Defendants and Counsel to Share Liability for Failing to Disclose a Server
In Rosehoff, Ltd. v. Truscott Terrace Holdings, LLC et. al., Case No. 14-277S (W.D.N.Y., May 10, 2016), Defendant’s failure to disclose a server led to joint liability for attorneys and clients. Plaintiff owns patents and trademarks with respect to an after-market fuel additive called Cataclean, and Defendants have asserted various property rights in the product, which Plaintiff seeks to annul. Two of the individual defendants, the Gannon brothers, were former managers of a US distributor for Cataclean; when Plaintiff caused their termination thereof, Defendants asserted rights to Cataclean products as well as certain customers and licensees of Plaintiff.
During discovery, Plaintiff requested certain emails relevant to its claims and filed a Motion to Compel when Defendants did not fully respond. The Motion was granted. Plaintiff again moved to compel production when Defendants again failed to produce responsive emails. Defendants responded that it was withdrawing certain of his claims leaving only some claims of Plaintiff; however, Plaintiff asserted that the discovery it sought remained relevant. The court again granted the Motion and required Defendants to produce the requested emails as well as affidavits describing the computers and storage devices used during the relevant period to create and store emails and other responsive documents, or if the devices were destroyed, the circumstances of the destruction. The court awarded sanctions.
Defendant opposed the sanctions, arguing that the discovery should be excused based upon their withdrawal of certain claims. Defendants submitted affidavits, which showed that potentially responsive documents were transferred between multiple computers, which were also shared between Defendants and their bookkeeper. Defendants did review pertinent emails in a backup hard drive and forwarded them to their counsel, which sent them to Plaintiff.
The affidavits also revealed the existence of a host server for certain emails maintained while the Gannon brothers acted as managers. Plaintiff averred that Defendants did not disclose this server previously. Plaintiff’s expert opined that the server contains a “significant volume” of relevant emails.
The court found that Defendants did not comply with their discovery obligations, as the withdrawal of Defendants’ claims did not moot Plaintiff’s requests. The court therefore found that sanctions were justified and even mandated by FRCP 37 unless the non-compliant party is somehow justified or an award of attorneys’ fees would be unjust. The court found no justification for Defendants’ failure to disclose the server and the failure to search for responsive documents. The court then ordered that Plaintiff’s attorneys’ fees should be paid equally by Defendants and by their counsel.