A New Jersey state trial court judge awarded two medical companies nearly $850,000 in damages for spoliation of evidence and violations of the New Jersey Computer Related Offenses Act (CROA) and Trade Secrets Act (TSA). Essex County Judge Jodi Lee Alper issued the decision after a 20-day trial, finding that the defendants, Dr. Kushal Shukla and his relative Rajiv Pandya, had destroyed crucial electronic evidence in violation of multiple court orders. The award consisted of $845,000 in sanctions for the defendants' failure to preserve evidence as required by the court. The case, initially about trade secret theft, shifted focus to evidence destruction.

The case stemmed from a lawsuit filed by Salerno Medical Associates, a Newark-based healthcare provider, and Axial Healthcare, a revenue cycle management company, against Shukla and Pandya. In the lawsuit, the plaintiffs accused the defendants of stealing sensitive patient and billing data, including Social Security numbers, with the intent of using it to open a competing business in India.

While the plaintiffs initially sought over $1.5 million in damages related to the stolen information, the case ultimately addressed the defendants' destruction of evidence. Judge Alper found that Shukla had deleted WhatsApp records and over 2,000 messages, in violation of preservation orders. Additionally, Shukla used anti-forensic software to conceal these actions. The judge was not swayed by Shukla's explanation, which claimed he was merely deleting personal messages, as implausible, citing the timing and scope of the deletions across multiple platforms.

Despite these findings, the plaintiffs failed to prove that the defendants successfully launched a competing business. Judge Alper noted that while there was strong evidence suggesting the defendants intended to start a rival company, the plaintiffs had not met the burden of proof required to establish actual damages from such competition. As a result, the court did not grant the full award the plaintiffs had requested, though it awarded the substantial sanctions for the spoliation of evidence. This case represents a cautionary tale for litigants to understand and abide by discovery obligations and ESI protocols and engage competent and experienced counsel.

Reach out to Caitlin Oyler, Counsel at CODISCOVR. Caitlin has over a decade of experience providing high-level advice to clients regarding all phases of the eDiscovery life cycle and managing high-profile document collections, reviews, and productions.