United States District Court, E.D. Tennessee
ROBERT H. YOE, III, et al., Plaintiffs,
CRESCENT SOCK COMPANY, et al., Defendants.
MEMORANDUM AND ORDER
K. LEE UNITED STATES MAGISTRATE JUDGE
the Court is Crescent's motion for sanctions pursuant to
Federal Rule of Civil Procedure 37(e) for alleged spoliation
of electronically stored information (“ESI”)
[Doc. 288], with supporting brief and exhibits [Doc. 289].
YEI filed a response in opposition with exhibits [Doc. 341].
Crescent filed a reply with exhibits [Doc. 346]. This matter
is now ripe.
parties' multifaceted dispute has a long and fiercely
litigated procedural history and the discovery phase of the
federal court case has been especially challenging. The
parties engaged in extensive and, at many times, contentious
discovery and motion practices concerning, among other
things, Plaintiffs access to ESI concerning YEI's
intellectual property allegedly in the exclusive possession
of Crescent. Crescent now requests that the Court impose a
severe form of sanctions on YEI for YEI's spoliation of
certain ESI-the exact nature of which is unknown due to its
significant facts concerning the spoliation motion are not in
dispute, but the content of the data destroyed is hotly
disputed. On September 4, 2013, Yoe and several other
employees who worked with the FITS sock brand were fired by
Crescent. Crescent also ended its contract with its
two-person IT consulting firm, DataBasix. At all relevant
times, DataBasix was a company owned by IT consultant George
Ervin (“Ervin”). The day prior, Crescent had
filed a lawsuit against Plaintiffs in McMinn County,
Tennessee Chancery Court (the “Chancery Court
Case”) concerning, among other things, the ownership of
certain intellectual property.
through DataBasix, worked consistently as an IT consultant to
Crescent during the time Yoe was employed [Doc. 289-3, Page
ID # 5182]. When Crescent terminated DataBasix's services
and Yoe, Ervin and his son were the only employees of
DataBasix and they promptly began working for YEI [Doc.
289-2, Page ID # 5141-42, 5172].
to the terminations in September 2013, Crescent's data
was protected via offsite backup to servers managed by
DataBasix [Doc. 289-2, Page ID # 5120-23]. At the termination
of the DataBasix contract by Crescent, Ervin was in
possession of ESI backed up onto servers from Crescent. Ervin
sought direction from Yoe and Yoe's attorney, Gary E.
Patrick (“Attorney Patrick”)-not from Crescent-as
to what he should do with that ESI [Doc. 289-2, Page ID #
gave depositions in both 2014 and 2017. On June 23, 2014,
before the data at issue on the hard drive had been
destroyed, Ervin testified:
Q. Okay. Well, did you - it's my understanding that you
provided Bob with some data in regard to Crescent since the
firing. Has there been a deletion since that occurred?
A. I would say so, yeah.
Q. Let me ask it this way. Do you have any data involving
Crescent on any manner of storage device?
Q. Tell me what you have.
A. I have a portable hard drive backup that's my own.
Q. And what data or information is on that portable hard
A. Anything that affects the intellectual
property of Yoe Enterprises.
Q. Where did that data come from?
A. My server.
Q. Would it have been copied from the server over on to the
portable hard drive? . . .
Q. Okay. When did that occur, that transfer?
A. I'm not sure.
Q. Was it since September 4th, 2013?
Q. Was it since January of 2014?
A. I don't know.
Q. Why did you transfer that information over on to a hard
drive, for what purpose?
A. To protect the intellectual
Q. When you say to protect the intellectual property, are you
talking about like the trademark information or -
A. Anything related to the - when Bob gets the brand back,
then he'll need the manufacturing
specifications to be intact and we'll need
to use that information to hit the ground running.
289-3, Page ID # 5183-85 (emphasis added)].
same 2014 deposition, Ervin testified about what he
considered to be YEI data copied to the hard drive:
Q Why do you say YEI data?
A Yoe Enterprises' intellectual property is contained in
the FITS specifications that were on it.
Q So on the hard drive do you have the actual knitting
Q Okay. Do you have FITS brand sales information that was
collected from Crescent?
A No. I was trying to get the knitting -- the things related
to knitting specifications.
Q Okay. And -- A Or total manufacturing specifications for
Q Okay. And we're just talking about the hard drive right
now. We're not talking about the server, okay, because
we're going to go back to that server. So you have
knitting specs. What else is on there relating to IT?
A Manufacturing specifications.
Q Is that different than knitting specifications?
A Sure. Yes.
Q When I hear the term knitting specifications, to me that
denotes what information is entered into the computer aspect
of a knitting machine. Am I right about that?
A Pretty close.
Q Okay. In contrast, what does manufacturing specifications
A Measurements, weights, relationships.
Q Would that be of yarns and materials --
Q -- primarily?
A Materials, raw materials, and the relationships between
Q Okay. What else is on the hard drive besides knitting
specs, manufacturing specs?
A There may be some extraneous data that is contained in the
databases that contains those information. So stuff I
don't look at, but there may be other tables.
Q Would any of that -- and you said on the hard drive you
don't -- there's not any sales data?
A I didn't say that. I said I don't know.
Q. Okay. Is it possible that there's on the server that
relates to Crescent; is that right?
Q We're talking about the server now.
Q. Right. We're talking about the server.
A I mean, I'm not sure what all is on there. I don't
know how to answer that question.
Q Well, I'm asking you why you still have their data.
I'm not asking you what the data is. I'm asking you
why you still have it.
A The data contains intellectual property.
Q And you've extracted that, right, and put it on the
A The portable hard drive.
289-3, Page ID # 5186-88].
Q Okay. Well, let's say, for example, if you did back up
[a company's] data, in your opinion would you own that
data if you preserved it for them?
A No. I would be a steward.
Q Well, wouldn't that be true of Crescent as well?
A And Yoe Enterprises at this point, yes.
289-3, Page ID # 5190].
years later, in his May 18, 2017 deposition taken in this
case, Ervin testified the typical Crescent backup of data
included a snapshot of “everything” but did not
include design programs, which involved a specialty program;
and thus, the knitting machine programs were not part of the
data backed up or copied to the hard drive [Doc. 289-2, Page
ID # 5124-25]. He also testified that, at times,
“pieces” of the design programs were backed up
[Doc. 289-2, Page ID # 5126-29].
to why he copied the data to a hard drive, Ervin testified in
2017 that he asked Yoe and Attorney Patrick what to do with
the information “that looked like it was
Crescent” contained on the backup servers that was
“stuff that belonged to [Yoe].” [Doc. 289-2, Page
ID # 5140]. Ervin swore he made a “safekeeping
copy” of that data on the servers because he
“asked the lawyers and we decided to preserve it, get
it off those servers and preserve it onto a backup
copy.” [Id.]. Plaintiff's counsel asserted
an attorney-client privilege and instructed Ervin not to
answer questions about any discussion Ervin had with Yoe with
counsel present about preserving the data to the hard drive
because Ervin “[was] an employee of YEI at the
time” of this discussion [Doc. 289-2, Page ID # 5142-45
Ervin's discussion with counsel, and within no more than
two weeks of the September termination, Ervin preserved the
data on an external hard drive with two terabytes of capacity
by taking the following steps:
Q. So after you had conversations with [Yoe] and [Attorney
Patrick] about what to do with it, what did you do with the
A I put it on a backup copy, a backup hard drive.
Q Okay. What type of hard drive was it?
A It was a USB external removable type ...