Quantlab Techs. Ltd. v. Godlevsky

317 F. Supp. 3d 943
CourtDistrict Court, S.D. Texas
DecidedJune 12, 2018
DocketCIVIL ACTION NO. 4:09–CV–4039
StatusPublished
Cited by1 cases

This text of 317 F. Supp. 3d 943 (Quantlab Techs. Ltd. v. Godlevsky) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Quantlab Techs. Ltd. v. Godlevsky, 317 F. Supp. 3d 943 (S.D. Tex. 2018).

Opinion

KEITH P. ELLISON, UNITED STATES DISTRICT JUDGE

Plaintiffs Quantlab Technologies Ltd. and Quantlab Financial, LLC ("Quantlab") filed a Motion for Attorneys' Fees and a Motion for Costs in 2015 against Defendants Andriy Kuharsky and Emmanuel Mamalakis. (Doc. No. 787, 788.) This Court deferred ruling on those motions pending an appeal of this case's merits by those defendants. In June 2017, the Fifth Circuit affirmed the jury verdict against them. Quantlab Tech., Ltd. (BVI) v. Kuharsky , 696 Fed.Appx. 682 (5th Cir. 2017). Quantlab has moved this Court to take up its pre-appeal motion for attorney fees, and it has filed an Amended Bill of Costs. (Doc. No. 869, 870.) Based on careful consideration of the filings and applicable law, Quantlab's motions are GRANTED .

I. BACKGROUND

This long-running dispute concerns the trade secrets of Quantlab, a firm that develops proprietary technologies for high-frequency trading. Its story has been told elsewhere. See, e.g., Quantlab , 696 Fed.Appx. at 684-91 ; Quantlab Tech. Ltd. v. Godlevsky , 2014 WL 651944 (S.D. Tex. Feb. 19, 2014). For present purposes, a few points suffice. The case began with six defendants: Vitaly Godlevsky, Andriy Kuharsky, Anna Maravina, Ping An, Emmanuel *947Mamalakis, and SXP Analytics, LLC. All but Kuharsky and Mamalakis reached a stipulated judgment with Quantlab before trial. (Doc. No. 742-47.) Also before trial, the Court granted summary judgment to Quantlab on its claims for copyright infringement and breach of contract against Kuharsky and its claim for copyright infringement against Mamalakis. (Doc. No. 661.) Additionally, this Court granted a partially dispositive sanction against Kuharsky, declaring him liable for misappropriation of trade secrets as a sanction for his "bad faith, intentional spoliation of evidence." (Doc. No. 725 at 9.)

At trial, the jury found Kuharsky liable for conspiracy to misappropriate trade secrets, for knowingly inducing Defendant Anna Maravina to breach the fiduciary duty that she owed to Quantlab, and conspiracy to engage in that knowing inducement. (Doc. No. 761.) The jury also found Mamalakis liable for misappropriation of trade secrets and conspiracy to commit the same. (Id. ) It then awarded the following damages: $1.8 million for Kuharsky's misappropriation of trade secrets; $1.0 million for Mamalakis's misappropriation of trade secrets; $5.4 million for Kuharsky's conspiracy to misappropriate; and $4.0 million for Mamalakis's conspiracy to misappropriate. (Id. ) The Fifth Circuit affirmed the jury's verdict against the two defendants. Quantlab , 696 Fed.Appx. at 691.

Godlevsky, Kuharsky, and Mamalakis were the central figures in the scheme to misappropriate Quantlab's trade secrets, while the other defendants were peripheral or subordinate. From the start, the three main defendants engaged in litigation behavior so acrimonious, vexatious, and indefensible that their bad faith exceeds any that this judge has seen in his nineteen years on the bench.

It began even before the onset of this litigation. In 2007, Kuharsky represented to Quantlab, through counsel, that he possessed no documents or devices from Quantlab. (Doc. No. 302-2 at 9.) This turned out to be a flagrant lie. In 2009, within a few months of Quantlab's commencing this lawsuit, Mamalakis moved for sanctions under Rule 11 of the Federal Rules of Civil Procedure on the grounds that Quantlab's complaint revealed an inadequate factual basis for the suit. (Doc. No. 46.) This motion proved as meritless as Kuharsky's initial representations were untruthful. In their acrimony and mendacity, these initial acts were a sign of things to come. In the years that followed, Kuharsky and Mamalakis filed many more meritless motions that tied up the judicial process in taxing and time-consuming disputes.1 Their vexatious conduct also necessitated extensive litigation by Quantlab throughout the discovery process.2

*948Over the course of this case, it became clear that Kuharsky and Mamalakis not only were litigating irresponsibly and abusively, but also that they were working hard to put important evidence beyond Quantlab's reach. That conduct prompted this Court to impose sanctions on two occasions. In February 2014, the Court ruled that it would issue a spoliation instruction against Kuharsky, Mamalakis, and Godlevsky, finding that "[a] staggering amount of evidence ha[d] been lost." (Doc. No. 490 at 48.) On the basis of a two-day evidentiary hearing in late 2013, the Court found that Mamalakis had given away or erased the contents of numerous computers that would likely have shown the misappropriation of Quantlab's proprietary technology. (Id. at 23-31.) Mamalakis had also led Defendant SXP Analytics to file for bankruptcy in 2012 in an effort to defeat this Court's orders. (Id. at 26 n.8.) As for Kuharsky, the Court found that he had spoliated a large amount of electronic storage that he had the duty to preserve. (Id. at 36-44.) At the time, the Court expressed that this conduct was "deeply troubling." (Id. at 48.)

In April 2015, the Court sanctioned Kuharsky further. (Doc. No. 725.) Quantlab had demonstrated that Kuharsky had taken numerous steps to destroy incriminating evidence on a laptop that he was obligated to produce to Quantlab. (Id. at 7.) This spoliation was in direct violation not just of litigants' general duty to preserve and produce relevant evidence, but also of a specific order of this Court. (Id. at 7-8.) Consequently, the Court took the rare and draconian step of declaring Kuharsky liable for one of the claims against him. (Id. at 9.)

At many points in the bitter journey of this case, this Court exhorted the defendants to proceed in good faith and help the case toward its long-overdue resolution. Its exhortations went unheeded. Not one week after the Court imposed its partially dispositive sanction on Kuharsky, and only a few days before trial, Kuharsky thought it fit to seek the disqualification of Quantlab's counsel. (Doc. No. 741.) This motion, utterly meritless and contrary to this Court's many requests for more responsible behavior, exemplifies the conduct these defendants exhibited throughout this case's unnecessarily long history.3

II. LAW

Federal courts possess inherent power "to manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Link v. Wabash R. Co. , 370 U.S. 626

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317 F. Supp. 3d 943, Counsel Stack Legal Research, https://law.counselstack.com/opinion/quantlab-techs-ltd-v-godlevsky-txsd-2018.