SOLIANT HEALTH, LLC, Plaintiff, v. AEQUOR HEALTHCARE SERVICES, LLC, Defendant CIVIL ACTION NO. 1:23-cv-02354-LMM United States District Court, N.D. Georgia, Atlanta Division Filed April 19, 2024 May, Leigh M., United States Magistrate Judge ORDER *1 This case comes before the Court on Plaintiff's Motion for Sanctions [54]. After due consideration, the Court enters the following Order. I. BACKGROUND This case involves allegations that Defendant Aequor Healthcare Services, LLC (“Aequor”) has misappropriated Plaintiff Soliant Health, LLC's (“Soliant”) trade secrets. Dkt. No. [47]. Specifically, Plaintiff alleges that Defendant misappropriated its confidential database of candidates for healthcare jobs as well as Plaintiff's pricing information. Id. ¶¶ 32–46. Plaintiff moved for a preliminary injunction shortly after filing its complaint. Dkt. No. [12]. At a hearing on Plaintiff's motion, the Court asked Defendant whether it possessed the trade secrets at issue in this case, to which Defendant's counsel responded: “No. I mean, as we've submitted in declarations, there's no evidence that anyone who is a former Soliant employee that moved to Aequor copied anything and took it or provided it to Aequor.” Dkt. No. [33] at 8–9. The Court followed up with defense counsel, specifically asking whether Defendant was making an affirmative representation to the Court and whether counsel had verified this information with Defendant. Id. Defense counsel responded: “Yeah. Based on their understanding, they have no reason to believe that they have this information.” Id. at 9. Later in the hearing, the Court also specifically noted that, if Defendant's representation was false, it could sanction Defendant. Id. at 16. Ultimately, the Court relied on Defendant's representation in denying Plaintiff's motion for a TRO and ordering expedited discovery. Id. at 16–23, 43. Months later during discovery, Defendant informed Plaintiff that it located emails containing Plaintiff's confidential information. Dkt. No. [54] at 16–17. Defendant later produced these emails, which show that Plaintiff's former employee Thomas Yates emailed confidential information concerning approximately 1,100 of Plaintiff's candidates to Defendant's employees. Id. at 14; Dkt. No. [55-1]. Based on this newly produced evidence, Plaintiff amended its complaint, Dkt. No. [47], and filed a second motion for a preliminary injunction, which the Court granted. Dkt. No. [64]. Plaintiff also moved for sanctions based on Defendant's misrepresentation to the Court in the prior hearing. Dkt. No. [54]. II. LEGAL STANDARD A federal court may sanction a party pursuant to its inherent power. See Chambers v. NASCO, Inc., 501 U.S. 32, 43–44 (1991). The Court's inherent power is “governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.” Purchasing Power, LLC v. Bluestem Brands, Inc., 851 F.3d 1218, 1223 (11th Cir. 2017) (quoting Chambers, 501 U.S. at 43). In order to invoke its inherent power, the Court must find that a party acted in bad faith. See id. (“The key to unlocking a court's inherent power is a finding of bad faith.”). “[A] party shows bad faith by delaying or disrupting the litigation or by hampering enforcement of a court order.” Chambers, 501 U.S. at 46 (quotation omitted). The Court's inherent power “must be exercised with restraint and discretion and used to fashion an appropriate sanction for conduct which abuses the judicial process.” Purchasing Power, 851 F.3d at 1223 (quotation omitted). III. DISCUSSION *2 Plaintiff argues that Defendant's misrepresentation to the Court warrants the imposition of sanctions. Dkt. No. [54] at 23–24. Specifically, Plaintiff argues that Defendant should be required to pay Plaintiff's attorney's fees and expenses incurred for: (a) briefing Plaintiff's second motion for a preliminary injunction; (b) amending Plaintiff's complaint to reflect the newly produced evidence; and (c) conducting additional discovery “to uncover the scope” of Defendant's “cover up.” Id. at 24. Defendant responds that the statements at issue “are not misrepresentations” because Plaintiff's initial allegations focused only on the misconduct of Plaintiff's former employees Ron Washburn and Robert Lutz. Dkt. No. [58] at 3. According to Defendant, its representations to the Court concerned only Washburn and Lutz—not other of Plaintiff's former employees such as Yates. The Court disagrees with Defendant. Defense counsel broadly stated that “there's no evidence that anyone who is a former Soliant employee that moved to Aequor copied anything and took it or provided it to Aequor.” Dkt. No. [33] at 8–9. This statement is plainly untrue, given the emails sent from Yates to Defendant's employees. Further, nothing in defense counsel's statement nor its context supports Defendant's theory that the statement referred only to Washburn and Lutz. To the contrary, Plaintiff's first complaint explicitly referenced Yates and alleged that he had violated several post-employment obligations, including his obligation to maintain trade secrets. Dkt. No. [1] ¶¶ 48–50. Plaintiff also specifically mentioned Yates by name during the hearing on Plaintiff's first motion for a preliminary injunction. See Dkt. No. [33] at 17. Thus, the Court finds that Defendant's statement referred to any of Plaintiff's former employees, including Yates, and is therefore a misrepresentation. The Court also finds that this misrepresentation constitutes bad faith misconduct.[1] From the time Plaintiff filed its Complaint, Defendant has been on notice that Yates was involved in the allegations at issue in this case. At the same time, several of Defendant's employees possessed emails from Yates that clearly contained Plaintiff's candidate information along with messages such as “[Soliant] can burn” and “I am going after every direct nursing client [Soliant] had.” Dkt. No. [55-1] at 386–87. Despite possessing this information, Defendant represented to the Court that it had adequately investigated the matter and found that none of Plaintiff's former employees provided confidential information to Defendant. Ultimately, however, this statement was untrue, and a minimally adequate investigation should have revealed Yates' emails.[2] Additionally, Defendant first notified Plaintiff about the Yates emails as early as December 2023. Dkt. No. [54] at 16–17. At this point—nearly three months before Plaintiff filed its motion for sanctions—Defendant did not notify the Court that it had misrepresented a fact to the Court. Nor did Defendant do so at any point prior to the hearing on Plaintiff's motion. Defendant's failure to correct an obvious misrepresentation supports a finding of bad faith. The Court also notes that the existence of the Yates emails would have been material to the first preliminary injunction hearing, as the Court explicitly relied on Defendant's representation that it did not possess any of Plaintiff's confidential information. Thus, the Court finds that sanctions are appropriate. *3 The Court next proceeds to the question of which sanctions are appropriate. Plaintiff requests three categories of expenses, associated with: (1) briefing Plaintiff's second motion for a preliminary injunction, (2) amending its complaint, and (3) conducting additional discovery. The Court addresses each category below. First, the Court agrees with Plaintiff that Defendant should be liable for Plaintiff's attorney's fees and expenses associated with briefing its second motion for a preliminary injunction. Defendant's misrepresentation caused Plaintiff to incur additional expenses in bringing the misrepresentation to the Court's attention and renewing its arguments for a preliminary injunction. Defendant should therefore be required to compensate Plaintiff for these expenses. Second, the Court finds that Defendant should also be liable for Plaintiff's attorney's fees and expenses associated with filing its amended complaint. One of the primary amendments to Plaintiff's complaint is the addition of new allegations reflecting Yates' emails. See, e.g., Dkt. No. [47] ¶¶ 66–74. Again, Plaintiff's reliance on Defendant's misrepresentation caused Plaintiff additional expenses, because Plaintiff did not know Yates' role in sharing confidential information until after Defendant's misrepresentation came to light. Thus, Defendant must compensate Plaintiff for these expenses. Third and finally, the Court defers Plaintiff's request for attorney's fees and expenses associated with conducting additional discovery to determine the scope of Defendant's “cover up.” Plaintiff does not explain how Defendant's misrepresentation caused Plaintiff to incur specific discovery expenses, and it is unclear from the record which portions of discovery would be requested by Plaintiff regardless of Defendant's misrepresentation. Thus, the Court defers Plaintiff's request for discovery expenses. Following discovery, however, Plaintiff may file a well-briefed motion explaining why particular expenses were caused by Defendant's misrepresentation. IV. CONCLUSION In accordance with the foregoing, Plaintiff's Motion for Sanctions [54] is GRANTED in part and DEFERRED in part: Defendant is required to pay Plaintiff's reasonable costs and attorney's fees incurred in briefing its Motion for a Preliminary Injunction [54] and filing its First Amended Complaint [47]. Plaintiff's request for sanctions associated with discovery expenses is deferred until after discovery has concluded. Consistent with this Court's Local Rule 54.2, Plaintiff SHALL, within 30 days, submit an application for fees and costs related to the above filings. Defendant shall have an opportunity to respond within the next 30 days. IT IS SO ORDERED this 19th day of April, 2024. Footnotes [1] In its brief and at the hearing, Defendant did not address whether its conduct constitutes bad faith. Instead, Defendant's only argument against sanctions is that its statement was not a misrepresentation. The Court has already addressed this argument above. [2] The information provided in Yates' emails was on Plaintiff Soliant's letterhead, further demonstrating that Defendant knew or should have known that it possessed Plaintiff's information. Dkt. No. [55-1].