Triton Construction Co, Inc. Triton Construction Co, Inc. v.v.

Eastern Shore Electrical Eastern Shore Electrical Services, Inc. Eastern Shore Services, Inc. Eastern Shore Services, LLC, George Elliot, Services, LLC, George Elliot,

Teresa Elliot, Tom Kirk and Kirk’s Teresa Elliot, Tom Kirk and Kirk’s Electrical ServicesElectrical Services

Court of Chancery of DelawareCourt of Chancery of DelawareDecided May 18, 2009Decided May 18, 2009

Decision Authored by Vice Chancellor ParsonsDecision Authored by Vice Chancellor Parsons

PartiesParties► Plaintiff: Triton Construction – Electrical Plaintiff: Triton Construction – Electrical

subcontractor that bids against other subcontractor that bids against other contractors for jobscontractors for jobs

► Defendants: Defendants: Eastern Shore Electrical Services, Eastern Shore Eastern Shore Electrical Services, Eastern Shore

Services, LLC – Competing electrical contractorServices, LLC – Competing electrical contractor George and Teresa Elliot (he is president of both George and Teresa Elliot (he is president of both

Eastern, she is majority owner of both Eastern)Eastern, she is majority owner of both Eastern) Tom Kirk, Kirk’s Electrical Services - Hired by Triton Tom Kirk, Kirk’s Electrical Services - Hired by Triton

as Estimator and Project Manager, began working as Estimator and Project Manager, began working for Eastern part-time doing the same job.for Eastern part-time doing the same job.

FactsFactsTom Kirk, d/b/a Kirk’s Electrical Services – Main Tom Kirk, d/b/a Kirk’s Electrical Services – Main

CharacterCharacter► Hired by Triton in 2004 as an Estimator and Project Hired by Triton in 2004 as an Estimator and Project

ManagerManager► Eastern tried to hire Kirk away from Triton in 2005, Kirk Eastern tried to hire Kirk away from Triton in 2005, Kirk

rejected the offer but started working part-time as an rejected the offer but started working part-time as an estimator. Triton was never informed by Eastern or Kirk. estimator. Triton was never informed by Eastern or Kirk. Kirk and George Elliot testified that they agreed Kirk would Kirk and George Elliot testified that they agreed Kirk would not give estimates on projects Triton was bidding on…but not give estimates on projects Triton was bidding on…but he did.he did.

► From 2005 to 2007, Kirk and Elliot met 2-3 times per month From 2005 to 2007, Kirk and Elliot met 2-3 times per month in parking lots, never at either’s office, and talked on the in parking lots, never at either’s office, and talked on the phone up to 10 times/day. Elliot never called Kirk at his phone up to 10 times/day. Elliot never called Kirk at his office at Triton, only on his cell. Both testified office at Triton, only on his cell. Both testified communications were more personal than business. communications were more personal than business.

► In total, over 22 months, Kirk bid on 195 bids for Eastern In total, over 22 months, Kirk bid on 195 bids for Eastern while working for Triton, and won 59 jobs for Eastern, with while working for Triton, and won 59 jobs for Eastern, with those jobs accounting for $3 million in gross profit.those jobs accounting for $3 million in gross profit.

Facts - continuedFacts - continued

► Of the 195 bids, on 13 of those Kirk prepared bids Of the 195 bids, on 13 of those Kirk prepared bids for both Triton and Eastern, and of those Eastern for both Triton and Eastern, and of those Eastern won 2, Triton won 1won 2, Triton won 1

► Kirk eventually resigned from Triton and was hired Kirk eventually resigned from Triton and was hired by Eastern, making $92k/yr, while he had made by Eastern, making $92k/yr, while he had made $68k/yr at Triton.$68k/yr at Triton.

► Triton alleges that Kirk breached duties of due care, Triton alleges that Kirk breached duties of due care, loyalty and disclosure, and that Eastern aided and loyalty and disclosure, and that Eastern aided and abetted Kirk’s breaches, and that Eastern and Kirk abetted Kirk’s breaches, and that Eastern and Kirk engaged in a civil conspiracy to harm Triton’s engaged in a civil conspiracy to harm Triton’s business, and that Eastern engaged in unfair business, and that Eastern engaged in unfair competition, and was unjustly enriched, among competition, and was unjustly enriched, among other issues.other issues.

What ESI is at Issue?What ESI is at Issue?

► 2 months before left Triton, Triton employees 2 months before left Triton, Triton employees had tech support do a ghost copy of Kirk’s had tech support do a ghost copy of Kirk’s computer hard drive in his Triton office computer hard drive in his Triton office because they became suspicious. because they became suspicious.

► After Kirk left, a general contractor contacted After Kirk left, a general contractor contacted Triton and told Triton that it and Eastern had Triton and told Triton that it and Eastern had submitted identical bids. Triton then looked submitted identical bids. Triton then looked on the computer Kirk had used when on the computer Kirk had used when employed with Triton, but could find barely employed with Triton, but could find barely any files.any files.

► The ‘ghost copy’ of the hard drive was The ‘ghost copy’ of the hard drive was restored and bid information was recovered restored and bid information was recovered for bids Kirk did for both Triton and Easternfor bids Kirk did for both Triton and Eastern

ESI, continuedESI, continued

► A computer forensics expert hired by Triton A computer forensics expert hired by Triton found that Kirk had installed a ‘wiping program’ found that Kirk had installed a ‘wiping program’ on his office computer that made the files on his office computer that made the files irretrievable.irretrievable. The wiping program allowed specific files to be The wiping program allowed specific files to be

deleteddeleted

► Kirk claimed he never used a wiping programKirk claimed he never used a wiping program► Kirk also backed up his work files for Eastern on Kirk also backed up his work files for Eastern on

his home computer and a flash drive.his home computer and a flash drive. He claimed he could not produce them, and never He claimed he could not produce them, and never

did.did.

What E-Discovery Rules are What E-Discovery Rules are effected?effected?

►Duty to Preserve EvidenceDuty to Preserve Evidence Delaware law imposes an affirmative duty “to Delaware law imposes an affirmative duty “to

preserve evidence [which] attaches upon the preserve evidence [which] attaches upon the discovery of facts and circumstances that would discovery of facts and circumstances that would lead to a conclusion that litigation is imminent or lead to a conclusion that litigation is imminent or should otherwise be expectedshould otherwise be expected. . Sears, Roebuck & Sears, Roebuck & Co. v. Midcap, 893 A.2d 542, 550 (Del.2006).Co. v. Midcap, 893 A.2d 542, 550 (Del.2006).

What E-Discovery Rules are What E-Discovery Rules are effected?effected?

► Spoliation of Evidence Spoliation of Evidence FRCP 37 provides for sanctions where the FRCP 37 provides for sanctions where the

producing party fails to provide e-discovery producing party fails to provide e-discovery outside of the safe harbor (37f). In addition to outside of the safe harbor (37f). In addition to sanctions, spoliation of ESI may result not only in sanctions, spoliation of ESI may result not only in an an adverse inferenceadverse inference, an award of attorneys' , an award of attorneys' fees, and possibly an adverse judgment. fees, and possibly an adverse judgment.

In order for an adverse inference to be drawn, Delaware In order for an adverse inference to be drawn, Delaware requires a determination “that the party acted requires a determination “that the party acted intentionally or recklessly in failing to preserve the intentionally or recklessly in failing to preserve the evidenceevidence..

Analysis of Analysis of TritonTriton from E- from E-discovery perspectivediscovery perspective

► Applying the Rules:Applying the Rules: Vice Chancellor did not believe that Elliot and Vice Chancellor did not believe that Elliot and

Kirk’s communications were not primarily Kirk’s communications were not primarily business relatedbusiness related

Vice Chancellor did not find Kirk’s testimony Vice Chancellor did not find Kirk’s testimony credible that he did not install a wiping program credible that he did not install a wiping program on his work computer at Tritonon his work computer at Triton

Vice Chancellor also did not find Kirk’s claim Vice Chancellor also did not find Kirk’s claim credible that he could not produce his home credible that he could not produce his home computer or flash drive because he no longer computer or flash drive because he no longer owned themowned them

Analysis of Analysis of TritonTriton from E- from E-discovery perspectivediscovery perspective

► Applying the RulesApplying the Rules The court found that Kirk either intentionally or The court found that Kirk either intentionally or

recklessly destroyed or failed to preserve recklessly destroyed or failed to preserve evidence relating to this litigation at a time when evidence relating to this litigation at a time when he knew such litigation was imminent or he knew such litigation was imminent or otherwise to be expected. otherwise to be expected.

Thus, the court found an Thus, the court found an adverse inference to be adverse inference to be appropriateappropriate based on the inference that Kirk based on the inference that Kirk either destroyed or discarded his thumb drive either destroyed or discarded his thumb drive and home computer or recklessly failed to fulfill and home computer or recklessly failed to fulfill his duty to preserve that potential evidence. his duty to preserve that potential evidence.

OutcomeOutcome

►Triton wonTriton won Defendants are liable to the plaintiff for Defendants are liable to the plaintiff for

breach of certain fiduciary duties, tortious breach of certain fiduciary duties, tortious interference with prospective economic interference with prospective economic advantage as to two projects, and aiding advantage as to two projects, and aiding and abetting such wrongful conduct. and abetting such wrongful conduct.

Monetary damages in the amount of Monetary damages in the amount of $167,644 $167,644

QuestionsQuestions

►(1) Is the adverse inference appropriate?(1) Is the adverse inference appropriate?►(2) Should Tom Kirk have been criminally (2) Should Tom Kirk have been criminally

charged with Theft for wiping his Triton charged with Theft for wiping his Triton office computer’s hard drive?office computer’s hard drive? DE Theft Statute 11 § 841 , in relevant part:DE Theft Statute 11 § 841 , in relevant part:

►(a) A person is guilty of theft when the person (a) A person is guilty of theft when the person takes, exercises control over or obtains property of takes, exercises control over or obtains property of another person intending to deprive that person of another person intending to deprive that person of it or appropriate it. it or appropriate it.