In Cat3, LLC et. al. v. Black Lineage, Inc. et. al., Case No. 14-5511 (S.D.N.Y., Jan. 12, 2016), Plaintiff sued Defendants for trademark infringement, unfair competition, false designation of origin, and cybersquatting under the Lanham Act. The case involves two websites – SLAMXHYPE.com, owned by Plaintiffs, and FLASHXHYPE.com, used by Defendants. During discovery, the parties produced emails to each other. When Plaintiffs deposed Defendant Black Lineage’s president, Vahe Estepanian, and certain emails were used as deposition exhibits, discrepancies were discovered between the emails produced at the deposition and those produced in discovery. Defendants then demanded production of the emails in native file format to investigate the discrepancy.
Plaintiffs, under court order, produced ESI related the emails, which Defendants had analyzed by a forensic computer expert. The expert determined that Plaintiffs had deleted emails and replaced them with duplicates that included altered information, and these replacements were produced to Defendants. Defendants filed a Motion for Sanctions based upon the expert’s opinion. Plaintiffs responded with affidavits from staff and from counsel stating that no documents were altered and that they had no knowledge of alteration. At an evidentiary hearing, Plaintiffs’ witnesses testified that they had made no alterations, but that information may have been changed when Plaintiffs migrated their emails to another system. Plaintiffs produced an expert witness who acknowledged that this was a possibility.
The court looked at the issue under the newly revised Rule 37(e) (even though the case was filed before the new rules took effect) because it would not be unjust or impracticable to do so. Under the revised Rule 37(e), a party has a duty to preserve relevant information when the party reasonably anticipates litigation. The court determined that because Defendants were seeking terminating sanctions, clear and convincing evidence was required.
The court found evidence that Plaintiffs altered the emails. Plaintiffs’ expert did not analyze the emails in native format, and Plaintiffs’ alternative theories were unsupported by any evidence. Under the new Rule 37(e), sanctions are appropriate if the offending party acted with intent to deprive another party of information for use in the litigation. The court found that circumstantial evidence led to the conclusion that intent was present. The court ordered that Plaintiffs were not permitted to use their version of the emails and ordered that Plaintiffs pay Defendants’ costs and fees incurred in sorting out the issue.