Stein v. Clinical Data, Inc.

26 Mass. L. Rptr. 269
CourtMassachusetts Superior Court
DecidedOctober 9, 2009
DocketNo. 20073418BLS2
StatusPublished
Cited by1 cases

This text of 26 Mass. L. Rptr. 269 (Stein v. Clinical Data, Inc.) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Stein v. Clinical Data, Inc., 26 Mass. L. Rptr. 269 (Mass. Ct. App. 2009).

Opinion

Fabricant, Judith, J.

INTRODUCTION

This action arises from the termination of the plaintiff, Israel Stein’s, employment with the defendant, Clinical Data, Inc. (CDI), and events thereafter. The motion now before the Court relates to discovery; CDI contends that Stein intentionally destroyed material evidence, in defiance of a court order for discovery; it seeks sanctions and a finding of contempt. For the reasons that will be explained, the Court will find that Stein did intentionally destroy data, and will order sanctions pursuant to Mass.R.Civ.P. 37.1

BACKGROUND

Stein, a physician, was a founder of CDI. He served in various executive positions with the company until August 30 of 2006, when he resigned, apparently in the context of a dispute over his changed role after the appointment of a new chief executive officer. His employment agreement entitled him to severance pay and benefits, and obligated him to refrain from certain conduct for a one-year period, including competing with the company, using or disclosing its trade secrets and confidential business information, and soliciting its employees. The company began paying Stein the agreed severance upon his resignation.

Beginning sometime in 2006, CDI was preparing to sell its Vital Diagnostics Division, including a foreign subsidiary known as Vital Scientific N.V, through a private auction process conducted by Lazard Freres and Company, LLC. In early 2007, CDI formed the belief that Stein was engaging in communication with potential bidders in the auction process in a manner that interfered with the process, and that in doing so he had used and disclosed confidential and proprietary business information of CDI. The company sent Stein a letter, in March of 2007, demanding that he [270]*270stop such conduct, and threatening action against him.

Thereafter, the parties negotiated a settlement agreement. The settlement agreement provided that Stein would provide an affidavit detailing his communications with participants in the auction process, and the parties would exchange mutual releases. Stein did offer an affidavit, but CDI did not accept it, contending that it was both late and incomplete. The company terminated Stein’s severance pay and benefits.

Stein brought this action on August 3, 2007. His amended complaint, filed on April 29, 2008, asserts claims of breach of his employment agreement (count I), breach of the settlement agreement (count II), breach of the implied covenant of good faith and fair dealing (count III), violation of the Massachusetts Wage Act (count IV), violation of G.L.c. 93A (count V), and promissory estoppel (count VI), along with claims for declaratory judgment as to the binding nature of the two agreements (count VII) and specific performance of both (count VIII).

CDI responded to the amended complaint, on May 5, 2008, with its answer and counterclaim, which it amended on September 25, 2008.2 In answer to Stein’s claims, CDI asserts, among other defenses, that Stein’s breaches excused it from further performance. In counterclaim, CDI alleges that Stein’s affidavit failed to make full disclosure as required by the settlement agreement. Further, the counterclaim alleges that Stein interfered with the auction process, and used and disclosed confidential information of CDI in doing so, in violation of his employment agreement. In particular, CDI alleges that Stein assisted a group of management employees of Vital Scientific in their effort to prepare to bid for the company, and that he attempted to dissuade other potential bidders, particularly an entity known as Transasia. As a result, CDI alleges, the auction process failed, causing a substantial loss to CDI.

The counterclaim also alleges that Stein consulted for competitors of CDI, in particular an entity known as Epidauros, both during his employment and within the year after his termination, in violation of his employment agreement, and used CDI’s confidential information in doing so. Finally, the counterclaim alleges that Stein, in violation of his employment agreement, solicited Richard Driver to leave his employment as CDI’s chief scientist. Based on those allegations, the counterclaim asserts claims of breach of the employment agreement and the settlement agreement (counts I and II), breach of the implied covenant of good faith and fair dealing (count III), breach of fiduciaiy duty (count IV), tortious interference with advantageous relations (count V), and misappropriation of trade secrets (counts VI and VII).

The parties proceeded to conduct discoveiy, punctuated by a series of disputes that were presented to the Court for resolution. A particularly intense dispute arose with respect to CDI’s request for production of Stein’s e-mail communications with various people involved in the auction process, with entities for which CDI alleges Stein provided consulting services, and with Richard Driver. CDI first requested communications relating to the auction process and to consulting with competitors in its first request for production of documents, dated September 25, 2007. It submitted a second request, relating specifically to Driver, dated September 19, 2008. Stein produced certain documents responsive to the first request in November of 2007, but refused certain aspects of the request. In response to a motion to compel from CDI, the Court on June 11,2008, ordered Stein to produce e-mail communications with five named potential competitors. Stein produced additional documents in October 2008, but CDI remained convinced that Stein’s production was incomplete, both because of the small quantity of materials produced, and because of discrepancies between those materials and corresponding materials CDI received through discoveiy from third parties.

On November 20, 2008, CDI served and filed an “Emergency Motion to Compel Plaintiff Israel M. Stein, M.D. to Preserve Electronic Records and to Produce His Computer and E-Mail Accounts for Forensic Inspection.” CDI contended that documents produced in response to subpoenas to third parties revealed that Stein’s production of his e-mails was incomplete, and that Stein had withheld incriminating documents and/or tampered with documents he did produce by making undisclosed redactions. To remedy that conduct, CDI sought an order prohibiting Stein from deleting e-mails from his personal computer and from his web-based e-mail service, and requiring him to submit his personal computer for forensic examination and to produce all e-mails stored on his web-based e-mail service.

The Court heard CDI’s motion on November 25,2008. Stein’s position at argument was, in substance, that he had met his discovery obligations, that the purported discrepancies between his production and the documents CDI had received from third parties did not establish any misconduct on his part, and that the relief sought would be an unwarranted invasion of his privacy.3 After lengthy argument and discussion, the Court stated, “I am not, based on materials that are before me, I am not finding that Dr. Stein has in any way failed to comply with his discovery obligations. I don’t think that has been established here... I’m not making the finding that there has been a failure to meet obligations or that there has been any sort of deliberate effort to conceal or to manipulate.”4 The Court nevertheless ordered, “in the interest of moving this forward,” that Stein refrain from deleting any e-mails from the relevant period of time,5

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Related

Stein v. Clinical Data, Inc.
26 Mass. L. Rptr. 540 (Massachusetts Superior Court, 2009)

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Bluebook (online)
26 Mass. L. Rptr. 269, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stein-v-clinical-data-inc-masssuperct-2009.