On February 25, 1998, Century commenced the above-referenced action pursuant to 47 U.S.C. §§ 553 and 605 seeking, inter alia,
damages and injunctive relief against the defendants for their modification, distribution and/or sales of fully descrambling cable television decoders with *178 the intent that they be used to intercept and view Century's scrambled premium and Pay Per View cable television services. On February 26, 1998, the Court entered an Ex Parte
Order to Show Cause for a Temporary Restraining Order, Preliminary Injunction, Expedited Discovery, and Seizure (the “TRO”), which ordered, in pertinent part, that:
TRO at 4 (emphasis added). The TRO also ordered:
[P]laintiffs are granted expedited discovery from defendants, any of their accountants or other agent(s) or person(s) acting on their behalf, which may relate to defendants' decoder modification and/or sales business and the location, nature and amount of defendants' assets, including discovery of all business records, banking records and invoices, including all records stored on computer diskettes or tapes or within computer terminals or otherwise, regarding the purchase, sale, modification, storage and distribution of and payment for cable television devices and related equipment by or from defendants ...
The TRO also provided that the U.S. Marshal Service would execute a seizure at the residences of defendants Carrillo and Elliot López Pina a/k/a Rafael López (“López”). TRO at 7–9. Pursuant to the TRO, the U.S. Marshal Service executed the seizure order simultaneously at the residences of Carrillo and López on February 28, 1998.
At the López residence, investigator Robert Morales, acting on behalf of Century, spoke with López at length and summarized his statements in affidavit form with the intention (expressed to López) that the summary would be signed by López. A copy of the statement (“López St.”), translated into English, is attached to the Affidavit of Robert Morales (“Morales aff.”). López reviewed the López St. and confirmed that it was accurate, but refused to sign it. Morales aff. at par. 18.
In brief, López told Morales that he had brought to Carrillo the cable converter-decoder that had been issued to him by Century. Carrillo then modified it so that it would receive all the premium channels and some pay per view services for which Carrillo charged him $200.00. Morales aff. at pars. 4–7; López St. at pars. 1–5. On another occasion in or around December of 1997, López contacted Carrillo regarding problems he was experiencing with the device modified by Carrillo. Id.
at par. 6. Carrillo then told López that he too was having problems with his cable TV signal, and he indicated that he was concerned that his house was under surveillance. Id.
at par. 6. They agreed to an arrangement whereby Carrillo would come to López's residence to continue his decoder modification business. Id.
at par. 9. According to López, this arrangement was contemplated to last for one month, and at the end of 1997, Carrillo paid López $1,000.00 in cash. Id.
at par. 11.
Carrillo continued to use López's residence for his business through January, 1998, but López denied receiving any additional payments. Id.
at pars. 11–12. López also stated that Carrillo used a laptop computer to conduct his decoder modification business, and used information cards to keep track of his customers. Id.
at pars. 15–16. Approximately 85 of *179 such cards were recovered at López's residence during the seizure.
On March 4, 1998, counsel for the plaintiffs and Carrillo met. José Vázquez, Century's counsel, advised Vilma Dapena, Carrillo's attorney, that her clients were in contempt of the TRO as they had failed to provide certain accountings ordered by it. See
Affidavit of José Vázquez submitted in support of Motion (“Vázquez aff.”) at par. 3. Vázquez also advised Dapena that the plaintiffs had learned (from defendant López) that Carrillo possessed a laptop computer which he used to clone cable television converter decoder electronic keys as well as records which identified those persons for whom he had modified decoders, and that Century wanted Carrillo to surrender such items. Id.
Dapena stated at that time that she was unfamiliar with the case and had not yet discussed it with her client. She therefore requested an adjournment of the scheduled depositions, which was granted.
On March 5, 1998, Dapena sent Vázquez a letter stating her concerns that complying with the disclosure and discovery aspects of the TRO might constitute a waiver of her client's constitutional right against self-incrimination. See
March 5, 1998 letter from Dapena to Vázquez attached as Exhibit “2” to Vázquez aff. The letter did not state that the computer and business records had been destroyed. It must be assumed that if Dapena had authority to assert her client's privilege against self-incrimination, and sufficient knowledge of the facts to make that assertion, that she knew or had been told that the computer and records were in Carrillo's possession.
On March 9, 1998, and prior to the scheduled preliminary injunction hearing, the Court, Vázquez and Dapena met to discuss the outstanding issues. At this time, Dapena indicated that her clients Carrillo and López would consent to the entry of a permanent injunction against them. Vázquez noted that the seizures had not resulted in obtaining certain critical evidence in the case, i.e.,
Carrillo's laptop computer, which was believed to contain decoder modification programs and/or sales records, and Carrillo's customer list or other relevant sales records.
The Court inquired from Dapena whether her clients would turn over such items and appear for their depositions. She indicated that they had not done so due to their concerns that Century would refer the case to prosecutors and that compliance with the TRO would waive their privilege against self-incrimination. In response to the Court's suggestion, Vázquez represented that if the defendants complied with the TRO and produced the laptop and client list, his clients would agree not to refer the matter to prosecutors (although they would cooperate with prosecutors if an investigation or prosecution of the defendants was undertaken).
Vázquez objected to the suggestion that the items be produced on the following day, stating that there was no reason why they could not be produced immediately. He specifically expressed Century's concern that Carrillo would not comply with his attorney's representations or a Court order requiring production of the items. He recommended that an investigator retained by Century accompany Carrillo from the hearing to the location of the laptop and records, so that they could be promptly turned over without fear of destruction or disposal by Carrillo. At the conclusion of this meeting, the parties appeared in Court and Carrillo's counsel represented to the Court that Carrillo would produce the laptop computer, client list and other records at plaintiffs' counsel's office at 9:00 a.m. the following day. As with Dapena's assertions to Vázquez on the prior day, it must be assumed that *180 Dapena had sufficient knowledge of the facts (i.e.,
the existence if not the location of the laptop and business records), to make such an assertion to the Court.
Later, on March 9, 1998, the Court entered the Order Granting Preliminary Injunction (“Preliminary Injunction”).
In pertinent part, it ordered:
[T]he defendants shall, by Thursday, March 10, 1998 at 9:00 a.m., produce at the office of plaintiff's counsel the following:
1. The laptop computer and any other computers, diskettes or computer tapes used by defendants in their decoder modification and sales business, and
2. Any and all other business records as set forth in the TRO, including but not limited to client lists, regarding the defendants' decoder modification business, and
3. Written identification of all of their assets, whether individually or jointly owned by others, and it is further
ORDERED, that defendants' failure to comply with the preceding provisions shall immediately subject them to this Court's contempt power, with the possible contempt sanctions including imprisonment until compliance is completed and monetary sanctions[.]
Preliminary Injunction at 3–4.
On the morning of March 10, 1998, while Vázquez was in court on another matter, two items were dropped off at his office, i.e.,
a list of five names and telephone numbers and a beeper. No letter was included regarding the items to be produced pursuant to the parties' agreement and the Court's order. Consequently, Vázquez sent a letter to Dapena regarding her clients' failure to produce the laptop computer and customer records. The letter also advised her that if the designated items were not produced by 5:30 p.m. that day, Century would be forced to file a civil contempt motion seeking sanctions, including monetary damages and coercive imprisonment.
A copy of Vázquez's March 10, 1998 letter to Dapena is attached as Exhibit “3” to the Vázquez aff. The laptop computer and sales records were never produced.
On March 10, 1998, Dapena sent a letter to Vázquez regarding Century's deposing Carrillo and the possibility of settlement of Century's claims against her clients, a copy of which is attached as Exhibit “4” to the Vázquez aff. Despite the fact that Carrillo's time to produce the computer and records pursuant to the Court's order had expired the prior day, the letter made no mention of them.
On March 12, 1998, defendant Carrillo appeared for his deposition. He again failed to produce any computer equipment or business or customer records. Consequently, Vázquez asked Carrillo what had become of the laptop computer and records. Carrillo replied that he had given them to a relative (whom he would not identify) who had destroyed the computer and burned the records and then deposited the remains of both into a garbage can that subsequently was picked up and emptied into the municipal dump.
During the deposition, the transcript of which is attached as Exhibit “5” to the Vázquez aff. (“Carrillo Tr.”), Vázquez again asked Carrillo where the records relating to the business were located. He replied that he assumed that they were at *181 the municipal dump in San Juan where garbage finally ends up. Carrillo Tr. at 17. Vázquez then asked Carrillo what happened to the records, and Dapena declined to let him answer the question on the basis of his privilege against self-incrimination. Id.
Tr. at 34 [similar sequence regarding the fate of the laptop computer] ). At Dapena's suggestion, Carrillo then testified that the records no longer existed, and that they had been destroyed, and that such records had pertained to his clients. Id.
at 19. When Carrillo was asked in what form the records had been, Dapena again raised his privilege against self-incrimination and declined to permit him to answer. Id.
In light of the sequence of events set forth above, the Court finds that defendant Carrillo willfully and intentionally arranged for the destruction of his laptop computer and business records. There seems to be no dispute that Carrillo was conducting business with his laptop computer up until the time of the seizure (at which time the TRO was served upon him). Then, on March 9, 1998, Dapena represented to this Court that the items would be turned over on the following day. These facts, coupled with Carrillo's subsequent assertion of his privilege against self-incrimination in response to various questions regarding the nature of his records,
leads to the conclusion that such items were destroyed after service of the TRO upon him, if not after the preliminary injunction was issued, in direct violation of such order(s) and for the sole purpose of avoiding production of the computer and records to the plaintiffs in this action.
123In the present case, the Court has found that plaintiffs have proven, by clear and convincing evidence, that defendant Carrillo discarded his laptop computer and his business records in an intentional effort to (i) destroy proof of his liability to Century and (ii) prevent Century from taking steps against his customers to prevent future theft (constituting criminal conduct under 47 U.S.C. §§ 553 and 605) and seek recovery from Carrillo's customers.
The Court also finds that plaintiffs have demonstrated, by clear and convincing evidence, that these actions were undertaken in violation of the TRO, at a minimum, and also very likely the preliminary injunction.
*182 456District courts have inherent power to enforce compliance with their lawful orders, or to provide remedies to plaintiffs for losses sustained as a result of a violation of court orders, through civil contempt. Morales Feliciano v. Hernandez Colon, 697 F.Supp. 26, 34 (D.Puerto Rico 1987). A district court also has the inherent authority to enter sanctions for discovery abuses. Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y.1991); Computer Associates Int'l, Inc. v. American Fundware, Inc., 133 F.R.D. 166, 168 (D.Col.1990) (citing
Roadway Express, Inc. v. Piper, 447 U.S. 752, 765, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980)).
If such abuses are egregious, entry of a default judgment is appropriate. Reebok Intern. Ltd. v. Sebelen, 959 F.Supp. 553, 556–57 (D.P.R.1997); Computer Associates, 133 F.R.D. at 168 (citing
National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (plaintiff's antitrust action dismissed for failure to respond to interrogatories)); *183 Telectron, Inc., 116 F.R.D. at 126–28 (dismissing, as a product of Court's inherent powers and Fed.R.Civ.P. 37, action brought by plaintiff who destroyed documents in response to discovery notice); Carlucci v. Piper Aircraft Corp., 102 F.R.D. 472, 486 (S.D.Fla.1984).
The inherent power of a district court has been reinforced by Fed.R.Civ.P. 37(b)(2), which states, in pertinent part:
If a party ... fails to obey an order to provide or permit discovery ... the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following: ... (C) an order striking out pleadings or parts thereof ... or rendering a judgment by default against the disobedient party.
Computer Associates, 133 F.R.D. at 168; see also
Philips Medical Systems Intern., B.V. v. Bruetman, 982 F.2d 211, 214 (7th Cir.1992) (affirming default judgment entered as sanction for defendant's failure to continue being deposed); Frame v. S–H, Inc., 967 F.2d 194, 203 (5th Cir.1992) (court holds that lower court's striking defendants' answer and entering default judgment pursuant to Fed.R.Civ.P. 37 in response to document destruction and other obstructionist tactics was appropriate and, if subject to any fault, was that it was tardily applied); G–K Properties v. Redevelopment Agency of City of San José, 577 F.2d 645, 647 (9th Cir.1978) (upholding district court's dismissal of case for discovery abuses, and stating “We encourage such orders”).
In Wm T. Thompson Co. v. General Nutrition Corporation, Inc., 593 F.Supp. 1443, 1455–56 (C.D.Cal.1984), the facts of which are analogous to the present case, the court noted that the defendant was subject to sanctions under the court's inherent powers and Fed.R.Civ.P. 37 for knowingly and purposefully permitting its employees to destroy key documents and records. The court determined that striking the defendant's answer and entering a default judgment was appropriate because, similar to the present case, the defendant's destruction of critical documents deprived plaintiff of the evidence it needed to build its case. Id. at 1456. See also
Telectron, Inc., 116 F.R.D. at 130 (“Both more serious—and certainly less remediable—than a party's failure to respond to discovery requests is the willful destruction of discoverable materials. In cases where such destruction has occurred, default judgment has been deemed the only appropriate sanction under Rule 37”).
After concluding that entry of default was the most appropriate sanction, the Wm. T. Thompson Co.
court discussed at length its reasons for concluding that imposing less severe sanctions (such as an order precluding defendants from introducing certain evidence) would be inappropriate because such sanctions either would have the same result, i.e.,
certain victory for the complainant,
or because they might not fully provide redress (in the context of the litigation) to the complainant for the loss of the evidence, or because they would act to reward the contemnor for its misconduct. Id. See also
Reebok Intern., 959 F.Supp. at 557 (“A court is not necessarily required to attempt less severe sanctions before turning to the sanction of dismissal ... nor is a court required to provide an adversary hearing before imposing this sanction”). The Court believes that the reasoning of Wm. T. Thompson
*184 and Reebok Intern.
is applicable to the facts of this case.
In Computer Associates,
the court held that employing default as a sanction was appropriate only if (i) the contemnor acted willfully or in bad faith; (ii) that the complainant was seriously prejudiced by the contemnor's actions; and (iii) that alternative sanctions would not adequately punish the contemnor and deter future discovery violations. Id.
at 169. Analyzing the factors, the court found (i) that the defendant intentionally destroyed evidence after the obligation to preserve it arose and after it had clear notice of that obligation, and concluded that the defendant acted intentionally, (ii) that the destruction of the best evidence relating to the core issue in the case inflicted the ultimate prejudice upon the plaintiff, and (iii) that no alternative sanction would adequately punish the defendant and deter future like-minded litigants. Id.
at 170. See also
Telectron, Inc., 116 F.R.D. at 131 (using same test and reaching same result).
7Applying the Computer Associates
test to the present case, Carrillo was on notice as of the date of the seizure (when he was served with the TRO) of the claims against him and, more importantly, of the TRO's prohibition against the destruction of any records or computers.
Nevertheless, he failed to turn them over to plaintiff in response to a second order specifically directing such production (and again enjoining the destruction of evidence), destroying them instead.
89Clearly, Carrillo willfully and intentionally violated one, if not both, orders of this Court. Apart from having been specifically identified in both orders, the destroyed evidence obviously was crucial to the case, as the laptop computer would furnish crucial evidence of defendants' decoder key modification programs, and the sales records and client list (possibly contained in the laptop or on diskettes or tapes) provide the best, if not sole, basis for quantifying the precise number of violations and the resulting statutory damages to be awarded to Century. See
47 U.S.C. §§ 605(e)(3)(C)(i)(II) and (ii) and 553(b)(3) and (c)(3)(A)(ii) (providing for assessment of statutory damages on a per violation basis). See also
Telectron, 116 F.R.D. at 133 (“[W]hile it is now impossible to determine precisely what or how many documents were destroyed, the bad-faith destruction of a relevant document, by itself, ‘gives rise to a strong inference that production of the document would have been unfavorable to the party responsible for its destruction’ ”) (citing
Coates v. Johnson & Johnson, 756 F.2d 524, 551 (7th Cir.1985)); Nation–Wide Check Corp. v. Forest Hills Distributors, 692 F.2d 214, 217 (1st Cir.1982).
*185 Finally, Carrillo's pattern of contumacious actions, and his evasive, recidivist underlying conduct (see e.g.,
Affidavit of José Marrero dated February 23, 1998 at pars. 3, 23 and 29 [noting Carrillo's evasive business practices and stated knowledge of Century's investigation of him]; Affidavit of Jeffrey Engleman dated February 20, 1988 at pars. 16, 20 [noting change in location of master or mother key device in response to Century's investigation] ) manifests that the sanction of a default judgment is the only sanction which will adequately punish him and deter him and other similarly-inclined litigants. See
Reebok Intern., 959 F.Supp. at 557 (“dismissal may generate a powerful deterrent effect”); Computer Associates, 133 F.R.D. at 170 (“Destruction of evidence cannot be countenanced in a justice system whose goal is to find the truth through honest and orderly production of evidence through established discovery rules. I hold that nothing less than default judgment on the issue of liability will suffice to both punish this defendant and to deter others similarly tempted”); Carlucci, 102 F.R.D. at 489 (“It is not the Court's function to drag a party kicking and screaming through discovery. That is what the defendant required in this case and such conduct must be deterred if the courts are to perform their intended functions”).
10It is customary in civil contempt proceedings for the Court to award to a successful complainant its attorneys' fees and related costs necessary to bring the contemnor's violations to the Court's attention. See e.g.
Time Warner Cable of New York City v. U.S. Cable T.V., Inc., 920 F.Supp. 321, 327 (E.D.N.Y.1996) (citing
Hutto v. Finney, 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978)); In re Hardy, 97 F.3d 1384, 1390 (11th Cir.1996) (noting that attorneys' fees can be awarded pursuant to the Court's inherent contempt powers).
Carrillo has engaged in contumacious bad faith scorched earth defense tactics in a blatant effort to prevent plaintiffs from proving their case against him. Carrillo's disobeying one or more orders entered approximately two weeks apart clearly required Century to undertake the legal research and drafting necessary to bring this contempt motion in order to obtain the relief sought herein. Numerous courts have held that an award of attorneys' fees is appropriate in a case, such as the present case, where a motion was brought either in contempt or pursuant to Fed.R.Civ.P. 37 in order to seek relief for a party's failure to obey discovery orders or destruction of evidence. See
Fed.R.Civ.P. 37(a)(4)(A) and (b)(2)(E). See also
Reebok Intern., 959 F.Supp. at 559; Wm. T. Thompson, 593 F.Supp. at 1456; In re Turner, 142 F.R.D. at 77–78;
Telectron, Inc., 116 F.R.D. at 135, 137.
Pursuant to the foregoing, it is
ORDERED that plaintiffs' motion is hereby GRANTED; and it is further
ORDERED that a default judgment is hereby entered in favor of plaintiffs and against defendant Carrillo pursuant to Fed.R.Civ.P. 37, and plaintiffs are also awarded as against Carrillo their reasonable *186 attorneys' fees and other costs incurred in pursuing the issue of the destroyed evidence and in researching, preparing and filing the Motion, and it is further
ORDERED that within 45 days, plaintiffs will submit to the Court a breakdown of their costs and attorneys' fees incurred in pursuit of the present motion, as well as a breakdown of the damages that stem from defendant Carrillo's illegal scheme to steal Cable TV's signal.