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Johnston v. Vincent

Court of Appeals of Louisiana, Third Circuit

December 13, 2017

VESTA HALAY JOHNSTON, ET AL.
v.
SUSAN HALAY VINCENT, ET AL.

         APPLICATION FOR SUPERVISORY WRIT OF REVIEW FROM A JUDGMENT OF THE FOURTEENTH JUDICIAL DISTRICT COURT PARISH OF CALCASIEU, NO. 2015-4153 HONORABLE G. MICHAEL CANADAY, DISTRICT JUDGE

          Rudie Ray Soileau, Jr. Hunter William Lundy Lundy, Lundy, Soileau & South COUNSEL FOR: Defendants/Respondents - Susan Halay Vincent and Martin Bryan Vincent.

          John Michael Veron J. Rock Palermo, III D'Ann R. Penner Veron, Bice, Palermo & Wilson, LLC COUNSEL FOR: Plaintiffs/Applicants - Vesta Halay Johnston, Lake Charles Rubber and Gasket Company, LLC.

          James David Cain, Jr. Thomas Patrick LeBlanc Loftin, Cain & LeBlanc, LLC COUNSEL FOR: Defendants/Respondents - Gulf Coast Rubber & Gasket and Moby Goodwin.

          Court composed of Ulysses Gene Thibodeaux, Chief Judge, Sylvia R. Cooks, and Candyce G. Perret, Judges.

          ULYSSES GENE THIBODEAUX CHIEF JUDGE.

         Vesta Halay Johnston and Lake Charles Rubber and Gasket Co., L.L.C. (LCR&G) filed suit against Susan Halay Vincent, Martin Bryan Vincent, Moby Goodwin, and Gulf Coast Rubber and Gasket, L.L.C. (GCR&G) for defamation and unfair trade practices. Shortly thereafter, the parties entered into a consent judgment to preserve all of the companies' electronic and digital data as well as the parties' smart phones (Preservation Order). Due to the defendants' unsatisfactory responses to discovery, the plaintiffs' filed a motion to comply which the trial court granted (Production Order). The plaintiffs then filed their motion for sanctions against defendants, alleging violations of the Production Order. In their supplemental memorandum, the plaintiffs further alleged that the defendants had violated the Preservation Order by failing to preserve an iPhone 4 that they claimed belonged to Mr. Vincent and was used by him at times relevant to their suit. Taking the matter under advisement, the trial court subsequently denied the motion for sanctions. After the trial court then denied their motion for reconsideration, the plaintiffs sought writs from this court. Finding no manifest error in the trial court's factual conclusion that the plaintiffs failed to prove that the defendants violated either discovery order, we deny the writ.

         I. ISSUES

         The plaintiffs ask this court to decide:

         (1) whether the trial court abused its discretion when it denied sanctions under La.Code Civ.P. art. 1471;

         (2) whether the trial court erred when it incorrectly interpreted the Preservation Order and the Production Order; and

         (3) whether the trial court correctly applied the four-factor test for sanctions under La.Code Civ.P. art. 1471.

         II.

         FACTS AND PROCEDURAL HISTORY

         This family dispute involves LCR&G, a private, family-held business started in 1957 by Michael Halay, the father of Mrs. Vincent, Mrs. Johnston, and Kathryn Halay Heinen. In 1991, Mr. Halay promoted his son-in-law, Mr. Vincent, to general manager of LCR&G and subsequently named him vice president.

         Mr. Halay died in 2004, and his three daughters inherited his estate, including LCR&G, in equal one-third shares. LCR&G was reorganized on June 2, 2005, and the three sisters became managing members. In November 2013, Mrs. Vincent filed a shareholder derivative suit against Mrs. Johnston and Mrs. Heinen, claiming that they were interfering with Mr. Vincent's management of the company. Mr. Vincent was later terminated from LCR&G on September 25, 2014. That same month, Mrs. Vincent filed a petition to dissolve LCR&G, and the company was put in receivership. The receivership was shortly dissolved, and the trial court ordered formal mediation, which took place in October 2014. On October 14, 2014, Mrs. Vincent sold her interest in LCR&G to her sisters for $8, 615, 000. In early November 2014, the Vincents and Mr. Goodwin opened a new, competing business-GCR&G-and allegedly hired eleven key employees from LCR&G.

         On October 14, 2015, Mrs. Johnston and LCR&G sued the defendants, alleging that GCR&G and its principals had engaged in unfair trade practices, breached their contractual and fiduciary duties, and defamed the plaintiffs by, inter alia, taking the plaintiffs' proprietary information, soliciting customers, as well as employees, while still employed by the plaintiffs, and making false public statements about the plaintiffs' financial condition. In part, the plaintiffs sought an expedited contradictory hearing to consider the issuance of an order to preserve and quarantine electronic devices until their computer forensic expert was allowed unimpeded access to copy all data and metadata. The defendants, however, disagreed with the quarantine of their electronic devices. Eventually, the parties agreed upon the Preservation Order at issue herein, and the trial court signed a consent judgment on November 18, 2015, consistent with the parties' agreement.

         The Preservation Order required both companies to create and preserve a digital image of all data in an "accessible, usable form":

IT IS ORDERED, ADJUDGED AND DECREED that the parties have a duty to preserve documents, information, data and other electronic or digital communications or compilations of data which are or may be relevant to issues in this litigation. This includes any and all records, notes, memos, letters, photographs, logs, e-mails, ledgers (whether on paper or kept electronically or digitally) pertaining in any way to the allegations of this lawsuit. This includes but certainly is not limited to, any and all business records pertaining the operations of [LCR&G] before October 14, 2015 and to the operations of [GCR&G] from October 15, 2014.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that all parties agree to cease and desist from any activities or acts the result of which would inadvertently or intentionally result in the deletion or destruction of materials which may be the subject of a discovery request or may be potentially relevant.

         It also required the parties to preserve all records and content pertinent to their claims and defenses on their iPhones:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the parties agree to take appropriate measures to preserve and prevent from deletion, destruction or alteration any and all records and content pertinent to plaintiffs' claims or defendants' defenses in or on: (1) any and all work electronic mail account(s) to which the parties have access; (2) any and all personal electronic mail account(s) to which Vesta Halay Johnston, Susan Vincent, Martin Bryan Vincent, and Moby Goodwin have access; ... (4) any and all cellular telephones, smart phones, or iPhones used for work by Vesta Halay Johnston, Susan Vincent, Martin Bryan Vincent, and Moby Goodwin; (5) any and all personal cellular telephones, smart phones, or iPhones of Vesta Halay Johnston, Susan Vincent, Martin Bryan Vincent, and Moby Goodwin[.]

GCR&G subsequently retained Kiersted Systems (Kiersted) in Houston, Texas, to create and store its digital image database.

         On December 10, 2015, plaintiffs filed their first set of requests for production of documents. Relevant to the issues herein, the plaintiffs sought the production of "all correspondence, emails, and texts messages between any and all of the defendants and any and all employees of LCR&G between August 2014 to December 2014."[1] In response, defense counsel sent a correspondence to the plaintiffs' counsel, dated January 27, 2016, requesting that the plaintiffs provide a list of former and current employees, as well as any other search terms that the plaintiffs would like the defendants to use to search the image database. The defendants referred to that correspondence in their response to the plaintiffs' requests. On March 3, 2016, the plaintiffs filed their first motion to compel, arguing that they "should not have to produce a list of employees. Mr. Vincent has the experience and the background to generate a list of his own."

         After hearing the matter, the trial court granted the motion and signed the Production Order on April 6, 2016. Therein, the trial court ordered "the defendants ... to produce all correspondence, emails, and text messages between any and all of the defendants and any and all employees of LCR&G . . . between August 2014 and October 2014 without LCR&G producing a list of employees." But, "to the extent that the plaintiffs want GCR&G to produce correspondence, emails, and text messages between any and all of the defendants and any and all employees of LCR&G between November and December 2014, the plaintiffs must first supply GCR&G with a list of said employees."

         The plaintiffs then filed their motion for sanctions on June 30, 2016, arguing that "the defendants have refused to comply with this Court's judgment." In their supporting memorandum, the plaintiffs complained (emphasis in original): "To date, not one single email or text message has been produced by the defendants in this litigation." The matter was set for hearing on September 12, 2016.

         On August 31, 2016, the plaintiffs conducted the La.Code Civ.P. art. 1442 deposition of GCR&G for which Mr. Vincent appeared as representative (the 1442 deposition). During this deposition, Mr. Vincent was specifically asked about the preservation of an iPhone 4 that he allegedly purchased in February 2013. He explained that he "probably had a 4[, ]" but he did not remember when he bought it and did not know what had become of it. It was an iPhone 5 that he used in the time period relevant to the motion to compel-August 2014 through December 2014-and had been using since October 2013. That phone was backed up on his home computer, which was imaged by Kiersted, when he upgraded to an iPhone 6 in March or April 2015. Prior to this deposition, the ...


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