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Failure to Conduct Reasonable Investigation for Responsive Documents and Other Discovery Abuses Warrant Adverse Inference Instruction

Posted in CASE SUMMARIES

3M Innovative Props. Co. v. Tomar Elecs., 2006 WL 2670038 (D. Minn. Sept. 18, 2006)

In this patent infringement litigation, the district court judge affirmed the magistrate’s report and recommendation that plaintiff’s motion for sanctions against the defendant be granted in part. 3M offered three bases for sanctions: (1) Tomar gave false discovery responses; (2) Tomar failed to retain, collect, and produce court-ordered documents; and (3) Tomar engaged in deposition misconduct. 3M requested that judgment be entered against Tomar, or alternatively, that the court issue multiple sanctions including an adverse inference instruction.

The court observed that it was empowered to issue the requested discovery sanctions through Rule 37 and through the court’s inherent powers. It considered each ground advanced by 3M and found in 3M’s favor. First, it found that the evidence clearly indicated that, through the deposition testimony of Tomar’s representative (Sikora) and its supplemental discovery responses, Tomar had willfully given false discovery responses. With respect to the second ground for sanctions, the court stated:

In light of the Supreme Court’s directive that discovery under the federal rules requires a complete disclosure of relevant facts known to the parties, parties are under a duty to complete a reasonable investigation when presented with the opposing party’s interrogatories and document requests. Discovery requests served on a company solicits information known to the company, not solely information known by the president, CEO, or other person directed to respond to the discovery requests. Accordingly, a reasonable investigation by a company would include an inquiry of a company’s employees for relevant information. A company need not question all employees, but must question those that would reasonably have relevant information.

The court concluded: “Contrary to the directive of the Supreme Court, this discovery has all the earmarks of a game of blind man’s bluff.” The court summarized its findings:

  1. Scott Sikora as the representative for Tomar clearly gave false and misleading discovery responses; 
  2.  Tomar failed to conduct a reasonably inquiry or investigation for information or documents responsive to 3M’s discovery requests; 
  3. Tomar failed to comply by this Court’s February 10, 2006, discovery order; 
  4. Tomar failed to instigate a litigation hold on relevant documents after being notified of pending litigation. Tomar has still not instigated a litigation hold even after being served discovery requests and ordered to comply with those discovery requests by this court. Tomar has yet to inform its employees to retain possible relevant documents; 
  5. Noting the lack of credible evidence to the contrary, evidence presented to the Court is sufficient to indicate that relevant and discoverable documents have been destroyed; 
  6. Sikora acted inappropriately during depositions and guided a witness’ answer; 
  7. Tomar’s counsel inappropriately directed Sikora and Huizingh not to answer questions regarding Tomar’s product development project; 
  8. Tomar’s described conduct is an abuse of the discovery process; and 
  9. Tomar has exhibited a complete disregard for the authority of this Court and for the rules in which parties before this Court must abide.

The court noted that Tomar had presented no evidence or argument that it conducted a reasonable investigation for responsive information or documents, other than to assert that Sikora was in possession of all relevant documents and therefore an inquiry of other employees for relevant information was not necessary. The court found that “this position is not reasonable nor supported by evidence before this court,” and stated:

A party’s obligation to conduct a reasonable inquiry when presented with discovery requests during litigation also triggers an “obligation to preserve evidence arises that when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003); see also E*TRADE Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 588 (D.Minn.2005). Although Sikora has indicated that he prevented some documents from being destroyed, Tomar did not implement a company-wide litigation hold on relevant documents. There is no indication that Sikora ever contacted any employee with instructions to retain documents relevant to the pending litigation. Employees testified that they had continued to delete documents, including email, after the litigation commenced. Sikora testified that he is the one most knowledgeable about the email system at Tomar. He told 3M during his deposition that once an email had been deleted, it could not be retrieved.

Tomar now states in its memorandum to the Court, that it has downloaded over 6000 individual emails from Tomar’s sales representative’s laptop computer and that these email, contrary to 3M’s assertion, have not been destroyed. These email should have been produced in response to 3M first set of document requests, submitted over eight months ago. Based on assertions by Tomar and testimony by SikoraFN4 and other Tomar employees, however, absent this motion for sanctions, it would have been assumed, both by this Court and opposing counsel, that these documents no longer existed. Because Tomar failed to initiate a litigation hold, it remains unclear to this court whether the email sent or received by Tomar employees or any relevant documents are still obtainable. Contrary to the sworn testimony by Sikora given at his depositions that all deleted email could not be retrieved, Tomar has now expressed to the Court that no documents, including email, have been destroyed. Based on the evidence in sworn testimony before this Court, absent evidence to the contrary, and noting that in four months since this Court’s order compelling full responses to 3M’s document requests, no email other than those from Sikora’s mailbox have been produced, the Court finds that relevant email have been destroyed.

(Emphasis added.)

Accordingly, the court imposed a number of evidentiary sanctions, including an adverse inference instruction, barring Sikora from attending the deposition of any Tomar witness or any third party, granting 3M additional depositions and other discovery, and awarding 3M its reasonable fees and costs associated with the sanctions motion. The court further warned: “Failure to abide by this Court’s rulings, the Federal Rules of Civil Procedure, or any further discovery abuse, may result in further sanctions, including a recommendation by this Court to the district court that a default judgment be issued against Tomar.”