IO Group, Inc. et al v. GLBT, Ltd. et al

Filing 124

Order by Magistrate Judge Donna M. Ryu granting in part and denying in part 63 Plaintiffs' Motion for Sanctions.(dmrlc1, COURT STAFF) (Filed on 10/19/2011)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA

11
For the Northern District of California

United States District Court

10
IO GROUP INC, et al.,

12
13

No. C-10-1282 MMC (DMR)
ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFFS’
MOTION FOR SANCTIONS FOR
SPOLIATION OF EVIDENCE

Plaintiffs,
v.

14

GLBT LTD, et al.,

15

Defendants.
___________________________________/

16
17
18

I. INTRODUCTION
Plaintiffs moved for terminating sanctions for spoliation of evidence, attorneys’ fees and

19

costs, and an order compelling the production of certain documents. [Docket No. 63.] The court

20

conducted a hearing on September 22, 2011. No representative for Defendants appeared. Having

21

considered the parties’ briefs and accompanying submissions, the court hereby GRANTS Plaintiffs’

22

motion in part and DENIES it in part.

23

At the September 22, 2011 hearing, the court ordered briefing from Plaintiffs as to the

24

amount of reasonable attorneys’ fees and costs that should be awarded as a sanction against

25

Defendants. [Docket Nos. 120 & 121.] Having considered Plaintiffs’ submissions, and having

26

deemed that the matter appropriately may be decided on the papers without oral argument, this

27

Order also contains the court’s ruling as to the amount of sanctions that should be levied against

28

Defendants in the form of attorneys’ fees and costs payable to Plaintiffs.

1
2

II. FACTUAL AND PROCEDURAL BACKGROUND
This is an action for alleged copyright and trademark infringement. In March 2010,

3

Plaintiffs Io Group, Inc., Channel One Releasing, Inc. and Liberty Media Holdings, LLC

4

(“Plaintiffs”) filed suit against United Kingdom based-Defendants GLBT, Ltd. (“GLBT”), Mash and

5

New, Ltd., Port 80, Ltd., Steven Compton, and David Compton. The complaint alleges that

6

Defendants operate three websites from which members can upload and download videos in a

7

manner which infringes upon Plaintiffs’ copyrighted works and trademarks.

8
9

Plaintiffs contend that Defendants operate each of the three websites identically. Defendants
store a large number of video files on computer servers they control. Users are able to view a
certain number of videos from each of the websites on any given day for free; if a user wishes to

11
For the Northern District of California

United States District Court

10

watch more than the maximum number allowed, he or she may obtain unlimited access by paying a

12

monthly membership fee, or by uploading video content to Defendants’ servers. Plaintiffs thus

13

allege that rather than creating or licensing content for the sites, Defendants encourage users to

14

upload copyright-protected material. (Compl. ¶¶ 29-31.) Plaintiffs further allege that Defendants’

15

business model depends on the uploading, posting, display and performance of copyrighted

16

audiovisual works belonging to Plaintiffs and others. (Compl. ¶ 37.)

17

Prior to filing the instant lawsuit, Plaintiffs sent Defendants Steven Compton, GLBT, Mash

18

and New, Ltd., and Port 80, Ltd. a letter notifying them of their duty to preserve relevant evidence.

19

(Decl. of G. Sperlein, July 6, 2011, Ex. C.) The letter specifically requested that Defendants

20

preserve, inter alia, all electronic video files, emails, copies of any work removed from the websites

21

at the demand of a copyright holder, and all notices or requests to remove content (“takedown

22

notices”). Id. Also prior to filing the lawsuit, Plaintiffs sent an email to Defendants’ UK counsel

23

regarding Defendants’ evidence preservation obligations. (Decl. of G. Sperlein, Ex. E.) Shortly

24

after filing the lawsuit, Plaintiffs notified Defendants’ UK counsel of Defendants’ evidence

25

preservation obligations by letter once more, again requesting that Defendants preserve specific

26

categories of evidence. (Decl. of G. Sperlein, Ex. D.)

27
28

In May 2011, the parties submitted a joint letter brief to the court regarding several discovery
disputes. [Docket No. 52.] The court conducted a telephonic hearing on June 13, 2011. During the

2

1

hearing, defense counsel claimed that his clients had no documents responsive to a number of

2

discovery requests, and also made troubling representations regarding his clients’ practice of

3

disposing of certain kinds of documents. In light of the court’s concerns about spoliation of

4

evidence, on June 14, 2011, the court ordered each defendant to submit a sworn, detailed declaration

5

addressing seven specific areas of information. [Docket No. 57.] The requested information

6

included a statement of when the individual or entity became aware of Plaintiffs’ lawsuit, a

7

description of the steps taken by the individual or the entity to preserve potentially relevant evidence

8

and to gather documents responsive to discovery requests and when the steps were taken, and the

9

identification of each custodian whose files were searched for relevant evidence and a description of

11
For the Northern District of California

United States District Court

10

the types of relevant records in each person’s possession. Id.
On June 23, 2011, individual defendants David Compton and Steven Compton filed

12

declarations on behalf of themselves and the entity defendants regarding their document

13

preservation and collection efforts. [Docket Nos. 61-1, 61-2.] In the present motion for sanctions,

14

Plaintiffs argue that the information provided in the court-ordered declarations reveals evidence of

15

spoliation, and that Defendants’ “disjointed, unclear, and evasive answers” to the court’s questions

16

about document preservation and collection efforts “hide the true scope of the destruction of

17

evidence.” (Pls.’ Mot. 4.) Plaintiffs seek terminating sanctions for Defendants’ spoliation of

18

evidence, as well as an order compelling Defendants to produce additional documents in response to

19

discovery requests. Plaintiffs have also requested monetary sanctions in the form of attorneys’ fees

20

and costs associated with this motion, independent of any other sanctions the court may impose.

21

On September 9, 2011, the court ordered Defendants to submit additional information

22

regarding Plaintiffs’ motion for sanctions, including a sample takedown notice and any

23

corresponding email(s) sent to a user with the notification that the offending posting has been or will

24

be removed. [Docket No. 107.] Defendants did not comply. On September 19, 2011, the court

25

issued an Order to Show Cause why Defendants should not be sanctioned for their failure to comply

26

with the order to submit additional information, and again ordered Defendants to submit the

27

requested information by no later than 12:00 p.m. on September 21, 2011. [Docket Nos. 113, 114.]

28

3

1

Defendants did not comply with the Order to Show Cause, nor did they ever submit the requested

2

information.

3
4

III. LEGAL STANDARDS
Courts are vested with inherent powers arising out of “‘the control necessarily vested in

cases.’” Unigard Sec. Ins. Co. v. Lakewood Eng’g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992)

7

(quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)). The Ninth Circuit has recognized trial

8

courts’ “inherent discretionary power to make appropriate evidentiary rulings in response to the

9

destruction or spoliation of relevant evidence.” Glover v. BIC Corp., 6. F.3d 1318, 1329 (9th Cir.

10

1993). Therefore, sanctions for spoliation of evidence may be imposed under the court’s inherent

11
For the Northern District of California

courts to manage their own affairs so as to achieve the orderly and expeditious disposition of

6

United States District Court

5

powers to manage its own affairs. Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006).

12

Courts also have authority to sanction a party “who fails to obey an order to provide or permit

13

discovery” pursuant to Federal Rule of Civil Procedure 37(b)(2)(A). Id. (internal quotation marks

14

omitted).

15

Where spoliation has occurred, the determination of an appropriate sanction “is confined to

16

the sound discretion of the trial judge, and is assessed on a case-by-case basis.” Fujitsu Ltd. v. Fed.

17

Express Corp., 247 F.3d 423, 436 (2d Cir. 2001) (internal citations omitted). In determining

18

whether and what type of sanctions to issue, courts generally consider three factors: “(1) the degree

19

of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by

20

the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to

21

the opposing party.” Nursing Home Pension Fund v. Oracle Corp., 254 F.R.D. 559, 563 (N.D. Cal.

22

2008) (quoting Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994) (courts should

23

choose “the least onerous sanction corresponding to the willfulness of the destructive act and the

24

prejudice suffered by the victim.”).

25

Courts have developed three types of sanctions for destruction of evidence. First, “[t]he

26

spoliation of evidence germane to proof of an issue at trial can support an inference that the evidence

27

would have been unfavorable to the party responsible for its destruction.” Zubulake v. UBS

28

Warburg LLC, 229 F.R.D. 422, 430 (S.D.N.Y. 2004) (internal quotation marks omitted). Second, a

4

1

court can exclude witness testimony based on the spoliated evidence. See Unigard, 982 F.2d at 368-

2

369. Third, a court may dismiss the claim of the party responsible for the spoliation when the court

3

determines that “a party has engaged deliberately in deceptive practices that undermine the integrity

4

of judicial proceedings.” Leon, 464 F.3d at 958 (quoting Anheuser-Busch, Inc. v. Natural Beverage

5

Distribs., 69 F.3d 337, 348 (9th Cir. 1995)). “Before imposing the ‘harsh sanction’ of dismissal,”

6

either pursuant to a court’s inherent power or to Rule 37, a court must consider the following

7

factors: “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to

8

manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy

9

favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Id.
(internal quotation marks and citations omitted). The court need not find bad faith by the offending

11
For the Northern District of California

United States District Court

10

party before issuing terminating sanctions for destruction of evidence; willfulness or fault may

12

suffice. Id.; Unigard, 982 F.2d at 368 n.2.

13
14

IV. DISCUSSION
The court will first determine whether Defendants’ declarations complied with the June 14,

15

2011 order to provide detailed information about Defendants’ document preservation and collection.

16

Next, the court will address the parties’ arguments about evidence spoliation and Plaintiffs’ request

17

for an order compelling the production of additional documents by Defendants. Finally, the court

18

will address whether sanctions are appropriate for Defendants’ failure to comply with the court

19

orders to provide additional information regarding the motion for sanctions and the September 19,

20

2011 Order to Show Cause.

21

A.

Defendants’ Document Preservation and Collection Efforts & the Court’s Order
to Provide Declarations Detailing the Same

22
23

Defendants made troubling representations about their document retention practices, raising

24

serious questions about the integrity of their preservation and collection efforts. The court

25

responded by ordering each Defendant to submit declarations regarding document preservation and

26

collection efforts. The court set forth seven specific areas of inquiry for each declarant to address in

27

detail in the declarations, and even emphasized the words “detailed declaration” in the order.

28

Plaintiffs argue that the declarations fail to comply with the order to respond to each area of inquiry,

5

1

and that Defendants provided disjointed, unclear, and evasive information in response to the court’s

2

order.

3

The court agrees. The declarations provided by Defendants completely omitted much of the

4

requested information, and were evasive and unforthcoming. For example, neither declaration

5

included any information about the steps taken to preserve potentially relevant evidence and when

6

the steps were taken, whose files were searched for relevant evidence, what types of relevant records

7

were in each person’s possession, and how the files were organized, stored, and maintained. Neither

8

declaration provided information about the approximate number or size of relevant records for each

9

person whose files were searched for relevant evidence, other than the vague statement that “[a]ll
potentially relevant information is contained in our extensive database.” (Decl. of D. Compton ¶ 4,

11
For the Northern District of California

United States District Court

10

June 22, 2011; Decl. of S. Compton ¶ 5, June 22, 2011.) Steven Compton provided no information

12

about what steps he took to gather documents responsive to discovery requests and when the steps

13

were taken, and David Compton only stated that “[t]he database was searched.” (Decl. of D.

14

Compton ¶ 7, June 22, 2011.) His declaration is silent as to when it was searched or any other steps

15

he took to gather responsive documents.

16

With regard to whether relevant information has been destroyed, both declarants gave

17

contradictory information. Steven Compton first stated “[w]e have not ‘destroyed’ any evidence

18

that is relevant to this case,” but then claimed that if any evidence was destroyed, it would have been

19

“relevant to our defense.” (Decl. of S. Compton ¶ 6.) He then admitted that Defendants have

20

“deleted the actual emails containing the DMCA notices [notices to take down or remove content].”

21

Id. David Compton echoed Steven Compton’s statement that if any evidence was destroyed, it

22

would have been relevant to Defendants’ defense. (Decl. of D. Compton ¶ 8, June 22, 2011.) He

23

then stated “we have systematically deleted all emails that are sent to the site, this included DMCA

24

take down notices.” Id. at ¶ 9.

25

Addressing Defendants’ data retention policy, Defendants provide only the vaguest of

26

information, stating “[p]ersonal data is not kept for a period longer than is necessary, having regard

27

to the purposes for which they are processed.” (Decl. of D. Compton ¶ 10, June 22, 2011 (emphasis

28

omitted); Decl. of S. Compton ¶ 7 (emphasis omitted).) Both declarants admitted that they “do not

6

1

keep emails however as [they] have been advised by [their] UK lawyers this would violate the Data

2

Protection Act.” (Decl. of D. Compton ¶ 11, June 22, 2011; Decl. of S. Compton ¶ 8.)

3

In sum, the court concludes that Defendants failed to provide adequately detailed

4

declarations regarding their document preservation and collection efforts, and thus violated this

5

court’s June 14, 2011 order. Defendants’ failure to comply with a court order “to provide or permit

6

discovery” is sanctionable pursuant to Rule 37(b)(2)(A). The court finds that the payment of

7

reasonable expenses, including attorneys’ fees, by Defendants to Plaintiffs for the failure to comply

8

with the order as a sanction is appropriate, as discussed further infra. See Fed. R. Civ. P.

9

37(b)(2)(C).
B.

11
For the Northern District of California

United States District Court

10

Litigants are under a duty to preserve “what [they know], or should know, is relevant in the

12

action, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely

13

to be requested during discovery and/or is the subject of a pending discovery request.” Zubulake v.

14

UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003). The duty extends to “any documents or

15

tangible things . . . made by individuals ‘likely to have discoverable information that the disclosing

16

party may use to support its claims or defenses.’” Id. at 217-218 (quoting Fed. R. Civ. P.

17

26(a)(1)(A)). The duty to preserve evidence arises as soon as the parties reasonably anticipate

18

litigation. Id. at 216.

Spoliation of Evidence

19

Plaintiffs assert that the information contained in Defendants’ declarations reveals that

20

Defendants failed to meet their preservation and collection obligations and destroyed relevant

21

evidence. Plaintiffs also submitted deposition testimony by David Compton in which he explained

22

that Defendants receive email “takedown” notifications and requests to remove alleged infringing

23

material from Defendants’ three websites. Defendants respond by emailing users that material they

24

have posted to the websites is the subject of a takedown notice and is being removed. (D. Compton

25

Dep. 57:20-58:21, 60:6-10, June 29, 2011.) However, he also testified that Defendants’ email

26

system automatically deletes both incoming and outgoing emails after three to four days. (D.

27

Compton Dep. 131:2-5; 132:15-18; 58:22-59:7.) It appears Defendants did not suspend the

28

automatic deletion function until July 2011, over a year after the lawsuit was filed. (Decl. of D.

7

1

Compton ¶ 11, July 20, 2011.) Further, when Defendants receive takedown notices, they remove the

2

audiovisual content from the websites and delete it from their servers. (D. Compton Dep. 53:19-

3

54:6.)

4

This evidence, along with information contained in the declarations themselves (“we have

5

systematically deleted all emails that are sent to the site” (Decl. of D. Compton ¶ 9, June 22, 2011.)),

6

clearly demonstrates that Defendants violated their duty to preserve relevant evidence, and that

7

spoliation occurred with respect to three categories of evidence: takedown notices, audiovisual files

8

removed from the websites, and emails. Plaintiffs argue that Defendants’ spoliation was willful,

9

particularly in light of the fact that Plaintiffs sent three separate evidence preservation letters.
Therefore, Plaintiffs contend that Defendants have “engaged deliberately in deceptive practices that

11
For the Northern District of California

United States District Court

10

undermine the integrity of judicial proceedings,” that a fair trial on the merits is impossible given the

12

extent of the spoliation, and that an entry of default is appropriate. (Pls.’ Mot. 17, quoting Leon, 464

13

F.3d at 958.)

14

Defendants do not dispute that audiovisual files, takedown notices, and internal emails were

15

deleted. Their opposition is silent as to any justification for deleting takedown notices and

16

audiovisual files, and their sole justification for the destruction of emails is that UK’s Data

17

Protection Act (“DPA”) does not permit them to retain personal data for longer than is necessary,

18

and actually requires them to delete emails. Defendants argue that the facts of this case are

19

distinguishable from Leon and Anheuser-Busch, which “involved parties who had engaged in a

20

pattern of deception over a number of years and which involved dishonesty” to the court. In

21

contrast, Defendants contend they “have been fully frank with the court and have fully admitted

22

what they have done” and “have obeyed all [c]ourt orders.” (Opp. at 6.) Defendants argue that they

23

have now retrieved some of the missing emails and files1, and have “undertaken to desist from

24

deleting anything in the future.” (Defs.’ Opp’n 8.) Therefore, while Defendants concede that an

25
26
27
28

1

Defendant David Compton submitted a declaration in connection with Defendants’
opposition to the present motion in which he represents that he “[has] been able to retrieve all emails
deleted for the past 6 weeks,” and that he “[has] also been able to retrieve all video clips deleted
from the site since November 25, 2010. Now nothing is being deleted.” (Decl. of D. Compton ¶ 11,
July 20, 2011.)

8

1

adverse inference instruction “may be appropriate,” they argue that terminating sanctions are not

2

warranted. (Defs.’ Opp’n 7.)

3

With respect to their systematic deletion of emails, Defendants’ argument appears to be that

4

the DPA shields them from sanctions for spoliation. However, Defendant has offered no evidence

5

that audiovisual files and takedown notices contain any personal data protected by the DPA. The

6

third class of evidence, emails, potentially could contain personal data, but Defendants have made

7

no showing that any, let alone all, of the destroyed emails contained such protected information.

8

Moreover, Defendants have provided no authority supporting their interpretation of the DPA, and

9

this court has already considered and rejected Defendants’ argument that the court lacks authority to
order the production of documents that Defendants claim are protected by the DPA. See Order Re

11
For the Northern District of California

United States District Court

10

Joint Letter Re Discovery Disputes 2-3, June 14, 2011 [Docket No. 57]; see also Richmark Corp. v.

12

Timber Falling Consultants, 959 F.2d 1468, 1474 (9th Cir. 1992) (“it is well settled that such

13

[foreign ‘blocking’] statutes do not deprive an American court of the power to order a party subject

14

to its jurisdiction to produce evidence even though the act of production may violate that statute.”),

15

quoting Societe Nationale Industrielle Aerospatiale v. United States Dist. Court, 482 U.S. 522, 544

16

n.29 (1987); Columbia Pictures Indus. v. Bunnell, No. 06-1093, 2007 WL 2080419, at *11-12 (C.D.

17

Cal. May 29, 2007) (examining application of Netherlands’ DPA to discovery dispute); Int’l Med.

18

Group, Inc. v. Essential Health, Ltd., No. 08-923, 2010 WL 3169395, at *1 (S.D. Ind. July 16, 2010)

19

(rejecting application of UK’s DPA).

20

In sum, Defendants have conceded that they destroyed evidence and have not demonstrated

21

that production of the spoliated evidence would have been “impossible,” or that production “would

22

subject [them] to civil or criminal sanctions.” Jorgensen v. Cassidy, 320 F.3d 906, 912 (9th Cir.

23

2003). Therefore, the court must determine what type of sanctions are appropriate. Unigard, 982

24

F.2d at 368. The court will consider the three Schmid factors in making this determination.

25
26

1.

Degree of Defendants’ Fault

The first factor is the degree of fault of the party who destroyed the evidence. “A party’s

27

destruction of evidence qualifies as willful spoliation if the party has some notice that the documents

28

were potentially relevant to the litigation before they were destroyed.” Leon, 464 F.3d at 959

9

1

(emphasis in original) (citation omitted). Here, the destroyed documents clearly were relevant.

2

Moreover, Defendants had ample notice that the files they destroyed were potentially relevant to the

3

litigation. Plaintiffs notified Defendants of their obligation to preserve evidence no less than three

4

times (twice before filing suit), and explicitly identified the evidence they sought to be preserved.

5

Yet Defendants did not suspend their automatic deletion function on their email system until July

6

2011, over a year after the lawsuit was filed. The court concludes Defendants “consciously

7

disregarded” their obligation to preserve relevant evidence. See Hamilton v. Signature Flight

8

Support Corp., No. 05-0490, 2005 WL 3481423, at *7 (N.D. Cal. Dec. 20, 2005) (listing cases

9

holding sanction for failure to preserve evidence appropriate “only when a party has consciously

11
For the Northern District of California

United States District Court

10

12

disregarded its obligation to do so”).
2.

Degree of Prejudice Suffered by Plaintiffs

Plaintiffs argue that there is no way to determine the amount of prejudice they may have

13

suffered as a result of Defendants’ spoliation, given that the information contained in the lost

14

evidence “touches virtually every element of Plaintiffs’ copyright claims and every element of

15

Defendants’ defenses.” (Pls.’ Mot. 22.) Contrary to Defendants’ assertions that if any evidence was

16

destroyed, it would have been relevant to Defendants’ defense, the court finds that it is Plaintiffs

17

who have been prejudiced as a result of Defendants’ destruction of evidence.

18

With respect to the deleted audiovisual files, Plaintiffs are prejudiced by not being able to

19

examine the files and related metadata for any “red flags” indicating that infringement was likely.

20

Such red flags could render Defendants ineligible for safe harbor protections of the Copyright Act.

21

See 17 U.S.C. § 512(c)(1)(A) (service provider not liable for infringement if has no actual

22

knowledge that material is infringing). Further, Plaintiffs seek to hold Defendants liable under the

23

doctrines of contributory liability and vicarious infringement. In order to prove these claims,

24

Plaintiffs must first demonstrate that there has been direct infringement of their copyrights by third

25

parties, i.e. the users posting infringing material. Columbia Pictures Indus., Inc. v. Fung, No. 06-

26

5578, 2009 WL 6355911, at *7 (C.D. Cal. Dec. 21, 2009). By deleting the content removed from

27

their sites as a result of takedown notices, Defendants destroyed key evidence that would allow

28

Plaintiffs to prove the underlying infringement.

10

1

The loss of takedown notices and corresponding removal notification emails also prejudices

websites when analyzing a claim of inducement to infringe. See Columbia Pictures, 2009 WL

4

6355911, at *10 (scale of infringement occurring through use of defendants’ products is evidence of

5

intent to induce infringement). Although the number of takedown notices does not alone determine

6

the amount of actual infringement on the site, a large number of notices could indicate that a large

7

portion of the material on the site is infringing. In addition, in order to be eligible for safe harbor

8

protection, Defendants must show that they have policy in place providing for the termination of

9

repeat infringers. 17 U.S.C. § 512(i)(1)(A). Defendants claim that they have such a policy in place,

10

but without the ability to examine the takedown notices and corresponding emails, Plaintiffs have no

11
For the Northern District of California

Plaintiffs. First, the trier of fact may consider the extent of copyright infringement on Defendants’

3

United States District Court

2

way of challenging the implementation and enforcement of the policy because they cannot examine

12

whether Defendants actually terminated individual users who repeatedly posted infringing material.

13

Finally, the destruction of Defendants’ internal emails renders it impossible for Plaintiffs to

14

explore Defendants’ motivation and state of mind in operating their websites; this is key to

15

Plaintiffs’ claim of secondary infringement based on inducement. See Metro-Goldwyn-Mayer

16

Studios v. Grokster, Ltd., 545 U.S. 913, 937-939 (2005) (examining evidence of intent to cause

17

infringement, including internal communications).

18
19
20

Therefore, the court concludes that Plaintiffs have been prejudiced as a result of Defendants’
evidence spoliation.
3.

Whether a Lesser Sanction Would Avoid Substantial Unfairness to
Defendants

21
Next, the court must consider whether a lesser sanction is appropriate. Rejection of lesser
22
sanctions is appropriate when (1) no lesser sanction could both punish Defendants and deter others
23
similarly tempted and (2) the facts show that deceptive conduct has occurred and will continue.
24
Advantacare Health Partners, LP v. Access IV, No. 03-4496, 2004 WL 1837997, at *6 (N.D. Cal.
25
Aug. 17, 2004) (citations omitted). Here, a lesser sanction, such as an adverse inference instruction,
26
could both punish Defendants and deter others similarly tempted. Such instructions would restore
27
Plaintiffs to the position in which they would have been had Defendants not destroyed evidence. To
28

11

1

the extent an adverse inference may place Plaintiffs in a more advantageous position than if

2

Defendants had never destroyed evidence to begin with, the inference is nevertheless appropriate, as

3

it places the risk of an erroneous judgment on the party that wrongfully created the risk. West v.

4

Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999).

5

Further, it does not appear that Defendants’ deceptive conduct will continue to occur.

6

Defendants have retrieved some of the missing emails and files, and have taken steps to “desist from

7

deleting anything in the future.” (Defs.’ Opp’n 8.) Therefore, the court concludes that default

8

sanctions are not appropriate because Defendants’ actions “do not eclipse entirely the possibility of a

9

just result.” In re Napster, Inc. Copyright Litig., 462 F. Supp. 2d 1060, 1071 (N.D. Cal. 2006)

11
For the Northern District of California

United States District Court

10

12

(internal quotation marks omitted).
4.

Adverse Inference Sanctions

As discussed above, the court finds that adverse inferences in Plaintiffs’ favor are warranted

13

with regard to the categories of evidence that Defendants concede were destroyed. In order for a

14

court to impose an adverse inference sanction, Plaintiffs must demonstrate “‘(1) that the party

15

having control over the evidence had an obligation to preserve it at the time it was destroyed; (2)

16

that the records were destroyed with a culpable state of mind; and (3) that the destroyed evidence

17

was relevant to the party’s claim or defense such that a reasonable trier of fact could find that it

18

would support that claim or defense.’” In re Napster, Inc., 462 F. Supp. 2d at 1078 (quoting

19

Hamilton, 2005 WL 3481423, at *3).

20

As discussed above, Defendants deleted takedown notices, audiovisual files, and internal

21

emails which it had a duty to preserve, knowing that such a duty existed. Defendants’ conduct

22

amounts to willfulness, which is sufficient culpability to justify an adverse inference. Hamilton,

23

2005 WL 3481423, at *5. In addition, the documents and files were relevant to the action as

24

discussed above. Therefore, Plaintiffs are entitled to adverse inference instructions in the form of

25

rebuttable presumptions. Given the specific evidence destroyed by Defendants, the court orders the

26

following rebuttable factual presumptions: 1) third parties posted material on Defendants’ websites

27

that infringed Plaintiffs’ copyrights; 2) Plaintiffs submitted takedown notices to Defendants

28

12

1

regarding the infringing material; and 3) Defendants did not take steps to remove Plaintiffs’

2

infringing material from their websites.

3

C.

4

Plaintiffs also seek an order compelling the production of additional documents responsive to

Motion to Compel

5

their discovery requests. Plaintiffs argue that the court previously ordered Defendants to produce

6

documents responsive to a number of discovery requests, but that Defendants failed to produce all

7

responsive documents. Discovery closed on June 30, 2011.

8
9

First, Plaintiffs seek additional documents responsive to Request for Production (“RFP”) No.
7, which sought all billing files related to gayforit.com, one of Defendants’ websites. Plaintiffs
argue that instead of producing responsive documents, Defendants only produced a spreadsheet that

11
For the Northern District of California

United States District Court

10

appears to be a summary or compilation of information found in billing files. Plaintiffs seek the

12

records underlying the summary. Defendants respond that they use a third party biller, that the

13

requested records are in the third party biller’s possession, and that the information on the

14

spreadsheet reflects all of the billing information in Defendants’ possession. Given that Defendants

15

are not in possession of the actual billing files, Plaintiffs’ request for an order compelling further

16

responses to RFP No. 7 is DENIED.

17

Next, Plaintiffs seek additional documents responsive to RFP No. 9, which sought all

18

documents showing Defendants terminated services for members who violated their repeat infringer

19

policy. Defendants only produced a spreadsheet which appears to be a summary of information

20

about certain users, and Plaintiffs seek the documents underlying the summary. Defendants respond

21

that all of their records relating to banned users are contained in a digital database, and that the

22

spreadsheet properly presents all of the information contained in the records.

23

It is clear that some documents responsive to this request, such as emails, systematically

24

were deleted by Defendants. However, Defendants have represented that as of July 20, 2011, they

25

suspended the automatic delete function on their email system and retrieved all emails deleted for

26

the previous six weeks. (Decl. of D. Compton ¶ 11, July 20, 2011.) Therefore, Plaintiffs’ request

27

for an order compelling further responses to RFP No. 9 is GRANTED. Defendants are ordered to

28

produce all responsive documents in their possession, custody, and/or control. In its June 14, 2011

13

1

Order [Docket No. 57], the court ordered Defendants to produce documents responsive to a number

2

of Plaintiffs’ requests, but permitted Defendants to redact the names and street addresses of

3

individual users, as well as the users’ bank account and credit card account information.

4

Accordingly, in producing additional documents responsive to RFP No. 9, Defendants may redact

5

said information.

6

Finally, Plaintiffs seek additional documents responsive to RFP No. 2, which seeks all

7

documents in Defendants’ possession that reference Defendants’ three websites. According to

8

Plaintiffs, in Defendants’ privilege log, served on June 23, 2011, Defendants identified for the first

9

time a database containing over 1.8 million pages of responsive documents, and claimed the
documents were privileged pursuant to European data protection laws. Defendants’ opposition

11
For the Northern District of California

United States District Court

10

clarifies that the database only contains 1.8 million records, as opposed to pages, and argues that

12

Plaintiffs’ motion is untimely.

13

Although Plaintiffs’ request is clearly overbroad, Defendants’ only argument for withholding

14

the information is on the basis of the DPA, an argument the court has already considered and

15

rejected. Therefore, Plaintiffs’ request for an order compelling further responses to RFP No. 2 is

16

GRANTED. In producing additional documents responsive to RFP No. 2, Defendants may make

17

redactions consistent with the court’s June 14, 2011 Order.

18

D.

19

Defendants’ violation of the order to provide document preservation and collection

20

declarations justifies the imposition of sanctions in the form of reasonable attorneys’ fees and costs

21

incurred in bringing this motion. Defendants’ declarations failed to answer many basic questions,

22

and answered others with minimal information and conclusory statements. They were far from the

23

“detailed declarations” ordered by the court, and certainly raised more questions than they answered.

24

As a result, Plaintiffs spent unnecessary resources to challenge the deficient declarations. Further,

25

Defendants failed to comply with two court orders to submit additional information regarding the

26

present motion prior to the September 22, 2011 hearing on the motion, as well as an Order to Show

27

Cause why Defendants should not be sanctioned for their failure to comply with the order to submit

28

additional information. [Docket Nos. 107, 113, & 114.] This failure to comply with a court order

Reasonable Attorneys’ Fees and Costs

14

1

“to provide or permit discovery” is sanctionable pursuant to Rule 37(b)(2)(A), and the payment of

2

reasonable expenses, including attorneys’ fees, by Defendants to Plaintiffs for the failure to comply

3

with the order as a sanction is appropriate. See Fed. R. Civ. P. 37(b)(2)(C).

4

Plaintiffs argue that they should be compensated for 52.5 hours of work spent by their

5

counsel in connection with the motion for sanctions at the hourly rates of $335 and $450, for a total

6

of $19,945. [Docket Nos. 120 & 121.] Defendants did not submit an opposition to Plaintiffs’

7

request.

8

Having carefully reviewed the time records submitted by Plaintiffs, the Court finds that

takes into account a reduction in the amount of fees sought by Plaintiffs due to the fact that they did

11

not entirely prevail on their motion. The sanctions shall be paid to Plaintiffs within forty-five (45)

12

days of the date of this Order.

13

IT IS SO ORDERED.

17
18

Dated: October 19, 2011

19

S DISTRICT
TE
C
TA

DERED

O OR
IT IS S

NO

DONNA M. RYU
United States Magistratena M. Ryu
on Judge

20

RT

21

Judge D

ER

23
24
25
26
27
28

15

A

H

22

R NIA

UNIT
ED

S

16

it in part, and awards fees to Plaintiffs in the amount of $15,000.

FO

15

For the foregoing reasons the court hereby GRANTS Plaintiffs’ motion in part and DENIES

LI

14

IV. CONCLUSION

RT
U
O

For the Northern District of California

Plaintiffs should be awarded a total of $15,000 in reasonable attorneys’ fees and costs. This amount

10

United States District Court

9

N

F
D IS T IC T O
R

C