Union Pump Co. v. Centrifugal Technology, Inc., et

404 F. App'x 899
CourtCourt of Appeals for the Fifth Circuit
DecidedDecember 17, 2010
Docket10-30040, 10-30072
StatusUnpublished
Cited by4 cases

This text of 404 F. App'x 899 (Union Pump Co. v. Centrifugal Technology, Inc., et) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Union Pump Co. v. Centrifugal Technology, Inc., et, 404 F. App'x 899 (5th Cir. 2010).

Opinion

PER CURIAM: *

Plaintiff, Union Pump Company, sued three of its former employees after the former employees formed a competing business. Union Pump alleged that the defendants misappropriated its trade secrets and engaged in unfair competition because the defendants were using Union Pump’s proprietary drawings to operate their competing business. Union Pump also alleged that the defendants spoliated evidence by deleting and destroying electronically stored information. Following a two-week trial, the jury returned a verdict in Union Pump’s favor. Union Pump appeals the district court’s refusal to award attorney’s fees as a sanction for the defendants’ spoliation of evidence. The defendants also appeal, arguing that they are entitled to a new trial because the district court made several evidentiary errors and there was insufficient evidence to sustain the amount of the damages award. For the following reasons, we affirm the district court’s judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff, Union Pump Company, is in the business of designing, manufacturing, and servicing industrial pumps. In 1995, Union Pump’s predecessor, David Brown Pumps, Inc., 1 purchased American Pump *902 Company located in Shreveport, Louisiana. All of American Pump’s intellectual property was included in the sale, including the design and fabrication drawings for all of the American Pump pumps and component parts. At the time of the sale, American Pump was partially owned by two of the individual defendants, Daniel Cleveland and Jerry Don Elmore. The third individual defendant, Charles Goodrich, was an employee of American Pump. Following the sale, Union Pump continued to manufacture and service the American Pump line of pumps, and the three individual defendants continued to work in the Shreveport plant.

On December 2, 2002, Union Pump announced that it would close the Shreveport plant and relocate plant functions to various other locations in the United States. Despite the closure of the Shreveport plant, Union Pump intended to continue servicing pumps in the American Pump line. The employees responsible for winding down operations at the Shreveport plant, including Goodrich, Cleveland, and Elmore, were instructed to send all of the American Pump design and fabrication drawings to another location.

In April 2008, immediately following the closure, Goodrich, Cleveland, and Elmore formed a competing company, Centrifugal Technology, Inc. (CTI). In September 2003, Union Pump was unable to locate a drawing for a heat exchanger component part for a pump in the American Pump line. A Union Pump employee contacted Cleveland, asking whether Cleveland still possessed any materials belonging to Union Pump. According to Cleveland, he found the drawing on a computer disk in a box of miscellaneous items. Cleveland forwarded the drawing to the Union Pump employee.

Thereafter, Union Pump discovered that it was missing a large number of design and fabrication drawings for the American Pump line. Based on Cleveland’s possession of at least one drawing, and the defendants’ formation of a competing business, Union Pump determined that the defendants were likely in possession of more American Pump drawings. Union Pump filed this action in September 2004, alleging that Cleveland, Goodrich, and Elmore, along with CTI, had tortiously converted Union Pump’s intellectual property, engaged in unfair trade practices, and violated the Louisiana Uniform Trade Secrets Act (LUTSA), La.Rev.Stat. §§ 51:1431-39. Union Pump sought damages for the unauthorized use of its drawings, return of the drawings themselves, and an injunction preventing CTI from using the drawings in the future.

Union Pump immediately sought discovery of all electronically stored information in the defendants’ possession that might relate to the litigation. The district court appointed a special master to oversee discovery in the case and appointed a computer expert to analyze the defendants’ computers. Each of the parties also retained its own computer expert. In addition, the district court entered a protective order in December 2004 that prohibited the defendants from “taking any action to destroy, *903 erase, eradicate, secret, conceal, dispose of or otherwise render unavailable for inspection by plaintiffs, any and all design drawings, AutoCAD drawings, schematics, computer data, [or] computer files.” The court-appointed computer expert took forensic images of the defendants’ computer hard drives in April and May of 2005 and copies of those images were given to the computer experts retained by the parties.

After inspecting the defendants’ hard drives, Union Pump learned that the defendants had spoliated much of the evidence relevant to the litigation by deleting or destroying the electronic information contained on the hard drives. Specifically, Union Pump’s computer expert, Andrew Rosen, discovered that most of the data on the hard drives of at least three of the defendants’ computers had been deleted using memory wiping software designed specifically for that purpose. Rosen found that the software was used in the most invasive “deep clean” mode, and that it was used between March and May 2005, after the district court had entered the protective order and before the court-appointed expert was able to access the hard drives. Goodrich had used the disk-wiping software on his hard drive just days before the hard drive was to be imaged by the court-appointed expert in May 2004. Rosen also found evidence that Goodrich had performed internet searches on computer forensics and disk-wiping. In addition, the court-appointed expert discovered that the tapes designed to back up CTI’s hard drives were blank. The tapes had supposedly been rotated every night and on a biweekly basis, but the only way the backup tapes could be blank is if they were erased or had never been used.

Union Pump also learned that the defendants had disposed of several relevant items. During his deposition, Cleveland admitted that he had been in possession of at least three computer disks containing American Pump drawings. Cleveland admitted to discussing the disks with Goodrich after Union Pump had contacted him for the drawings, and that he and Goodrich had decided to destroy the disks instead of returning them to Union Pump. CTI had also disposed of a computer just prior to the filing of the complaint.

Upon learning this information, Union Pump amended its complaint to add a cause of action for spoliation of evidence. Union Pump also filed a series of motions related to the spoliation. It first filed a motion for sanctions, asking that the district court sanction the defendants under Federal Rule of Civil Procedure 37(b) for violation of the court’s discovery orders and under the court’s inherent power to sanction misconduct. Union Pump averred that a variety of sanctions were appropriate, including entry of default judgment, an adverse inference instruction, and attorney’s fees. Several months later, Union Pump moved for summary judgment with respect to its spoliation claims and again asked the court to enter default judgment against the defendants and award attorney’s fees to Union Pump. The district court declined to rule on either motion.

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404 F. App'x 899, Counsel Stack Legal Research, https://law.counselstack.com/opinion/union-pump-co-v-centrifugal-technology-inc-et-ca5-2010.