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granting summary judgment against plaintiff's claim for tortious interference with prospective economic advantage because the plaintiff had failed to demonstrate the existence of any damages, like diverted sales or a loss of goodwill in the marketplace caused by Defendant's behavior
Summary of this case from 3PD, Inc. v. U.S. Transp. Corp.Opinion
CIVIL NO. CCB-06-3041.
September 30, 2008
MEMORANDUM
Now pending before this court is a motion for summary judgment filed by defendant Chamilia, LLC and its president Jeff Julkowski ("Mr. Julkowski") (together "Chamilia") against plaintiff Pandora Jewelry, LLC ("Pandora"). Pandora asserts several claims stemming from a series of communications sent by Chamilia, including false advertising pursuant to section 43(a) of the Lanham Act, injurious falsehood, tortious interference with prospective economic advantage, and unfair competition. Also pending is a motion for sanctions filed by Pandora against Chamilia claiming spoliation of evidence related to the communications at issue in this case. Pandora seeks sanctions pursuant to Federal Rule of Civil Procedure 37 and the court's inherent authority to issue sanctions for spoliation of evidence. The issues in this case have been fully briefed and no hearing is necessary. For the reasons stated below, Chamilia's motion for summary judgment will be granted, and Pandora's motion for sanctions will be granted in part and denied in part.
Count I of the complaint alleges a Lanham Act violation based on the November 10, 2006 letter; Count II alleges injurious falsehood; Count III alleges tortious interference with prospective economic advantage; Court IV alleges a Lanham Act violation based on the January 8 and 15, 2007 communications; and Count V alleges unfair competition.
BACKGROUND
On March 7, 2006, Pandora filed suit in this court against Chamilia for alleged patent infringement of its jewelry design (CCB-06-600). On March 29, 2006, Chamilia answered Pandora's complaint and filed counterclaims, accusing Pandora of wrongful interference with business relationships and an antitrust violation. On June 19, 2006, Pandora moved to bifurcate the trials and stay discovery on Chamilia's counterclaims. On October 26, 2006, the court granted Pandora's motion. In light of that order, the court assumed Pandora would withdraw a related subpoena for records, and accordingly granted Chamilia's motion to quash the subpoena.The Communications
On November 10, 2006, Chamilia sent a letter to a number of jewelry retailers, many of whom were Pandora customers, misrepresenting the court's October 26 order granting Chamilia's motion to quash the subpoena. On November 14, 2006, Chamilia sent the identical letter via email to a number of blind copy recipients (together "the November 2006 communication"). As a result, Pandora filed the present action against Chamilia alleging Lanham Act false advertising, injurious falsehood, and tortious interference with prospective economic advantage. Pandora also filed for a temporary restraining order ("TRO") to stop Chamilia from further circulating the November 2006 communication. The court granted the TRO on November 22, 2006, and issued an order directing Chamilia to file a recipient list with the court and issue a corrective notice to all recipients.
On January 8, 2007, Chamilia issued another letter to jewelry retailers regarding the United States Patent and Trademark Office's ("USPTO") publication of a Chamilia patent application. Chamilia sent the identical letter via email, again to blind recipients, on January 15, 2007 (together "the January 2007 communication"). The letter stated that the USPTO's publishing of the application acknowledged Chamilia's "unique product offering" and indicated the patent would issue in 2007. On February 7, 2007, Pandora amended its complaint to include another Lanham Act false advertising claim and a claim of unfair competition. Pandora also moved for a preliminary injunction, which the court denied on September 27, 2007.
Also on September 27, 2007, the court issued an order in the patent infringement case granting in part and denying in part Chamilia's motion for claim construction. In response, Chamilia sent another email to blind recipients on October 2, 2007 describing the court's decision ("the October 2007 communication"). The following day, an "anonymous" identical email was distributed to retailers. While the face of the email identifies a Pandora email account as the sender, the email is signed "The Chamilia Team." The source of this email is unknown. Both Pandora and Chamilia deny sending the October 3 email. According to Pandora, between October 3, 2007 and October 11, 2007, an anonymous caller contacted at least six Pandora retailers and one Pandora sales representative stating that Pandora lost a patent lawsuit and the retailers should remove Pandora advertising from their stores or risk false advertising litigation. Chamilia denies any involvement with these calls.
On February 29, 2008, Chamilia filed its motion for summary judgment with the court.
Discovery
On November 1, 2007, the court held a conference call with the parties to set a discovery schedule and directed a period of discovery to end on January 31, 2008. During that call, the court, mindful of the limited discovery period, approved Pandora's plan to seek discovery through a letter to Chamilia's counsel in addition to various document requests. Pandora sent the letter together with its first set of document requests on December 20, 2007. On January 22, 2008, Chamilia issued its responses to the document requests, which failed to produce any information not already in Pandora's possession. On January 27, 2008, Chamilia informed Pandora via email that it would not respond to Pandora's requests for additional information claiming they were improperly submitted in the letter to counsel. Chamilia sent this email only upon Pandora's inquiry as to when it would receive the requested information.
In response, Pandora issued a formal set of interrogatories on January 28, 2008, seeking additional information regarding the communications at issue. On January 29, 2008, Pandora issued a second set of document requests and interrogatories. On January 31, 2008, Pandora deposed Mr. Julkowski, who stated that he could not find any documents related to the communications at issue on any Chamilia computer system and that he did not know who received the communications. On February 27 and 28, 2008, Chamilia formally objected to Pandora's first and second sets of interrogatories and the second document request, claiming they were untimely served because a response would have been due after the discovery deadline set by the court.
Throughout the discovery period, Chamilia failed to produce any new documents or information related to the communications at issue in this litigation, including the recipients lists of the emails sent to blind recipients. Chamilia contends this is because it no longer possesses the emails or any related electronic communications possibly due to Chamilia's having changed its electronic server twice during the litigation period or due to its email system forcing users to delete or archive emails every ninety days. Based on Chamilia's failure to cooperate in discovery and to produce any information related to the communications, Pandora filed its motion for sanctions on February 29, 2008.
ANALYSIS
A. Defendant's Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment:
should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c). The Supreme Court has clarified this does not mean that any factual dispute will defeat the motion:
By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).
i. Lanham Act False Advertising
The Lanham Act prohibits the "false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities." 15 U.S.C. § 1125(a)(1)(B). A plaintiff asserting false advertising under the Lanham Act must establish that:
(1) the defendant made a false or misleading description of fact or representation of fact in a commercial advertisement about his own or another's product; (2) the misrepresentation is material, in that it is likely to influence the purchasing decision; (3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (4) the defendant placed the false or misleading statement in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products.Scotts Co. v. United Indus. Corp., 315 F.3d 264, 272 (4th Cir. 2002).
Count One: The November 2006 Communication
Chamilia contends that summary judgment is warranted as to count one because the November 2006 communication is not a commercial advertisement, and Pandora cannot show that the communication has caused or is likely to cause any injury. Consideration of the latter argument is adequate to decide the matter, and so the court will not address Chamilia's other ground. See Tao of Sys. Integration, Inc. v. Analytical Servs. Materials, Inc., 330 F.Supp.2d 668, 671 (E.D. Va. 2004) (finding plaintiff's lack of evidence of causation and injury sufficient to grant summary judgment on Lanham Act false advertising claim without discussing other grounds for summary judgment); see also Celotex, 477 U.S. at 322 ("Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.").
Pandora offers no evidence that it has been harmed or is likely to be harmed by the November 2006 communication. Pandora does not identify a single diverted or even disgruntled retailer or any loss of reputation among its current retailers or any other recipients of the communication. Pandora's inability to demonstrate the requisite damages is particularly compelling here, both because the language of the communication was the most egregious of the communications at issue (such that the court granted Pandora a TRO and ordered Chamilia to send a corrective letter), and Pandora possessed the recipients list for this communication. Pandora had ample opportunity to investigate any potential injury arising from the communication, and yet there is no evidence of injury demonstrated in the record. Moreover, Pandora offers no evidence that Chamilia benefitted from its alleged false advertisements. See Tao, 330 F.Supp.2d at 672 (reading the fifth element of the Scotts test "expansively to recognize a valid claim when plaintiff can alternatively . . . demonstrate a benefit to the defendant"). Thus, based on Pandora's inability to meet all of the required elements under Scotts, the court will grant Chamilia's motion for summary judgment as to count one of the complaint.
For all of Pandora's claims, it contends that it is "too soon" to determine the full extent of its damages attributable to Chamilia's communications. However, such prognostications unsupported by any evidence in the record do not establish material issues of fact in the summary judgment context. See Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985) (the party opposing summary judgment "cannot create a genuine issue of fact through mere speculation or the building of one inference upon another.").
Count Four: The January 2007 Communication
In regard to the January 2007 communication, Chamilia contends summary judgment is warranted because the communication is not a commercial advertisement, the letter does not contain false or misleading descriptions of fact, the alleged misrepresentations are not material, and Pandora cannot show that the communication has caused or is likely to cause any injury. Again, the court finds the issue of injury is adequate to decide the matter.
The fact that Pandora never obtained a recipients list of the January 2007 communication from Chamilia does not escape the court's notice. However, Pandora fails to offer any evidence to show that it has or will suffer injury arising from the communication, or that having access to a recipients list would have enabled it to prove such injury. While three retailers contacted Pandora regarding the January 2007 communication — two sending it along as an "FYI" and one inquiring if Pandora knew anything about Chamilia's "recieving [sic] a patent" (Pl.'s Mot. for Sanctions Exh. L) — these communications fall short of the type of injury other courts have required to survive summary judgment on a Lanham Act claim. See, e.g., Cashmere Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d 302, 318-19 (1st Cir. 2002) (finding sufficient evidence of injury in a Lanham Act claim to survive summary judgment where plaintiff produced evidence that defendant's false advertising caused three of plaintiff's customers to cease doing business with plaintiff in favor of defendant). Thus, because Pandora cannot make the requisite showing of injury, the court will grant summary judgment on the Lanham Act claim in count four of the complaint.
As discussed below, while Pandora has not shown that Chamilia acted in "bad faith" in failing to retain copies of the communications and their recipients list, the court nonetheless finds reason to impose sanctions based on Chamilia's discovery abuses.
ii. Tortious Interference with Prospective Economic Advantage: Count Three
To prove tortious interference with prospective economic advantage, the plaintiff must show that the defendant "committed 1) intentional and willful acts; 2) calculated to cause damage to plaintiff in its lawful business; 3) done with an unlawful or improper purpose; 4) that results in actual damages." Nat'l. Bd. for Certification in Occupational Therapy, Inc. v. Am. Occupational Therapy Ass'n. (NBCOT), 24 F.Supp.2d 494, 505-06 (D. Md. 1998) (citing K K Mgmt., Inc. v. Lee, 557 A.2d 965, 973 (Md. 1989) (citations omitted)). The plaintiff "must produce sufficient evidence of all four elements to withstand summary judgment." Henry v. Nat'l Ass'n of Air Traffic Specialists, 836 F.Supp. 1204, 1210 (D. Md. 1993), aff'd 34 F.3d 1066 (4th Cir. 1994).
As discussed above, Pandora has not produced sufficient evidence that Chamilia's conduct resulted in diverted sales or a loss of goodwill in the marketplace. In NBCOT, the plaintiff, a membership organization, alleged that defendant's conduct, which included making false statements about the organization, resulted in plaintiff's lost membership revenue. The court concluded that the plaintiff failed to establish that the defendant's conduct caused the lost revenue. NBCOT, 24 F.Supp.2d at 506. Here, Pandora does not even allege that it has lost revenue or suffered any other pecuniary injury as a result of Chamilia's conduct. Thus, the court concludes that Pandora has failed to demonstrate the existence of any damages caused by Chamilia's behavior. Because Pandora cannot meet all of the elements of the tortious interference claim, the court grants Chamilia's motion for summary judgment.
Pandora's contention that it is entitled to recover damages to its reputation reasonably expected to flow from Chamilia's conduct is unavailing because Pandora has presented no evidence that it has suffered any such damages. In Rite Aid Corp. v. Lake Shore Inv., 471 A.2d 735, 740 (Md. 1984), the Court of Appeals of Maryland adopted a theory of recovery for tortious interference with contracts that allows for recovery of pecuniary and non-pecuniary damages, including "actual harm to reputation" reasonably expected to result from the tortious interference. The court reasoned that "this measure of damages . . . fully recognizes that the tortfeasor who induces the breach must be held to the more extensive tort damages since the tort is necessarily an intentional one." Id. at 740-41. Thus, while plaintiffs suing under a tortious interference with prospective advantage claim may be eligible for the more extensive recovery, the plaintiff still must adequately demonstrate that some damage has been caused. See NBCOT, 24 F.Supp.2d at 506 (concluding that a plaintiff can recover non-pecuniary damages for the tort only where it can demonstrate the existence of some damages caused by the defendant).
iii. Injurious Falsehood: Count Two
To maintain a claim for injurious falsehood, the plaintiff must establish that the defendant acted with malice in publishing a known falsity that caused special damages. Neurotron, Inc. v. Am. Ass'n of Electrodiagnostic Med., 189 F.Supp.2d 271, 277 (D. Md. 2001) (citing NBCOT, 24 F.Supp.2d at 511 n. 27). "The plaintiff must prove in all cases that the publication has played a material and substantial part in inducing others not to deal with him, and that as a result he had suffered special damage." NBCOT, 24 F.Supp.2d at 511 (quoting Horning v. Hardy, 373 A.2d 1273, 1278 (Md.App. 1977)).
Pandora has failed to demonstrate that Chamilia's communications caused special damages. As discussed above, Pandora does not present sufficient evidence that Chamilia's conduct caused Pandora to lose profits or threatened Pandora's prospective advantage. See NBCOT, 24 F.Supp.2d at 511 (granting defendant's motion for summary judgment on injurious falsehood claim where plaintiff failed to "prove special damage, in the form of loss of a present or prospective advantage") (citing Morrissey v. William Morrow Co., 739 F.2d 962, 976 n. 20 (4th Cir. 1984)). Thus, the court will grant Chamilia's motion for summary judgment on the injurious falsehood claim.
In addition to the November 2006 and January 2007 communications, Pandora points to the October 3, 2007 email sent by an anonymous remailer system and the anonymous phone calls as further evidence of Chamilia's injurious falsehood, but offers little or no evidence to prove that Chamilia was responsible for these communications. Even assuming Chamilia was responsible, that would not change the fact that Pandora has failed to produce sufficient evidence of damages to survive summary judgment.
iv. Unfair Competition: Count Five
Maryland defines unfair competition as "damaging or jeopardizing another's business by fraud, deceit, trickery or unfair methods of any sort. . . . What constitutes unfair competition in a given case is governed by its own particular facts and circumstances . . . [with] the general principle that all dealings must be done on the basis of common honesty and fairness, without taint of fraud or deception." Trimed, Inc. v. Sherwood Med. Co., 977 F.2d 885, 891 (4th Cir. 1992) (quoting Balt. Bedding Corp. v. Moses, 34 A.2d 338, 342 (Md. 1943)).
Pandora alleges that Chamilia's communications constitute unfair competition because they have "caused confusion among the jewelry market." (Pl.'s Opp'n to Def.'s Mot. Summ. J.) However, Pandora does not offer sufficient evidence to support this assertion. The only evidence of retailer confusion in the record is an email from a retailer sent in response to the January 2007 communication inquiring if Pandora knew anything about Chamilia's "recieving [sic] a patent." As discussed above, this evidence is insufficient to establish that Pandora has suffered damages as a result of Chamilia's conduct, and is similarly insufficient to establish that Chamilia jeopardized Pandora's business. Even assuming the communications rise to the level of fraud, deceit, or trickery, Pandora's unfair competition claim cannot survive summary judgment for the same reason its other claims fail: Pandora offers no evidence that its business has been damaged or jeopardized. Thus, the court will grant Chamilia's motion for summary judgment on the unfair competition claim.
B. Plaintiff's Motion for Sanctions
i. Discovery Abuses
37 See 37See
December 20, 2007 Request for Information
Rule 30(b)(6) Deposition
See Snead v. Automation Indus., Inc. 102 F.R.D. 823 828-89 Int'l Ass'n of Machinists and Aerospace Workers v. Werner-Masuda (IAMAW) 390 F.Supp.2d 479 487 See id. See IAMAW390 F.Supp.2d at 489-90 Sampson v. City of Cambridge251 F.R.D. 172184Zubulake v. UBS Warburg LLC (Zubulake IV) 220 F.R.D. 212222
Chamilia correctly asserts that Pandora did not specifically list the January 15, 2007 email or the October 2, 2007 email in its letter of December 20. Rather, Pandora sought information regarding only (1) the January 8, 2007 letter and (2) the October 3, 2007 email, which Chamilia denies sending; Pandora did not specifically refer to either the January 15 or the October 2 emails until January 29, 2008 when it filed its second set of document requests and interrogatories. The January 15, 2007 email, however, transmitted the January 8, 2007 letter, and fell within the scope of both the December 20, 2006 request and Pandora's First Set of Document Requests numbers 8 and 9.
As a consequence of Chamilia's stonewalling of Pandora's attempts to discover evidence in this case, in particular the recipients lists of the various communications, the court will grant Chamilia's motion for sanctions pursuant to Rule 37 and its inherent power and will order Chamilia to pay for the reasonable costs Pandora incurred from the following activities: (1) preparing and sending the December 20 letter; (2) preparing and sending both sets of interrogatories and the second set of document requests; (3) preparing for and conducting the Rule 30(b)(6) deposition of Mr. Julkowski; and (4) one half the cost of preparing and submitting the motion for sanctions. Pandora may file an appropriate motion demonstrating its reasonable costs associated with each of the aforementioned tasks within 30 days.
To the extent the lack of production results from deletion of emails, Chamilia's failure to prevent the loss does not fall within the routine, good faith exception of Rule 37(e), which protects parties "for failing to provide electronically stored information lost as a result of the routine, good-faith operation of an electronic information system." See Fed.R.Civ.P. 37 advisory committee's note (stating that "good faith . . . may involve a party's intervention . . . to prevent the loss of information, if that information is subject to a preservation obligation."). As discussed below, because Chamilia had a duty to preserve documents when it sent the January 8 and 15, 2007 communications and the October 2, 2007 communication, Chamilia's failure to preserve documents does not fall within the protective scope of Rule 37(e).
ii. Spoliation
Pandora also seeks sanctions against Chamilia for the spoliation of evidence pursuant to the court's inherent authority to control the judicial process. Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991)). Spoliation involves "the destruction or material alteration of evidence or . . . the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation." Id. A party seeking an adverse inference instruction based on the spoliation of evidence must establish three elements:
(1) the party having control over the evidence had an obligation to preserve it when it was destroyed or altered; (2) the destruction or loss was accompanied by a "culpable state of mind;" and (3) the evidence that was destroyed or altered was "relevant" to the claims or defenses of the party that sought the discovery of the spoliated evidence, to the extent that a reasonable factfinder could conclude that the lost evidence would have supported the claims or defenses of the party that sought it.Thompson v. United States Dep't of Hous. Urban Dev., 219 F.R.D. 93, 101 (D. Md. 2003) (citing Zubulake IV, 220 F.R.D. at 220).
As to the first element, the Fourth Circuit has noted that "[t]he duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation." Silvestri, 271 F.3d at 591. "Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a `litigation hold' to ensure the preservation of relevant documents." Thompson, 219 F.R.D. at 100 (quoting Zubulake IV, 220 F.R.D. at 218.) Considering that the two parties already were engaged in patent litigation and the lawsuit stemming from the November 2006 communication, Chamilia reasonably should have known that any evidence related to any of the communications sent to Pandora retailers would be relevant to the ongoing litigation. See Broccoli v. Echostar Comm'ns Corp., 229 F.R.D. 506, 510-11 (D. Md. 2005) (finding the defendant employer was placed on notice of potential litigation and thus had a duty to preserve documents as soon as the plaintiff employee informed two supervisors of another supervisor's sexually harassing behavior). Thus, Chamilia had a duty to preserve relevant evidence relating to the communications at issue and initiate a litigation hold. These documents, which were under Chamilia's control, were lost or deleted after its duty to preserve relevant evidence attached. Thus, Pandora satisfies the first element of the spoliation analysis.
The second element is whether the destruction or loss was accompanied by a "culpable state of mind," which includes bad faith destruction, gross negligence, and ordinary negligence. Thompson, 219 F.R.D. at 101. The Fourth Circuit requires only that the party seeking sanctions demonstrate fault, with the degree of fault impacting the severity of sanctions. Silvestri, 271 F.3d at 590. Pandora claims Chamilia's failure to preserve evidence was willful or in bad faith and contends that Chamilia's justifications for the lost evidence — changing electronic servers and automatic archiving or deleting of emails after ninety days — are "no excuse." (Pl's. Mem. in Support of its Mot. for Sanctions at 7.)
While Pandora accuses Chamilia of "turn[ing] an intentional blind eye toward document retention" ( id. at 15), it offers no evidence, other than Chamilia's failure to retain the emails, that Chamilia deliberately deleted or destroyed evidence. There is no question that Chamilia had a duty to preserve the emails, and Chamilia's inability to produce any documents related to the emails clearly evidences that it failed to do so. However, merely meeting the first element under Thompson does not necessitate a finding of willful or bad faith destruction. See Sampson, 251 F.R.D. at 181-82 (finding that while electronic documents under the defendant's control were lost or destroyed after the duty to preserve relevant evidence arose, plaintiff could not establish defendant's bad faith in part because plaintiff presented no evidence that defendant purposely destroyed any documents). While the court cannot conclude that Chamilia acted in bad faith, it does appear that Chamilia was grossly negligent in its failure to preserve evidence. See Zubulake IV, 220 F.R.D. at 220 ("Once the duty to preserve attaches, any destruction of documents is, at a minimum, negligent."). Given the controversy surrounding the November 2006 email, Chamilia should have been well aware of the importance of preserving email records.
Pandora cites Broccoli v. Echostar Comm'ns Corp., 229 F.R.D. 506 (D. Md. 2005) for the proposition that, at some point, a party crosses the line from negligence to bad faith where it is on reasonable notice that relevant evidence will be destroyed pursuant to a routine document retention policy and fails to prevent the destruction. In Broccoli, the court imposed sanctions on the defendant employer for failing to preserve, among other things, employment-related documents relevant to the plaintiff and his termination, correspondence pertaining to the plaintiff's termination, and emails exchanged during the plaintiff's employment and termination. The court found bad faith because the defendant's "regular policy . . . of `deep-sixing' nettlesome documents and records (and of management's efforts to avoid their creation in the first instance) [was] overwhelming." Id. at 511. While the court takes issue with Chamilia's failure to produce any evidence of who received the communications, the record does not demonstrate the same wide-spread, systematic destruction of essential documents that was present in Broccoli. Thus the finding of bad faith in Broccoli is not controlling in this analysis.
The court now turns to the third element under Thompson, whether the lost evidence was relevant to Pandora's claims. Thompson, 219 F.R.D. at 101. In Thompson, the court defined "relevant evidence" as that which a "reasonable factfinder could conclude . . . would have supported the claims or defenses of the party that sought it." Id. As articulated in Gates Rubber Co. v. Bando Chem. Indus., Ltd., 167 F.R.D. 90 (D. Colo. 1996), within the spoliation context, "the burden is on the aggrieved party to establish a reasonable possibility, based on concrete evidence rather than a fertile imagination, that access to the [lost material] would have produced evidence favorable to his cause." Id. at 104 (alteration in original) (internal quotations omitted).
Here, Pandora contends that the lost evidence, particularly the recipients lists from the January 2007 and October 2007 communications, would be relevant to its claims by enabling it to show injury arising from the communications. Pandora offers no concrete proof, however, that the lost materials would have produced evidence favorable to the required showing of injury. The only evidence Pandora offers are three emails from Pandora retailers who received the January 2007 communication, two of which pass the email along as an "FYI" and one which inquires whether Pandora knew anything about Chamilia's "recieving [sic] a patent." This is simply not enough to establish a reasonable possibility that access to lost documents would have produced favorable evidence of injury. Pandora maintains that it does not have the resources to assess which of its over 2,000 retailers received the communications, and thus it cannot determine if it has sustained any injury as a result of the communications. However, Pandora cannot point to even a single diverted customer or any evidence of damage to its reputation in the marketplace stemming from any of the communications at issue in this litigation. Moreover, Pandora had access to at least some of the recipients of the October 3, 2007 email sent by the anonymous remailer system, as the copy of the email submitted to the court contained a snapshot of the recipients list ( see Pl.'s Mot. for Sanctions Exh. G), and yet Pandora offers no evidence that it suffered any injury as to those recipients. The court also notes that the potential favorability of the evidence at issue in this case is easily distinguishable from the destroyed evidence in cases where courts have imposed spoliation sanctions. See Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 156-57 (4th Cir. 1995) (upholding imposition of sanctions for spoliation where plaintiff's expert destroyed areas of a boat at issue in a products liability action before defendant and its experts were able to examine the boat); Broccoli, 229 F.R.D. at 511-12 (imposing sanctions where the defendant did not preserve vital employment and termination documents and internal investigation files relevant to plaintiff's claims of sexual harassment and retaliation).
As the summary judgment discussion, above, reveals, Pandora is unable to demonstrate it has suffered any actual injury as a result of Chamilia's communications, which is an essential element for all of Pandora's claims in this litigation.
In the summary judgment context, Pandora offers its prediction that "time will show" how damaging the communications prove to be. (Pl.'s Opp. Mem. to Def.'s Mot. for Summary Judgment Exh. L at 44.) However, speculation as to the communications' potential effects does not enable Pandora to survive summary judgment on its substantive claims and also falls short of the concrete evidence needed to establish relevance in the spoliation context.
As the analysis of Pandora's substantive claims, above, makes clear, Pandora does not offer sufficient evidence of injury to support its Lanham Act claim of false advertising stemming from the November 2006 communication. While Chamilia provided the recipients list for that communication, Pandora could not identify a single diverted or even disgruntled customer and offered no evidence of how that original email had harmed its reputation in the marketplace. Considering that the November 2006 communication contained the most egregious language involving Pandora, such that the court ordered Chamilia to send a corrective letter to all recipients, the absence of injury casts serious doubt on whether the subsequent communications would have any effect on Pandora's business.
Based on Pandora's failure to demonstrate that the lost evidence would have supported its claims, the court declines to impose dispositive sanctions against Chamilia, such as an adverse inference instruction or summary judgment, for spoliation of evidence.
A separate Order follows.
ORDER
For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that:1. The defendants' motion for summary judgment (docket entry no. 36) is GRANTED;
2. The plaintiff's motion for sanctions (docket entry no. 37) is GRANTED in part and DENIED in part;
3. Judgment is entered in favor of the defendants, except for sanctions;
4. The Clerk shall CLOSE this case; and
5. The plaintiff may file a motion demonstrating reasonable attorneys' fees and costs within 30 days.