United States District Court, Northern District of California, San Jose Division
December 1, 2008
WILLIAM A. ASHMAN, PLAINTIFF,
SOLECTRON CORPORATION, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Jeremy Fogel, District Judge
(1) DENYING MOTION TO DISMISS; (2) GRANTING MOTION TO COMPEL RETURN OF IMPROPERLY OBTAINED DOCUMENTS; (3) GRANTING IN PART MOTION TO EXCLUDE IMPROPERLY OBTAINED DOCUMENTS; AND (4) DENYING MOTION TO DISQUALIFY COUNSEL
Defendant Solectron Corporation ("Solectron") moves to dismiss the first amended complaint ("FAC") of Plaintiff William A. Ashman ("Ashman") as a sanction for Ashman's improper retention and theft of Solectron documents prior to filing the instant action. In the alternative, Solectron seeks an order that Ashman return all improperly obtained documents and bar their use for the remainder of the instant litigation. Solectron also moves for disqualification of Ashman's current counsel. For the reasons set forth below, the motions to dismiss and to disqualify counsel will be denied. The motion to compel the return of documents will be granted, and the motion to preclude use of the documents will be granted in part.
Solectron is an international electronics manufacturer and supply chain services provider. On July 21, 2003, Solectron hired Ashman as an IT server administrator for its Milpitas, California facility. Ashman was fifty-two years old when he was hired. As a condition of employment, Ashman signed Solectron's Employee Proprietary Information Agreement, which required that employees return all company documents upon termination.*fn2 Shortly after his hiring, Ashman was diagnosed with a form of cancer. Ashman thereafter took two medical leaves of absence, the first lasting from September 9, 2003 until November 21, 2003. The second leave of absence began on October 22, 2004 and ended when Ashman returned to work on February 21, 2005.
During the fall of 2004, concurrent with Ashman's second leave of absence, Solectron began to reorganize its workforce in a cost-reduction effort. This reorganization included employee layoffs. After Ashman returned from his second leave of absence, he learned that he had been designated for layoff. The parties dispute the sequence of events with respect to the notice provided to Ashman regarding his termination. Solectron claims that Ashman was notified upon or shortly after his return to work on February 21, 2005. Ashman alleges that rather than informing him immediately of his termination, Solectron instead appointed him to help with administrative aspects of the reorganization. According to Ashman, part of this task included accessing certain documents associated with the reorganization. Ashman alleges that as a result of such access he discovered a document indicating that he had been designated for layoff. Ashman claims that he then confronted a supervisor with his concerns and was assured that his position was safe. Ashman alleges that Solectron then removed this document from its computer network. By Ashman's account, on March 14, 2005 Solectron informed Ashman that he had been designated for layoff and that his last day of employment would be March 31, 2005.
Shortly after his termination, Ashman filed a discrimination complaint with the Equal Employment Opportunity Commission ("EEOC"). The complaint alleged that Ashman was terminated due to his age and/or medical condition. As part of the complaint process, Ashman provided the EEOC with Solectron documents that Ashman had obtained while employed. Solectron asserts not only that Ashman's use of the documents violated the terms of his employment agreement, but also that Ashman provided documents that he had no authority to possess even while he was employed.
Ashman also provided the EEOC with documents obtained after his termination. In June 2006, Solectron initiated an audit of its e-mail accounts and discovered that an individual was logging into Solectron's computer network and reading the e-mail communications of high-level Solectron managers. Solectron reported this incident to local law enforcement authorities in Milpitas, who determined that Ashman was responsible for the activity. Ashman subsequently was arrested and admitted that he had been accessing internal Solectron e-mails and other documents in order to obtain evidence to bolster his EEOC complaint. On July 19, 2007, Ashman pled no contest to a misdemeanor violation of Cal.Penal Code § 502(c)(2). Solectron reported this incident to the EEOC as part of its defense against the discrimination charge. Notwithstanding Ashman's actions, on December 19, 2007 the EEOC issued a right to sue letter. Ashman filed the instant action on March 13, 2008, and the operative FAC was filed on March 18, 2008.
Ashman served his initial disclosures pursuant to Fed.R.Civ.P. 26 on July 1, 2008. Included in the disclosures were multiple documents that appeared to have been obtained both during his employment and after his termination. The disclosures also included a number of privileged documents. Solectron then contacted Ashman's counsel and demanded the return of all Solectron documents in Ashman's possession. Solectron also requested that Ashman voluntarily dismiss the FAC or replace his counsel in light of the fact that Ashman's current counsel had viewed privileged Solectron documents. In response, Ashman's counsel refused to return the documents and argued that Ashman's actions were justified in light of Solectron's failure to produce certain documents during the initial round of discovery.
A federal court has inherent power to impose sanctions "to prevent abuses, oppression, and injustice." Gumbel v. Pitkin, 124 U.S. 131, 144, 8 S.Ct. 379, 31 L.Ed. 374 (1888). When a party wrongfully obtains documents outside the normal discovery process, a number of different types of sanctions are available. These include dismissal of the action, the compelled return of all documents, restrictions regarding the use of the documents at trial, disqualification of counsel, and monetary sanctions. See Fayemi v. Hambrecht & Quist, Inc., 174 F.R.D. 319, 324-27 (S.D.N.Y.1997).
A. Dismissal of the FAC
Dismissal is a "harsh sanction," and courts must consider multiple factors when considering such a request, including "(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions." Anheuser- Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 348 (9th Cir.1995) (quoting Henry v. Gill Indus., Inc., 983 F.2d 943, 948 (9th Cir.1993)). The party to be sanctioned must have acted in bad faith. Id. at 348. Moreover, there must be a relationship between the behavior in question and the merits of the case such that the "transgression `threaten[s] to interfere with the rightful decision of the case.' " Id. (quoting Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 591 (9th Cir.1983)).*fn3
Solectron analogizes the instant case to Jackson v. Microsoft Corp., 211 F.R.D. 423 (W.D.Wash.2002), in which the court sanctioned the plaintiff by dismissing the complaint. In Jackson, the plaintiff was a former employee who alleged various civil rights violations by his employer. After the litigation began, it was discovered that prior to his termination the plaintiff had come into the possession of two compact disks containing approximately 10,000 e-mail messages copied from his former employer's computer network without authorization. Id. at 426. The court found that the plaintiff's "conduct was willful and exemplifies the bad faith with which he has pursued this litigation." Id. at 431. It concluded that the plaintiff's "astonishing pattern of deceptive acts and fraudulent testimony" were serious offenses and warranted dismissal of the case, especially because the plaintiff never gave a credible explanation as to how he had obtained the documents or as to why he failed to produce the documents after months of litigation. Id. at 432. The court also found that any lesser sanction would not outweigh the prejudice to the former employer. Id.
Solectron argues that Ashman's conduct is at least as egregious as that described in Jackson. It asserts that Ashman's bad faith is evidenced by his continuous and unlawful access to Solectron's computer network after the date of his termination, his use of the unlawfully obtained documents in both the EEOC investigation and the instant action, and the lack of any real justification as to why all of the documents should not be returned, despite repeated written requests by Solectron. Solectron argues that it has suffered irremediable prejudice from Ashman's actions and that dismissal is the only adequate sanction. In response, Ashman argues that his actions were justified in light of his concern that Solectron would delete incriminating documents, thereby preventing any chance that he would succeed at trial. In essence, Ashman asserts that he had to act in order to prevent possible spoliation of the evidence. Ashman also has repeatedly justified his conduct as being a protected activity under applicable anti-discrimination law.*fn4
While Ashman's claim that he was trying to preserve evidence may tend to show that he did not act with subjective bad faith, Ashman is bound by the same discovery rules as any other litigant. Discovery self-help is not a protected activity. See O'Day v. McDonnell Douglas Helicopter Co., 79 F.3d 756, 763-64 (9th Cir.1996) (anti-retaliation clause of ADEA "protects reasonable attempts to contest an employer's discriminatory practices; it is not an insurance policy, a license to flaunt company rules or an invitation to dishonest behavior."). However, the Court is inclined to agree with Ashman that dismissal would be too severe a sanction, particularly because the primary policy of resolving litigation on the merits is not outweighed by actual prejudice to Solectron. Most if not all of the relevant documents taken by Ashman will be produced by Solectron during discovery, and there is no evidence that Ashman or his counsel have engaged in improper conduct since the instant litigation was commenced. Moreover, as discussed in further detail below, lesser sanctions are available as a remedy. See Halaco, 843 F.2d at 381.
B. Return of Documents and Restrictions on Future Use
Obviously, the Court has within its power to order the return of the documents. See, e.g., Herrera v. Clipper Group, L.P., No. 97-CIV-560, 1998 WL 229499, at *3 (S.D.N.Y. May 6, 1998) (proper remedy was to order the plaintiff to return all documents and pay for the costs of bringing the motion). The Court also may impose restrictions on the use of the documents during the remainder of the litigation. See Fayemi, 174 F.R.D. at 326 (precluding any use of improperly obtained documents at trial); Pure Power Boot Camp v. Warrior Fitness Boot Camp, No. 08 Civ. 4810, 2008 WL 4866165, at *21-22 (S.D.N.Y. Oct. 23, 2008) (improperly obtained e-mails limited to impeachment purposes only).
In the instant case, the documents at issue (except for privileged documents) likely would have been produced by Solectron. In such circumstances, courts have been hesitant to exclude the use of such documents entirely. See Herrera, 1998 WL 229499, at 5. Moreover, excluding or severely limiting the use of the documents in the instant action may create a "windfall strategic advantage" for Solectron because at least several of the documents at issue form the crux of Ashman's allegations. See id. Accordingly, within seven days of this order Ashman shall return all Solectron documents in his possession, whether in electronic or hard-copy form, and any copies that remain in his possession shall be destroyed. Ashman is barred from using or referring to any privileged content within the documents. After all the documents are returned to Solectron, Ashman will be permitted to use any document produced by Solectron during the normal course of discovery. Ashman will be responsible for the expenses incurred by Solectron in connection with making the instant motions. See Herrera, 1998 WL 229499, at 3.*fn5
C. Disqualification of Counsel
Solectron argues that on two independent grounds Ashman's counsel should be disqualified. First, Solectron contends that counsel violated ethical rules by not returning documents, especially privileged documents, that counsel knew were obtained unlawfully. Second, Solectron argues that because counsel is aware of the privileged content of some of the documents, counsel consciously or subconsciously will put that knowledge to use notwithstanding any constraints imposed by the Court. See Herrera, 1998 WL 229499, at *4. While counsel's actions are cause for concern, the Court concludes that the severe sanction of disqualification is not appropriate at this time, assuming that going forward Ashman and his counsel comply with the Court's instructions regarding the return of all Solectron documents and the prohibitions regarding privileged material. This conclusion is without prejudice to a future motion by Solectron in the event that Ashman or his counsel misuse the information of which they have become aware.
Accordingly, IT IS HEREBY ORDERED that (1) the motion to dismiss is DENIED; (2) the motion to compel the return of all improperly obtained documents is GRANTED; (3) the motion to exclude the use of the improperly obtained documents is GRANTED IN PART; and (4) the motion to disqualify counsel is DENIED. Within seven days of the date of this order, Ashman shall return all documents to Solectron in accordance with the instructions set forth above. Ashman shall be responsible for the expenses incurred by Solectron in connection with making the instant motions.
IT IS SO ORDERED.