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The Katiroll Company, Inc v. Kati Roll and Platters

August 3, 2011

THE KATIROLL COMPANY, INC., PLAINTIFF,
v.
KATI ROLL AND PLATTERS, INC. AND NIRAJ JIVANI,
DEFENDANTS.



The opinion of the court was delivered by: Brown, Chief Judge

NOT FOR PUBLICATION

MEMORANDUM OPINION

This matter comes before the Court on a motion by Plaintiff for spoliation sanctions and to compel discovery (Doc. No. 108). The Court has considered the parties' submissions and decided the motion without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, that motion is denied in part and granted in part.

I. BACKGROUND

This is a trademark infringement case involving two restaurants that sell a similar type of food called katirolls. Plaintiff originally brought this action on March 3, 2010, in the Southern District of New York alleging, among other things, infringement of their distinctive trade dress. (Compl.; Doc. No. 1). The Southern District of New York transferred the case to New Jersey based on a lack of personal jurisdiction. (Memorandum Order dated July 9, 2010; Doc. No. 31).

Shortly after the transfer, this Court granted a motion for a preliminary injunction after a two-day evidentiary hearing. After setting forth its findings of fact and conclusions of law, this Court found that Plaintiff was entitled to a preliminary injunction on its trade dress claims but found that it had not carried its burden on infringement of the trademark. (Doc. Nos. 72, 73).

This motion focuses on the discovery positions of the parties. Particularly, this motion focuses on whether Defendants' fact discovery has been late forthcoming and whether Defendants purposely and deliberately destroyed important discoverable information. Fact discovery in this case is ongoing and does not close until September 30, 2011. (Doc. No. 110).

II. SPOILATION SANCTIONS AND MOTION TO COMPEL

A. Standard of Review

Parties to litigation often are required to preserve litigation evidence. This duty "arises when the party in possession of the evidence knows that litigation by the party seeking the evidence is pending or probable and the party in possession of the evidence can foresee the harm or prejudice that would be caused to the party seeking the evidence if the evidence were to be discarded." Kounelis v. Sherrer, 529 F. Supp. 2d 503, 518 (D.N.J. 2008). If the party does not so preserve the evidence, they are said to have spoliated that evidence, which can give rise to sanctions. "In determining whether spoliation sanctions are appropriate, the two key considerations are the 'degree of fault of the party who altered or destroyed the evidence' and 'the degree of prejudice suffered by the opposing party.'" Id. (quoting Schmidt v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)).

Sanctions for spoliation include: "dismissal of a claim or granting judgment in favor of a prejudiced party; suppression of evidence; an adverse inference, referred to as the spoliation inference; fines; and attorneys' fees and costs." Id. A spoliation inference is the mildest sanction and "permits a jury to draw an adverse inference that the spoliated evidence might or would have been unfavorable to the position of the offending party." Veloso v. Western Bedding Supply Co., Inc.,281 F.Supp.2d 743, 746 (D.N.J. 2003) (internal quotation marks omitted). To qualify for a spoliation inference, the movant must show at least four things: "First, it is essential that the evidence in question be within the party's control. Second, it must appear that there has been actual suppression or withholding of the evidence. Third, the evidence destroyed or withheld was relevant to claims or defenses. And fourth, it was reasonably foreseeable that the evidence would later be discoverable." Mosaid Tech., Inc. v. Samsung Elec. Co., Ltd., 348 F.Supp.2d 332, 336 (D.N.J. 2004).

There is a split in this district's jurisprudence as to the fault required to support the second factor -- the suppression or withholding of the evidence. Some courts have required that spoliation to be the result of intentional conduct before giving an adverse inference instruction. Veloso v. Western Bedding Supply Co., 281 F.Supp.2d, 743, 746-49 (D.N.J. 2003); Costello v. City of Brigantine, No. 99-4072, 2001 WL 732402, at *26 (D.N.J. Jun. 28, 2001). Others have held that the inference is justified where the party possessing the evidence destroyed it negligently. Kounelis, 529 F. Supp. 2d at 518 (appropriate where either negligently or intentionally destroyed, but balancing the degree of fault with the prejudice produced); Mosaid Techn., Inc. v. Samsung, 348 F.Supp.2d 332, 337-38 (D.N.J. 2004); Scott v. IBM Corp., 196 F.R.D. 233, 249 (D.N.J. 2000) (finding that spoliations might be appropriate where there was nothing to indicate documents were intentionally destroyed).

This Court concludes that the best rule is to use the amount of prejudice to the opposing party to help to determine the degree of fault required: Where there is substantial prejudice to the opposing party, negligence may be sufficient to warrant a spoliation inference. Where there is minimal prejudice to the opposing party, intentional conduct is required.

B. Application

The Plaintiff complains to this Court about a series of discovery abuses that allegedly require a spoliation inference. However, the Court concludes in its discretion that, as to some conduct, the prejudice to Plaintiff of the alleged destruction of evidence is minimal and that it was partially at fault. Thus, no spoliation inference is appropriate. In other instances, the Court lacks sufficient information to make a determination but is troubled by aspects of Defendants' failed disclosures. While the Court finds it is premature to enter a spoliation inference in these instances, the Court is open to spoliation sanctions in the future and grants the motion to compel in some instances. In still other instances, the Court determines that a spoliation instruction is warranted.

1. The Appearance of the Restaurant

This Court's February 1, 2011 order gave Defendants twenty days to change the infringing color of the restaurant from orange to another color. (Doc. No. 73). Thereafter, Defendants' counsel agreed that Defendants would leave the restaurant in its current condition until February 4, 2011, so that Plaintiff could take video and pictures of the restaurant in its infringing form. However, Plaintiff complains that the Defendants painted a few test patches of new colors on the wall prior to the pictures. (Pl.'s Br. at 11).

There is little question that the change in the appearance of the restaurant fits the first, third and fourth criterion for the spoliation instruction: the appearance was within the Defendants' control, it was ultimately changed before evidence could be taken, and Defendants knew that Plaintiff wanted to take pictures of the restaurant. The only real question is about the intentionality of the conduct and the prejudice to the Plaintiff.

Plaintiff has suffered little prejudice from this action, and Defendants are minimally at fault for the issue. See Kounelis, 529 F. Supp. 2d at 519. First, Plaintiff has suffered minimal if any prejudice. Defendants' counsel represented that the test patches of a gold color were 2 feet by 1 foot, and were small compared to the size of the restaurant; Plaintiff has submitted no evidence to contradict this. As such, the jury will not have difficulty imagining the entire restaurant was orange rather than orange with two small test patches of gold on either the video or the pictures taken on the day of inspection. This is particularly true in light of Plaintiff's prior assertion before this Court that Mr. Jivani's use of gold is so similar to orange that for certain lightings and on certain computer screens, it will appear as orange. Further, Plaintiff is in possession of pictures of the restaurant prior to the change, so the evidence is somewhat cumulative. (Dolich Decl. at Ex. E).

Second, while Mr. Jivani was at fault for painting prior to the video and pictures, such fault was minimal because the painting was undertaken to comply with this Court's preliminary injunction order. Such conduct was not intentional. Thus, the fault and prejudice do not weigh in favor of a spoliation sanction and the Court will not order one.

After Plaintiff realized that Mr. Jivani had painted the test patches, Plaintiff requested the security surveillance video taken prior to the repainting, which the Defendants agreed to provide. Defendants claim that they were unable to save the video but cite no support for that statement. (Defs.' Br. at 11). As the Court acknowledged above, there is minimal prejudice to Plaintiff because the video that Plaintiff could have taken during the inspection would have been sufficient. However, the Court is not satisfied with Defendants' explanation and finds it highly suspect. Indeed, after having represented that they had the video, Defendants somewhat lamely state that they were unable to save the video. (Id.). As such, the Court orders Defendants to provide it with a full, sworn explanation of what happened to the ...


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