Only the Westlaw citation is currently available.Superior Court of Massachusetts,Suffolk County.Israel M. STEIN, M.D.v.CLINICAL DATA, INC.

Civil Action No. 07-3418-BLS2.

Oct. 9, 2009.

MEMORANDUM OF DECISION AND ORDERON DEFENDANT CLINICAL DATA, INC .'S“MOTION FOR SANCTIONS AND FINDINGOF CONTEMPT AGAINST PLAINTIFF IS-RAEL M. STEIN, M.D. FOR VIOLATINGCOURT ORDER AND INTENTIONALLYDESTROYING EVIDENCE”

JUDITH FABRICANT, Justice.

INTRODUCTION*1

This action arises from the termination of theplaintiff, Israel Stein's, employment with the de-fendant, Clinical Data. Inc. (CDI), and events there-after. The motion now before the Court relates todiscovery; CDI contends that Stein intentionallydestroyed material evidence, in defiance of a courtorder for discovery; it seeks sanctions and a findingof contempt. For the reasons that will be explained,the Court will find that Stein did intentionally des-troy data, and will order sanctions pursuant toMass. R. Civ. P. 37.FN1FN1.The Court declines CDI's invitationto treat this matter as contempt, finding theremedies available underRule 37suffi- cient.

BACKGROUND

Stein, a physician, was a founder of CDI. He servedin various executive positions with the companyuntil August 30 of 2006, when he resigned, appar-ently in the context of a dispute over his changedrole after the appointment of a new chief executiveofficer. His employment agreement entitled him toseverance pay and benefits, and obligated him to re-frain from certain conduct for a one year period, in-cluding competing with the company, using or dis-closing its trade secrets and confidential businessinformation, and soliciting its employees. The com-pany began paying Stein the agreed severance uponhis resignation.Beginning sometime in 2006, CDI was preparing tosell its Vital Diagnostics Division, including a for-eign subsidiary known as Vital Scientific N.V,through a private auction process conducted byLazard Freres and Company, LLC. In early 2007,CDI formed the belief that Stein was engaging incommunication with potential bidders in the auc-tion process in a manner that interfered with theprocess, and that in doing so he had used and dis-closed confidential and proprietary business in-formation of CDI. The company sent Stein a letter,in March of 2007, demanding that he stop such con-duct, and threatening action against him.Thereafter, the parties negotiated a settlementagreement. The settlement agreement provided thatStein would provide an affidavit detailing his com-munications with participants in the auction pro-cess, and the parties would exchange mutual re-leases. Stein did offer an affidavit, but CDI did notaccept it, contending that it was both late and in-complete. The company terminated Stein's sever-ance pay and benefits.Stein brought this action on August 3, 2007. Hisamended complaint, filed on April 29, 2008, assertsclaims of breach of his employment agreement(count I), breach of the settlement agreement (countII), breach of the implied covenant of good faithand fair dealing (count III), violation of the Mas-Page 1Not Reported in N.E.2d, 2009 WL 3857445 (Mass.Super.)

(Cite as: 2009 WL 3857445 (Mass.Super.))

sachusetts Wage Act (count IV), violation of G.L.c. 93A (count V), and promissory estoppel (countVI), along with claims for declaratory judgment asto the binding nature of the two agreements (countVII) and specific performance of both (count VIII).CDI responded to the amended complaint, on May5, 2008, with its answer and counterclaim, which itamended on September 25,2008.FN2In answer toStein's claims, CDI asserts, among other defenses,that Stein's breaches excused it from further per-formance. In counterclaim, CDI alleges that Stein'saffidavit failed to make full disclosure as requiredby the settlement agreement. Further, the counter-claim alleges that Stein interfered with the auctionprocess, and used and disclosed confidential in-formation of CDI in doing so, in violation of hisemployment agreement. In particular, CDI allegesthat Stein assisted a group of management employ-ees of Vital Scientific in their effort to prepare tobid for the company, and that he attempted to dis-suade other potential bidders, particularly an entityknown as Transasia. As a result, CDI alleges, theauction process failed, causing a substantial loss toCDI.FN2.On September 8, 2008, the partiesfiled with the Court a stipulation, in whichthey agreed to dismissal of certain of theclaims previously pled on both sides.

The counterclaim also alleges that Stein consul-ted for competitors of CDI, in particular an entityknown as Epidauros, both during his employmentand within the year after his termination, in viola-tion of his employment agreement, and used CDI'sconfidential information in doing so. Finally, thecounterclaim alleges that Stein, in violation of hisemployment agreement, solicited Richard Driver toleave his employment as CDI's chief scientist.Based on those allegations, the counterclaim assertsclaims of breach of the employment agreement andthe settlement agreement (counts I and II), breachof the implied covenant of good faith and fair deal-ing (count III), breach of fiduciary duty (count IV),tortious interference with advantageous relations(count V), and misappropriation of trade secrets(counts VI and VII).The parties proceeded to conduct discovery, punc-tuated by a series of disputes that were presented tothe Court for resolution. A particularly intense dis-pute arose with respect to CDI's request for produc-tion of Stein's e-mail communications with variouspeople involved in the auction process, with entitiesfor which CDI alleges Stein provided consultingservices, and with Richard Driver. CDI first reques-ted communications relating to the auction processand to consulting with competitors in its first re-quest for production of documents, dated Septem-ber 25, 2007. It submitted a second request, relatingspecifically to Driver, dated September 19, 2008.Stein produced certain documents responsive to thefirst request in November of 2007, but refused cer-tain aspects of the request. In response to a motionto compel from CDI, the Court on on June 11,2008, ordered Stein to produce e-mail communica-tions with five named potential competitors. Steinproduced additional documents in October, 2008,but CDI remained convinced that Stein's productionwas incomplete, both because of the small quantityof materials produced, and because of discrepanciesbetween those materials and corresponding materi-als CDI received through discovery from thirdparties.On November 20, 2008, CDI served and filed an“Emergency Motion to Compel Plaintiff Israel M.Stein, M.D. to Preserve Electronic Records and toProduce His Computer and E-Mail Accounts forForensic Inspection.” CDI contended that docu-ments produced in response to subpoenas to thirdparties revealed that Stein's production of his e-mails was incomplete, and that Stein had withheldincriminating documents and/or tampered with doc-uments he did produce by making undisclosed re-dactions. To remedy that conduct, CDI sought anorder prohibiting Stein from deleting e-mails fromhis personal computer and from his web-based e-mail service, and requiring him to submit his per-sonal computer for forensic examination and to pro-Page 2Not Reported in N.E.2d, 2009 WL 3857445 (Mass.Super.)

(Cite as: 2009 WL 3857445 (Mass.Super.))

duce all e-mails stored on his web-based e-mail ser-vice.The Court heard CDI's motion on November 25,2008. Stein's position at argument was, in sub-stance, that he had met his discovery obligations,that the purported discrepancies between his pro-duction and the documents CDI had received fromthird parties did not establish any misconduct on hispart, and that the relief sought would be an unwar-ranted invasion of his privacy.FN3After lengthyargument and discussion, the Court stated, “I amnot, based on materials that are before me, I am notfinding that Dr. Stein has in any way failed to com-ply with his discovery obligations. I don't think thathas been established here.... I'm not making thefinding that there has been a failure to meet obliga-tions or that there has been any sort of deliberateeffort to conceal or to manipulate.”FN4The Courtnevertheless ordered, “in the interest of moving thisforward,” that Stein refrain from deleting any e-mails from the relevant period of time,FN5andthathe submit his personal computer for forensic exam-ination.FN3.Notably absent from Stein's argumentat that time was any suggestion that his e-mail communications from the relevanttime period would no longer appear on hispersonal computer because of a routinearchiving and deletion process, or for anyother reason.FN4.It bears noting that the Court did notfind that Stein had complied with his ob-ligations-the Court made no finding eitherway on this issue.FN5.The Court commented that “I wouldthink he would have understood that hehad that obligation whether I ordered it ornot,” to which Stein's counsel replied, “I'llrepresent that to the Court.”

Counsel agreed to designate the period of September 1, 2006, through August 31, 2007, as therelevant period, and then reached agreement in sub-stance on a protocol for the examination, using a setof agreed search words, and providing Stein's coun-sel an opportunity to review all documents identi-fied for relevance and privilege before they wouldbecome available to CDI's counsel. After receivingconflicting proposed orders, the Court entered awritten order, dated December 5, 2008, in the formproposed byCDI.FN6Theorder set out the pro-tocol for the forensic examination, and directedStein to turn over his computer by December 16,2008.FN6.Stein preserved his overall objectionto the examination, and also asserted ob- jections to certain aspects of the order theCourt entered.Stein missed the deadline, but did submit his com-puter on December 30, 2008.FN7CDI's forensiccomputer expert, Stephen Swanson, examined thecomputer, and made a startling discovery: it con-tained no e-mails from the relevant period of time.What the computer did contain was evidence indic-ating that, between November 20, 2008, when CDIserved its motion seeking examination of the com-puter, and November 30, 2008, the program “DriveScrubber 3” was installed and run on the computerthree times, on November 23, 24, and 29, and thenremoved from the computer. The effect was to re-move from the computer permanently whateverpertinent materials may have been present there asof the date of the motion. Thereafter, Swanson's ex-amination revealed, a new operating system, Win-dows Vista, was installed on the computer threetimes, on November 30, 2008, again on December24, 2008, and again on December 28,2008.FN8Swanson's examination also revealed the use of re-gistry cleaning software on November 24, 2008,twice on December 28, 2008, and again on Decem-ber 29, 2008; such software tends to, but in this in-stance did not, remove evidence of the use of scrub-bingsoftware.FN9FN7.On December 10, 2008, Stein filed amotion for reconsideration, which thisPage 3Not Reported in N.E.2d, 2009 WL 3857445 (Mass.Super.)