United States District Court, S.D. New York
OPINION & ORDER
S. ROMAN, UNITED STATES DISTRICT JUDGE
International Business Machines ("IBM") brings this
action against Defendant Nagaseelan Naganayagam
("Naganayagam") for breach of contract, alleging
that it is due $112, 260.81 for the value of rescinded stock
options and equity awards previously given to Defendant-a
former employee of IBM.
before the Court is Plaintiffs motion for summary judgment
and Defendant's cross-motion pursuant to Rule 37 of the
Federal Rules of Civil Procedure for spoliation sanctions.
For the reasons that follow, Plaintiffs' motion is
GRANTED and Defendants' motion is DENIED.
following undisputed facts are taken from the parties'
respective Rule 56.1 statements,  affidavits, and exhibits
submitted in support of their motions. Disputed facts along
with the allegations made in the parties' operative
pleadings will be discussed as relevant.
an information technology corporation organized under the
laws of the State of New York, with its headquarters and
principal place of business in Armonk, New York.
(Defendant's Local Civil Rule 56.1 Counterstatement of
Material Facts ("Def.'s 56.1 Reply"), ¶ 1,
ECF No. 62.) Defendant is a former employee of IBM who served
as a Vice President in the Global Business Services Division
of IBM Australia. (Id. ¶ 3.)
the course of his employment at IBM, Defendant received long
term incentive and equity awards under the terms and
conditions of IBM's Long Term Performance Plan (the
"Plan") and Equity Award Agreements dated June 8,
2009, June 8, 2010, June 8, 2011, and June 8, 2012
(collectively the "EAAs"). (Id.
¶¶ 5, 10.) Under the EAAs, Defendant was granted
Restricted Stock Units ("RSUs"), which were
scheduled to vest on later dates in accordance with his
continued employment with IBM. (Id. ¶ 11.) Both
the Plan and the various EAAs include terms for the possible
cancellation and rescission of the awards granted to
Defendant. (Id. ¶¶ 8, 14, 16.) Namely,
Section 13(a) of the Plan states, in pertinent part:
"[IBM] may cancel, rescind, suspend, withhold or
otherwise limit or restrict any unexpired, unpaid, or
deferred Awards at any time if the Participant. . . engages
in any 'Detrimental Activity.' For the purposes of
this Section 13, 'Detrimental Activity' shall
include: (i) the rendering of services for any organization
or engaging directly or indirectly in any business which is
or becomes competitive with the Company, or which
organization or business, or the rendering of services to
such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the
(Decl. of Barbara M. Maisto in Supp. for PL's Mot. for
Summ. J. ("Maisto Decl."), Ex. G, 1999 Long-Term
Performance Plan, at 9, ECF No. 60.)
13(b) of the Performance Plan further provides that if a
Participant "fails to comply with the provisions of
[Section 13(a)] prior to, or during the Rescission Period,
then any exercise, payment or delivery may be rescinded
within two years after such exercise, payment or
delivery." (Mat 10.)
the various EAAs executed by Defendant during his employment
reiterate that "IBM may cancel, modify, rescind,
suspend, withhold or otherwise limit or restrict [the]
Award[s] in accordance with the terms of the Plan, including,
without limitation, canceling or rescinding this Award if
[the Participant] render[s] services for a competitor piior
to, or during the Rescission Period." (Def.'s 56.1
Reply ¶ 13.) Under the terms of the EAAs, the scope of
the Rescission Period is defined as twelve months.
of 2013, the RSUs awarded to Defendant in June of 2009, 2010,
2011, and 2012 vested and were released into Defendant's
Morgan Stanley Smith Barney account. (Id.
¶¶ 17-20.) As a result, Defendant realized gains
totaling $112, 260.81. (Id. ¶ 21.)
Defendant voluntarily resigned from IBM on March 31, 2014.
(Id. ¶ 23.) On April 7, 2014-roughly one week
after his resignation from IBM-Defendant became employed by
Computer Science Corporation ("CSC") as Vice
President, General Manager, and Managing Director for its
Australia/New Zealand Region. (Id. ¶ 24.) CSC
is an information technology corporation that provides
services including application management, infrastructure,
business consulting, technology and systems integration and
enterprise resource planning to clients in the banking,
healthcare, and insurance industries. (Id. ¶
connection with his employment for CSC, Defendant accepted
the written terms of an offer letter dated February 27, 2014
(the "Offer Letter"). (Id. ¶ 33.)
This Offer Letter included a non-compete provision, under
which Defendant agreed that he "would not compete with
CSC by joining IBM." (Id. ¶ 37, Maisto
Decl., Ex. O, Offer Letter, at 2.) Further, the Offer Letter
contained an indemnification provision, stating that
"CSC will indemnify [Defendant] for any loss in IBM
equity value resulting from violation of [his]
non-competition agreement with IBM." (Id.
initiated this action by filing the Complaint on October 09,
2015, seeking to enforce the terms of the contract and
rescind the aforementioned pecuniary gains awarded to
Defendant. Specifically, Plaintiff argues that CSC and IBM
are competitors, making Defendant's employment with CSC a
"detrimental activity" under the terms of the Plan.
(Compl. ¶¶ 36-37, ECFNo. 1.)
February 24, 2016, this Court issued a discovery plan and
referred this case to Magistrate Judge Lisa Margaret Smith.
(Civil Case Discovery Plan and Scheduling Order, ECF No. 25;
Order Referring Case to Magistrate Judge, ECF No. 24.)
Shortly thereafter, Defendant served his first set of
interrogatories and requests for production of documents,
which included "requests for all documents relating to
Defendant's employment with IBM, Defendant's
departure from IBM, and documents relating to Defendant's
defenses." IBM v. Naganayagam, No.
15-CV-7991(NSR)(LMS), slip op. at 2 (S.D.N.Y.Dec. 09, 2016).
IBM produced certain documents, but otherwise broadly
retorted that the document requests were "vague,
ambiguous, unduly burdensome and overbroad." Id
In June of 2016, Defendant was deposed by Plaintiffs counsel.
(Decl. of Justin V. Sumner in Opp. to PL's Mot. for Summ.
J. ("Sumner Decl."), Ex. C, Nagaseelan Dep., June
29, 2016, ECF No. 63.) During his deposition, Defendant
described working on "strategic business paper[s]"
in which IBM identified their marketplace competitors during
his employ at IBM. (Id. at 101:4-25.) Defendant
claimed these strategic plans omitted any mention of CSC as
an IBM competitor in Australia and New Zealand. Id.
While Defendant admitted he did not possess these documents,
he testified to their existence and asserted that they are in
IBM's possession. (Id.)
of 2016, Defendant's counsel deposed IBM employee Lisa
Caldwell. (Sumner Decl., Ex. H, Lisa Caldwell Dep., July 11,
2016.) During her deposition, Caldwell testified that while
she was "sure" she had sent and received emails
regarding Defendant's departure from IBM, no
"hold" was ever placed on her emails or other
documents. (Id. at 27:8-28:22.) Similarly, during a
deposition held on July 26, 2016, another IBM employee-Sudhir
Mattoo, the Human Resources Leader in Defendant's
division at IBM-testified that he was never asked to retain
emails he sent or received about Defendant's departure
from IBM. (Sumner Deck, Ex. F, Sudhir Mattoo Dep. 43:3-7,
July 26, 2016.)
August 4, 2016, Plaintiff submitted a letter to this Court
seeking leave to file a motion for summary judgment. (ECF No.
33.) The very next day, Defendant's counsel indicated
their intention to proceed with a motion for spoliation
sanctions relating to IBM's alleged failure to preserve
e-mails relevant to the present litigation. (ECF No. 34.)
August 29, 2016, Defendant requested that Plaintiff produce
all documents that evidence, relate, or refer to: "(1)
IBM's strategic business plans for the Australia and New
Zealand markets between January 1, 2013 and June 1, 2015, (2)
companies IBM identified as competitors for the Australia and
New Zealand markets between January 1, 2013 and June 1, 2015,
(3) [Defendant's] defense that CSC is not a competitor of
IBM for the purposes of IBM's Long Term Performance
Plan." Naganayagam, 15-CV-7991(NSR)(LMS), slip
op. at 3 (internal quotation marks omitted). IBM objected to
the request for production, arguing that Defendant's
request was untimely, disproportionate to the needs of the
case, and sought the production of privileged, highly
confidential and proprietary material. Id.
October 31, 2016, Defendant filed amotion to compel
production of "IBM's strategic plans for Australia
and New Zealand, e-mails related to Defendant's departure
from IBM that were referenced in Lisa Caldwell's
deposition, a list of Defendant's accounts, and
Defendant's own e-mails from the course of his employment
at IBM." Id. at 5. Plaintiff filed an
opposition to the motion to compel reiterating its
aforementioned objections and arguing that based on the
testimony of the deponents and an apparent concession of
defense counsel during a prior conference, it was settled
that IBM and CSC are competitors-rendering the requested
material irrelevant. Id. at 5-6.
Smith issued an Opinion and Order on December 9, 2016,
denying Defendant's request to compel the production of
both his own emails and client account information as well as
Lisa Caldwell's emails, finding that Defendant had failed
to establish the relevance of these materials. However, Judge
Smith ruled that Plaintiff was ...