INDUSTRIA DE ALIMENTOS ZENU S.A.S. v. LATINFOOD U.S. CORP.
2:16-cv-06576
| D.N.J. | May 26, 2022Background
- Industria de Alimentos Zenú S.A.S. sued Latinfood U.S. Corp. and its owner Wilson Zuluaga for alleged trademark and trade-dress appropriation of the ZENÚ and RANCHERA marks.
- Defense counsel issued a litigation hold on Feb. 13, 2017; shortly thereafter Zuluaga’s computer allegedly experienced a hard‑drive failure and Zuluaga disposed of the old drive.
- Defendants used an automated email‑deletion protocol (two‑week retention) and did not timely suspend it; third‑party production from Cibao and a forensic review later revealed additional emails, multiple hard drives, a USB key, and cloud sync folders.
- A neutral forensic examiner (Fronteo) analyzed a drive Defendants disclosed in 2019 and found it functional, with ~99,940 files accessed during the litigation period and evidence of cloud sync folders and an undisclosed USB key.
- Plaintiff moved for spoliation and discovery‑withholding sanctions (Rule 37[e], 37[c]); Defendants cross‑moved for sanctions under Rule 37(d).
- Magistrate Judge Hammer denied Rule 37(e) spoliation relief (no proven actual loss of ESI), granted relief under Rule 37(c) in part (monetary fees and targeted remedial searches/productions), and denied Defendants’ cross‑motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether spoliation of ESI occurred under Fed. R. Civ. P. 37(e) | Zuluaga discarded the crashed hard drive and maintained an auto‑deletion policy, causing irretrievable loss of relevant emails and documents | Loss was inadvertent or not proved; other copies existed; no reasonable failure to preserve | Denied — Plaintiff failed to prove actual loss of ESI under amended Rule 37(e) |
| Whether Defendants withheld/disclosed discovery in violation of Rule 26(e)/37(c) (undisclosed drives, partial Cibao production, poor searches) | Defendants concealed the Fronteo drive, withheld Cibao emails, used inadequate search terms, and refused to search other repositories | Failures were mistaken or inadvertent; not substantially unjustified | Granted in part — Court found violations not substantially justified or harmless; ordered fee shifting and targeted discovery remedies |
| Appropriate sanctions (scope/severity) for withholding and late/non‑production | Seeks default, adverse inferences, and fees | Opposes extreme sanctions; argues no prejudice warranting severe relief | Court declined dispositive sanctions (default/adverse inference) but awarded reasonable attorneys’ fees/costs related to forensic review, additional deposition, Cibao subpoenas, and ordered further searches/productions |
| Defendants’ cross‑motion under Rule 37(d) arguing Plaintiff’s Rule 30(b)(6) designees were inadequate | N/A (Defendants contend designees were unprepared and effectively failed to appear) | Plaintiff notes court previously addressed adequacy and ordered substitute witness; no sanction requested earlier | Denied — Court previously ruled and defendants’ sanction motion untimely/inappropriate; cross‑motion denied |
Key Cases Cited
- Mosaid Technologies Inc. v. Samsung Electronics Co., 348 F. Supp. 2d 332 (D.N.J. 2004) (definition and discussion of spoliation principles)
- Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004) (seminal treatment of ESI preservation duties and litigation holds)
- Bistrian v. Levi, 448 F. Supp. 3d 454 (E.D. Pa. 2020) (application of amended Rule 37(e))
- Wachtel v. Health Net, Inc., 239 F.R.D. 81 (D.N.J. 2006) (sanctions framework and remedies under Rule 37)
- Republic of the Philippines v. Westinghouse Elec. Corp., 43 F.3d 65 (3d Cir. 1994) (limits on inherent power and need to tailor sanctions)
- In re Prudential Ins. Co. of Am. Sales Practice Litig., 278 F.3d 175 (3d Cir. 2002) (reserve inherent power for egregious conduct)
- Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d 212 (3d Cir. 2007) (consideration of timing and circumstances when determining sanctions)
- National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976) (purposes of discovery sanctions: penalize, deter, compensate, compel)
- Tarlton v. Cumberland County Correctional Facility, 192 F.R.D. 165 (D.N.J. 2000) (example of monetary sanctions for failure to timely provide records)