MEMORANDUM, ORDER AND RECOMMENDATION
This Memorandum, Order and Recommendation addresses Plaintiffs Motion For Terminating And Other Sanctions Arising Out Of Defendants’ Intentional Destruction Of Evidence And Other Litigation Misconduct (“Pl.’s Mot.”), ECF
Through four years of discovery, during which Defendant Mark Pappas, President of Defendant CPI, had actual knowledge of his duty to preserve relevant information, De
For the reasons stated herein, Plaintiffs' Motion will be GRANTED IN PART and DENIED IN PART, and it further is recommended that, in addition to the relief ordered by this Memorandum and Order, Judge Gar-bis enter an Order granting a default judgment against Defendants with regard to Count I of the Complaint (which alleges copyright infringement). Among the sanctions this memorandum imposes is a finding, pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vii), that Pappas’s pervasive and willful violation of serial Court orders to preserve and produce ESI evidence be treated as contempt of court, and that he be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney’s fees and costs that will be awarded to Plaintiff as the prevailing party pursuant to Fed.R.Civ.P. 37(b)(2)(C).
I. BACKGROUND
Regrettably, the events underlying the pending motions are convoluted and cannot be summarized succinctly. They must be set forth in considerable detail, inasmuch as they spanned several years, involved multiple actors and a succession of defense attorneys, and are memorialized by hundreds of Court
For ease of comprehension, after briefly describing the basis of the underlying lawsuit, the Background section of this Memorandum, Order and Recommendation chronicles Pappas’s
VSI filed a Complaint against CPI, Mark Pappas, Stephanie Pappas (Mark Pappas’s wife at the time), and “John Doe a/k/a Fred Bass” on October 11, 2006, alleging, inter alia, violations of copyrights and patents, and unfair competition.
1. Pappas Attempted to Prevent the Discovery of Evidence Against Him
The bulk of this factual background describes Pappas’s successful deletions of ESI. To understand the gravity of these events, however, it is helpful to place them in the context of Pappas’s state of mind during discovery. For years, Pappas engaged in a cat and mouse game to hide harmful ESI from production during discovery, repeatedly trying to stall or prevent VSI from discovering evidence that he improperly accessed or used VSI’s website or drawings. Ultimately, after Plaintiff demonstrated the incompleteness of Pappas’s ESI production, the Court compelled Pappas to produce the ESI evidence he had not succeeded in deleting. This evidence supported Plaintiffs claims. Therefore, Pappas’s actions in this regard did not result in actual prejudice to Plaintiffs ability to obtain evidence to support its claims, although it clearly resulted in considerable delay in completion of discovery and expense associated with efforts to discover the nature and extent of the spoliation. Nonetheless, I shall catalog a representative sampling of them because they are probative of the intentionality and bad faith of Pappas’s successful deletions.
Additionally, Pappas delayed in producing relevant ESI after Plaintiff identified it and requested it in discovery, and he lied about the completeness of Defendants’ ESI production. For example, Pappas swore on September 27, 2007 that “Defendants have produced to Plaintiff all non-privileged ESI sought by Plaintiff in its Rule 34 production requests.” (Sept. 27, 2007 Pappas Aff. 2, ECF No. 150.) Yet, Defendants had not produced 2,477 fully intact “deleted emails,” 1,589 of which were between CPI and Digican, which Defendants, through their attorney at the time, Christopher Mohr,
Moreover, at least two of Pappas’s successful larger deletions of ESI occurred on the eve of scheduled discovery regarding the contents of Pappas’s work computer. First, the Court scheduled a discovery hearing for February 1, 2007, and the afternoon before, Pappas deleted 9,234 files from his work computer, a password-protected laptop. (ECF No. 42; July 22, 2009 Spruill Report 3, ¶ 3.) Some, but not all, of these files reappeared in the middle of 2009, well after Plaintiff filed repeated motions to compel and the Court issued numerous orders to produce the evidence, as discussed infra. Second, an imaging of Pappas’s work computer was scheduled for the week of February 21, 2007. Pappas deleted almost 4,000 files on February 16 and 17, 2007, and someone ran Microsoft Window’s Disk Defragmenter program immediately afterward, rendering the files unrecoverable.
£ Pappas Failed to Implement a Litigation Hold
Before litigation began, CPI stored all of its data on its server and backed up the data on ten backup tapes. (DeRouen Dep. 17:9-12, June 29, 2007, ECF No. 341-17.) Each tape would run for a day, and then someone at CPI would replace it with the next tape. (Id. at 46:10-19.) At the end of a two-week period, the process began again with the first tape, which was “amended” to incorporate any changes to the server since it last was recorded. (Id.) As to the reliability of the backup system, Evan DeRouen, Pappas’s computer consultant of the past six years, testified that the system failed “[a]t least once or twice a week” when someone forgot to replace the backup tape. (Id. at 45:13-17, 46:1-3.) DeRouen added that sometimes a week went by before someone replaced the
The record is devoid of any evidence that Defendants considered, let alone implemented, a litigation hold after Plaintiff filed suit or after the Court issued preservation orders, discussed infra. To the contrary, DeRouen testified that after suit was filed, nothing was done to address the system’s deficiencies and to ensure the preservation of relevant ESI; Pappas did not ask him to take any steps, nor did he take any steps, to prevent users from deleting files from the server, or even to advise them not to delete files. (Id.) VSI’s ESI expert, Andreas Spruill of Guidance Software, observed that “multiple users who ha[d] accounts on the server [were] adding, deleting, creating, just carrying on business as usual.” (Dec. 1, 2009 Hr’g Tr. 123:25-124:75.) Although Defendants retained Genevieve Turner
DeRouen testified in 2007 that Pappas and/or Mohr, Defendants’ counsel at the time, instructed him to retain the exchange server logs and not to delete anything. (DeRouen Dep. 87:4-25.) He stated that he therefore “removed the ... function that allowed the [exchange server] logs to be purged once they’re backed up” and ensured that “the backups are done.” (Id. at 88:21-89:4.) However, Spruill testified in December 2009 that he had not “seen any exchange server logs that ha[d] been preserved or produced.” (Dee. 1, 2009 Hr’g Tr. 122:20-123:5.) Nor had he seen any evidence that DeRouen prevented the logs from being purged, as he said he had. (Id. at 123:6-24.) Spruill stated in his affidavit that he “saw no evidence of any litigation hold having been implemented in regards to CPI’s ESI as that term is commonly understood. No reasonable measures were taken to prevent potentially relevant data stored on any of CPI’s computer systems from being modified, overwritten, or deleted.” (Third Spruill Aff. ¶ 31.) Moreover, Defendants have produced only ten backup tapes, which contain only data from November 15, 2006, and January 17, 2007. (July 22, 2009 Spruill Report 4.) This hardly evidences an effective litigation hold.
In evaluating the weight to be given to DeRouen’s testimony, I cannot overlook his dependence on his wife’s income, paid by CPI, and his qualifications as an ESI expert leave much to be desired, as he has not taken any college-level computer courses or passed any Microsoft proficiency tests.
3. Early Evidence of Pappas’s Failure to Preserve ESI
An examination of the CPI System Registry conducted during discovery showed 353 user-initiated deletions of files from Mark Pappas’s work computer, a password-protected laptop, commencing soon after VSI filed suit, i.e., between October 11, 2006, and November 17, 2006. (July 22, 2009 Spruill Report 2-3, PL’s Mot. Ex. 14, ECF No. 341-14; Defs.’ Opp’n 5.) In addition, on October 19, 2006, Pappas sent a series of emails instructing Federico, the Argentine contact, to destroy various emails and attachments relating to the VSI drawings that Pappas had sent to Federico for “conversion” to CPI drawings. (Pappas emails, PL’s Mot. Ex. 13, ECF No. 341-13.) Defendants have neither denied nor rebutted the evidence of these deletions and instructions to delete during the proceedings related to the pending motions. Nor have they produced the 353 files deleted from Pappas’s work computer or any files or emails that Federico destroyed per Pappas’s instruction.
Because Defendants had notice of the existing lawsuit at the time of the deletions, they clearly were under an obligation to preserve these potentially relevant files. Defendants, through their current attorney, James Rothschild, claimed that the files deleted from Pappas’s work computer were preserved because the computer “was synchronized to the CPI server,” such that the files were copied to the server and “still exist on the server.” (Oct. 28, 2009 Rothschild Ltr., ECF No. 324.) However, the more believable evidence is to the contrary. As discussed in detail infra, CPI replaced its “Old Server” with a “New Server” in April 2007. DeRouen stated in an affidavit that before the server exchange in April 2007, “most of the files from Mark Pappas’ workstation were not mapped [i.e., copied] to the server,” (DeRouen Aff. ¶ 3), and he later testified in April 2010 that his affidavit was accurate. (Apr. 26, 2010 Hr’g Tr. 38:11-17.) DeRouen also stated that Pappas “was aware” that his files generally were not copied to the server before April 2007. (Id. at 70:17-22.) Further, DeRouen testified that “some” of the files on Pappas’s work computer “would not be found” on the Old Server because it could not accommodate all of Pappas’s files. (Id. at 69:13-70:3.) DeRouen explained that for files on Pappas’s work computer to be copied to either server, Pappas would “have to put it in the folder that gets synchronized” because only “certain folders” were synchronized. (Id. at 117:20-118:6.) Defendants did not offer any evidence that Pappas put the deleted files into the synchronized folders so that they would be copied to the Old Server or the New Server. And, even if the files were copied to the Old Server, by the time VSI received the Old Server, it had become corrupted and could not be searched. (Apr. 26, 2010 Hr’g Tr. 153:16-20, 155:11-16 (Spruill Test.).) Given that Plaintiff has shown that the ESI evidence was deleted, Defendants’ claims to have preserved it are not credible.
Turner, CPI’s ESI litigation consultant, made an image (i.e., copy) of CPI’s New Server in July 2007, and Rothschild stated that “the image of the new server contains copies of the deleted files.” (Oct. 28, 2009 Rothschild Ltr.) Again, the evidence does not support this assertion. As noted above, not all of Pappas’s files were copied to the New Server, and therefore, they would not appear on an image of the New Server. Also, Turner testified that she “did not image” the New Server in its entirety; instead, she took a “targeted collection” of user files, folders, and emails, without imaging “unallocated space” where deleted files most likely would appear. (Dec. 2, 2009 Hr’g Tr. 105:15-107:22; Feb. 9, 2009 Turner Report 3.) Moreover, the files in question predated the New Server, and therefore only would appear on the New Server if they had been copied to the Old Server in the first place and then
The relevance of any files or emails that Federico deleted pursuant to Pappas’s instructions is readily apparent from Pappas’s emails to Federico, which were preserved. They would have demonstrated the truth of VSI’s core contention—that Pappas accessed VSI’s website under a fictitious name on numerous occasions to download multiple design drawings of VSI and, in violation of the limited licensing agreement on the VSI website that had to be accepted before the drawings could be downloaded, sent them out of the country to be copied as CPI design drawings, sans any reference to their true origin, so that Pappas then could submit them as part of bid documents for the type of jobs for which CPI competed with VSI. If this is not “smoking gun” evidence, one wonders what is. That Defendants, despite their protests of innocent intent and conduct, produced no evidence in rebuttal, and have “acquiesced” in the entry of a default judgment with regard to Plaintiffs flagship claim, suggests that they too view this deleted ESI for what it is—critical evidence proving the guts of Plaintiffs liability claims. Equally clearly, the absence of these emails referring to the unauthorized conversion of VSI drawings to CPI files is prejudicial to Plaintiffs case. With regard to the 353 deleted files, although their contents are unknown, the only rational conclusion that can be drawn is that VSI suffered prejudice from the loss of these files, based on Pappas’s bad faith, willful misconduct and the fact that the large quantity of deletions occurred shortly after VSI filed suit. Defendants have not offered any evidence to rebut this conclusion. To the contrary, they acquiesced in the entry of a default judgment on the copyright claim, essentially conceding the prejudice to VSI of the loss of the deleted files.
4. Pappas Failed to Preserve His External Hard Drive Despite Plaintiffs Demand that Defendants Preserve ESI
Pappas was deposed on November 17, 2006, and, at the conclusion of the deposition, VSI’s counsel gave notice to Defendants that VSI would be filing a request to have the CPI hard drives imaged, and explicitly demanded that no files be deleted and that no data be scrubbed. (Pappas Dep. 148:23—25— 149:1-9.) Pappas later admitted he was aware this request had been made. (Oct. 29, 2009 Hr’g Tr. 89:25 (Pappas Test.), Pl.’s Mot Ex. 12, ECF No. 341-12.)
Subsequent forensic examination of Pap-pas’s work computer revealed the existence of a SimpleTeeh “Simple Drive” tm external hard drive (“EHD”) that last was plugged into Pappas’s work computer on November 7, 2006, and last used on November 20, 2006 (just days after VSI notified Defendants to preserve ESI), when the backup feature for the EHD was run and then the software for the EHD was “uninstalled” from Pappas’s work computer. (July 22, 2009 Spruill Report 2, ¶¶ 3-6.) A subsequent examination of Pappas’s work computer led Spruill, VSI’s ESI expert, to conclude that the EHD must have been connected to it continuously from November 7 to November 20, 2006. (Id. at 2, ¶ 5.) Therefore, the EHD still was in Pap-pas’s possession after VSI filed this lawsuit, and it also was in Pappas’s possession on and after November 17, 2006, when Plaintiff informed Defendant that it would be requesting imaging of Defendants’ computers.
The EHD contained 62,071 files that were transferred to it from Pappas’s work computer on July 10, 2006, shortly before suit was filed. (Id. at 2, ¶ 3; Defs.’ Opp’n 4.) Based on a log created on Pappas’s work computer at the time of the transfer, VSI’s IT director, Bryan Slaughenhoupt, concluded that the transferred files likely were relevant because the file names corresponded with search terms contained in the Joint Search Proto
Pappas testified that he presumed that, even though the EHD was not produced, the information on the EHD had been, because the server was produced and it contained the same information. (Oct. 29, 2009 Hr’g Tr. 175:20-176:1.) However, as discussed above, at the time that the EHD was connected to Pappas’s work computer, not all of the files on that computer regularly were copied to the server. Moreover, as noted, the Old Server was corrupted and unsearchable when VSI received it. (Apr. 26, 2010 Hr’g Tr. 153:16-20, 155:11-16 (Spruill Test.).) And, because Defendants did not disclose the existence of the EHD to Genevieve Turner, their ESI litigation consultant who worked with Plaintiffs ESI consultant to develop and implement the Joint Search Protocol for ESI, she did not image the EHD or search it for responsive ESI. (Dec. 2, 2009 Hr’g Tr. 55:19-56:5 (Turner Test.), Pl.’s Mot. Ex. 19, ECF No. 341-19). Again, the prejudice to Plaintiff is clear.
According to Defendants, Pappas did not “intentionally” dispose of the EHD “to keep the files on it from being subject to discovery.” (Defs.’ Opp’n 5.) This argument is absurd. Pappas purchased the EHD; attached it to his work computer immediately before suit was filed; used it for months, including after suit was filed and Plaintiff had demanded preservation of ESI; transferred 62,071 files to it, which included many files with names that render their relevance readily apparent; and kept its existence secret even from his own ESI litigation expert. He testified that he returned the EHD in November 2006—without having someone back up its contents—to “Bob from Office Max” because he was “frustrated” by its automatic backup features that “would flash messages and interrupt [his] work.” (Oct. 29, 2009 Hr’g Tr. 18:13-19:11.) Defendants failed to produce any documentation corroborating Pappas’s testimony that the EHD was returned to Office Max, such as an affidavit from “Bob,” a receipt from Office Max, or documents showing the crediting of the purchase price of the EHD back to CPI after it was returned. Yet Pappas expects the Court to accept his doe-eyed explanation at face value, rather than the untruth that it manifestly is. Even if true, this is of little moment, as Defendants concede that the EHD “should not have been disposed of since it was in existence after the lawsuit had been filed.” (Defs.’ Opp’n 5.) Moreover, the EHD and its contents never were made available for forensic examination during discovery and remain unavailable today. It does not require Napoleonic insight to recognize with a casual glance at the names of the unavailable files that what was lost was relevant to Plaintiffs claims, and the absence of such a large quantity of clearly relevant files was prejudicial.
5. Pappas Also Failed to Preserve Files and Emails Immediately Following Plaintiffs Demand that Defendants Preserve ESI
On November 17, 2006, the very same day Defendants were put on notice not to destroy
6. The Court Issued a Preservation Order and Pappas Continued to Delete ESI
On December 7, 2006, VSI served a second Request for Production of Documents on Pappas and CPI.
Subsequent forensic examination of Defendants’ computers showed that the CPI System Registry reflected 9,282 user-initiated deletions of files from Pappas’s work computer between my December 22, 2006 order and the February 1, 2007 discovery hearing. (July 22, 2009 Spruill Report 3, ¶3.) The files, with names like “bollardcad8.doc,” “China-6.zip,” “nancadsamples.zip,” “UBBEN-CHCAD.doc,” and “victor.zip,” “appear to be related to “VSI-like’ site furnishing, sale of products made in China, Nanead (the company in Argentina with which Federico was affiliated), Digican, Victor Stanley products, Ecklund (a company that CPI used to manufacture site furnishings) and CAD drawings.” (Ninth Slaughenhoupt Aft. ¶ 33.) Almost all of the deletions occurred on January 31, 2007, the eve of the discovery hearing. (Id. ¶¶ 31, 44.) Pappas knew that the discovery hearing would be held the next day and that VSI’s interest in imaging his computers “was at issue.” (Oct. 29, 2009 Hr’g Tr. 123:15 & 125:8-12 (Pappas Test.).)
Pappas testified that he believed that DeRouen, CPI’s computer consultant, made the January 31, 2007 deletions. (Id. at 33:3-4.) In a February 2010 affidavit, undoubtedly
Incredulously, Defendants again contend that these deleted files were “preserved” because they had been copied to the server. (Oct. 28, 2009 Rothschild Ltr.) Spruill testified that “some” of the files deleted on January 31, 2007 “did reappear” in the middle of 2009, in a folder called “Mark Copy” that appeared on the New Server. (April 26, 2010 Hr’g Tr. 142:12-18.) However, according to Spruill, the “Mark Copy” folder did not contain all of the deleted files and, because someone ran the Disk Defragmenter program, as discussed below, he “was unable to recover” the files that did not reappear “in any intelligible form.” (July 22, 2009 Spruill Report 4.) Also, as discussed, Spruill could not search the Old Server because it had become corrupted. (Apr. 26, 2010 Hr’g Tr. 153:16-20, 155:11-16 (Spruill Test.).) Thus, I find that Pappas deleted the files, and the timing of the bulk of the deletions immediately prior to the scheduled discovery hearing suggests to me that he deleted the files to prevent their discovery. Given the file names, it is evident that the files were relevant and would have supported Plaintiffs case, and I conclude that Defendants breached their duty to preserve potentially relevant ESI.
7. The Court Again Admonished Defendants of Their Duty to Preserve and Issued Another Preservation Order, and Pappas Deleted Files and Used Programs to Oveiwrite the Files
At the February 1, 2007 discovery hearing, noting that “certain emails have been deleted,” I again admonished the parties of their duty to preserve relevant ESI and instructed counsel to explain to their clients the duty to preserve “all information that may ... be relevant to the claims and defenses.” (Feb. 1, 2007 Conf. Tr. 18:18-24-19:1-3, 23:8, 24:3-5, Pl.’s Mot. Ex. 15, ECF No. 341-15.) I reminded counsel that the parties had a “duty to intervene and to suspend any operations as part of an electronic records management system that might need to override [sic] or cause the loss and destruction [of ESI] that might be relevant.” (Id. at 18:18-23, 25:19-26:3.) Christopher Mohr, defense counsel at the time, stated on the record that he understood the Court’s admonitions and orders given during the discovery conference. (Id. at 25:11, 25:14.) Further, Pappas admitted that Mohr spoke with him regarding my instructions. (Oct. 29, 2009 Hr’g Tr. 130:14-133:20 (Pappas Test.).)
During a February 2, 2007 conference, Defense counsel agreed that Defendants would follow “the two tier approach” outlined in this Court’s Suggested Protocol for Discovery of Electronically Stored Information (ECF No. 56-1) (“Suggested ESI Protocol”),
Despite the discussion of preservation obligations during the discovery hearing and conference and in the February 1, 2007 Order, in the weeks that followed, as described in further detail below, a user logged into Pappas’s work computer as Pappas, ran a Disk Cleanup program on it, deleted files, accessed the Registry Editor, and ran the system’s Disk Defragmenter program on the computer. The Disk Cleanup program empties the Recycle Bin and deletes temporary internet files, i.e., records of web sites visited. (Dec. 1, 2009 Hr’g Tr. 52:20-25, 53:16-55:15, 57:1-3 (Spruill Test.).) Once deleted, a file can be overwritten by Disk Defragmenter, such that the data is “lost.” (Id.) Indeed, defragmentation is sometimes used as “a method to cover up deletions of data by eliminating all traces of deleted data.” RKI, Inc. v. Grimes,
The person who signed in as “Pappas” ran the Disk Cleanup program on Defendant Pappas’s work computer on February 7, 2007; CPI had not used this program in the past. (Dec. 1, 2009 Hr’g Tr. 52:20-25, 53:16-55:15, 57:1-3 (Spruill Test.).) Between February 2, 2007 and February 23, 2007, this user deleted 4,316 user-content files from Pappas’s work computer. (July 22, 2009 Spruill Report 3-4.) Almost all (3,969) of the deletions occurred between noon on Friday, February 16, 2007, and early morning on Saturday, February 17, 2007. (Id.; Feb. 16, 2010 Pappas Aff. ¶ 9) Additionally, on the night of February 16, 2007, the user accessed the computer’s Registry Editor. (Dec. 1, 2009 Hr’g Tr. 58:1-20 (Spruill Test.).) Thereafter, during the late morning of Saturday, February 17, 2007, this user successfully initiated an execution of the system’s Disk Defragmenter program. (July 22, 2009 Spruill Report 4.) Over 200 files were deleted on February 17, 2007, and as of that date, Pappas had permanently deleted over 1,000 files from the Recycle Bin. (Id. at 3^4.) On July 1, 2009, Spruill provided Defense counsel and Defense ESI litigation consultant Turner with a list of the files that Pappas
This was the first and only user-executed defragmentation on Pappas’s work computer. (July 22, 2009 Spruill Report 4.) Importantly, the defragmentation was done just ahead of the scheduled imaging of Pappas’s work computer during the week of February 21, 2007. (Oct. 29, 2009 Hr’g Tr. 153:12-17, 161:8-11 (Pappas Test.).) Following the defragmentation, Plaintiffs ESI experts at Guidance Software were unable to recover any of the deleted files from Pappas’s work computer “in any intelligible form.” (July 22, 2009 Spruill Report 4.) Also, because the files were purged through the use of the Disk Cleanup and Disk Defragmenter programs, they were not preserved on the server, despite Defendants’ contentions to the contrary.
DeRouen, CPI’s computer consultant, testified that he probably ran the programs and deleted the files as part of the system “maintenance” he ran while working on Defendants’ computers from a remote location. (Apr. 26, 2010 Hr’g Tr. 31:13-25.) Yet, when questioned, DeRouen agreed with Plaintiffs counsel that he would not have selectively opened, examined, and deleted files as part of routine maintenance, as Plaintiffs evidence demonstrates happened in this case. (Id. at 32:1-5.) Nonetheless, DeRouen claimed that any files that were deleted “were backed up on the server in two places.” (Id.)
Not so, according to Spruill, whose testimony was far more credible than DeRouen’s. Spruill testified that the person who ran the Disk Defragmenter program was not working remotely (Dec. 1, 2009 Hr’g Tr. 166:8-25), and Pappas admitted he was the only person present at CPFs offices at the time the Disk Defragmenter program was run. (Oct. 29, 2009 Hr’g Tr. 167:1-168:21 (Pappas Test.); see Ninth Slaughenhoupt Aff. ¶ 39.) The evidence of record convinces me that Pappas was the person who deleted the files and executed the Disk Defragmenter program, but if he did not, then it was DeRouen, the computer consultant Pappas retained and whose wife is a longstanding CPI office manager.
As the above factual summary amply demonstrates, much of what was deleted took place after I admonished Defense counsel of the duty to preserve relevant evidence and after I had issued a written Preservation Order. Further, the occurrence of these deletions immediately before the scheduled imaging of Pappas’s computer evidences purposeful violation of this Court’s preservation orders, and a knowing violation of the duty to preserve potentially relevant evidence. These circumstances, combined with the purposeful destruction by Pappas of ESI that included files with names that make their relevance manifest, convince me that, as with other deletions already discussed, this was prejudicial to Plaintiff.
8. Pappas Failed to Preserve ESI When CPI Switched from the Old Server to the New Server
Defendants ordered a new server on October 30, 2006, two weeks after this action began, and installed it in April, 2007. (Apr. 26, 2010 Hr’g Tr. 92:22-93:2 (DeRouen Test.).) DeRouen transferred the data on the “Old Server” to the “New Server” on April 21, 2007. (Id. at 96:24-97:9.) It is unclear why Defendants replaced the Old Server. According to Pappas, the Old Server “got corrupted.” (Oct. 29, 2009 Hr’g Tr. 178:10-14, 181:11-15.) According to DeRouen’s June 2007 testimony, the Old Server was nearing its capacity when it was replaced. (DeRouen Dep. 16:15-16.) Spruill stated in a sworn affidavit, based on his examination of the Old Server, that that there was no apparent operational reason for exchanging servers in the middle of the ESI collection process that was taking place as part of the discovery in this case. (Third Spruill Aff. ¶ 9.)
More fundamentally, Spruill stated that exchanging servers and failing to preserve the data on the Old Server would “cause the irretrievable loss of some content and records of user activities that would otherwise
DeRouen acknowledged that he had not transferred any deleted ESI. (Apr. 26, 2010 Hr’g Tr. 101:5-20 (DeRouen Test.).) Nonetheless, he testified that the deleted ESI was preserved because it still existed on the Old Server, which was sent to Plaintiff. (Id. at 101:5-20.) However, VSI did not receive the Old Server immediately; VSI and the ESI litigation consultants, Turner and Spruill, did not even learn that there had been a server exchange until June 29, 2007, when DeRouen was deposed. (Def.’s Resp. to Pl.’s Second Set of Interrog. # 11, Pl.’s Mot. Ex. 92, EOF No. 341-92; Dec. 2, 2009 Hr’g Tr. 29:21-25, 83:10-25, 142:18-24 (Turner Test.).) By the time VSI received the Old Server, it had become corrupted and could not be searched, and Spruill had to rely instead on an image that Turner made of the Old Server on July 13, 2007. (Apr. 26, 2010 Hr’g Tr. 153:16-20, 155:11-16 (Spruill Test.); Dec. 2, 2009 Hr’g Tr. 85:3-86:4, 105:15-107:22 (Turner Test.).)
The completeness of Turner’s image of the Old Server, like the completeness of her image of the New Server, is questionable. In her February 9, 2009 report, Turner stated that the Old Server “was not responsive to the imaging process,” so she created a targeted collection instead of imaging it in its entirety, and the targeted collection did not include the unallocated spaces where deleted files would be stored. (Feb. 9, 2009 Turner Report 3.) Notably, Pappas testified that he stored files in a deleted state; all files in a deleted state when Turner imaged the Older Server would have been excluded. And, according to Spruill, the Old Server had been purged before Turner had the opportunity to image it, such that she could not have captured the deleted files if she had tried. (Apr. 26, 2010 Hr’g Tr. 153:24-154:20.) Although, as noted, a folder containing some—but not all—of the files deleted on January 31, 2007, inexplicably “reappeared” on the New Server, and ESI deleted on January 17, 2007 was recovered from a backup tape and produced for Plaintiff, that backup tape was the most recent backup tape produced for the Old Server. Therefore, other than those files in the folder that “reappeared,” Defendants failed to preserve any ESI deleted between January 18, 2007 and April 21, 2007, when the Old Server was replaced. The relevance of some of the files—those that were deleted permanently on January 31, 2007—is evident from their names, which include “bollardcad8.doc,” “China-6.zip,” “nancadsamples.zip,” “UBBENCHCAD.doc,” and “victor.zip,” as discussed above. (Ninth Slaughenhoupt Aff. ¶ 33.) Although the contents, quantity, and relevance of the other lost files are unknown, Defendants have failed to demonstrate that what was not preserved was irrelevant, or its loss benign. The events surrounding the switch from the Old to New Server, viewed in the context of everything else that occurred, convince me that what was lost included relevant evidence, the absence of which prejudices Plaintiff.
9. The Court Repeatedly Ordered the Production of ESI, and Pappas Used Programs Called Easy Cleaner and CCleaner to Delete It
On August 1, 2007, August 30, 2007, September 21, 2007, and October 3, 2007, I ordered Defendants to “produce all relevant, non-privileged ESI” to Plaintiffs counsel. (EOF Nos. 131,145,149, and 164.) Nonetheless, at the December 1, 2009 hearing, Plaintiff offered evidence that someone at CPI used a program called Easy Cleaner to “scrub” or delete data from Defendants’ computers and another called CCleaner “to clear up file content in specific areas, and ... to go through the registry .. and clear out ... dead registry entries” from the New Server in July 2008 and August 2009, months after my series of orders, and over a year after my two initial preservation orders. (Dec. 1, 2009 Hr’g Tr. 118:6-119:14, 120:18-22 (Spruill Test.); Dee. 2, 2009 Hr’g Tr. 63:13-20 (Turner Test.).) DeRouen, Defendants’ computer consultant over the past six years, admitted
Spruill testified that the only purpose for using the Easy Cleaner was “to permanently destroy data,” and that “[t]here’s absolutely no reason whatsoever” for a business under a preservation order to run a “scrubbing program” such as Easy Cleaner. (April 26, 2010 Hr’g Tr. 119:1-121:14.) Spruill added that it was extremely difficult to perform a forensic examination of any computer system after Easy Cleaner had been used on it. (Id. at 120:5-6.) DeRouen testified that CCleaner may have run “automatically” in July and that he did not “know why” it was run in August. (Apr. 26, 2010 Hr’g Tr. 107:20-110:6, 111:20-23.) Pappas stated that CCleaner was run in August “without any instruction from [him] and without [his] knowledge.” (Feb. 16, 2010 Pappas Aff. ¶ 13.) However, neither Pappas nor DeRouen provided credible testimony. Instead, I accept as credible Spruill’s version of the events. Regardless of the “spin” Defendants attempt to put on it, following a series of ESI preservation and production orders by the Court, Defendants allowed their computer consultant to run programs that eliminated temporary internet files. (Apr. 26, 2010 Hr’g Tr. 113:1-24 (DeRouen Test.).) It cannot be ignored that this occurred in a case the essence of which involves surreptitious entry to Plaintiffs website for the purposes of downloading design drawings that Defendants then pirated and misrepresented to be their own in order to compete with Plaintiff. It is no coincidence that the deleted files included those showing the internet site that Defendants had accessed. I am persuaded that these files were relevant, and that their loss caused prejudice to Plaintiff.
10. Plaintiff Moves for Spoliation Sanctions
Plaintiff filed its fourth motion for sanctions, the subject of this Memorandum, Order and Recommendation, alleging “CPI and Pappas’ destruction of the key evidence and other forms of misconduct” and seeking a default judgment as “the only effective method to punish such egregious conduct, deter others, and fully mitigate the prejudice to VSI and the judicial process.” (Pl.’s Mot. 45.) Plaintiff also seeks a civil fine and a “referral for criminal prosecution against Pappas”; and attorney’s fees and costs, including costs related to all of Plaintiffs ESI motions and efforts to “uncover[] Defendants’ discovery abuses.” (Id. at 97-98.) Alternatively, Plaintiff seeks leave to amend its Rule 26 disclosures and reports, and asks the court to reopen discovery and “to enter a permanent injunction against Pappas and CPI as requested in the Verified Complaint.” (Id. at 98.)
In their Opposition, Defendants admit that “certain CPI ESI was deleted by Pappas and CPFs Computer Engineer Evan DeRouen and/or others after CPI was served with the lawsuit and after a preservation order was issued,” although they “deny that the deletions were done for the purpose of withholding ESI from VSI.” (Defs.’ Opp’n 2.) Defendants also admit that fifteen CPI products were based on VSI designs. (Defs.’ Surreply 5.) Defendants state that they “are willing to accept as a sanction ... a consent judgment on liability for copyright infringement and a consent injunction on Plaintiffs copyright claim.” (Defs.’ Opp’n 29.) In their view, “[c]opyright infringement has always been the heart of [VSI’s] case.” (Defs.’ Surreply 1.)
As will be discussed in greater detail below, assessing appropriate sanctions for proven failure to preserve evidence, whether ESI or not, is a complex task, made so in large part by the need to evaluate the relevance of the evidence lost and the prejudice to the party claiming injury because of the spoliation. In the sections above I have described eight ways in which Defendants willfully and permanently destroyed evidence related to this lawsuit, as well as their failed attempts to destroy evidence that later was recovered. In each section I have explained the relevance of the evidence lost and why the loss
But this case is in an entirely different posture. Plaintiff has proved grave misconduct that was undertaken for the purpose of thwarting Plaintiffs ability to prove its case and for the express purpose of hamstringing this Court’s ability to effect a just, speedy, and inexpensive resolution of a serious commercial tort. The prejudice to Plaintiff is clear and has been described in each of the sections above. It is helpful, but of little comfort, that Defendants themselves agree with my assessment that the lost or destroyed ESI was relevant, and its absence as evidence prejudicial to Plaintiff. At the hearing held on June 25, 2010, counsel for Defendants stated:
[Wje’ve given up on prejudice .... [with regard to Plaintiffs copyright claim] which I think was the appropriate thing to do. We gave up on the issue of relevance, and so I would think that the Court would decide what the profits should be from those 15 products, and then the Court ... would determine what would be the appropriate attorneys’ fees....
(June 25, 2010 Hr’g Tr. 3:16-22.) Having chronicled what happened and the effect that it had on Plaintiffs ability to prosecute its claims and the Court’s ability to ensure a fair trial, I will turn now to a discussion of the law governing where we go from here, given what we know.
II. DISCUSSION
Plaintiff asks the Court to sanction Defendants for their
Motions seeking sanctions for spoliation stem from alleged destruction of or failure to preserve potentially relevant evidence. When the spoliation involves ESI, the related issues of whether a party properly preserved relevant ESI and, if not, what spoliation sanctions are appropriate, have proven to be one of the most challenging tasks for judges, lawyers, and clients. Recent decisions, discussed below, have generated concern throughout the country among lawyers and institutional clients regarding the lack of a uniform national standard governing when the duty to preserve potentially relevant evidence commences, the level of culpability required to justify sanctions, the nature and severity of appropriate sanctions, and the scope of the duty to preserve evidence and whether it is tempered by the same princi-, pies of proportionality that Fed.R.Civ.P. 26(b)(2)(C) applies to all discovery in civil cases.
Nothing in this memorandum should add to this collective anxiety. Defendants do not dispute that spoliation took place, relevant evidence was lost, and Plaintiff was prejudiced accordingly; that Defendants’ misconduct was sufficiently egregious to warrant sanctions; and that the sanctions warranted
A. The Court’s Authority to Impose Spoliation Sanctions
To resolve the issue of appropriate sanctions for spoliation, the court must consider the source and nature of its authority to impose such sanctions. Two “main” sources supply the court with authority to impose sanctions against a party for spoliation of evidence. Goodman,
First, there is the “court’s inherent power to control the judicial process and litigation, a power that is necessary to redress conduct ‘which abuses the judicial process.’ ” United Med. Supply Co. v. United States,77 Fed.Cl. 257 , 263-64 (2007) (quoting Chambers v. NASCO, Inc.,501 U.S. 32 , 45-46,111 S.Ct. 2123 ,115 L.Ed.2d 27 (1991)); accord Thompson,219 F.R.D. at 100 (quoting Silvestri,271 F.3d at 590 ); see also Adkins v. Wolever,554 F.3d 650 , 652 (6th Cir.2009); Leon v. IDX Sys. Corp.,464 F.3d 951 , 958 (9th Cir.2006); Flury v. Daimler Chrysler Corp.,427 F.3d 939 , 944 (11th Cir.2005); In re NTL, Inc. Secs. Litig.,244 F.R.D. 179 , 191 (S.D.N.Y. 2007). Second, if the spoliation violates a specific court order or disrupts the court’s discovery plan, sanctions also may be imposed under Fed.R.Civ.P. 37. United Med. Supply Co.,77 Fed.Cl. at 264 , cited in Sampson,251 F.R.D. at 178 .
Id. at 505-06 (some citations omitted).
The court’s inherent authority arises “when a party deceives a court or abuses the process at a level that is utterly inconsistent with the orderly administration of justice or undermines the integrity of the process.” United States v. Shaffer Equip. Co.,
Pursuant to their inherent authority, courts may impose fines or prison sentences for contempt and enforce “the observance of order.” Hudson,
However, the court’s inherent authority only may be exercised to sanction “bad-faith conduct,” Chambers,
Rule 37(b)(2), pertaining to sanctions for failure to comply with a court order, provides:
(A) For Not Obeying a Discovery Order. If a party or a party’s officer, director, or managing agent—or a witness designated under Rule 30(b)(6) or 31(a)(4)—fails to obey an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a), the court where the action is pending may issue further just orders. They may include the following:
(i) directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, as the prevailing party claims;
(ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;
(iii) striking pleadings in whole or in part;
(iv) staying further proceedings until the order is obeyed;
(v) dismissing the action or proceeding in whole or in part;
(vi) rendering a default judgment against the disobedient party; or
(vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination.
(C) Payment of Expenses. Instead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.
In this case, I issued a series of orders to preserve evidence, including ESI, and another series of orders to produce ESI evidence, all of which were violated. As discussed above, after each of them, Pappas and CPI destroyed ESI evidence:
1. On December 22, 2006, I issued an order staying discovery until after a discovery hearing scheduled for January 18, 2007, and included in it an admonition that the parties had a duty to preserve evidence, including ESI. EOF No. 41. Pappas had actual knowledge of the order and understood its import. Between the issuance of my order and the hearing, Pappas deleted 9,282 files from his work comput*519 er, most of them on the eve of the discovery hearing.28
2. On February 1, 2007, I orally admonished counsel of their clients’ duty to preserve relevant ESI, and ordered counsel to explain this duty to their clients. I followed this up the same day with a written preservation order, ECF No. 56, which Pappas knew had been issued. Between February 2 and 23, 2007, Pappas ran or caused to be run a Disk Cleanup program on his work computer, deleted files, entered his computer’s Registry Editor, and ran the system’s Disk Defragmenter program on the computer. This occurred shortly before the scheduled imaging of Pappas’s work computer.29
3. I issued orders on the following dates to produce or permit discovery: August 1 and 30, September 21, and October 3, 2007. ECF Nos. 131, 145, 149, and 164. After those orders were issued, between July 2008 and August 2009, Pappas or DeRouen ran the CCleaner and Easy Cleaner programs on CPI’s New Server and scrubbed (deleted) ESI.30
While it is clear that I have authority pursuant to Rule 37(b)(2)(A) to impose sanctions for the violation of my four orders to produce discovery, it must be determined whether I have authority to do so for violation of my three preservation orders, in which I ordered that ESI be preserved, but did not at that time order its actual production. For the reasons that follow, I conclude that I do.
On its face, Rule 37(b)(2) permits sanctions for disobedience of “an order to provide or permit discovery, including an order under Rule 26(f), 35, or 37(a).” (Emphasis added.) The rule does not define what is meant by “provide or permit” discovery, but the advisory committee’s notes to Rule 37 reflect that subsection (b) was amended in 1970 to broaden the ability of a court to sanction for a violation of discovery. Fed.R.Civ.P. 37 advisory committee’s note to the 1970 amendment to subdiv. (b). The Advisory Committee observed that “[v]arious rules authorize orders for discovery—e.g., Rule 35(b)(1), Rule 26(c) as revised, Rule 37(d). Rule 37(b)(2) should provide comprehensively for enforcement of all these orders.” Id. The advisory committee’s note following the 1980 amendment to Rule 37 refers to newly-enacted Rule 26(f), which governs discovery conferences, and states that Rule 26(f) requires “an order respecting the subsequent conduct of discovery” following such a meeting. Fed. R.Civ.P. 37 advisory committee’s note to the 1980 amendment to subdiv. (b)(2). This reference is particularly important because, as amended in 2006, Rule 26(f) specifically contemplates that when the parties meet and confer to discuss discovery, they must, inter alia, “discuss any issues about preserving discoverable information.” Thus, it cannot seriously be questioned that a court order to preserve information, including ESI, has as its core purpose the objective of ensuring that the ESI can be “provided” during discovery, and is intended to “permit” that discovery. It would clearly violate the purpose of Rule 37(b) if a court were unable to sanction a party for violating the court’s order to preserve evidence simply because that order did not also order the production of the evidence. As will be discussed below, the duty to preserve relevant evidence is a common law duty, not a rule-based duty. It therefore is no surprise that Rule 37(b)(2) does not specifically refer to court orders to “preserve” evidence. The reference to Rule 26(f), however, which does specifically refer to preservation obligations, makes it clear that court orders issued to enforce discovery plans agreed to by the parties, which include preservation obligations, would be enforceable by Rule 37(b)(2) sanctions. If so, then it is equally compelling that a preservation order issued by the court sua sponte, and designed to govern the discovery process by ensuring that the evidence to be preserved, if
Moreover, it is clear that courts have broadly interpreted the authority granted by Rule 37(b)(2) to permit sanctions for failures to obey a wide variety of orders intended to “permit discovery.” See, e.g., Hathcock v. Navistar Int’l Transp. Co.,
B. Proof of Sanction-Worthy Spoliation
In the Fourth Circuit, to prove spoliation that warrants a sanction, a party must show:
“(1) [T]he party having control over the evidence had an obligation to preserve it when it was destroyed or altered; (2) the destruction or loss was accompanied by a “culpable state of mind;” and (3) the evidence that was destroyed or altered was “relevant” to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reason*521 able factfinder could conclude that the lost evidence would have supported the claims or defenses of the party that sought it.”
Goodman,
1. Duty to Preserve Evidence and Breach of that Duty
The first consideration is whether the alleged spoliator had a duty to preserve the lost evidence and breached that duty. “Absent some countervailing factor, there is no general duty to preserve documents, things, or information, whether electronically stored or otherwise.” Paul W. Grimm, Michael D. Berman, Conor R. Crowley, Leslie Wharton, Proportionality in the Post-Hoc Analysis of Pre-Litigation Preservation Decisions, 37 U. Balt. L.Rev. 381, 388 (2008). Yet, it is well established that “[a] formal discovery request is not necessary to trigger the duty to preserve evidence.” Krumwiede v. Brighton Assocs., L.L.C., No. 05-C-3003,
The common law imposes the obligation to preserve evidence from the moment that litigation is reasonably anticipated. See Silvestri,
The duty to preserve evidence “includes an obligation to identify, locate, and maintain, information that is relevant to specific, predictable, and identifiable litigation.” Legal Holds, supra, at 3. It is well established that the duty pertains only to relevant documents. See Pension Comm.,
[A]ny documents or tangible things (as defined by [Fed.R.Civ.P. 34(a)) ] made by individuals “likely to have discoverable information that the disclosing party may use to support its claims or defenses.” The duty also includes documents prepared for those individuals, to the extent those documents can be readily identified (e.g., from the “to” field in e-mails). The duty also extends to information that is relevant to the claims or defenses of any party, or which is “relevant to the subject matter involved in the action.” Thus, the duty to preserve extends to those employees likely to have relevant information-the “key players” in the case.
Zubulake v. UBS Warburg LLC (Zubulake IV),
Beyond these basics, the duty to preserve evidence should not be analyzed in absolute terms; it requires nuance, because the duty “ ‘cannot be defined with precision.’ ” Grimm, 37 U. Balt. L.Rev. at 393 (quoting Shira A. Scheindlin, Moore’s Federal Practice E-Discovery: The Newly Amended Federal Rules of Civil Procedure 7 n. 28 (2006)). Proper analysis requires the Court to determine reasonableness under the circumstances—“reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation.” The Sedona Conference, The Sedona Principles: Best Practices Recommendations & Principles for Addressing Electronic Document Production ii (2d ed.2007), available at http://www. thesedonaconference.org/content/miscFiles/ (follow link); see Jones,
Case law has developed guidelines for what the preservation duty entails. Unfortunately, in terms of what a party must do to preserve potentially relevant evidence, case law is not consistent across the circuits, or even within individual districts. This is what causes such concern and anxiety, particularly to institutional clients such as corporations, businesses or governments, because their activities—and vulnerability to being sued— often extend to multiple jurisdictions, yet they cannot look to any single standard to measure the appropriateness of their preservation activities, or their exposure or potential liability for failure to fulfill their preservation duties. A national corporation cannot have a different preservation policy for each federal circuit and state in which it operates. How then do such corporations develop preservation policies? The only “safe” way to do so is to design one that complies with the most demanding requirements of the toughest court to have spoken on the issue, despite the fact that the highest standard may impose burdens and expenses that are far greater than what is required in most other jurisdictions in which they do business or conduct activities.
For example, as noted, parties must preserve potentially relevant evidence under their “control,” and in the Fourth Circuit and the Second Circuit, “ ‘documents are considered to be under a party’s control when that party has the right, authority, or practical ability to obtain the documents from a non-party to the action.’ ” Goodman,
It generally is recognized that when a company or organization has a document retention or destruction policy, it “is obligated to suspend” that policy and “implement a ‘litigation hold’ to ensure the preservation of relevant documents” once the preservation duty has been triggered. Goodman,
Although it is well established that there is no obligation to “‘preserve every shred of paper, every e-mail or electronic document, and every backup tape,’ ” Consol. Edison Co. of N.Y., Inc. v. United States,
[A] litigant could choose to retain all then-existing backup tapes for the relevant personnel (if such tapes store data by individual or the contents can be identified in good faith and through reasonable effort), and to catalog any later-created documents in a separate electronic file. That, along with a mirror-image of the computer system taken at the time the duty to preserve attaches (to preserve documents in the state they existed at that time), creates a complete set of relevant documents.
District courts in the Fifth and Sixth Circuits have relied on Zubulake TV’s discussion of
Breach of the preservation duty, also, is premised on reasonableness: A party breaches its duty to preserve relevant evidence if it fails to act reasonably by taking “positive action to preserve material evidence.” See Jones,
Before turning to the remaining elements of a spoliation claim, it is helpful in analyzing the existence of the duty to preserve evidence and its breach to keep in mind the entity to whom that duty is owed, because this is important in determining an appropriate sanction when spoliation is found. What heretofore usually has been implicit—but seldom stated—in opinions concerning spoliation is that, with the exception of a few jurisdictions that consider spoliation to be an actionable tort,
The civil justice system is designed for courts to decide eases on their merits, and to do so, the fact-finder must review the facts to discern the truth. See Barnhill v. United States,
That the duty is owed to the court, and not to the party’s adversary is a subtle, but consequential, distinction. A proper appreciation of the distinction informs the Court’s decision regarding appropriate spoliation sanctions. Where intentionally egregious conduct leads to spoliation of evidence but causes no prejudice because the evidence destroyed was not relevant, or was merely cumulative to readily available evidence, or because the same evidence could be obtained from other sources, then the integrity of the judicial system has been injured far less than if simple negligence results in the total loss of evidence essential for an adversary to prosecute or defend against a claim. In the former instance, the appropriateness of a case-dispositive sanction is questionable despite the magnitude of the culpability, because the harm to the truth-finding process is slight, and lesser sanctions such as monetary ones will suffice. In contrast, a sympathetic though negligent party whose want of diligence eliminates the ability of an adversary to prove its case may warrant casedispositive sanctions, because the damage to the truth-seeking process is absolute. Similarly, certain sanctions make no logical sense when applied to particular breaches of the duty to preserve. For example, an adverse inference instruction makes little logical sense if given as a sanction for negligent breach of the duty to preserve, because the inference that a party failed to preserve evidence because it believed that the evidence was harmful to its case does not flow from mere negligence—particularly if the destruction was of ESI and was caused by the automatic deletion function of a program that the party negligently failed to disable once the duty to preserve was triggered. The more logical inference is that the party was disorganized, or distracted, or technically challenged, or overextended, not that it failed to preserve evidence because of an awareness that it was harmful. In short, matching the appropriate sanction to the spoliating conduct is aided by remembering to whom the duty to preserve is owed.
Failures to preserve evidence also cause another, less widely discussed, injury to the civil justice system. “When spoliation issues are litigated, ‘more attention is focused on e-discovery than on the merits, with a motion for sanctions an increasingly common filing.’ ” (Allman, Amending the Rules 1) (quoting Dan H. Willoughby, Jr. & Rose Hunter Jones, Sanctions for E-Discovery Violations: By the Numbers (2010 Conf. on Civil Litig., May 2010), available at http://civil conference.uscourts.gov/LotusQuickr/dcc/ Main.nsfih_RoomHome/4df38292d 748069d0525670800167212/?OpenDocument, under the links for Papers and Empirical Research); see Rimkus,
What frustrates courts is the inability to fashion an effective sanction to address the drain on their resources caused by having to wade through voluminous filings, hold lengthy hearings, and then spend dozens, if not hundreds, of hours painstakingly setting forth the underlying facts before turning to a legal analysis that is multi-factored and involved. Adverse inference instructions do not compensate for the expenditure of court resources to resolve a spoliation dispute, nor do awards of attorney’s fees and costs to the prevailing party in the dispute. Further, dispositive sanctions, the appellate courts tell us, are only appropriate where lesser sanctions will not suffice. Silvestri,
While some trial courts have ordered the payment of money to the clerk of the court as a sanction for unnecessarily prolonging and increasing litigation expense, or as a fine for unnecessarily consuming court resources, e.g., Pinstripe, Inc. v. Manpower, Inc., No. 07-cv-620-GKF-PJC,
The bottom line is that resolution of spoliation motions takes a toll on the court, separate from that extracted from the litigants, for which there is no satisfactory remedy short of criminal contempt proceedings, which are unlikely to be initiated absent extraordinary circumstances. In fact, research has revealed only one instance to date in which a court has initiated criminal contempt proceedings against a party for spoliation of ESI in a civil case. See SonoMedica, Inc. v. Mohler, No. l:08-cv-230 (GBL),
In this case, as the discussions above on pages 7 and 46-48 shows, Defendants clearly were under a duty to preserve ESI relevant to Plaintiffs claims on October 14, 2006, if not earlier, and that, in an unabated destruction continuing for years, failed to comply with that duty. While I have acknowledged that courts must consider issues of proportionality and reasonableness of the alleged spoliator’s conduct in determining whether there has been a breach of the preservation duty, neither is at issue in this ease.
Proportionality and reasonableness are not at issue because Defendants have never alleged that it would have been an undue burden for them to preserve the ESI they destroyed. Neither is this a case where a hapless party took objectively reasonable steps to preserve ESI, but it nonetheless was destroyed or lost. Defendants candidly admit that “certain CPI ESI was deleted by Pappas and CPI’s Computer Engineer Evan DeRouen and/or others after CPI was served with the lawsuit and after a preservation order was issued,” and they “take responsibility” for those deletions. Defs.’ Opp’n 2. Defendants admit that “between October 14, 2006 and February 17, 2007 thousands of files were deleted from Pappas’ laptop computer,” id. at 5; that “Pappas made deletions on his laptop” on February 16 and 17, 2007, id. at 2, 7; and that, consistent with Pappas’s testimony, “he would put e-mails into a ‘Deleted Items’ folder on his laptop” for what Defendants characterized as “storage purposes,” id. at 8 (citation omitted). Acknowledging that the EHD “should not have been disposed of since it was in existence after the lawsuit had been filed,” id. at 5, they “take responsibility for ... the failure to preserve files on the SimpleDrive [EHD],” id. at 2. Defendants also “recognize[ ] that there has been ... contradictory testimony about its computer stores, and contradictory testimony about the use of the name Fred Bass.” Defs.’ Surreply 19. Thus, in this case, the issue is not whether the preservation duty was triggered, or whether Defendants took reason
2. Culpable State of Mind
The second consideration for resolving a spoliation motion is to determine whether the alleged spoliator acted culpably. “Each case will turn on its own facts and the varieties of efforts and failures is infinite.” Pension Comm.,
“Courts differ in their interpretation of the level of intent required before sanctions may be warranted.” Sedona Conference Glossary, supra, at 48. In United Medical Supply Co. v. United States,
Negligence, or “culpable carelessness,” is “[t]he failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation[.]” Black’s Law Dictionary 846 (Bryan A. Garner ed., abridged 7th ed., West 2000). Negligence is contrasted with “conduct that is intentionally, wantonly, or willfully disregardful of others’ rights.” Id. With regard to preservation of evidence, if either the failure to collect or preserve evidence or the sloppiness of the review of evidence causes the loss or destruction of relevant information, the spoliator’s actions may amount to negligence, gross negligence, or even intentional misconduct. See Pension Comm.,
Gross negligence, which is something more than carelessness, ‘“differs from ordinary negligence only in degree, and not in kind.’ ” Pension Comm.,
Willfulness is equivalent to intentional, purposeful, or deliberate conduct. Buckley v. Mukasey,
Nevertheless, courts often combine then-analysis of willfulness and bad faith. E.g., Metro. Opera Ass’n,
[t]he evidence that the defendants knew about the litigation with Rimkus when they deleted the emails; the inconsistencies in the explanations for deleting the emails; the failure to disclose information about personal email accounts that were later revealed as having been used to obtain and disseminate information from Rimkus; and the fact that some of the emails reveal what the defendants had previously denied.
Rimkus,
In Krumwiede,
Here, the parties disagree about Defendants’ level of culpability. Plaintiff characterizes Pappas’ behavior as “egregious” and perjurous, and it insists that “Pappas has exhibited a pattern of litigation abuse and a persistent disrespect for the judicial process.” Pl.’s Mot. 56, 69. According to Plaintiff, “the record is replete with multiple conscious and affirmative acts by Pappas that led to the deliberate destruction of relevant evidence. Pl.’s Reply 1. Defendants acknowledge wrongdoing but insist that their “culpable state of mind was negligence.” Defs.’ Opp’n 25. Moreover, according to Defendants, Pappas’s September 27, 2007 Rule 37 certification was not false because he was not aware that his production was incomplete. Id. at 9-10. They insist that Plaintiffs allegations that Defendants “manufactured evidence” and removed data instead of producing all ESI are “unfounded.” Id. at 14-16. I disagree.
I find the circumstances of this ease to be indistinguishable from other cases in which the spoliating party was found to have acted in bad faith. The discussion supra at Sections I.1-I.9 convincingly demonstrates that Pappas, and through him CPI, directly and with the aid of DeRouen and “Federico,” set out to delete, destroy, or hide thousands of files containing highly relevant ESI pertaining to Plaintiffs claims. Suffice it also to say that in both Krumwiede,
3. Relevance of Lost Evidence and Resulting Prejudice
The third consideration is the relevance of the lost evidence. In the context of spoliation, lost or destroyed evidence is “relevant” if “a reasonable trier of fact could conclude that the lost evidence would have supported the claims or defenses of the party that sought it.” Thompson,
Spoliation of evidence causes prejudice when, as a result of the spoliation, the party claiming spoliation cannot present “evidence essential to its underlying claim.” Krumwiede,
When the party alleging spoliation shows that the other party acted willfully in failing to preserve evidence, the relevance of that evidence is presumed in the Fourth Circuit. Sampson, 251 F.R.D. at 179; Thompson,
Here, Plaintiff alleges that “Defendants’ massive and intentional destruction of emails and documents has substantially prejudiced, to various degrees, its ability to prove all of its claims, both in terms of liability and the extent of damages.” Pl.’s Reply 43. According to Plaintiff, Defendants’ actions caused prejudice because the ESI that Defendants “irretrievably deleted, destroyed and spoliated ... contained the very information and ‘fingerprints’ that would establish all or most of the elements of Counts I, II, VII, and VIII.” Pl.’s Mot. 76. Although Plaintiff concedes that “many of the known deletions ... were eventually recovered in whole or in part,” id., significant numbers of files were permanently destroyed. On the
Defendants’ willful, bad faith conduct allows this Court to presume relevance and prejudice. Defendants utterly fail to rebut this presumption through their inconsistent and incredible explanations for their destruction of ESI. Moreover, as painstakingly discussed in Sections 1.2—1.9, supra, it is obvious that the permanent loss of thousands of relevant files that proved that Defendants improperly accessed and used Plaintiffs proprietary information is prejudicial, because, even if the files were cumulative to some extent, Plaintiffs case against Defendants is weaker when it cannot present the overwhelming quantity of evidence it otherwise would have had to support its ease. Defendants themselves cannot seriously believe that their willful misconduct did not cause prejudice, because they acquiesced to the entry of a default judgment on Count I, Plaintiffs core claim, a clear concession that the spoliated documents were relevant to that claim and their destruction caused prejudice. And, lest there be any doubt, Defendants affirmatively stated with regard to the copyright claim: “ “[W]e’ve given up on prejudice ____which I think was the appropriate thing to do. We gave up on the issue of relevance----” June 25, 2010 Hr’g Tr. 3:16-22. Thus, the loss of ESI deprived Plaintiff of relevant evidence, and this loss was prejudicial.
C. Sanctions
In determining what sanctions are appropriate, the Court must consider the extent of prejudice, if any, along with the degree of culpability, and, as with the other elements, possible sanctions vary by jurisdiction. See Nucor Corp. v. Bell,
Sanctions that a federal court may impose for spoliation include assessing attorney’s fees and costs, giving the jury an adverse inference instruction, precluding evidence, or imposing the harsh, case-dispositive sanctions of dismissal or judgment by default. Goodman,
In this case, Plaintiff has urged this Court to impose the most severe of sanctions, including entry of a default judgment as to all remaining counts—Counts I (copyright infringment), II (unfair competition), VII (Lanham Act violations, namely false advertising and reverse palming off), and VIII (patent violations)—for both liability and damages; assessment of attorney’s fees and costs for what likely will amount to most of the litigation costs that Plaintiff has incurred; assessment of a civil fine; and referral of the matter to the United States Attorney for initiation of criminal proceedings against Pappas for “criminal contempt of Court, obstruction of justice, and perjury.” Pl.’s Mot. 97, 98, 99. On the record before me, Plaintiff hardly can be blamed for taking such an extreme position. Indeed, as exhaustively inventoried above, Defendants’ willful misconduct has had a considerable adverse impact on the Court’s pretrial schedule, imposed substantial burden on two judges of this Court and their staffs, and Pappas has essentially thumbed his nose at the Court’s efforts to oversee a pretrial process that would facilitate a fair and timely resolution of this case on its merits. Nonetheless, in fashioning spoliation sanctions, Courts must strive to issue orders that generate light, rather than heat, and without ignoring the magnitude of willful misconduct and prejudice, must fashion remedies that strike the appropriate balance between those that are normative and those that are compensatory. With this in mind, I will turn to what sanctions are appropriate in this case.
1. Dismissal or Default Judgment
Courts may order a default judgment or dismissal to “send a strong message to other litigants, who scheme to abuse the discovery process and lie to the Court, that this behavior will not be tolerated and will be severely sanctioned.” Krumwiede,
Although “Silvestri posits an either/or test,” Erie Ins. Exch.,
2. Adverse Inference and Other Adverse Jury Instructions
In its discretion, the court may order an adverse inference instruction, which informs a jury that it may “draw adverse inferences from ... the loss of evidence, or the destruction of evidence,” by assuming that failure to preserve was because the spoliator was aware that the evidence would have been detrimental. Vodusek,
3. Attorney’s Fees, Costs, and Fines
Less severe sanctions include costs, attorney’s fees, and fines, which not only compensate the prejudiced party but also “punish the offending party for its actions” and “deter the litigant’s conduct, sending the message that egregious conduct will not be tolerated.” See Pension Comm.,
L Contempt of Court
Fed.R.Civ.P. 37(b)(2)(A)(vii) provides that the court may “treat[ ] as contempt of court the failure to obey” a court order to provide or permit discovery of ESI evidence. Similarly, pursuant to its inherent authority, the court may impose fines or prison sentences for contempt and enforce “the observance of order.” United States v. Hudson,
When the nature of the relief and the purpose for which the contempt sanction is imposed is remedial and intended to coerce the eontemnor into compliance with court orders or to compensate the complainant for losses sustained, the contempt is civil; if, on the other hand, the relief seeks to vindicate the authority of the court by punishing the eontemnor and deterring future litigants’ misconduct, the contempt is criminal____
If the relief provided is a sentence of imprisonment, it is remedial if “the defendant stands committed unless and until he performs the affirmative act required by the court’s order,” and is punitive if “the sentence is limited to imprisonment for a definite period.” If the relief provided is a fine, it is remedial when it is paid to the complainant, and punitive when it is paid to the court, though a fine that would be payable to the court is also remedial when the defendant can avoid paying the fine simply by performing the affirmative act required by the court’s order.
Id. (quoting Hicks v. Feiock,
“Criminal contempt is a crime in the ordinary sense,” Bloom v. Illinois,
To hold a party in civil contempt, the court must find that four elements have been established by clear and convincing evidence:
“(1) the existence of a valid decree of which the alleged eontemnor had actual or constructive knowledge; (2) that the decree was in the movant’s ‘favor’; (3) that the alleged eontemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violation; and (4) that [the] movant suffered harm as a result.”
Id. at *3 (quoting Ashcraft v. Conoco, Inc.,
5. Appropriate Sanctions for Defendants
a. Default judgment as to liability on copyright claim only
Plaintiff argues that “only the severest forms of sanctions” would be “effective” against Defendants. Pl.’s Mot. 90-91. As Plaintiff sees it, “[i]f this Court finds that Defendants’ misconduct was egregious enough to have justified a forfeiture of their defenses, then it need not also determine whether Defendants’ misconduct denied VSI the ability to prove all its claims.” Pl.’s Reply 5-6. See Erie Ins. Exch.,
As noted, Defendants admit spoliation, relevance, and prejudice, and consent to a default judgment on liability for Count I, the copyright claim. Further, the facts amply demonstrate the intentional, bad faith permanent destruction of a significant quantity of relevant evidence, to the Plaintiffs detriment. Thus, it is clearly appropriate that the spoliation consequences include a judgment finding CPI and Pappas liable on Count J
It is far less certain, however, whether Plaintiff has demonstrated that a default judgment as to all the remaining counts alleged against Defendants is required, or that a default judgment as to damages for all counts, including Count I, is warranted. The copyright claim always has been Plaintiffs primary claim, and it is easy to see how the evidence that was destroyed prejudiced Plaintiffs efforts to prove it. The same cannot be said about the remaining counts for unfair competition (Count II),
Similarly, with the exception of the remedy of the entry of a permanent injunction as to the copyright claim, which Defendants do not oppose, Defs.’ Opp’n 29 & Ex. 11, it is not clear that Plaintiff has demonstrated an inability to prove monetary damages for any of the counts alleged. The debate all these years has focused on liability, not damages. While Plaintiff ultimately may be able to make this showing, it has not done so yet. Accordingly, entry of a default judgment as to monetary damages is denied, without prejudice. Rather, it is appropriate for the court to schedule a trial on the issues of liability for Counts II (unfair competition), VII (Lanham Act violations), and VIII (Patent Act violations), and money damages for all counts. Counsel have informed the Court that they do not seek a jury trial on these issues. (June 25, 2010 Hr’g Tr. 5:19-6:11.) Accordingly, these issued will be tried to the Court. I recommend that Plaintiff be permitted to proceed, but that if in the future of this litigation Plaintiff is able to demonstrate with greater particularity than it has to date that it cannot meet its burden of proof as to liability for Counts II (unfair competition), VII (Lanham Act violations), and VIII (Patent Act violations), or money damages as to all counts, because of Defendants’ spoliation, then the Court should revisit at that time whether additional sanctions, such as the entry of an order pursuant to Fed.R.Civ.P. 37(b)(2)(A)(ii) prohibiting Defendants from supporting their defenses to liability on Counts II, VII, and VIII, or money damages; or prohibiting them from opposing Plaintiffs proof of money damages; or finding Defendants liable for the counts other than copyright.
b. Permanent injunction on the copyright claim
As for the permanent injunction on the copyright count, which Plaintiff requests and Defendants do not oppose, Defs.’ Opp’n 29 & Ex. 11, I am recommending that Judge Gar-bis grant this as a sanction.
c. Attorney’s fees, costs, and civil, but not criminal, contempt
As the prevailing party, Plaintiff is entitled to reasonable attorney’s fees and costs. See Fed.R.Civ.P. 37(b)(2)(C) (For failure to comply with a court order to provide or permit discovery, “the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.”). Here, the failure was not substantially justified, and there are no circumstances making such an award unjust. Indeed, Defendants conceded that a fee award would be appropriate when Defense counsel stated that “the Court ... would determine what would be the appropriate attorneys’ fees.” (June 25, 2010 Hr’g Tr. 3:16-22.) Thus, spoliation sanctions shall include costs and legal fees allocable to spoliation. Specifically, as Plaintiff requested, the Court shall award attorney’s fees and costs, including costs related to uncovering Defendants’ discovery abuses; preparing, filing, and arguing all of Plaintiffs ESI motions; and retaining Guidance Software and Andre-as Spruill. To that end, Plaintiff shall submit a bill of costs within thirty (30) days of this Memorandum, Order and Recommendation, with Defendants’ response, if any, to be submitted within thirty (30) days thereafter.
Plaintiff also has asked the Court to refer this case to the United States Attorney to evaluate whether perjury or other criminal charges should be brought against Pappas. Pl.’s Mot. 98. Such action is unusual and extreme for spoliation cases, but not unheard of. See, e.g., SonoMedica Inc.,
It is true that, if the U.S. Attorney declined to initiate a criminal prosecution against Pappas for contempt of court, this court could appoint a private prosecutor to do so, pursuant to Fed.R.Crim.P. 42(a)(2). See Young,
This is not to say, however, that referral for criminal contempt proceedings is the extent of what this Court can do to address Pappas’s egregious behavior. After all, Rule 37(b)(2)(A)(vii) permits the Court to treat “as contempt of court the failure to obey any order except an order to submit to a physical or mental examination.” This sanction has the obvious benefit of being warranted on the existing record, without need for initiating new proceedings. As noted, there must exist “ ‘valid decrees of which the alleged contemnor [i.e., Pappas] had actual or constructive knowledge’ those decrees must have been in Plaintiffs favor; Pappas, by his conduct, must have “ ‘violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violation’”; and VSI must have suffered harm as a result of Pap-pas’s conduct. See SonoMedica, Inc.,
For such clearly contemptuous behavior, a very serious sanction is required. Accordingly, I order that Pappas’s acts of spoliation be treated as contempt of this court, and that as a sanction, he be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney’s fees and costs that will be awarded after Plaintiff has submitted an itemized accounting of the attorney’s fees and costs associated not only with filing this motion, but also with respect to all
Despite the fact that, if Pappas refuses to pay the attorney’s fees and costs ordered by the Court, he will be imprisoned for two years, it is quite clear that this is a civil—not a criminal—contempt sanction, because the relief is compensatory and the sanction will be imposed to coerce Pappas’s compliance with this Court’s order to pay attorney’s fees and costs to Plaintiff; Pappas can avoid imprisonment by promptly paying the fees and costs. See Hicks v. Feiock,
A separate Order follows.
ORDER AND RECOMMENDATION
1. ORDER
For the reasons stated in the Memorandum, Order and Recommendation issued this same date, on this 9th day of September, 2010, it is hereby ORDERED that
(1) Pursuant to Fed.R.Civ.P. 37(b)(2)(C), Defendant shall pay monetary sanctions equivalent to Plaintiffs attorney’s fees and costs, which will be awarded after further briefing by the parties, and which will include fees and costs associated with all discovery that would not have been untaken but for Defendants’ spoliation, as well as the briefings and hearings regarding Plaintiffs Motion for Sanctions;
(2) To that end, Plaintiff shall submit a bill of costs within thirty (30) days of the Court’s Order, with Defendants’ response, if any, to be submitted within thirty (30) days thereafter; and
(3) Pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vii), Defendant Pappas’s acts of spoliation shall be treated as contempt of this Court, and as a sanction, he shall be imprisoned for a period not to exceed two (2) years, unless and until he pays to Plaintiff the attorney’s fees and costs that will be awarded, as provided in Paragraphs (1) and (2) above.
2. RECOMMENDATION
On this 9th day of September, 2010, it is hereby RECOMMENDED that
(1) Pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vi), the Court enter a default judgment as to liability on Count I (copyright infringement) only, as a sanction for Defendants’ willful spoliation;
(2) Pursuant to Fed.R.Civ.P. 37(b)(2)(A), the Court grant Plaintiffs motion for injunctive relief as to Count I (copyright infringement), as a sanction for Defendants’ willful spoliation; and
(3) The Court deny without prejudice Plaintiffs motion for default judgment as to liability on the remaining counts and as to damages on all counts.
Any objections to this Order and Recommendation shall be filed within fourteen (14) days.
Notes
. Court papers formerly were cited as "Paper No.” or “Doc. No." The recently-published Nineteenth Edition of The Bluebook provides that electronically-filed documents should be cited as “ECF No.”
. On December 8, 2006, in accordance with 28 U.S.C. § 636 and Local Rules 301 and 302, Judge Garbis referred this case to me to resolve discovery disputes and related scheduling matters. ECF No. 21. Ordinarily, referral of a case to a Magistrate Judge to resolve discovery matters pursuant to 28 U.S.C. § 636(b)(1)(A) and Local Rule 301.5.a contemplates that the Magistrate Judge may order any appropriate relief short of issuing an order that is dispositive of one or more of the pending claims or defenses. Objections to such non-dispositive discovery orders must be served and filed within fourteen days of the entry of that order. Loe. R. 301.5.a. If a District Judge contemplates that the disposition of discovery disputes by a Magistrate Judge may involve sanctions that are dispositive of pending claims or defenses, such as those provided in Fed.R.Civ.P. 37(b)(2)(A)(v) and (vi), then the District Judge would direct the Magistrate Judge to propose findings of fact and recommendations for action to be taken pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 301.5.b. When a Magistrate Judge issues a Report and Recommendation, the parties have fourteen days to serve and file objections. Fed.R.Civ.P. 72(b); Loe. R. 301.5.b. Judge Garbis’s Order of Referral does not state whether it is pursuant to 28 U.S.C. § 636(b)(1)(A) or (B), but to the extent that this Memorandum and Order orders nondispositive relief, it shall be pursuant to 28 U.S.C. § 636(b)(1)(A); to the extent that it recommends dispositive relief, it shall be pursuant to 28 U.S.C. § 636(b)(1)(B). Either way, the parties have fourteen days in which to serve and file objections to any aspect of this Memorandum, Order and Recommendation. Loe. R. 301.5.
As discussed infra, both non-dispositive and dispositive relief is granted; accordingly the format is a hybrid memorandum and order and, as to the dispositive relief sought, a recommendation. See 28 U.S.C. § 363(b)(1).
. Imposing contempt sanctions pursuant to Rule 37(b)(2)(A)(vii), particularly including a sentence of imprisonment, is an extreme sanction, but this is an extreme case. For reasons that are much more fully explained below, this sanction is not a form of criminal contempt, which could not be imposed without compliance with Fed.R.Crim.P. 42, but rather a form of civil contempt, inasmuch as Pappas may purge himself of his contempt, and concomitantly avoid imprisonment, by performing the affirmative act of paying Plaintiff's attorney's fees and costs incurred in connection with successfully prosecuting this motion. Hicks v. Feiock,
. I acknowledge with gratitude the copious-fact checking of Joshua Altman, Ashley Marucci, and Jessica Rebarber; the research assistance of Rignal Baldwin V, Matt Haven, and Han Weinberger; and the cite-checking of Eric Kunimoto, Marissa Lenius, and Melissa O’Toole-Loureiro, all of whom interned in my Chambers over the course of the past year. Further, the indispensable assistance of my law clerk, Lisa Yurwit, is gratefully acknowledged.
. I note that the Court lacks any “effective” means to order Defendants to pay a fine to the Clerk of the Court. Such an order is regarded as a form of criminal contempt, which may not be imposed without affording Defendants the procedural protections of Fed.R.Crim.P. 42(b). See Buffington,
. For ease of reference I will refer to Pappas’s actions, but because Pappas controlled CPI at all times relevant to this case, his misconduct is attributable to him individually as well as to his company, CPI.
. As will be discussed in detail later in this memorandum, when a court is evaluating what sanctions are warranted for a failure to preserve ESI, it must evaluate a number of factors including (1) whether there is a duty to preserve; (2) whether the duty has been breached; (3) the level of culpability involved in the failure to preserve; (4) the relevance of the evidence that was not preserved; and (5) the prejudice to the party seeking discovery of the ESI that was not preserved. There is something of a "Catch 22” in this process, however, because after evidence no longer exists, it often is difficult to evaluate its relevance and the prejudice associated with it. With regard to Pappas’s many acts of misconduct, the relevance and prejudice associated with some of his spoliation can be established directly, or indirectly through logical inference. As to others, the relevance and prejudice are less clear. However, his conduct still is highly relevant to his state of mind and to determining the overarching level of his culpability for all of his destructive acts. When the relevance of lost evidence cannot be proven, willful destruction of it nonetheless is relevant in evaluating the level of culpability with regard to other lost evidence that was relevant, as it tends to disprove the possibility of mistake or accident, and prove intentional misconduct. Fed.R.Evid. 404(b).
. According to a February 2, 2009 letter from Plaintiff's counsel, "Pappas became aware that Victor Stanley was contemplating a lawsuit against him and CPI" in July 2006. (PTs Mot. Ex. 46, ECF No. 341-46.) Defense counsel acknowledged that ”[f]iles had been deleted from Mark Pappas's laptop in July 2006.” (June 9, 2009 Rothschild Ltr. to Court, ECF No. 300.)
Although Stephanie Pappas, Mark Pappas’s wife, is also a defendant, Plaintiff seeks no relief against Stephanie Pappas. (Pl.’s Mot. 100 n. 105.) References to "Pappas” in this memorandum are to Mark Pappas.
. VSI "manufactures a broad line of high quality site furnishings used in public and commercial sites, such as litter receptacles, benches, tables and chairs, ash urns, planters, tree guards, seats and bollards made from steel, cast ductile iron, several special of wood or recycled plastic.” (Compl. ¶ 10.) The design drawings and specifications at issue were from VSI’s “Product Libraiy,” which is posted on VSI’s website, and which includes design drawings and specifications, as well as images, for VSI products. (Id. ¶ 13, 20.) CPI is a competitor selling similar products. (Id. ¶ 1.)
. I note that this case is not Pappas’s maiden voyage into spoliation. He appears to have
. Digiean was CPI's connection to a Chinese supplier that manufactured CPI’s products that competed with VSI’s products. The emails that were destroyed related to VSI. (Pappas Dep. 88:19-91:6-21.) Hair was CPI's shipping agent involved in CPI's import of Chinese-made products that CPI subsequently sold under a false claim that they were "Made in the USA.” (Slaughenhoupt Aff. ¶ 42.) CPI sold these products in competition with VSI's products, which are manufactured in Maryland. (Id.)
. As discussed infra, in Section 1.3, although Pappas's email deletion instructions to Federico were available for discovery, any emails that Federico may have destroyed per Pappas’s directions have not been produced.
. Counsel who currently represent Defendants, James Rothschild and Joshua Kaufman, were not counsel to Pappas or CPI during the times when the misconduct resulting in spoliation of evidence took place.
. Disk Defragmenter, Microsoft Window’s disk defragmentation program, is a system utility that "consolidates fragmented files and folders on [a] computer’s hard disk, so that each occupies a single, contiguous space” in the system, http:// www.microsoft.com/resources/documentation/ windows/xp/all/proddocs/en-us/snap_defrag. mspx?mfr=true. To consolidate fragmented files, the program moves the file fragments together by "overwriting all those places” where space in the system was occupied by deleted files. As a result, “the ability to recover deleted items virtually ... disappears” because the same is occupied by other files. (Dec. 1, 2009 Hr’g Tr. 43:1—44:18 (Spruill Test.).) Cutting through all the techno-speak, it is foreseeable that the running of a disk defragmentation program, colloquially referred to as “defragging,” can result in the loss of files that were recoverable before the defragmentation occurred.
. There is no evidence to suggest that Ms. Turner was involved in any of the misconduct described in this memorandum. She testified credibly during the hearing and her testimony was helpful.
. DeRouen testified that his wife, Christie DeRouen, has worked for CPI for more than a decade as an office manager and earns about $68,000 annually, which represents approximately 75-80% of their family income. (Apr. 26, 2010 Hr'g Tr. 27:6-19.) With regard to his expertise, DeRouen is "certified from HP to repair their printers and computers,” but failed the one Microsoft examination he took. (Id. 67:25-68:7.)
. The incompleteness of the data transfer between servers is discussed in further detail below.
. After discovery commenced, the parties' ESI consultants conferred and developed a Joint Search Protocol for ESI, dated June 28, 2007 (Pl.’s Mot. Ex. 41, ECF No. 341-41), in accordance with the Court's Order (June 14, 2007 Conf. Tr. 16:14-21, Pl.’s Mot. Ex. 40, ECF No. 341-40). The Joint Search Protocol was amended in May 2009. (May 29, 2009 Spruill and Turner Ltr., ECF No. 299-1.) It was intended to facilitate VSI’s discovery of relevant ESI at a cost and burden proportional to what is at stake in this case.
. CPI named one of its product lines the “Fuvista” line. Pappas admitted during discovery that "Fuvista” stood for "Fuck you Victor Stanley,” (Pappas Dep. 22:20-24, Pl.’s Mot. Ex. 5, ECF No. 341-5), demonstrating that Pappas's wit transcended sophomoric pranks such as logging into VSI's web site as "Fred Bass" and extended to inventing insulting acronyms to name his competing products. When disclosed, the meaning of this acronym removes any doubt about his motive and intent. No doubt Pappas regarded this as hilarious at the time. It is less likely that he still does.
. At the parties’ initial Fed.R.Civ.P. 26(f) planning meeting on January 18, 2007, VSI reiterated its request for imaging of Defendants’ drives. (Joint Rule 26 Report of the Parties 3, ECF No. 51.)
. For the purpose of sanctions pursuant to Fed. R.Civ.P. 37(b)(2) for failure to obey a discovery order, it was in the December 22, 2006 Order that I first made the duty to preserve part of a Court order in this case. However, it was not the only preservation order. As discussed below, I issued another preservation order on February 1, 2007. Additionally, on August 1, 2007, August 30, September 21, and October 3, 2007, I ordered Defendants to produce all relevant, non-privileged ESI and a privilege log to Plaintiff. (ECF Nos. 131, 145, 149, 164, 341-45.)
. Suggested Protocol for Discovery of Electronically Stored Information ("ESI”), www.m dd.uscourts.gov/news/news/ESIProtocol.pdf.
. VSI alleges that "Defendants' misconduct and their three year evasion of their [prior] discovery obligations have been further aided and abetted by questionable conduct by their [former] counsel at various times and by DeRouen.” Pl.'s Mot. 73. Insofar as Plaintiff alleges spoliation by the attorneys who represented Defendants earlier in this litigation, Defendants' previous attorneys acted as Defendants’ agents. See Link v. Wabash R.R.,
. See Lawyers for Civil Justice, et al., Reshaping the Rules of Civil Procedure for the 21st Century: The Need for Clear, Concise, and Meaningful Amendments to Key Rules of Civil Procedure (2010 Conf. on Civil Litig., May 2, 2010); Dan H. Willoughby, Jr. & Rose Hunter Jones, Sanctions for E-Discovery Violations: By the Numbers (2010 Conf. on Civil Litig., May 2010); Thomas Y. Allman, Amending the Federal Rules: The Path to an Effective Duty To Preserve 5 (2010 Conf. on Civil Litig., June 15, 2010); Paul W. Grimm, Michael D. Berman, Conor R. Crowley, Leslie Wharton, Proportionality in the Post-Hoc Analysis of Pre-Litigation Preservation Decisions, 37 U. Balt. L.Rev. 381, 388 (2008). The 2010 Conference on Civil Litigation papers are available on the Conference’s website at http://civil conference.uscourts.gov/LotusQuickr/dcc/Main. nsf/hJRoomHome/ 4df38292d748069d052567080 0167212/POpenDocument, under the links for Papers and Empirical Research.
. See Robert E. Shapiro, Conclusion Assumed, 36 Litig. 59 (ABA Spring 2010).
. See articles cited at note 24, supra.
. In this regard, I have attached as an appendix to this memorandum a chart that contains citations to cases discussing preservation and spoliation in each of the circuits and attempts to break them down into discrete sub-issues to facilitate comparison of the positions taken by the circuits, and where applicable, districts within a particular circuit.
. See discussion, supra, in Section 1.6, at pages 509- 10.
. See discussion, supra, in Section 1.7, at pages 510- 12.
. See discussion, supra, in Section 1.9, at pages 513-14.
. The same factors can be culled from the case law in most other circuits. See, e.g., D’Onofrio v. SFX Sports Grp., Inc., No. 06-687 (JDB/JMF),
. See also Canton v. Kmart Corp., No. 1:05-cv143,
. See Foster v. Lawrence Mem’l Hosp.,
. This distinction is ali the more significant because, as noted, in the Second Circuit, certain conduct is considered gross negligence per se. Pension Comm.,
. As this Court noted in Sampson,
Most of the Fourth Circuit cases involving sanctions for spoliation of evidence arise in the context of a defendant asking for dismissal of a plaintiff's claims because of destruction of evidence by the plaintiff. As the Fifth Circuit has noted, "[b]ecause ... rendering default judgment is equally as harsh a sanction as dismissing the case of a plaintiff with prejudice, we cite cases involving these sanctions interchangeably.” Pressey [v. Patterson,898 F.2d 1018 , 1021 n. 2 (5th Cir.1990) ]. The court here cites cases involving requests for default judgment and for dismissal interchangeably.
. VSI cites various cases in which the Fourth Circuit has affirmed default or dismissal as a sanction for spoliation, but in many cases the court found irreparable prejudice. See Pl.'s Mot. 53 (citing King v. Am. Power Conversion Corp.,
In its own research, which has been considerable, the Court has identified only one case—in a different circuit—that was terminated based solely on a party's bad faith spoliation of evidence. In Miller v. Time-Wamer Communications, Inc., No. 97 Civ. 7286,
. Again, the significance of this departure comes to light when it is viewed in the context of the chain reaction spurred by considering certain conduct gross negligence per se. If, for example, a court adopts the position oí Pension Committee,
. Defendants indulge in a little verbal legerdemain in characterizing their position regarding Count I. They acquiesce to the entry of a “consent" judgment, rather than the entry by the Court of a default judgment. While the end result is the same under either characterization, tire latter makes it unambiguous that the outcome is as a severe sanction for egregious misconduct; the former implies a form of agreement without the pejorative classification, similar to settling a claim without admitting liability. It would be inappropriate for the Court to indulge Defendants in this face-saving effort. Defendants cannot have their cake and eat it too. They cannot admit to breach of the duty to preserve and acknowledge (or, more accurately, capitulate) on the issues of prejudice and relevance, but attempt to sanitize the result by labeling it something other than what it is-a sanction. Accordingly, the appropriate sanction is the entry of a default judgment as to liability for Count I, copyright infringement, pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vi). Because this is a dispositive outcome, I am recommending that Judge Garbis impose it, rather than doing so myself, although there can be no doubt that this result is warranted on this record.
. To summarize briefly, on December 22, 2006, I stated: “[B]oth parties are reminded of their substantive duty to preserve evidence, including electronic evidence, that is relevant to the case.” ECF No. 41. On February 1, 2007, I issued a written Preservation Order that stated that the parties had been admonished at the February 1, 2007 hearing of their "substantive duty to preserve evidence potentially relevant to the case, and ... ordered to do so by the Court.” (Feb. 1, 2007 Order 2, ECF No. 56.) The language of the Court’s preservation orders was crystal clear. Pappas testified that he understood both orders. (Oct 29, 2009 Hr’g Tr. 117:18-118:2, 139:10-140:19.) Even if the language of the first order and the Court's oral order on February 1, 2007 left anything to doubt, the clarity of the February 1, 2007 order is undeniable. Indeed, in Pappas’s own words, the Court’s February 1, 2007 preservation order “was very clear.” {Id. 139:10-140:19.) Pappas deleted thousands of files following these orders. Separate and apart from these preservation orders, civil contempt sanctions are warranted for Defendants’ violations of the Court’s August 1 and 30, September 21, and October 3, 2007 production orders, which stated clearly that Defendants were to "produce all relevant, non-privileged ESI” to Plaintiff's counsel. (ECF Nos. 131, 145, 149, and 164.) Pappas stated in a sworn affidavit that he produced all such ESI, demonstrating that he had knowledge of the orders, yet his ESI production was not complete.