Case Name: Savi Technologies, Inc. v. WackPro, Inc., et al.

Case No.: 2014-1-CV-268149

WackPro, Inc.’s Motion for Non-Monetary and Monetary Sanctions for Discovery Misconduct Against Savi Technologies, Inc.

This action arises out of a commercial relationship between plaintiff/cross-defendant Savi Technologies, Inc. (“Savi”) and defendant/cross-complainant WackPro, Inc. (“WackPro”) that spans several years. On March 22, 2012, the parties entered into an Independent Contractor Agreement (“ICA”), under which Savi agreed to provide SAP consulting services to WackPro by assisting in software development for its clients at WackPro’s facilities or those belonging to the clients. (First Amended Complaint (“FAC”), ¶ 6 and Exhibit A.) Independent contractors were assigned to each WackPro client project and Savi would issue a series of invoices, by contractor and client, to WackPro for payment for work completed. (Id., ¶ 10 and Exhibit B.) Savi alleges that WackPro breached the ICA by failing to remit payment for the required invoices with a total outstanding balance of no less than $111,429.64. (Id., ¶ 11.) Savi further alleges that WackPro breached separate oral agreements for the payment of referral fees and management services by failing to completely pay outstanding amounts due. (Id., ¶¶ 12-13.)

In April 22, 2016, Savi filed the FAC asserting the following causes of action: (1) breach of written contract; (2) breach of oral contract for referral fees; (3) breach of oral contract for management fees; (4) common count- open account; (5) common count- account stated; (6) common count- services rendered; (7) unjust enrichment; and (8) quantum meruit. Savi filed its initial complaint on July 18, 2014.

WackPro filed its Cross-Complaint on August 10, 2015, asserting claims against Savi for: (1) breach of contract; (2) breach of contract; (3) misappropriation of trade secrets; and (4) intentional interference with prospective economic advantage. The thrust of this pleading is that WackPro shared confidential information with Savi pursuant to the written agreement between the parties and Savi then breached the confidentiality and non-disclosure provisions of that agreement and used the information obtained to wrongfully interfere with WackPro’s client relationships. (Cross-Complaint, ¶¶4-11.) WackPro further alleges that Savi breached a non-compete provision of the written contract by “deliberately and unlawfully circumventing WackPro to solicit WackPro’s clients Riverpoint Solutions (“Riverpoint”) and SBP Consulting (“SBP”).” (Id., ¶ 20.)

On January 12, 2018, WackPro filed the motion now before the court, a motion for non-monetary and monetary sanctions for discovery misconduct against Savi.

IV. WackPro’s motion for non-monetary and monetary sanctions for discovery misconduct against Savi is GRANTED, in part.

In the instant motion, WackPro contends Savi willfully spoliated evidence. Spoliation of evidence in response to a discovery request after litigation has commenced or in anticipation of a discovery request is a misuse of discovery within the meaning of CCP section 2023.010, and therefore may result in terminating or issue sanctions. (Cedars-Sinai Med. Ctr. v. Super. Ct. (1998) 18 Cal.4th 1, 12 (Cedars-Sinai) [interpreting the former CCP, § 2023].) “[A] party moving for discovery sanctions based on the spoliation of evidence must make an initial prima facie showing that the responding party in fact destroyed evidence that had a substantial probability of damaging the moving party’s ability to establish an essential element of his claim or defense.” (Williams v. Russ (2008) 167 Cal.App.4th 1215, 1227, internal citation omitted [holding that a terminating sanction is appropriate in the first instance without a violation of prior court orders in egregious cases of intentional spoliation of evidence].)

“Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence, in pending or future litigation. [Citations.] Spoliation occurs along a continuum of fault-ranging from innocent through the degrees of negligence to intentional conduct. [Citation.]” (Willard v. Caterpillar, Inc. (1995) 40 Cal.App.4th 892, 907, disapproved by Cedars-Sinai, supra, 18 Cal.4th 1.)

In its second and third causes of action of its FAC, Savi alleges WackPro breached oral agreements to pay referral and management fees. As evidentiary support for these two causes of action, Savi proffers invoices numbered 4887, 5556 and 5561. WackPro contends Savi admits to altering invoices numbered 4887 and 5556. A copy of invoice number 4887 received by WackPro on or about April 11, 2013 identified “Consulting Services” as a description of the services performed. (See ¶4 and Exhibit B to the Declaration of Kumar Vytla, etc.) When produced in connection with discovery, invoice number 4887 identified, “Part payment of Referall [sic] fee for Devabhaktuni, Satish/Karusula Gopichand/Padal, Nihar” as a description of the services performed. (See ¶5 and Exhibit D to the Declaration of Dhaivat H. Shah, Esq., etc.) Savi’s PMK admitted altering invoice number 4887 during deposition. (See ¶4 and Exhibit C to the Declaration of Dhaivat H. Shah, Esq., etc.)

Based on this example of admitted alteration of evidence and other purported alterations, WackPro asks this court to impose terminating, issue, evidentiary, and/or monetary sanctions against Savi. In this court’s opinion, WackPro’s request for issue, evidentiary, and/or terminating sanctions is not warranted under the circumstances. The court is guided by the principle that the, “punishment must fit the crime.” (See Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1293.) As the court in Cedars-Sinai explained,

there are a number of nontort remedies that seek to punish and deter the intentional spoliation of evidence.

Chief among these is the evidentiary inference that evidence which one party has destroyed or rendered unavailable was unfavorable to that party. This evidentiary inference, currently set forth in Evidence Code section 413 and in the standard civil jury instructions, has a long common law history. …

As presently set forth in Evidence Code section 413, this inference is as follows: “In determining what inferences to draw from the evidence or facts in the case against a party, the trier of fact may consider, among other things, the party’s … willful suppression of evidence relating thereto ….” The standard California jury instructions include an instruction on this inference as well: “If you find that a party willfully suppressed evidence in order to prevent its being presented in this trial, you may consider that fact in determining what inferences to draw from the evidence.” (BAJI No. 2.03 (8th ed. 1994).) Trial courts, of course, are not bound by the suggested language of the standard BAJI instruction and are free to adapt it to fit the circumstances of the case, including the egregiousness of the spoliation and the strength and nature of the inference arising from the spoliation.

(Cedars-Sinai, supra, 18 Cal.4th at pp. 11–12.)

As indicated above, spoliation occurs along a continuum. On one end, an egregious example of spoliation would be an intentional destruction of unfavorable evidence. Here, the court finds Savi’s admitted alteration of evidence further down the continuum and more akin to shifting testimony. WackPro shall be entitled to present evidence concerning Savi’s alteration of the evidence and shall be entitled to present all of the same evidence presented in support of this motion to cast doubt on the credibility and weight of Savi’s evidence. An appropriate jury instruction is warranted. However, the court will defer ruling on the specific language of the jury instruction to the trial department. The court finds an appropriate jury instruction is sufficient under the circumstances and any further sanction is not warranted.

WackPro argues further that Savi engaged in discovery misuse by failing to obey the court’s February 16, 2017 order requiring Savi to produce a further response to a request for production of documents. More specifically, the court’s February 16, 2017 order required Savi to produce electronically stored information (including Quickbooks software, invoice, metadata, audit trail, and activity log) for forensic analysis by WackPro’s expert. According to WackPro’s expert, Savi created and altered invoices, in some instances, after commencement of this lawsuit. WackPro’s expert further opines that there is a separate Quickbooks database which Savi has not provided. In opposition, Savi proffers the declaration of its own expert denying the assertions made by WackPro’s expert and challenging the conclusions made by WackPro’s expert. In effect, the court is presented with dueling declarations concerning Savi’s compliance with the court’s February 16, 2017 order. The resolution of this factual dispute is better left to a trier of fact. Just as with the alteration of evidence, WackPro shall be entitled to present all of the same evidence presented in support of this motion and, to the extent admissible, expert opinion with regard to whether the invoices and audit information provided by Savi is complete, altered, etc. in order to cast doubt on the credibility and weight of Savi’s evidence. To the extent WackPro can adequately demonstrate Savi has altered or withheld evidence, an appropriate jury instruction is warranted. Again, the court will defer ruling on the specific language of such a jury instruction to the trial department. Terminating, evidentiary, issue, and/or monetary sanctions, however, are not appropriate under these circumstances.

Accordingly, WackPro’s motion for non-monetary and monetary sanctions is GRANTED, in part. To the extent WackPro establishes Savi altered or failed to produce evidence, an appropriate jury instruction is warranted. The specific language of the jury instruction shall be decided by the trial department. WackPro’s motion for non-monetary and monetary sanctions is otherwise DENIED.

Savi’s request for monetary sanctions is DENIED.