4SEMO.com, Inc. v. Southern Illinois Storm Shelters, Inc. et. al., Case No. 13-297 (S.D. Ill., Feb. 10, 2017) began as a trademark infringement suit brought by Defendant Southern Illinois Storm Shelters, Inc. (SISS) against Plaintiff. Plaintiff filed a counterclaim, and after disposition of Defendants’ claims, the counterclaim was all that remained. Plaintiff is in the business of selling and installing storm shelters; Defendant SISS manufactures, markets and sells storm shelters. The initial suit by SISS against Plaintiff related to the trademark Lifesaver Storm Shelters; Plaintiff’s counterclaim alleged that SISS, along with the other two Defendants, infringed upon its trademark as to Lifesaver Storm Shelters. Five of SISS’s claims were disposed of by a motion to dismiss, and the remaining claims of SISS were dismissed on summary judgment, leaving Plaintiff’s counterclaims.
A discovery dispute arose in 2014 with respect to invoices produced by Defendants to Plaintiff. Defendants would enter information into Quickbooks using “source documents” and generate invoices from there. The invoices were printed from Quickbooks and sent out to dealers without retaining a copy, but an electronic copy was retained in the program. Plaintiff advised the court that it received printouts, but only a “limited number” and accused Defendants of destroying invoices. Defendants argued that, although they did have a standard practice of destroying the source documents but agreed that going forward, they would develop a system to request source documents from any dealers with which they did business, and did send a form letter to the dealers. Plaintiff was concerned that Quickbooks was inaccurate and accuracy could not be determined because the source documents were not available. Defendants eventually produced the Quickbooks data but never provided the underlying documents.
In 2016, Plaintiff filed a Motion for Judgment without Trial alleging that Defendants have continued to destroy the source documents despite continuing promises to provide the discovery. Defendants countered that most of the orders were taken over the phone or email and entered into Quickbooks, and some were sent by text; only corporate customers used purchase orders. Plaintiff’s computer forensic expert did not examine the Quickbooks audit trail to see if any records had been altered.
The court found that Defendants did engage in sanctionable conduct by failing to preserve any source documents after the 2014 hearing and in fact continued to do everything exactly the same way they had done it before the hearing. Further, they did not supplement their production. The court found recklessness and bad faith. Plaintiff sought default judgment as a sanction, but the court felt that would be disproportionate to the circumstances, as Plaintiff’s prejudice was not sufficient to justify it and Plaintiff did not bring the issue to the court’s attention for two years. Instead, the court sanctioned Defendants by prohibiting them from refuting damages in the event of Plaintiff’s success in the suit.