*1 Defendants Horizon Global Americas, Inc. and the AMES Companies, Inc. (“Defendants”) move for sanctions against Plaintiff Cassar Industries, Inc. (“Plaintiff”) for violating this Court's Order (Dkt. 48) and for spoliating evidence. Specifically, Defendants seek an order that (1) precludes Plaintiff from offering or relying upon any information or documents not produced by the September 26, 2019 deadline; (2) requires Plaintiff to produce any documents that it has not produced within seven days; (3) requires Plaintiff to label with a Bates label each document it has produced and to transmit those in a certain format; (4) establishes that Plaintiff engaged in “naked licensing” in which it allowed third parties to use the trademark at issue in any manner; (5) establishes an adverse inference “for all evidence” that Plaintiff “destroyed,” including both at the stage of summary judgment and at trial; (6) provides for an award of attorneys' fees; and (7) provides a warning that any additional violations of the Court's orders will result in future sanctions. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the motion.

BACKGROUND

Plaintiff filed suit on April 19, 2019, alleging that Defendants have infringed Plaintiff's trademark for a “FlexSweep” broom and that they are liable for “false description.” (Dkt. 1.) Plaintiff began selling the FlexSweep broom connector to Defendants in 2008.[1] In 2013, Plaintiff alleges that it registered the trademark “FlexSweep” with the U.S. Patent and Trademark Office. (Id.) Defendants stopped buying the FlexSweep products, but their distributors continued to market Defendants' products as “incorporating FlexSweep connectors.” (Id.) Plaintiff claims that only Plaintiff has a patent for an unbreakable connector and thus that Defendants' false description has harmed Plaintiff. (Id.) Defendants also continued to describe their products as containing a “patented unbreakable connector” even after Defendants stopped buying Plaintiff's products. (Id.) Plaintiff seeks damages and injunctive relief. (Id.) Defendants assert, among other defenses, that Plaintiff lacks standing to assert the claims. (Dkt. 18.)

The discovery deadline for the conclusion of factual discovery in this case was September 13, 2019. (Dkt. 37.)[2] On September 24, 2019, the Court ordered Plaintiff to produce all responsive documents and documents incorporated by reference in responses to interrogatories by September 26, 2019. (Dkt. 48.) Specifically, the Court ordered that Plaintiff produce documents responsive to all requests to which Plaintiffs had agreed to produce some documents but had failed to do so, and the Court ordered that Plaintiff produce documents responsive to certain requests to which Plaintiff objected. (Id.) The Court also allowed Defendants to depose Simon Cassar in his individual capacity and as a corporate representative of Plaintiff after the discovery deadline, given the delay in producing documents. (Id.)

*2 There is no dispute that Plaintiff failed to comply with the Court's order and that Plaintiff produced documents after the Court-ordered deadline. (Dkt. 55-1.) Plaintiff does not present any evidence or argument in response to Defendants' factual contentions about the late production. Plaintiff's only excuse at the hearing for this motion was that its documents were disorganized. Plaintiff produced some documents on September 27, 2019, September 30, 2019, October 1, 2019, and October 15, 2019. (Dkts. 55, 55-1.) The documents that Plaintiff produced were not labeled with any numbers and instead were deposited electronically in a “dropbox” account, but Defendants allege that documents were added and then removed without any notice or explanation to Defendants. (Dkt. 55-1.) Defendants claim that, to this day, they cannot tell when certain documents were produced because Plaintiff did not notify them of the production, did not provide identifying information for the documents, and did not explain why certain documents appeared and then disappeared from the dropbox account. (Dkt. 55.) Plaintiff has no response to Defendants' contention and no explanation for this method of producing discovery. Plaintiff contends that the documents were not numbered because Plaintiff was required to produce electronic files in their “native” format, but there is no explanation for the inability to determine which documents were produced and when they were produced.

In addition, at the deposition of Simon Cassar on October 9, 2019, Plaintiff produced documents that had not been previously produced, and those documents are clearly responsive to document requests that were the subject of the Order requiring Plaintiff to produce responsive documents by September 26, 2019. (Dkt. 55-1.) Plaintiff produced for the first time at his deposition on October 9, 2019, the following:

*3 Cassar also stated at his deposition that he had not looked for some responsive documents, such as license agreements involving use of the trademark at issue with other companies, (Dkt. 60-2 at 105:2-107:2). Those are responsive to Document Request No. 14 (documents regarding “business arrangements[s] involving the FlexSweep Mark or FlexSweep Products, including ... any distributor agreements, licenses, agreements, contracts, deals, memoranda of understanding, assignments, settlements, royalty agreements, or purchase agreements”), and the Court ordered production of these documents. (Dkt. 48.)

At his deposition, Cassar admitted that he had not produced attachments to electronic mail messages that had been produced in response to requests for production. (Dkt. 60-2 at 227:17-228:18 and at 302:3-303:3.) Cassar admitted that he had not produced missing pages of emails that had been produced in response to requests for production. (Dkt. 60-2 at 263:9-264:6.)

At his deposition, Cassar also admitted that had had destroyed “all of the files prior to 2015” at some point in 2018, that he “got rid of” anything more than four years old, and that this destruction occurred either after he had sued Defendants or knew that a lawsuit was likely. (Dkt. 60-2 at 54:5-11, 55:7-21, 58:11-59:7.) This explanation conflicts with Plaintiff's written response, in which Plaintiff stated that “Plaintiff's accounting records were lost in the cloud in 2016.” (Dkt. 46-1.)

Defendants filed this motion on October 21, 2019, for a hearing date of December 2, 2019. (Dkt. 55.) At that time, Defendants requested an opportunity to supplement the briefing because the transcript of Cassar's deposition was not ready. (Id.) Plaintiff filed an opposition on November 19, 2019. (Dkt. 62.) The Court granted the motion to supplement the briefing and ordered that Defendants file their supplemental memorandum no later than October 30, 2019, and that Plaintiff file its response no later than November 12, 2019. (Dkt. 58.) That order stated: “The Court will not grant any additional extensions and will not allow any further briefing on this matter before the December 2, 2019, hearing.” Despite this clear deadline and admonition, Plaintiff submitted its response, with a declaration of Plaintiff's counsel, on November 21, 2019 – eight days late. Plaintiff did not seek leave to file a later brief and did not provide any reason for the late response. Given that the response was late, the Court STRIKES Plaintiff's “Memorandum of Points and Authorities in Opposition to Motion for Sanctions” (Dkt. 64) and the related Declaration of James Eschen in Opposition to Motion for Sanctions” filed on November 21, 2019.[4] Plaintiff's counsel did not appear in person for the hearing for this motion because of alleged confusion about the time of the hearing; the Court allowed Plaintiff's counsel to appear via telephone even though no prior permission had been sought.

ANALYSIS

A. Spoliation of Evidence.

When a party in litigation destroys evidence or fails to preserve evidence, a court may impose sanctions pursuant to both the inherent power of the court and Federal Rule of Civil Procedure 37. Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006). The Court may issue sanctions where:

*4 Clear-View Techs., Inc. v. Rasnick, 2015 WL 2251005 at *7 (N.D. Cal. May 13, 2015) (citations omitted). Here, although it is clear that Plaintiff destroyed documents when it had an obligation to preserve them and that the destroyed documents were potentially relevant, there is no evidence at this time that Plaintiff had a “culpable state of mind.” Thus, the Court will not order sanctions at this time based on spoliation of evidence. The Court notes that the conflicting explanations between Plaintiff's written responses (losing documents “in the cloud” in 2016) vs. the position Cassar took in his deposition (2018 disposal of documents going back four years) point to dishonesty. The Court will allow Defendants to further depose Cassar on the issue of destruction of documents and the state of his mind. Defendants may later renew the motion for spoliation of evidence and seek all appropriate remedies, including dismissal of the case, if they obtain information that supports that prong of the analysis.

B. Violation of Court Order under Federal Rule of Civil Procedure 37.

The Court considers the violations of the Court's orders under a different standard under Federal Rule of Civil Procedure 37 than that applied to spoliation. Where a party fails to obey an order to provide or permit discovery, the court may make an order to strike pleadings or parts thereof, stay further proceedings until the order is obeyed, dismiss the action or proceeding or any part thereof, or render judgment by default against disobedient party. Fed. R. Civ. P. 37(b)(2)(C). Under Federal Rule of Civil Procedure 37(b), a court may impose sanctions, including default, for failing to comply with a court order. Dreith v. Nu Image, Inc., 648 F.3d 779, 786 (9th Cir. 2011).

There is no dispute here that Plaintiff violated the Court's order (Dkt. 48) by failing to produce documents by the deadline set forth, by failing to produce some documents altogether, and by failing to search for documents that the Court ordered Plaintiff to produce.

Plaintiff argues that Defendants did not suffer prejudice because Plaintiff eventually produced the documents. There is a rebuttable presumption that unreasonable delay caused prejudice. In re Phenylpropanolamine (PPA) Products Liability Litig., 460 F.3d 1217, 1227-28 (9th Cir. 2006). The party opposing a motion for sanctions can rebut the presumption by proffering “an excuse for delay that, if anything but frivolous, shifts the burden of production” to the moving party “to show at least some actual prejudice.” Id. at 1228 (internal citation and quotation omitted). If the moving party does so, the responding party “must persuade the court that the claims of prejudice are illusory or relatively insignificant in light of his excuse.” Id. (internal citation and quotation omitted). Prejudice may be shown by reference to the “costs or burdens of litigation.” Id. (internal citation omitted). A party “suffers prejudice” if the responding party's actions impair the moving party's “ability to go to trial or threaten to interfere with the rightful decision of the case.” Adriana International Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir. 1990); In re PPA, 460 F.3d at 1227. “Failing to produce documents as ordered is considered sufficient prejudice” for dismissal as a sanction. In re PPA, 460 F.3d at 1227 (internal citation omitted). Prejudice and the excuse for violation of a Court's order are linked: “[w]hether prejudice is sufficient to support an order of dismissal is in part judged with reference to the strength” of the responding party's “excuse for the default.” Malone v. U.S. Postal Service, 833 F.2d 128, 131 (9th Cir. 1987) (noting that district court found that lack of financial resources to comply with Court's order was not sufficient to excuse violation of Court's order).

Plaintiff does not overcome the rebuttable presumption of prejudice. Plaintiff offers no reason for the violation of the Court's order other than disorganization. This is a frivolous excuse. Even if Plaintiff had offered a legitimate excuse, the undisputed facts show that Defendants have suffered actual prejudice. Because Plaintiff produced many key documents at Cassar's deposition or even after his deposition, Defendants were not able to question Cassar effectively or at all at his deposition. Defendants were not able to review Plaintiff's calculations of damages before the expert reports were due on September 27, 2019. In this situation, Defendants suffered actual prejudice. Defendants have suffered prejudice also because Plaintiff has yet to produce some of the missing pages of electronic mail messages and attachments. Plaintiff has no explanation for the missing pages and attachments. No remedy by the Court nor Plaintiff can cure prejudice caused by this failure to produce documents. Finally, Plaintiff did not even search for some responsive documents, such as license agreements with third parties, and again, the complete failure to search for documents hampers Defendants' ability to defend this case.

*5 Plaintiff's behavior in this action and its violations of the Court's order are outrageous. Plaintiff's methods of maintaining documents, searching for documents in response to requests, producing documents, and Plaintiff's general adherence to the Court's orders has been abysmal.

C. Remedies.

Although dismissal of the entire suit is an option that the Court can consider, the Court will not do so at this point. “The sanction of dismissal should be imposed only in extreme circumstances” and then only after a court considers “less drastic” alternatives. U.S. v. National Medical Enterprises, Inc., 792 F.2d 906, 912 (9th Cir. 1986). The decision regarding what sanctions to impose under Rule 37(b) rests within the “sound discretion” of the court. Potlach Corp. v. United States, 679 F.2d 153, 157 (9th Cir. 2002). Though, as noted at oral argument, the Court considers the Plaintiff's conduct close to the type of willful, bad faith behavior that ordinarily justifies dismissal, the Court will provide Plaintiff with a final opportunity to remedy the problems, with minimal inconvenience and minimal expense to Defendants.

The Court ORDERS the following:

The Court warns Plaintiff that further violations of the Court's orders will result in further sanctions, including and up to dismissal of the suit.

IT IS SO ORDERED.

Dated: December 2, 2019