Case Law: Daynight, LLC v. Mobilight, Inc

Court Affirms Default Judgment Sanction for Bad Faith Spoliation of ESI

Daynight, LLC v. Mobilight, Inc., 2011 WL 241084 (Utah App. Jan. 27, 2011). In this intellectual property dispute, the plaintiff and third-party defendants appealed the district court’s decision to grant default judgment as a sanction for ESI spoliation. Rejecting the argument that the sanction was excessive and unduly harsh, the court noted that Rule 37(g) of the Utah Rules of Civil Procedure concerns discovery violations greater than simple discovery abuse (as opposed to Rule 37(b)(2)) and “does not require a finding of ‘willfulness, bad faith, fault or persistent dilatory tactics’ or the violation of court orders before a court may sanction a party.” Moreover, the court noted that even if such culpability was required, the appellants willfully and in bad faith destroyed ESI, as evidenced by a video wherein the appellants’ employees spoke of their destruction of potentially harmful evidence. In addition, the employees committed such actions as “throwing the laptop off a building; running over the laptop with a vehicle; and stating ‘[If] this gets us into trouble, I hope we’re prison buddies.’” Finding this behavior demonstrated bad faith and a general disregard for the judicial process, the court affirmed the default judgment and award of attorneys’ fees and costs.

Commentary

As this case demonstrates, the imposition of severe sanctions is not limited to the federal courtroom. In this state court decision, the Court of Appeals of Utah relied on the Utah Rules of Civil Procedure in determining that the appellants’ behavior and intent – which was well documented thanks to a video recording – deserved the harsh sanction of a default judgment, in addition to an award of attorneys’ fees and costs. Although the federal circuits differ in terms of requirements for culpability, etc. when deciding to impose sanctions, it is a rather safe assumption that when party willfully and in bad faith destroys ESI, sanctions will follow – whether in a federal court or in one of the numerous state courts that possess rules regarding electronically stored information.

In terms of state courts rules, as of November 2010, 30 states now have some version of ediscovery civil procedure rules. Oklahoma, which amended its Code of Civil Procedure in November, is similar to many states which have adopted amendments that are largely analogous to the Federal Rules of Civil Procedure. However, Oklahoma did not include a provision for a mandatory meet and confer conference. Other states have followed the “Texas Model”. These states include Texas, Idaho and Mississippi. Many other states are in the process of considering amendments, while some states are taking the “best action is inaction” approach. One such state – Connecticut – has continued to apply existing rules and law to address ediscovery issues.

Given the wide variety of rules, interpretations and applications surrounding ediscovery issues, litigators must stay abreast of legislative and judicial developments. Education is absolutely key and practitioners should take advantage of the numerous resources provided by their trusted expert.