Globaltranz Enterprises LLC v. Pinnacle Logistics Group LLC

CourtDistrict Court, D. Arizona
DecidedJune 1, 2023
Docket2:22-cv-00545
StatusUnknown

This text of Globaltranz Enterprises LLC v. Pinnacle Logistics Group LLC (Globaltranz Enterprises LLC v. Pinnacle Logistics Group LLC) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Globaltranz Enterprises LLC v. Pinnacle Logistics Group LLC, (D. Ariz. 2023).

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Globaltranz Enterprises LLC, No. CV-22-00545-PHX-JAT

10 Plaintiff, ORDER

11 v.

12 Pinnacle Logistics Group LLC, et al.,

13 Defendants. 14 15 Pending before the Court is Plaintiff GlobalTranz Enterprises, LLC’s motion for 16 sanctions against Defendant Nicholas Jarvis (“Jarvis”) due to spoliation of evidence (Doc. 17 67). Jarvis responded (Doc. 70) and GlobalTranz replied (Doc. 73). The Court now rules. 18 I. BACKGROUND 19 This litigation arises from events following Plaintiff’s purchase of Volition 20 Logistics, LLC. Volition Logistics was in the business of arranging transportation for 21 truckload-or-smaller shipments of various kinds of goods. (See Docs. 52 at 5–6; 58 at 3). 22 Essentially, as a third-party-logistics provider Volition contracted with carriers to move 23 goods on behalf of customers who needed goods moved. (See id.). Plaintiff alleges that the 24 individual defendants are former Volition employees who used trade secrets and other 25 confidential information belonging to Plaintiff to “jump start” a competing business, 26 Pinnacle Logistics Group, LLC. (Doc. 52 at 2). 27 Plaintiff now claims that, before Jarvis left Volition, he synced 32,000 Volition files 28 to a personal computer using Microsoft OneDrive (a cloud backup and file synchronization 1 service). (Doc. 67 at 2). Plaintiff also claims that Jarvis downloaded confidential Volition 2 files onto two portable flash drives, which have not been located. (Id. at 2–3). Jarvis denies 3 possessing the flash drives, claims that he did not take any confidential information with 4 him when he left Volition, and has testified that he does not remember inserting the flash 5 drives in the first place. (Docs. 67-2 at 7–8, 11–13, 15, 42; 70-1 at 27). Jarvis has suggested 6 that this lack of memory may be due to contracting COVID during the month when the 7 flash drives were inserted. (Doc. 67-2 at 7). 8 Because Plaintiff has recovered the 32,000 OneDrive files, Plaintiff seeks spoliation 9 sanctions only relating to the information on the missing flash drives. (Doc. 67 at 2; 67-1 10 at 4–5; 73 at 5).1 Specifically, Plaintiff requests that this Court presume, and eventually 11 instruct the jury, that Jarvis copied Volition’s confidential and trade secret information onto 12 the flash drives and used that information at Pinnacle. (Doc. 67 at 18). 13 II. ANALYSIS 14 Plaintiff argues that it has satisfied the relevant standard for this severe sanction. 15 (Doc. 67 at 11–18). Jarvis counters that Plaintiff has not identified the correct legal standard 16 and has not presented enough evidence to satisfy it. (Doc. 70 at 2–3). The Court will 17 determine the correct legal standard and then consider whether that standard is satisfied. 18 a. Appropriate Legal Standard 19 “Spoliation is the destruction or material alteration of evidence, or the failure to 20 otherwise preserve evidence, for another’s use in litigation.” Fast v. GoDaddy.com LLC, 21 340 F.R.D. 326, 334 (D. Ariz. 2022) (citing Surowiec v. Cap. Title Agency, Inc., 790 F. 22 Supp. 2d 997, 1005 (D. Ariz. 2011)). Two independent sources of power authorize

23 1 Plaintiff also states that “[n]othing relating to the OneDrive issue must be resolved in order to rule on the Motion.” (Doc. 73 at 5). Plaintiff further states that it is irrelevant 24 whether Jarvis copied trade secrets to OneDrive, why the OneDrive account was set up in another Volition employee’s name, why the computer that synced files to OneDrive was 25 different than the computer into which the flash drives were inserted, why the OneDrive account was in use for three months after Jarvis’s employment ended, and why the folder 26 structure in the OneDrive account is different from the folder structure on Jarvis’s Volition computer (Id. at 5–8). Considering the factual uncertainty surrounding the OneDrive 27 account, the Court finds that Jarvis’s denial that he created the OneDrive account does not by itself necessarily prove that Jarvis is “untrustworthy.” Given Plaintiff’s insistence that 28 the OneDrive issue is irrelevant to ruling on the motion, the Court draws no other conclusions from the evidence and arguments regarding the OneDrive account. 1 sanctions against “a party who has despoiled evidence: the inherent power of federal courts 2 to levy sanctions in response to abusive litigation practices,” and Federal Rule of Civil 3 Procedure 37. See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006); Fed. R. Civ. 4 P. 37(b), (e). Rule 37(e) “sets the standards for sanctions arising from the spoliation” of 5 electronically stored information (“ESI”). Fast, 340 F.R.D. at 334; see also Fed. R. Civ. P. 6 37(e) advisory committee’s note to the 2015 amendment (“. . . Rule 37(e) . . . . authorizes 7 and specifies measures a court may employ . . . and specifies the findings necessary to 8 justify these measures.”). Where it applies, the “detailed language of Rule 37(e)” forecloses 9 “reliance on inherent authority to determine whether” sanctions are appropriate. Newberry 10 v. County of San Bernardino, 750 Fed. App’x 534, 537 (9th Cir. 2018) (citing Fed. R. Civ. 11 P. 37(e) advisory committee’s note to the 2015 amendment) (cleaned up); Steven S. 12 Gensler & Lumen N. Mulligan, 1 Federal Rules of Civil Procedure, Rules and 13 Commentary, Rule 37 (2022). 14 In its motion for sanctions, Plaintiff relies on cases decided under inherent judicial 15 power prior to the introduction of the current rule 37(e) in 2015. (See Doc. 67 at 11) (citing 16 Surowiec, 790 F. Supp. 2d at 1005; Aviva USA Corp. v. Vazirani, No. CV 11-0369-PHX- 17 JAT, 2012 WL 71020 (D. Ariz. Jan. 10, 2012)). Jarvis argues in response that the evidence 18 at issue is ESI and that Plaintiff’s motion must instead be evaluated under Rule 37(e). (Doc. 19 70 at 2). Plaintiff does not address this contention in its reply, and does not explain why 20 the motion should be decided under the Court’s inherent powers. (See Doc. 73 at 1–13). 21 The Court finds that Rule 37(e) supplies the standard relevant to Plaintiff’s motion 22 because the lost evidence at issue—the allegedly confidential information allegedly stored 23 on the missing flash drives—is ESI. Cf., e.g., TLS Mgmt. & Mktg. Servs. LLC v. Rodriguez– 24 Toledo, 2017 WL 1155743, at *1–2 (D.P.R. Mar. 27, 2017) (treating a discarded laptop as 25 ESI); Sosa v. Carnival Corp., 2018 WL 6335178, at *10, 12, 14–15 (S.D. Fla. Dec. 4, 26 2018) (finding that video footage which may have been downloaded to a flash drive was 27 ESI); Stanbro v. Westchester Cnty. Health Care Corp., 2021 WL 3863396, at *10 28 (S.D.N.Y. Aug. 27, 2021) (finding that a video stored on a DVD was ESI); 4DD Holdings, 1 LLC v. United States, 143 Fed. Cl. 118, 126, 131 (2019) (finding that information on hard 2 drives which were physically destroyed was ESI). Plaintiff does not argue otherwise. 3 Under Rule 37(e) sanctions may be appropriate where ESI “that should have been 4 preserved in anticipation or conduct of litigation is lost because a party failed to take 5 reasonable steps to preserve it, and it cannot be restored or replaced through additional 6 discovery.” Fed. R. Civ P. 37(e). If the Court finds that the loss of the ESI prejudiced the 7 moving party, the Court “may order measures no greater than necessary to cure the 8 prejudice.” Fed. R. Civ P. 37(e)(1).

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Globaltranz Enterprises LLC v. Pinnacle Logistics Group LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/globaltranz-enterprises-llc-v-pinnacle-logistics-group-llc-azd-2023.