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E.D. Cal.: Employees Taking Trade Secrets Must Cover Forensic Analysis of Their Electronic Devices

This week, Chief Judge Kimberly J. Mueller issued a decision ExamWorks v. Baldini, No. 2:20-CV-00920-KJM-DB, 2020 U.S. Dist. LEXIS 103366 (E.D. Cal. June 11, 2020) granting the Plaintiff's preliminary injunction motion barring the Defendants' continued misappropriation of trade secrets. The Court also ruled that the Defendants should presumptively bear the costs of forensic analysis that the Plaintiff needs to complete its electronic discovery. Judge Mueller will allow the Defendants to file a motion to rebut this presumption.

ExamWorks used KLDiscovery for electronic discovery, and K2 Intelligence for forensic work. K2's analysis determined that shortly before their departure former ExamWorks employees emailed confidential client information to their personal accounts.

The Defendants argued that they could not afford to pay K2's $550 per hour rate, and insisted that they only pay for data collection from their devices; the imaging of those devices; and the removal of ExamWorks' data. The Court has the discretion under Fed. R. Civ. P. 26(c) to protect a party from undue burden or expense in complying with discovery requests, despite the presumption that the responding party should cover its own costs. Judge Mueller cited a Supreme Court decision which found that, "the test in this respect normally should be whether the cost is substantial . . . in relation to ability to pay." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 361-62 (1978).

The Court noted that the facts showed that the Defendants realized that ExamWorks would react to their move to form a new business, and set aside money to invest in their new project. Two defendants were also shown not to be covering their own litigation costs. "Given that defendants have conceded improperly taking ExamWorks' trade secrets and the court has found they did so intentionally, they have not overcome the presumption that as the responding party they must bear the expense of discovery, including the costs of the forensic expert. This determination, however, does not preclude defendants' seeking to overcome the presumption through discovery motion practice before the assigned magistrate judge." ExamWorks, 2020 U.S. Dist. LEXIS 103366, at *44.

The Court's order requires the Defendants to preserve evidence on all electronic devices; make devices with relevant evidence available to the forensic expert; return all trade secrets and confidential information in their possession, custody, or control; and work with the forensic expert to "permanently and forensically remove" this information from these devices. Id. at *47.

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