The recent decision in Abbott Labs. V. Adelphia Supply USA, 2020 U.S. Dist. LEXIS 50928 (E.D.N.Y. March 24, 2020), has the legal world buzzing. This is a trademark case alleging infringement by the sale of generic diabetes test strips. The attention appears to be justified and litigants and lawyers should take notice of the actions and problems that led to the Court’s decision in the case.
In response to a motion for case-ending sanctions, the Court entered a default judgment against one of the parties (H&H Defendant parties) for their flagrant violations of the discovery process. What did they do, or not do?
First, the H&H Defendant parties made false representations to the Court about the number of responsive documents it had found and possessed. They initially told the Court that there were 6,000 responsive documents (communications and documents related to sales of test strips for a certain year). The Court relied upon this representation and ordered the H&H parties to produce documents only from 2014. Purportedly in compliance with the Court’s order, the H&H parties only produced just over 300 responsive documents. The Abbott parties raised concerns with the volume of this production in light of the representation that 6,000 responsive documents existed.
The Court allowed the Abbott parties to secure a copy of the H&H Defendant parties’ servers. Using the servers, the Abbott parties discovered that the H&H parties had not been truthful with the Court regarding the number of responsive records it possessed. In response, the H&H parties produced a second set of document numbering nearly 3,600. This was far more than the H&H parties had produced in the first place, but far fewer than the number they had represented to the Court initially (6,000).
The Court found H&H’s “wholly unsubstantiated serial explanations” of why they had “materially misrepresented the number of responsive documents/pages to the Court” unpersuasive and highly problematic. [*13] Take away: be honest, forthright, and accurate in all representations to the Court. Take the steps necessary to discover accurate information prior to presenting it to the Court.
The next problem for the H&H parties involved the search terms they used. [*14] The search terms, which the H&H parties designed, did not capture or locate but a few of the documents the Court ordered them to produce. The Court found that the H&H parties had intentionally designed the search terms to fail to capture certain documents or records they did not want produced. Take away: utilize legal and computer professionals to design and conduct searches for responsive documents.
The H&H parties also withheld documents that were sent by, received by, or involved their principals. [*14] Additionally, they did not produce any records from a foreign company through which the bulk of the subject sales occurred. Finally, the Court found that the Rule 30(b)(6) witness of the H&H parties perjured himself by providing false testimony. [*15]
Based upon this conduct, the Court concluded that the discovery deficiencies of the H&H parties were willful (intentional). The Court found that the conduct amounted to “deliberate tactical intransigence” and that the H&H parties had “calculatedly attempted to manipulate the judicial process.” [*15] The misconduct by the H&H parties “was not an isolated instance of perjury or one withheld document, [but] . . . a calculated pattern of pervasive misconduct that started early on and continued even after [the H&H parties] were caught red handed.” [*15-*16] Based on this record of egregious and dishonest conduct by the H&H parties, the Court granted the motion for sanctions and entered a default judgment against the H&H parties.
This case should serve as a caution and reminder to all litigants and attorneys that dishonesty and fraud will never be tolerated by a court.
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