declining to impose terminating 6 sanctions against plaintiff even though “the risk of prejudice to Defendant is great” and 7 plaintiff had history of discovery violations because “there is an appropriate less drastic 8 sanction that can be imposed”
How later courts described this case
- declining to impose terminating 6 sanctions against plaintiff even though “the risk of prejudice to Defendant is great” and 7 plaintiff had history of discovery violations because “there is an appropriate less drastic 8 sanction that can be imposed”
- affirming dismissal sanction where plaintiff 11 deleted relevant text messages about the case and assisted witnesses in deleting text 12 messages
- applying clear error standard of review to magistrate judge’s order imposing adverse inference jury instruction
Written by the judges who cited it.
The opinion
1
2
3
4
5
6
7
8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 3D SYSTEMS, INC., Case No.: 21-cv-1141-AGS-DDL
12 Plaintiff,
ORDER GRANTING IN PART
13 v. PLAINTIFF’S MOTION FOR
SANCTIONS
14 BEN WYNNE, et al.,
15 Defendants. [Dkt. No. 346]
16
17
18 I.
19 INTRODUCTION
20 After defendant Ben Wynne was served with the lawsuit in this case, he and
21 defendant Chris Tanner deleted information from a cloud-based platform called OnShape.
22 The deleted information included computer-aided design (“CAD”) files pertaining to work
23 that Wynne performed while employed at plaintiff 3D Systems and other information
24 pertaining to 3D printing more generally.
25 3D Systems moves for terminating and other sanctions for spoliation of evidence
26 under Federal Rule of Civil Procedure 37(e) and the Court’s inherent authority. The Court
27 has carefully considered the moving papers, the parties’ supplemental briefs, the arguments
28 of counsel, and the testimony given by Wynne, Tanner and 3D Systems employee Scott
1 Turner at the evidentiary hearing in this matter. As explained below, the present record
2 supports a finding that Wynne and Tanner spoliated evidence, that 3D Systems was
3 prejudiced and that sanctions are warranted under Rule 37(e)(1). However, the jury should
4 determine whether the spoliation was intentional, which is an essential prerequisite to
5 sanctions under Rule 37(e)(2). The Court further concludes that terminating sanctions are
6 not warranted under Rule 37(e)(2) in any event and that, if the jury finds the spoliation was
7 intentional, the appropriate sanction is to provide a “permissive inference” instruction
8 informing the jury that it may presume the deleted information was unfavorable to
9 defendants Wynne and Tanner, but is not required to do so. 1 Finally, Wynne and Tanner
10 must pay 3D Systems’s attorneys’ fees incurred in bringing this motion.
11 II.
12 BACKGROUND
13 A. 3D Systems Files Suit
14 In 2016, 3D Systems hired the five individual defendants (collectively
15 “Defendants”), including Wynne and Tanner, to “advance [its] Figure 4 print engine
16 technology.” Dkt. No. 363-27 (Declaration of Andrew Johnson) at ¶ 3. Defendants
17 simultaneously resigned their employment with 3D Systems in August 2017. Id. at ¶ 4.
18 3D Systems filed this lawsuit in the San Diego Superior Court on May 19, 2021.
19 Dkt. No. 1. The Complaint alleged, in relevant part:
20
21
22
23 1 The Court lacks the authority to impose the terminating sanctions that 3D Systems
seeks; however, the Court may order sanctions under Rule 37 “provided that the actual
24
sanctions imposed are non-dispositive.” Apple, Inc. v. Samsung Electronics Company, 888
25 F. Supp. 2d 976, 988 (N.D. Cal. 2012) (applying clear error standard of review to
magistrate judge’s order imposing adverse inference jury instruction); Clear-View Techs.,
26
Inc. v. Rasnick, No. 5:13-CV-02744-BLF, 2015 WL 2251005, at *6 (N.D. Cal. May 13,
27 2015) (“Magistrate judges may issue monetary sanctions and adverse inference jury
instructions for spoliation.”).
28
1 • Defendants and their company, Intrepid Automation, “misappropriated 3D Systems’
trade secrets” and were “unlawfully using and benefitting from 3D Systems’ trade
2
secrets” (id. at 15, ¶ 38);
3
• Defendants’ patent applications “contain trade secret and confidential drawing
4
details of Enso,” the print engine that is part of 3D Systems’s Figure 4 print system
5 (id. at 16, ¶ 42);
6 • Intrepid “stole and incorporated Enso CAD drawings and the initial Enso patent
filings that were not published at the time Intrepid filed its patent application for
7
Patent Number 10,780,640,” including “the spine for supporting components,
8 elevator mounted to spine, projector mounted to spine, and bracket on the projector”
9 (id. at 16, ¶ 44); and
10 • “Intrepid’s provisional filing of Patent Application Number US 20200103857 also
contains trade secret and proprietary elements directly from 3D Systems’ Enso
11
‘Figure 4’ print engine design, including elements from the Enso CAD drawings and
12 3D Systems’ initial Enso patent filings, which were not published at the time of
Intrepid’s provisional filing.” Id. at 17, ¶ 48.
13
14 On May 25, 2021, 3D Systems served defendants Wynne, Jamie Etcheson, Ivan
15 Chousal and Intrepid Automation with the Complaint. Dkt. No. 346-3.
16 B. The OnShape Platform
17 On May 25 and May 26, 2021, Wynne and Tanner deleted multiple documents and
18 elements from their OnShape account. OnShape is a cloud-based product development
19 platform. One of its features allows users to create and edit CAD files on the OnShape
20 platform. CAD files are used to design and build products such as 3D printers. The CAD
21 data stored on OnShape can range from a single part of a printer to a complete model of
22 the entire printer with the size and shape of every physical component part.
23 An OnShape “document” is a container that may contain multiple types of data
24 accessed through tabs within the document (analogous to the manner in which a single
25 Excel file may include multiple tabs with different information accessible through each
26 tab). An OnShape document is not limited to CAD data, however, and “can contain any
27 type of information related to one or more projects, such as assemblies, subassemblies,
28 parts, drawings, imported parts and any other projected related data such as PDFs, images,
1 and videos.” Dkt. No. 346-2 at 4. In this regard, an OnShape document is fundamentally
2 different than, for example, a Word document that consists of a single file. An OnShape
3 “element” is a “subcomponent of a document.” Dkt. No. 344 at 12.
4 An OnShape user can manually “trash” a document. Dkt. No. 346-2 at 5-6. A
5 trashed document is automatically deleted after 30 days. Id. at 6. Alternatively, the user
6 can manually delete a trashed document by selecting the document in the trash can and
7 clicking “trash forever.” Id. at 6-7. An OnShape user can delete an element within a
8 document in a single step. Id. at 7.
9 An OnShape document that is deleted cannot be recovered through the OnShape
10 platform. Dkt. No. 344 at 14. The record does not indicate whether the OnShape platform
11 can recover a deleted element.
12 C. The OnShape Deletions
13 Wynne used OnShape in connection with his duties at 3D Systems. Transcript of
14 March 27, 2024 Evidentiary Hearing (hereafter “Trans.”), Dkt. No. 470 at 33:22-34:12.
15 After leaving 3D Systems in August 2017, Wynne and Tanner used OnShape in connection
16 with their new 3D printing company, Intrepid Automation. Id. at 68:18-69:24, 72:18-
17 73:16, 162:24-164:2.
18 As noted above, 3D Systems served defendants Wynne, Etcheson, Chousal and
19 Intrepid Automation with the Complaint on May 25, 2021. Dkt. No. 346-3. On May 25
20 and 26, 2021, Wynne and Tanner trashed and/or deleted 10 documents and deleted 43
21 elements from OnShape as reflected in the following chart:
22
23 OnShape Document Action Taken by Wynne and Tanner
24 AY_AURORA_PLUS_HALO.zip Wynne imported the document to
OnShape on July 22, 2017, while
25
employed by 3D Systems.
26
Wynne trashed and deleted the document
27
on May 26, 2021.
28
1 OnShape Document Action Taken by Wynne and Tanner
2 shuttle_assy_rear.step Wynne imported the document to
OnShape on August 5, 2016, while
3
employed by 3D Systems.
4
Wynne trashed and deleted the document
5
on May 26, 2021.
6
SubChassisAssy3.zip Wynne imported the document to
7
OnShape on April 13, 2017, while
8 employed by 3D Systems.
9
Wynne trashed and deleted the document
10 on May 26, 2021.
11
A-PROTO FRAME.step Wynne created the document on OnShape
12 on September 13, 2017.
13
Wynne trashed and deleted the document
14 on May 26, 2021.
15
JIG MEMBRANE 70 um Tanner created the document on OnShape
16 on November 8, 2017.
17
Tanner deleted 15 elements on May 26,
18 2021.
19
Tanner trashed and deleted the document
20 on May 26, 2021.
21
BRANE FRAME MOD Tanner created the document on OnShape
22 on December 16, 2017.
23
Tanner deleted 5 elements on May 25,
24 2021.
25
Tanner trashed the document on May 25,
26 2021, and Wynne deleted it on May 26,
27 2021.
28
1 OnShape Document Action Taken by Wynne and Tanner
2 Print Test Fixture Tanner trashed the document on May 26,
2021.
3
4 _MLL15Slide_4.step Tanner imported the document to
OnShape on August 22, 2017.
5
6 Tanner deleted one element on May 25,
2021.
7
8 Tanner trashed the document on May 25,
2021, and Wynne deleted it on May 26,
9
2021.
10
_LWL15R71_6BS1_6TrackRail_2.step Tanner imported the document to
11
OnShape on August 22, 2017.
12
Tanner deleted one element on May 25,
13
2021.
14
Tanner trashed the document on May 25,
15
2021, and Wynne deleted it on May 26,
16 2021.
17
“DELETED” Tanner trashed the document on May 26,
18 2021.
19
dino test Tanner created the document on OnShape
20 on August 28, 2017.
21
Tanner deleted 11 elements on May 25,
22 2021.
23
IKO_Linear_Stage Wynne created the document on OnShape
24 on July 28, 2017, while employed by 3D
25 Systems.
26 Tanner deleted 7 elements on May 25,
27 2021.
28
1 OnShape Document Action Taken by Wynne and Tanner
2 Intrepid Scrachpad Wynne created the document on OnShape
on April 15, 2017, while employed by 3D
3
Systems.
4
Tanner deleted one element on May 25,
5
2021.
6
force_mount Wynne created the document on OnShape
7
on September 15, 2017.
8
Tanner deleted one element on May 25,
9
2021.
10
CHASSIS COMPONENTS – Brane Wynne created the document on OnShape
11
Frame (2).step on October 28, 2017.
12
Tanner deleted one element on May 25,
13
2021.
14
15 Records produced by OnShape show that Wynne and Tanner did not delete OnShape
16 documents or elements at any other time in 2021. Dkt. No. 346-2 at 13, ¶ 29.
17 At the March 27 evidentiary hearing, Wynne and Tanner each testified that they do
18 not recall deleting any OnShape documents or elements in May 2021, and they never
19 intended to deprive 3D Systems of relevant evidence. Trans. 28:18-25, 161:7-16.
20 III.
21 DISCUSSION
22 A. Federal Rule of Civil Procedure 37(e)
23 1. Legal standards
24 The law imposes upon litigants “a duty to preserve evidence which [they] know[] or
25 reasonably should know is relevant to” pending or reasonably anticipated litigation. In re
26 Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1067 (N.D. Cal. 2006). Spoliation is
27 a party’s breach of this duty and is sanctionable. See Compass Bank v. Morris Cerullo
28 World Evangelism, 104 F. Supp. 3d 1040, 1052 (S.D. Cal. 2015). Such sanctions serve to
1 cure the prejudice created by the spoliation to the extent possible, and to deter any future
2 spoliation. See Reinsdorf v. Skechers U.S.A., Inc., 296 F.R.D. 604, 626 (C.D. Cal. 2013).2
3 Federal Rule of Civil Procedure 37(e) governs the spoliation of electronically stored
4 information (“ESI”). The Rule empowers the Court to sanction a spoliating party when
5 ESI “that should have been preserved in the anticipation or conduct of litigation is lost
6 because [the] party failed to take reasonable steps to preserve it, and it cannot be restored
7 or replaced through additional discovery . . . .” Fed. R. Civ. P. 37(e). The Rule further
8 provides that the Court “may order measures no greater than necessary to cure the
9 prejudice.” Fed. R. Civ. P. 37(e)(1). However, where the spoliating party “acted with the
10 intent to deprive another party of the information’s use,” the Court may impose harsher
11 sanctions, including “instruct[ing] the jury that it may or must presume the information
12 was unfavorable to the party.” Fed. R. Civ. P. 37(e)(2).
13 Rule 37(e) “establishes three prerequisites to sanctions” for spoliation of ESI. Fast
14 v. GoDaddy.com LLC, 340 F.R.D. 326, 335 (D. Ariz. 2022). First, “the ESI should have
15 been preserved.” Id. Second, the ESI “[was] lost through a failure to take reasonable steps
16 to preserve it.” Id. And third, the ESI “cannot be restored or replaced through additional
17 discovery.” Id. The party moving for sanctions bears the burden of proving that the ESI
18 existed and was spoliated. See Belew-Nyquist v. Quincy School Dist. No. 144, No. 2:19-
19 CV-0215-TOR, 2020 WL 6845934, at *11 (E.D. Wash. Nov. 20, 2020). “The relevant
20 standard of proof . . . is a preponderance of the evidence.” Fast, 340 F.R.D. at 335.
21 “[O]nce spoliation is shown, the burden of proof logically shifts to the guilty party
22 to show that no prejudice resulted from the spoliation because that party is in a much better
23 position to show what was destroyed and should not be able to benefit from its
24 wrongdoing.” OmniGen Rsch. v. Yongqiang Wang, 321 F.R.D. 367, 372 (D. Or. 2017).
25 Moreover, “the finding of intent required by Rule 37(e)(2) can support not only an
26
27
2 All citations and internal quotation marks are omitted, and emphasis is added, unless
28
1 inference that the lost information was unfavorable to the party that intentionally destroyed
2 it, but also an inference that the opposing party was prejudiced by the loss of information
3 that would have favored its position.” Jones v. Riot Hosp. Grp. LLC, 95 F.4th 730, 736
4 (9th Cir. 2024). Stated otherwise, “[i]f intent is established, then prejudice is presumed.”
5 Hollis v. CEVA Logistics U.S., Inc., 603 F. Supp. 3d 611, 622 (N.D. Ill. 2022).
6 2. Obligation to preserve OnShape data
7 3D Systems served its complaint on Wynne and other defendants on May 25, 2021.
8 Dkt. No. 346-3. Following that service, Wynne and Tanner were obligated to preserve
9 evidence they knew or reasonably should have known was relevant to this litigation. In re
10 Napster, Inc. Copyright Litig., 462 F. Supp. 2d at 1067. Although the complaint was not
11 served on Tanner until June 2, 2021, the coordinated actions between Wynne and Tanner
12 in trashing and deleting the OnShape data on May 26, 2021 are strong circumstantial
13 evidence that Tanner knew of the complaint before he was formally served.
14 Defendants dispute whether all the OnShape documents and elements that Wynne
15 and Tanner deleted were relevant to this litigation. Although 3D Systems, as the moving
16 party, bears the burden of proving that relevant OnShape data existed, Belew-Nyquist, 2020
17 WL 6845934, at *11, this is particularly challenging because the deletion of that data by
18 Wynne and Tanner has rendered it unavailable and requires 3D Systems to rely on
19 circumstantial evidence to establish relevance. In certain circumstances, this type of
20 informational asymmetry may counsel in favor of shifting the burden of proof to the
21 spoliating party. See Hollis, 603 F. Supp. 3d at 620-21 (discussing allocation of burden of
22 proof in spoliation analysis). However, the Court does not consider whether shifting the
23 burden of proof is appropriate here because 3D Systems has established that at least three
24 of the deleted OnShape documents were relevant to this litigation. These three documents
25 were all imported to OnShape by Wynne in connection to his work for 3D Systems:
26
OnShape Document Contents
27
AY_AURORA_PLUS_HALO.zip This OnShape document contained CAD
28
1 OnShape Document Contents
2 (Wynne imported the document to and Halo circuit board, which are both
OnShape on July 22, 2017, while components of the 3D Systems Figure 4
3
employed by 3D Systems. He print system that is at issue in this
4 trashed and deleted it on May 26, litigation. Trans. 32:15-35:23.
2021.)
5
6
7
shuttle_assy_rear.step 3D Systems recovered an exact match for
8 this document, which contains CAD data
(Wynne imported the document to for a tray dispenser component of the
9
OnShape on August 5, 2016, while Figure 4 print system referred to as a “PEZ
10 employed by 3D Systems. He trashed dispenser.” Trans. 48:11-53:2.
and deleted it on May 26, 2021.)
11
12 SubChassisAssy3.zip This OnShape document contained CAD
data for the Herndon 3D printer that
13
(Wynne imported the document to Wynne testified he uploaded to OnShape
14 OnShape on April 13, 2017, while to see if he could make it marketable by
employed by 3D Systems. He trashed adding the Aurora projector and Halo
15
and deleted it on May 26, 2021.) circuit board. Trans. 39:6-44:22.
16
17
Additionally, Tanner deleted eleven elements from the “dino test” OnShape
18
document on May 25, 2021. The “dino test” document – which Tanner testified was the
19
linear stage spine assembly for the Atom print system – was relevant to the allegations in
20
the complaint that Defendants misappropriated CAD drawings from the Enso print engine,
21
including elements relating to the spine. Trans. 162:3-163:5; Dkt. No. 1 at 16, ¶ 44.
22
Finally, the apparently coordinated effort by Wynne and Tanner to trash and delete
23
OnShape documents and elements immediately after Wynne was served with 3D Systems’s
24
complaint is additional circumstantial evidence that the deleted documents and elements
25
were relevant to this case. This is particularly so where the record shows that neither
26
Wynne nor Tanner deleted any OnShape documents at any other point in 2021.
27
Accordingly, 3D Systems has shown that at least certain of the deleted OnShape documents
28
1 and elements “should have been preserved in the anticipation or conduct of litigation.”
2 Fed. R. Civ. P. 37(e).
3 3. Failure to preserve OnShape data
4 3D Systems has established that Wynne and Tanner “failed to take reasonable steps
5 to preserve” the deleted OnShape data. Id. Specifically, OnShape records show that
6 Wynne and Tanner took the affirmative step of trashing ten OnShape documents and took
7 a second affirmative step of deleting eight of those documents (apparently allowing the
8 remaining two trashed documents to automatically delete 30 days later). Dkt. No. 346-2
9 at 12, ¶ 27. OnShape data further shows that Tanner took the affirmative step of deleting
10 a total of 43 elements from nine OnShape documents. Id. at ¶ 28.
11 4. Inability to restore or replace OnShape data
12 Sanctions are appropriate only where the information “cannot be restored or replaced
13 through additional discovery.” Fed. R. Civ. P. 37(e). “A court may not sanction a party
14 for spoliation under [Rule] 37(e) if the parties can restore or replace the lost ESI through
15 feasible means.” Oracle USA, Inc. v. Rimini St., Inc., No. 2:10-CV-0106-LRH-VCF, 2020
16 WL 9209714, at *4 (D. Nev. Sept. 21, 2020), report and recommendation adopted, 2021
17 WL 1224904 (D. Nev. Mar. 31, 2021), on reconsideration, 2021 WL 9333202 (D. Nev.
18 June 9, 2021). This is because ESI “often exists in multiple locations” such that “loss from
19 one source may . . . be harmless when substitute information can be found elsewhere.”
20 Fed. R. Civ. P. 37(e), advisory committee notes to 2015 amendment.
21 Defendants contend that nine of the ten deleted OnShape documents have been
22 replaced “through substantial documentary evidence as well as testimony.” Dkt. No. 502
23 at 3. For example, Wynne deleted the OnShape document
24 AY_AURORA_PLUS_HALO.zip. That document is gone and cannot be recovered, but
25 Defendants point out that 3D Systems located AY_AURORA_PLUS_HALO.SLDASM, a
26 Solidworks assembly file with the same name. Wynne testified that uploading a CAD file
27 in Solidworks assembly format to OnShape requires the user to first convert the file to zip
28 format with the same top level name (e.g., to upload a Solidworks assembly file named
1 PRINTER.SLDASM to OnShape, the user must convert the file to PRINTER.zip prior to
2 uploading it). Trans. 18:9-19:24, 25:6-12. Defendants thus contend that the deleted
3 AY_AURORA_PLUS_HALO.zip document is the same as the recovered
4 AY_AURORA_PLUS_HALO.SLDASM file, just with a different extension. Trans.
5 32:19-21.
6 The recovered file AY_AURORA_PLUS_HALO.SLDASM contains CAD for 3D
7 Systems’s Aurora projector and Halo circuit board, which Wynne testified he uploaded to
8 OnShape to see if those components could be used with 3D Systems’s Herndon printer.
9 Trans. 42:9-45:6. However, according to Wynne, Intrepid never used the Aurora or Halo
10 CAD, and Intrepid’s Atom 3D print system uses a different, commercially available
11 projector and circuit board. Trans. 32:19-21, 33:20-25, 35:14-23. Moreover, Defendants
12 allowed 3D Systems to inspect the CAD for Intrepid’s first Atom print engine, so 3D
13 Systems could see for itself whether Defendants had misappropriated the Aurora or Halo
14 CAD for Intrepid’s own use. Trans. 29:1-13, 161:17-25.
15 Defendants thus contend the AY_AURORA_PLUS_HALO.zip document that
16 Wynne deleted from OnShape and the recovered
17 AY_AURORA_PLUS_HALO.SLDASM file are the same files with different extensions
18 and contain the same data. But as noted above, an OnShape document is a container that
19 may contain multiple types of data accessed through tabs within the document, including
20 “any type of information related to one or more projects, such as assemblies,
21 subassemblies, parts, drawings, imported parts and any other projected related data such as
22 PDFs, images, and videos.” Dkt. No. 346-2 at 4. As such, it cannot be determined with
23 any degree of certainty whether the recovered AY_AURORA_PLUS_HALO.SLDASM
24 file and the deleted AY_AURORA_PLUS_HALO.zip document contained precisely the
25 same data and that the spoliated OnShape document has been completely restored simply
26 because they share the same name. Moreover, with respect to at least one document
27 (SubChassisAssy3.zip) that Wynne imported to OnShape while employed at 3D Systems,
28
1 OnShape records reflect that Wynne opened the document multiple times in August 2017
2 after he left 3D Systems. Trans. 128:2-129:2.
3 Because an OnShape document that functions as a container for multiple types of
4 data is fundamentally different than a single “file” or “document” (as those terms are
5 commonly used), the Court cannot find that the nine recovered “files” contain precisely the
6 same data as the deleted OnShape documents, notwithstanding the similar file names. The
7 Court concludes that 3D Systems has met its burden, for purposes of this motion, of
8 showing that the ESI cannot be restored or replaced.
9 5. Prejudice and intent to deprive 3D Systems of information
10 3D Systems has established by a preponderance of the evidence that (1) relevant
11 OnShape documents and elements existed, (2) Wynne and Tanner had a duty to preserve
12 the documents and elements and failed to take reasonable steps to do so, and (3) the deleted
13 OnShape documents and elements cannot be restored or replaced. The burden thus shifts
14 to Wynne and Tanner to show their deletion of the OnShape documents and elements did
15 not prejudice 3D Systems. Youngevity Int’l v. Smith, No. 3:16-CV-704-BTM-JLB, 2020
16 WL 7048687, at *3 (S.D. Cal. July 28, 2020) (“Although Federal Rule of Civil Procedure
17 37(e) does not place the burden of proving or disproving prejudice on either party, if
18 spoliation is proven, the burden shifts to the spoliating party to prove the lost information
19 is not prejudicial.”).
20 a. Prejudice
21 “‘Prejudice’ under Rule 37(e) includes the thwarting of a party’s ability to obtain the
22 evidence it needs for its case.” Hollis, 603 F. Supp. 3d at 623. Prejudice also exists where
23 “the spoiling party’s actions impaired the non-spoiling party’s ability to go to trial or
24 threatened to interfere with the rightful decision of the case.” Leon v. IDX Sys. Corp., 464
25 F.3d 951, 959 (9th Cir. 2006). The record demonstrates that 3D Systems was prejudiced
26 by the deletion of the OnShape documents and elements. As explained above, it is not
27 possible to determine the precise contents of each OnShape document deleted by Wynne
28 and Tanner given that an OnShape document is really a container of information. As such,
1 Wynne and Tanner have not demonstrated that the lost information is not prejudicial. See
2 Jones, 95 F.4th at 736 (“production of some evidence does not excuse destruction of other
3 relevant evidence”). Corrective measures are thus appropriate, but they must be “no greater
4 than necessary to cure the prejudice.” Fed. R. Civ. P. 37(e)(1).
5 b. Intent to deprive
6 Rule 37(e)(2) authorizes more severe sanctions where the spoliating party “acted
7 with the intent to deprive another party of the information’s use.” Fed. R. Civ. P. 37(e)(2).
8 “Rule 37(e) does not define ‘intent,’ but in context, the word is most naturally understood
9 as involving the willful destruction of evidence with the purpose of avoiding its discovery
10 by an adverse party.” Jones, 95 F.4th at 735 (affirming dismissal sanction where plaintiff
11 deleted relevant text messages about the case and assisted witnesses in deleting text
12 messages). “Because intent can rarely be shown directly, a district court may consider
13 circumstantial evidence in determining whether a party acted with the intent required for
14 Rule 37(e)(2) sanctions.” Id. “Relevant considerations include the timing of destruction,
15 affirmative steps taken to delete evidence, and selective preservation.” Id.
16 These relevant considerations could lead a reasonable factfinder to conclude that
17 Wynne and Tanner deleted the OnShape documents and elements to avoid their discovery
18 by 3D Systems. Wynne and Tanner took affirmative steps to trash and delete the
19 documents in a seemingly coordinated manner on May 26, 2021, the day after Wynne was
20 served with the complaint. Their conduct stands in stark contrast to the remainder of 2021,
21 when neither Wynne nor Tanner deleted any OnShape documents or elements. Moreover,
22 although the record does not clearly indicate how many documents Wynne and Tanner
23 maintained on their OnShape account, a reasonable factfinder could conclude that they
24 selectively deleted some but not all of the documents and elements in their account.
25 On the other hand, both Wynne and Tanner testified that, although they do not recall
26 deleting any OnShape documents on May 26, 2021, they would not have deleted evidence
27 to prevent its discovery by 3D Systems. Moreover, defendants presented evidence at the
28 March 27 evidentiary hearing that certain of the deleted documents were either 3D Systems
1 CAD data that was not used in connection with their work at Intrepid Automation (e.g.,
2 AY_AURORA_PLUS_HALO.zip) or CAD data that has no bearing on the trade secrets
3 allegedly misappropriated in this case (e.g., Print Test Fixture). For example,
4 shuttle_assy_rear.step – which Wynne imported to OnShape while employed by 3D
5 Systems and deleted on May 26, 2021 – contains CAD data for a tray dispenser component
6 of the Figure 4 print system referred to as a “PEZ dispenser.” Trans. 48:11-53:2. Wynne
7 testified that Intrepid does not use the “PEZ dispenser” feature. Trans. 53:19-54:2.
8 A second example is SubChassisAssy3.zip – which Wynne imported to OnShape
9 while employed by 3D Systems and deleted on May 26, 2021. Wynne testified that this
10 OnShape document contained CAD data for 3D Systems’s Herndon 3D printer that he
11 uploaded to OnShape to see if he could make it marketable by adding the Aurora projector
12 and Halo circuit board. Trans. 39:6-44:22. Wynne further testified that Intrepid has not
13 used the Herndon printer’s CAD data. Trans. 45:23-25.
14 Considering all the foregoing evidence, the Court concludes that “[r]easonable
15 minds could disagree” whether Wynne and Tanner deleted the OnShape documents and
16 elements with intent to deprive 3D Systems of this information. Microvention, Inc. v. Balt
17 USA, LLC, No. 820CV02400JLSKES, 2023 WL 7476998, at *22 (C.D. Cal. Oct. 5, 2023).
18 As such, “the Court will leave that determination to the jury.” Hollis, 603 F. Supp. 3d at
19 624. Rule 37(e)(2)’s advisory committee notes contemplate this approach:
20
If a court were to conclude that the intent finding should be made
21 by a jury, the court’s instruction should make clear that the jury
may infer from the loss of the information that it was unfavorable
22
to the party that lost it only if the jury first finds that the party
23 acted with the intent to deprive another party of the information’s
use in the litigation. If the jury does not make this finding, it may
24
not infer from the loss that the information was unfavorable to
25 the party that lost it.
26
Fed. R. Civ. P. 37 advisory committee notes to 2015 amendment. That instruction is
27
discussed below.
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1 6. Curative measures
2 a. Defendants at issue
3 The motion seeks sanctions against all five individual defendants and Intrepid
4 Automation. In response to the Court’s inquiry at the initial motion hearing on January 11,
5 2024, 3D Systems represented that it was limiting its motion to sanctions against Wynne,
6 Tanner and defendant Intrepid Automation (presumably because there was no evidence
7 that defendants Etcheson, Mueller or Chousal spoliated evidence). Dkt. No. 435 at 97.
8 However, 3D Systems’s motion does not set forth the basis for sanctions against Intrepid
9 Automation. The Court understands Intrepid is an entity controlled by one or more of the
10 individual defendants, but in the absence of any evidence as to which defendants control
11 Intrepid or legal authority justifying the imposition of sanctions against Intrepid for the
12 actions of Wynne and Tanner, the Court concludes 3D Systems has not established its
13 entitlement to sanctions against Intrepid. Accordingly, the curative measures described
14 below apply to defendants Wynne and Tanner only.
15 b. Jury instructions
16 Based on the foregoing analysis, 3D Systems is entitled to relief under Rule 37(e)(1),
17 which requires the Court to “impose only those measures that are no greater than necessary
18 to cure the prejudice resulting from the loss of the ESI.” Hollis, 603 F. Supp. 3d at 625.
19 “A common curative measure is instructing the jury that it can consider the circumstances
20 surrounding the loss of the ESI.” Id. See Youngevity Int’l, 2020 WL 7048687, at *5 (“Here,
21 since the Court finds spoliation and prejudice, but no intent, the parties are allowed to
22 present evidence and argument to the jury regarding the lost text messages and Relevant
23 Defendants’ intent, and the Court will instruct the jury it may consider the evidence along
24 with all the other evidence in making its decision.”).
25 As discussed above, the Court concludes that the issue of intent – an essential
26 prerequisite to imposition of sanctions under Rule 37(e)(2) – should be decided by the jury.
27 If the jury finds that Wynne and Tanner deleted the OnShape documents and elements with
28 intent to deprive 3D Systems of the information’s use in this litigation, the appropriate
1 remedy under Rule 37(e)(2) is to instruct the jury it may presume the deleted information
2 was unfavorable to Wynne and Tanner. See Fed. R. Civ. P. 37(e)(2)(B). The Court will
3 provide a jury instruction that informs the jury it may consider the evidence of spoliation
4 with all other evidence in making its decision and that, if the jury finds Wynne or Tanner
5 acted with intent, it may presume the deleted information was unfavorable to that party.
6 See, e.g., Hollis, 603 F. Supp. 3d at 625-26 (example of curative jury instruction under
7 Rule 37(e)(1) and (e)(2)).
8 c. Terminating sanctions
9 Terminating sanctions are not warranted. The relevant factors in this analysis are
10 “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to
11 manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public
12 policy favoring disposition of cases on their merits; and (5) the availability of less drastic
13 sanctions.” Connecticut Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091,
14 1096 (9th Cir. 2007). These factors “provide[] the district court with a way to think about
15 what to do, not a set of conditions precedent for sanctions,” because “[i]n deciding whether
16 to impose case-dispositive sanctions, the most critical factor is not merely delay or docket
17 management concerns, but truth.” Id. at 1096-97. Thus, “[w]here a party so damages the
18 integrity of the discovery process that there can never be assurance of proceeding on the
19 true facts, a case dispositive sanction may be appropriate.” Id. at 1097 (citation omitted).
20 The first and fourth factors weigh for and against terminating sanctions, respectively,
21 although that is true in virtually every case. The second factor is neutral – the discovery
22 of the spoliation and the resulting motion practice have caused the parties and the Court to
23 expend time and resources, but the litigation has progressed in the interim and motions for
24 summary judgment are pending. Consideration of the third and fourth factors counsels
25 against terminating sanctions. The Court has found that 3D Systems suffered prejudice
26 sufficient to warrant relief under Rule 37(e)(1) in the form of a jury instruction. But the
27 alleged trade secrets at issue in this case and the defenses raised by Defendants – including
28 their statute of limitations defense – go far beyond the CAD that Wynne and Tanner
1 deleted, and terminating sanctions based on those deletions would impede a search for the
2 truth. Id. at 1097. Moreover, as described above, a less drastic sanction in the form of a
3 permissive jury instruction is available here if the jury finds intent, and the Court has not
4 previously imposed sanctions on Defendants. See Compass Bank v. Morris Cerullo World
5 Evangelism, 104 F. Supp. 3d 1040, 1060 (S.D. Cal. 2015) (declining to impose terminating
6 sanctions against plaintiff even though “the risk of prejudice to Defendant is great” and
7 plaintiff had history of discovery violations because “there is an appropriate less drastic
8 sanction that can be imposed”).
9 d. Attorneys’ fees
10 Given the finding that Wynne and Tanner spoliated evidence that warrants sanctions
11 under Rule 37(e)(1), the Court concludes that 3D Systems “is entitled to an award of
12 reasonable attorneys’ fees and costs that [it] incurred in preparing and arguing the sanctions
13 motion only.” Porter v. City & Cnty. of San Francisco, No. 16-CV-03771-CW(DMR),
14 2018 WL 4215602, at *5 (N.D. Cal. Sept. 5, 2018). “There is no requirement in Rule 37(e)
15 or the Committee Notes that a court must make a finding of bad faith before imposing
16 monetary sanctions, and district courts have imposed monetary sanctions pursuant to Rule
17 37(e)(1).” Spencer v. Lunada Bay Boys, No. CV1602129SJORAOX, 2018 WL 839862, at
18 *1 (C.D. Cal. Feb. 12, 2018) (rejecting argument that Rule 37(e)(1) does not authorize
19 monetary sanctions), aff’d, 806 Fed. App’x 564, 568 (9th Cir. 2020) (finding the district
20 court “did not abuse its discretion by ordering the sanctions award,” although the amount
21 was in error); Est. of Bosco by & Through Kozar v. Cnty. of Sonoma, 640 F. Supp. 3d 915,
22 931 (N.D. Cal. 2022) (imposing permissive inference jury instruction against defendant
23 under Rule 37(e)(2) and awarding plaintiff attorneys’ fees and costs).
24 / / /
25 / / /
26 / / /
27 / / /
28 / / /
1 B. Inherent Power
2 A district court may impose sanctions, including terminating sanctions, for “a broad
3 range of willful improper conduct.” Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001).
4 When considering whether terminating sanctions are appropriate, the Ninth Circuit directs
5 district courts to consider “(1) the existence of certain extraordinary circumstances, (2) the
6 presence of willfulness, bad faith, or fault by the offending party, (3) the efficacy of lesser
7 sanctions, [and] (4) the relationship or nexus between the misconduct drawing the dismissal
8 sanction and the matters in controversy in the case . . . .” Halaco Eng’g Co. v. Costle, 843
9 F.2d 376, 380 (9th Cir. 1988).
10 A majority of courts hold that Rule 37 “provides the exclusive source of sanctions
11 for the loss of ESI and forecloses reliance on [the Court’s] inherent authority.” Fast, 340
12 F.R.D. at 335. See also, e.g., Gault v. United States, No. 20-10687 PA (PVC), 2022 WL
13 4292340, at *6 (C.D. Cal. Aug. 23, 2022) (noting that “[t]he weight of authority holds that
14 [t]he 2015 revision to Rule 37(e) provides the sole basis for a court to take action for the
15 failure to preserve electronic evidence”); Shiflett v. City of San Leandro, No. 21-CV-
16 07802-LB, 2024 WL 536302, at *4 (N.D. Cal. Feb. 10, 2024) (“after the 2015 amendments,
17 courts cannot rely on their inherent authority to issue sanctions for failing to preserve
18 electronically stored information”).
19 The Court need not address whether Rule 37(e) precludes the Court from imposing
20 sanctions under its inherent authority. Even if the Court could rely on its inherent authority,
21 it would nevertheless conclude that such authority would, at most, counsel in favor of the
22 sanctions imposed under Rule 37(e) as described above.
23 IV.
24 CONCLUSION
25 For the foregoing reasons, the Court GRANTS IN PART 3D Systems’s motion for
26 sanctions as follows:
27 1. The Court will provide a jury instruction under Rule 37(e) as described above.
28
1 2. 3D Systems shall recover its attorneys’ fees and costs incurred as a result of
2 ||this sanctions motion. By not later than 7 days from the date of this Order, 3D Systems
3 ||shall submit the amount of fees and costs it seeks to recover with appropriate
4 ||documentation. Wynne and Tanner may respond to the fee request no later than 7 days
5 || thereafter.
6 IT IS SO ORDERED.
7 ||Dated: August 21, 2024 _—_—
8 Tb Lh,
10 United States Magistrate Judge
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