A California federal court held that sanctions for spoliation are proper when a party consciously disregards its obligations to preserve relevant evidence (and in particular did not make sure that the documents were irretrievable before discarding the device allegedly destroyed by a power surge) and as result the other side is deprived of the documents it needed. Inc. v. Nxtbigthing, LLC, 2016 U.S. Dist. LEXIS 15831 (N.D. Cal. Feb. 8, 2016).
This was a copyright case. Plaintiff InternMatch Inc. seeks the cancellation of the trademark “INTERNMATCH” whose registration was allegedly fraudulently obtained by Defendants Nxtbigthing, LLC and Mr. Batterman.
The Plaintiff sought copies of documents that would support the Defendants’ assertion that that they have used the mark “continuously and extensively.” Defendants informed Plaintiff that electronic copies of potentially responsive documents “were irretrievably lost” in two different occasions: in August 2011 (due to a lightning strike) and in April 2015 (due to a power surge). They allege that when two lightning strikes hit Batterman’s office in the summer/fall of 2011 the database containing the documents was lost. Batterman purchased a replacement iMac desktop computer where he transferred documents through a backup jump drive. However, a power surge also destroyed this device on April 2, 2015 (while the litigation was pending.) The “iMac desktop computer that contained corporate records and marketing material central to the parties’ dispute … [was] discarded” (allegedly by Batterman wife’s Ms. Santo) without running diagnostics to verify if the files on the hard drive could be recovered.
The plaintiff sought sanctions. The court found that “ [A]t least by January 2015, Defendants knew about the present action and were under a duty to preserve relevant evidence. The evidence shows that Defendants violated this duty. As a result, the parties can only access the few existing paper copies of the relevant documents, rather than the electronic files, which would include valuable information such as the creation and modification history of the files.”
As for the culpability necessary for sanctions, the court expressed doubt on Defendants’ story (which it found not credible, among other reasons, for their many inconsistencies) and found the spoliation “willful”.
However, it was pointed out that “even if the Court accepted this strained version of events in its entirety …. Defendants would still have failed in their obligation to ensure that relevant evidence be preserved. … [A]t the very least, Defendants consciously disregarded their obligations to preserve relevant evidence. There is no evidence that Defendants took any steps to preserve relevant information after the litigation began. They did not communicate their evidence preservation obligations to Santo, even though she … [had] access to Nxtbigthing’s electronic devices. After the alleged power surge, Defendants failed to identify whether data from the electronic devices might be recoverable, and instead simply discarded the devices.”
Because “of the spoliation, InternMatch is unable to verify the genuineness of Nxtbigthing’s evidence of use documents … InternMatch is entitled to an adverse inference instruction. … Additionally, Defendants are precluded from offering argument and testimony that the destroyed evidence … (or copy thereof]… supports Defendants’ assertions that they have priority to the trademark.” Attorneys’ fees were also granted to Plaintiff.
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