Award of Terminating Sanctions


Mulcahy LLP Obtains Terminating Sanctions in Trade Secrets and Unfair Competition Case

By Mulcahy LLP on December 27, 2019

LOS ANGELES, CALIFORNIA – On December 27, 2019, Mulcahy LLP obtained terminating sanctions on behalf of its client HS2 Academy in a case where Defendants – a competing business and its management team – were caught repeatedly hacking into HS2’s computer system to steal proprietary information.

HS2 is one of the largest educational consulting firms in the country. In 2015, Steve Seung Moke Park and one of HS2’s former employees, Neal Ivan Lee, opened Young Scholars Institute LLC to compete directly with HS2. After several months, HS2 started hearing from its customers that Young Scholars Institute LLC – also known as YSI – may be using copyrighted programs and other materials created by HS2. 

Soon thereafter, HS2 discovered that YSI had somehow obtained HS2’s customer list and other information not publicly available and was soliciting these customers to leave HS2 in favor of YSI. This led HS2 to file a lawsuit on January 26, 2017 for copyright infringement, misappropriation of trade secrets, and unfair competition.

HS2 was able to secure a temporary restraining order and preliminary injunction prohibiting the Defendants from accessing (or attempting to access) HS2’s computer system and emails, among other things. Still, this did little if anything to deter Defendants’ unlawful conduct.

Even with the strong circumstantial evidence of unlawful conduct, HS2 could not definitively show how Defendants were able to get through HS2’s firewall to access its proprietary information. The case dragged on for more than two and a half years with no resolution.

In August 2019, HS2 retained Mulcahy LLP to try the case. Trial was scheduled for January 2020. While preparing for trial, attorneys Kevin Adams and Cristina Truong pieced together strong circumstantial evidence that linked Defendants to the IP addresses used to access HS2’s system. With this connection, they petitioned the District Court for leave to seek additional discovery on the IP addresses used to hack into HS2’s system. The petition was granted and Mulcahy LLP was able to subpoena third-party internet records to conclusively show that Defendants had been continually accessing HS2’s computer system.      

Not only was Mulcahy LLP able to show that Defendants had engaged in the unlawful conduct underlying the lawsuit, but also that Defendants had brazenly violated the court’s injunction nearly 2,800 times by hacking into HS2’s computer and calendar systems and stealing proprietary information and customer lists. With this evidence in hand, Mulcahy LLP filed a motion for terminating sanctions.

On December 27, 2019, and just over two weeks before trial, the court granted Mulcahy LLP’s motion, struck Defendants’ Answer, and set a date for a prove up hearing on HS2’s request for compensatory and punitive damages and an award of attorneys’ fees and costs. The monetary award will be joint and several against Defendants YSI, Park and Lee.   

Mulcahy LLP is a boutique litigation firm that provides legal services to franchisors, manufacturers and other companies in the areas of antitrust, trademark, copyright, trade secret, unfair competition, franchise, and distribution laws.

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