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Failure to Produce Entire Web Page Constitutes Sanctionable Conduct

Posted in CASE SUMMARIES

Beck v. Atlantic Coast PLC, 868 A.2d 840 (Del. Ch. Feb. 11, 2005)

This case was brought as a class action seeking relief and damages in connection with the marketing and sale of “Window Power Tools.” This allegedly sham product, developed by Digital Millennium, Inc. (“DMI”) and Salaman Zafar of Pakistan and sold via Atlantic Coast PLC, was advertised as being capable of optimizing Windows. Heinrich Beck, the proposed class representative and alleged victim of the scheme, was in fact a savvy Internet user who was not victimized and decided to pursue those responsible for the product. Beck’s web page revealed his true identity and motivation, but its entirety was wrongfully withheld and only revealed via an Internet search by Atlantic Coast.

Window Power Tools was apparently marketed via popup windows designed to look like Microsoft Windows Error Messages. Presumably, unsophisticated users would believe that there was something wrong with their machines and would purchase the software to fix nonexistent problems. The proposed amended complaint claimed that Atlantic Coast made false warrantees of a 300% speed increase via use of the software.

Beck was alleged in the complaint to have had the same legal interests and suffered the same injury as the Class. He was to fairly and adequately represent Class interests. However, Beck is a software engineer who recognized the dubious claims in association with Window Power Tools. He is a Macintosh user who was not tricked by any apparent Microsoft Windows error messages but instead became irritated by the ads and decided to embark on a “weasel hunt,” which he documented on the Optimizer web page here.

Beck never purchased or used the software. Instead, Roth of Lukins & Annis, hired as class action counsel for the “hunt,” bought it from DMI. The transaction was routed through Atlantic Coast’s payment system and the product forwarded to a consultant who determined that it could not function as advertised.

Despite Atlantic Coast having requested “all documents reflecting any correspondence, communications, or transactions between Plaintiff and any of the Defendants,” Scott (one of Beck’s attorneys) chose not to produce the entire Optimizer web page. Scott had known about the page for a year. It clearly bore on Beck’s fitness to be a class representative and the viability of Beck’s personal claims against Atlantic Coast.

…Atlantic Coast’s document request explicitly sought “all documents reflecting,” not “some documents reflecting.” The contents of the Optimizer Page were not privileged materials, they were plainly relevant within the meaning of Rule 26(b)(1), and they should have been produced.

The web page was only discovered when Atlantic Coast’s counsel performed an Internet search for “Jack Zilla,” a term used in an e-mail exchange that had been produced by Plaintiff.

A week before oral argument was scheduled, Atlantic Coast’s counsel informed the Court that Beck could not be contacted. At oral argument, Scott of Lukins & Annis conceded that the case should be dismissed based on Beck’s failure to cooperate. Scott offered to dismiss the case, but Atlantic Coast’s counsel insisted on receiving an award based on the behavior of Beck and his counsel.

The Court found that Beck’s complaints were false and deceptive, and counsel engaged in inexcusable conduct justifying fee shifting and sanctions. By hiding obviously non-privileged relevant information plainly requested by opposing counsel, sanctions under Rule 37 are justified.

Beck and his counsel would have allowed the Court and Atlantic Coast to proceed without seeing the Optimizer Page, “working a stealthy spoliation of evidence and fraud by concealment.” The Court ordered Beck and his counsel to pay $25,000 to Atlantic Coast, dismissed the case with prejudice as to Beck, enjoined counsel from filing similar litigation, fined counsel $2500, and required a copy of the decision in this case to accompany pro hac vice applications by counsel.