TRG Closing Brief On TRG V Keating

Case 3:15-cv-00057-L-AGS Document 404-1 Filed 04/25/19 PageID.
32532 Page 1 of 53
1 Gerald A. Klein, Esq. (Bar No. 107727)

[email protected]
2 Michael S. LeBoff, Esq. (Bar No. 204612)
[email protected]
3 KLEIN & WILSON
A Partnership of Professional Corporations
4 4770 Von Karman Avenue
Newport Beach, California 92660
5 (949) 631-3300; Facsimile (949) 631-3703
6 Attorneys for Defendant JOHN A. JASTREMSKI and
Defendant and Counterclaimant THE RETIREMENT GROUP, LLC
7
8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 JEREMY L. KEATING; RICHARD P. CASE NO. 3:15-cv-00057-L-AGS
12 GIGLIOTTI; and ALEXANDER J.
MELE, DEFENDANT AND
13 COUNTERCLAIMANT THE
14 RETIREMENT GROUP, LLC AND
Plaintiffs, DEFENDANT JOHN A.
15 JASTREMSKI’S CLOSING BRIEF RE
16 v. MOTION FOR TERMINATING
SANCTIONS
17 JOHN A. JASTREMSKI; THE
18 RETIREMENT GROUP, LLC; and Date: March 4-6, April 15-17, 2019
DOES 1-5, Time: 9:00 a.m.
19 Place: Judicate West – San Diego
20 402 West Broadway, Suite 2400
Defendants. San Diego, CA 92101
21
22
AND RELATED CROSS-ACTIONS.
23
24
25 ///
26 ///
27 ///
28 ///
391149_1 1
Case 3:15-cv-00057-L-AGS Document 404-1 Filed 04/25/19 PageID.32533 Page 2 of 53
1 TABLE OF CONTENTS
Page No.
2
3 1. Introduction ....................................................................................................... 6
4 2. TRG Proved It Had Protectable Trade Secrets Pursuant to the
California Uniform Trade Secrets Act. ............................................................. 8
5 A. TRG Invested Millions of Dollars Over Decades Building
a Valuable Salesforce Database That Was The Envy of
6 The Securities Industry. .......................................................................... 8
7 B. TRG Implements Rigorous Security Measures to Protect
Salesforce. ............................................................................................. 12
8 3. As Judge Lorenz Found, TRG’s Database is a Valuable Trade Secret
Even if Some Basic Customer Information Also Resides on
9 The FSC Database. .......................................................................................... 13
10 A. TRG’s Database Constitutes a Trade Secret. ........................................ 14
B. TRG Goes to Great Lengths to Protect its Trade Secrets. .................... 16
11
C. That TRG Provided FSC With Limited Information From
12 TRG’s Database to Comply With Regulatory Requirements
Does Not Mean The Database Is No Longer a Trade Secret. ............... 16
13 D. The Elaborate Conspiracy to Steal TRG’s Database Confirms
The Immense Value of Salesforce. ....................................................... 18
14
4. Dalton Masterminds a Conspiracy to Steal Salesforce, Leave No
15 Evidence Behind, and Destroy TRG by Instigating False
Regulatory Claims to Cripple TRG’s Litigation Efforts. ................................ 19
16 5. Three “Whistleblowers” in The Conspiracy Confess to Jastremski
And Provide Critical Evidence None of the conspirators would
17 have produced. ................................................................................................. 24
18 6. The “Broker Protocol” is An Irrelevant Red Herring Because TRG
is Not a Signatory to The broker protocol Contract, and the
19 Conspirators Stole Their Information From TRG, Not FSC. ......................... 28
7. The FSC Privacy Policy Protects Private Customer Information and
20 Does Not Give Brokers a License to Steal TRG’s Trade Secrets. .................. 31
21 8. Courts Have Authority to Grant Terminating Sanctions for
Willful Spoliation of Evidence, Even Without Proof of Prejudice.
22 But Once TRG Proves a Willful Spoliation of Evidence, The
Burden is on The Ardent Group to Show No Prejudice To
23 Avoid Termination. ......................................................................................... 32
9. The Conspirators’ Purposeful Destruction of Evidence Requires
24 The Special Master To Issue Terminating Sanctions. ..................................... 37
25 A. Dalton And Silvers Destroyed Important Evidence And
Attempted To Undermine These Proceedings By
26 Repeatedly Testifying Falsely. .............................................................. 40
B. Dismissal is The Appropriate Remedy For the
27 Conspirators’ Willful Concealment and Destruction of
Critical Evidence That They Knew Might Fall Into The
28 Hands of TRG. ...................................................................................... 45
391149_1 2
1 C. As Each of The Conspirators Was Engaged In A

Common Conspiracy to Steal Trade Secrets and Destroy
2 Evidence of the Theft to Cover Up the Theft, Each Is
Responsible For The Acts of The Others And
3 Terminating Sanctions Should Be Issued Against Each
Party. ..................................................................................................... 49
4 10. Another Factor the Special Master Must Consider is The Dalton
5 Group’s Long History of Discovery Abuse. ................................................... 51
11. Despite an Order From the Special Master, An Order From The
6 Court, And Being REminded That Sanctions Remain Unpaid,
Dalton Has Done Nothing to Pay the Balance of Sanctions Owed. ............... 51
7 12. Conclusion ....................................................................................................... 52
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
391149_1 3
1 TABLE OF AUTHORITIES
2 Page No.
3 Federal Cases
4 Adriana Intern. Corp. v. Thoeren, 913 F. 2d 1406 (9th. Cir. 1990) .............................. 50
5 Alexander v. Nat’l Farmers Org., 687 F. 2d 1173 (8th Cir. 1982) ............................... 35
6 Anderson v. AirWest, Inc., 542 F.2d 522 (9th Cir. 1976) .............................................. 36
7 Anheuser-Busch, Inc. v. Natural Beverage Distributors,

69 F. 3d 337 (9th Cir. 1995) .............................................................................. passim
8
Apple Inc. v. Samsung Electronics Co., Ltd.,
9 881 F. Supp. 2d 1132 (N.D. Cal. 2012)............................................................. passim
10 Chambers v. NASCO, Inc., 501 U.S. 32 (1991) ............................................................ 36
11 E.I. du Pont de Nemours & Co. v. Christopher, 431 F. 2d 1012
(5th Cir. 1970) .......................................................................................................... 17
12
Fin. Programs, Inc. v. Falcon Fin. Servs., Inc.,
13 371 F. Supp. 770 (D. Or. 1974) ................................................................................ 17
14 Global NAPs, Inc. v. Verizon New England Inc.,
603 F. 3d 71 (1st Cir. 2010).................................................................... 32, 33, 48, 49
15
Hynix Semiconductor Inc. v. Rambus, Inc.,
16
591 F. Supp. 2d 1038 (N.D. Cal. 2006).............................................................. 40, 45
17 Jerry Beeman & Pharmacy Servs., Inc. v. Caremark, Inc.,
18 322 F. Supp. 3d 1027 (C.D. Cal. Jan. 2018) ...................................................... 36, 37
19 In re Josephson, 218 F. 2d 174 (1st Cir. 1954) ............................................................. 36
20 JustMed, Inc. v. Byce, 600 F. 3d 1118 (9th Cir. 2010) .................................................. 17

Leon v. IDX Systems Corp., 464 F. 3d 951 (9th Cir. 2006).................................... passim
21
Malone v. United States Postal Service, 833 F. 2d 128 (9th Cir. 1987) ....................... 35
22
In re Napster, Inc. Copyright Litigation, 462 F. Supp. 2d at 1068 ................... 33, 36, 45
23
Nursing Home Pension Fund v. Oracle Corp.,
24 254 F.R.D. 559 (N.D. Cal. 2008) ............................................................................. 33
25 Pinkerton v. United States, 328 U.S. 640 (1946) .......................................................... 50
26 Pyro Spectaculars North, Inc. v. Souza,
861 F. Supp. 2d 1079 (E.D. Cal. 2012) .................................................................... 16
27
Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc.,
28 923 F. Supp. 1231 (N.D. Cal. 1995) ......................................................................... 17
391149_1 4
1 TeleVideo Systems, Inc. v. Heidenthal,

2 826 F. 2d 915 (9th Cir. 1987) ............................................................................. 32, 33
3 United States v. Kitsap Physicians Serv.,

314 F. 3d 995 (9th Cir. 2002) ............................................................................. 34, 37
4
Valley Engineers Inc. v. Electric Engineering Co.,
5 158 F. 3d 1051 (9th Cir. 1998) ........................................................................... 32, 33
6 Wanderer v. Johnston, 910 F. 2d 652 (9th Cir. 1990) ................................................... 36
7 Wm. T. Thompson Co. v. General Nutrition Corp.,
593 F. Supp. 1443 (C.D. Cal. 1984) ......................................................................... 34
8
Wyle v. R.J. Reynolds Industries, Inc., 709 F. 2d 585 (9th Cir. 1983) .......................... 35
9
Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003) .................. 33, 34, 37
10
11 California Cases
12 Am. Credit Indem. Co. v. Sacks, 213 Cal. App. 3d 622 (1989) ............................... 15, 16
13 Courtesy Temp. Serv., Inc. v. Camacho, 222 Cal. App. 3d 1278 (1990) ................ 14, 15
14 Morlife, Inc. v. Perry, 56 Cal. App. 4th 1514 (1997) ........................................ 14, 15, 16
15 ReadyLink Healthcare v. Cotton, 126 Cal. App. 4th 1006 (2005) ................................ 14
16
17 Federal Statutes
Fed. R. Civ. P. 37 ..................................................................................................... 36, 50
18
19
California Statutes
20
California Civil Code §§ 3426-3426.11 ........................................................................ 13
21
California Civil Code § 3426.1(d) ................................................................................. 14
22 California Civil Code § 3426.1(d)(2) ............................................................................ 17
23 California Financial Code §§ 4050-4060 ............................................................... 29, 31
24
25
26
27
28
391149_1 5
1 Defendant and counterclaimant The Retirement Group, LLC (“TRG”) and

2 defendant John A. Jastremski (“Jastremski”) (sometimes Jastremski and TRG will be
3 referred to collectively as “TRG”) submit the following closing brief in support of
4 terminating sanctions against Steven Dalton (“Dalton”), Lloyd Silvers (“Silvers”) and
5 Ardent Retirement Planning LLC (“Ardent”) (collectively the “Ardent Group”).
6 1. INTRODUCTION
7 Overwhelming evidence at the hearing on terminating sanctions proved the
8 Ardent Group’s contempt for the legal process and its conscious effort to undermine
9 the integrity of these court proceedings. The evidence showed the following deliberate
10 acts to hide evidence, falsify evidence, destroy evidence and stonewall discovery:
11 (1) Dalton, as head of the Ardent Group, served as the “ringleader” in a conspiracy to
12 steal TRG’s trade secrets and then hide evidence of the theft; (2) the Ardent Group and
13 Jeremey L. Keating (“Keating”), Alexander J. Mele (“Mele”), and Richard P. Gigliotti
14 (“Gigliotti”) (collectively the “Keating Group”) stole TRG’s trade secrets and then hid
15 or destroyed any evidence of the theft; (3) the Ardent Group and the Keating Group
16 used false email addresses and secret Google Drives to hide the theft and failed to
17 produce any emails or documents from these hidden cloud systems, claiming the false
18 email addresses and Google Drives were never used; (4) Dalton and Silvers destroyed
19 Tina Abernathy’s (“Abernathy”) computer because they were concerned she might
20 turn the computer over to TRG; (5) On phone calls with the Ardent Group and the
21 Keating Group, Dalton told his fellow conspirators, “not to leave footprints in the
22 sand” referring to not leaving behind discoverable evidence; (6) Dalton told his
23 co-conspirators not to use email addresses from Securities America, Inc. (“SAI”)
24 because SAI would produce such emails in discovery whereas the conspirators would
25 not; (7) Dalton told his co-conspirators to stonewall discovery as long as possible
26 while his “25-point plan” to destroy TRG and Jastremski unfolded; (8) Before turning
27 over computers to TRG’s forensic expert, Silvers destroyed almost 10,000 files and
28 installed a “wiping program” to delete files such that only 17 percent (17%) of certain
418710_1 6 3:15-cv-00057-L-AGS
1 files are still available; (9) Keating destroyed cloud links as part of the group effort to
2 conceal his use of Dropbox to transfer TRG trade secrets to Ardent; (10) Gigliotti
3 claims he “lost” two years of text files even though he emphatically told his
4 co-conspirators to communicate with him using text messages rather than email;
5 (11) Gigliotti claims his Dropbox, the method he would have used to transfer TRG
6 files to Ardent, just “disappeared;” (12) Mele and Gigliotti discussed in text messages
7 building a secret Google Drive and using an iPad where all the “scheming” would
8 occur; (13) Mele and Gigliotti discussed in text messages using a throwaway Google
9 phone to make regulatory complaints against TRG; (14) Mele intentionally destroyed
10 over 1,000 computer files and his TRG notebooks, even though he knew litigation was
11 “99% certain”; (15) the Keating Group destroyed the spreadsheets they used to
12 download their “Broker Protocol” information, even though they knew they would be
13 sued and planned to file their own lawsuit one day after leaving TRG; (16) the Ardent
14 Group and the Keating Group repeatedly testified falsely in deposition and the Ardent
15 Group continued to testify falsely at the hearing before the Special Master; (17) Dalton
16 demonstrated a long history of stonewalling discovery including repeatedly being
17 sanctioned and held in contempt for numerous discovery violations; and (18) Dalton
18 threatened key witness, John Davenport (“Davenport”) after Dalton learned Davenport
19 signed a declaration laying out the conspiracy to steal trade secrets and destroy
20 evidence.
21 Following the first three days of TRG’s persuasive and detailed presentation,
22 SAI and the Keating Group settled with TRG collectively paying $2.55 million and
23 releasing all claims against TRG and Jastremski. While the settling parties did not
24 admit liability, the settlement following TRG’s hard-hitting presentation speaks
25 volumes. Although, counsel for TRG warned the Ardent Group of the solemn nature
26 of these proceedings before questioning Dalton and Silvers, this warning had no
27 impact on them as Silvers and Dalton continued to testify falsely despite clear evidence
28 ///
418710_1 7 3:15-cv-00057-L-AGS
1 contradicting their testimony. This false testimony demonstrated contempt for the
2 legal process and these proceedings.
3 Contrary to the assertions of the Ardent Group’s counsel, where a party engages
4 in deliberate conduct to destroy evidence and lie under oath, there is no requirement
5 for the victim of spoliation to prove prejudice. Once TRG proved evidence was
6 destroyed, it was the Ardent Group’s burden to prove no prejudice – something it did
7 not attempt to do. In any event, TRG proved substantial prejudice, given the amount
8 of spoliation and the difficulty of ascertaining exactly what was destroyed. For these
9 reasons among others, and to protect the integrity of the legal process, the Special
10 Master should recommend terminating sanctions, as lessor sanctions would be
11 inadequate and inappropriate given the long history of discovery abuse and the
12 intentional destruction of evidence.
13 2. TRG PROVED IT HAD PROTECTABLE TRADE SECRETS
14 PURSUANT TO THE CALIFORNIA UNIFORM TRADE SECRETS
15 ACT.
16 Given the severity of the requested sanctions, the Special Master instructed TRG
17 to prove the merits of its case. While TRG initially disagreed it had the burden to
18 prove the underlying trade secret claim, TRG now agrees showing the underlying
19 factual background explains why the Ardent Group and the Keating Group conspired
20 to steal TRG’s trade secrets and made every effort to destroy evidence of the theft.
21 The following facts prove TRG has valuable trade secrets and that the Keating
22 Group and the Ardent Group conspired together over a period of months to steal them.
23 A. TRG Invested Millions of Dollars Over Decades Building a Valuable
24 Salesforce Database That Was The Envy of The Securities Industry.
25 TRG, LLC is a registered investment advisor. (R.T. 90:6-10) TRG is also a dba
26 of Jastremski and acts a marketing group for Jastremski, TRG and the brokers
27 affiliated with TRG. (R.T. 89:18-90:5) TRG focuses on the lucrative “lump sum”
28 financial management market. (R.T. 91:23-92:5) TRG’s target “lump sum” market
418710_1 8 3:15-cv-00057-L-AGS
1 consists of the most highly compensated employees in the few Fortune 500 companies
2 still offering traditional pension plans with optional “lump sum” distributions rather
3 than monthly payouts. (R.T. 92:1-25)
4 Of the 650,000 employees who work at these companies, TRG targets fewer
5 than 5 percent (5%) of them. (R.T. 93:1-10) The “lump sum” market targets clients
6 who receive “lump sum” retirement distributions averaging $800,000. (COE Ex. 2,
7 ¶ 9) TRG estimates its target market constitutes less than one percent (1%) of the
8 American public. (R.T. 93:25-94:2) Silvers testified that every financial advisor
9 wants to get into this lucrative market. (R.T. 94:9-15) However, as Jastremski
10 testified, it is difficult to break into this market because of the hard work and
11 substantial capital it takes to become successful. (R.T. 94:20-95:5)
12 Given this tiny niche market, the key to success is finding qualified prospects.
13 Jastremski credibly testified that after 35 years in the industry he has never seen a
14 publicly available list identifying people in this target market. (R.T. 96:20-97:3) This is
15 why TRG spent millions of dollars over decades building a proprietary database of
16 clients and potential clients (“Salesforce”). (R.T. 130:16-23) To handle TRG’s
17 business needs, TRG had to redesign the “off the shelf” Salesforce product at great
18 expense. (R.T. 104:13-105:3; 105:8-106:15) As a result of these revisions and detailed
19 record keeping, TRG has accumulated voluminous valuable information about its
20 clients including family names, hobbies, interests, investment objectives, expenses and
21 a vast amount of personal information that helps bind clients to the TRG brokers
22 assigned to their accounts. (Ibid.; R.T. 108:13-112:9)
23 Keating and Mele both admitted having this important information at their
24 fingertips was key to their developing and maintaining clients. (R.T. 107:23-108:10;
25 114:5-116:14) As Jastremski explained, the information on the Salesforce database
26 allows financial planners to convince clients they know everything they need to know
27 about their financial situations, building critical bonds of trust. (R.T. 112:10-113:20).
28 Making basic mistakes about the client’s family relationships or investments can result
418710_1 9 3:15-cv-00057-L-AGS
1 in a client leaving the firm. Ibid. It is the Salesforce database that allows TRG’s
2 brokers to develop bonds of trust with clients and avoid making costly mistakes. Ibid.
3 Jastremski explained how important it is to document every call and discussion
4 in the Salesforce database because it is impossible for an advisor to remember all the
5 detailed financial information clients need their advisors to know to manage client
6 accounts. (R.T. 117:7-118:13) Jastremski testified it is ludicrous to believe the
7 Keating Group’s testimony that they were not using a database immediately after
8 leaving TRG. (R.T. 118:19-119:12; 120:1-122:11; 131:3-134:11)
9 As part of its ceaseless efforts to identify prospects and convert prospects into
10 customers, TRG monitors layoffs and early retirement packages at the target
11 companies to focus on the potential clients with the highest probability of going into
12 retirement. (R.T. 98:8-20) The identification process takes years of patience, diligent
13 effort and costs millions of dollars. (COE Ex. 2, ¶ 10) The Ardent Group did not
14 make the slightest effort to dispute this assertion. As part of the process of identifying
15 prospects, TRG places 2000 cold calls each day. (R.T. 98:21-99:2) TRG sends out
16 almost a quarter-million mailers each year to potential prospects. (R.T. 101:2-6) In
17 total, TRG spends roughly $2 million each year finding prospects. (R.T. 101:14-18)
18 TRG also puts on seminars at expensive restaurants for its hottest prospects and turns
19 over these presentations to its brokers like the Keating Group to convert prospects into
20 clients. (R.T. 100:14-19) Even when prospects are found and qualified, it is an uphill
21 battle to convert the prospects into customers. Keating admitted fewer than five
22 percent (5%) of prospects he solicited became clients. (R.T. 97:11-19)
23 A retiree must be confident his or her advisor knows the intimate details of their
24 family situation, interests, income and expenses, net worth, trading preferences, asset
25 balance, trading accounts, account holdings, etc. (COE Ex. 2, ¶¶ 72-73, 76) TRG’s
26 Salesforce database is a treasure trove of information advisors need to build bonds of
27 trust with the client and service client accounts. (COE Ex. 2, ¶¶ 20-22, 72-81) In
28 addition, information such as a client’s anticipated date of retirement, interest in taking
418710_1 10 3:15-cv-00057-L-AGS
1 the lump sum offer and monthly distribution requirements, RetireKit financial data,
2 etc. are integral to developing and servicing a client.
3 Mele admitted Salesforce was valuable and gave him the detailed information he
4 needed to service client accounts (information not available under the Broker
5 Protocol). (COE Ex. 7 [119:19-21; 97:17-99:7]) Keating admitted the TRG
6 Salesforce database is not publicly available, is valuable, and constitutes a trade secret
7 and likewise considers his own database to be a trade secret. (R.T. 136:9-140:18)
8 Gigliotti acknowledged Salesforce contained precious gold to be mined to identify
9 valuable customers. (COE Ex. 6 [30:19-31:11; 31:13; 31:19-21; 53:9-13])
10 Over the years, Mele estimated he may have received more than 10,000 leads
11 from the Salesforce database. (R.T. 144:9-145:3) Mele also admitted that the clients
12 he worked with at TRG still represent the majority of his client base. Keating admitted
13 Salesforce gave him between 5,000 to 10,000 leads to convert into clients.
14 (COE Ex. 5 [29:17-30:8]) To this day, Keating admits that the focus of his practice is
15 on the same clients he had when he worked for TRG. (COE Ex. 5 [51:4-18; 52:24-
16 53:18]; and Ex. 7 [48:24-49:5])
17 Interestingly, the Keating Group considers its own parallel Zoho database
18 proprietary and valuable. (COE Ex. 7 [112:23-25; 113:7; 113:22-23; 114:1-4;
19 114:12-22]; Ex. 5 [25:3-9; 25:12-26:1; 26:3; 26:23-27:9; 56:2-3; 56:6-19; 56:22;
20 56:24; 57:13-58:2; 65:24-67:2]) Keating admits client databases are the bread and
21 butter of an advisor’s business. (COE Ex. 5 [65:24-66:14])
22 Keating testified the Ardent Group wanted to create a business model replicating
23 the TRG model. (R.T. 146:12-20) Mike Dalton (“Mike”) testified the TRG business
24 model (i.e., Salesforce) was so unique to the industry, the Ardent Group wanted to
25 copy TRG’s methods right down to TRG’s forms (R.T. 145:12-146:5; 146:22-147:4)
26 And they did. The theft of information even included stealing TRG’s
27 PowerPoint presentations. In COE Ex. 730-4, Ardent was so sloppy about copying a
28 ///
418710_1 11 3:15-cv-00057-L-AGS
1 TRG PowerPoint presentation that it left a reference to TRG in the PowerPoint

2 presentation it copied. (COE Ex. 730; Ex. 9 [194:13-24; 196:3-18])
3 But perhaps the most convincing proof of Salesforce’s value is “in the pudding.”
4 TRG’s Salesforce converted the Keating Group, who had a history of financial failure,
5 into moneymaking superstars. Although Keating had worked at well-known financial
6 institutions prior to working at TRG, he had had not attracted a single client.
7 (R.T. 159:11-17) By the time Keating left TRG, he controlled $200 million of assets
8 and was making a seven figure income. (R.T. 162:18-20; 164:25-165:2) Mele was
9 unemployed before joining TRG, had no book of business and his prior employment
10 was tending bar. (R.T. 160:24-161:8; 163:13-15) He came to TRG with no experience,
11 zero assets under management but left with 32 million of assets under management.
12 (R.T. 161:15- 24; 163:13-164:10) Mele was earning $200,000 annually before leaving
13 TRG. (R.T. 165:3-5) Likewise, Gigliotti had been unsuccessful building a book of
14 business before joining TRG. (R.T. 159:2-9) After accessing Salesforce, Gigliotti
15 controlled approximately $40 million of assets under management and was making
16 about $200,000 annually. (R.T. 163:4-6; 165:3-5) Without access to Salesforce, none
17 of that would have happened. Salesforce converted the Keating Group from nothing
18 into financial rock stars.
19 This compelling evidence shows TRG’s Salesforce is a valuable trade secret.
20 B. TRG Implements Rigorous Security Measures to Protect Salesforce.
21 TRG implements strict security procedures to protect Salesforce, including
22 protecting Salesforce access in secure premises accessible only by electronic key.
23 (R.T. 146:7-22) Access to information provided to staff and independent contractors
24 was on a need to know basis. (COE Ex. 2, ¶ 85) Advisors may only access the specific
25 clients and prospects TRG assigned to them. (COE Ex. 2, ¶¶ 113, 120) Computers are
26 password-protected, and sharing passwords is prohibited. (R.T. 147:23-148:25)
27 Salesforce can only be accessed from pre-authorized IP addresses. Ibid. Computers
28 have restricted hardware to make it difficult to use of external hard drives that might be
418710_1 12 3:15-cv-00057-L-AGS
1 used to steal data. (R.T. 149:1-9) Software could not be downloaded to TRG
2 computers without express approval from Jastremski. (COE Ex. 4) TRG also closely
3 monitored computers to check whether anyone engaged in any unusual downloads of
4 information. (R.T. 150:18-151:2) And these are just the “physical” protections.
5 TRG also requires each advisor and employee to sign confidentiality agreements
6 and online user agreements prohibiting them from using or disclosing TRG’s trade
7 secrets. (R.T. 149:10-150:11) Splash screens remind TRG personnel and independent
8 contractors of their obligations throughout the day. Ibid. Their agreements prohibit
9 employees and independent contractors from using unauthorized cloud servers. Ibid.
10 At any time, TRG had FSC Securities Corporation’s (“FSC”) authority to deny
11 advisors access to the FSC database. (R.T. 150:15-17) The Keating Group, Ardent, and
12 Keating assistant, Jim White (“White”) admitted TRG had strict security controls in
13 place to protect Salesforce. (R.T. 153:21-156:24)
14 TRG also implemented a privacy policy that was more stringent than the one
15 FSC required, prohibiting advisors from taking client information when they left.
16 (R.T. 151:3-7) Contrary to the arguments of the counter-defendants, FSC never
17 objected to TRG’s more stringent privacy policy in any of FSC’s annual audits of
18 TRG. (R.T. 151:8-12) In fact, when the Keating Group left TRG, FSC sent the
19 Keating Group letters advising them “Any individual contract that you may have with
20 [TRG] may supersede [the FSC privacy] policy.” (R.T. 151:25-152:6) Throughout
21 TRG’s relationship with FSC, FSC assured TRG it would maintain the confidentiality
22 of TRG’s customer information. (R.T. 152:12-153:17)
23 3. AS JUDGE LORENZ FOUND, TRG’S DATABASE IS A VALUABLE
24 TRADE SECRET EVEN IF SOME BASIC CUSTOMER INFORMATION
25 ALSO RESIDES ON THE FSC DATABASE.
26 California codified the Uniform Trade Secrets Act in California Civil Code
27 §§ 3426-3426.11 (“CUTSA”). The CUTSA defines “trade secret” in very broad terms:
28 ///
418710_1 13 3:15-cv-00057-L-AGS
1 “(d) ‘Trade secret’ means information, including a formula,

2 pattern, compilation, program, device, method, technique, or
process, that:
3
(1) Derives independent economic value, actual or
4
potential, from not being generally known to the public or to
5 other persons who can obtain economic value from its
disclosure or use; and
6
7 (2) Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.” California Civil
8 Code § 3426.1(d).
9 In denying the Keating Group’s motion for summary judgment, the court found, “It is
10 undisputed that TRG meets the first prong of the trade secret definition.” (ECF 83
11 [8:21-23]) As set forth below there cannot be any dispute: Salesforce is a trade secret.
12 A. TRG’s Database Constitutes a Trade Secret.
13 To qualify as a trade secret, the claimed trade secret must have value from being
14 kept confidential and unknown to the public, and the owner must take reasonable steps
15 to protect the information. California Civil Code § 3426.1(d). Under the CUTSA,
16 customer lists qualify as trade secrets when the data requires expenditure of resources
17 to create the list and is not generally known to the public. See, Courtesy Temp. Serv.,
18 Inc. v. Camacho, 222 Cal. App. 3d 1278 (1990); and ReadyLink Healthcare v. Cotton,
19 126 Cal. App. 4th 1006 (2005).
20 Morlife, Inc. v. Perry, 56 Cal. App. 4th 1514 (1997), is the seminal case
21 establishing why customer lists receive judicial protection. In Morlife, former
22 employees worked for a roofing company that repaired roofs rather than replaced
23 them. Id. at 1518. Before resigning, one employee took his collection of business
24 cards representing 75 to 80 percent (75% to 80%) of the customer base. Id. The
25 former employees then solicited their customers. Id. In finding the “customer list”
26 (i.e., business cards) to be protected trade secrets, the trial court had concluded the
27 employer’s business was “relatively unusual” and, therefore, the customers would not
28 be readily ascertainable. Id. at 1521. The Morlife court reasoned that, where
418710_1 14 3:15-cv-00057-L-AGS
1 information is more difficult to obtain and an employer is required to spend resources

2 to gather the information, a court will more likely find such information constitutes a
3 trade secret. Id. at 1522 (citing Courtesy Temp. Serv. Inc. v. Camacho, supra,
4 222 Cal. App. 3d 1278).
5 In Morlife, the employer proved the customer list was confidential by presenting
6 evidence of how unique its business was, how customers were not readily ascertainable
7 but could only be discovered with great effort, and that it took considerable time and
8 money to identify customers interested in roof repairs as opposed to roof replacement.
9 Morlife, Inc., 56 Cal. App. 4th at 1522. The employer also testified it developed a
10 customer base by investing in “telemarketing, sales visits, mailings, advertising,
11 membership in trade associations, referrals, and research.” Id. He testified that only
12 10 of 100 contacts from the telemarketing department resulted in a meeting, and each
13 sales visit cost the company $238. Id. The former employer testified that to protect
14 the information, the employment contracts had a specific confidentiality provision
15 expressly referring to its customers’ names and telephone numbers. Id. at 1523. See
16 also, Am. Credit Indem. Co. v. Sacks, 213 Cal. App. 3d 622 (1989). The TRG
17 Salesforce database is much more valuable than the database in Morlife, but otherwise
18 the case is hard to distinguish from the facts of this case.
19 In Am. Credit, an insurance broker in a unique niche market decided to join a
20 competing insurance agency. Am. Credit, 213 Cal. App. 3d at 626. The court found
21 her former employer had a unique insurance niche (just as TRG’s niche is unique).
22 Id. at 625. The broker admitted that before a client could be considered a prospect, the
23 client had to be sold on the concept of the unique insurance niche. Id. at 631. The
24 court concluded her former employer’s customer list was a trade secret because it
25 “allows a competitor to direct sales efforts to the elite 6.5 percent of those potential
26 customers which already evinced a predisposition to purchase credit insurance.” Id. at
27 630-631. The court further concluded the broker used her former employer’s
28 information to solicit her former clients even though she agreed not to do so.
418710_1 15 3:15-cv-00057-L-AGS
1 Id. at 632-33. By announcing her departure in conjunction with a solicitation of

2 business, she violated the CUTSA. (Id.) In his declaration, and at the hearing,
3 Jastremski described facts in detail proving the Salesforce database is a trade secret,
4 not materially different from the databases determined to be trade secrets in Morlife
5 and Am. Credit. (COE Ex. 2, ¶¶ 3-81, 119, 154-156, 159-162, 173)
6 B. TRG Goes to Great Lengths to Protect its Trade Secrets.
7 As noted above, TRG engages in extraordinary efforts to protect Salesforce,
8 including: (1) building access is controlled by electronic keys; (2) each computer is
9 password protected; (3) computers are disabled to prevent using thumb drives;
10 (4) employees must sign written and electronic confidentiality agreements before
11 onboarding with TRG and accessing FSC or TRG databases; (5) employees and
12 advisors get access to information on a “need to know” basis (which is why Keating
13 had to use the services of White and Lujano, who had access to information he did
14 not); (6) access to Salesforce from computers other than TRG computers is prohibited
15 without TRG permission; and (7) Salesforce is locked by two levels of authentication.
16 (COE Ex. 2, ¶¶ 82-116) As set forth in the COE, even the Keating Group concedes the
17 level of security was intense. (ECF 197 [13:26-14:1]; COE Ex. 5 [159:7-8]; Ex. 7
18 [399:18-25]) Accordingly, TRG satisfies the requirement of using reasonable effort to
19 protect its trade secrets.
20 C. That TRG Provided FSC With Limited Information From TRG’s
21 Database to Comply With Regulatory Requirements Does Not Mean
22 The Database Is No Longer a Trade Secret.
23 Although Judge Lorenz and Judge Schopler were seemingly unimpressed by
24 such arguments, the Conspirators made much of the fact that FINRA and SEC
25 regulations require TRG to provide FSC with certain basic information about
26 customers to open brokerage accounts. But the courts have long acknowledged
27 security measures must be reasonable, not perfect. See, Pyro Spectaculars North, Inc.
28 v. Souza, 861 F. Supp. 2d 1079, 1091 (E.D. Cal. 2012) (noting employer need not build
418710_1 16 3:15-cv-00057-L-AGS
1 an “impenetrable fortress” of security); see also, E.I. du Pont de Nemours & Co. v.
2 Christopher, 431 F. 2d 1012, 1016, 1017 (5th Cir. 1970). Disclosure of trade secrets to
3 necessary third parties does not mean trade secrets are lost. See, e.g., JustMed, Inc. v.
4 Byce, 600 F. 3d 1118, 1129-30 (9th Cir. 2010); Fin. Programs, Inc. v. Falcon Fin.
5 Servs., Inc., 371 F. Supp. 770, 776 (D. Or. 1974) (trade secrets not lost where
6 information disclosed to third party is based on mutual understanding information
7 would remain confidential and only used for limited purposes); see also, Religious
8 Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 923 F. Supp. 1231, 1253-54 (N.D.
9 Cal. 1995) [concluding documents were protected even though disclosed to thousands
10 of parishioners who agreed to keep documents confidential].
11 As set forth in California Civil Code § 3426.1(d)(2), efforts to maintain secrecy
12 must be reasonable under the circumstances. TRG’s disclosure of limited
13 information (required by law to open customer brokerage accounts) could hardly be
14 considered a public disclosure. The only entities who had access to this information
15 was TRG and FSC and those working for them and bound by confidentiality
16 agreements. The limited disclosures TRG made to FSC are consistent with both
17 companies’ compliance with securities regulations. TRG gave basic customer
18 information to FSC because FSC had a “need to know” as a matter of law, and because
19 FSC assured Jastremski it would keep this information confidential. (COE Ex. 2,
20 ¶¶ 41-57) And FSC promised to keep that information confidential and allowed TRG
21 to cut off its advisors’ access to that information at any time. (COE Ex. 21 ¶¶ 7-8;
22 Ex. 46, ¶ 4)
23 Lisa Roth (“Roth”), the regulatory expert for the Ardent Group, admitted FSC
24 would not share TRG’s client information with whomever they wanted as it would be
25 “ridiculous,” and FSC “would want to stay in business for more than three months.”
26 (COE Ex. 18 [177:8-11; 177:18-178:7]) Roth testified financial institutions are
27 obligated to maintain the privacy of client information housed at broker-dealers. (COE
28 Ex. 18 [179:21-180:7])
418710_1 17 3:15-cv-00057-L-AGS
1 But even if TRG’s limited disclosure of information lost trade secret status
2 (although the law says otherwise), this loss of trade secret status has no impact on the
3 vast majority of Salesforce information never provided to FSC. The information FSC
4 requires to open an account does not scratch the surface of what is included in the
5 robust TRG Salesforce database. (COE Ex. 2, ¶¶ 55-75) As Jastremski explains in his
6 declaration, Salesforce gives Registered Investment Advisor’s essential tools they need
7 to see customer’s total financial situation, not the narrow snapshot FSC’s database has.
8 Advisors could not do their jobs using only the FSC database. (COE Ex. 2, ¶¶ 32-33,
9 35, 55, 72-81) This is why the Keating Group and other former advisors have risked
10 large judgments, legal fees, and regulatory sanctions to steal the coveted TRG
11 database.
12 And in Judge Lorenz’s ruling on summary judgment, he seemed to recognize
13 that just because FSC had some of the information in the TRG database, that fact alone
14 did not strip the Salesforce database of its trade secret status. (ECF 83 [8:21-9:23])
15 D. The Elaborate Conspiracy to Steal TRG’s Database Confirms The
16 Immense Value of Salesforce.
17 As discussed below in great detail, perhaps the most compelling proof TRG’s
18 Salesforce is a trade secret that cannot be replicated by anything encompassed in the
19 Broker Protocol (even if the Broker Protocol were relevant to this case), is the lengths
20 to which the Conspirators went to steal Salesforce and cover their tracks. If all the
21 Keating Group needed to conduct business was Broker Protocol information from the
22 FSC database, there would have been no need for an elaborate conspiracy, a cover-up,
23 or for the Keating Group to stay at TRG for at least two months after agreeing to join
24 SAI. As Davenport testified, the theft of the Salesforce database would allow them to
25 operate just as they did the day before they left TRG. (COE Ex. 14 [189:23-190:3;
26 129:16-130:9]) It is precisely because all Conspirators knew they were stealing data
27 from Salesforce (as Mike and Davenport testified) that they had no choice but to
28 engage in an elaborate conspiracy to cover up what they had done.
418710_1 18 3:15-cv-00057-L-AGS
1 4. DALTON MASTERMINDS A CONSPIRACY TO STEAL

2 SALESFORCE, LEAVE NO EVIDENCE BEHIND, AND DESTROY TRG
3 BY INSTIGATING FALSE REGULATORY CLAIMS TO CRIPPLE
4 TRG’S LITIGATION EFFORTS.
5 Mike and Davenport testified the TRG business model was so successful, the
6 Ardent group wanted to knock it off. (ECF 157-4 [29:4-5]; R.T. 146:22-147:5;
7 182:21-185:6) Taking the Keating Group (the largest producing group at TRG) was the
8 obvious first step. But Davenport testified Keating told his co-conspirators he would
9 not leave TRG until he had a duplicate of Salesforce. (COE Ex. 30 [4:21-24]; Ex. 5
10 [66:8-14]) Mike testified the Conspirators’ plan was to take as much of Salesforce as
11 they could so the Keating Group would “hit the ground running” from day one. (COE
12 Ex. 12 [99:2-9; 222:4-20]; Ex. 28, ¶¶ 43-50)
13 After stealing the TRG data, the Conspirators did everything they could to hide
14 their tracks. But TRG’s forensic examiner, Sevel discovered Keating uploaded various
15 files to the cloud: C:/Users/Jeremy.keating/Dropbox/TRG/UploadtoSalesForce/AZLIn
16 dexFund.docx; and C:/Users/Jeremy.keating/Dropbox/TRG/UploadtoSalesForce/Silver
17 toKeatingTransfer.xlsx. (COE Ex. 35, ¶ 12) The obvious inference from these
18 now-deleted files is that Keating uploaded Salesforce data to Silvers, who loaded it
19 into the Ardent Group’s Zoho database and or another database or cloud drive not
20 produced during discovery.
21 Caught red-handed by Sevel’s forensic examination of his TRG computer,
22 Keating admitted he uploaded information to the cloud. (COE Ex. 5 [291:11-16])
23 Keating falsely testified he deleted the cloud links because he was “cleaning up” his
24 files in November 2014. According to Keating, TRG’s IT administrator, Kevin
25 Talebpour (“Talebpour”), told Keating in November 2014, he would get a new
26 computer. (ECF 192-5, ¶ 15; 214:25-216:24) This statement was a lie. Talebpour
27 denied any such discussion occurred. (COE Ex. 31, ¶ 6) Though Keating swore under
28 oath Talebpour told him in November 2014 he would get a new laptop, he did not
418710_1 19 3:15-cv-00057-L-AGS
1 recall sending a text that proved otherwise. In a January 9, 2015 text (two months
2 after deleting the cloud links), Keating told his assistant, White, he was “stressed”
3 because he learned TRG was getting him a new laptop (and Keating suspected TRG
4 had discovered the conspiracy). (COE Ex. 422; R.T. 217:13-218:3) Accordingly, the
5 discussion Keating mentioned regarding replacement of his laptop occurred in January
6 2015, not two months earlier as Keating claimed.
7 The importance of Salesforce was emphasized by the Conspirators themselves.
8 The Conspirators knew if TRG discovered their plan, TRG would cut off Salesforce
9 access. (COE Ex. 6 [83:17-24]) The only way to get what they needed was to gather
10 as much information from Salesforce as possible without a massive download that
11 would raise alarms. (COE Ex. 28, ¶ 49) So, the Conspirators took information over a
12 period of months, correctly believing the download over time would not be
13 discovered. (COE Ex. 12 [90:10-91:1; 91:15-19; 222:4-20]) Gigliotti admitted the
14 Keating Group knew TRG closely monitored Salesforce activity. (COE Ex. 6
15 [87:23-88:4]) This is why, even though SAI admitted it struck a final deal with the
16 Keating Group by October/November 2014 (COE Ex. 13 [46:12-18; 47:4-7]), the
17 Keating Group remained at TRG until January 2015 to finish downloading critical
18 Salesforce information they needed. (COE Ex. 891) In fact, Keating’s assistant,
19 White, was continuing to update Salesforce for Keating just days before Keating left
20 TRG. (R.T. 231:19-232:1; 238:6-240:8) What would have been the purpose of doing
21 this if Keating planned to leave? The obvious answer is Keating wanted Salesforce as
22 updated as possible as he knew he was leaving soon.
23 Recognizing he could not explain why the Keating Group stayed at TRG after
24 committing to SAI, Gigliotti obfuscated about the timing of his decision to leave TRG.
25 (COE Ex. 6 [81:4-14; 86:16-25; 124:20-125:3]) Likewise, Keating testified he did not
26 make a decision to leave TRG before December 2014. (R.T. 166:13-16) But SAI’s
27 Briganti testified the Keating Group committed to join SAI in
28 October/November 2014. (R.T. 166:23-167:9) SAI’s transition supervisor, Pam Cross,
418710_1 20 3:15-cv-00057-L-AGS
1 confirmed she could have “on boarded” the Keating Group in one day.
2 (R.T. 167:11-20) In a December 18, 2014 text, Mele confirmed he knew he had
3 already committed to join SAI weeks earlier when he referred to Jastremski as
4 “insane,” saying, “I just laughed and smiled on the inside knowing I’m out.” (COE
5 Ex. 7 [282:13-283:3]; Ex. 258) But the Keating Group stayed at TRG for over a month
6 after coming to terms with SAI. (R.T. 167:24-25)
7 The only reason the Keating Group delayed departure was to download
8 Salesforce information inconspicuously to create their parallel database, just as
9 Davenport testified. (COE Ex. 14 [129:16-130:9]) On December 26, just days before
10 leaving TRG, Mele had a text exchange with Silvers telling him he was bringing his
11 TRG laptop to Silvers. (COE Ex. 259; R.T.174:24-177:4) Mele had no explanation as
12 to why he was bringing computers to Silvers. (Ibid.) Silvers also struggled to explain
13 why Mele was bringing over his computers to the Ardent Group. (R.T. 177:9-178:10)
14 Even after downloading Salesforce information needed to service their clients,
15 Keating wanted more. There was information available to TRG administrators like
16 White and Lujano, but not to Keating. (R.T. 219:8-14) Keating therefore gave
17 “bonuses” to White and Lujano to steal TRG documents only they were authorized to
18 access – and promised to hire them after he left. On December 19, 2014, White took a
19 “vacation day” from TRG, but computer records prove he worked remotely to
20 download Salesforce information. (COE Exs. 776, 791, 793) For whom? Keating.
21 In the days and weeks before the Keating Group left TRG, Lujano repeatedly
22 went to TRG’s office when she knew no one would be there. Attached as Exhibit 3 to
23 COE Ex. 33 is a report on the times Lujano was in and out of the TRG office at strange
24 hours. (COE Ex. 33, ¶ 6) For example, she entered the office at 4:51 a.m. on
25 December 12, 2014 (just days before the Keating Group left TRG). She returned to the
26 TRG office at 5:04 a.m. She returned to the TRG office again at 5:35 a.m. All of
27 these early morning entries and exits suggest Lujano was putting papers in her car and
28 driving to the Ardent office five minutes away. Lujano could not explain what she was
418710_1 21 3:15-cv-00057-L-AGS
1 doing. (COE Ex. 15 [160:21-161:21; 162:19-25; 163:6-167:25; 168:7-191:25])

2 Keating paid Lujano a $10,000 “bonus” even though she was not his employee.
3 (COE Ex. 5 [105:22-23; 107:13-108:3]; Ex. 15 [13:14-25; 211:15-213:1]) She was
4 then paid an additional $5,000 immediately after she joined Keating at
5 Ardent/CIA/SAI. (COE Ex. 15 [211:15-213:1]) This was impressive compensation for
6 an employee whose name Keating could not pronounce at his deposition, (COE Ex. 5
7 [82:1-4]) and for someone White, characterized as less than competent “because she
8 really is bad at her job and didn’t deserve a $100 bonus.” (COE Ex. 16 [125:6-10])
9 Keating also paid White a $6,000 “bonus” even though White was not his employee.
10 (COE Ex. 16 [131:10-23]) White initially denied getting the bonus but then admitted
11 it. (COE Ex. 16 [66:19-25; 129:25-131:23]) White could not explain what he was
12 doing for Keating when he was supposedly on vacation. (COE Ex. 16 [179:4-23])
13 To cover their tracks, Dalton warned the Conspirators not to leave “footprints in
14 the sand.” Among advice he gave to them was to blind copy emails so no one would
15 know who was on the email string (COE Ex. 44), use fictitious email addresses to
16 avoid discovery (COE Ex. 12 [261:22-262:13;265:9-14]), and destroy documents.
17 (COE Ex. 739) Recognizing a financial institution as large as SAI would comply with
18 discovery obligations, Dalton specifically advising Conspirators not to use SAI email
19 addresses. (COE Exs. 759, 832)
20 Dalton hoped to make it hard for TRG to recover from the anticipated hit to its
21 business, telling his co-conspirators he would set distracting “brush fires” and launch a
22 “25-point campaign” against TRG. (COE Exs. 739, 68; Ex. 28, ¶¶ 39-40; Ex. 10
23 [215:16-216:15]) This “25-point campaign” included false complaints to FINRA and
24 the SEC. (COE Ex. 2, ¶ 109) Neither the SEC nor FINRA ultimately bought what
25 Dalton was selling. (COE Ex. 2, ¶ 109) Keating initially denied there was a “25-point
26 plan” but then admitted it. (COE Ex. 5 [247:9-16; 248:1-3; 28:24-29:8; 149:13-150:5;
27 333:2-334:14]; Ex. 68) Silvers only admitted hearing “something” about a “25-point
28 plan,” and Dalton “might” have sent a copy to him. (COE Ex. 10 [146:1-14;
418710_1 22 3:15-cv-00057-L-AGS
1 148:11-149:03; 217:7-8]) Ultimately, Silvers admitted everything. (COE Ex. 10

2 [149:2-3; 215:11-14; 216:3-15]) But when Dalton was asked about the 25-point plan in
3 his deposition, he just lied. (COE Ex. 9 [6:12-25]) Dalton denied using the term
4 “brush fires” in connection with TRG (R.T. 191:18-192:2) but then called it a “to do”
5 list to transition the Keating Group. (R.T. 192:10-194:18) Absurd.
6 Mike testified truthfully that the purpose of the “brushfires” was to bring TRG
7 to its knees so it could not litigate this case, and damage TRG’s reputation by
8 communicating to internal employees that TRG was “upside down.” (R.T. 195:25-
9 196:25) Jastremski confirmed Dalton’s false accusations succeeded in causing FINRA
10 and the S.E.C. to investigate TRG, requiring TRG to produce voluminous documents
11 and sit for a deposition. (R.T. 197:3-198:5) Ultimately, but at great expense, the
12 S.E.C. and FINRA exonerated TRG. (COE Exs. 975, 982; R.T. 198:9-201:24)
13 The Conspirators came up with secret ways to communicate without leaving
14 “footprints in the sand.” They used false email addresses such as
15 [email protected] (which Silvers admitted creating but said he could not
16 remember why (COE Ex. 10 [137:13-138:21]), [email protected] (which
17 Mele said was coined by Gigliotti. (COE Ex. 7 [396:20-397:4]) The Conspirators
18 swore they never used false email addresses – they just created them for no reason at
19 all. (COE Ex. 7 [396:20-397:17; 283:13-285:2]; Ex. 6 [151:17-152:2]; Ex. 10
20 [137:13-138:21]; Ex. 567) Finally, Mele admitted using the false email address but
21 could not have been more vague as to the purpose. (COE Ex. 7 [284:12-21; 397:11-
22 398:16]; Ex. 258) He said these secret email addresses were created “to keep track of
23 questions, legal questions, concerns, but we never – I believe stopped very early using
24 that . . . [and] completely forgot about it.” (COE Ex. 7 [396:22-397:17]) Again,
25 absurd. Nothing was produced from these email addresses or associated cloud Google
26 Drives. And the Keating Group and the Ardent Group would have “forgotten” about
27 these false emails forever had the ruse not been uncovered by TRG’s forensic expert,
28 Sevel. (COE Exs. 23, 34, 35) When asked why they did not communicate using their
418710_1 23 3:15-cv-00057-L-AGS
1 actual email addresses, Mele said, “I thought it would be a better way to go . . . we just
2 didn’t want [to use personal email addresses].” (COE Ex. 7 [398:6-9; 398:23-24;
3 399:1-9])
4 Before deleting thousands of files on his TRG computer, Mele brought his
5 computer to Silvers so he could download data and load it into the Ardent Zoho
6 database. In a text message dated less a month prior to leaving TRG, Mele told Silvers
7 he was bringing his TRG laptop to Ardent – an obvious competitor to TRG. (COE
8 Ex. 10 [178:8-179:13]; Ex. 259) And why would he do that?
9 The Conspirators used hidden Google Drives to leave messages for each other,
10 and then deleted the link to them so those messages would never be revealed. (COE
11 Ex. 445) The deception became so pervasive, Dalton, Silvers, and SAI referred to
12 Keating, Mele, and Gigliotti as “X,” “Y,” and “Z,” but Silvers initially denied knowing
13 who those people were and why they used these monikers. (COE Ex. 10 [316:23-
14 317:2]; Exs. 669, 670) Panicked when he saw a document where he used an “X,” “Y,”
15 and “Z” reference, Silvers said he was unsure whom he was referencing. (COE Ex. 10
16 [317:9-20]) Likewise, Dalton pretended not to know who “X,” “Y” and “Z” were.
17 (R.T. 472:22-474:6) But the evidence is overwhelming Silvers and Dalton knew
18 exactly whom they referenced when referring to X, Y and Z. (COE Ex. 10 [317:21-
19 318:6]; Exs. 669, 618, 612, 733, 729, 670)
20 5. THREE “WHISTLEBLOWERS” IN THE CONSPIRACY CONFESS TO
21 JASTREMSKI AND PROVIDE CRITICAL EVIDENCE NONE OF THE
22 CONSPIRATORS WOULD HAVE PRODUCED.
23 Davenport, Mike, and Silvers, confessed to conspiracy, and two of them gave
24 Jastremski declarations. (COE Exs. 28-30; Ex. 2, ¶¶ 181-210) Based upon what the
25 whistleblowers said, TRG amended its counterclaim to include some of the
26 information the whistleblowers disclosed. Upon reading the amended counterclaim,
27 Dalton told Mike (whom he did not know was one source of the information) that the
28 new complaint was “strangely on point.” (COE Ex. 28, ¶ 74)
418710_1 24 3:15-cv-00057-L-AGS
1 Confronted by declarations from Mike and Davenport, the Conspirators deposed

2 Mike and Davenport hoping to undermine them. But if the declarations Mike and
3 Davenport signed were bad for the conspirators, the depositions they gave were much
4 worse. Davenport credibly testified: (1) the Ardent Group created Ardent as a TRG
5 knock-off (COE Ex. 14 [49:13-21]); (2) Keating insisted Ardent have a duplicate of
6 Salesforce before he left TRG (R.T. 183:5-14); (3) Keating uploaded Salesforce data
7 into Dropbox and Google Drive accounts which Silvers transferred to Ardent’s Zoho
8 (COE Ex. 14 [270:22-271:23; 279:24-280:7]); (4) the Keating Group took information
9 greatly in excess of the Broker Protocol (COE Ex. 14 [108:8-18; 125:18-127:3;
10 108:8-18; 125:18-127:3]); (5) Dalton never planned to comply with the Broker
11 Protocol, but instead was “raiding [Salesforce] to bring it over and create a database
12 similar to what they just came from, so there will be no down time and they will
13 continue to do their business just like they were doing the day before,” (COE Ex. 14
14 [140:14-20]); (6) “[Dalton] was intending to get as much information from those three
15 gentleman [sic] out of TRG as possible. And that included not only individual accounts
16 that they were currently servicing, but prospect information as well,” (COE
17 Ex. 14 [126:15-20]); (7) the Keating Group admitted taking information far beyond the
18 Broker Protocol, including client identification information, asset information,
19 investment objectives, family history, prior accounts, account statements, and notes
20 from client calls (COE Ex. 14 [151:4-18]); (8) Dalton and the Keating Group paid lip
21 service to the Broker Protocol but did not intend to follow it (COE Ex. 14
22 [317:15-318:7]); (9) Dalton told his Co-conspirators to be careful about what was in
23 writing and to “stick strictly to the conference calls” (COE Ex. 14 [120:17-20]);
24 (10) the Conspirators used fake email addresses to disguise themselves (COE
25 Ex. 14 [349:8-14]); (11) Dalton told Silvers to destroy computers (COE Ex. 14
26 [283:24-284:3]); (12) Keating said he needed to destroy evidence (COE
27 Ex. 14 [298:2-17]); (13) one agenda item in COE Ex. 739 was “Keating Doc Disposal”
28 (COE Ex. 14 [346:11-347:6]); (14) the Conspirators discussed loading TRG data into
418710_1 25 3:15-cv-00057-L-AGS
1 Zoho (COE Ex. 14 [348:12-349:3]); (15) Dalton’s attorney said the Ardent Group and
2 the Keating Group would have liability for what they did (COE Ex. 14 [94:17-95:7,
3 102:8-19]); (16) the Keating Group’s attorney confirmed this assessment (COE Ex. 14
4 [116:19-117:15]); and (17) Dalton threatened Davenport after he signed his
5 declaration. (COE Ex. 14 [352:12-353:6]; Ex. 9 [51:5-8])
6 Interestingly, Silvers denied being shocked by Davenport’s testimony; he claims
7 he was only annoyed by it. (COE Ex. 10 [68:24-69:5]) Silvers said it was just “a little
8 bit misleading.” (COE Ex. 10 [69:6-9]) That is because Davenport’s testimony was
9 true and heavily corroborated by documentary evidence.
10 Mike convincingly testified to the following: (1) SAI hired Dalton and Mike to
11 recruit TRG advisors (COE Ex. 12 [41:18-42:3; 42:10-18; 78:5-80:10]); (2) SAI
12 discussed taking confidential client information from TRG (COE Ex. 12 [290:7-19]);
13 (3) SAI told Mike SAI wanted to develop a “lump sum” model like the one at TRG
14 (COE Ex. 12 [84:5-19]); (4) SAI paid Mike to transfer TRG’s business and clients to
15 SAI (COE Ex. 12 [87:8-14]); (5) Silvers said he knew TRG people who could funnel
16 information out of TRG on a thumb drive (that employee was probably Nelson) (COE
17 Ex. 12 [90:21-91:1]); (6) Dalton paid Nelson to steal TRG information (COE Ex. 12
18 [75:4-77:8; 179:7-22; 182:14-183:12]); (7) the Ardent Group and the Keating Group
19 discussed uploading TRG information to Ardent’s Zoho (COE Ex. 12 [91:15-25;
20 234:18-21; 288:6-14]); (8) the Keating Group paid TRG employees bonuses to steal
21 information, including a woman Keating worked with whose name Mike could not
22 recall (i.e., Lujano) (COE Ex. 12 [92:1-8; 100:10-22]); (9) White was paid money to
23 steal TRG information for Keating (COE Ex. 12 [376:8-12]); (10) the customer
24 information taken was taken from TRG and was not Broker Protocol information
25 (COE Ex. 12 [92:20-93:5; 185:17-186:5; 186:12-187:1; 222:4-10; 249:23-250:16;
26 265:15-266:1; 298:9-13]); (11) during weekly calls, the Ardent Group and the Keating
27 Group discussed being sued (COE Ex. 12 [168:18-169:12; 373:20-374:3]); (12) Mike
28 was told not to put things in writing (COE Ex. 12 [169:14-23; 372:2-8]); (13) the
418710_1 26 3:15-cv-00057-L-AGS
1 Ardent Group and the Keating Group discussed destroying evidence to make sure no
2 trail tied them to the theft (COE Ex. 12 [270:13-272:11]); (14) Silvers told Mike
3 computers were destroyed (COE Ex. 12 [302:21-303:5]); (15) the Conspirators
4 discussed that if they could take enough TRG advisors and staff, they could replicate
5 TRG and put TRG out of business (COE Ex. 12 [185:3-9]); (16) Dalton developed a
6 “25-point plan” to wage a two front war against TRG by reducing its financial strength
7 and simultaneously launching a regulatory campaign against TRG (COE
8 Ex. 12 [197:25-198:7]); (17) Silvers and Davenport told Mike the Zoho database had
9 become a duplicate of TRG’s (COE Ex. 12 [238:2-23]); (18) the Keating Group
10 created fictitious email addresses “with names of people with opposite genders to
11 surreptitiously store and transmit passwords for our databases and trade secret data that
12 we took from TRG” (COE Ex. 12 [261:22-262:13; 265:9-14]); (19) the Conspirators
13 used terms such as “losing documents,” i.e., destroying them (COE Ex. 12
14 [266:11-22]); (20) Zoho links were deleted to hide a trail (COE
15 Ex. 12 [267:23-268:3]); (21) Google Drive data was deleted (COE Ex. 12 [269:1-5]);
16 (22) Abernathy’s computer was destroyed so she would not give evidence to TRG
17 (COE Ex. 12 [303:9-304:16; 384:3-23]; Ex. 10 [247:4-249:17]); (23) it is
18 inconceivable the Keating Group could have filled seminars as they did “out of the
19 box” without the TRG data they had taken (R.T. 180:16-182:19); and (24) after the
20 lawsuit was filed, the Conspirators discussed getting rid of evidence so there would not
21 be a trail. (COE Ex. 12 [307:16-308:9]) This testimony is all corroborated.
22 After learning he might get the same deal Davenport and Mike received, Silvers
23 discussed giving Jastremski a similar declaration to get out of the lawsuit. (COE
24 Ex. 10 [58:1-12]) When Jastremski insisted Silvers give TRG all his computers as a
25 gesture of good faith, Silvers told Jastremski words to the effect of, “If you think
26 Davenport’s computer hard drives are valuable, wait until you see mine.” (COE Ex. 2,
27 ¶ 195) And Silvers was right. Almost all the key evidence in this case came from
28 ///
418710_1 27 3:15-cv-00057-L-AGS
1 Silvers’ computers. (COE Ex. 2, ¶¶ 192-205) The Conspirators failed to produce most
2 of that evidence. (Id.)
3 6. THE “BROKER PROTOCOL” IS AN IRRELEVANT RED HERRING
4 BECAUSE TRG IS NOT A SIGNATORY TO THE BROKER
5 PROTOCOL CONTRACT, AND THE CONSPIRATORS STOLE THEIR
6 INFORMATION FROM TRG, NOT FSC.
7 There is no bigger red herring in this case than the “Broker Protocol.” The
8 “Broker Protocol” is a false pretext to concoct an explanation as to how the Keating
9 Group could have been up and running from day one without using TRG’s trade secret
10 information. Mike testified there was no way they could have been as successful as
11 they were without TRG’s trade secrets. (COE Ex. 12 [273:15-23; 274:10-18])
12 In any event, the Broker Protocol is simply a contract among some
13 broker-dealers who signed it. (ECF 272-2, Ex. L) Neither the Keating Group nor
14 TRG signed the Broker Protocol. (R.T. 168:11-15) A contract among parties does not
15 trump statutes and common law regarding trade secrets. Even if the Broker Protocol
16 arguments were relevant – and they are not – the Broker Protocol would only have
17 prevented FSC from suing SAI. As Jerry Murphy, CEO of FSC, stated, “FSC’s
18 adherence to the Protocol is not intended to interfere with or modify or terminate
19 agreements and obligations and liabilities which Independent Contractor Financial
20 Advisors may reach among themselves separate and apart from FSC.” (COE Ex. 46,
21 ¶ 4) In fact, after the Keating Group resigned from FSC, FSC sent letters to each of
22 them warning them to live up to their contracts with TRG. (COE Ex. 2, ¶ 50) In fact,
23 by its own terms, the Broker Protocol does not apply when less than an entire
24 marketing group leaves a firm like TRG. (COE Ex. 317; R.T. 168:18-169:15)
25 Even assuming the Keating Group complied with the Broker Protocol by taking
26 the scant five pieces of information allowed, that compliance would not negate
27 a finding of trade secrets theft. As Jastremski notes, but for his introduction of the
28 ///
418710_1 28 3:15-cv-00057-L-AGS
1 Keating Group to Salesforce and then to FSC, none of them would have known what
2 was on the FSC database or the Salesforce database. (R.T. 170:4-23)
3 Finally, as SAI admitted during Cross’s deposition, the Keating Group could not
4 hide behind the Broker Protocol to excuse their trade secrets theft because California
5 law trumps the Broker Protocol. (COE Ex. 17 [35:4-36:6]) Approximately 75 percent
6 (75%) of TRG’s clients and prospects are California residents. (COE Ex. 2, ¶ 48)
7 Therefore, notwithstanding anything in the Broker Protocol, the Keating Group had to
8 comply with the Privacy Act, embodied in California Financial Code §§ 4050-4060
9 (“Privacy Act”). Under the Privacy Act, the Conspirators needed affirmative consent
10 from each customer before any FSC data could be shared with people no longer
11 affiliated with FSC (including the Keating Group upon termination) and unrelated third
12 parties such as SAI, Ardent, White, Abernathy, and Lujano. California Financial
13 Code § 4051.5(b)(2) and § 4052.5. Once the Keating Group was no longer at FSC or
14 TRG, they could not take any customer information without written affirmative
15 consent from each customer – something they did not have.
16 It is undisputed taking private information such as names, addresses, phone
17 numbers, email addresses, and account types are all protected by the Privacy Act. It is
18 undisputed the Keating Group did not have prior written consent to take information
19 from FSC. Neither the Broker Protocol nor FSC privacy policies could negate the
20 Privacy Act. That is why SAI’s Cross (who “onboarded” the Keating Group to SAI)
21 claimed she refused to go near the client documents the Keating Group were preparing
22 after they moved to Ardent to avoid breaking the law. (COE Ex. 17 [12:11-13:6])
23 But, all of this is moot as the Conspirators stole the trade secrets from TRG,
24 not FSC. As Jastremski testified, the Broker Protocol information was not enough for
25 the Keating Group to service customers – they would have needed the information
26 from Salesforce to do their jobs correctly. (R.T. 171:1-173:7) Mele confirmed the
27 Broker Protocol lacks important information he needed to service clients.
28 (R.T. 173:8-21) Keating told Dalton the FSC database was not up-to-date and was
418710_1 29 3:15-cv-00057-L-AGS
1 missing information. (R.T. 174:8-16) Gigliotti admitted information he needed from

2 TRG’s Salesforce was not in the FSC database. (COE Ex. 6 [53:1-13]) The Ardent
3 Group’s reference to taking information from FSC pursuant to the “Broker Protocol”
4 was a sham to disguise the Keating Group’s theft of data from TRG.
5 As Davenport testified, the plan was always to take from TRG far more than
6 Broker Protocol information, so the Keating Group could “hit the ground running.”
7 (R.T. 178:17-23) Davenport testified Dalton never intended to follow the Broker
8 Protocol; on the contrary, his plan was to have the Keating Group take as much client
9 and prospect information from TRG as possible. (R.T. 179:6-180:7) The Keating
10 Group’s testimony they downloaded the Broker Protocol information from the FSC
11 database is weak at best. Keating could not recall whether he had any discussions with
12 Gigliotti or Mele about downloading their Broker Protocol information even though all
13 of them supposedly had to do it and there was no easy way to download the
14 information. (COE Ex. 5 [280:1-18]) Keating could not remember when he discussed
15 downloading Broker Protocol information with Dalton. (COE Ex. 5 [281:10-16]) In
16 fact, Keating could not explain precisely how he downloaded the Broker Protocol
17 information. (COE Ex. 5 [267:23-272:14; 275:3-25]) Keating could not explain why he
18 needed to download Broker Protocol information on the date he alleged he did so,
19 January 8 or 9, 2015, if there was nothing TRG could do to stop him from accessing
20 the information at a later date. (COE Ex. 5 [268:23-269:10]) The only reason he
21 downloaded anything was to create the pretext of saying whatever information the
22 Keating Group took came from the Broker Protocol. (COE Ex. 5 [323:6-11]) That
23 contention is false. But each of the Keating Group claimed to have deleted and no
24 longer possess the spreadsheets they claim they downloaded from FSC’s databases.
25 (COE Ex. 188 [8:18-21]; Ex. 496 ¶ 18; ECF 42-2, ¶ 21; ECF 103-2, ¶¶3-4)
26 ///
27 ///
28 ///
418710_1 30 3:15-cv-00057-L-AGS
1 7. THE FSC PRIVACY POLICY PROTECTS PRIVATE CUSTOMER

2 INFORMATION AND DOES NOT GIVE BROKERS A LICENSE TO
3 STEAL TRG’S TRADE SECRETS.
4 When it became obvious the Broker Protocol argument would not “fly” because
5 the Keating Group took much more information than allowed under the Broker
6 Protocol (which the Broker Protocol says nullifies the right to take Broker Protocol
7 information), the Keating Group and Ardent Group moved to “plan B.” Despite
8 repeatedly saying they only took Broker Protocol information, the Conspirators argued
9 that they also took information they wanted pursuant to the FSC privacy policy. But
10 the FSC privacy policy is designed (and mandated by law) to protect consumers, not
11 advisors raiding their firms. FSC’s privacy policy gave itself the right to provide
12 information to brokers (assuming the brokers complied with California Financial
13 Code §§ 4050-4060 – which there was not) but was not obligated to do so, and the
14 Conspirators knew it. In fact, upon the Keating Group’s departure from FSC, FSC
15 advised the Keating Group they had to live up to their agreements with TRG,
16 notwithstanding FSC’s privacy policy which was subordinate to agreements TRG
17 had with the Keating Group. (COE Ex. 2, ¶ 50)
18 Even if the Keating Group requested information pursuant to the FSC privacy
19 policy, they still would not have been allowed to take that information without TRG’s
20 permission. Each member of the Keating Group had agreements with TRG which
21 specifically prohibited them from using a “back door” to steal the trade secret
22 information they agreed to leave behind when the relationship began. (COE Exs. 1, 3,
23 4, 191, 192, 193, 498, 499, 501) Accordingly, the Broker Protocol and FSC privacy
24 policy are just sham arguments – and always were. The Keating Group and the Ardent
25 Group obtained the information they took from TRG, not from the Broker Protocol.
26 ///
27 ///
28 ///
418710_1 31 3:15-cv-00057-L-AGS
1 8. COURTS HAVE AUTHORITY TO GRANT TERMINATING

2 SANCTIONS FOR WILLFUL SPOLIATION OF EVIDENCE, EVEN
3 WITHOUT PROOF OF PREJUDICE. BUT ONCE TRG PROVES A
4 WILLFUL SPOLIATION OF EVIDENCE, THE BURDEN IS ON THE
5 ARDENT GROUP TO SHOW NO PREJUDICE TO AVOID
6 TERMINATION.
7 This is not case where someone negligently failed to maintain records or
8 inadvertently destroyed evidence. This is a case where the Ardent Group and the
9 Keating Group went out of their way to avoid leaving evidence behind, hid evidence
10 where they could and destroyed any evidence left behind with the intent to injure TRG
11 in litigation.
12 Federal courts will not tolerate destruction of evidence and may issue
13 terminating sanctions for willful spoliation. See, e.g., Leon v. IDX Systems Corp., 464
14 F. 3d 951 (9th Cir. 2006) [dismissal with prejudice where employee intentionally
15 deleted data from his employer-owned laptop]; Anheuser-Busch, Inc. v. Natural
16 Beverage Distributors, 69 F. 3d 337 (9th Cir. 1995) [dismissal appropriate because the
17 defendant’s concealment of relevant documents for three years and continuous false
18 denials under oath that the documents existed clearly impaired the plaintiff’s ability to
19 go to trial and interfered with the rightful decision of the case]; Valley Engineers Inc.
20 v. Electric Engineering Co., 158 F. 3d 1051 (9th Cir. 1998) [case dispositive sanction
21 was appropriate where, even though thousands of pages were produced, four of the
22 most important pages had not been produced and there was no reason to believe such
23 omission was innocent]; TeleVideo Systems, Inc. v. Heidenthal, 826 F. 2d 915 (9th Cir.
24 1987) [court did not abuse its discretion in striking the answer and entering default
25 judgment against defendant as sanction for committing perjury during depositions and
26 filing false pleadings]; Global NAPs, Inc. v. Verizon New England Inc., 603 F. 3d 71
27 (1st Cir. 2010) [terminating sanctions in the form of default judgment where party lied
28 to court about records kept, dropped laptop containing relevant evidence down stairs,
418710_1 32 3:15-cv-00057-L-AGS
1 and intentionally deleted relevant files during pendency of litigation]. All those things
2 happened in this case.
3 Courts recognize there is a difference between parties who inadvertently fail to
4 preserve evidence and parties who destroy evidence intentionally. See, e.g., Nursing
5 Home Pension Fund v. Oracle Corp., 254 F.R.D. 559 (N.D. Cal. 2008) (finding an
6 alleged failure to communicate document preservation instructions to a sufficient
7 number of employees was insufficient to warrant sanctions). In contrast, willful
8 destruction of evidence justifies and mandates terminating sanctions. See, Leon, 464
9 F. 3d at 958; Anheuser-Busch, 69 F. 3d at 348; Valley Engineers, 158 F. 3d at 1055,
10 1058; TeleVideo Systems, 826 F. 2d at 916-917; Global NAPs, 603 F. 3d at 93-94.
11 To a certain point, courts will forgive parties that inadvertently fail to comply
12 with discovery obligations, but courts will not tolerate willful destruction of evidence.
13 Global NAPs, 603 F. 3d at 93-94. “Dismissal is an available sanction when ‘a party
14 has engaged deliberately in deceptive practices that undermine the integrity of judicial
15 proceedings’ because ‘courts have inherent power to dismiss an action when a party
16 has willfully deceived the court and engaged in conduct utterly inconsistent with the
17 orderly administration of justice.’” Leon, 464 F. 3d at 958 [quoting Anheuser-Busch,
18 69 F. 3d at 348]. As discussed above and more specifically below, the Ardent Group
19 engaged a pattern of false testimony and destruction of evidence.
20 Litigants are obligated to preserve evidence from the moment litigation is
21 reasonably anticipated, not destroy it. Apple Inc. v. Samsung Electronics Co., Ltd.,
22 881 F. Supp. 2d 1132, 1136 (N.D. Cal. 2012). “The duty to preserve documents
23 attaches ‘when a party should have known that the evidence may be relevant to future
24 litigation.’” In re Napster, Inc. Copyright Litigation, 462 F. Supp. 2d at 1068 [quoting
25 Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003)]. A litigant’s
26 duty to preserve evidence encompasses what the party “knows, or reasonably should
27 know, is relevant in the action, is reasonably calculated to lead to the discovery of
28 admissible evidence, is reasonably likely to be requested during discovery, and/or is
418710_1 33 3:15-cv-00057-L-AGS
1 the subject of a pending discovery request.” Wm. T. Thompson Co. v. General

2 Nutrition Corp., 593 F. Supp. 1443, 1455 (C.D. Cal. 1984). The duty to preserve
3 evidence “extends to information that is relevant to the claims or defenses of any party,
4 or which is relevant to the subject matter involved in the action.” Zubulake, 220
5 F.R.D. at 218. Thus, “anyone who anticipates being a party or is a party to a lawsuit
6 must not destroy unique, relevant evidence that might be useful to an adversary.”
7 (emphasis added.)
8 Here, the parties knew there would be litigation months before the Keating
9 Group left TRG. Gigliotti said the Keating Group was “100 percent certain” TRG
10 would sue them and they told Dalton of their concerns. (R.T. 204:23-205:12) Mele
11 believed there was a “99 out of a hundred” chance TRG would sue him. (COE Ex. 7
12 [166:2-4; 169:15-22; 171:2-5]) Keating also told Dalton he believed a lawsuit was
13 inevitable– two months before he would leave TRG. (R.T. 206:12-21) Silvers also
14 admitted he knew TRG would likely sue them. (R.T. 209:8-12) The Keating Group
15 discussed the probability of litigation with Dalton. (R.T. 204:15-205:5)
16 In fact, Dalton expected to be sued almost a year before the Keating Group left
17 TRG. In April of 2014, after reviewing Keating’s contract with TRG with legal
18 counsel, Dalton recognized he, SAI, and Keating would likely be sued, but getting
19 sued was just “the cost of doing business.” (COE Ex. 596; Ex. 9, 10) But at
20 deposition, Dalton denied having any suspicions he would be sued. (R.T. 209:21-
21 210:5) Caught in a lie by the documents he did not know TRG had, Dalton just
22 continued to lie and claimed not to recall what he had written about expecting to be
23 sued. (R.T. 211:10-212:12; 213:2-16) Accordingly, there was no doubt in anyone’s
24 mind that litigation was inevitable – yet the Conspirators not only failed to preserve
25 evidence – they willfully destroyed it.
26 “A party’s destruction of evidence qualifies as willful spoliation if the party has
27 ‘some notice that the documents were potentially relevant to the litigation before they
28 were destroyed.’” Leon, 464 F. 3d at 959 [quoting United States v. Kitsap Physicians
418710_1 34 3:15-cv-00057-L-AGS
1 Serv., 314 F. 3d 995, 1001 (9th Cir. 2002)]. “[B]ecause ‘the relevance of . . .
2 [destroyed] documents cannot be clearly ascertained because the documents no longer
3 exist,’ a party ‘can hardly assert any presumption of irrelevance as to the destroyed
4 documents.’” Leon, 464 F. 3d at 959 [quoting Alexander v. Nat’l Farmers Org., 687
5 F. 2d 1173, 1205 (8th Cir. 1982)]. And oddly, that is what the Ardent Group does
6 here. They claim that because TRG does not know what documents were destroyed or
7 hidden, TRG cannot prove prejudice. But as set forth above, the Ardent Group has
8 incorrectly reversed the burden of proof.
9 As set forth above, the Ardent Group anticipated they would be in litigation with
10 TRG from the outset of their scheme. The Ardent Group and the Keating Group
11 testified they were preparing for a lawsuit by June 2014. (COE Ex. 596; Ex. 9
12 [154:7-155:6; 154:21-155:17; 156:17-157:7; 157:16-158:16]) Accordingly, as of June
13 2014, the Conspirators’ obligation to preserve evidence included client files, notes,
14 emails, text messages, and documents on all databases and cloud drives.
15 In determining whether to impose terminating sanctions, courts consider the
16 following factors: “(1) the public’s interest in expeditious resolution of litigation;
17 (2) the court’s need to manage its dockets; (3) the risk of prejudice to the party seeking
18 sanctions; (4) the public policy favoring disposition of cases on their merits; and
19 (5) the availability of less drastic sanctions.” (Citations and quotation marks omitted.)
20 Leon, 464 F. 3d at 958.
21 The court is not required to make explicit findings to show it considered each of
22 the factors. Malone v. United States Postal Service, 833 F. 2d 128, 130
23 (9th Cir. 1987). However, willfulness, fault, or bad faith is a prerequisite to dismissal.
24 Wyle v. R.J. Reynolds Industries, Inc., 709 F. 2d 585, 589 (9th Cir. 1983). The district
25 court’s exercise of discretion will not be disturbed on appeal unless the record creates
26 “a ‘definite and firm conviction that the court below committed a clear error of
27 judgment in the conclusion it reached upon a weighing of the relevant factors.’”
28 ///
418710_1 35 3:15-cv-00057-L-AGS
1 Anderson v. AirWest, Inc., 542 F.2d 522, 524 (9th Cir. 1976) [quoting In re Josephson,
2 218 F. 2d 174 (1st Cir. 1954)].
3 These cases show there are two paths to terminating sanctions: repeated
4 violations of court orders (pursuant to Fed. R. Civ. P. 37) OR destruction of evidence.
5 Leon v. IDX Systems Corp., 464 F. 3d at 958. Here, TRG seeks terminating sanctions
6 for the Ardent Group’s willful destruction of evidence, repeated discovery violations
7 and lying under oath.
8 District courts may impose terminating sanctions to “manage their own affairs
9 so as to achieve the orderly and expeditious disposition of cases. Chambers v.
10 NASCO, Inc., 501 U.S. 32, 43 (1991). This power extends to a party’s destruction of
11 evidence. See, Leon, 464 F. 3d at 958. “[A] party’s motive or degree of fault in
12 destroying evidence is relevant to what sanction, if any, is imposed.” (Emphasis
13 added.) In re Napster, 462 F. Supp. 2d at 1066-1067. Here, there is overwhelming
14 evidence the hiding and destruction of evidence was willful.
15 Contrary to the Ardent Group’s contention, four of the five factors under the
16 Ninth Circuit’s test for determining whether to impose terminating sanctions weigh in
17 favor of dismissal. See, Leon, 464 F. 3d at 958. The Ardent Group incorrectly claim
18 the first two factors (public’s interest in expeditious resolution of litigation and the
19 court’s need to manage its docket) do not favor imposition of termination sanctions.
20 On the contrary, courts have held the first two factors favor imposition of a terminating
21 sanction. Jerry Beeman & Pharmacy Servs., Inc. v. Caremark, Inc., 322 F. Supp. 3d
22 1027, 1036 (C.D. Cal. Jan. 2018) [citing Wanderer v. Johnston, 910 F. 2d 652, 656
23 (9th Cir. 1990)]. This case has been delayed for over two years because of the
24 shenanigans of the Ardent Group and the Keating Group. TRG should not have to
25 waste more money trying to reconstruct a case made more difficult to put together
26 because of the Ardent Group’s wrongful conduct.
27 In any event, courts have held the lone factor weighing against dismissal
28 (public policy favoring dismissal of cases on their merits) is not determinative.
418710_1 36 3:15-cv-00057-L-AGS
1 Leon, 464 F. 3d at 961; Jerry Beeman, 322 F. Supp. 3d at 1036.The evidence

2 establishes the Ardent Group’s destruction of documents was intentional and amounted
3 to willful spoliation of relevant evidence, thereby warranting imposition of terminating
4 sanctions. See, Leon, 464 F. 3d at 959 [“A party’s destruction of evidence qualifies as
5 willful spoliation if the party has ‘some notice that the documents were potentially
6 relevant to the litigation before they were destroyed.’”] [quoting United States v.
7 Kitsap, 314 F. 3d at 1001]. The Ardent Group knew they would be in litigation, yet
8 they intentionally destroyed and deleted documents and files to keep them out of
9 TRG’s hands.
10 The evidence of the Ardent Group’s intentional document destruction is
11 overwhelming. When, as here, “evidence is destroyed in bad faith (i.e., intentionally
12 or willfully), that fact alone is sufficient to demonstrate relevance.” Zubulake,
13 220 F.R.D. 220. Any number of documents deleted and destroyed could have been
14 relevant to TRG’s claims, but TRG will never be able to access these documents and
15 thus is extremely prejudiced because it will be forced to rely on incomplete evidence at
16 trial. Anheuser-Busch, 69 F. 3d at 354 [finding prejudice when a party’s refusal to
17 provide certain documents “forced Anheuser to rely on incomplete and spotty
18 evidence”]. Accordingly, the Ardent Group failed to meet their burden to show no
19 prejudice resulted from the spoliation. See, Apple, 888 F. Supp. 2d 976, 998.
20 Finally, given the willful and intentional spoliation of evidence, a sanction other
21 than dismissal would not adequately mitigate the prejudice TRG suffers by not having
22 the destroyed evidence. Anheuser-Busch, 69 F. 3d at 352 [“It is appropriate to reject
23 lesser sanctions where the court anticipates continued deceptive misconduct.”].
24 9. THE CONSPIRATORS’ PURPOSEFUL DESTRUCTION OF EVIDENCE
25 REQUIRES THE SPECIAL MASTER TO ISSUE TERMINATING
26 SANCTIONS.
27 While the Ardent Group intentionally failed to preserve evidence, this is one of
28 those very unusual cases where parties not only failed to preserve evidence, but
418710_1 37 3:15-cv-00057-L-AGS
1 intentionally destroyed a massive amount of evidence which cannot be recovered. The

2 testimony of the whistleblowers, the Ardent Group and Keating Group themselves, and
3 the documentary record make it clear that they did what they could to not leave a trail
4 of documents and destroyed any evidence they might have overlooked that was
5 harmful to their case. Fortunately, they did leave enough of a trail to find “footprints.”
6 But it is obvious that some of the footprints are gone forever.
7 Among other things, the Ardent Group and Keating Group did the following:
8 (1) Dalton and Silvers destroyed Abernathy’s computer because they were worried
9 she might bring damaging evidence to Jastremski (COE Ex. 758; Ex. 9 [180:12-17]);
10 (2) Keating and Mele deleted thousands of computer files before they returned their
11 computers to TRG (COE Ex. 35, ¶ 13; Ex. 7 [276:10-15]); (3) Mele destroyed his
12 notebooks and yellow notepads rather than turn them over to TRG or his own attorney
13 (COE Ex. 188, ¶ 18); (4) Silvers deleted approximately 10,000 files before delivering
14 his computers to Sevel (COE Ex. 34, ¶¶ 11, 15, 23); (5) Dalton threatened Davenport
15 after seeing his declaration (ECF 157-4, ¶¶ 105-107; ECF 157-4, Ex. 7; COE Ex. 14
16 [352:12-353:6]; Ex. 9 [51:5-8; 93:20-22]); (6) Keating refused to produce critical text
17 messages about his departure from TRG, which were found on Silvers’ computers
18 (ECF 157-4, ¶ 76; COE Ex. 900); (7) Gigliotti claimed he lost two years of text
19 messages (ECF 192 [15:16-16:4]) and did not produce critical text messages about his
20 departure from TRG, which were found on Silvers’ computers (ECF 157-4, ¶ 76; COE
21 Ex. 900); (8) Gigliotti claims his Dropbox “disappeared” (COE Ex. 6 [292:3-24]); (9)
22 Silvers had Nelson “clean” computers two months after this litigation began (COE Ex.
23 641; Ex. 10 [319:2-11]); (10) Gigliotti failed to identify that he used a Microsoft
24 Surface 2 in his interrogatory responses (COE Ex. 893 [12:17-25]), and nothing
25 appears to have been produced from this device; (16) Gigliotti told Mele that he was
26 going to “call FINRA and ask for a list of illegal crap from a diff phone” suggesting it
27 was a “throw away” phone that could not be recovered (COE Ex. 897); (11) Even
28 though Keating and Gigliotti did not identify any desktop computers in their
418710_1 38 3:15-cv-00057-L-AGS
1 interrogatory responses, Lujano testified that they did use them at Ardent (COE Ex.
2 893 [12:17-25]; Ex. 894 [14:2-10]; Ex. 15 [243:17-18; 244:20-24]); (12) Silvers
3 deleted tens of thousands of documents from his computers and external drives before
4 giving them to Sevel (COE Ex. 34, ¶¶ 11, 15, 23); (13) Silvers installed a program
5 called DBAN, a “Hard Drive Eraser & Data Clearing Utility” program on one of his
6 thumb drives before delivering it to Sevel (COE Ex. 34, ¶ 16) and it appears that
7 program was used (R.T. 329:6-15; (14) The Ardent Group and Keating Group deleted
8 prospect names from their databases before providing them to a neutral third party, D4,
9 for comparing overlaps (ECF 243 and 243-1; R.T. 420:4-14); (15) Keating and
10 Gigliotti used a cloud program called “Box” to store client information but did not
11 identify it in their interrogatory responses (COE Ex. 893 [6:23-7:11]; Ex. 894 [7:25-
12 8:19]; Ex. 16 [115:19-23]; Ex. 895); (16) Gigliotti did not identify OneDrive in his
13 interrogatory responses to TRG, even though he said that if something had to do with a
14 client, it would go in OneDrive (COE Ex. 893 [6:23-7:11]; Ex. 6 [295:15-296:10]);
15 (17) Gigliotti told Silvers on at least two occasions to keep communications in text and
16 not email, but the texts are all missing (COE Ex. 896); (18) the conspirators used secret
17 Google Drives and false email addresses but nothing has been produced from them,
18 because they deny actually using them. (COE Ex. 7 [396:20-397:17; 283:13-285:2];
19 Ex. 6 [151:17-152:2]; Ex. 10 [137:13-138:21]; Ex. 567)
20 It is TRG’s burden to prove spoliation took place – not to show documents are
21 recoverable or otherwise available. To the extent documents could be recovered, the
22 burden is on the Keating Group to prove documents are recoverable. “[S]poliation of
23 evidence raises a presumption that the destroyed evidence goes to the merits of the
24 case, and further, that such evidence was adverse to the party that destroyed it . . .”
25 Apple, 888 F. Supp. 2d at 998. If spoliation is shown, “the burden of proof logically
26 shifts to the guilty party to show that no prejudice resulted from the spoliation
27 because that party “is in a much better position to show what was destroyed and should
28 not be able to benefit from its wrongdoing.” (Emphasis added.) Id. at 998 [quoting
418710_1 39 3:15-cv-00057-L-AGS
1 Hynix Semiconductor Inc. v. Rambus, Inc., 591 F. Supp. 2d 1038, 1060 (N.D. Cal.
2 2006), overturned on other grounds]. It is, therefore, up to the parties who destroyed
3 evidence to show that there is no harm – not up to TRG to prove otherwise and incur
4 costs to do so. See, Apple, 888 F. Supp. 2d at 998.
5 Litigants should not be rewarded for gaming the judicial system. When parties
6 deliberately destroy evidence, there must be severe consequences. TRG will never be
7 able to access these missing documents and thus is extremely prejudiced because it
8 will be forced to rely on incomplete evidence at trial. Anheuser-Busch, 69 F. 3d at 354
9 [dismissal is appropriate where the victim of spoliation is “forced Anheuser to rely on
10 incomplete and spotty evidence”]. See also, Leon, 464 F. 3d at 960.
11 A. Dalton And Silvers Destroyed Important Evidence And Attempted To
12 Undermine These Proceedings By Repeatedly Testifying Falsely.
13 Dalton and Silvers worked to steal TRG information from 2012 up to the last
14 days that the Keating Group worked with TRG. But even before the Keating Group left
15 TRG, the plan was to make discovery in the anticipated litigation as difficult as
16 possible. When Keating made his home office visit to SAI in July of 2014, Dalton
17 asked SAI to carry out its approval process with “No emails, all old-school pen and
18 paper.” (COE Ex. 955) Interestingly, in the text messages where Dalton made this
19 statement to Mike, he said “The lawyer there [at SAI] said ‘hey, we’re just recruiting a
20 representative from another firm. We’re not trying to steal John’s trade secrets or lead
21 program.’” Dalton immediately followed that statement with another: “Which is true,
22 THEY are not.” (COE Ex. 41, p. 61 of 140) The obvious inference from this statement
23 is that while SAI was not trying to steal trade secrets, the Ardent Group and the
24 Keating Group were trying to steal them.
25 In the weeks preceding the Keating Group’s departure, the Conspirators had a
26 conference call where an agenda item was to “Minimize discoverable and subpoenas.”
27 (COE Ex. 567; Ex. 9 [145:5-7]) The Conspirators followed this strategy for the rest of
28 this litigation. In another conference call, the conspirators referenced “Keating doc
418710_1 40 3:15-cv-00057-L-AGS
1 disposal.” (COE Ex. 739) It is impossible for anyone (other than the conspirators) to
2 know exactly was hidden or destroyed. The Ardent Group’s contention Mike
3 manufactured this evidence is laughable – and one more attempt to game the legal
4 process. This contention was never made until opening statement at this hearing.
5 Once the Keating Group left TRG to join Ardent, Dalton and Silvers engaged in
6 a systematic effort to destroy all traces of evidence showing that they took TRG
7 information. Almost immediately after the Keating Group joined SAI, White reported
8 to Dalton that one computer was fried. (COE Ex. 41, p. 2 of 5) In March of 2015,
9 Nelson told Silvers to “Throw that tower and laptop in your car. I have an extra hard
10 drive you can have if I need to copy any personal files before cleaning them.”
11 (Emphasis added.) (COE Ex. 641; Ex. 10 [319:2-11])
12 In exchanges on May 25, 2015, months after this litigation was filed, Silvers
13 expressed frustration to Dalton about Abernathy’s performance and his decision to
14 terminate her the following week. (COE Ex. 10 [247:4-21]) Dalton told Silvers to
15 “tread lightly” because “if she decides to call John [Jastremski] and stir the pot out of
16 revenge, we have issues.” (COE Ex. 758; Ex. 9 [180:12-17]) When the time to
17 terminate Abernathy finally came in August of 2015, Dalton told Silvers to “crack”
18 Abernathy’s personal laptop and wait until Abernathy’s roommate went to lunch as
19 well. (COE Ex. 654) Abernathy returned to find her computer no longer worked and
20 had to have its hard drive replaced. (COE Ex. 10 [315:6-23]) In his response to
21 Abernathy’s request for reimbursement for her failed hard drive, Dalton complained
22 that the technician at Best Buy “probably diagnosed her computer based on the fact
23 that it had failed, and doesn’t know the circumstances behind it.” (COE Ex. 10
24 [316:13-22]) Obviously, Silvers and Dalton did know the circumstances. They
25 intentionally “fried” Abernathy’s hard drive.
26 Dalton’s testimony that he was concerned Abernathy had personally identifiable
27 information on her computer is not credible. Abernathy had been using her personal
28 computer from the time she started and, therefore, it is therefore obvious the Ardent
418710_1 41 3:15-cv-00057-L-AGS
1 Group knew she would have personally identifiably information on the computer.
2 There is not a shred of evidence suggesting Dalton or Silvers told Abernathy about
3 their concerns regarding her potentially having personally identifiable information on
4 the computer or asked her to remove it. Dalton’s explanation that he was more
5 concerned about personally identifiable information being on her computer than he
6 was about his unauthorized access to someone else’s personal property, strongly
7 suggests his motive was to do something other than protect customer information.
8 When Exhibit 545 and 654 are read together, the only reasonable inference was Dalton
9 was afraid after Abernathy was fired, she wo use in this litigation. Of great
10 importance, we will never know what that information was – but whatever it was, it
11 scared Dalton and Silvers.
12 Likewise, the testimony of Dalton and Silvers that Abernathy’s computer was
13 working just fine when she returned from lunch is refuted by Exhibit 544 where
14 Abernathy told Mele that her computer had been “fried” by a power surge a week
15 earlier (i.e., on or about August 4, 2015, the day of the “crack it” text) Abernathy was
16 obviously clueless as to what happened to her computer but, it is equally obvious
17 someone told her it was a power surge even though Silvers denied he knew anything
18 about what caused the Abernathy’s computer to fail. (COE Ex. 10 [315:6-316:22])
19 But physical computers were not the only items that Silvers and Dalton ensured
20 were destroyed. By the time Silvers turned his computers in to Sevel, he made sure the
21 Google Drives the Ardent office used were cleaned of any information that the Ardent
22 personnel testified they stored there. (COE Ex. 445; Ex. 34 ¶¶ 7, 25, 29; Ex. 10
23 [111:21-112:7]; Ex. 39 [50:19-51:19]) Sevel also found that on the day Silvers turned
24 in his computers, he modified his “iCloud Drive” cloud drive so that it only contained
25 three empty folders. (COE Ex. 34, ¶ 27) When Sevel examined the computers and
26 external drives he received from Silvers, he found that tens of thousands of documents
27 were deleted from them. (COE Ex. 34, ¶¶ 11, 15, 23) Sevel also found: (1) there was
28 an upgrade to Windows 10 on the first computer Silvers turned over which modified
418710_1 42 3:15-cv-00057-L-AGS
1 files and data which made it impossible to tell which USB devices were connected
2 prior to December 5th (R.T. 326:7-21); (2) approximately 25 percent (25%) of the
3 LNKs to the Google Drive on the firsts computer was permanently deleted
4 (R.T. 326:22-327:9); (3) the same USB drive that included the DBAN software had
5 been wiped itself (R.T. 327:16-20; 329:7-15); (4) Silvers used another USB device
6 with a program called “VeraCrypt” to encrypt another computer that Silvers had
7 originally withheld (R.T. 331: 2-8; 331:16-25); (5) Silvers deleted 1712 from a Lexar
8 USB device, and only about 17 percent (17%) of those files were recoverable
9 (R.T. 332:8-23); (6) the second computer that Silvers provided also had a recent
10 Windows 10 upgrade which inhibited the examination (R.T. 332:25-333:12); (7) the
11 second computer also had numerous deleted files (R.T. 333:12-13); (8) Silvers told
12 Sevel that he no longer had access to Dropbox (R.T. 333:17-22); (9) the Box.com
13 credentials that Silvers provided did not work, and Silvers later told Sevel that he no
14 longer had access to Box.com (R.T. 333:23-334:2); and (10) Sevel could not find
15 Gmail accounts for the relevant time period, which had to be deleted intentionally.
16 (R.T. 335:9-13)
17 Dalton was at the center of the effort to hide and destroy evidence. In August
18 2015, the same time that Abernathy’s computer was destroyed, Dalton received a text
19 message from Barbara Sullins, one of the former TRG recruits the Ardent group
20 snatched from TRG, that said, “FYI, given discovery requests from JJ, we will not be
21 putting sem [sic] prospects in Ardent CRM. We do not want any emails, etc. linking
22 with Ardent at this point in time. Thanks, Barb.” (COE Ex. 41, p. 1 of 1)
23 Dalton’s use of aliases X, Y, and Z to conceal the identities of the Keating
24 Group also shows a conscious effort to hide evidence. Dalton’s testimony he could not
25 be certain who these people were was false. (R.T. 472:22-474:6) In COE Exhibits 669,
26 618, 612, 733, 729, 670, it is obvious Dalton knew who X was, who Y was, and who Z
27 was, and his testimony to the contrary was false. (COE Ex. 9 [174:8-11])
28 ///
418710_1 43 3:15-cv-00057-L-AGS
1 Dalton also testified falsely regarding his 25 Point Plan. Although Dalton
2 claimed to be a busy man, he testified that the 25 Point Plan did not serve any real
3 purpose. (R.T. 276:10-277:6) But Mike refuted Dalton. Mike credibly testified the
4 purpose of the 25 Point Plan was to “bring down” TRG through regulatory proceedings
5 that would “lead to TRG’s bankruptcy and collapse.” (R.T. 277:7-278:11) Indeed,
6 Dalton confirmed he did report TRG to regulatory bodies and TRG confirmed
7 regulatory bodies investigated TRG in response to Dalton’s complaints. (R.T. 278:21-
8 279:20; 197:3-8; 199:14-17) The Securities and Exchange Commission and the
9 Financial Industry Regulatory Authority both exonerated from Dalton’s false
10 accusations. (R.T. 198:9-199:4; 199:14-15; 201:23-24)
11 Dalton also testified falsely about his effort to create regulatory “brush fires” to
12 harass TRG and to make it difficult for TRG to litigate. (R.T. 183:22-184:3) As Mike
13 testified, the purpose of these brush fires was to make it as difficult as possible for
14 TRG to litigate this matter. (R.T. 277:7-278:11) The testimony about “brush fires”
15 shows the length to which Dalton would go to undermine the legal process and commit
16 perjury. Dalton’s testimony that his reference to brush fires was simply a “to-do list”
17 in connection with onboarding new brokers was preposterous and perjurious.
18 (R.T. 192:4-194:19)
19 Dalton also lied about not knowing he would be sued in this case to avoid the
20 requirement to preserve evidence. At his deposition, Dalton denied he knew he would
21 be sued in this case and then was directly impeached by his own text message showing
22 he knew Keating, SAI, and Dalton would be sued after the SAI raid on TRG.
23 (R.T. 209:16-210:6; 211:3-212:13) Once again, Dalton’s denial that he knew he would
24 sued was willfully false testimony (i.e., perjury).
25 When the time to do a database comparison by a neutral third party (D4) came,
26 The Ardent Group decided to hide the number of prospects they had in common with
27 TRG by deleting prospects from the Ardent database. (R.T. 420:4-14) By checking
28 files that TRG found on Silvers’ computer and comparing the D4 “matches,” TRG
418710_1 44 3:15-cv-00057-L-AGS
1 found that the Ardent Group withheld thousands of names from D4. (ECF 243,
2 243-1). Again, obvious tampering with evidence. The Ardent Group’s only
3 explanation was the expert ESI company must have made a mistake. (Transcript not
4 available.)
5 B. Dismissal is The Appropriate Remedy For the Conspirators’ Willful
6 Concealment and Destruction of Critical Evidence That They Knew
7 Might Fall Into The Hands of TRG.
8 Because the Conspirators destroyed of a massive amount of relevant evidence,
9 lesser sanctions are inappropriate. A sanction other than dismissal would not
10 adequately mitigate the prejudice TRG suffers by not having the evidence. Given the
11 destruction of evidence, how would TRG know what is missing? Instructing the jury
12 to draw an adverse inference or excluding witness testimony would not be an adequate
13 remedy, as the jury would have to speculate as to what is missing and will never know.
14 Moreover, the Conspirators have engaged in deceptive conduct and will continue to do
15 so. See, In re Napster, 462 F. Supp. 2d at 1074.
16 It is because it is virtually impossible for victims of spoliation to identify
17 evidence which has been destroyed, that courts have found terminating sanctions for
18 intentional destruction of evidence are appropriate. See, Anheuser-Busch, 69 F. 3d at
19 353-354; Leon, 464 F. 3d at 959-961. TRG does not know what it does not know. It is
20 up to the Ardent Group to show that there is no harm – not up to TRG to prove
21 otherwise. See, Apple, 888 F. Supp. 2d 976, 998 (stating if spoliation is shown, “the
22 burden of proof logically shifts to the guilty party to show that no prejudice resulted
23 from the spoliation” because that party “is in a much better position to show what was
24 destroyed and should not be able to benefit from its wrongdoing” [quoting Hynix,
25 591 F. Supp. 2d at 1060, overturned on other grounds]. Accordingly, the SAI,
26 Keating, and Ardent parties have the burden of proof backwards.
27 At the hearing, the Ardent Group made no effort to prove any of the missing
28 evidence could be recovered. The only thing they said in that regard was “everything
418710_1 45 3:15-cv-00057-L-AGS
1 is still in the cloud.” But as Dalton admitted in cross-examination, if documents were

2 not put on the cloud, then they cannot be found there; likewise if documents were
3 deleted from the cloud, they will now be missing. (Transcript not available.)
4 In Leon, the Court of Appeals concluded the plaintiff-appellant’s deletion and
5 wiping of over 2,000 files from his employer-provided laptop computer, while
6 litigation was pending, was “indisputably intentional [and] amounted to willful
7 spoliation of relevant evidence.” 464 F. 3d at 959. In Leon, Dr. Mauricio Leon
8 (“Leon”), sued his former employer alleging violations of various federal and state
9 laws in connection to his termination. The district court dismissed Leon’s case with
10 prejudice after finding Leon willfully destroyed evidence by deleting 2,200 files from
11 his employer-issued laptop while litigation was pending. Id. at 955. According to the
12 district court, Leon’s behavior amounted to willful spoliation because Leon knew he
13 had a duty to preserve all data on his employer-issued laptop, yet intentionally deleted
14 thousands of personal and work-related files; Leon then wrote a program to write over
15 the deleted documents. Id. at 959.
16 On appeal, the Leon court focused on whether Leon acted in bad faith. The
17 Court of Appeals analyzed the bad faith requirement as follows:
18 “Leon admits that he intended to destroy information,
including evidence of pornographic files, but he contends
19 that his intent was merely to protect his privacy. Leon had
ample notice, however, that the files he destroyed were not
20 merely ‘private’ and were potentially relevant to the
litigation at hand. Leon ran the wiping program,
21 eliminating over 2,200 files, including pornographic files,
well after IDX had filed its action for declaratory judgment
22 and he had filed his own employment discrimination
action. IDX’s declaratory judgment action sought to
23 establish whether IDX could legally fire Leon for his ‘failure
to satisfactorily perform his job duties.’ Therefore, Leon was
24 on notice that files created on his employer-issued computer
were relevant to a lawsuit centering on the existence of
25 legitimate grounds for firing Leon. . . Leon was on notice
that files created in violation of . . . IDX company policy
26 would be relevant to IDX’s lawsuit against him.” (Emphasis
added.) Leon, 464 F. 3d at 959.
27
28 ///
418710_1 46 3:15-cv-00057-L-AGS
1 The Court of Appeals concluded the district court’s finding that Leon acted in bad faith
2 was not clearly erroneous. Leon., 464 F. 3d at 959.
3 Next, the Leon court addressed the extent to which IDX needed to prove
4 prejudice. The district court recognized there was no way to recreate the contents of
5 Leon’s personal files, which likely would have been “‘at the heart of IDX’s defense
6 were [the files] available.’” Leon, 464 F. 3d at 959-960. The Leon court stated:
7 “Leon’s spoliation ‘threatened to distort the resolution’ of the
case . . . because any number of the 2,200 files could have
8 been relevant to IDX’s claims or defenses, although it is
impossible to identify which files and how they might have
9 been used.” Leon, 464 F. 3d at 960.
10 Therefore, even though (as in this case) IDX could not specifically point to any
11 prejudice because it could not determine what files had been deleted, the Leon court
12 concluded the district court’s finding of prejudice to IDX was not clearly erroneous.
13 Id. at 960. The same is true for TRG. TRG will never be able to show what was on
14 Abernathy’s computer, but whatever it was, it frightened Dalton. Likewise, TRG will
15 never know what was on the secret Google Drives or secret email addresses. If
16 Davenport and Mike are to be believed, there was a massive destruction of evidence.
17 (R.T. 285:20-286:10; 432:24-438:10; 438:2-11) TRG knows some of what has been
18 lost but will never be able to identify the scope of all the destruction. That is why
19 courts treat the willful destruction of evidence so harshly.
20 Lastly, in reviewing whether the district court should have considered lesser
21 sanctions, the Leon court considered three criteria:
22 “(1) whether the district court explicitly discussed the
23 feasibility of less drastic sanctions and explained why such
alternate sanctions would be inappropriate; (2) whether the
24 district court implemented alternative sanctions before
ordering dismissal; and (3) whether the district court warned
25 the party of the possibility of dismissal before ordering
dismissal.” Leon, 464 F. 3d at 960 (citing Anheuser-Busch,
26 69 F. 3d at 352).
27 The Court of Appeals concluded the district court satisfied the first criterion in
28 finding that “‘less drastic sanctions are not useful’ because a ruling excluding evidence
418710_1 47 3:15-cv-00057-L-AGS
1 would be ‘futile,’ and fashioning a jury instruction that creates a presumption in favor
2 of IDX ‘would leave Defendants equally helpless to rebut any material that Plaintiff
3 might use to overcome the presumption.’” Leon, 464 F. 3d at 960. The other two
4 criteria were inapplicable because Leon’s spoliation of evidence occurred before the
5 district court had an opportunity to compel discovery or otherwise order lesser
6 sanctions, or to warn Leon of the possibility of dismissal. In other words, the willful
7 destruction of evidence made the other two factors moot. These same factors apply
8 equally to TRG as lesser sanctions will be of little effect.
9 The Court of Appeals held that four of the five Anheuser-Busch factors
10 supported the district court’s decision to dismiss Leon’s case. Leon, 464 F. 3d at 960.
11 While one of the five factors weighed against dismissal (i.e., public policy favoring
12 dismissal of cases on their merits), that factor alone was insufficient to outweigh the
13 other four factors. Id. at 961. Accordingly, the Court of Appeals affirmed the district
14 court’s dismissal. Id. at 961, 963.
15 Similarly, in Global NAPs, 603 F. 3d at 71, the First Circuit Court of Appeals
16 affirmed a district court’s decision to terminate a case for a single act of wrongdoing.
17 The district court found that Global NAPs, Inc. (“GNAPs”), the GNAPs companies,
18 and their owner, Frank Gangi (“Gangi”), committed willful discovery misconduct and
19 lied to the court. Id. at 93-94. The Court of Appeals found defendants withheld and
20 destroyed financial records. Id. For instance, the bookkeeper testified that
21 information contained in a computer accounting program – the one place where
22 financial transactions were recorded – were lost when she dropped her computer down
23 a flight of stairs. Six months later, the bookkeeper deleted files on her new computer
24 using a program called Windows Washer, claiming she wanted to avoid having
25 personal information produced during discovery. Id.
26 The Court of Appeals stated the district court could conclude that the
27 bookkeeper’s stories were “‘wholly incredible’” (as in this case) because both alleged
28 “computer mishaps” were suspiciously timed. Global NAPS, 603 F. 3d at 93-94. The
418710_1 48 3:15-cv-00057-L-AGS
1 computer was dropped around the same time the court was beginning to scrutinize the
2 defendants’ finances. And the computer wipe occurred mere minutes before GNAPs’
3 attorneys arrived to gather documents for discovery. Id. at 94. The district court,
4 relying on testimony provided by a computer expert, had discretion to conclude the
5 deletion of files was intentional and targeted relevant records. Id. Just as in this
6 case. Finally, there were good grounds to find “the defendants lied to the court about
7 when they ‘lost’ their financial records.” Global NAPs, 603 F. 3d at 94. The court
8 rejected defendants’ argument the district court should have found they were guilty
9 only of poor recordkeeping and accidents. Id. The court observed, “That story was
10 contradicted by evidence and common sense. The court certainly could conclude the
11 better explanation was that the defendants had willfully concealed and destroyed
12 evidence.” Id. Just as in this case.
13 In this case, the number of “mishaps” are countless, and the Keating Group and
14 the Ardent Group consistently lied to the court about those “mishaps.” When the
15 events and destruction of evidence are put into context, it is obvious the destruction of
16 evidence was willful and done to prevent disclosure of damaging evidence. There
17 must be a serious consequence for such improper behavior that goes to the heart of the
18 legal system.
19 C. As Each of The Conspirators Was Engaged In A Common Conspiracy
20 to Steal Trade Secrets and Destroy Evidence of the Theft to Cover Up
21 the Theft, Each Is Responsible For The Acts of The Others And
22 Terminating Sanctions Should Be Issued Against Each Party.
23 The declarations of the whistleblowers and the documentary evidence should
24 leave no doubt in the special master’s mind that the Ardent Group and the Keating
25 Group were engaged in a conspiracy. The Keating Group worked in tandem with
26 Dalton prior to terminating with TRG by calling Dalton’s attorney to develop the
27 “brush fires.” (COE Ex. 601) They diverted an onboarding group of advisors who
28 represented two million dollars in revenues from TRG to Ardent/SAI while using code
418710_1 49 3:15-cv-00057-L-AGS
1 names to keep “plausible deniability.” (COE Exs. 618, 612, 669, 670; Ex. 41, p. 76 of
2 187) They mutually used deceptive tactics to hide and delete evidence. After the first
3 terminating sanctions hearing, the Keating Group retained the same attorney as the
4 Ardent Group.
5 Where there is a conspiracy, each act of a conspirator is attributable to each of
6 the other conspirators. See, Pinkerton v. United States, 328 U.S. 640 (1946).
7 Accordingly, the willful destruction of evidence by one conspirator in this case is
8 deemed a destruction of evidence by all. While no cases explicitly state a court may
9 issue terminating sanctions based on vicarious liability or agency theories, the Ninth
10 Circuit has upheld a default judgment against defendants as a terminating sanction for
11 Rule 37 violations, even though not all defendants engaged in misconduct. See,
12 Adriana Intern. Corp. v. Thoeren, 913 F. 2d 1406 (9th. Cir. 1990). In Adriana, the
13 district court dismissed Adriana’s complaint, struck appellants’ answers to
14 cross-claims, and entered default judgment as a sanction for discovery abuses.
15 Id. at 1409. The Adriana court found the record supported the district court’s findings
16 the appellants violated several court orders. Id. at 1411. The appellants argued they
17 were not the ones who engaged in misconduct. The Adriana court rejected this
18 contention because the individual defendants “participated” in misconduct.
19 Id. at 1414. The court also stated that even misconduct of the appellants’ attorney
20 could be imputed to all his clients. Id. The Ninth Circuit concluded, “[Appellants’]
21 argument that misconduct by one party cannot be grounds for sanctioning an
22 ‘innocent’ party fails because none of the parties in this case are ‘innocent.’” Id.
23 Accordingly, the Adriana court affirmed the default judgment sanction for the
24 appellants’ “outrageous behavior.” Id. at 1417.
25 But here, as the Special Master suggested, the conspiracy was to steal trade
26 secrets and destroy evidence to cover up the theft. (R.T. 75:6-12; 712:18-713:3)
27 Accordingly, the issue is not a conspiracy to destroy, but a conspiracy to steal trade
28 secrets and cover up what had been done.
418710_1 50 3:15-cv-00057-L-AGS
1 10. ANOTHER FACTOR THE SPECIAL MASTER MUST CONSIDER IS

2 THE DALTON GROUP’S LONG HISTORY OF DISCOVERY ABUSE.
3 As part of the 25 point brush fire campaign, the Ardent Group hoped to stretch
4 out discovery as long as possible and wait for regulatory bodies to “bring down” TRG.
5 (R.T. 195:20-197:1) Almost two years passed before the Ardent Group produced any
6 documents at all and when they did – it was just 12 documents consisting of 17 pages.
7 (COE Ex. 999A) Throughout this case, The Ardent Group dragged its feet refusing to
8 comply with discovery. Not including this motion for terminating sanctions, TRG was
9 forced to bring six motions regarding discovery. The court sanctioned the Ardent
10 Group four times and awarded a total of $29,246.00 against the Ardent Group.
11 (COE Ex. 999A) Even when sanctioned, the Ardent Group refused to pay sanctions
12 timely and Judge Schopler almost terminated the Ardent Group at the hearing on the
13 order to show cause until sanctions were paid at the hearing. (COE Ex. 999A) When
14 this long history of scoffing at the discovery process is combined with the evidence
15 presented at this hearing, this case screams out for terminating sanctions. The Ardent
16 Group has shown nothing but contempt for the legal system which is why it is already
17 been found to have been in contempt two times. (ECF 188 and 380)
18 11. DESPITE AN ORDER FROM THE SPECIAL MASTER, AN ORDER
19 FROM THE COURT, AND BEING REMINDED THAT SANCTIONS
20 REMAIN UNPAID, DALTON HAS DONE NOTHING TO PAY THE
21 BALANCE OF SANCTIONS OWED.
22 It is amazing that even though he is facing terminating sanctions, Dalton
23 continues to play games regarding the payment of sanctions. At the last hearing before
24 Judge Schopler in January 2019, Dalton was only able to reverse the court’s tentative
25 ruling to issue terminating sanctions when minutes before the court took the bench,
26 Dalton presented a check to TRG covering sanctions owed.
27 The day before that, the Special Master recommended sanctions be issued
28 against the counterdefendants jointly and severally against the Ardent Group and the
418710_1 51 3:15-cv-00057-L-AGS
1 Keating Group, and Judge Lorenz approved that order. Notwithstanding that order, as
2 discussed on the last day of the hearing on terminating sanctions, TRG brought to the
3 court’s attention that Dalton still had not paid the sanctions he was ordered to pay.
4 Attached to the Supplemental Compendium of Exhibits as Exhibit 1058 is an email
5 from Dalton’s counsel stating that her client still has not gotten back to her about
6 whether Dalton would pay the sanctions owed. One easy inference from this situation
7 is that – yet another attorney – is having problems getting Dalton to do what he is
8 required to do. This refusal to pay sanctions – again – is grounds by itself to terminate
9 Dalton.
10 12. CONCLUSION
11 Extraordinary cases like this demand extraordinary remedies. TRG
12 convincingly presented evidence the Ardent Group did everything in their power to
13 avoid creating evidence, hide evidence, and destroy evidence. Even when their lies
14 were obvious, the Ardent Group had no hesitation to lie at deposition and lie again at
15 the hearing on terminating sanctions. The Ardent Group’s actions undermine the
16 integrity of the judicial process and made it extremely costly for TRG to obtain justice.
17 In fact, as Mike testified, a key component of Ardent’s 25 point plan was to stonewall
18 discovery and hope the SEC or FINRA brought TRG to its knees before TRG could
19 obtain justice. The history of Dalton’s refusal to comply with discovery – and his
20 refusal to pay sanctions he was ordered to pay – should cause any court to recognize
21 that Dalton would continue to undermine the judicial process at every turn.
22 The Ardent Group misrepresented the law when they repeatedly stated it is
23 TRG’s burden to prove prejudice. The law is quite the opposite. Once intentional
24 destruction of evidence has been proven, it is up to the party who destroyed evidence
25 to show the evidence is recoverable. Here, the Ardent Group did not make the
26 slightest effort to prove evidence is recoverable and that contention would be
27 inconsistent with what the experts on both sides found. The closest the Ardent group
28 came to proving there is not prejudice was to state all evidence could be found “on the
418710_1 52 3:15-cv-00057-L-AGS
1 cloud," even though Dalton conceded that if evidence was never loaded to the cloud or
2 deleted from the cloud, it could not be found on the cloud.
3 The overwhelming evidence in this case proves a willful destruction of evidence
4 and complete disrespect for the judicial process. If this is not an appropriate case for
5 terminating sanctions, then what is?
6 GERALD A. KLEIN
KLEIN & WILSON
7
8 Dated: April 25, 2019 By:=----=-~=--=-;~-\------,~=-------
Gerald . K ei , P.C.
9 Attorneys £ Defendant/Counterclaimant
The Retirem nt Group, LLC and
10 Defendant J A. Jastremski
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
53 3:15-cv-00057-L-AGS
418710_1

TRG Closing Brief On TRG V Keating

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

TRG Closing Brief On TRG V Keating

Uploaded by

Copyright:

Available Formats

Case 3:15-cv-00057-L-AGS Document 404-1 Filed 04/25/19 PageID.

1 Gerald A. Klein, Esq. (Bar No. 107727)

1 C. As Each of The Conspirators Was Engaged In A

7 Anheuser-Busch, Inc. v. Natural Beverage Distributors,

20 JustMed, Inc. v. Byce, 600 F. 3d 1118 (9th Cir. 2010) .................................................. 17

1 TeleVideo Systems, Inc. v. Heidenthal,

3 United States v. Kitsap Physicians Serv.,

1 Defendant and counterclaimant The Retirement Group, LLC (“TRG”) and

1 TRG PowerPoint presentation that it left a reference to TRG in the PowerPoint

1 “(d) ‘Trade secret’ means information, including a formula,

1 information is more difficult to obtain and an employer is required to spend resources

1 Id. at 632-33. By announcing her departure in conjunction with a solicitation of

1 4. DALTON MASTERMINDS A CONSPIRACY TO STEAL

1 doing. (COE Ex. 15 [160:21-161:21; 162:19-25; 163:6-167:25; 168:7-191:25])

1 148:11-149:03; 217:7-8]) Ultimately, Silvers admitted everything. (COE Ex. 10

1 Confronted by declarations from Mike and Davenport, the Conspirators deposed

1 missing information. (R.T. 174:8-16) Gigliotti admitted information he needed from

1 7. THE FSC PRIVACY POLICY PROTECTS PRIVATE CUSTOMER

1 8. COURTS HAVE AUTHORITY TO GRANT TERMINATING

1 the subject of a pending discovery request.” Wm. T. Thompson Co. v. General

1 Leon, 464 F. 3d at 961; Jerry Beeman, 322 F. Supp. 3d at 1036.The evidence

1 intentionally destroyed a massive amount of evidence which cannot be recovered. The

1 is still in the cloud.” But as Dalton admitted in cross-examination, if documents were

1 10. ANOTHER FACTOR THE SPECIAL MASTER MUST CONSIDER IS

You might also like