Bеfore the Court is Plaintiffs' Motion for an Order Sanctioning Defendant for Making Material Misrepresentations of Fact to the Court [Doc. # 37], which has been referred for hearing and determination under
I. FACTS
This is a patent case. Plaintiffs allege that Defendant Bestop, Inc. ("Bestop") infringed its
Appended to Plaintiffs' motion for sanctions is the declaration of Eric P. Carnevale, and attorney for Webasto. Mr. Carnevale states that in response to a document subpoena, FCA produced copies of the Power Point presentation that it had received from Bestop. Carnevale Declaration , Doc. # 37, Pg. ID 596-597. The Power Point presentation that FCA produced is appended as Exhibit A to the Carnevale Deсlaration, and filed under seal [Doc. # 40]. Every page of that Power Point presentation, with the exception of the cover page, has a footer stating, "Disclosure or duplication without consent is prohibited," unlike the copy that Bestop submitted with its motion to dismiss, which did not contain the footer.
On January 13, 2018, 10 days before the scheduled evidentiary hearing, Mr. Sadowski filed a second Declaration [Doc. # 58]. He states that after he received Webasto's Reply Brief [Doc. # 44], he undertook further investigation, and found that the Power Point presentation had been scanned tо him, and that 47 minutes later, he transmitted the scanned document to Richard Hoffman (an attorney for Plaintiff). Second Sadowski Declaration , Doc. # 58, ¶¶ 3-4. He also states that someone handed him a hard copy of the Power Point presentation, and that this copy did not have the non-disclosure footer.
Evidentiary Hearing Testimony
David Smith
David Smith, Bestop's Director of Engineering, testified at the January 23, 2018 evidentiary hearing.
Mr. Smith testified that the Power Point presentation attached to his Declaration is not the one that he sent to FCA, and that the presentation attached to his Declaration is missing the footer. (Tr. 12-13). The presentation that he created and that he provided to FCA (admitted at the hearing as Plaintiff's Exhibit 2) did have the footer on every page. (Tr. 19). He did not know whether the copy of the Power Point he gave to Mr. Sadowski had the footer or not. (Tr. 21). However, he sent a native version of the Power Point, containing the footer, to FCA. He was not aware of any software bug that would have deleted the footer (Tr. 22).
Mr. Smith testified that he did not consider the disclosure to FCA to be confidential, and that Bestop did not request a confidentiality agreеment. (Tr. 36). Over the years, however, he has disclosed confidential information to FCA without a non-disclosure agreement. (Tr. 42-43) He described the presentation at the FCA facility as being held in an open space that would have been accessible to FCA employees or "anyone that can access the Chrysler Tech Center." (Tr. 36-39). However, he could not identify anyone that was present who was not a Bestop of an FCA employee. He acknowledged that the public cannot walk into the Chrysler facility whenever they want, but must sign in and pass through a security protocol. (Tr. 43). Mr. Smith testified that "in his mind" he gave FCA consent to disclose the information in the presentation. (Tr. 42).
In response to questioning by the Court, Mr. Smith acknowledged that the email sent to FCA, containing the Power Point with the footer, bears his email address. (Tr. 51).
Jeffrey Sadowski
Mr. Sadowski testified that he worked with the electronic version of the Power Point when he was talking to Mr. Smith about his declaration, but that he did not remember if the version he sent to FCA had the non-disclosure footer. (Tr. 57). He acknowledged, howеver, that the Power Point that Webasto obtained from FCA had the footer, but the version he filed with the Court with his motion to dismiss did not (Tr. 60-61). He opined that it would not have been helpful to the Court to have had the version with the footer. (Tr. 62).
Mr. Sadowski testified that he and Plaintiff's counsel met after Webasto obtained the Power Point from FCA, but he denied that Webasto's counsel offered him the ability to raise the discrepancy with the Court. (Tr. 76). Mr. Sadowski did not in fact raise the issue with the Court. (Tr. 77).
Mr. Sadowski reiterated that he had a copy of the native Power Pоint presentation when he worked on the Smith Declaration, and that the native copy had the non-disclosure footer. (Tr. 79). In Mr. Sadowski's first Declaration (submitted with his response to the motion for sanctions), he stated that he used a software application
Mr. Sadowski testified that before the pre-hearing status conference with the Court, he had investigated and learned that the Power Point was a scanned document, not a .pdf conversion that was affected by a software bug, but he did not inform the Court at that time. (Tr. 96).
Mr. Sadowski stated affirmatively that he did not fabricate evidence by removing the footer, and does not know anyone who did. (Tr. 121). He opined that it was irrelevant whether the version of the Power Point he filed with the Court did or did not have the non-disclosure footer because the FCA mеeting was in a public place. (Tr. 123-124).
II. ANALYSIS
It has long been held that federal courts possess the inherent authority to sanction bad faith conduct, including conduct that is "tantamount to bad faith." Metz v. UnizanBank ,
" 'Recklessness is defined as more than mere negligence but less than intent.' " In re Champion Enterprises, Inc., Securities Litigation ,, 858 (E.D.Mich.2001) (citing 144 F.Supp.2d 848 Mansbach v. Prescott, Ball & Turben , , 1024 n. 36 (6th Cir.1979) ); see Black's Law Dictionary (7th ed.1999) (defining 'recklessness' as involving 'a greater degree of fault than negligence but a lesser degree of fault than intentional wrongdoing'); see also Smith v. Wade , 598 F.2d 1017 , 45, 461 U.S. 30 , 103 S.Ct. 1625 (1983) (describing recklessness as short of actual malicious intent). The Sixth Circuit has defined 'recklessness' as 'highly unreasonable conduct which is an extreme departure from the standards of ordinary care.' Ohio Drill & Tool Co. v. Johnson , 75 L.Ed.2d 632 , 741 (6th Cir.1980) ; see Black's Law Dictionary (7th ed.1999) (defining 'recklessness' as '[c]onduct whereby the actor does not desire harmful consequence but nonetheless foresees the possibility and consciously takes the risk')." 625 F.2d 738
As an initial matter, after reviewing the pleadings and exhibits and hearing the testimony at the evidentiary hearing, I do not find that Mr. Sadowski intentionally doctored the Power Point presentation or intentionally proffered false or misleading evidence to the Court when he filed Bestop's motion to dismiss. Had that been the case, I would be inclined to recommend a dismissal of Bestop's counterclaim and possibly a default judgment in favor of Webasto. See Plastech Holding Corp. v. WM Greetech Automotive Corp. ,
The gist of Bestop's motion to dismiss was that the presentation to FCA was a public disclosure thаt invalidated Plaintiff's claim as prior art. The basis of the motion would therefore be open to question in the light of evidence that the presentation was not public, but subject to confidentiality and non-disclosure. I will address Mr. Sadowski's "lack of relevance" argument at greater length later, but at this point suffice it to say that a footer on every page of the Power Point stating that "[d]isclosure or duplication without consent is prohibited" is on its face relevant information. First, before an attorney files an exhibit, it shоuld be carefully scrutinized for completeness and accuracy. And a reasonable attorney who became aware that he or she had inadvertently filed an exhibit that had deleted this information would be horrified. The first thing that attorney would do would be to immediately notify the Court. The attorney would then undertake an exhaustive investigation of how the error occurred. Last, but not least, the attorney would offer a sincere apology to the Court and to opposing counsel.
Mr. Sadowski did none of these things. Instеad, after being informed that he filed an exhibit that he should have known had relevant information removed, he dug in. This is what he did (and did not do):
When he prepared the Smith Declaration, he worked from the native version of the Power Point, which contained the non-disclosure footer. He attempts to minimize his error by referring to it as the "fine print at the bottom of the page," but it appeared on every page. It was obvious. Before the version of the presentation with the footer removed was filed, he should have сarefully examined the exhibit to make sure it conformed to the native version by comparing the two. He could have filed the complete version and argued, as he does now, that the footer did not really constitute a valid non-disclosure agreement.
In response to the motion to dismiss, Plaintiffs requested that the Court deny the motion "and permit Webasto to conduct
Plaintiff experienced difficulty in getting discovery from Webasto, including the request for other copies of the Power Point. When Plaintiff's counsel obtained the copy that Bestop had sent to FAC, he and Mr. Sadowski met to discuss the matter. Although Mr. Sadowski denied that Webasto's counsel "offered him the ability" to raise the discrepancy with the Court, he conceded that he met with Plaintiff's counsel. (Tr. 76). This was before the motion for sanctions was filed. Again, most lawyers would be horrified to learn that they had filed such a document with the Court, even (or especially) if they had done so mistakenly, and would have immediately informed the Court without being "offered the ability" to do so by opposing counsel. Mr. Sadowski did not inform the Court. (Tr. 77). Indeed, the Court was not aware that Bestop had filed an incomplete exhibit until Plaintiff filed its motion for sanctions. Had Mr. Sadowski timely informed the Court, perhaps this motion for sanctions would have been unnecessary.
Instead of being horrified, or at least contrite about filing an exhibit that did not contain the non-disclosure footer, Mr. Sadowski's response has beеn that it would not have made any difference if he had filed the complete version. He testified as follows:
Q: So you don't think it would have been useful for the Court to have seen the presentation that had the nondisclosure footer on it in contemplating whether or not to grant your motion to dismiss?
A: I don't think so. I think our motion would have been the same motion, your response would have been the same response, and the judge would have ruled the same way. (Tr. 62).
* * *
Q: (Referring to Bestop's reply brief) And then you go down in that same pаragraph, and you say, "no circumstances would exist that the meeting and the disclosures were anything except public disclosures"; is that fair?
A: that's what it says, yes.
Q: right. And in fact, you had information in your possession that suggested that maybe the presentation wasn't public; is that right?
A: That's not correct.
Q: You had a presentation in your possession that the Court didn't have that had a nondisclosure footer in it, right?
A: But that wouldn't change anything with respect to the public disclosure or circumstances or inferences existing that the meeting and the disclosures were anything except public disclosures.
Q: You're making that decision now, but a court may have found differently; is that fair?
A: I don't believe so. I've never seen a case where that's happened. (Tr. 66-67).
Of course Mr. Sadowski's opinion (and it is just that, an opinion) that the presence or absence of the nondisclosure footer would not have been relevant is absurd.
Nor does it appear that Mr. Sadowski undertook an investigation until after the motion for sanctions was filed. That investigation was woefully inadequate, and has been followed by shifting and changing explanations as to what happened. In his first Declaration in response to the motion for sanсtions, Mr. Sadowski blamed a software bug or malfunction that occurred when he converted the native version of the Power Point to a .pdf version. He stated that the deletion "was performed unintentionally during the processing of the documents for filing or submission by email." He stuck with that story until he received Webasto's Reply Brief, at which point he undertook "further investigation." Yet he testified that when he filed his original Declaration, he was in fact in possession of information that would have shown he never converted the native version to a .pdf file. Indeed, he testified that the email he had earlier sent to Webasto's counsel, containing the Power Point presentation, had file properties showing that the presentation had been scanned, not converted.
In United States v. Wheeler , the attorney was sanctioned for, among other things, "failing to undertake the most basic investigаtion of the underlying facts."
Which brings us to the question of prejudice. The Court denied Bestop's mоtion to dismiss even without the complete and correct exhibit. However, the filing of this misleading exhibit, followed by Mr. Sadowski's decision to not inform the Court, his untimely and inadequate investigation into the cause of the false filing, his complete lack of contrition, and his cavalier attitude about the seriousness of this matter, is an affront to the integrity of the judicial process, regardless of the fact that Bestop lost the motion. Plaintiff has cited
"...[F]alsifying evidence to secure a court viсtory undermines the most basic foundations of our judicial system. If successful, the effort produces an unjust result. Even if not successful, the effort imposes unjust burdens on the opposing party, the judiciary, and honest litigants who count on the courts to decide their cases promptly and fairly."Id. at 402 .
I recognize that unlike Secrease and Plastech , the submission of the altered exhibit was not intentional. But it was reckless. As the Court in United States v. Wheeler noted, "While [the attorney's] conduct may not have been with malicious intent, this Court finds that it also was more than merely negligent."
"Goodyear's conduct readily falls within the classification of 'fault.' It reflected extraordinarily poor judgment in the way it packaged, labeled and handled the rim base and side ring. Equally inexcusable is the uncontested finding that Goodyear stood idly for months before it attempted to investigate the side ring's apparent loss; it waited even longer before informing the plaintiffs that the side ring was missing. These omissions cannot be characterized merely as a mistake or carelessness. Rather, they reflect gross negligence on the part of Goodyear-a flagrant disregard of its assumed duty, under the protective order, to preserve and monitor the condition of evidence which could be pivotal in a lawsuit."
Therefore, sanctions are appropriate, proportional to the facts of this case.
In Roadway Exp., Inc. v. Piper ,
First, Mr. Sadowski will be required to pay attorneys fees to Webasto's counsel for time reasonably expended in litigating what should have been an otherwise unnecessary motion for sanсtions. Imposition of attorney fees is an available sanction under these circumstances. See United States v. Wheeler ,
Secondly, while I decline to dismiss Bestop's counterclaim, I will exclude Bestop's use of any evidence related to the Mr. Smith's Power Point presentation to FCA.
III. CONCLUSION
Plaintiffs' Motion for an Order Sanctioning Defendant for Making Material Misrepresentations of Fact to the Court [Doc. # 37] is GRANTED.
Defendant Bestop is precluded from any evidentiary use of the Smith Power Point presentation to FCA, described above.
Attorney Jeffrey Sadоwski will pay Plaintiff's reasonable attorney fees related to the motion for sanctions.
Within 14 days of the date of this Opinion and Order, Plaintiff will file with the Court a statement of attorney fees substantiating the number of hours expended
Within 14 days after Plaintiff files its statement, Mr. Sadowski may file a response addressing the reasonableness of Plaintiff's fee request.
IT IS SO ORDERED.
Notes
Attached to Plaintiffs' Reply Brief [Doc. # 44] is the affidavit of Jeremy J. Klobucar, senior staff counsel at FCA, offered to authenticate as a business record the Power Point presentаtion it received from Bestop and that it produced in response to Webasto's Rule 45 subpoena.
While Mr. Sadowski offered his interpretation of the Declaration, it did not in fact contain the explicit statements attributed to Mr. Smith.
The transcript of the evidentiary hearing is found at Doc. # 60. References to page numbers of the transcript in this Opinion will be designated by "Tr."
Although the testimony refers to an initial "hearing," in fact the proceeding was an in-chambers status conference held on December 5, 2017. Thus, by that date Mr. Sadowski knew that his first Declaration, attributing the dеletion to a software bug introduced during the conversion to .pdf, was erroneous. He filed his second Declaration 39 days later, on January 13, 2018.
Mr. Sadowski's position seems to be that there was uncontraverted evidence that the presentation was held in a place open to the public, and was therefore a public presentation. However, Mr. Smith testified that the FCA facility was not freely open to the general public, and that visitors had to pass through a security protocol. He was unable to say whether anyone was present other than FCA of Bestop employees. There is plainly a question of fact as to whether the presentation was limited to FCA employees.
Ironically, Mr. Sadowski in Bestop's response to the sanctions motion [Doc. # 44], Pg. ID 910, asks for sanctions against Webasto's counsel for not conducting a proper investigation, stating, "Attorney Smith should have investigated the facts, which could have been accomplished through simple discovery requests and an examination of the file 'properties' for all of the documents in question." This is a good example of a pot-and-kettle discussion.