Lighthouse List Company, LLC v. Cross Hatch Ventures Corp.
Lighthouse List Company, LLC v. Cross Hatch Ventures Corp.
2014 WL 11531800 (S.D. Fla. 2014)
June 12, 2014

Snow, Lurana S.,  United States Magistrate Judge

Mobile Device
Forensic Examination
Exclusion of Pleading
Adverse inference
Text Messages
Bad Faith
Metadata
Sanctions
Spoliation
Failure to Produce
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Summary
The court found that the defendants had failed to disclose communications between McFadden and Fuller, had deleted text messages from McFadden's iPhone, and had utilized search terms in a protocol to review 55,000 files to determine which were responsive to the specific discovery requests. As a result, the court struck the defendants' pleadings and ordered sanctions.
Lighthouse List Company, LLC, Plaintiff,
v.
Cross Hatch Ventures Corp., et al., Defendants
CASE NO. 13-60524-CIV-DIMITROULEAS/Snow
Signed June 11, 2014
Filed June 12, 2014

Counsel

Franklin Lewis Zemel, Arnstein & Lehr, LLP, Fort Lauderdale, FL, for Plaintiff.
Alec Huff Schultz, James Robert Bryan, Leon Cosgrove LLC, Coral Gables, FL, Mark R. Osherow, Broad and Cassel, West Palm Beach, FL, Julie Elizabeth Hough, Brinkley Morgan, Ft. Lauderdale, FL, for Defendants.
4TY, LLC, Seminole, FL, pro se.
Snow, Lurana S., United States Magistrate Judge

REPORT AND RECOMMENDATION

*1 THIS CAUSE is before the Court on the Plaintiff's Motion for Extraordinary Relief (ECF No. 260), which was referred to United States Magistrate Judge Lurana S. Snow for a Report and Recommendation. The motion is ripe for consideration and an evidentiary hearing was held before the undersigned on May 15, and 16, 2014.
I. RELEVANT PROCEDURAL HISTORY AND BACKGROUND
This is an action for unauthorized access, misuse and permanent deletion of files from the Plaintiff's computers in violation of the federal Computer Fraud and Abuse Act (CFAA), misappropriation of trade secrets in violation of Florida's Uniform Trade Secrets Act (FUTSA), unfair trade practices in violation of Florida's Deceptive and Unfair Trade Practices Act (FDUTPA), tortious interference with business relations, conversion, conspiracy, unjust enrichment, and breach of employee duty of loyalty. (ECF No 125)
Lighthouse List Company, LLC (“Lighthouse”) is in the business of providing target list marketing and direct response marketing services in Florida and nationwide. The services include direct marketing on the internet; postal, telemarketing, e-mail marketing; supplying telemarketing data, and list management services.
Defendant, Cross Hatch Ventures (“Cross Hatch”) is a competitor. Steve McFadden (“McFadden”) is a former employee of Lighthouse who, according to Lighthouse, formed Cross Hatch during his employment with Lighthouse. According to Lighthouse, McFadden and Betsy Resnick, a co-defendant[1], conspired with each other while still employed by Lighthouse to develop a competing business. Lighthouse alleges that the Defendants used Lighthouse's confidential and proprietary information to steal Lighthouse's clients, business know-how and opportunities.
McFadden resigned from Lighthouse on February 5, 2013. On February 7, 2013, Lighthouse, through counsel, sent a cease and desist letter to McFadden which demanded that McFadden cease using Lighthouse's confidential and proprietary information and return the laptop computer he used while employed at Lighthouse, along with all data stored within it. On March 6, 2013, Lighthouse filed its Verified Complaint for Injunctive Relief and Damages (ECF No. 1), and an Emergency Motion for ex parte Temporary Restraining Order, in which Lighthouse sought the immediate preservation of all of McFadden's electronic devices. (ECF No. 6) On March 19, 2014, Lighthouse's digital data forensic expert (“DDFE”) imaged each of the electronic devices identified by McFadden, including three laptops and an Apple iPhone 5.
On April 2, 2013, the Court entered the parties' Agreed Order on Plaintiff's Motion for Temporary Injunction, which, among other things, enjoined McFadden and Cross Hatch from destroying any and all information, data, and documents, whether in electronic form or otherwise that are potentially relevant to Lighthouse's claims. (ECF No. 30, ¶6)
*2 On June 10, 2013, Lighthouse propounded its First Request for Production of Documents and First Set of Interrogatories to the Defendants. Request for Production number 4, which was directed to McFadden and Cross Hatch, required the production of all documents related to communications between McFadden and Cross Hatch and any employees of Lighthouse during the year after McFadden left his employment with Lighthouse. Interrogatory number 5 to McFadden and Interrogatory number 7 to Cross Hatch asked McFadden and Cross Hatch to identify all communications between them and any current and former Lighthouse employees.
On June 20, 2013 the parties submitted a Stipulation Regarding Search Protocol for Electronically Stored Information (ECF No. 80), which the Court approved on June 24, 2014. (ECF No. 85)
On July 3, 2013, McFadden and Cross Hatch served responses to Lighthouse's discovery requests. On July 30, 2013, Lighthouse filed motions to compel seeking better responses from both McFadden and Cross Hatch. (ECF Nos. 95 and 96)
On August 13, 2013, counsel for McFadden and Cross Hatch received a hard drive from the DDFE containing a privileged set of documents, as well as responsive documents, based upon the agreed upon search protocol. Pursuant to the parties' agreement, the Defendants were to review the files, and within five days, direct the DDFE to remove non-responsive or privileged documents prior to producing the remainder to Lighthouse. On September 9, 2013, Lighthouse filed a motion to compel the immediate release of the electronically stored information (“ESI”). (ECF No. 128)
At the October 8, 2013 hearing on Lighthouse's motions to compel, the Defendants argued that all information responsive to Lighthouse's discovery requests could be found within the documents located within the imaged data. The data had not, however, been released to Lighthouse as of the date of the hearing. The Court overruled McFadden and Cross Hatch's objections to Request for Production 4, and also overruled their objections to Interrogatories 5 and 7. The Court then ordered the Defendants to produce responsive documents on or before October 16, 2013. (ECF No. 162). On October 18, 2013, the Court granted the Defendants an extension of time to comply. (ECF No. 168)
On October 24, 2013, Cross Hatch served an Amended/Supplemental Answers/Better Answers to the First Set of Interrogatories in which Cross Hatch identified Jason Fuller as a Lighthouse employee with whom McFadden had contact after McFadden left Lighthouse. Specifically, Cross Hatch stated:
Jason Fuller contacted Steve McFadden via Linked In to understand his departure. Mr. McFadden explained to him that there was no data to sell at Lighthouse, he'd had many broken promises and it was time for him to go on his own. He does not remember specific times or dates.
Lighthouse filed the instant motion after discovering that Cross Hatch had failed to disclose a significant number of text messages[2] exchanged between McFadden and Mr. Fuller between February 20, 2013 and March 15, 2013, in which Mr. Fuller had revealed the substance and/or contents of e-mail communications between Lighthouse and its attorneys.[3] Lighthouse believes communications between McFadden and Fuller continued until at least December of 2013. Lighthouse does not know whether McFadden shared any of the information he obtained from Fuller with his former counsel, or with his new attorney who entered his appearance on November 15, 2013. (ECF Nos. 179 and 180).
*3 Lighthouse requested an evidentiary hearing to determine the scope of the damage and the appropriate remedy, which it asserts may include: 1) a finding that the Defendants have knowingly and willfully violated the Temporary Restraining Order and Preliminary Injunction, 2) a finding that Defendants have knowingly and willfully engaged in discovery misconduct, 3) consideration of whether Defendants' pleadings should be stricken, 4) consideration of whether Defendants' counsel should be disqualified, and 5) consideration of whether financial or other sanctions should be ordered.
The Defendants argue that, to the extent that Lighthouse is asserting a discovery violation, the motion is untimely. Lighthouse discovered the text messages prior to McFadden's March 12, 2014 deposition, but did not file the instant motion until May 6, 2014. According to the Defendants, Lighthouse could have questioned McFadden about the texts during the deposition, but chose not to do so. The Defendants also argue that the text messages appear to disclose the facts underlying privileged communications, rather than the privileged communications themselves, and that in any event, Fuller, who should be deemed a member of Lighthouse corporate management, waived the privilege. The Defendants represent that they have now produced e-mails between McFadden and Fuller which Lighthouse asserts had not been produced earlier. According to the Defendants, they believed that these e-mails had been included in the prior production, and if not included, they were not omitted willfully.
II. EVIDENCE PRESENTED
Lighthouse called Defendant Steve McFadden as its first witness. McFadden testified that he had not ceased communicating with Jason Fuller on March 19, 2013, andthat Mr. Fuller occasionally would phone him. He could not recall when he and Mr. Fuller ceased exchanging text messages, but admitted to deleting all text messages with Fuller from his cell phone sometime around the summer of 2013. McFadden explained he had no reason to keep the text messages because, in his view, everything had been captured in the March 19, 2013 forensic image, and the texts were taking up memory on his phone. He explained that, to his knowledge, no text messages were deleted that had not been included in the forensic capture, but later McFadden said he was not certain that there were no texts with Fuller after March 19, 2013. McFadden stated that he and Fuller did not exchange e-mails after March 19, 2013.
McFadden admitted that he swore to Cross Hatch's Amended Supplemental Answers to Lighthouse's First Set of Interrogatories. In particular, he conceded that he swore to Cross Hatch's answer to Interrogatory 7. McFadden explained that the response does not disclose the existence of the text messages because, in October of 2013 when he provided the supplemental answer, he had forgotten about them. McFadden testified that although his supplemental answers were not complete, he did the best he could while laboring under a court deadline[4].
McFadden admitted to meeting with Fuller in February 2013, and with Fuller and Betsy Resnick sometime after March 2013. He stated that he met with Betsy Resnick frequently, and could not explain why he had not disclosed this in the interrogatory answers, other than to state that he thought he had done so.[5] He also testified that he continued to communicate by phone with Mr. Fuller until sometime in the last quarter of 2013.
*4 McFadden related that the text messages between himself and Fuller accurately reveal that on February 20, 2013, he and Fuller scheduled an “off the record” meeting at a McDonald's restaurant. He did not recall whether they discussed Fuller securing a new cell phone number, but admitted that future text messages from Fuller, which commenced the following day, came from a different telephone number. Fuller and McFadden discussed the fact that Lighthouse was planning to file a lawsuit against McFadden. They also discussed McFadden's reasons for leaving Lighthouse, and Fuller's dismay upon being told that McFadden had quit because of him.
The former co-workers discussed purported lies that had been told to Fuller, and their mutual unfavorable opinion about McFadden's former employer. McFadden characterized this and other communications with Fuller as “gossip,” and stated that initially, he was not sure whether Fuller was acting as an agent of Lighthouse or as his friend. He did not know whether he could trust Mr. Fuller, and worried that Mr. Fuller might be setting him up. As time went on, McFadden and Fuller restored their friendship, and their conversations dwelled less upon work. McFadden estimated that between February 2013 and December 2013, he spoke to Mr. Fuller approximately once a month. At some point, McFadden stopped receiving telephone calls from Fuller.
McFadden admitted that the text messages also accurately reveal that Fuller advised him to take steps to impede Lighthouse's ability to trace any data McFadden may have taken from Lighthouse. He conceded that he understood what Fuller was advising him to do, and concedes that he asked how much time he had to do it, but ultimately had not acted on Fuller's advice.
McFadden explained that his February 25, 2013 text message to a friend, stating that he had spoken to an attorney and was told that Lighthouse would have to take him to court to get his laptop, had not been prompted by any information provided to him by Fuller. Instead, the message was the result of the February 7, 2013 cease and desist letter he had received which demanded that he turn the laptop over to Lighthouse. McFadden had not yet retained counsel, but did bring up the subject up at a party in casual conversation with his friend, who was the corporate attorney for his former company.
McFadden admitted that the text messages also correctly reflect that he had asked Fuller if Lighthouse was planning to sue Betsy Resnick. Fuller responded affirmatively, and told McFadden that he “[r]ead injunction last night,” and that Lighthouse was going to allege that McFadden and Resnick were working together. Lighthouse also was planning to go after their personal computers. McFadden testified that he relayed this information to Ms. Resnick, but did nothing else with it. McFadden also admitted that Fuller revealed to him in a text message that Lighthouse's lawyers had advised that there was nothing wrong with McFadden competing against Lighthouse because the parties did not have a non-compete agreement in force. Fuller also told McFadden that Lighthouse's attorneys advised Lighthouse not to respond to McFadden's letter about commissions. McFadden stated that he did not know how Fuller had obtained the information, and that he already knew that he did not have a non-compete agreement with Lighthouse. McFadden explained that everyone had access to Mark Traverso's[6] e-mail inbox, including Fuller in his capacity as IT manager. Further, McFadden testified that Mr. Traverso walks around and talks about such things all the time.
*5 McFadden conceded that he received a text message from Fuller advising him to make a backup DVD of his Ameribase e-mail messages, then put his laptop in a safety deposit box. Fuller further suggested that McFadden get a new laptop and advise the court that he had gotten rid of the old one in order to be totally finished with Lighthouse. McFadden testified that he had not solicited Fuller's advice, and although he responded “ok,” to the text, he did not take Fuller's suggestion. McFadden stated that he did not remember making a copy of his Ameribase e-mails, although he did make copies of items periodically because he recently had experienced a computer crash and wanted to back up his data.[7]
McFadden also acknowledged that Fuller initiated a March 14, 2013 text in which Fuller asked McFadden if he had made the DVD. McFadden responded that he had not gotten a new computer. Fuller stressed that McFadden should at least create the backup DVD of his Ameribase e-mails because a forensic person would be visiting Lighthouse the following day, and McFadden thanked him.
McFadden also agreed that when Fuller asked him if he was available to talk the next day, he instructed Fuller to phone him. A telephone conversation lasting nearly forty minutes ensued. McFadden could not recall the specifics of the conversation.
McFadden stated that Lighthouse had not asked him about the Fuller texts during McFadden's March 2014 deposition, and that he did not see the iPhone 5 report until at least one week after the third day of his deposition.
McFadden refused to answer any questions about communications with his attorneys, including advice he may have received from them, invoking his attorney-client privilege.
Jason Fuller testified next. He stated that he currently is employed by Lighthouse and that Mark Traverso is his supervisor. He described his job responsibilities as managing data bases, administering e-mail for his team, and occasionally fixing computers. On the advice of his counsel, Fuller invoked his rights under the Fifth Amendment, and refused to answer all other questions, including when he stopped exchanging text messages with Mr. McFadden, whether he has had any communications of any kind with McFadden in 2014, and whether McFadden told Fuller he was sharing the information Fuller provided to him with McFadden's attorneys.
Lighthouse next called Mark Traverso. Mr. Traverso testified that he maintains two e-mail addresses. The older of the two accounts was with AOL, and was established eighteen years ago when there were no domain names available for companies. The newer account uses the domain “Lighthouse List.” A password is required to access the AOL account. According to Mr. Traverso, it was well known at Lighthouse that Mr. Fuller, as head of the IT department, had password access to his in-box. Mr. Traverso's assistant, Matthew Kowalski, also has password access to Mr. Traverso's e-mail accounts. Two other IT employees, Amy Newman and Jimmy Nasso might have been provided with Mr. Traverso's password when both Mr. Traverso and Mr. Kowalski were away.
Mr. Traverso testified that after examining the McFadden/Fuller text messages and comparing them to a screen capture of all e-mails between himself and Lighthouse's counsel[8] during February and March 2013, he was able to identify multiple instances where Mr. Fuller relayed information to McFadden which had been obtained directly from the attorney-client e-mails.[9] As an example, Mr. Traverso referred to an e-mail from Toby Milgram, a Lighthouse employee, that he forwarded to Lori Adelson on February 26, 2013. The text of that e-mail was cut and pasted directly into a February 27, 2013 text message from Fuller to McFadden. (Plaintiff's Exhibit 6, and ECF No. 260-2, p.8) The string of texts includes Mr. Fuller's advice to McFadden to “[t]ell Betsy not to talk to or trust Tobi. She's bad mouthing both of y'all to the big boy.” (ECF No. 260-2, p. 8). Mr. Traverso testified that he found at least six similar instances of copying by Fuller.
*6 According to Mr. Traverso, the first indication from the text messages that Fuller was sharing information with McFadden was on February 22, 2014, when Fuller told McFadden that McFadden's laptop had been a topic of discussion with the lawyers, and advised McFadden to “[p]repare in case they try to force u to return through court...I'll keep you posted.” Id. at 9.
Mr. Traverso further testified that on March 4, 2013, a message from counsel was delivered to his AOL account which included a draft copy of the complaint and motion for injunctive relief. On the same day, Fuller asked McFadden, “[y]ou get your atty yet? Their (sic) finalizing fact sheet for injunction today....” Fuller followed with another text stating, “saying you sent ksg files from your personal email.” Id. at 7. On March 5, 2013, Fuller texted McFadden stating that he “...[r]ead injunction last nite. Trying to say u 2 are working together. Also trying to go after both of your personal/home computers....” Id. at 6. According to Mr. Traverso, all of this information had been taken directly from e-mails between himself and counsel.
On March 8, 2013, Fuller advised McFadden “[t]hey also got your letter about commissions but atty told them bot (sic) to respond. Atty said they served you with legal papers. Make sure u get good atty.” When McFadden told Fuller he had not been served, Fuller responded, “[s]ays served on march 7, 2013 1:45pm cross hatch registered agent spiegel & ultrera ....” Id. at 4-5.
Mr. Traverso also identified an instance on March 11, 2013 in which Fuller had texted McFadden and stated that the “[c]ourt issued an injunction to prevent you from destroying and/or deleting data from the laptop. Did you get served with that notice yet?” On the same date, Fuller asked McFadden, “[w]ho is Betsy talking or bragging to? I read that she bragged to somebody over the weekend that the papers were sent to the wrong address....” Id. at 3-4.
Mr. Traverso testified that he believed the last instance of copying occurred on March 14, 2013 when Fuller sent a text to McFadden stating simply, “Bluhm?” Id. at p. 2. According to Mr. Traverso, he had e-mailed attorney Lori Adelson after receiving a telephone call from an attorney named Bluhm, asking if Ms. Adelson knew who he was. Mr. Fuller continued the text exchange by reporting to McFadden that “[t]hey're getting scared thinking you're counter-suing!!” Id. According to Mr. Traverso, that information also came directly from his e-mail exchange with Ms. Adelson. On the same day, Fuller advised McFadden that, “[t]hey have a forensics guy coming here tomorrow ....” Id. at 1.
According to Mr. Traverso, all of the information relayed by Fuller to McFadden had been taken directly from e-mail communications between him and his counsel. Furthermore, these emails addressed issues which Mr. Traverso had never discussed with Fuller. Mr. Traverso emphasized that he had not authorized Fuller to review his e-mails and share the information with McFadden. He stated that he did not learn that Fuller had provided information to McFadden until about six weeks prior to the hearing. As soon as he discovered the invasion, he changed his passwords. He described Mr. Fuller's current status with Lighthouse as “on vacation,” and stated that he would not consider him to be an employee in good standing.
The Defendants called as a witness Serge Jorgensen. The parties stipulated that he is an expert in digital data forensic examination. Mr. Jorgensen testified that his expert services had been requested twice during the course of this case. The first time was in October of 2013, when his company, Sylint, was asked to assist the Defendants with identifying and producing to the Plaintiff documents from a culled-down set provided by the Plaintiff's expert. More recently, Sylint was asked to employ its expertise to explain the possible cause of some evidentiary issues concerning the forensic capture of Mr. McFadden's iPhone.
*7 Mr. Jorgensen testified that the culled-down data set produced to the Plaintiff by its expert, Site Logic, in August 2013, and from which the Defendants identified responsive documents for production, did not include data from McFadden's iPhone5. Mr. Jorgensen explained that he recently discovered that Computer Forensics, the expert that had acquired the data in March 2013, erroneously had introduced an image taken from an unrelated iPhone4 into the data being examined. This unrelated iPhone4 image was included among the data reviewed by SiteLogic in order to produce the culled-down data set in accordance with the protocol[10] the parties agreed upon.[11]
Mr. Jorgensen described two discrete problems with the culled-down data set provided by Site Logic to the Plaintiff. First, because data had been collected from the wrong iPhone, a search of that data would not have extracted the text messages that are at issue in this proceeding. Second, even if data from the correct iPhone had been included, the text messages could not have been viewed because of the format of the production. Therefore, Mr. Jorgensen questioned whether McFadden would have been able to review the text messages even if the correct iPhone image had been produced.
Mr. Jorgensen also was asked to explain why some of the metadata from files forensically imaged in March 2013 would have date stamps indicating the documents had been created in August 2013. He related that when the Plaintiff's expert accessed the data, it had changed the time stamps on approximately 5,000 files to reflect date stamps of July and August 2013, when the data in question actually had been generated between 2010 and 2013. He noted that the original evidence would still be secure in its evidentiary container, collected by Computer Forensics, and the unaltered evidence would still be accessible to McFadden directly from his laptop. The error had occurred when the data set was collected by Site Logic in 2013, and would affect the ability to accurately filter by date.
Mr. Jorgensen also was asked to explain why certain recently discovered e-mails might not have been produced to Lighthouse by Mr. McFadden at an earlier time.[12] He first noted that the e-mails in question were not part of the culled-down set provided by the Plaintiff's expert. As a result, Mr. Jorgensen examined the original March, 2013 forensic image of Mr. McFadden's laptop hard drive and discovered that all five e-mails were present. Mr. Jorgensen then applied the protocol to the five e-mails and discovered that two of the five should have resulted in “hits” and been included in the culled-down set. He could not explain why they had not. Mr. Jorgensen stated that he found no evidence to indicate that there had been any attempt to delete the e-mails.
III. RECOMMENDATIONS OF LAW
The Court first notes that to the extent that Plaintiff is urging discovery sanctions for Cross Hatch's incomplete response to Interrogatory 7, the motion is untimely. S.D. Fla. L.R. 26.1(h)(1) requires that discovery motions be filed within thirty days of the occurrence of grounds for the motion absent a showing of good cause for failure to do so. Local Rule 26.1(h)(1) “reflects a policy of promoting the prompt resolution of discovery disputes by requiring the parties to timely bring to the court's attention matters that the parties cannot resolve amongst themselves.” Manno v. Healthcare Revenue Recovery Group, LLC, 2012 WL 1409532 (S.D. Fla. April 23, 2012) (citing, Kendall Lakes Towers Condo. Ass'n, Inc. v. Pac. Ins. Co., 2011 WL 6190160 (S.D. Fla. 2011)).
*8 In this case, the Plaintiff first became aware of the text messages exchanged between McFadden and Fuller at least as early as McFadden's March 12, 2014 deposition. The instant motion was not filed until May 6, 2014. Discovery closed on March 19, 2014, and trial is imminent. Because the Plaintiff has not shown good cause why this issue was not raised sooner, it will not be considered.
Plaintiff's primary argument however, is that sanctions are appropriate in light of McFadden's unauthorized access to Plaintiff's privileged e-mails. The Court possesses the inherent authority to sanction parties who conduct litigation in bad faith or who perpetrate a fraud on the court. Chambers v. NASCO, Inc., 501 U.S. 32, 51 (1991). The power to do so arises from the court's need “to manage [its] own affairs so as to achieve the orderly and expeditious disposition of cases.” Id. at 43. It is a power, however, that must be exercised with restraint. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764 (1980). “The key to unlocking the court's inherent power is a finding of bad faith.” Barnes v. Dalton, 158 F.3d 1212, 1214 (11th Cir. 1998). Such a finding may be made when a party's conduct delays or disrupts the litigation, or hampers the enforcement of a court order. Byrne v. Nezhat, 261 F.3d 1075, 1121 (11th Cir. 2001). Fraud on the court is established “when clear and convincing evidence demonstrates that ‘a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party's claim or defense.’ ” McDowell v. Seaboard Farms of Athens, Inc., 1996 WL 684140, *2 (M.D. Fla. 1996) citing Vargas. Peltz, 901 F.Supp. 1572, 1579 (S.D. Fla. 1995).
The Plaintiff cites two cases in support of its assertion that sanctions are appropriate in this case. In Eagle Hospital Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298 (11th Cir. 2009) the Eleventh Circuit upheld a district court's decision to strike the defendant's answer and affirmative defenses, pursuant to its inherent power, after discovering that the defendant had been secretly monitoring the plaintiff's confidential e-mail communications.[13] The district court found that the defendant's refusal in deposition to answer questions about whether he could continue monitoring was sufficient to establish the defendant's bad faith, and that his conduct had disrupted the litigation. The court considered lesser sanctions, but noted that the defendant was privy to privileged information that he could not unlearn, and that neither the plaintiff nor the court could know the extent of the defendant's activities. The severe sanction employed was necessary “as a deterrent to other litigants contemplating improper interception of communications between clients and their attorneys.”
In Leor Exploration & Production, LLC v. William Natbony, 2010 U.S. Dist. Lexis 101824 (S.D. Fla., Sep. 28, 2010) the district court adopted the magistrate judge's recommendation that the defendant's pleadings be stricken for disruption of the litigation by obtaining unauthorized access to privileged communications and by threatening witnesses.[14] At the evidentiary hearing on the plaintiffs' sanctions motion, the defendant invoked his Fifth Amendment privilege and declined to answer any questions about the hacking or about his access to the privileged e-mails, and refused to turn over his computer for inspection. Based on the testimony of experts who offered their opinions about how the hacking could have been accomplished and who likely had done it, the magistrate judge concluded that the defendant was responsible and that he had acted in bad faith.
*9 The Defendants here assert that both cases are distinguishable. McFadden has not refused to turn over his devices, nor has he refused to testify. Not only has he appeared for deposition on three occasions, he voluntarily testified at the evidentiary hearing on the instant motion. According to the Defendants, McFadden did not solicit the information from Fuller, and there is no evidence that McFadden utilized any of the privileged communications to the Defendants' advantage. McFadden also asserts that Lighthouse has not offered any evidence of prejudice.
The Court cannot agree. The evidence presented clearly established that Jason Fuller shared with McFadden the content of numerous e-mails revealing litigation strategy, which were intended to be privileged communications between Lighthouse and its attorneys. These communications provided McFadden with advance notice of Lighthouse's litigation tactics, including the contents of Lighthouse's ex parte motion for temporary restraining order, seeking an order requiring McFadden to turn over his devices and enjoining him from destroying any information potentially relevant to Lighthouse's claims.
McFadden may not have realized the gravity of the actions at the time he committed them. Nevertheless, his admission that he deleted all text messages between himself and Fuller sometime after the March 2013 forensic capture, coupled with his failure to disclose the communications in discovery, suggests that if (as is likely) the communications continued thereafter, he did not want them to be discovered. It is worth noting that McFadden's deletion of the text messages, regardless of whether communication ceased between himself and Fuller after March 19, 2013, was likely in violation of the injunction entered by the Court on April 2, 2013. Additionally, although McFadden claims not to have used the information Fuller disclosed to him, there is no evidence that he discouraged Fuller from continuing to provide him with the “inside” information.
Although Mr. McFadden has been more forthcoming than the defendants in Eagle Hospital and in Leor, there is no way to know when the inappropriate communications between McFadden and Fuller ended. When asked about this, Mr. Fuller invoked his rights under the Fifth Amendment. Moreover, the Plaintiff will never know whether Mr. McFadden shared with his former or current lawyers information provided by Fuller because, when asked, McFadden invoked attorney client privilege[15], and Fuller again invoked the Fifth Amendment.
Fact finders in civil proceedings may draw adverse inferences against a party who refuses to testify. Baxter v. Palmigiano, 425 U.S. 308, 318 (1976). A negative inference also may be drawn against a party when a non-party refuses to testify if such an inference is trustworthy under all of the circumstances and will advance the search for truth. Libutti v. United States, 107 F.3d 110, 124 (2nd Cir. 1997). The Court should weigh four factors: 1) the nature of the relevant relationship, 2) the degree of control of the party over the non-party witness, 3) the compatibility of the interests of the party and non-party in the outcome of the litigation, and 4) the role of the non-party in the litigation. Id. at 123-124. The first and fourth factors weigh heavily in favor of drawing a negative inference from Mr. Fuller's refusal to testify. According to McFadden, the two are friends. Additionally, Mr. Fuller's actions evidence loyalty to McFadden. There is also no question that Mr. Fuller has injected himself into this litigation, and at least with respect to the issues presently before the Court, he has played a key role.
*10 Based upon Mr. Fuller's invocation of his Fifth Amendment privilege when asked when communication with McFadden ceased, the Court infers that communications continued after the March 19, 2013 forensic capture. Although Mr. Fuller no longer has password access to Mr. Taverso's e-mail account, the Defendants unquestionably have had an unfair advantage for an indeterminate amount of time during the course of this litigation. Further, Mr. McFadden admits that he deleted text messages to and from Fuller from his iPhone sometime after being ordered not to destroy any evidence which might potentially be relevant to this case. The Court cannot countenance such behavior. Short of striking the Defendants' pleadings, the Court cannot fashion a remedy which would cure the prejudice. Neither ordering Defendants to obtain new counsel nor imposing a monetary sanction would be effective, since the entire litigation has been tainted by the unfettered intrusion into Lighthouse's privileged communications. The Court has no choice but to strike the Defendants' pleadings.
IV. CONCLUSION
This Court having considered carefully the pleadings, arguments of counsel, and the applicable case law, it is hereby
RECOMMENDED that the Plaintiff's Motion for Extraordinary Relief (ECF No. 260) be GRANTED and that all of the Defendants' pleadings be stricken.
The parties will have 14 days from the date of being served with a copy of this Report and Recommendation within which to file written objections, if any, for consideration by The Honorable William P. Dimitrouleas, United States District Judge. Failure to file objections timely shall bar the parties from attacking on appeal factual findings contained herein. LoConte v. Dugger, 847 F.2d 745 (11th Cir. 1988), cert. denied, 488 U.S. 958 (1988); RTC v. Hallmark Builders, Inc., 996 F.2d 1144, 1149 (11th Cir. 1993).
DONE AND SUBMITTED at Fort Lauderdale, Florida, this 11th day of June, 2014.

Footnotes

Lighthouse's claims against Betsy Resnick were dismissed with prejudice on May 19, 2014 pursuant to agreement of the parties. (ECF No. 279)
A transcript of the text messages was attached as an exhibit to the motion. (ECF No. 260-2)
Lighthouse did not receive the data from McFadden's iPhone until March of 2014 owing to an error that was made by the DDFE.
Mr. McFadden explained that the Plaintiff gave the Defendants the hard drive at the last minute. After the Court granted Lighthouse's motions to compel, he had only three days to review 55,000 files to determine which were responsive to the specific discovery requests.
He later testified that he did not realize that he was supposed to disclose communications with co-defendant, Betsy Resnick.
Mark Traverso is Vice President of Lighthouse List.
McFadden testified that in the second week of February 2013, the Windows 8 platform on his laptop crashed. According to McFadden, a February 22, 2013 text message exchange between himself and Fuller in which McFadden stated that he loved his laptop but was not fond of Windows 8, supports this testimony. He testified that he believes he was able to restore everything, but only the forensic expert would know for certain whether any data was lost as a result.
These consisted of e-mails between Traverso and Lori Adelson, who was Traverso's primary contact at Arnstein & Lehr.
The screen shot Mr. Traverso refers to is reproduced in Plaintiff's Exhibit 5.
The search terms utilized in the protocol are listed in Defendants' Exhibit 1.
The Plaintiff hired Site Logic to take over after their expert at Computer Forensics died. Mr. Jorgensen does not have a relationship with either Computer Forensics or Site Logic.
The e-mails were introduced into evidence as Defendants' Exhibit 2.
The e-mails, which were attorney client communications, were attached to an affidavit submitted by the defendant to the court.
The magistrate judge recommended that the Plaintiffs' request for fees be denied and the district court overruled the Plaintiffs' objections finding that the imposed sanctions were sufficiently severe and to impose additional sanctions would be excessive and would show a lack of restraint.
The Court is mindful that no adverse inference may be drawn from the invocation of the attorney-client privilege. See e.g. Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 225-26 (2nd Cir. 1999).