A special master appointed by the Delaware District Court has recommended formal sanctions against both Envestnet and Yodlee to address their alleged intentional destruction of evidence in a $100 million lawsuit brought by the fintech platform provider FinancialApps.
FinancialApps' case stretches back to 2019, when it sued Envestnet and Yodlee, accusing them of misappropriating FinancialApps' proprietary software platform.
Envestnet's acquisition by Bain Capital in a $4.5 billion deal was approved by shareholders last September. Yodlee was acquired by STG Partners in late June.
FinancialApps sued Envestnet Inc. and Yodlee Inc., alleging trade secret misappropriation, tortious interference and unfair competition. On Dec. 10, 2024, Judge Jennifer L. Hall of the U.S. District Court for the District of Delaware appointed Chad S.C. Stover as special master to provide a report and recommendation for the resolution of the parties’ competing spoliation motions.
A spoliation motion is a request for sanctions against a party that has destroyed or failed to preserve evidence in a court case.
On Wednesday, Stover’s report and recommendation was publicly filed, recommending that the District Court grant the portion of FinancialApps’ motion related to the spoliation of data from a subscription service called Papertrail, and deny the defendants’ motion entirely, according to Kasowitz LLP, the firm representing FinancialApps.
Either party is permitted to file an objection, which is due next week.
A spokesperson for Envestnet said the firm does not comment on pending litigation.
"FinancialApps’ claims against Envestnet have already prevailed at summary judgment, and its case against the multi-billion-dollar wealth management giant owned by Bain Capital is now headed to a jury trial in Delaware Federal Court," Kasowitz said Wednesday.
According to Stover's report, "Envestnet and Yodlee were found to have acted with the 'intent to deprive' FinancialApps of 'highly relevant' logging data generated by software known as 'Papertrail,' which 'would have likely [provided] some of the best evidence' of Defendants’ alleged misconduct," Kasowitz states.
Stover recommended that "the trial judge instruct the jury that they are permitted to presume that the data stored in the Papertrail system, which was intentionally destroyed by Envestnet (and Yodlee), was unfavorable to Defendants," and that FinanacialApps be allowed "to provide evidence of the Defendants’ intentional spoliation at trial," a spokesperson for the law firm said.
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