F & J Samame, Inc. v. Arco Iris Ice Cream, No. SA-13-CV-365-XR, 2015 WL 4068575 (W.D. Tex. July 2, 2015).

Zapproved Case Summary IconIn this intellectual property case focusing on infringement and trade dress issues, the court found the intentional loss of evidence merited monetary sanctions but did not award an adverse inference, instead ordering additional discovery and permitting the defendant to renew its motion once it could establish the extent of any prejudice.

Candy company F & J Samame, Inc. claimed the defendants wrongfully copied the labels and packaging of its candy products. During discovery, numerous disputes ensued when the defendants were unable to produce documents relating to their candy labeling, packaging, and marketing decisions from 2010 or 2011, and the court appointed a special master to handle them.

The defendants claimed they no longer had any responsive documents because they had lost access to relevant e-mails. Before the lawsuit was filed, the defendants had switched from Hotmail to Yahoo Mail when they had problems with their account and claimed they could no longer access their messages. However, this transition occurred well before the duty to preserve arose.

Unfortunately, the defendants had destroyed other files as well. The special master found that the defendants ran CCleaner on the hard drives of a laptop and personal computer the same day as the court’s hearing appointing him, deleting or overwriting at least 62,000 files. The defendants insisted that they had installed and used CCleaner before the hearing and did not delete any relevant information. Rather, they said the run date likely reflected a software update, and any deletions were merely non-company-related “junk.”

The court found that even if, as the defendants claimed, they had only reinstalled the software on the date of the hearing, it “enhanced” the defendants’ culpability, especially since the court had admonished them not to “tamper with their computers.” The court concluded that wiping the laptop’s hard drive probably resulted in the loss of relevant sales data and information relating to the products’ labeling and packaging.

Given the defendants’ intentional destruction of evidence, the only issue for the court to decide was whether the loss of evidence prejudiced the plaintiff. The plaintiff suggested it was “irreparably prejudiced” because it lacked evidence relating to the defendants’ profits from the infringing products and from the absence of complete paper trail demonstrating the defendants’ infringement. Therefore, the plaintiff asked for an adverse inference and/or for its attorneys’ fees and costs associated with its discovery efforts.

Meanwhile, the defendants provided other e-mails and data from a third-party packaging vendor from the relevant time frame, but the court remarked that this evidence “produced more questions” because it was one-sided, sporadic, and lacked attachments. Moreover, additional facts unearthed by the plaintiff gave the court pause: the defendants began making candy at least two years earlier than they stated in court, and a third-party witness testified about additional computers, physical documents, and a flash drive likely to contain relevant data that the defendants had never mentioned. Thus, the court concluded that the defendants committed three transgressions: they “failed to preserve relevant electronically stored information, violated a court order, and stalled the discovery process.” Further, they “acted with the intent to deprive Plaintiff of relevant data” and “misled” the plaintiff and the court.

Although the plaintiff ultimately secured some additional information through the court’s use of its “case management authority” that would help with its trade dress claims, it was denied relevant data for its infringement claim and thus suffered prejudice. Accordingly, the court ordered the defendants to reimburse the plaintiff for its attorneys’ fees for four motions, three hearings, and all of the defendants’ depositions and ordered additional depositions at the defendants’ expense. The court declined to issue an adverse inference instruction but permitted the plaintiff to renew the request at the close of discovery.

F & J Samame, Inc. v. Arco Iris Ice Cream, No. SA-13-CV-365-XR, 2015 WL 4068575 (W.D. Tex. July 2, 2015).

https://scholar.google.com/scholar_case?case=15853552299898866307&q=samame+v+arco&hl=en&as_sdt=6,47

 

Takeaways

The court did its best to limit the effects of the lost evidence, even though the plaintiff could not definitively establish prejudice. Here, the circumstances surrounding the loss as well as the defendants’ misrepresentations cast doubt on the defendants’ credibility and mitigated the plaintiff’s inability to show damage to its claims.

Related Posts