Minerva26

Atl. Diving Supply, Inc. v. Komornik

2024 WL 5454689 (Va. Cir. 2024)

March 13, 2024

Download PDF

To Cite List

Summary

The court found that the defendant, a former employee of the plaintiff, had misappropriated trade secrets and violated the Virginia Computer Crimes Act by knowingly exceeding his permissions and directing others to do the same. The court also found that the defendant had conspired with others to steal business opportunities from the plaintiff and had breached his fiduciary duties. The court awarded the plaintiff damages and attorney's fees for the harm caused by the defendant's actions.

Note: This is an unpublished decision. Check your jurisdiction’s rules about citing unpublished decisions before citing this case to a court.

Re: Atlantic Diving Supply, Inc.
v.
Margeaux Komornik, et al

Docket No. CL20-10185

Circuit Court of Virginia

March 13, 2024

Counsel

Kevin E. Martingayle, Esquire, Matthew J. Moynihan, Esquire, Bischoff Martingayle, P.C., 3704 Pacific Avenue, Suite 100, Virginia Beach, Virginia 23451
Brett A. Spain, Esquire, Bethany J. Fogerty, Esquire, Wilcox & Savage, P.C., 440 Monticello Avenue, Suite 2200, Norfolk, Virginia 23510
Christopher D. Davis, Esquire, Erin C. McDaniel, Esquire, Davis Law, PLC, 555 Belaire Avenue, Suite 340, Chesapeake, Virginia 23320

Lannetti, David W., Judge

Opinion

Dear Counsel:

Today the Court provides its post-trial ruling related to the “Second Amended Complaint” filed by Plaintiff Atlantic Diving Supply, Inc. (“ADS”) against Defendant Simon Hanford.[1] ADS seeks compensatory and punitive damages against Hanford, claiming that he violated the Virginia Uniform Trade Secret Act by misappropriating ADS trade secrets, violated the Virginia Computer Crimes Act, conspired with others to steal ADS contractual opportunities, tortiously interfered with ADS contracts, breached his fiduciary duties toward ADS, and committed fraud against ADS.

As an initial matter, the Court finds that Hanford spoliated—and directed his co-conspirators to spoliate—evidence related to this litigation, both prior to and after suit was filed, justifying an inference that the spoliated evidence was adverse to Hanford. The Court further finds that Hanford misappropriated ADS trade secrets, violated the Virginia Computer Crimes Act, conspired against ADS, tortiously interfered with multiple ADS contracts, breached his fiduciary duties toward ADS, and engaged in fraud against ADS. As a result, the Court finds Hanford liable to ADS in the amount of $8,230,401.39 in compensatory damages and $350,000.00 in punitive damages. Finally, the Court finds that ADS is entitled to payment by Hanford of its reasonable attorney's fees and costs accrued during this matter.

Background

ADS is a corporation engaged in the business of government contracting and, more specifically, supplies tactical and operational equipment and provides logistics service solutions to the government, military, and related customers. Tr. 1363–77. ADS and its competitors connect government customers that need certain items or services with vendors that can satisfy those needs, streamlining the process for both the customers and the vendors. Id. Developing positive relationships with both customers and vendors provides ADS substantial awareness, pricing, and timing advantages and assists it in winning future contracts over its competitors. Id at 1366–67, 1374–75. Although this process—as employed by ADS and its competitors—may sacrifice some competition, it provides an extremely efficient process for customers and vendors. Id at 1369.

The contractor, i.e., a company like ADS, that develops a contractual opportunity between a customer and vendors through established relationships is frequently the only party—other than the customer—that knows exactly what the customer needs. See Tr. 1364–67. This knowledge allows the contractor to develop and finalize a comprehensive bid for the customer's needs, which significantly reinforces the contractor's advantage in the subsequent bidding process. Tr. 1379–80. Because there is a very short turnaround time between posting an opportunity and the deadline to submit bids, the contractor that developed the bid has a significant advantage over other competing contractors hoping to secure the contract. Tr. 1380–81, 1387, 1389. As a result, success in the business is highly dependent upon relationships that contractors, normally through individual employees, develop with customers and vendors, as well as the contractors’ proven experience and expertise. Tr. 1364–67, 1375–78. These relationships also allow contractors like ADS to learn about upcoming requirements, identify vendors and products, and help develop opportunities to contract alongside their customers, all before an opportunity reaches the bidding stage. Tr. 1374–75. Additionally, ongoing relationships with vendors typically result in those vendors providing contractors discounts on their products, injecting an additional competitive advantage because the contractor is then able to bid a lower contract price than a contractor that has not secured such discounts. Tr. 1387–88.

Hanford was hired by ADS in 2013 to develop and head its foreign military sales (“FMS”) and international business unit after serving in the British Army for twenty-one years and working for a government contracting company for two years. Tr. 2136–43. Like other employees, Hanford was required to sign a non-compete agreement, promising not to work for a competitor within one year after leaving employment with ADS. Pl.’s Ex. 91; Tr. 258–67.

By the time Hanford left ADS, many, if not most, of ADS's FMS customer accounts resulted from customer relationships that Hanford and those who worked for him had cultivated. Tr. 2027–28. The FMS unit coordinated with United States governmental entities to provide equipment to foreign militaries. Tr. 1363, 1367. Hunter Schofield, Margeaux Komornik, and Corey Conwell—who are alleged co-conspirators—also worked in this unit at the time leading up to Hanford's departure from ADS. See Tr. 317–22. More specifically, Schofield and Komornik worked as part of the “Inside Sales Team” that worked at ADS's office—with Schofield reporting to Komornik—while Conwell worked on the “Outside Sales Team” that worked in the field supporting Schofield and Komornik. See Tr. 841, 845–46, 763–64.

While at ADS, Hanford did not get along with ADS's Chief Sales Officer, Brant Feldman. Tr. 2208–11. A final disagreement, which occurred at a meeting between the two in December 2019, involved ADS's future strategic business practices. Tr. 2214–15. Feldman ultimately directed Hanford to terminate all operations outside the United States, including pre-letter of request (“LOR”) and direct commercial sales (“DCS”) work.[2] Id. Feldman did not think that this work was worth the investment of time and effort while Hanford strongly believed that the work was critical to ADS's future success. Tr. 2215–16. In early January 2020, Feldman directed Hanford to determine whether he could effectively support an ADS business model without LOR and DCS work. See Tr. 2248–49. In a message at the time to Don Rachello, who worked for Hanford, Hanford wrote “I've quit in my head” and indicated that he intended to exact an “informal severnece” [sic] by working for ADS only two days a week. Pl.’s Ex. 432, at 32646. However, it appeared to ADS that Hanford had decided to stay and support Feldman's vision. Id. at 32648. Hanford later would proclaim that early 2020 was when he started to plan his future departure from ADS. Pl.’s Ex. 142, at 436 (stating on July 20, 2020, “I've been planning this for six months.”).

Shortly after his message to Rachello in January 2020, Hanford reached out to Will Somerindyke, Chief Executive Officer of Regulus Global, LLC (“Regulus”), one of ADS's competitors, to discuss possible employment opportunities. Tr. 288–89; Pl.’s Ex. 627, at 199106. Hanford told Somerindyke that he could provide services to Regulus, despite his one-year non-compete period, by working as a “consultant.” Tr. 289.

On January 9, 2020—shortly after his meeting with Feldman—Hanford offered to provide competitors, including Somerindyke and Regulus, inside information that would enable them to secure two large opportunities from ADS, with a combined profit of more than $2 million. Pl.’s Ex. 627, at 199100. More specifically, they were FMS opportunities in Micronesia and Palau on behalf of Naval Air Systems Command. Tr. 1185–86, 1403–05. Hanford assured Somerindyke that these were ideal opportunities to target, as “nobody [at ADS] would be watching.” Tr. 289. Hanford ultimately steered these contracts to Federal Resources Supply Co. (“Federal Resources”), working in conjunction with Aquila International LLC (“Aquila”) and Global Ordnance. Tr. 1186–87, 1403–05; Pl.’s Ex. 627, at 199444. Hanford received more than $1 million in fees from Aquila over the next two years, Pl.’s Ex. 98, and he later told Somerindyke that at least $400,000 of that was a kickback for steering the Micronesia and Palau opportunities to Federal Resources and Aquila. Tr. 1187–88. Hanford made a similar statement to Rachello. Tr. 1403–05, 1408.

On January 9, 2020, Hanford informed Rachello that he was considering going to work for Federal Resources or creating an independent FMS team organized under VIII, LLC (“VIII”), a limited liability company whose sole member was Hanford. Tr. 263; Pl.’s Ex. 432. Hanford developed a “shopping list” of people he intended to recruit, including but not limited to Rachello, Conwell, Komornik, and Schofield. See Pl.’s Ex. 432, at 32646. He refined this list during Spring 2020, id. at 32646, 32661, after pressuring and misleading those being recruited by falsely representing that ADS was disbanding the FMS team and that their jobs were in jeopardy, Tr. 631–32. He made a similar representation to Somerindyke. Tr. 1192.

In late June 2020—while Hanford was still employed by ADS—Hanford proposed to Somerindyke building an entire FMS division at Regulus to be led by Hanford, Pl.’s Ex. 627, at 199107, and in early July, Hanford and Somerindyke agreed that Hanford would join Regulus as its de facto chief operating officer, Tr. 1191. In support of this, Hanford provided consulting services for Regulus through VIII. Tr. 263. Hence, during July 2020, Hanford was employed by both ADS and Regulus—its competitor—a fact that Hanford admitted at trial.[3] Tr. 518. Hanford testified that one of his first tasks as consultant to Regulus was to create for Somerindyke an organizational chart and identify individuals Regulus could recruit—largely from ADS—to fill gaps identified in the chart. Tr. 2357–58, 1193–94; Pl.’s Ex. 627, at 199107.

Hanford approached Conwell about leaving ADS for Regulus, and Conwell, who had not considered leaving ADS previously, agreed to join Regulus after meeting with Hanford and Somerindyke on July 7, 2020. Tr. 635–38; Pl.’s Ex. 627, at 199112–13. Conwell did not immediately leave ADS, however, because Hanford assured him that dual employment with ADS and Regulus was “fine” and was not “that big of a deal.” Tr. 653–54. Soon thereafter, Hanford created and shared with Conwell a detailed “30/60/90 plan,” which outlined Hanford's plan to acquire ADS's pipeline of FMS business over the next three months. Tr. 657–60, 1196, 1246–48; Pl.’s Ex. 101. Hanford then directed Conwell to “capture as much [of Conwell's] previous [ADS] pipeline as possible,” Tr. 657–60, 723–24, 726, “transit” his ADS contacts and work in Israel and Jordan to Regulus, Tr. 664, and “[i]dentify and capture any vulnerable Program offices.” Pl.’s Ex. 101. This latter task referred to transitioning Conwell's existing customer relationships from ADS to Regulus. Tr. 660–62. The plan also called for Hanford to undertake similar tasks. Tr. 1196, 1246–48. On July 13, 2020, Hanford and Conwell met to discuss which ADS opportunities could immediately be transferred to Regulus, whereupon Conwell raised concerns that such actions would violate his ADS employment agreement. Tr. 657–60. Hanford instructed Conwell not to be a “pussy” and directed Conwell to contact Bryan Ball, a U.S. government employee responsible for certain Air Force FMS requirements with whom Conwell and Schofield had previously worked, to pursue Air Force FMS opportunities for ADS. Id. Hanford further directed Conwell to instruct Schofield to email Conwell the pricing, vendor quotes, and bills of materials (“BOMs”) for the highly profitable opportunities that ADS had developed with Ball and to falsely inform Schofield—who at this point was unaware of the plan to transition ADS opportunities to Regulus—that the information was needed for a transition of the opportunities to ADS, which Conwell did. Tr. 747–49; Pl.’s Exs. 175–77. Schofield provided this information to Conwell, who subsequently provided it to Hanford, who intended to use it to attempt to transition the opportunities from ADS to Regulus. Tr. 747–49; Pl.’s Exs. 175–77.

Throughout July 2020, Hanford and Conwell intensely recruited Schofield. Tr. 785, 858–59; Pl.’s Exs. 142, 147–55. Hanford freely disclosed to Schofield that he intended to take business from ADS and that she would be in a position at Regulus to manage all Air Force FMS opportunities that Conwell could transition from ADS to Regulus. Pl.’s Ex. 142. Schofield interpreted these communications as Hanford's plan to “steal[ ] that business” from ADS and slowly “steal people” from ADS. Pl.’s Ex. 149. On July 28, 2020, Schofield nevertheless spoke to Ball and was able to convince him to shift the Air Force FMS opportunities from ADS to Regulus, despite the fact that Ball had not previously worked with Regulus. Tr. 1328–29; Pl.’s Ex. 161. Once Schofield convinced Ball to work with Regulus, Hanford received approval from Somerindyke to extend a formal employment offer to Schofield to work at Regulus. Pl.’s Ex. 627, at 199122. Schofield began her employment with Regulus on August 10, 2020, four days before her last day at ADS. Tr. 890–91.

On July 17, 2020, Hanford accessed ADS's Salesforce application—the company's detailed sales database—and generated a report displaying the complete ADS FMS pipeline. Tr. 1611–12, 2335; Pl.’s Exs. 627, at 199118, 629. Hanford, despite knowing that this pipeline was ADS's proprietary information, forwarded it to Somerindyke. Tr. 2335, 2379; Pl.’s Ex. 627, at 199118. Hanford also transferred the contacts from his ADS email account to his VIII email account. Tr. 378. It also appears that Hanford retained all of his ADS emails on his computer after he left ADS. Tr. 547–48; Pl.’s Ex. 432, at 32694. Further, because Hanford began working for Regulus at the beginning of July 2020, he had unfettered access to ADS information while working for both ADS and Regulus throughout July 2020. Tr. 484, 2327–28.

In August 2020, Komornik sent—from her private Gmail account to Hanford's VIII email address—ADS pricing, vendor pricing, and planned markups regarding potential opportunities in India. Pl.’s Exs. 3–5. Around that time, Hanford reported to Somerindyke that Komornik was “pass[ing] the intel as it happens,” Pl.’s Ex. 627, at 199126, and Hanford suggested that Regulus work with Federal Resources on the India opportunities, as Regulus—unlike Federal Resources and ADS—was not qualified to bid directly on those opportunities. Id. at 199125. Komornik on multiple occasions provided additional confidential ADS information to Hanford and other alleged co-conspirators. See Pl.’s Exs. 3–11, 13–17, 19–30, 35, 40, 42, 44–47, 49, 144A, 1440. Hanford admitted that, during this time period, he “got information about what ADS was doing every day.” Tr. 445.

On August 13, 2020, her next to last day at ADS, Schofield—at Hanford's direction—forwarded to her Gmail account the ADS pricing, vendor quotes, and BOMs she had sent to Conwell. Pl.’s Exs. 178, 179. Shortly thereafter, Schofield sent Hanford a “pipeline” of opportunities that she planned to pursue for Regulus, which included many of the opportunities associated with the July 13 and August 13 communications. Pl.’s Ex. 168. This “pipeline” indicated that the opportunities were created between April and June 2020—while Schofield was still at ADS—and included projected revenue and profit margin figures that matched the ADS documents. Id. On August 27, 2020, Schofield informed, inter alia, Hanford and Somerindyke that she expected 2021 Regulus purchase orders for six opportunities that began at ADS. Pl.’s Ex. 224. This communication included projected revenue, cost of goods sold, and profit margin percentages derived from ADS documents. Id.; Pl.’s Exs. 178–79.

On September 2, 2020, Hanford met with Conwell and Schofield to discuss using ADS part number information—to create analogous Regulus part numbers—and having Ball post these opportunities on “bid boards” on behalf of Regulus. Pl.’s Ex. 227. They also discussed re-sourcing BOMs to alternate vendors so that they would not be associated with ADS. Id. These actions were designed to preclude ADS from discovering that Regulus's opportunities derived from ADS information. Id. Later that month, Schofield forwarded to Hanford a newly created Regulus quote, along with a previous ADS quote, for an Estonia opportunity so that Hanford could “see how it compares.” Pl.’s Ex. 230. The prices of the two were identical. Compare Pl.’s Ex. 229 with Pl.’s Ex. 239; see also Tr. 986. Hanford directed Schofield to ensure she used pricing that vendors had provided to ADS when putting together Regulus bidding information so that Komornik was not exposed for providing ADS bidding information to Regulus. Pl.’s Exs. 142, at 443–44, 227. In 2022, Schofield captured for Regulus the Estonia, Lithuania, and Latvia Airfield opportunities, as well as the Bulgaria opportunity, all of which originated at ADS. Tr. 1008, 1010, 1011, 1015, 1016, 1018, 1019, 1021, 1022, 1027, 1065.

On or about October 5, 2020, Feldman expressed to Somerindyke ADS's concerns that certain Regulus employees might be in possession of ADS confidential and proprietary information. Tr. 1201–03. Somerindyke tasked Hanford with investigating ADS's concerns. Tr. 1267. Hanford then directed Schofield and Komornik to collect all of their emails and forward them to his VIII email account, allegedly to prevent Regulus from obtaining copies of the emails. Tr. 925, 2451. During discovery in the current litigation, Hanford failed to produce the vast majority of these emails, the existence of which could only be deduced from trial testimony and information produced by Regulus on the eve of trial. Tr. 37, 583–90, 1297; Pl.’s Ex. 627. At trial, Hanford admitted that ADS information had been taken by Schofield and Conwell, although he claimed that he was unaware of their actions at the time. Tr. 2302, 2312–13, 2366–68.

Beginning around June 2020, Hanford and Somerindyke regularly communicated via WhatsApp messages, an instant messaging application. Tr. 1185, 1188, 1193-94. Despite relevant discovery requests by ADS, copies of these messages were never produced during pretrial discovery. However, less than a week before trial—and after Somerindyke had settled with ADS—Regulus produced at least 386 pages of these messages. Tr. 37; Pl.’s Ex. 627. Hanford, on the other hand, never produced copies of any of these messages.

Immediately before the start of trial, the Court entered a “Final Judgment Order as to Defendant Komornik” (“Komornik Judgment Order”), which was requested by ADS and signed as “Seen” by Hanford. See Tr. 9–11; Komornik Judgment Order. Among other things, Komornik stipulated therein that she (1) “took ADS's trade secret, proprietary, and confidential information ... from ADS computer systems and provided it to Hanford and others without authority and for the purpose of allowing them to use the ADS information for the[ ] benefit of [Regulus], including but not limited to in competing for the award of U.S. Government contracts,” (2) “assisted Hanford with the recruitment of other ADS employees,” (3) “attempted to cancel ADS contract awards,” and (4) “provided false and misleading information to ADS.” Komornik Judgment Order 1. She also stipulated that she “destroyed evidence regarding all of the foregoing.” Id. During closing argument at trial, Hanford argued that this order could not be considered as substantive evidence because it constituted inadmissible hearsay, did not qualify as a co-conspirator exception to the hearsay rule, and violated the Confrontation Clause. Tr. 2975, 3044-48. However, the Court notes that Hanford signed the order—which includes Komornik's stipulations—without objection, was free to call Komornik as a witness at trial, and did not object to the order being considered by the Court until closing arguments. Hence, the Court rules that the Komornik Judgment Order is admissible as evidence. See King William Cty. v. Jones, 65 Va. App. 536, 548, 779 S.E.2d 213, 219 (2015) (“Courts have long encouraged parties to stipulate to undisputed issues .... [A] party agreeing to a stipulation must be bound by it .... Accordingly, a valid stipulation constitutes credible evidence.”).

ADS first alleges that Hanford intentionally misappropriated ADS trade secrets associated with its bids on potential contracts in violation the Virginia Uniform Trade Secrets Act (the “VUTSA”), Va. Code §§ 59.1-336 et seq. (2019 Repl. Vol.). Second, ADS alleges that Hanford and his alleged co-conspirators violated the Virginia Computer Crimes Act (the “VCCA”), Va. Code §§ 18.2-152.1 et seq. (2021 Repl. Vol.), by “us[ing] a computer or computer network, without authority, and embezzled, stole and/or converted proprietary, confidential, and competitively secret information that they knew was property of ADS.” Third, ADS alleges that Hanford and his alleged co-conspirators engaged in statutory civil conspiracy in violation of section 18.2-499 of the Code of Virginia when they “combined, agreed and mutually undertook or concerted together for the purpose of willfully and maliciously injuring ADS with regard to its reputation, trade, and business.” Fourth, ADS alleges that Hanford and his alleged co-conspirators tortiously interfered with ADS's “contractual and business relationships and expectancies” while “aware of the great care that ADS takes to protect its contractual and business relationship expectancies ... and confidential, proprietary, and competitively sensitive information.” Fifth, ADS alleges that Hanford and his alleged co-conspirators breached their fiduciary duties to ADS during their employment at ADS. Finally, ADS alleges that Hanford and his alleged co-conspirators “intentionally and knowingly misrepresented and concealed that they had begun serving the interests of Regulus” while still employed at ADS.[4]

A trial was held on May 31 through June 9, 2023. At the conclusion of the presentation of evidence, the Court granted the parties leave to file post-trial briefing before the Court heard closing arguments. Closing arguments were presented to the Court on November 6, 2023. At the conclusion of the closing arguments, the Court took the matter under advisement.

Analysis

The Court has considered the pleadings, evidence and oral argument presented at trial, and applicable authorities. The Court now rules on the matters before it.

A. Spoliation of Evidence

On January 18, 2023, ADS filed a “Motion for Spoliation Sanctions” against, inter alia, Hanford, which the Court took under advisement pending trial. ADS renewed its motion against Hanford at trial.[5] The Court addresses this matter first because it directly affects the Court's analysis of many of ADS's claims.

Based on the overwhelming evidence produced at trial, including Hanford's own testimony, the Court finds that Hanford spoliated vast quantities of evidence. Further, the Court finds that Hanford demonstrated little respect for the Rules of Supreme Court of Virginia, going to great lengths to fail to preserve, destroy, and to convince others to destroy documents and communications that clearly would have been adverse to him. Tr. 457–60, 589–90, 737, 1085–86, 1293–94. As Conwell, one of Hanford's co-conspirators, recalled, Hanford had joked that “Americans follow rules too much” and about “Americans and [their] silly court systems with [their] rules that don't make any sense.” Tr. 833.

Section 8.01-379.2:1 of the Code of Virginia governs spoliation of evidence and provides as follows:

A party or potential litigant has a duty to preserve evidence that may be relevant to reasonably foreseeable litigation. In determining whether and at what point such a duty to preserve arose, the court shall include in its consideration the totality of the circumstances, including the extent to which the party or potential litigant was on notice that specific and identifiable litigation was likely and that the evidence would be relevant.

If evidence that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, or is otherwise disposed of, altered, concealed, destroyed, or not preserved, and it cannot be restored or replaced through additional discovery, the court (i) upon finding prejudice to another party from such loss, disposal, alteration, concealment, or destruction of the evidence, may order measures no greater than necessary to cure the prejudice, or (ii) only upon finding that the party acted recklessly or with the intent to deprive another party of the evidence's use in the litigation, may (a) presume that the evidence was unfavorable to the party, (b) instruct the jury that it may or shall presume that the evidence was unfavorable to the party, or (c) dismiss the action or enter a default judgment.

Va. Code § 8.01-379.2:1(A), (B) (2015 Repl. Vol.). As noted in the statute, spoliation can result from a party's intentional or negligent acts. Wolfe v. Va. Birth-Related Neurological Injury Comp. Program, 40 Va. App. 565, 581, 580 S.E.2d 467, 475 (2003). Further, whether a party acted in bad faith is relevant to the court's determination of whether spoliation has occurred. Gentry v. Toyota Motor Corp., 252 Va. 30, 34, 471 S.E.2d 485, 488 (1996).

Here, the Court finds that there is definitive proof that Hanford and his co-conspirators failed to preserve and destroyed information relevant to this case. ADS's computer software, ActivTrak, took thousands of screenshots of Komornik's laptop between July 31 and September 24, 2020, evidencing that she sent herself, Hanford, and Hanford's brother multiple emails containing ADS's proprietary and confidential information. Tr. 149–50, 154–59. ActivTrak is a cybersecurity program that, when triggered by suspicious conduct such as accessing a personal email account, automatically saves screenshots of ongoing activity on a given computer. Id. None of these emails were produced during discovery; rather, they apparently were destroyed by Hanford and his co-conspirators. Tr. 302–03, 545, 547, 553, 579–82. The actual emails are highly relevant and prejudicial to ADS because the ActivTrak screenshots do not show the full text of the emails; they only show the portions that happened to be on the computer screen at the time the screenshot was taken. Tr. 151–52. Additionally, many of the emails contained attachments, the contents of which are not depicted in the ActivTrak screenshots. See, e.g., Pl.’s Ex. 33.

Further, there are other emails that Hanford and his alleged co-conspirators once possessed but never produced. Hanford did not produce any emails between himself and Komornik or between himself and any other people to whom he most likely sent relevant information because Hanford deleted all of these emails. See Tr. 302–03, 545, 547, 553, 579–82. Rachello testified at trial that Hanford bragged to him about steering two ADS opportunities in Micronesia and Palau to Federal Resources, an ADS competitor, but Hanford never produced any communications between himself and Federal Resources, which likely included confidential ADS information. Tr. 302–03, 544–47, 549, 553, 563, 565, 589.

The WhatsApp instant messaging system was one of the primary means by which Hanford and his alleged co-conspirators communicated about misappropriating ADS information. See, e.g., Tr. 274, 304, 498, 529, 850; Pl.’s Ex. 627. Schofield produced WhatsApp messages between herself and Komornik, as well as messages between Komornik and Hanford, that contradict large portions of their deposition testimony. Tr. 851–52; Pl.’s Exs. 107, 142, at HMS 000445 (WhatsApp messages between Schofield and Hanford that include information about ADS opportunities after Hanford would have known to preserve messages and emails), 144, 144A, 144C, 227. Additionally, the WhatsApp messages and emails that were produced demonstrate that Komornik sent ADS's proprietary and confidential information to Schofield. Pl.’s Exs. 33, 144, 144A, 144C. Further, messages between Hanford and Schofield evidence Hanford convincing Schofield to leave ADS to work at Regulus. Pl.’s Ex.142. ADS does not have any three-way messages between Hanford, Komornik, and Conwell because Hanford and Conwell—and likely Komornik—deleted these WhatsApp messages. Tr. 544, 703–04, 708; Komornik Judgment Order.

Further, Hanford and Komornik admitted to deleting documents, apparently in response to ADS's request for production of documents during discovery. See Komornik Judgment Order; Tr. 302–03, 545–47, 553, 579–82. Hanford testified about his systematic routine of deleting emails, allegedly due to the quantity of emails he received, although he testified that he did not delete any emails since he became aware of this litigation. Tr. 545, 579-80. However, Hanford told Conwell on August 19, 2020, that he was moving his ADS files to his VIII email account and that he was using his VIII account to continue an email chain with a supplier that he started on his ADS email account. Tr. 377–79, 582. This arguably demonstrates that Hanford retained documents responsive to ADS's request for production of documents after leaving ADS. Id. Additionally, Hanford sent Rachello a message stating that Hanford kept all of his ADS files and emails after leaving ADS, Tr. 547, and it appears that Hanford did not start deleting these documents until this litigation was pending, see, e.g., Pl.’s Ex. 627, at 199198.

Lastly, Hanford had multiple electronic devices that he claimed were lost, stolen, broken, inaccessible, or discarded after he was on notice of this potential litigation. Tr. 593–97, 2638–41. For instance, Hanford discarded and replaced his business phone in late October 2020, before ADS became aware of the misappropriation of its trade secrets. Tr. 593–97. Additionally, Hanford disposed of his work laptop in late 2020. Tr. 2641.

There is also definitive proof that Hanford intentionally destroyed evidence after he knew litigation was likely, as well as during the course of litigation. According to the WhatsApp messages between Hanford and Somerindyke, Hanford knew that litigation was likely no later than October 5, 2020, when he admitted that he had emails that ADS might request in discovery. Pl.’s Ex. 627, at 199162–63. Less than two hours later, Hanford suggested deleting these emails provided the computer server did not keep backup copies. Id. Somerindyke immediately instructed Hanford not to delete documents, id., clearly putting Hanford on notice as of October 5, 2020, regarding his duty to preserve evidence.

Additionally, Hanford received a formal litigation hold letter from Regulus on December 10, 2020. Pl.’s Ex. 362. The letter specified that preservation of evidence applied not only to his Regulus email accounts, but also to any of his personal messaging applications. Id. Hanford nevertheless failed to turn over any of his WhatsApp messages that existed at that time. He also failed to preserve any WhatsApp messages he sent or received after receipt of the December 10, 2020, litigation hold letter and, in fact, failed to produce a single WhatsApp message in discovery.[6] Tr. 592–93. Despite receipt of the litigation hold letter, Hanford testified at trial that “[i]t wasn't my belief that I needed to keep personal messages.” Tr. 592. This attitude was consistent with his message to Schofield—after receiving a subpoena from ADS during this litigation—that only a person “as stupid as a frog” would have kept documents. Pl.’s Ex. 145.

Hanford was also clearly involved in relevant communications that occurred after he received the litigation hold letter. In fact, 273 pages of the WhatsApp messages between him and Somerindyke post-date the litigation hold letter. See Pl.’s Ex. 627. These messages include (1) an admission that Regulus captured the Thermo Paper opportunity that began at ADS, id. at 199217; (2) an admission that Schofield and Komornik shared ADS info, id. at 199317; (3) a discussion of plans to target additional employees to recruit from ADS, id. at 199326; and (4) an admission that Hanford recruited former ADS employees to Regulus, id. at 199475. All of these admissions—relevant to the ongoing conspiracy, Hanford's breach of fiduciary duty, and damages—were destroyed by Hanford and almost never were produced. Hanford testified—unconvincingly—that he “didn't feel there was a requirement” for him to preserve and produce his messages with Somerindyke, which clearly involved topics relevant to the litigation, Tr. 589–90, notwithstanding the litigation hold letter that expressly put him on notice of that requirement, see Pl.’s Ex. 362.

Further, the evidence is clear that there were additional documents that Hanford destroyed and that were never produced by Hanford or his co-conspirators. First, the last page of the WhatsApp messages indicates that, in direct contravention of the instructions in the litigation hold letter, Hanford turned on “disappearing messages” in his WhatsApp chat with Somerindyke in January 2022. Pl.’s Ex. 627, at 199484. Those subsequent messages could not be recovered by Somerindyke and are thus gone forever.

Second, Conwell, Schofield, and Somerindyke testified that Hanford possessed a general “disregard” for keeping data or communications, Tr. 1293–94; was “disinterested in turning anything over to ADS,” Tr. 1294; and made comments to others that they would have to be idiots to keep information and produce it during litigation and chastised his co-conspirators for being “stupid” for producing information, see, e.g., Tr. 703–06, 737, 1085–86; Pl.’s Exs. 145, 627. Conwell clearly understood Hanford's “commander's intent” regarding spoliation and, accordingly, testified that he deleted his WhatsApp messages with Hanford—which ranged from 2015 through the conclusion of his work at Regulus in August 2021—and his personal emails with Hanford after receiving a copy of the litigation hold letter in December 2020. Tr. 707–10, 712-14. Once again, these messages, including those which post-date the litigation hold letter, were not produced by Hanford. Additionally, Hanford admitted that he exchanged text messages with Juan Vazquez—another ADS employee that Hanford recruited—and with Komornik that he failed to produce, claiming that he “had no obligation to preserve them at that time.” Tr. 584-85. Komornik apparently deleted her copies of these messages at Hanford's direction as well. See Komornik Judgment Order; Tr. 580–81.

The Court observed at trial that this would have been a much difference case without the WhatsApp messages in Plaintiff's Exhibit 627. Tr. 1898–99. As that exhibit demonstrates, Hanford made admissions to his co-conspirators that he would not repeat in court. Plaintiff's Exhibit 142, Hanford's messages with Schofield, was similarly enlightening, and Hanford castigated Schofield for failing to delete them after they came to light. Tr. 1085–86. Thus, the Court finds that there is ample evidence to believe that the additional deleted WhatsApp messages—especially those Hanford had with Conwell and Komornik—would have been at least as damaging as the ones produced by Somerindyke on the eve of trial. This is particularly true given that Hanford and his counsel repeatedly relied on a lack of information or documents as part of Hanford's defense. See, e.g., Tr. 211–12, 309.

In addition, Hanford deleted emails in his VIII account. See Pl.’s Exs. 3–7, 14–16, 42, 46–47, 49, 101. Although ADS was unable to pinpoint the date on which Hanford deleted these emails—owing in large part to Hanford's disposal of the devices on which these emails were held and accessed—Hanford clearly retained his emails until he learned of the litigation. See Pl.’s Ex. 627, at 199141 (referencing a review of seven years of emails). In fact, Hanford apparently did not dispose of many of these emails until after he received the December 2020 litigation hold letter. See Tr. 555–56; Pl.’s Ex. 134 (referencing the need to look through “old emails” and that the person being discussed was known at his “old place”). Therefore, Hanford's emails were almost certainly deleted after litigation became foreseeable.

The Court finds the evidence of Hanford's spoliation to be overwhelming. Consequently, the Court now turns to the issue of an appropriate remedy for Hanford's spoliation. In its motion and at trial, ADS asks the Court to enter default judgment against, inter alia, Hanford because of his widespread misconduct, which has caused ADS to be unaware of the full extent of Hanford's actions. ADS Mot. Spoliation Sanctions 19. Alternatively, ADS asks the Court to impose the following adverse inference against Defendants:

That [Hanford and his alleged co-conspirators] destroyed the information because they knew it would be used as evidence against them, and that this series of deliberate steps by them demonstrates that they stole ADS information, that there were additional damning communications among them, that each of them willingly participated in this conspiracy to harm ADS, and that [Hanford and his alleged co-conspirators] improperly accessed ADS's computer network to misappropriate its information.

Id. at 19–20; see also Tr. 3096–97. In addition, ADS asks the Court to “specifically infer that Hanford misappropriated confidential and proprietary pricing information regarding the opportunities in Micronesia and Palau that he bragged about steering to a competitor.” ADS Mot. Spoliation Sanctions 20. Lastly, ADS asks the Court to “preclude [Hanford and his alleged co-conspirators] from contending ... that they did not receive the communications subject to the spoliation” as well as “from refuting that the documents appearing in screenshots contained ADS's confidential information.” Id.

In response, Hanford argues that ADS failed to prove that the allegedly spoliated evidence ever existed or that he was under a duty to preserve evidence when any alleged spoliation occurred. Hanford's Memo. Opp. ADS's Mot. Spoliation Sanctions 5. The Court is not persuaded by Hanford's arguments, including but not limited to his assertion that he had no duty to preserve evidence prior to the date of the litigation hold letter.

In 2017, the Supreme Court of Virginia decided Emerald Point, LLC v. Hawkins, 294 Va. 544, 808 S.E.2d 384 (2017), which led to the adoption in 2019 of section 8.01-379.2:1 of the Code of Virginia. There, the court opined that spoliation of evidence occurs when a party is aware that there is, or probably will be, litigation involving evidence under its control and the party fails to preserve such evidence, either intentionally or negligently. Id. at 556, 808 S.E.2d at 391. Remedial action by the court is only warranted if the moving party demonstrates that “rational jurors could find that the party failing to preserve the evidence knew, or reasonably should have known ... that the evidence was likely to be material in probably or pending litigation.” Id. at 557, 808 S.E.2d at 392. Additionally, the absence of the evidence that was destroyed must prejudice the other party. Va. Code § 8.01-379.2:1(B)(i); cf. Steves & Sons, Inc. v. JELD-WEN, Inc., 327 F.R.D. 96, 104 (E.D. Va. 2018) (opining that, under federal law, for a party to demonstrate spoliation of electronically stored information (“ESI”), it must prove that “(1) ESI should have been preserved; (2) ESI was lost; (3) the loss was due to a party's failure to take reasonable steps to preserve the ESI; and (4) the ESI cannot be restored or replaced through additional discovery”). However, spoliation itself does not give rise to an independent action. Va. Code § 8.01-379.2:1(C).

A court may order measures “no greater than necessary to cure the prejudice” to the other party for accidental or negligent spoliation. Id. § 8.01-379.2:1(B)(i). However, reckless or intentional spoliation can justify an adverse presumption, monetary sanctions, dismissal of the action, or default judgment. Id. § 8.01-379.2:1(B)(ii).

Courts impose sanctions when an individual has acted in bad faith in order to punish the offending party and deter others from acting similarly in the future. Gentry v. Toyota Motor Corp., 252 Va. 30, 34, 471 S.E.2d 485, 488 (1996). In Emerald Point, the Supreme Court of Virginia held that to support an adverse instruction to the jury, the court must find “a party acted with the intent to deprive another party of the use of that information in the litigation.” 294 Va. at 557, 808 S.E.2d at 392. As the supreme court noted, this rule closely follows Rule 37(e) of the Federal Rules of Civil Procedure, which although intended for electronic sources, holds that an adverse inference instruction cannot be given until the court finds an intent to deprive the other party of evidence. Fed. R. Civ. P. 37(e). The court in Emerald Point held that there must be “a finding of intentional loss or destruction in order to prevent [the evidence's] use in litigation before the court may permit [a] spoliation inference.” 294 Va. at 559, 808 S.E.2d at 392. The court reasoned that to allow an adverse inference for evidence that was only negligently destroyed would be unduly severe and disproportionate. Id. at 559, 808 S.E.2d at 393.

Here, based on the totality of the circumstances, the Court finds that Hanford, while aware of pending or actual litigation, failed to preserve evidence under his control—either intentionally or negligently—that was likely to be material to the litigation, and that the evidence Hanford failed to preserve was highly prejudicial to him. The Court further finds that Hanford directed others to destroy material evidence prejudicial to him and that Hanford acted in bad faith. Therefore, the Court presumes that the evidence that Hanford failed to preserve was prejudicial to him, and the Court applies this adverse presumption as it analyzes ADS's various claims.

B. Virginia Uniform Trade Secrets Act

ADS claims that Hanford violated the VUTSA, Va. Code § 59.1-336 et seq. (2019 Repl. Vol.). “In order for a plaintiff to establish [a violation of the VUTSA], two statutory elements must be proved, namely, the existence of a ‘trade secret’ and its ‘misappropriation’ by the defendant.” MicroStrategy Inc. v. Li, 268 Va. 249, 263, 601 S.E.2d 580, 588 (2004). A “trade secret” is defined by the VUTSA as

information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: 1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and 2. Is the subject of efforts that are reasonable under the circumstances do maintain its secrecy.

Va. Code § 59.1-336. Further, “misappropriation” for purposes of the VUTSA is defined as follows:

Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or Disclosure or use of a trade secret of another without express or implied consent by a person who a. Used improper means to acquire knowledge of the trade secret; or b. At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was (1) Derived from or through a person who had utilized improper means to acquire it; (2) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; (3) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (4) Acquired by accident or mistake.

Id.

Therefore, a violation of the VUTSA requires that there be both a trade secret and misappropriation of that trade secret. Further, the violator is liable for any damages that may result from that misappropriation. In light of the evidence presented at trial, the Court finds that Hanford violated the VUTSA, as outlined in more detail below.

1. Existence of Trade Secrets

For purposes of the VUTSA, a “trade secret” “derives economic value from not being generally known ... to other persons who can obtain economic value from its disclosure or use.” Va. Code § 59.1-336 (2019 Repl. Vol.). The trade secret must also be “subject [to] efforts that are reasonable under the circumstances to maintain its secrecy.” Id.

To successfully bring a VUTSA claim, a plaintiff must adequately identify any trade secrets that were allegedly misappropriated. Compare MicroStrategy Inc. v. Li, 268 Va. 249, 256, 601 S.E.2d 580, 584–85 (2004) (finding the claim sufficient) with Preferred Sys. Sols., Inc. v. GP Consulting, LLC, 284 Va. 382, 407, 732 S.E.2d 676, 689 (2012) (rejecting the claim). Proper identification of the trade secret at issue is vital to succeed under the claim because the Court must be able to analyze the specific secret under the statutory framework—that is, the Court must be able to identify the confidential information with such specificity that its value, protection, and misappropriation can be determined. Although the VUTSA does not include any express requirements regarding the specificity of trade secret identification, cases interpreting the act suggest that claiming categories of information as trade secrets—or asserting conclusory statements claiming information as a trade secret without further factual allegations that would allow a court to identify the confidential information and then proceed with the analysis for each secret—is insufficient for a viable trade secret claim. See, e.g., Preferred Sys. Sols., 284 Va. at 407, 732 S.E.2d at 689 (rejecting a claim when the plaintiff only “reference[d] a laundry list of items that [it] consider[ed] to be ‘Confidential Information’ ”); MicroStrategy, 268 Va. at 256, 601 S.E.2d at 584-85 (finding sufficient a claim that “the defendants misappropriated 242 trade secrets”); MicroStrategy, Inc. v. Bus. Objects, S.A., 331 F. Supp. 2d 396 (E.D. Va. 2004) (“Moreover, the alleged trade secret must be described ‘in sufficient detail to establish each element of a trade secret.’ It is not enough to claim generally that trade secrets were stolen. A plaintiff must identify, with particularity, each trade secret it claims was misappropriated. This must be done to allow the finder of fact to distinguish that which is legitimately a trade secret from other information that is simply confidential but not a trade secret, or is publicly available information.” (citations omitted)), aff'd, 429 F.3d 1344 (Fed. Cir. 2005); Integrated Glob. Servs. v. Mayo, No. 3:17cv563, 2017 U.S. Dist. LEXIS 148355, at *17e18 (E.D. Va. Sept. 13, 2017) (involving a detailed list of each misappropriated document and the trade secret information within each document).[7]

The U.S. Court of Appeals for the Seventh Circuit provided a helpful explanation of its analysis:

According to [the plaintiff], “a 43-page description of the methods and processes underlying and the inter-relationships among various features making up [the plaintiff's] software package” is specific enough. No, it isn't. These 43 pages describe the software; although the document was created for this litigation, it does not separate the trade secrets from the other information that goes into any software package .... That's vital under the statutory definition. Likewise, [the plaintiff's] tender of the complete documentation for the software leaves mysterious exactly which pieces of information are the trade secrets .... A plaintiff must do more than just identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition.

Idx Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583–84 (7th Cir. 2002); see also Elizabeth A. Rowe, Snapshot of Trade Secret Developments, 60 Wm. & Mary L. Rev. Online 47, 55 (2019) (“This means that the plaintiff must identify the trade secret (precisely each piece of information the plaintiff alleges is a trade secret) and show that it took reasonable efforts to preserve this information.”).

Although these cases suggest that trade secrets must be identified with specificity, there seems to be no one standard for the requisite specificity. The identification and analysis of a trade secret is therefore largely fact-based.

Here, the Court has endeavored to sort through the extraordinary quantity of evidence presented[8] in order to determine whether (1) ADS adequately identified specific trade secrets and (2) whether any of those trade secrets were misappropriated by Hanford. ADS argues that the information Hanford stole for Regulus included trade secrets and that Hanford misappropriated those trade secrets when he provided them to Regulus personally or by directing others to do so. Specifically, ADS alleges that Hanford misappropriated the following trade secrets as they relate to the individual sales opportunities at issue:

ADS pricing to customers
Vendor pricing to ADS
BOMs
ADS deal strategy

In response, Hanford argues that ADS failed to adequately specify what trade secrets he allegedly misappropriated. Hanford asserts that ADS only identified categories of information, as opposed to “specific items,” and that ADS therefore has failed to identify any cognizable trade secrets under the VUTSA. The Court disagrees. Although ADS in its post-trial brief identified allegedly stolen trade secrets by category, at trial ADS identified the specific trade secrets—e.g., a BOM, ADS pricing—that Hanford misappropriated for each opportunity ADS claims it lost as a result of Hanford's actions. Additionally, as noted above, the Court finds that Hanford brazenly spoliated evidence that was in his possession and directed others to do so as well. Therefore, even if ADS had not identified the specific trade secrets that Hanford stole that were associated with each opportunity, the Court can justifiably infer that the documents destroyed by Hanford and his co-conspirators identified such trade secrets and provided evidence of their misappropriation. As such, the Court finds that ADS sufficiently identified trade secrets and Hanford's misappropriation thereof, as further discussed below.

a. Reasonable Efforts to Maintain Secrecy of ADS's Trade Secrets

ADS also proved that it took reasonable steps to maintain the secrecy of the information taken by Hanford and his alleged co-conspirators. For instance, every ADS employee was required to sign an employment agreement that included a confidentiality provision. Tr. 1579, 1585. Additionally, the ADS employee handbook further explained the confidentiality requirement to employees. Tr. 244; Pl.’s Ex. 94. ADS also trained its employees to maintain confidentiality of company information and required all independent contractors to sign confidentiality agreements. Tr. 1579–85, 1590. In addition to physical security measures—e.g., locked doors accessible only by key card, escorting visitors while in the office—ADS employed significant cybersecurity measures.[9] See, e.g., Tr. 139–52.

The Court finds that these efforts by ADS were more than sufficient to satisfy the statutory requirement that any information classified as a trade secret be subject to reasonable efforts to protect it. Further, these efforts were companywide and therefore applied to each piece of information—e.g., each BOM, each ADS pricing—just as they applied to each opportunity with which Hanford interfered.

b. Specificity of the Trade Secrets Alleged by ADS

ADS argues that its pricing to customers, vendor pricing it received, BOMs it assembled, and its “deal strategy”—as they relate to each of the opportunities Hanford allegedly steered away from ADS—qualify as trade secrets under the statute. Hanford asserts that these claims are not specific enough. The Court disagrees.

Although the Court agrees with Hanford that plaintiff's post-trial briefs refer to ADS's trade secrets by categories, e.g., ADS pricing, ADS presented specific evidence at trial pointing to each of the alleged trade secrets. Based on this evidence, the Court finds that ADS has identified the misappropriated trade secrets with the requisite specificity, as discussed in more detail below.

1. Bulgaria K-Loader (BU-D-QAB)

Plaintiff claims that Hanford misappropriated trade secrets related to the Bulgaria K-Loader opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets allegedly misappropriated as (1) ADS's pricing for the opportunity, (2) a BOM assembled for the opportunity, and (3) ADS's deal strategy. See Tr. 1022–30; Pl.’s Exs. 33 (September 2020 ActivTrak screenshots demonstrating Komornik sending Bulgaria information, including ADS pricing, vendor pricing, and ADS deal strategy, to Schofield), 201 (August 2020 email chain between Ball and Conwell regarding “K Loader Parts” sent to Schofield), 203 (August 2020 email from Schofield to Ball, which includes the BOM), 208 (October 2020 email chain between Schofield and Ball that was forwarded to Hanford), 209 (October 2022 email chain with Schofield discussing when the contract would be awarded to Regulus), 210 (December 2022 Sales Order from Regulus), 211 (November 2022 Purchase Order to Regulus).

The Court finds that ADS also proved that Hanford and his co-conspirators misappropriated the above-mentioned trade secrets. The exhibits referenced above and evidence introduced by ADS at trial demonstrate that Hanford and his co-conspirators discussed and disseminated these trade secrets, which ultimately led to ADS losing the opportunity. Pl.’s Exs. 201, 203, 208–11.

Therefore, the Court finds that Hanford misappropriated ADS trade secrets, namely (1) ADS pricing, (2) BOM, and (3) ADS deal strategy as they relate to the Bulgaria K-Loaders opportunity.

2. Estonia Airfield (EE-D-Runway Matting Kit)

Plaintiff argues that Harford misappropriated trade secrets related to the Estonia Airfield opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) deal strategy, (3) vendor pricing, and (4) ADS pricing. Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending Estonia information, including ADS pricing, vendor pricing, BOM, and ADS deal strategy, to Schofield), 178 (August 2020 emails from Schofield with BOM, ADS pricing, and vendor pricing for Estonia, as well as the documents themselves), 219 (August 2020 – Schofield emailing herself BOM), 220 (August 2020 – Schofield emailing BOM and quote numbers to Ball), 226 (September 2020 emails between Schofield and Michael Tolene, a vendor representative).

The Court finds that ADS also proved that Hanford and his co-conspirators misappropriated the above-mentioned trade secrets. The exhibits above and other evidence introduced by ADS at trial demonstrate that Hanford and his co-conspirators discussed and disseminated these trade secrets, which ultimately led to ADS losing the opportunity.

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Estonia Airfield opportunity, namely (1) the BOM, (2) ADS deal strategy, (3) vendor pricing, and (4) ADS pricing.

3. Latvia Airfield (LG-D-Airfield Kit)

Plaintiff argues that Harford misappropriated trade secrets related to the Latvia Airfield opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) deal strategy, (3) vendor pricing, and (4) ADS pricing. Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending Latvia information, including ADS pricing, vendor pricing, BOM, and ADS deal strategy, to Schofield), 176 (July 2020 email chain between Schofield and Conwell with quote numbers, vendor pricing, ADS pricing, and BOM for various opportunities, including the Latvia Airfield), 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including the Latvia Airfield kit), 220 (August 2020 – Schofield emailing BOM and quote numbers to Ball), 222 (August 2020 – Schofield emailing Latvia BOM to herself), 226 (September 2020 emails between Schofield and Tolene).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Latvia Airfield opportunity, namely (1) the BOM, (2) ADS deal strategy, (3) vendor pricing, and (4) ADS pricing.

4. Lithuania Airfield (LH-D-Airfield Kit)

Plaintiff argues that Harford misappropriated trade secrets related to the Lithuania Airfield opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) deal strategy, (3) vendor pricing, and (4) ADS pricing. Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending Lithuania information, including ADS pricing, vendor pricing, BOM, and ADS deal strategy, to Schofield), 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including the Lithuania Airfield kit), 220 (August 2020 – Schofield emailing BOM and quote numbers to Ball), 221 (August 2020 Schofield email in which she emails herself the Lithuania BOM), 226 (September 2020 emails between Schofield and Tolene).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Lithuania Airfield opportunity, namely (1) the BOM, (2) ADS deal strategy, (3) vendor pricing, and (4) ADS pricing.

5. Norway Thermo Paper 1 and 2

Plaintiff argues that Harford misappropriated trade secrets related to the Norway Thermo Paper opportunities. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) deal strategy, (3) vendor pricing, and (4) ADS pricing. Tr. 684–86, Pl.’s Exs. 8 (August 2020 email from Komornik to Conwell and Schofield), 78 (August 2020 email from Komornik to Conwell and Schofield with attachment), 323 (September 2020 email from Schofield to Peter Brosage, the customer representative, taking the opportunity for Regulus), 325 (August 2020 WhatsApp messages between Conwell and Schofield with screenshots of Salesforce contact information for Thermo Paper vendor), 327 (email between Conwell, Schofield, and Hanford with Conwell asking Schofield to process the Thermo Paper for Regulus), 326 (email from Schofield to Regulus team to get Norway Thermo Paper customer set up with Regulus and purchase order from Brosage for the Thermo Paper), 328 (September 2020 email from Conwell to Schofield evidencing Teams comments for the Thermo Paper opportunity, confirming Regulus's acquisition of Thermo Paper opportunity), 330 (email from Schofield to Katie Wilson, head of program management at Regulus, regarding commission payment for Thermo Paper opportunity).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Norway Thermo Paper opportunities, namely (1) the BOM, (2) ADS deal strategy, (3) vendor pricing, and (4) ADS pricing.

6. Lithuania Medical Kits

Plaintiff argues that Harford misappropriated trade Secrets related to the Lithuania Medical Kits opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) deal strategy, (3) vendor pricing, and (4) ADS pricing. Pl.’s Exs. 33 (September 2020 ActivTrak screenshots of Komornik's computer with Schofield asking Komornik to send over quotes, BOMs, deal strategy, and vendor quotes to her, plus additional screenshots of Komornik doing just that), 273 (email from Ball to Schofield with surgical kits information), 274 (email from Brad Stewart, Regulus Vice President of Sales, to Schofield indicating that he would provide pricing to Schofield), 275 (quote for Lithuania Medical Kits sent to Hanford for approval), 277 (S&K Aerospace—prime contractor with the sole authority to award contracts on PROS V[10] for AFSAC, a customer—award for one of the medical kits), 279 (another kit awarded to Regulus), 280-308 (awards of the remaining kits to Regulus).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Lithuania Medical Kits opportunity, namely (1) the BOM, (2) ADS deal strategy, (3) vendor pricing, and (4) ADS pricing.

7. Micronesia (AIR-1.4 International FM Air Field)

Plaintiff argues that Harford misappropriated trade secrets related to the Micronesia opportunity. The Court agrees.

For this opportunity, ADS provided fewer exhibits showing specific trade secrets. However, ADS did provide evidence that Hanford directed this opportunity away from ADS to Federal Resources and that Hanford bragged about getting a $400,000 kickback. Tr. 1403–05, 1408, 1187–88; Pl.’s Ex. 438 (order to Federal Resources for the requirements and award to Federal Resources). Additionally, the Court infers that Hanford destroyed evidence of him providing ADS trade secrets—specifically BOM's, ADS deal strategy, vendor pricing, and ADS pricing—to Federal Resources and that, absent Hanford's actions, ADS would have been able to present evidence of Hanford's misappropriation of ADS trade secrets related to the Micronesia opportunity.

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Micronesia opportunity.

8. Palau (AIR-1.4 International PW Air Field)

Plaintiff argues that Harford misappropriated trade secrets related to the Palau opportunity. The Court agrees.

For this opportunity, ADS again provided fewer exhibits showing specific trade secrets. However, ADS was able to provide clear evidence that Hanford directed this opportunity away from ADS and to Federal Resources. Tr. 1404–05, 1408; Pl.’s Exs. 438 (order to Federal Resources for the requirements and award to Federal Resources). Additionally, the Court infers that Hanford destroyed evidence of him providing ADS trade secrets—specifically BOM's, ADS deal strategy, vendor pricing, and ADS pricing—to Federal Resources and that, absent his actions, ADS would have been able to present evidence of Hanford's misappropriation of ADS trade secrets related to the Palau opportunity.

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Palau opportunity.

9. Croatia (EZ-D-JTAC)

Plaintiff argues that Harford misappropriated trade secrets related to the Croatia opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) vendor pricing, and (3) ADS pricing. Pl.’s Exs. 19 (ActivTrak Screenshots from Komornik's computer showing her sending Schofield the ADS quote for Croatia opportunity), 82 (Komornik sending vendor quote to Schofield), 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including the Croatia opportunity), 338 (Schofield forwarding Croatia information to Conwell). ADS did not provide evidence regarding the deal strategy for this opportunity. However, the Court infers that this evidence would have been provided had Hanford and, at his direction, his associates not destroyed evidence. Therefore, the Court infers that the destroyed documents would have contained evidence of ADS deal strategy as it relates to the Croatia opportunity being misappropriated.

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Croatia opportunity, namely (1) the BOM, (2) vendor pricing, and (3) ADS pricing.

10. India 1 and India 2 (IN-B-UCW and IN-B-UCW (EM Gen 3))

Plaintiff argues that Harford misappropriated trade secrets related to the India 1 and India 2 opportunities. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) deal strategy, (3) vendor pricing, and (4) ADS pricing. The Court notes that distinguishing which piece of evidence applies to which India opportunity has proved extremely difficult. However, the evidence that ADS has provided, in combination with the spoliation adverse inference, allows the Court to find that ADS has adequately identified trade secrets related to both opportunities. Pl.’s Exs. 4 (ActivTrak screenshots evidencing Komornik sending Hanford Salesforce info in August of 2020 related to the India opportunity), 109 (email chain discussing India opportunity), 110 (email chain with Hanford discussing India opportunity), 112 (Hanford discussing next steps to pursue opportunity at Regulus), 113 (email chain between Hanford and Conwell discussing India opportunity), 114 (emails between Hanford and Conwell discussing India opportunity), 627, at 199126 (WhatsApp messages between Hanford and Somerindyke).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the India opportunities, namely (1) the BOM, (2) ADS deal strategy, (3) vendor pricing, and (4) ADS pricing.

11. Ukraine Airfield Kit (UA-D-Airfield Kit)

Plaintiff argues that Harford misappropriated trade secrets related to the Ukraine Airfield Kit opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) the BOM, (2) vendor pricing, and (3) ADS pricing. Pl.’s Exs. 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including the Ukraine opportunity), 195 (WhatsApp messages between Schofield and Komornik regarding the Ukraine fire gear opportunity), 227 (WhatsApp messages between Schofield, Conwell, and Hanford regarding multiple airfield opportunities, including the Ukraine opportunity).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Ukraine Airfield Kit opportunity, namely (1) the BOM, (2) vendor pricing, and (3) ADS pricing.

12. Romania (RO-D-EJTC-Elbit)

Plaintiff argues that Harford misappropriated trade secrets related to the Romania opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) vendor pricing and (2) ADS pricing. Pl.’s Exs. 24 (ActivTrak screenshots of Komornik's computer screen evidencing her sending Conwell an email Komornik received regarding the Romania opportunity), 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including the Romania opportunity), 345 (WhatsApp messages between Schofield and Conwell regarding the Romania opportunity).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Romania opportunity, namely (1) vendor pricing and (2) ADS pricing.

13. Ghana (GH-P6-D-EAA-5k)

Plaintiff argues that Harford misappropriated trade secrets related to the Ghana opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) deal strategy, (2) vendor pricing, and (3) ADS pricing. Pl.’s Exs. 179 (emails between Schofield and Conwell regarding multiple opportunities, including the Ghana opportunity), 227 (WhatsApp messages between Schofield, Conwell, and Hanford regarding multiple airfield opportunities, including the Ghana opportunity), 332 (emails between Schofield and Komornik with screenshots of ADS quotes and deal strategy regarding the Ghana opportunity).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Ghana opportunity, namely (1) ADS deal strategy, (2) vendor pricing, and (3) ADS pricing.

14. Ukraine JBT (UA-D-Wright)

Plaintiff argues that Harford misappropriated trade secrets related to the Ukraine JBT opportunity. The Court agrees.

For this opportunity, ADS identified the trade secrets stolen by Hanford as (1) deal strategy and (2) vendor pricing. Pl.’s Exs. 144 (WhatsApp messages between Schofield and Komornik regarding the Ukraine JBT opportunity), 193 (July 2020 WhatSapp messages between Schofield and Conwell regarding Ukraine ammunition opportunity, including ADS quotes), 216 (award for forklift opportunity from S&K and PROS purchase order for forklift), 317 (list of current PROS opportunities Schofield sent Komornik in August 2020, including bids), 318 (email from Ball to Schofield regarding ADS cancelling the opportunity because they could not accept terms and conditions), 144 (WhatsApp messages between Schofield and Komornik regarding another discussion with Katy Wade, an ADS employee), 320 (email from Komornik with the deal strategy, the JB 950, and the quote from the vendor), 322 (October 2020 WhatsApp messages in which Hanford discusses revenue on PROS up to that point), 431 (emails between Schofield, Komornik, and Rachello relating to the Ukraine JBT opportunity).

Therefore, the Court finds that Hanford misappropriated ADS trade secrets related to the Ukraine JBT opportunity, namely (1) ADS deal strategy and (2) vendor pricing.

c. Information That Derives Economic Value from Not Being Known

In addition to adequately identifying the ADS trade secrets that were stolen, ADS has adequately proved that the trade secrets derived economic value from not being known. First, ADS adequately proved that its pricing derived economic value from not being known. Rachello testified that the pricing that ADS provided to customer was typically the same pricing that ADS would bid. Tr. 2091. Therefore, if ADS's pricing is known by a competitor before ADS can submit its bid, the competitor can underbid ADS, thereby greatly increasing the competitor's chances that it would win the contract instead of ADS. The U.S. District Court for the Eastern District of Virginia came to this same logical conclusion in MicroStrategy, Inc. v. Business Objects, S.A., 331 F. Supp. 2d 396 (E.D. Va. 2004), aff'd, 429 F.3d 1344 (Fed. Cir. 2005) (“Plaintiff's discount schedule was a protectable trade secret where testimony made clear that a volume discount schedule was ... of economic value to a competitor because a competitor possessing knowledge of such pricing could undercut the plaintiff or price differently to influence a prospect's purchase decision.”). Therefore, for the Bulgaria K-Loader, Estonia Airfield, Latvia Airlfield, Lithuania Airfield, Norway Thermo Paper 1 and 2, Lithuania Medical Kits, Micronesia, Palau, Croatia, India 1 and 2, Ukraine Aircraft Kit, Romania, and Ghana opportunities listed above, the Court finds that ADS derived economic value from the associated pricing, as it was not publicly known.

Second, ADS proved that its BOMs derived economic value from not being publicly known. BOMs provide a company a comprehensive list of all materials, products, and parts that a customer needs to be located and provided to them. This information is critical to forming a competitive and viable bid. Schofield testified that ADS's BOMs are not publicly known. Tr. 1147. BOMs are typically generated through private and confidential contact and communication between the customer and ADS. Tr. 756, 1553–54. Generating these BOMs then allows ADS to secure pricing, often with discounts, from the vendors and then submit a comprehensive and competitive bid to the customer, thus greatly increasing its likelihood of winning the contract. Id. Therefore, for the Bulgaria K-Loader, Estonia Airfield, Latvia Airfield, Lithuania Airfield, Norway Thermo Paper 1 and 2, Lithuania Medical Kits, Croatia, India 1 and 2, and Ukraine Airfield Kit opportunities listed above, the Court finds that ADS derived economic value from the associated BOMs, as they were not publicly known.

Third, ADS proved that its deal strategy derives economic value from not being publicly known. Tr. 170, 944, 991–92, 1383–85. ADS's deal strategy is a plan for how the company is going to bid, i.e., who the vendors are, what the pricing will be, if there are discounts, what the margin of profit will be, and how ADS will price the items for the final bid. Tr. 170. Similar to knowing ADS's pricing, a competitor knowing ADS's deal strategy gives it an enormous competitive advantage, allowing it to not only know what ADS is likely to bid, but also knowing what ADS's strategy will be for setting its price, which vendors ADS plans to use, and what profit ADS plans to make. Knowing this information would allow a competitor to underbid ADS, greatly increasing the chance that the competitor would win the bid. Therefore, for the Bulgaria K-Loader, Estonia Airfield, Latvia Airfield, Lithuania Airfield, Norway Thermo Paper 1 and 2, Lithuania Medical Kits, India 1 and 2, Romania, Ghana, and Ukraine JBT opportunities listed above, the Court finds that ADS derived economic value from the associated deal strategies, as they were not publicly known.

Finally, ADS also proved that vendor pricing derives economic value from not being publicly known. As referenced earlier, ADS often can secure discounts from vendors for products, which then allows ADS to bid the lowest possible price to the customer. If an outside party or a competitor were to learn the prices that vendors were charging ADS, they could use that information to underbid ADS and have a much higher likelihood of winning the bid. Therefore, for the Estonia Airfield, Latvia Airfield, Lithuania Airfield, Norway Thermo Paper 1 and 2, Lithuania Medical Kits, Micronesia, Palau, Croatia, India 1 and 2, Ukraine Airfield Kit, Romania, Ghana, and Ukraine JBT opportunities listed above, the Court finds that ADS derived economic value, as the associated vendor pricing was not publicly known.

2. Misappropriation of the Trade Secret

The Code of Virginia defines misappropriation of trade secrets.

Misappropriation of such a trade secret can occur under the following circumstances:

1. Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

2. Disclosure or use of a trade secret of another without express or implied consent by a person who

a. Used improper means to acquire knowledge of the trade secret; or
b. At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was

(1) Derived from or through a person who had utilized improper means to acquire it;
(2) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use;
(3) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(4) Acquired by accident or mistake.

Va. Code § 59.1-336 (2019 Repl. Vol.).

ADS adequately proved misappropriation of trade secrets for all of the opportunities discussed above. Although the Court finds that the evidence presented is sufficient on its own, the Court also recognizes Hanford's rampant spoliation of evidence and therefore infers that the missing documents, emails, and messages would have demonstrated additional misappropriation of trade secrets associated with these opportunities.

As a result, the Court finds that Hanford misappropriated ADS trade secrets. Damages under this claim are discussed in Section H, infra.

C. Virginia Computer Crimes Act

The Virginia Computer Crimes Act states as follows: “Any person who uses a computer or computer network, without authority and: 1. Obtains property or services by false pretenses; 2. Embezzles or commits larceny; or 3. Converts the property of another; is guilty of the crime of computer fraud.” Va. Code § 18.2-152.3 (2021 Repl. Vol.).

ADS claims that Hanford repeatedly violated the VCCA after he stopped working for ADS and began his attempts to send business to Regulus and other ADS competitors. ADS claims only nominal damages under this claim because the supporting evidence came to light shortly before trial and ADS therefore lacked adequate time to properly value the damages resulting from Hanford's breach.

After trial, the Court of Appeals of Virginia decided Wallace v. Commonwealth, 76 Va. App. 696 (2023), an en banc decision that addressed a claim under the VCCA. Wallace further supports that Hanford violated the VCCA. The Wallace court focused on the specific issue of authorization, finding that the VCCA does not criminalize the actions of a defendant if his actions were authorized by the plaintiff. More specifically, the court held that in order for a defendant to be convicted of violating the VCCA, the “manner” in which he used the computer—not the “purpose”—must have been “without authority.” Wallace, 76 Va. App. at 708. Additionally, the manner in which the defendant uses the computer must be such that he has no right to engage in such use, z.e., akin to hacking or otherwise breaking into a computer, or that he “knowingly exceed[s]” his existing permissions regarding the use of that computer. Va. Code § 18.2-152.2 (2021 Repl. Vol.). “To prove that a defendant knowingly exceeded [his] authorization, the [plaintiff] must first establish the scope of the defendant's right, agreement, or permission.” Wallace, 76 Va. App. at 706.

Although Hanford apparently did not violate the VCCA in a manner akin to hacking or otherwise breaking into any ADS property, the Court finds that the evidence presented at trial sufficiently supports a finding that Hanford knowingly exceeded the scope of the permissions and authority he was granted regarding ADS computers and networks.

First, ADS proved that Hanford had signed an enforceable employment agreement with clear policies that prohibited the behavior in which Hanford and his co-conspirators engaged. Pl.’s Ex. 91; Tr. 258–62. Therefore, although Hanford had the authority to access the ADS documents and trade secrets that eventually made their way to Regulus, his use of those documents and trade secrets was entirely outside the scope of the permission ADS had granted him. For instance, ADS presented evidence that Hanford accessed ADS documents for the express purpose of sending them to Regulus. See, e.g., Tr. 2372–75; Pl.’s Ex. 133. Although Hanford was still technically employed by ADS at the time, this access—for the purpose of providing them to Regulus, a competitor of ADS—constitutes a violation of the VCCA because Hanford knowingly exceeded the bounds of his permissions and authority regarding the handling of these secrets. Tr. 555–59, 2379; Pl.’s Exs. 134, 135, 627, at 199118. Additionally, ADS presented evidence that Hanford transferred confidential ADS files from his ADS email and computer to his VIII email, another breach of the VCCA. Tr. 378; Pl.’s Ex. 131. Finally, ADS presented evidence that Hanford directed Schofield, Conwell, and Komornik to send confidential files and documents from ADS to Regulus, Tr. 764; Komornik Judgment Order; Pl.’s Exs. 4, 33, 628, and to hide their behavior to prevent anyone from ADS from discovering their wrongdoing, Tr. 289, 422, 737, 739–41, 1039, 2545–53. The Court finds that each of these actions, taken while knowing that they were not permitted under any employment agreement or policy of ADS, constitutes a violation of the VCCA.

The Court finds that no reasonable mind could believe that an employee of one company would have permission to take trade secrets from that company and give them to a competitor. Therefore, the Court holds that the scope of Hanford's permission to use ADS computers and networks with authority does not include the actions he took that were intentionally adverse to ADS.

Because the Court finds that Hanford violated the VCCA multiple times, it will award ADS nominal damages for these breaches, as sought by ADS. These damages are discussed in more detail in Section H, infra.

D. Statutory Civil Conspiracy

The Code of Virginia provides the following with respect to civil conspiracy:

A. Any two or more persons who combine, associate, agree, mutually undertake or concert together for the purpose of (i) willfully and maliciously injuring another in his reputation, trade, business or profession by any means whatever or (ii) willfully and maliciously compelling another to do or perform any act against his will, or preventing or hindering another from doing or performing any lawful act, shall be jointly and severally guilty of a Class 1 misdemeanor. Such punishment shall be in addition to any civil relief recoverable under § 18.2-500.

B. Any person who attempts to procure the participation, cooperation, agreement or other assistance of any one or more persons to enter into any combination, association, agreement, mutual understanding or concert prohibited in subsection A of this section shall be guilty of a violation of this section and subject to the same penalties set out in subsection A.

Va. Code § 18.2-499 (2021 Repl. Vol.).

A. Any person who shall be injured in his reputation, trade, business or profession by reason of a violation of § 18.2-499, may sue therefor and recover three-fold the damages by him sustained, and the costs of suit, including a reasonable fee to plaintiff's counsel, and without limiting the generality of the term, “damages” shall include loss of profits.

B. Whenever a person shall duly file a civil action in the circuit court of any county or city against any person alleging violations of the provisions of § 18.2-499 and praying that such party defendant be restrained and enjoined from continuing the acts complained of, such court shall have jurisdiction to hear and determine the issues involved, to issue injunctions pendente lite and permanent injunctions and to decree damages and costs of suit, including reasonable counsel fees to complainants' and defendants' counsel.

Id. ADS brings its claim under section 18.2-499 and seeks damages under section 18.2-500.

ADS argues that Hanford conspired with Schofield, Conwell, and Komornik to steal business opportunities from ADS and direct them to Regulus, intending to deprive ADS of the revenue expected from those opportunities. In response, Hanford claims that he had no knowledge of Schofield's, Conwell's, and Komornik's actions until late 2020, and he therefore did not conspire with anyone to steal business from ADS.

The Court did not find Hanford's testimony credible. ADS, on the other hand, provided convincing evidence of Hanford's knowledge and intent to deprive ADS of at least seven different contract opportunities. ADS also provided credible evidence of Hanford's intent to cause ADS damage through the attempted transfer of an entire established team at ADS to Regulus, an ADS competitor. ADS established that, beginning in early 2020, Hanford began systematically recruiting individuals from ADS to work for Regulus and then, once these individuals were on board, directed his co-conspirators to deprive ADS of business through the use of ADS's confidential information and trade secrets. The Court finds that Hanford's actions, including directing his co-conspirators, were clearly conducted in a manner intended to evade detection by ADS, evidencing Hanford's willful and malicious intent to damage ADS.

Additionally, the Court infers, based on Hanford's spoliation of evidence, that any missing evidence would support Hanford's conspiracy with Schofield, Conwell, and Komornik. Therefore, the Court finds that Hanford willfully and maliciously conspired to steal the following opportunities from ADS and that the conspiracy he led damaged ADS via lost profits from these opportunities. The evidence that ADS was able to provide regarding the conspiracy to steal each opportunity is presented below.

1. Bulgaria K-Loader

At trial, ADS presented substantial evidence in support of its claim that Hanford conspired with Schofield, Conwell, and Komornik to steal the Bulgaria K Loader opportunity from ADS. See Tr. 1022–30; Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending to Schofield Bulgaria information, including ADS pricing, vendor pricing, and ADS deal strategy), 201 (August 2020 email chain between Ball and Conwell regarding “K Loader Parts” sent to Schofield), 203 (August 2020 email from Schofield to Ball that includes the Bulgaria L Loader BOM), 208 (October 2020 email chain between Schofield and Ball that was forwarded to Hanford), 209 (October 2022 email chain with Schofield discussing when the contract would be awarded to Regulus), 210 (December 2022 Sales Order from Regulus), 211 (November 2022 Purchase Order to Regulus).

2. Estonia Airfield

At trial, ADS presented substantial evidence in support of its claim that Hanford conspired with Schofield, Conwell, and Komornik to steal the Estonia Airfield opportunity from ADS. See Tr. 959–62, 963–64, 970, 972–74, 976–77; Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending to Schofield Estonia Airfield information, including ADS pricing, vendor pricing, BOM, and ADS deal strategy), 178 (August 2020 emails from Schofield with Estonia Airfield BOM, ADS pricing, and vendor pricing, as well as supporting documents), 219 (August 2020 – Schofield emailing herself BOM), 220 (August 2020 – Schofield emailing BOM and quote numbers to Ball), 226 (September 2020 emails between Schofield and Tolene).

3. Latvia Airfield

At trial, ADS presented substantial evidence in support of its claim that Hanford conspired with Schofield, Conwell, and Komornik to steal the Latvia Airfield opportunity from ADS. See Tr. 963–66, 970–78; Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending to Schofield Latvia Airfield information, including ADS pricing, vendor pricing, BOM, and ADS deal strategy), 176 (July 2020 email chain between Schofield and Conwell with Latvia Airfield quote numbers, vendor pricing, ADS pricing, and BOM for various opportunities, including Latvia Airfield), 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including Latvia Airfield), 220 (August 2020 Schofield email sending BOM and quote numbers to Ball), 222 (August 2020 – Schofield emailing BOM to herself), 226 (September 2020 emails between Schofield and Tolene).

4. Lithuania Airfield

At trial, ADS presented substantial evidence in support of its claim that Hanford conspired with Komornik, Schofield, and Conwell to steal the Lithuania Airfield opportunity from ADS. See Tr. 963, 970–78; Pl.’s Exs. 33 (September 2020 ActivTrak screenshots evidencing Komornik sending to Schofield Lithuania Airfield information, including ADS pricing, vendor pricing, BOM, and ADS deal strategy), 178 (August 2020 email chain between Schofield and Conwell with BOM, ADS pricing, and vendor pricing for various opportunities, including Lithuania Airfield), 220 (August 2020 Schofield email sending BOM and quote numbers to Ball), 221 (August 2020 Schofield email in which she emails herself BOM), 226 (September 2020 emails between Schofield and Tolene).

5. Norway Thermo Paper 1 and 2

At trial, ADS presented substantial evidence in support of its claim that Hanford conspired with Schofield, Conwell, and Komornik to steal the Norway Thermo Paper opportunities from ADS. See Tr. 685–86, 897–903; Pl.’s Exs. 8 (August 2020 email from Komornik to Conwell and Schofield), 78 (August 2020 email from Komornik to Conwell and Schofield with attachment), 323 (September 2020 email from Schofield to Brosage taking opportunity for Regulus), 325 (August 2020 WhatsApp messages between Conwell and Schofield with screenshots of Salesforce contact information for Thermo Paper vendor), 327 (email between Conwell, Schofield, and Hanford with Conwell asking Schofield to process Norway Thermo Paper for Regulus), 326 (email from Schofield to Regulus team to get Norway Thermo Paper customer set up with Regulus, and purchase order from Brosage for the Thermo Paper opportunities), 328 (September 2020 email from Conwell to Schofield evidencing Teams comments for the Thermo Paper opportunities, confirming Regulus's acquisition of the Thermo Paper opportunities), 330 (email from Schofield to Wilson regarding commission payment for Thermo Paper opportunities).

6. Lithuania Medical Kits

At trial, ADS presented substantial evidence in support of its claim that Hanford conspired with Schofield, Conwell, and Komornik to steal the Lithuania Medical Kits opportunity from ADS. See Tr. 1043–44: Pl.’s Exs. 33 (September 2020 ActivTrak screenshots of Komornik's computer evidencing Schofield asking Komornik to send over Lithuania Medical Kits quotes, BOMs, deal strategy, and vendor quotes to her, plus additional screenshots of Komornik doing so), 273 (email from Ball to Schofield with surgical kits information), 274 (email from Stewart to Schofield indicating that he would provide pricing to Schofield), 275 (quote for Lithuania Medical Kits sent to Hanford for approval), 277 (S&K Aerospace award for one of the medical kits), 279 (another kit awarded to Regulus), 280–308 (awards of the remaining kits to Regulus).

ADS also provided evidence of Hanford's willful malice to deprive ADS of business by manipulating others to direct opportunities to Regulus instead. See Tr. 631–32 (Conwell testimony that he and the rest of the FMS team were told by Hanford that their ADS group was going to be discontinued); Pl.’s Ex. 149 (Schofield discussing Hanford's conversation with her regarding “stealing” ADS clients and opportunities to pass on to Regulus and recounting that Hanford falsely told her that ADS was disbanding the FMS team). Additionally, Hanford's breach of fiduciary duties to ADS and his tortious interference with ADS business expectancies further evidence Hanford's intent to deprive ADS of further opportunities through the ADS FMS team.

Further, ADS proved damages in the form of lost profits for each of these opportunities, as discussed further in Section H, infra.

E. Tortious Interference

In Virginia, a claim for tortious interference requires a plaintiff to prove

(1) the existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted.

Duggin v. Adams, 234 Va. 221, 226, 360 S.E.2d 832, 835 (1987). Furthermore, the Supreme Court of Virginia has defined a business expectancy as follows:

Initially, we shall comment on several obvious principles that apply to the tort of wrongful interference with a prospective business or economic advantage. First, proof of the existence of the first and third elements of the tort must meet an objective test; proof of subjective expectations will not suffice. In other words, mere proof of a plaintiff's belief and hope that a business relationship will continue is inadequate to sustain the cause of action .... Second, the proof must establish a “probability” of future economic benefit to a plaintiff. Proof of a “possibility” that such benefit will accrue is insufficient.

Comm. Bus. Sys. v. Halifax Corp., 253 Va. 292, 301, 484 S.E.2d 892, 897 (1997).

Therefore, under Virginia law, ADS must first prove that there was a probability that it was going to secure and benefit from the opportunities ADS claims Hanford interfered with. The Court finds that ADS has done this for each of the business expectancies it claims Hanford interfered with.

First, ADS presented evidence regarding its likelihood of being awarded opportunities that it helped cultivate, i.e., opportunities that it worked directly with customers to develop. Rachello testified at trial as follows:

So if we're tracking it or developing it, then we will have advanced knowledge of it and – before it comes out to bid. So if we're the ones who provided the information or put the vendors and the government customer together for whatever reason, we have advanced knowledge. We helped develop it. You name it -- we will be tracking it and we can probably even predict more or less when it comes out of bid -- out to bid .... If it's another prime on the contract and it's a kit and it's pretty – it's futile because they have the same competitive advantage that we would have.

Tr. 1390–91.

Further, Hanford testified to the significant advantage ADS had when it was the company to help set up the contract and prepare for a bid. When testifying about the advantages of “repackaging,” a process ADS employed as it helped a customer prepare a contract for bidding, Hanford stated the following:

[W]ell, there are three reasons [to employ repackaging] -- to avoid the scope of the contract, so to bury items in there that don't fit the scope of the contract in order that they can be pushed through the contract, or to limit competition on those line items. So, for example, a list of ten items that are commonly known and available, when it goes out to the six primes, each one of the primes can go and identify that product or a similar product and offer [it] at the best price to the government. If those ten line items have been squashed into a kit under a bill of materials, the bill of materials is the ten line items. The kit is the one, two, three. The one, two, three comes out on the contract .... That kit would come out to bid, and then all six primes would have to go to [a vendor] to obtain a quote, at which point [the vendor is] free to set pricing as [it] wish[es]. And [it] may offer a discount to one prime over the others, which means the buy price for that kit for that prime is less than the buy price for the others. And the individual prime offered the lower price will be aware of the others because [it] will be advised the discount as opposed to MSRP, and they then know that if they bid -- if their buy price is $90 and everybody else is $100, they can bid [$]99.99 and you really can't lose.

Tr. 2185–86.

ADS also presented data suggesting that when the ADS FMS team previously bid on opportunities at the same stage of production, it enjoyed an 87.1% success rate. Pl.’s Ex. 449. This supports the conclusion that if ADS worked with a customer to prepare an opportunity for bidding, it had a significant probability of winning the bid based on its advanced knowledge of the opportunity itself, what the customer specifically needed, and discounts it could secure from vendors.

ADS presented evidence that for the Estonia Airfield, Lithuania Airfield, Latvia Airfield, and Bulgaria K-Loader opportunities, ADS had been working with those customers to develop the opportunities and had secured discounts from vendors. Pl.’s Ex. 178; Tr. 958–59.

Additionally, ADS presented evidence at trial demonstrating that it had a high probability of winning the Norway Thermo Paper opportunities. For these two opportunities, the customer had reached out to ADS seeking the product, and ADS had provided a sample. Tr. 899. The customer then reached out seeking to purchase the product, at which point Komornik interfered—at Hanford's direction—and diverted the opportunity to Regulus. Tr. 897–98. The Court finds that the customer's interest in working with ADS, coupled with its attempt to contract with ADS to complete the purchase of the product, are strong indicators that without Komornik's interference, ADS would have acquired the opportunities.

ADS also presented evidence that it had a high probability of winning the Micronesia and Palau opportunities. WhatsApp messages from Hanford indicate that he estimated a 90% chance of success for each of these opportunities. Pl.’s Ex. 627, at 199100. Additionally, ADS bid on each of these opportunities when it historically had more than an 87% chance of winning opportunities on which it bid. Pl.’s Ex. 449.

Therefore, the Court finds that ADS provided sufficient evidence to prove that it had a valid business expectancy for the Estonia Airfield, Lithuania Airfield, Latvia Airfield, Bulgaria K-Loader, Micronesia, Palau, and Norway Thermo Paper opportunities.

The Court further finds that Hanford was aware of each of these opportunities as well as the probability that ADS would win them. For this element of tortious interference, the Court once again applies an adverse inference based on Hanford's destruction of evidence. Although ADS provided some evidence that Hanford knew about the Micronesia and Palau opportunities, see Tr. 1186–87, 1403–05; Pl.’s Ex. 627, at 199444, the Court infers that Hanford destroyed evidence that demonstrated his knowledge of the other opportunities.

Hanford—and, at his direction, his co-conspirators—also interfered with the business expectancies ADS had for each opportunity. ADS presented evidence that Hanford directed Schofield, Conwell, and Komornik to divert opportunities from ADS to Regulus, see Pl.’s Exs. 149, 175–77, 432; Tr. 747–49, and that he directed Komornik to block or otherwise sabotage opportunities that came ADS's way, see, e.g., Pl.’s Exs. 144 at 425, 425, 431; Tr. 1421–22, 1428–29, 1431–34, 1436–37. Hanford's actions caused ADS to lose each of the opportunities for which it previously had a business expectancy. The loss of these business expectancies caused damage to ADS through lost profits. The Court's specific findings regarding ADS's damages associated with each opportunity is explained in Section H, infra.

Regarding the restrictive covenants in ADS employment contracts, ADS argues that Hanford completely disregarded the restrictive covenants in his, Conwell's, and Schofield's employment agreements by (1) personally working for Regulus while still employed at ADS and (2) manipulating Schofield and Conwell to do the same. ADS asserts that Hanford did this with full knowledge of the employment agreements and the restrictive covenants contained within them. Hanford argues that he did not know he was violating the covenants and did not think there were any restrictions against working for Regulus while he was working for ADS. Additionally, Hanford contends that he did not direct Conwell or Schofield to breach their employment agreements.

Based on the evidence presented at trial, the Court finds that, at a minimum, Hanford interfered with Schofield's ADS employment agreement as it related to the Lithuania Medical Kit opportunity.

Determining whether a defendant interfered with an employment contract requires the same basic analysis as interference with a business expectancy. See Duggin, 234 Va. at 226 (opining that a tortious interference analysis applies to “a valid contractual relationship or business expectancy”). Therefore, to demonstrate that Hanford interfered with ADS employment contracts, ADS must prove that a valid contract existed, that Hanford knew about the contract, and that Hanford intentionally interfered with the contract, resulting in damages Id.

Of note, the Court finds ADS's claims somewhat confusing. On one hand, ADS appears to allege that Hanford interfered with his own, Conwell's, and Schofield's employment agreements by violating the restrictive covenant in his own contract and manipulating Conwell and Schofield to do the same. However, ADS claims only lost-profit damages associated with Hanford manipulating Schofield into violating her employment agreement. ADS Post-Trial Br. 28, 35. A valid claim of tortious interference must result in damages. Therefore, although ADS proved that Hanford knew about and violated his and Conwell's employment contracts, the Court only considers the violation of Schofield's contract for this claim, as it is the only claim of tortious interference that allegedly resulted in identifiable damages.

First, ADS's employment contract with Schofield was a valid contract. As ADS points out, the U.S. District Court for the Eastern District of Virginia has already examined the restrictive covenant violated in this contract and deemed it valid. See Atl. Diving Supply, Inc. v. Basnight, No. 22CV298, 2022 WL 5568083 (E.D. Va. Sept. 21, 2022); Atl. Diving Supply, Inc. v. Moses, No. 12CV380, 2014 WL 3783343 (E.D. Va. July 31, 2014). Therefore, the Court finds that the first element of tortious interference—the existence of a valid contract—is satisfied.

Second, ADS proved that Hanford knew about Schofield's employment contract and its restrictive covenant. At trial, Conwell testified that he spoke to Hanford about his and Schofield's non-compete agreements. Tr. 687-88. Additionally, Hanford testified that he knew about the employment contracts and the restrictive covenants that ADS employees were required to sign. Tr. 2546. Therefore, the Court finds that the second element of tortious interference—Hanford's knowledge of Schofield's employment contract and the restrictive covenant within it—is also satisfied.

Third, ADS proved that Hanford interfered with Schofield's employment contract. ADS showed how Hanford sought to bring Schofield to Regulus with the goal of bringing the AFSAC opportunities she was working on at ADS with her. Pl.’s Exs. 142, 627, at 199122; Tr. 441. Hanford also worked with Conwell to get Schofield started at Regulus, i.e., “stealing that business for Regulus.” Pl.’s Ex. 149.

Finally, ADS also proved that Hanford's interference resulted in damages. At ADS, Schofield was responsible for the Estonia Airfield, Lithuania Airfield, Latvia Airfield, Bulgaria K-Loader, and Lithuania Medical Kit opportunities. ADS claims lost profits under its claim of interference with Schofield's employment agreement only for the Lithuania Medical Kit opportunity. The damages associated with each opportunity, as well as the employment agreement interference, are discussed in further detail in Section H, infra.

F. Breach of Fiduciary Duties

To establish a claim for breach of fiduciary duty, a party must prove (1) the existence of a fiduciary duty, (2) breach of that duty, and (3) damages caused by the breach. Carstensen v. Chrisland Corp., 247 Va. 433, 434–44, 442 S.E.2d 660, 666 (1994).

The Supreme Court of Virginia has “long recognized that under the common law an employee, including an employee-at-will, owes a fiduciary duty of loyalty to his employer during his employment. Williams v. Dominion Tech. Partners, L.L.C., 265 Va. 280, 289, 576 S.E.2d 752, 757 (2003). “Subsumed within this general duty of loyalty is the more specific duty that the employee not compete with his employer during his employment.” Id.

The Court finds that ADS adequately proved the first two elements of a breach of fiduciary duty. Hanford clearly owed a duty of loyalty to ADS as its employee, including the responsibility not to compete against ADS, separate from and independent of the restrictive covenant in his employment contract. See id. at 289, 291, 576 S.E.2d at 757, 758 (“We have recognized that certain conduct by an employee during the term of his employment will clearly constitute a breach of the duty of loyalty he owes to his employer. Principally, an employee must not have misappropriated trade secrets, misused confidential information, [or] solicited an employer's clients or other employees prior to termination of employment.” (internal citations omitted)). ADS also provided evidence of Hanford's breach of loyalty, demonstrating that he actively sought to steer opportunities away from ADS and to convince ADS employees to leave and take ADS opportunities to Regulus, a competitor of ADS.

The third element, that the breach of his duty caused ADS damages, requires a more in-depth analysis. Causation of damages must be proved with clear and convincing evidence. See Williams v. Dominion Tech. Partners, L.L.C., 265 Va. 280, 290, 576 S.E.2d 752, 757 (2003) (“In order to sustain a claim for [ ] statutory business conspiracy, the plaintiff must prove by clear and convincing evidence that ... such actions injured the plaintiff's business.”).

ADS claims the lost profits from Micronesia and Palau as the damages that resulted from Hanford's breach of fiduciary duty.

To prove that Hanford's breach of his fiduciary duty to ADS caused ADS's loss of profits associated with the Micronesia and Palau opportunities, ADS provided the following evidence: testimony from Rachello, who indicated that Hanford admitted that he had redirected these opportunities away from ADS (Tr. 1405, 1408); WhatsApp messages from Hanford discussing the opportunities with Somerindyke (Pl.’s Ex. 627, at 199100, 199444); and WhatsApp messages between Hanford and Rachello discussing how Komornik was covering for Hanford and allowing him to pursue pushing the Micronesia and Palau opportunities elsewhere (Pl.’s Ex. 432, at 32688). Additionally, the Micronesia and Palau opportunities were opportunities on which ADS had bid, which historically meant that ADS had nearly a 90% chance of winning. In light of this, ADS argues that the evidence of Hanford's meddling, combined with ADS's high probability of winning these opportunities, sufficiently proved the requisite causation: that Hanford's breach of fiduciary duty to ADS caused the loss of the Micronesia and Palau opportunities and their associated profits.

The Court finds this evidence and argument persuasive. Hanford testified that he did not steer the Micronesia and Palau opportunities away from ADS, but the evidence does not support this. Although the Court finds that there is sufficient evidence to support a finding that Hanford violated his fiduciary duty to ADS, the Court alternatively relies on Hanford's widespread destruction of evidence and the concomitant spoliation inference. More specifically, the Court—as additional evidentiary support—infers that the messages, emails, and other documentation that Hanford destroyed contained additional evidence that would shown Hanford's direct role in steering these opportunities away from ADS.

G. Fraud

In Virginia, “[a]n allegation of fraud requires a showing by clear and convincing evidence of an intentional and knowing misrepresentation of a material fact, made with the intent to mislead, and relied upon by [the plaintiff] to his or her detriment.” Flippo v. CSC Assocs. III, L.L.C., 262 Va. 48, 66, 547 S.E.2d 216, 227 (2001).

ADS claims that Hanford committed fraud by violating his duty of loyalty to ADS. More specifically, ADS claims that by working for Regulus while employed by ADS, Hanford improperly accepted payment by ADS as a full-time employee under the faithless servant doctrine. Stated differently, ADS argues that Hanford intentionally and knowingly misrepresented that he would work full time for ADS, which ADS relied upon to its detriment. As recompense for Hanford's misrepresentation, ADS asks the Court to award damages in the amount of $148,731.15, the sum total of Hanford's, Schofield's, Komornik's, and Conwell's salaries for the duration of the time they were working for both ADS and Regulus.

The Court finds that ADS proved that Hanford committed fraud against it and, therefore, ADS should be awarded damages. However, as to ADS's claim for the recovery of compensation paid to Komornik, Schofield, and Conwell, the Court finds that ADS failed to sufficiently prove that it is entitled to recover the compensation it paid to Komornik, Schofield, and Conwell from when they began working with Hanford, against ADS's interests, through the end of their employment with ADS.

However, the Court finds that ADS adequately proved each element of fraud as it applied to Hanford's actions. Hanford admitted that he simultaneously worked for ADS and Regulus, competing companies, during August 2020, and he further testified at trial—without any legal support—that any fiduciary duties he owed to ADS only applied during his forty-hour work week at ADS. Tr. 270, 319. Additionally, ADS was unaware that Hanford was employed by Regulus before he resigned from ADS, and the Court holds that it clearly was improper for Hanford to simultaneously work for competing companies. The Court further finds that Hanford misrepresented that he would work exclusively for ADS in August 2020 and that ADS relied on this misrepresentation to its detriment.

ADS claims faithless servant damages under both its claim of breach of fiduciary duty and its claim of fraud. ADS relies on Hartford Accident & Indemnity Co. v. Cox to support its argument that Hanford must return all compensation paid to him by ADS during 2020. No. 87-456-N, 1988 U.S. Dist. LEXIS 6567 (E.D. Va. June 29, 1988).[11] “An employee whose actions are disloyal to the interests of his employer forfeits his right to compensation for services rendered by him and if he is paid without knowledge of his disloyalty he may be compelled to return what he has improperly received.” Id. at *5 (citations omitted). The Court has not identified any Virginia appellate caselaw that directly addresses this same issue, but the Court finds Hartford persuasive.

The Court finds that ADS adequately proved, by clear and convincing evidence, that Hanford committed fraud against ADS during the entire portion of 2020 he was employed by ADS, and ADS therefore is entitled to recover Hanford's entire salary during that period.

For fraud, Virginia law requires that each element, including damages, be proved by clear and convincing evidence. See Taylor v. Arlington Cnty. Bd., 189 Va. 472, 486, 53 S.E.2d 34, 40 (1949) (“We have said too many times to cite cases about it that fraud must be established by clear and convincing evidence.”); see also Klaiber v. Freemason Assocs., 266 Va. 478, 485, 587 S.E.2d 555, 558 (2003) (“What is more, ‘an allegation of fraud in the abstract does not give rise to a cause of action; it must be accompanied by allegation and proof of damage.’ ” (quoting Community Bank v. Wright, 221 Va. 172, 175, 267 S.E.2d 158, 160 (1980))). Additionally, “the rule as to what constitutes damage [for fraud], in any case, may broadly be stated to be that there is no damage where the position of the complaining party is no worse than it would be had the alleged fraud not been committed.” Klaiber, 266 Va. at 485, 587 S.E.2d at 558 (citations omitted). For example, in Cohn v. Knowledge Connections, Inc., the plaintiff was required to prove that the actions of the defendant, who had allegedly misrepresented the qualifications for a position at the defendant's company, were the cause of the plaintiff's failure to secure the position. 266 Va. 362, 369, 585 S.E.2d 578, 582 (2003). At the close of trial, the defendant moved to strike the plaintiff's evidence and set aside the jury's $125,000 plaintiff's verdict, arguing that the plaintiff failed to adequately demonstrate that the defendant's actions caused the plaintiff's damages. Id. at 366, 585 S.E.2d at 580. The trial court granted the motion, and the Supreme Court of Virginia affirmed, opining that “the evidence proving a causal connection must be ‘sufficient to take the question out of the realm of mere conjecture, or speculation, and into the realm of legitimate inference.’ ” Id. at 369, 585 S.E.2d at 582 (2003) (quoting Hawkins v. Beecham, 168 Va. 553, 561, 191 S.E. 640, 643 (1937)).

In Hartford, the district court similarly required that evidence of fraud be proven by “clear and convincing evidence” but also held as follows: “Fraud or breach of trust ought not to be lightly imputed, and no arbitrary rule can be laid down as to the amount of evidence necessary to satisfactorily prove fraud. It does not have to be proven by direct evidence, but may be proven by circumstantial evidence. Often it can only be proven by circumstantial evidence.” 1988 U.S. Dist. LEXIS 6567, at *6–7.

Here, ADS provided evidence that Hanford began his efforts to steer opportunities away from ADS in January 2020. Pl.’s Exs. 432, 627. ADS provided further evidence that Hanford continued to work against ADS's interests into the summer and fall months of 2020, personally directing opportunities away from ADS and recruiting others to do so, as well as convincing ADS employees to leave ADS to work for Regulus, one of its direct competitors. Pl. ’s Exs. 142, 627, at 199109, 199115, 199118, 199122–23. Additionally, the adverse inference resulting from Hanford's spoliation of evidence covers any time gaps during this period that lack evidence of Hanford working against ADS's interests, i.e., any periods of time in 2020 where ADS was unable to provide evidence of Hanford's disloyalty while employed by ADS would have been found in the documents Hanford destroyed.

The Court finds that each of Hanford's actions aimed at steering opportunities away from ADS was intended to deprive ADS of business that ADS might otherwise have had an opportunity to work on. These actions were disloyal to ADS throughout Hanford's employment with ADS in 2020 as he attempted to steal an entire team of employees from ADS. Hanford acted against ADS's interests while receiving compensation from ADS, and he fraudulently represented, at least impliedly, to ADS that he worked only for ADS. Because Hanford fraudulently represented that he was working for ADS during this time period, he “forfeit[ed] his right to compensation for services rendered by him.” Therefore, the Court finds that ADS is entitled to be reimbursed for the salary it paid Hanford in 2020.

H. Summary of Damages

As a result of the multitude of misdeeds committed by Hanford against ADS, the Court finds that an award of compensatory damages is appropriate and that ADS has proved such damages with reasonable certainty. More specifically, the Court finds that ADS is entitled to damages for each of the counts brought against Hanford, as discussed below.

1. Violation of Virginia Uniform Trade Secrets Act

As noted above in Section B, the Court finds that Hanford misappropriated trade secrets related to the following opportunities: Bulgaria K-Loader (BU-D-QAB), Estonia Airfield (EE-D-Runway Matting Kit), Latvia Airfield (LG-D-Airfield Kit), Lithuania Airfield (LH-D-Airfield Kit), Norway Thermo Paper 1 and 2, Lithuania Medical Kits, Micronesia (AIR-1.4 International FM Air Field), Palau (AIR-1.4 International PW Air Field), Croatia (EZ-D-JTAC); India 1 and India 2 (IN-B-UCW and IN-B-UCW (EM Gen 3)); Ukraine Airfield Kit (UA-D-Airfield Kit); Romania (RO-D-EJTC-Elbit); Ghana (GH-P6-D-EAA-5k); and Ukraine JBT (UA-D-Wright). Although the Court could award damages for each of these opportunities under this claim, ADS argues that damages under this claim should include only the Croatia, India 1 and India 2, Ukraine Airfield Kit, Romania, Ghana, and Ukraine JBT opportunities, presumably because ADS's ad damnum for this claim is only $2,000,000.00. ADS argues that damages associated with the remaining opportunities should be awarded under the conspiracy claim. The Court finds that because ADS is entitled to damages related to these opportunities under either claim, separating the damages out as ADS suggests is acceptable.

The Croatia, India 1 and India 2, Ukraine Airfield Kit, Romania, Ghana, and Ukraine JBT opportunities are opportunities that neither ADS nor Regulus won. However, they are opportunities that ADS likely would have won—based on its contract development and bidding history, as discussed above—had it not been for the actions of Hanford and his co-conspirators. Therefore, the Court finds that ADS is entitled to damages associated with misappropriation of these opportunities pursuant to the VUTSA.

The VUTSA provides that damages can be measured by, inter alia, calculating a reasonable royalty, i.e., an estimate of what “a person desiring to use [the trade secret] would be willing to pay for its use and [the trade secret] owner desiring to license the [trade secret] would be willing to accept” based on a hypothetical sale of the trade secret to another company immediately before the time of the theft. Keystone Trans. Sols., LLC v. Nw. Hardwoods, Inc., No. 5:18-CV-00039, 2019 U.S. Dist. LEXIS 67562, at *12–13 (W.D. Va. Apr. 22, 2019).[12] In determining a reasonable royalty, courts consider a variety of factors, including the effect of the parties’ competitive posture, the prices past purchasers or licensees paid, the value of the trade secret to the plaintiff, the nature and extent of use by the defendant, and any “unique factors in the particular case,” such as the availability of ready alternative options. See Airfacts, Inc. v. Amezaga, 30 F.4th 359, 369 (4th Cir. 2022) (quoting Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 539 (5th Cir. 1974)). Here, Kevin Yeanoplos, ADS's expert witness, looked at (1) the value of these trade secrets to ADS's business model, (2) the impact on the parties’ competitive posture given that ADS would not be able to pursue the opportunities, (3) the extensive business analytics data ADS used in its business planning, and (4) ADS's actual consulting agreements in place at the time of the theft. Using these factors, Yeanoplos offered several possible royalty percentages to the Court.

The Court finds that ADS's approach to measuring damages for these opportunities, awarded under the trade secret count and using the reasonable royalty method, with discounts and profits, is reasonable. The final amounts for each opportunity, using a twenty-one percent royalty rate,[13] are as follows:

Croatia (EZ-D-JTAC): $ 206,134 India 1 (IN-B-UCW): $4,630,707 India 2 (IN-B-UCW): $2,438,045 Ukraine Airfield Kit (UA-D-Airfield Kit): $ 140,132 Romania (RO-D-EJTC-Elbit): $ 510,944 Ghana (GH-P6-D-EAA-5k): $ 31,960 Ukraine JBT (UA-D-Wright): $ 81,914 Total: $8,039,836

Although the reasonable royalties from each opportunity result in calculated damages of over $8,000,000, damages under this claim are limited to $2,000,000 pursuant to ADS's ad damnum for this count in its complaint. Therefore, the Court orders Hanford to pay ADS damages in the amount of $2,000,000 under ADS's trade secrets claim.

2. Violation of Virginia Computer Crimes Act

As discussed above in Section C, the Court finds that Hanford violated the Virginia Computer Crimes Act. ADS has claimed only nominal damages under this count. Thus, the Court orders Hanford to pay ADS nominal damages in the amount of $1.00.

3. Conspiracy

As noted above in Section D, the Court finds that Hanford conspired with Schofield, Conwell, and Komornik to steer opportunities away from ADS and to Regulus. As damages, ADS seeks associated lost profits for these opportunities, i.e., its expectation damages. The opportunities at issue under this claim are the Bulgaria K-Loader, Estonia Airfield, Latvia Airfield, Lithuania Airfield, and Norway Thermo Paper 1 and 2. Each of these opportunities originated with ADS and eventually were won by Regulus after Hanford and his co-conspirators interfered.

ADS calculated the lost profits to ADS and to Regulus, arguing that the former should be awarded to ADS. However, based on the uncertainty inherent in ADS's estimated lost profits, the Court finds that a more appropriate measurement of damages is Regulus's actual profits, as a proxy for ADS's lost profits. Therefore, the Court orders Hanford to pay damages to ADS for each of these opportunities based on the profits Regulus realized from winning these opportunities. These damages are as follows:

Bulgaria K-Loader (BU-D-QAB): $ 8,250.11 Estonia Airfield (EE-D-Runway Matting Kit): $353,130.16 Latvia Airfield (LG-D-Airfield Kit): $ 42,219.42 Lithuania Airfield (LH-D-Airfield Kit): $298,763.11 Norway Thermo Paper (NO-X-Thermo Paper 1 and 2): $ 4,303.53 Lithuania Medical Kits: $430,583.68 Total: $1,137,250.01 ($3,411,750.03 if trebled)

Hence, under the conspiracy claim, the Court orders Hanford to pay ADS compensatory damages in the amount of $1,137,250.01. Additionally, in light of the egregious nature of Hanford's conspiratorial actions, the Court finds that an award of treble damages, as provided in Virginia's business conspiracy statute, is appropriate. See Va. Code § 18.2-500(A) (2021 Repl. Vol.). Therefore, the Court finds that Hanford is liable to ADS in the amount of $3,411,750.03 under ADS's conspiracy claim.

4. Tortious Interference

a. Tortious Interference with Business Expectancies

As discussed in Section E above, the Court finds that Hanford interfered with ADS's business expectancies related to the following opportunities: Estonia Airfield, Lithuania Airfield, Latvia Airfield, Bulgaria K-Loader, Micronesia, Palau, and Norway Thermo Paper opportunities. As damages for these lost opportunities, lost profits normally would be the appropriate award; however, lost profits for the Estonia Airfield, Lithuania Airfield, Latvia Airfield, Bulgaria K-Loader, and Norway Thermo Paper opportunities have already been awarded under the conspiracy claim. Therefore, only lost profits for the Micronesia and Palau opportunities are awarded under this claim.

With respect to Micronesia and Palau, the Court could award $400,000 in restitution—for the “kickback” Hanford received for steering these opportunities away from ADS to Federal Resources—or ADS's lost profits. The Court finds that ADS adequately proved that it would have been awarded these opportunities—based on its contract development and bidding history, as discussed above—and that award of its lost profits therefore is warranted. These lost profits are as follows:

Micronesia (AIR-1.4 International FM Air Field): $1,324,522.08 Palau (AIR-1.4 International PW Air Field): $1,377,009.67 Total: $2,701,531.75

Therefore, under the tortious interference with business expectancies claim, the Court orders Hanford to pay ADS damages of $2,701,531.75.

b. Tortious Interference with Restrictive Covenants

As discussed above in Section E, the Court finds that Hanford interfered with the restrictive covenants contained in Schofield's employment agreement. The Court further finds that as a result of Hanford's interference, ADS lost profits from the Lithuania Medical Kit opportunity.

The Court orders Hanford to pay damages in the amount of $430,583.68 to ADS under this claim. See Exhibit B-l. These damages were calculated using the profits earned by Regulus when it won this opportunity and are awarded under the conspiracy claim.

5. Breach of Fiduciary Duty

As discussed above in Section F, the Court finds that Hanford breached his fiduciary duty to ADS by steering the Micronesia and Palau opportunities away from ADS to Federal Resources and Aquila. However, the Court awards damages for Hanford's breach of fiduciary duty pursuant to ADS's tortious interference with business expectancies claim, as discussed above. The quantum of damages is the same under either claim.

6. Fraud

As discussed above in Section G, the Court finds that Hanford committed fraud against ADS throughout the entirety of the year 2020. Although he may have worked at times for ADS during that time, the Court finds persuasive the case law supporting disgorgement of his entire ADS salary. Therefore, the Court orders Hanford to pay ADS damages in the amount of his ADS salary for the year 2020, which totaled $117,118.61.

7. Punitive Damages

In Virginia, punitive damages are available when a defendant acted with “willful and wanton negligence,” which is defined as “acting consciously in disregard of another person's rights or acting with reckless indifference to the consequences, with the defendant aware, from his knowledge of existing circumstances and conditions, that his conduct probably would cause injury to another.” Cowan v. Hospice Support Care, Inc., 268 Va. 482, 487, 603 S.E.2d 916, 919 (2004).

The Court finds that Hanford clearly acted with willful and wanton negligence. Further, the Court recognizes that the statutory treble damages awarded as part of the conspiracy count are punitive in nature. However, the Court finds—in light of the circumstances present here, including but not limited to Hanford's intentional spoliation of evidence—that the full amount of punitive damages allowed by statute, i.e., $350,000, is appropriate, in addition to the conspiracy-related treble damages.[14] Therefore, the Court orders Hanford to pay to ADS punitive damages in the amount of $350,000.00.

8. Attorney's Fees and Costs

Although each party is normally responsible for its attorney's fees under the American Rule, Bolton v. McKinney, 299 Va. 550, 554, 855 S.E.2d 853, 855 (2021), statutory exceptions apply here. The VUTSA provides that “[i]f the court determines that (i) a claim of misappropriation is made in bad faith, or (ii) willful and malicious misappropriation exists, the court may award reasonable attorneys’ fees to the prevailing party.” Va. Code § 59.1-338.1 (2019 Repl. Vol.). Additionally, Virginia's business conspiracy statute provides that a prevailing party may recover “the costs of suit, including a reasonable fee to plaintiff's counsel.” Id. § 18.2-500(A) (2021 Repl. Vol.).

Based on Hanford's bad faith, willful and malicious misappropriation of ADS's trade secrets, and egregious conspiratorial actions, the Court finds that ADS is entitled to payment by Hanford of its reasonable attorney's fees and costs accrued during this matter.

Conclusion

For the reasons discussed above, the Court finds that Hanford misappropriated ADS trade secrets, violated the Virginia Computer Crimes Act, conspired with others to steal ADS contractual opportunities, tortiously interfered with ADS contracts, breached his fiduciary duties toward ADS, and committed fraud against ADS. As such, the Court finds Hanford liable to ADS for reasonable royalties of $2,000,000.00 under ADS's VUTSA claim, $1.00 under ADS's VCCA claim, $3,411,750.03 in lost profits under ADS's conspiracy claim, $2,701,531.75 in lost profits under ADS's tortious interference with business expectancies claim, $117,118.61 under ADS's fraud claim, and $350,000.00 in punitive damages, totaling $8,580,401.39.[15] The Court further finds Hanford liable to ADS for ADS's reasonable attorney's fees and costs, in an amount to be determined.

Attached is an Order consistent with the ruling in this letter opinion. The matter will stay on the open docket until the issue of attorney's fees and costs are resolved.

Sincerely,

Footnotes

[1]

Although additional defendants were named in the Second Amended Complaint, they all resolved their disputes with ADS prior to trial.

[2]

Pre-LOR work involves developing an opportunity before a request is sent to the United States, Tr. 305, and DCS work involves a company, like ADS, working directly with foreign buyers, Tr. 840-41. ADS's cessation of international operations included Hanford having to terminate his brother, who had been working as an independent contractor under Hanford. Tr. 2200–05; Pl.’s Ex. 432, at 32644.

[3]

Hanford testified—unconvincingly—that he did not realize that it was wrong to work for competing companies at the same time and that any fiduciary duties he owed to ADS only applied during his forty-hour work week at ADS. Tr. 270, 319.

[4]

ADS also alleged a count of aiding and abetting breaches of fiduciary duties, which was dismissed by the Court on demurrer on June 7, 2022, and a count of conversion against Komornik, who is no longer a defendant in this case.

[5]

Both parties claimed pre-trial that the other spoliated evidence during the course of this litigation. The Court finds that Hanford—but not ADS—spoliated evidence, as discussed in more detail below.

[6]

As an example, Plaintiff's Exhibit 627 shows WhatsApp messages between Hanford and Somerindyke exchanged between January 4, 2020, and March 29, 2023. See Pl.’s Ex. 627. None of these messages were produced by Hanford.

[7]

As is appropriate, the Court does not consider unpublished cases to hold precedential value. The Court instead considers the rationale offered by the court to the extent that this Court finds it persuasive

[8]

The Court admitted 446 exhibits during the nine-day trial, which produced a trial transcript of more than 3,400 pages.

[9]

Of note, one of ADS's cybersecurity measures led to the capture and retention of the ActivTrak screenshots from Komornik's ADS computer.

[10]

PROS V is a public bid board/contracting mechanism created by S&K Aerospace and used to advertise various opportunities.

[11]

See supra note 7.

[12]

The Court considers Keystone to be applicable persuasive authority for its analysis. See Green v. Portfolio Recovery Assocs., LLC, No. 0144-22-3, 2024 Va. App. LEXIS 88, at *1 n.2 (Feb. 20, 2024) (“[W]e may rely on other jurisdictions’ definitions as persuasive authority.”).

[13]

Of note, regardless of the royalty rate used by Yeanoplos, the resultant calculated damages exceed $2,000,000, the amount that ADS is seeking for this claim.

[14]

A trial court may award both treble damages and punitive when the awards are based on separate claims involving different legal duties and injuries. See 21st Century Sys. v. Perot Sys. Gov't Servs., 284 Va. 32, 46, 726 S.E.2d 236, 243 (2012).

[15]

The Court leaves it to the parties to resolve any issues regarding setoffs that may result from the settlement of some of the parties.