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Court Questions Defendants’ Claims That a Lightning Strike and Power Surge Destroyed Computer Hardware

Posted on February 26th, 2016

In InternMatch, Inc. v. Nxtbigthing, LLC, et. al., Case No. 14-05438 (N.D. Cali., Feb. 8, 2016), Plaintiff sued Defendants for trademark infringement, alleging that Defendants fraudulently obtained registration of the trademark INTERNMATCH. Before filing suit, Plaintiff notified Defendants of its asserted rights to the trademark; Plaintiff filed suit nearly a year later. The corporate defendant filed a countersuit.

During discovery, Plaintiff requested copies of any documents, including electronic documents, relating to Defendants’ defense that it had continually and extensively used the trademark. Defendants responded that a lightning strike in 2011 and a power surge in April 2015 had destroyed responsive documents, including the only copies of marketing materials that established Defendants’ defenses. Defendants claimed that they discarded various electronic devices after the lightening strike and power surge without checking to see if they could recover any files. Plaintiff filed a Motion seeking terminating sanctions.

The court looked to the spoliation sanctions elements in the recently-amended FRCP 37, including the requirement that the party seeking terminating sanctions must establish intent. The court also noted that in the 9th Circuit, a court must analyze five specific elements in deciding whether to issue terminating sanctions: 1) public interest in resolution of litigation; 2) the courts’ needs in managing dockets; 3) risk of prejudice to the moving party; 4) public policy favoring disposition on the merits; and 5) the availability of less drastic sanctions.

The court found that Defendants had a duty to preserve evidence no later than January 2015 when Plaintiff served the complaint and that Defendants violated that duty by disposing of the hardware after the power surge without first determining if recoverable files existed on the hard drive. The court then reviewed the facts as set forth by the individual defendant, finding him not credible and the events relayed implausible. The court held that even if it believed Defendants’ version of events, Defendants were still culpable for spoliation because they failed to preserve relevant evidence, at the very least “consciously disregarding” the duty to preserve. The court held that, although Defendants’ conduct was willful, less severe sanctions were available. The court ordered an adverse inference instruction and prohibited Defendants from using the destroyed evidence to further their defenses. The court also awarded Plaintiff’s attorneys’ fees for filing the motion.

ILS – Plaintiff ESI Experts

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