as I have here, an intent by the party who lost or destroyed the 

evidence to prevent the other party from using it in the litigation. See Advisory 

Committee Note to 2015 Amendment to Fed. R. Civ. P. 37(e). A specific finding of 

prejudice is not required in such cases because the finding of intent to deprive the 

other party of the use of certain information also supports the inference that the 

missing information was unfavorable to the party that destroyed it—and thus the 

further inference that the party who now cannot use the lost evidence has been 

prejudiced by that loss. Id. 

 For the reasons discussed above, I find that defendants’ discovery violations 

were willful and the product of bad faith. Default judgment is a harsh penalty, and 

litigation ordinarily ought to be resolved on the merits, but the sanction is 

appropriate here. Lesser sanctions—for example, an instruction permitting or 

 

13 There is evidence that DNZ told GMT that DNZ was going to sell product directly to 

overseas customers, and from this evidence, defendants argue that there was no “secret” 

about Tru Group or Seamarky. But defendants did hide their connection to Seamarky—and 

to this day, refuse to acknowledge it. Moreover, there is evidence that DNZ promised not to 

go after GMT’s customers, so there was reason to keep secret those kinds of efforts even if 

GMT knew DNZ might be competing in the marketplace generally. 
27 

requiring the jury to infer that the information from the lost computers and nowunavailable e-mail accounts was favorable to GMT—would not adequately reflect 

the seriousness of defendants’ wrongs. Defendants were not merely dilatory or 

misleading by omission in their litigation tactics; they were affirmatively deceitful, 

to GMT and to the court. Giving false information or a false impression to the court 

in the hopes of obtaining a benefit in the litigation is a most egregious offense, as it 

“undermines the most basic foundations of our judicial system.” Secrease v. W. & S. 

Life Ins. Co., 800 F.3d 397, 402 (7th Cir. 2015); cf. Ridge Chrysler Jeep, LLC v. 

DaimlerChrysler Fin. Servs. Ams. LLC, 516 F.3d 623, 626 (7th Cir. 2008). While an 

adverse-inference instruction, or a prohibition on introducing certain types of 

evidence, might level the playing field between the litigants, those sanctions would 

not be sufficient to punish defendants for their dishonesty. Defendants falsely told 

Magistrate Judge Kim that they liquidated their computers as part of a business 

wind-down and that Dong’s emails were surprisingly lost. They then willfully 

dodged other efforts to investigate the case by falsely claiming no connection to 

Seamarky and intentionally avoiding their obligations under Rule 30(b)(6). The 

abuse of the litigation process was serious enough to bar defendants from denying 

liability to GMT on its trade-secrets claim. 

 This sanction does not, however, change the disposition of the other claims in 

this case. The recognition of DNZ’s Chinese-court judgment and its preclusive effect 

against GMT remains in place. See [208]. The dismissal of other claims by GMT, 
28 

[136], is also not revisited. Finally, the sanction of default does not fix the amount of 

damages, and GMT remains obligated to prove its damages.14

B. Defendants’ Motion for Summary Judgment 

 Because the motion for default is granted, defendants’ motion for summary 

judgment is denied as moot.15 GMT’s motions to strike defendants’ Local Rule 56.1 

statement, [373], and to strike Dong Jue Min’s declaration, [371], are likewise 

denied. 

IV. Conclusion 

 Plaintiff’s motion for default judgment, [299], is granted. An order of default 

is entered against defendants on plaintiff’s trade-secrets claim, with the amount of 

damages to be determined in additional proceedings. The disposition of the other, 

resolved claims in this litigation is unchanged. Plaintiff’s motion to supplement the 

record, [385], is denied. Defendants’ motion for summary judgment, [367], is denied 

 

14 GMT’s motion to supplement the record on its motion for default, [385], is denied. The 

conduct described in the motion to supplement targets an attorney for defendants, and is 

not related to the electronically stored information that is the basis for GMT’s Rule 37(e) 

motion. The latter is granted without considering the evidence GMT seeks to add with its 

motion to supplement. 

15 On the merits, defendants’ motion for summary judgment would be denied. While they 

have reasonable arguments that GMT has not identified its trade secret with specificity and 

the alleged secrets were not actually confidential, defendants have not established that 

they are entitled to judgment as a matter of law. There are factual disputes over the 

promise of confidentiality, and the scope of the customer information that may have 

extended beyond routine, non-secret industry information. Particularly with respect to the 

process of making high oil-content fibers to satisfy customer requirements, GMT has 

pointed to evidence suggesting that it spent time, effort, and money to derive economic 

value from information that could not be easily duplicated by others. This is sufficient to 

defeat summary judgment. See Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 

714, 723 (7th Cir. 2003) (the existence of a trade secret is ordinarily a question of fact).
29 

as moot. Plaintiff’s motions to strike, [369], [371], and [373], are denied. A status 

hearing is set for 10/7/16 at 9:30 a.m. 

ENTER: 

 ___________________________ 

 Manish S. Shah 

 United States District Judge 

Date: 9/13/2016