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GN Netcom, Inc. v. Plantronics, Inc., No. 12-1318-LPS, 2016 WL 3792833 (D. Del. July 12, 2016).

In this antitrust lawsuit, the court imposed more than $3 million in sanctions against a defendant whose senior executive intentionally deleted thousands of e-mails to prevent the plaintiff from discovering them.

The plaintiff, GN Netcom (GN), also known as Jabra, sued the defendant, Plantronics, alleging marketplace monopolization and tortious interference based on a distribution program prohibiting sales of competing products. This motion for sanctions arose from GN’s discovery that Don Houston, Plantronics’s Senior Vice President of Sales, had deleted e-mails.

Upon learning of GN’s lawsuit in 2012, Plantronics issued two legal holds, held training on preservation, and sent quarterly reminders regarding compliance. Despite these efforts, one month after the lawsuit was filed, Houston suggested that recipients of an e-mail chain regarding competition to “immediately delete this message.” Twice more, in October 2013 and in April 2014, Houston directed employees to delete e-mails “due to the ongoing legal issues.” Houston himself “double-deleted” 40 percent of his e-mails from November 2013 through February 2014 from both his e-mail and deleted items folders. Meanwhile, other Plantronics executives directed employees to refer to competitors GN and Jabra using “code words” to avoid detection of communications.

In early 2014, Plantronics’s counsel “became concerned about [Houston’s] document retention” and obtained backup tapes dating back to November 2013. Plantronics also retained a forensics expert to recover the deleted e-mails. The expert concluded that “Houston deleted between 36,397 and 90,574 unrecoverable e-mails,” of which 2,380 to 5,887 were “likely to have been responsive” to GN’s discovery requests. Plantronics “did not further engage Stroz” to finish its analysis and “unrestored” its previously restored backup tapes. Plantronics told GN that all deleted e-mails had been recovered but did not advise GN of its vendor’s analysis until February 2015.

GN deposed Houston three times. In July 2014, he “admitted that he had ‘made a mistake’ in asking others to delete e-mails, but he could not remember” deleting any himself. In January 2015, he stated that he hadn’t “delete[d] any e-mails” involving the litigation. In June 2015, he “maintained” that he had “fully complied with the litigation hold.” Houston also stated that his directives to others to delete e-mails were not “to suppress or withhold evidence” but only due to concern about “sloppy” language. He also testified that he thought “IT always saved all of our e-mails no matter what, so they were never permanently deleted.”

First, the court noted that under amended Federal Rule of Civil Procedure 37(e), Houston had lost thousands of e-mails that could not be restored or replaced. Plantronics argued that spoliation did not apply because it “went to great lengths” to guard against it. The court held that Plantronics’s argument required a “perverse interpretation” of the rule, and that Plantronics’s “extensive document preservation efforts do not absolve it of all responsibility” where senior management deleted e-mails and Plantronics failed to take “all the reasonable steps it could have taken” to recover them.

The court further found that Plantronics acted “in bad faith with the intent to deprive GN of discovery.” Houston intentionally deleted e-mails and ordered others to do so to “protect[]the business,” and, as a senior executive, his actions could be attributed to the company. Adding to the bad faith were other executives’ instructions to use code words “to evade discovery” and Plantronics’s refusal to disclose information about its vendor’s investigation to GN. Plantronics’s “repeated obfuscation and misrepresentations” about Houston’s e-mails supported the conclusion that Plantronics intended to damage GN’s ability to “effectively litigate its case.”

GN offered “plausible, concrete suggestions” about what the deleted evidence might have shown. Because Plantronics acted in bad faith, “the burden shift[ed] to the spoliating party to show lack of prejudice,” and Plantronics failed to do so. Finding prejudice to GN and Plantronics’s “high degree of fault,” the court imposed $3 million in punitive sanctions, awarded GN its fees and costs, and, at a minimum, ordered a permissive adverse inference instruction that the lost information was unfavorable to Plantronics.

GN Netcom, Inc. v. Plantronics, Inc., No. 12-1318-LPS, 2016 WL 3792833 (D. Del. July 12, 2016).

 

Takeaways

Organizations should closely monitor the preservation actions of senior executives. If counsel discover suspicious behavior, they should notify opposing counsel and the court and take immediate, comprehensive action to remedy the spoliation. Here, Plantronics’s efforts were inadequate: it collected backup tapes for Houston but not others who might have received his e-mails and failed to finish collecting documents from backup tapes.

 

 

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