Evidence is Lost By A party To Litigation – But Sanctions Are Modest

QUANTLAB TECHNOLOGIES LTD. v. GODLEVSKY, Dist. Court, SD Texas 2014 – Google Scholar.

In this case, Quantlab Technologies sued several defendants, including two former employees and alleged that they stole Quantlab’s software code. As discovery proceeded, the court determined that the defendants lost numerous computers and other devices which may have contained evidence of the theft. The court explained the potential loss of evidence:

Quantlab bases its claims against Mr. Mamalakis primarily upon his decision in mid-tolate 2012 to wipe clean and/or give away twenty-three developer work stations used while he was at the helm of SXP. (Doc. No. 449 at 7, 17.) As discussed in greater detail above, SXP had about twelve developers who wrote code — including, but not limited to, code for the “brain” — and worked remotely from across the country. (Doc. No. 471 at 44-45, 54-56.) Mr. Mamalakis has not disputed that he wiped some developer work stations and gave away others,[6] but he nevertheless strenuously objects to the imposition of dispositive sanctions….

In sum, the developer workstations were relevant, and their absence prejudices Quantlab, because those machines would have provided a more complete picture of how SXP’s code changed over time and could have helped to show whether SXP developers used Quantlab code as a guide while they worked. In fact, they may have been the single best way to make such a showing. This is not to say that Quantlab has shown that the developer workstations necessarily would have helped to prove Defendants’ duplicity; there is a chance that the developer workstations would have proved totally worthless and could even have been useful to Defendants in exculpating themselves. But the developer workstations would have been a fairly obvious place to look for relevant evidence, and because Mr. Mamalakis wiped some clean and gave others away, no one will ever know what they would have revealed.

The court ultimately concluded that the defendants negligently allowed potential evidence to be destroyed, but it did not find evidence of willful conduct. Thus, the court rejected the request for litigation-ending sanctions and instead ordered a spoliation instruction. The court left open the possibility of reconsidering the litigation ending sanctions issue.

A spoliation instruction, the court suggested, would allow the jury to draw an adverse inference against the defendants that the defendants allowed certain evidence to be lost or destroyed and that the jury could find that the lost evidence was harmful to the defendants’ legal position.

In sum, spoliation cases tend to involve a great deal of side litigation – the court here held a hearing to determine what was destroyed and why. Often the side litigation about spoliation and Rule 37 becomes more important than the merits of the dispute.

Edward X. Clinton, Jr.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s