E360 Insight, Inc. v. Spamhaus Project
2011 U.S. App. LEXIS 18322
| 7th Cir. | 2011Background
- e360 Insight, Inc. sued Spamhaus Project in federal court for tortious interference with contract, tortious interference with prospective economic advantage, and defamation; Spamhaus removed, later defaulted, and a district court awarded $11,715,000 in damages.
- On remand for damages after a prior remand, the district court awarded $27,002 ($27,000 for contract interference and $1 nominal for the other two claims) after a bench trial.
- Spamhaus challenged the damages award, and e360 cross-appealed; the Seventh Circuit initially affirmed the default judgment but vacated the damages award and remanded for more inquiry.
- The district court imposed discovery sanctions on e360 for repeated deposition failures and late, expansive interrogatory responses, striking sixteen new witnesses and damages testimony beyond the original $11.7 million figure.
- Exhibit 5(a), a new damages analysis, was excluded for being disclosed late and for lack of admissible methodology under Rule 702, among other reasons.
- Linhardt, e360’s primary damages witness, was deemed not credible; the court found his damages testimony unreliable and excluded most of it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether discovery sanctions were proper | e360 argues sanctions were excessive and unfairly excluded its witnesses. | Spamhaus contends sanctions were reasonable given repeated discovery noncompliance. | Sanctions were proper and proportionate; sanctioned witnesses and limited damages were affirmed. |
| Whether the motion to compel responses was properly denied | e360 claims it was prejudiced by the denial of compel responses. | Spamhaus argues deposition limits and July order barred new discovery; denial caused no substantial prejudice. | District court’s denial did not constitute reversible error; no actual prejudice shown. |
| Whether Exhibit 5(a) was admissible | Exhibit 5(a) corrected a calculation and did not introduce new evidence beyond sanctions. | Exhibit 5(a) was a late, new damages calculation and thus inadmissible. | Court did not abuse discretion in excluding Exhibit 5(a). |
| Whether Linhardt's damages testimony was properly treated | Linhardt’s testimony should be admissible as lay or expert testimony on damages. | Linhardt lacked credibility/expertise for damages valuation, undermining weight of his testimony. | Linhardt’s damages testimony was given little to no weight due to credibility concerns. |
| Whether the final damages award of $27,000 was proper | e360 argues the award should reflect lost profits from contracts. | Spamhaus contends the award should be limited to profits and proper measure under Illinois law. | Damages based on revenue were improper; the award is vacated and remanded for nominal damages of three dollars. |
Key Cases Cited
- Southeast I.P. v. Rogers, 357 U.S. 197 (1958) (dismissal/production sanctions require willfulness or fault in some contexts)
- Tamari v. Bache & Co. (Lebanon) S.A.L., 729 F.2d 469 (7th Cir. 1984) (noncompliance with discovery orders; sanctions may be imposed)
- Johnson v. Kakvand, 192 F.3d 656 (7th Cir. 1999) (wide latitude in fashioning sanctions; uphold reasonable sanctions)
- Searls v. Glasser, 64 F.3d 1061 (7th Cir. 1995) (actual and substantial prejudice required for denial of discovery relief)
- Newman v. Metropolitan Pier & Exposition Authority, 962 F.2d 589 (7th Cir. 1992) (pattern of noncompliance; district court may act swiftly)
- Crown Life Ins. Co. v. Craig, 995 F.2d 1376 (7th Cir. 1993) (sanctions must be proportionate; avoid excessive prejudice)
- Taylor v. Meirick, 712 F.2d 1112 (7th Cir. 1983) (lost revenue vs. lost profits; require substantiation of profits)
- Meyer v. City of Chicago, 547 F.3d 817 (7th Cir. 2008) (standard for abuse of discretion in evidentiary rulings; credibility matters)
- Philos Technologies, Inc. v. Philos & D, Inc., 645 F.3d 851 (7th Cir. 2011) (personal jurisdiction in Rule 60(b) context)
- Europlast, Ltd. v. Oak Switch Systems, Inc., 10 F.3d 1266 (7th Cir. 1993) (choice of law on damages; Illinois law controls damages measure in diversity)