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Victor Stanley, Inc. v. Creative Pipe, Inc.

United States District Court for the District of Maryland

September 9, 2010, Decided; September 9, 2010, Filed

Civil No. MJG-06-2662

Opinion

 [*499]  MEMORANDUM, ORDER AND RECOMMENDATION

This Memorandum, Order and Recommendation addresses Plaintiff's Motion For Terminating And Other Sanctions Arising Out Of Defendants' Intentional Destruction Of Evidence And Other Litigation Misconduct ("Pl.'s Mot."), ECF 1 No. 341, which Plaintiff Victor Stanley, Inc. ("VSI") filed; Plaintiff's Supplemental Memorandum Relating To Possible Misconduct By Others That Contributed To Defendants' Spoliation Of Evidence, ECF No. 342; Defendants Creative Pipe, Inc. ("CPI") And Mark Pappas' Opposition To Victor Stanley, Inc.'s Motion For Sanctions ("Defs.' Opp'n"), ECF No. 350; Plaintiff's Reply to Defendants' Opposition, ECF No. 368; and Defendants' Surreply, ECF No. 372. 2

Through four years of discovery, during which Defendant Mark Pappas, President of Defendant CPI, had actual knowledge of his duty to preserve relevant information, Defendants  [*500]  delayed their electronically stored information ("ESI") production; deleted, destroyed, and otherwise failed to preserve evidence; and repeatedly misrepresented the completeness of their discovery production to opposing counsel and the Court. Substantial amounts of the lost evidence cannot be reconstructed. After making repeated efforts throughout discovery to try to effect preservation of ESI evidence and obtain relevant ESI evidence to support its claims, Plaintiff  [**5] has identified eight discrete preservation failures, as well as other deletions that did not permanently destroy evidence, in a byzantine series of events. These events culminated in a succession of requests by Plaintiff to obtain discovery that it consistently maintained Defendants had not provided despite numerous Court orders. Plaintiff sought permission to file its fourth motion for sanctions, and the Court held evidentiary hearings on October 29 and December 1 and 2, 2009. Ultimately, Plaintiff received permission and filed the above-referenced motion, which resulted in filings and exhibits exceeding the Manhattan telephone directory in girth, as well as hearings jointly conducted before the undersigned and Judge Garbis on February 24, 2010; April 26, 2010; and June 25, 2010. At the end of the day, Defendant did not rebut, but indeed acknowledged, that the majority of Plaintiff's allegations were accurate. Moreover, without conceding any inappropriate motive on their part, Defendants stated their willingness to acquiesce in the entry of a default judgment on Count I (which alleges copyright infringement), the primary claim filed against them. That Defendants Pappas and CPI would  [**6] willingly accept a default judgment for failure to preserve ESI in the primary claim filed against them speaks volumes about their own expectations with respect to what the unrebutted record shows of the magnitude of their misconduct, and the state of mind that must accompany it in order to sustain sanctions of that severity.

For the reasons stated herein, Plaintiff's Motion will be GRANTED IN PART and DENIED IN PART, and it further is recommended that, in addition to the relief ordered by this Memorandum and Order, Judge Garbis enter an Order granting a default judgment against Defendants with regard to Count I of the Complaint (which alleges copyright infringement). Among the sanctions this memorandum imposes is a finding, pursuant to Fed. R. Civ. P. 37(b)(2)(A)(vii), that Pappas's pervasive and willful violation of serial Court orders to preserve and produce ESI evidence be treated as contempt of court, and that he be imprisoned for a period not to exceed two years, unless and until he pays to Plaintiff the attorney's fees and costs that will be awarded to Plaintiff as the prevailing party pursuant to Fed. R. Civ. P. 37(b)(2)(C). 3 The recommendation that a default judgment be imposed  [**7] as to Count I is made pursuant to Fed. R. Civ. P. 37(b)(2)(A)(vi), based on the Defendants' spoliation of evidence, as further described herein. As noted, Defendants themselves have agreed that such a sanction is appropriate. (Defs.' Opp'n 29.)

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269 F.R.D. 497 *; 2010 U.S. Dist. LEXIS 93644 **

VICTOR STANLEY, INC., Plaintiff, v. CREATIVE PIPE, INC., ET AL., Defendants.

Subsequent History: Magistrate's recommendation at, Sanctions allowed by Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 541, 2010 U.S. Dist. LEXIS 132910 (D. Md., Sept. 9, 2010)

Adopted by, Costs and fees proceeding at Victor Stanley, Inc. v. Creative Pipe, Inc., 2011 U.S. Dist. LEXIS 139092 (D. Md., June 14, 2011)

Prior History:  [**1] Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251, 2008 U.S. Dist. LEXIS 42025 (D. Md., May 29, 2008)

Disposition: Plaintiff's motion was granted in part and denied in part. The court ordered that defendant individual's acts of spoliation be treated as contempt of court, and that as a sanction, he be imprisoned for a period not to exceed two years, unless and until he paid to plaintiff the attorney's fees and costs that would be awarded after plaintiff has submitted an itemized accounting of the attorney's fees and costs.

CORE TERMS

deleted, spoliation, files, sanctions, discovery, preservation, Server, bad faith, duty to preserve, courts, documents, Defendants', emails, destruction, destroyed, relevant evidence, orders, costs, culpability, gross negligence, court order, fault, attorney's fees, criminal contempt, parties, cases, adverse inference, default judgment, willfulness, backup

Civil Procedure, Judicial Officers, Magistrates, General Overview, Sanctions, Contempt, Civil Contempt, Evidence, Relevance, Preservation of Relevant Evidence, Spoliation, Business & Corporate Law, Agency Relationships, Duties & Liabilities, Discovery & Disclosure, Discovery, Misconduct During Discovery, Electronic Discovery, Electronic Information Preservation, Methods of Discovery, Inspection & Production Requests, Relevance of Discoverable Information, Relevant Evidence, Judges, Discretionary Powers, Inferences & Presumptions, Presumptions, Pretrial Judgments, Default & Default Judgments, Default Judgments, Dismissal, Involuntary Dismissals, Jury Trials, Jury Instructions, Criminal Contempt, Constitutional Law, Fundamental Rights, Criminal Process, Right to Jury Trial, Burdens of Proof, Proof Beyond Reasonable Doubt, Clear & Convincing Proof, Remedies, Costs & Attorney Fees