Co-Author: Joe Ludlow
One of the better descriptors found in eDiscovery opinions was the first line of Judge Iain D. Johnston’s fee splitting order: “If Dante were a judge, he would have placed fee litigation as an inner circle of judicial hell.”
This order awarded over $2.5 million as a result of discovery sanctions imposed against Defendant and its former counsel in DR Distributors LLC v. 21 Century Smoking, Inc, v. CB Distributors, Inc. and Carlos Bengos, 2021 WL 185082, No. 12 CV 50324 (1/19/2021). The $2,526,744.76 sanction is to be split evenly between Defendant and its two former attorneys.
DR Distributors began in 2012 as a trademark infringement action between two electronic cigarette companies. Plaintiff DR Distributors, LLC, which owns the trademark for “21st Century Smoke,” accused Defendant 21 Century Smoking, Inc. and owner Brent Duke of committing trademark infringement under the Lanham Act. After all this time the case is still unresolved. Defendant found itself at a clear disadvantage resulting from self-inflicted errors during discovery.
Judge Johnston rebuked Defendant and its former counsel for a wide range of eDiscovery missteps. Counsel was admonished for orally instructing Defendant to preserve relevant webmail and chat messages rather than issuing a written litigation hold. Counsel failed to direct Defendant to disable the automated deletion of chats and emails. Defendant erroneously represented, and Counsel failed to verify, that all relevant email could be found on Defendant’s company servers, despite the existence of web-based email and chats that were stored only in the cloud. Defendant was also permitted to self-collect relevant emails without proper counsel guidance or supervision. These basic discovery failures resulted in spoliation and untimely production, laying the groundwork for significant sanctions.
In addition to the eventual monetary award, Defendants were required to produce all responsive ESI, barred from using any evidence that wasn’t provided to Plaintiffs in a timely manner, and were prevented from using certain expert testimony. The jury was to be provided detailed instructions as to the nature and extent of the spoliation. Former defense counsel was required to complete continuing legal education on ESI and certify that they read Judge Johnston’s entire 256-page order.
In his 2021 order, Judge Johnston explained “…through a series of missteps, misdeeds, and misrepresentations, Defendants and the former defense counsel find themselves looking down the barrel of a sanctions motion Howitzer.” There are many lessons to be learned from this case as these pitfalls could have been avoided by following proper discovery procedures at the outset of the dispute.
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The views and opinions expressed in the article represent the view of the authors and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is it intended to be a substitute for professional legal advice.