*1 On October 10, 2021, Plaintiff Hannan Ribiyou Kabushikigaisha (“Plaintiff”) filed a Motion for Sanctions Based on Discovery Abuse and Spoliation of Evidence (“Motion”). ECF No. 184. On November 29, 2021, Defendants Agu Ramen, LLC, Agu Express, LLC, and Penny Kyoung Suk Kidani, Personal Representative of the Estate of Grant K. Kidani (collectively, the “Kidani Defendants”) filed a Memorandum in Opposition to the Motion (“Opposition”). ECF No. 198. That same day, Defendants Agu Ramen Cupertino, LLC (“Defendant Agu Cupertino”), Agu Isenberg, LLC (“Defendant Agu Isenberg”), and Angel Capital Inc. (“Defendant Angel Capital”) filed a joinder to the Opposition. ECF No. 199. On December 6, 2021, Plaintiff filed a Reply. ECF No. 204.

The Court elected to decide this matter without a hearing pursuant to Rule 7.1(c) of the Local Rules of Practice for the United States District Court for the District of Hawaii. After carefully considering the Motion, applicable law, and the record in this case, the Court DENIES the Motion for the reasons set forth below.

This action concerns a dispute among the members and manager of AGUPlus, LLC (“AGUPlus”) and others regarding a ramen restaurant chain, AGU Ramen. Plaintiff is 90% owner of AGUPlus, with the remaining 10% owned by Defendant Agu Ramen, LLC. Hisashi Teddy Uehara (“Mr. Uehara”) was Defendant Agu Ramen, LLC's sole member and manager.[1] Grant K. Kidani, Esq. (“Mr. Kidani”), was a Hawaii-licensed attorney who previously represented AGUPlus.

Plaintiff alleges that, in 2018, Mr. Uehara and Mr. Kidani conspired together to misappropriate AGUPlus’ assets and intellectual property to open competing restaurants in Korea and California. Mr. Uehara and Mr. Kidani also allegedly arranged for Defendant Angel Capital, to acquire rights to the AGU Ramen brand without Plaintiff's knowledge or consent.

Plaintiff also alleges that Mr. Uehara and Mr. Kidani attempted to take over one of the AGU Ramen locations on Oahu through Defendant Agu Isenberg. In addition, Mr. Kidani allegedly incorporated Defendant AGU Express, Inc. (“Defendant Agu Express”) in Texas and Defendant Agu Cupertino in California to open additional AGU Ramen locations in those states. Plaintiff alleges that Mr. Uehara and Mr. Kidani took the foregoing actions without Plaintiff's knowledge or consent.

I. Procedural Background

On July 12, 2019, Plaintiff filed its original Complaint. ECF No. 1. On September 19, 2019, Defendants Agu Ramen, LLC, Mr. Romano, and Agu Isenberg filed their Counterclaim against Plaintiff. ECF No. 52-1. On November 18, 2019, Plaintiff filed its First Amended Complaint against Defendants Agu Ramen, LLC, Mr. Romano, Mr. Kidani, Agu Isenberg, Agu Express, Agu Cupertino, and Angel Capital. ECF No. 73. The First Amended Complaint also names AGUPlus as a nominal defendant.

A. Plaintiff's Motion to Compel Forensic Examination in the Bankruptcy Proceeding

*2 On November 29, 2019, AGUPlus filed a voluntary petition for bankruptcy under Chapter 11 in the United States Bankruptcy Court for the District of Hawaii, Case No. 19-01529 (“Bankruptcy Proceeding”).[2] On February 18, 2021, the bankruptcy court issued an Order for Forensic Examination of Certain Devices (“02/18/2021 Bankruptcy Order”) in the Bankruptcy Proceeding. Bankruptcy Proceeding, ECF No. 478. The 02/18/2021 Bankruptcy Order appointed MSEO Consulting, LLC to serve as the “Forensic Expert” and examine certain electronic devices that Mr. Kidani had used since January 1, 2016. Id.

B. Mr. Kidani's Production of Electronic Devices and the Forensic Expert's Examination Thereof

The Court takes the following asserted facts regarding Mr. Kidani's production of electronic devices and the Forensic Expert's examination thereof from Plaintiff's Motion. Pursuant to the 02/18/2021 Bankruptcy Order, Mr. Kidani represented to the Forensic Expert that, since January 1, 2016, Mr. Kidani had used one laptop, one external hard drive, and one personal computer. ECF No. 184-1 at 9. Mr. Kidani also represented that his then-current cellular phone had been recently activated in or around 2020. Id. (citing ECF No. 184-2, Declaration of Mark P. Seo (“Seo Decl.”) at 3 ¶ 7). On February 26, 2021, Mr. Kidani's computer expert, Milton Lee (“Mr. Lee”) delivered to the Forensic Expert three of Mr. Kidani's electronic devices, two Seagate external drives and a Dell Laptop Service Tag with a Western Digital internal hard drive. Id. at 9-10 (citing Seo Decl. at 4-5 ¶ 13). The Forensic Expert performed a forensic imaging of these three devices. Id.

On March 1, 2021, Mr. Lee provided the Forensic Expert with a Western Digital SATA drive from a personal computer. Id. at 10. Mr. Lee noted that he was “unable to access files on the drive and believed that it was physically damaged.” Id. Although the Forensic Expert attempted to perform a forensic imaging of this drive, he was unable to do so because of its condition. Id. (citing Seo Decl. at 5 ¶ 14).

On March 5, 2021, Mr. Kidani delivered to the Forensic Expert a Samsung Galaxy phone. Id. (citing Seo Decl. at 6 ¶ 19). At the time of delivery, Mr. Kidani allegedly confirmed that he had two laptops and two phones. Id. (citing Seo Decl. at 6 ¶ 20). The Forensic Expert's initial analysis indicates that Mr. Kidani's Samsung Galaxy phone was activated on August 31, 2020. Id. at 10-11 (citing Seo Decl. at 6 ¶ 23). Mr. Kidani indicated to the Forensic Expert that “his previous cell phone was turned into his cellular carrier, Verizon. Kidani failed to turn over his second laptop.” Id. at 10 (citing Seo Decl. at 6 ¶ 21). Plaintiff alleges that Mr. Kidani also failed to respond to the Forensic Expert's repeated requests for logins and passwords. Id. (citing Seo Decl. at 6 ¶ 22).

C. Plaintiff's Motion to Compel Forensic Examination in This Case

On February 16, 2021, two days before the bankruptcy court issued its 02/18/2021 Bankruptcy Order, Plaintiff filed a Motion to Compel Search of Forensic Image of Defendant Grant K. Kidani's Electronically Store Information (“Motion to Compel”). ECF No. 150. On April 2, 2021, this Court entered an order granting the Motion to Compel (“04/02/2021 Order”). ECF No. 165. Similar to the 02/18/2021 Bankruptcy Order, the 04/02/2021 Order provided for the appointment of the Forensic Expert – the same forensic expert appointed under the 02/18/2021 Bankruptcy Order – to examine Mr. Kidani's electronic devices:

Id. at 2-3 ¶¶ 2-3.

On July 7, 2021, counsel for Mr. Kidani informed the Court and the parties that Mr. Kidani had passed away. ECF No. 174. On September 1, 2021, the Court granted Plaintiff's Motion to Substitute Penny Young Suk Kidani (“Ms. Kidani”) for Mr. Kidani as a defendant. ECF No. 181. On October 10, 2021, Plaintiff filed the instant Motion.

Plaintiff alleges that, on or around January 19, 2021, “a user logged in as ‘Grant Kidani’ ” deleted files from Kidani's Dell Laptop's Internal Drive. ECF No. 184-1 at 11. Plaintiff also alleges that, on January 21, 2021, “the recycle bin was emptied, removing all deleted files from the [Dell] desktop's hard drive.” Id. That same day, “Avast Ultimate Software was installed on the Dell Laptop. Avast Software deletes files in the recycle bin, formerly in the recycle bin and the internet browser search histories.” Id. (citing Seo Decl. at 7 ¶ 28). In addition, Plaintiff alleges that Mr. Kidani failed to produce all Devices, usernames, and passwords required under the 04/02/2021 Order. Plaintiff seeks sanctions against Mr. Kidani for these alleged failures and wrongful conduct pursuant to the Court's inherent authority and Federal Rule of Civil Procedure 37(b)(2).[3]

Plaintiff, however, relies on the wrong provision in Rule 37. The gravamen of Plaintiff's Motion is Mr. Kidani's alleged failure to preserve electronically stored information, which is governed by Rule 37(e):

Although the Kidani Defendants refer to an outdated version of Rule 37(e), neither Plaintiff nor the Kidani Defendants cites to the current Rule 37(e).

“When a party fails to take reasonable steps to preserve electronically stored information ..., and the information is lost as a result, Rule 37(e) directs that the initial focus should be on whether the lost information can be restored or replaced through additional discovery.” Fed. R. Civ. P. 37(e) advisory committee's note to 2015 amendment. Stated differently, a party is only entitled to relief under Rule 37(e) for another party's failure to preserve electronically stored information if “it cannot be restored or replaced through additional discovery.” Fed. R. Civ. P. 37(e); see also Fed. R. Civ. P. 37(e) advisory committee's note to 2015 amendment (“[Rule 37(e)] applies only when such information is lost. Because electronically stored information often exists in multiple locations, loss from one source may often be harmless when substitute information can be found elsewhere.”).

Plaintiff asserts that it “does not have the ability to obtain [the deleted files] from any other source.” ECF No. 184-1 at 23. This conclusory assertion is directly contradicted, however, by the Forensic Expert's declaration in support of the Motion, which states: “Recovery of deleted files from computer hard drives is possible through the use of several forensic recovery applications, extending the time required for me to complete Forensic Examination.” Seo Decl. at 7 ¶ 29. Based on this statement, though it might require additional time and effort, the Forensic Expert could potentially restore the subject deleted files. Plaintiff thus fails to convince the Court that the lost information cannot be restored so as to entitle Plaintiff to relief under Rule 37(e)(1) or (2). See Fed. R. Civ. P. 37(e)(1) advisory committee's note to 2015 amendment (“If the information is restored or replaced, no further measures should be taken.”).

Moreover, Plaintiff asks the Court to impose sanctions against Mr. Kidani in the form of a default judgment. In the alternative, Plaintiff asks the Court to give adverse-inference jury instructions regarding Mr. Kidani's liability as to Plaintiff's claims. While Rule 37(e)(2) grants courts discretion to enter default judgment and give an adverse-inference jury instruction, these are “very severe measures to address or deter failures to preserve electronically stored information ....” Fed. R. Civ. P. 37(e)(2) advisory committee's notes to 2015 amendment. That is why a court may impose such measures “only on a finding that the party that lost the information acted with the intent to deprive another of the information's use in litigation.” Id.

*5 Indeed, the advisory committee's notes encourage courts to exercise caution in imposing the measures set forth in Rule 37(e)(2):

Id.

The Court finds that Plaintiff, having not addressed Rule 37(e), fails to establish that Mr. Kidani acted with the intent to deprive Plaintiff of the purportedly lost information. The Court thus further finds that imposing Plaintiff's requested “very severe measures” is not warranted or appropriate at this time.

Based on the foregoing, the Court DENIES the Motion for Sanctions Based on Discovery Abuse and Spoliation of Evidence (ECF No. 184).

IT IS SO ORDERED.

DATED: Honolulu, Hawaii, January 11, 2022.

Although Plaintiff initially named Mr. Uehara as a defendant in this action, Mr. Uehara passed away while this case was pending. On June 22, 2020, the Court granted Plaintiff's motion to substitute Paul A. Romano, as Dependent Administrator of the Estate of Hisashi Teddy Uehara (“Mr. Romano”), for Mr. Uehara as a defendant. ECF No. 100.

On December 4, 2019, in light of the Bankruptcy Proceeding, the district court stayed the case. ECF No. 88. On May 28, 2020, the district court lifted the stay. ECF No. 94.

The Motion seeks sanctions against Mr. Kidani. As the Court previously noted, however, Ms. Kidani replaced Mr. Kidani as a party in this action after Mr. Kidani passed away. For clarity purposes in addressing the Motion only, the Court refers to Mr. Kidani as the individual against whom Plaintiff seeks sanctions.