Court Awards $3M Sanction and Adverse Inference for Spoliation in Antitrust Case

eDiscovery Client Alert

On July 6, 2016, Judge Leonard P. Stark, of the federal district court in Delaware, ordered a $3 million punitive monetary sanction, and an adverse inference jury instruction, against antitrust defendant Plantronics after finding that a top executive at the company had deleted thousands of potentially relevant emails. This case is noteworthy both because of the severity of the sanction and the court's decision to impute the conduct of an employee to the company even though numerous preservation practices were in place and the employee was instructed not to destroy information.

In GN Netcom, Inc. v. Plantronics, Inc., GN Netcom alleged that Plantronics engaged in monopolistic conduct and restraint of trade in violation of the Sherman Act and the Clayton Act, as well as tortious interference with business relations for implementing and enforcing a "Plantronics Only Distributor ("POD") program for distributors of its headsets." GN Netcom, Inc. v. Plantronics, Inc., Mem. Op., No. 12-1318-LPS, at 1 (D. Del. July 6, 2016).

As recounted in the Court's decision, Plantronics had engaged in numerous preservation efforts including issuing quarterly litigation hold reminders, requiring acknowledgement by its employees, and two rounds of preservation training. In spite of these efforts, a sales executive at the company deleted thousands of emails responsive to the parties' search terms and related to the POD program. According to the court's Order, the executive had "ultimate responsibility for the POD program" and "was personally involved with any material decision affecting POD's or the POD program." Mem. Op. at 2, n. 1. Discovery also revealed that the executive had instructed other employees to delete emails relevant to the subject matter of the case.

Under the 2015 amendments to Rule 37, sanctions for failure to preserve relevant evidence may only be appropriate upon a showing that the party failed to take reasonable steps to preserve the evidence and that such failure resulted in prejudice to the opposing party. Fed. R. Civ. P. 37(e)(1). However, if a court finds that a party acted in "bad faith" – that is, with intent to deprive an opposing party of relevant evidence – it may order more severe sanctions, such as a presumption that the evidence was unfavorable to the spoliating party or an adverse inference jury instruction. Fed. R. Civ. P. 37(e)(2). In the most extreme case, the court may order dismissal or a default judgment. Id.

Based on findings of bad faith, the court, applying both amended Fed. R. Civ. P. 37(e) and existing Third Circuit precedent, reasoned that although Plantronics had numerous preservation practices in place, the company must bear some responsibility "for the failure of a member of its senior management to comply with his document preservation obligations." The court also pointed to Plantronics conduct after the deletion was discovered as further evidence of bad faith stating Plantronics obfuscated and misrepresented the deletions and failed to take all the reasonable steps it could have to restore the lost data. Mem. Op. at 14 -18.