404 F. App'x 899
5th Cir.2010Background
- Union Pump sued three former employees (Cleveland, Goodrich, Elmore) and CTI for misappropriation of trade secrets, unfair competition, LUTSA violations, and spoliation of evidence after the ex-employees formed a competing firm.
- Union Pump purchased American Pump Company drawings in 1995; the sale included IP like design and fabrication drawings and key personnel stayed after the sale.
- After Shreveport plant closure in December 2002, drawings were sent elsewhere and many American Pump drawings later went missing.
- In 2003 the defendants formed Centrifugal Technology, Inc. (CTI); CTI bid on jobs using allegedly copied Union Pump drawings.
- A protective order governed discovery; forensic imaging revealed spoliation (disk wiping, blank backup tapes, and disposed computers); Union Pump added spoliation as a claim.
- Two-week trial resulted in a Union Pump verdict finding LUTSA violation, conversion, and intentional spoliation; damages awarded and CTI unjustly enriched; district court denied attorney’s fees for spoliation; appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sanctions for spoliation via inherent powers | Union Pump seeks attorney’s fees under inherent powers due to spoliation | CTI contends sanctions are unwarranted beyond adverse inference | No abuse; adverse inference instruction sufficed; no inherent-power fees awarded |
| Admission of Bixler testimony | Testimony to corporate knowledge admissible under 30(b)(6) | Hearsay within Bixler’s testimony should be excluded | Harmless error; corroborated by other evidence |
| Yarbrough witness address issue | Address error prejudiced Union Pump | No prejudice; sufficient opportunity to depose | Not reversible; district court did not abuse discretion |
| Attaway's scope of expert testimony | Attaway could address hard drives 10–11 beyond initial report | Testimony outside the scope of disclosure | Not reversible; Rosen’s earlier report made scope clear; limited admissibility appropriate |
| Damages sufficiency and review | Damages supported by Sharp’s inflation-adjusted figure | Transcript of Sharp’s testimony should have been sent to jury | Damage award plausible; transcript issue not required; sustained |
Key Cases Cited
- Chambers v. NASCO, Inc., 501 U.S. 32 (U.S. 1991) (inherent powers to sanction; high threshold; abuse of judicial process)
- Natural Gas Pipeline Co. of Am. v. Energy Gathering, Inc., 86 F.3d 464 (5th Cir. 1996) (inherent power sanctions; must be common-sense, limited remedy for spoliation)
- FDIC v. MAXXAM, Inc., 523 F.3d 566 (5th Cir. 2008) (inherent powers; restraint in sanctions; not broad reservoir of power)
- Boland Marine & Mfg Co. v. Rihner, 41 F.3d 997 (5th Cir. 1995) (limits on the use of inherent powers; preserve court’s authority)
- Hodge v. Wal-Mart Stores, Inc., 360 F.3d 446 (4th Cir. 2004) (spoliation sanctioning as an inherent power of courts)
- Leon v. IDX Sys. Corp., 464 F.3d 951 (9th Cir. 2006) (sanctions for discovery misconduct; deletion of electronic information)