Envestnet, Inc. Found to have Actively Participated in Spoliation and now Faces $100 Million Trade Secret Misappropriation Claim in Delaware Jury Trial

Six years into a $100 million lawsuit brought by Kasowitz LLP on behalf of fintech pioneer FinancialApps, LLC against defendants Envestnet, Inc. and Yodlee, Inc. for trade secret misappropriation, tortious interference, and unfair competition, a Special Master appointed by the Delaware District Court has recommended formal sanctions against both Envestnet (recently acquired by Bain Capital) and Yodlee (recently acquired by STG Partners), to address their intentional spoliation of evidence.  Defendants 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.  

On December 10, 2024, Judge Jennifer L. Hall of the United States 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.  On August 20, 2025, Special Master Stover’s Report and Recommendation was publicly filed, recommending that the District Court grant the portion of FinancialApps’ motion related to the spoliation of Papertrail data, and deny Defendants’ motion entirely.  

Among other things, Special Master Stover found that logs generated by Papertrail—which markets itself as “a flight data recorder for . . . apps”—were “highly relevant” to FinancialApps’s trade secret misappropriation claim; that “Defendants had a duty to preserve” Papertrail’s log data; and that Defendants instead “unilaterally and intentionally cancelled the [Papertrail] subscription days after FinancialApps filed [its] lawsuit,” resulting in permanent deletion.  

Rejecting Defendants’ various reasons for failing to preserve the Papertrail data as “flimsy,” Special Master Stover was equally unswayed by Envestnet’s attempt to saddle its former subsidiary and co-defendant, Yodlee, with exclusive responsibility for the spoliation, finding that “Envestnet is responsible for the failure to preserve because it actively participated in the decision to discontinue the Papertrail subscription without preserving the data,” and “actively participated in the spoliation.”  
Notably, Special Master Stover found that “Defendants acted with an intent to deprive” FinancialApps of the Papertrail data, because “Defendants issued a document-hold notice covering the Papertrail ESI, then made the unilateral decision to contradict the hold notice and delete the Papertrail ESI, and cancelled the subscription that necessarily resulted in deletion of the Papertrail ESI a few days after FinancialApps filed its complaint.”  

As a sanction for their misconduct, Special Master Stover recommended that a permissive adverse inference be granted, allowing the jury “to presume that the Papertrail ESI was unfavorable to Defendants,” and further, that FinancialApps be granted leave to submit “evidence of spoliation at trial.”

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.

A copy of the report is available here.

The Kasowitz LLP team representing FinancialApps is led by partners Marc E. Kasowitz, Matthew A. Kraus, and A. Macdonald Caputo, Jr., and includes associates Joshua Marks, Frank Piacenti, and Kathleen Kennedy.