I. BACKGROUND

The Court issued an Order on December 2, 2019, which, among other things, ruled that several actions by Defendants in this case merited sanctions. Dkt. No. [162]. However, the Court found that the briefing then before it was inadequate to determine proper sanctions, so the Court directed Plaintiff to submit a brief more fully addressing appropriate sanctions and allowed Defendants to respond. Id. The parties have now done so. Dkt. Nos. [163, 164].

II. LEGAL STANDARD

The Eleventh Circuit has “long acknowledged the broad discretion of the district court to impose sanctions.” Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). Federal courts possess the inherent power to sanction bad-faith conduct in litigation. See Chambers v. NASCO, Inc., 501 U.S. 32 (1991). “[W]hen rules alone do not provide courts with sufficient authority to protect their integrity and prevent abuses of the judicial process, the inherent power fills the gap.” Peer v. Lewis, 606 F.3d 1306, 1315 (11th Cir. 2010) (quoting Shepherd v. Am. Broadcasting Cos., 62 F.3d 1469, 1474 (D.C. Cir. 1995)). In invoking its inherent power, a court must determine that bad faith exists. Chambers, 501 U.S. at 49-50; In re Sunshine Jr. Stores, Inc., 456 F.3d 1291, 1304 (11th Cir. 2006) (“[T]he key to unlocking a court's inherent power is a finding of bad faith.”). A party demonstrates bad faith by “delaying or disrupting the litigation or by hampering enforcement of a court order.” Chambers, 501 U.S. at 46; In re Sunshine, 456 F.3d at 1304.

“[F]ederal law governs the imposition of spoliation sanctions.” Flury, 427 F.3d at 944. “Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” Graff v. Baja Marine Corp., 310 F. App'x 298, 301 (11th Cir. 2009). “Sanctions for spoliation of evidence are intended ‘to prevent unfair prejudice to litigants and to insure the integrity of the discovery process.’ ” Oil Equipment Co. v. Modern Welding Co., 661 F. App'x 646, 652 (11th Cir. 2016).

To find spoliation, the Court looks at three primary factors: “the extent of prejudice caused by the spoliation (based on the importance of the evidence to the case), whether that prejudice can be cured, and the culpability of the spoliator.” Id. And the Eleventh Circuit has listed five factors relevant to the sanctions question: “(1) whether the defendant was prejudiced as a result of the destruction of evidence; (2) whether the prejudice could be cured; (3) the practical importance of the evidence; (4) whether the plaintiff acted in good or bad faith; and (5) the potential for abuse if expert testimony about the evidence was not excluded.” Flury, 427 F.3d at 945. Possible sanctions include a rebuttable presumption that the lost evidence was unfavorable to the spoliating party, a jury instruction, the exclusion of certain evidence, and default judgment. ML Healthcare Servs., LLC v. Publix Super Markets, Inc., 881 F.3d 1293, 1307–09 (11th Cir. 2018). However, any award of fees and costs should be directly related to the spoliation motion and attributable to the spoliating party's misconduct. Carter v. Butts Cty., 2016 WL 1274557, at *11 (M.D. Ga. Mar. 31, 2016); see also Swofford v. Eslinger, 671 F. Supp. 2d 1274, 1287 (M.D. Fla. 2009) (“[T]he amount of fees and costs awarded may not exceed the costs, expenses, and attorneys' fees reasonably incurred because of the sanctionable conduct.” (quotation omitted and alteration adopted)).

III. DISCUSSION

*2 In its December 5, 2019 Order, the Court required further briefing to determine appropriate sanctions for two of Defendants' discovery failures. Dkt. No. [162]. First, the Court found sanctionable the Bijani Defendants' failure to preserve handwritten sales information for the period from October 27, 2017 to March 19, 2018. Id. at 14–19. And second, the Court found sanctionable the Bijani Defendants' deletion of electronic communications with Shenzhen Kindvast, their Chinese packaging supplier. Id. at 22–28. Plaintiff has proposed specific sanctions for these failures, Dkt. No. [163], and Defendants have responded to Plaintiff's proposal. Dkt. No. [164]. Plaintiff also requests two additional items of relief: (1) that the Court order a forensic IT expert to clone Defendants' computers to search for deleted information and (2) that the Court award Plaintiff attorney's fees tied to its Motion for Sanctions. Dkt. No. [163].

A. Missing Sales Invoices

Plaintiff requests two remedies against Defendants based on the missing sales information from October 27, 2017 to March 19, 2018. Id. at 1–3. First, Plaintiff requests a jury instruction on the missing information modeled on an order by a Florida district court in a similar case: “The jury shall be instructed to infer that the sales invoices for the Bijani Defendants from October 27, 2017 to March 19, 2018 contained information harmful to them in this case.” Id. at 2 (citing Swofford v. Eslinger, 571 F. Supp. 2d 1274 (M.D. Fla. 2009)). And second, Plaintiff requests that it be allowed to present evidence that the sales-mix during the period of missing sales information was the same as the sales-mix of Defendants' cumulative sales. Id. at 2. Plaintiff contends that this is necessary since the missing sales information leaves it blind as to the portion of the gross sales during the relevant period ($666,768.34) that derived from the allegedly infringing products. Id. The extrapolated sales for the relevant period would include four products: Incense, Jumbo-sized Incense, Floor Display, and Air Fresheners. Id. Plaintiff also requests that Defendants not be able to rebut Plaintiff's sales evidence for the relevant period, so long as the cumulative sales of those four products do not exceed the gross sales for the period. Id. at 2–3.

Defendants object to Plaintiff's proposed jury instruction. Dkt No. [164] at 6. They argue that a broad instruction that the “sales invoices ... contained information harmful to them” overcorrects the problem of the missing invoices because it would turn the jury against Defendants when a simpler, narrower instruction would fix the problem. Id. at 6–7. Defendants suggest that they would stipulate that the product-mix during the period of the missing invoices “was substantially the same as in other periods for which invoices were available.” Id. at 7.

The Court agrees with Plaintiff that an adverse jury instruction would be an appropriate remedy, given that the Court found that Defendant Bijani destroyed the sales records in bad faith. United States v. Lanzon, 639 F.3d 1293, 1302 (11th Cir. 2011) (“An ‘adverse inference instruction’ is proper in civil cases where a party has failed to preserve evidence and there is a showing of bad faith in doing so.” (citing Bashir v. Amtrak, 119 F.3d 929, 931 (11th Cir. 1997))). The Court will instruct the jury to view the missing sales records against Defendants. As to the exact wording of the instruction, the Court will address that with the parties at their pretrial conference. And because Defendants agree to stipulate that the product-mix for the period of missing sales records was the same as that during other periods, the Court will allow Plaintiff to introduce evidence that this was true and will instruct the jury accordingly.

B. Missing Communications with Chinese Supplier

For the missing electronic communications with Shenzhen Kindvast, Plaintiff requests sanctions under Federal Rule of Civil Procedure 37(e), which governs the failure to preserve electronically stored information in the anticipation or conduct of litigation. Id. at 3 (citing Fed. R. Civ. P. 37(e)). Plaintiff argues that the Court may order sanctions under either Rule 37(e)(1), which allows the Court to order measures no greater than necessary to cure the prejudice to Plaintiff, or Rule 37(e)(2), which allows the Court to order relief based “upon [a] finding that [a] party acted with the intent to deprive another party of the information's use in litigation.” Plaintiff proposes that the Court give a jury instruction as follows: “The jury shall be instructed to infer that it must presume that the subject missing Shenzhen Kindvast emails (occurring post-litigation commencement) were unfavorable to the Bijani Defendants.” Id. at 5 (citing O'Berry v. Turner, 2016 U.S. Dist. LEXIS 55714, at *10 (M.D. Ga. Apr. 27, 2016)).

*3 Defendants attack Plaintiff's proposed instruction on several grounds. Defendants object to the wording of the instruction, which they call “confusing.” Dkt. No. [164] at 2 n.2. Defendants say that Plaintiff's proposed parenthetical—“(occurring post-litigation commencement)”–should be rewritten to say, “that were dated after the Complaint in this lawsuit was served on April 21, 2017.” Id.

Defendants also argue that the instruction is overbroad for two reasons. First, Defendants argue that the instruction would allow the jury to infer that deleted emails that had nothing to do with the packaging redesign were unfavorable to them. Id. at 2 (“Noorani's proposed instruction pre-supposes in a vacuum that the deleted emails are somehow material herein on the subject of the re-design of AB's packaging ....”). Defendants argue that the Court should tailor its instruction to information in the missing evidence that “is probative on a material issue,” the redesigned packaging. Id. at 3. Second, and relatedly, Defendants argue that the deleted emails cannot pertain to the redesign of the packaging. Id. at 3. This is because the earliest email that Plaintiff subpoenaed from Google was dated November 17, 2017, and Defendants contend that the redesign had already been completed by July 13, 2017 at the latest. Id. at 3–4.

Defendants also argue that “[i]t is also indisputable that all of the available emails to, or from, Kindvast deal with the mundane subjects of ordering, processing and shipping packaging product, none of which is a contested issue in this lawsuit.” Dkt. No. [164] at 6.

The Court finds that an adverse inference instruction is not appropriate in this case. The Eleventh Circuit has discussed when an adverse inference is appropriate under Rule 37(e). See ML Healthcare Servs., LLC v. Publix Super Mkts., Inc., 881 F.3d 1293, 1308 (11th Cir. 2018). The ML Healthcare court held that an adverse inference is only appropriate when a court assesses sanctions under Rule 37(e)(2) because that provision involves a level of culpability akin to bad faith:

Id.

Plaintiff argues that the Court should find that Defendants intentionally deleted the emails and text messages with Shenzhen to deprive Plaintiff of their use in litigation. Dkt. No. [163] at 5 (citing Fed. R. Civ. P. 37(e)(2)). However, in the Court's Order of December 5, 2019, the Court did not find that Defendants deleted the electronic communications to deprive Plaintiff of its use in litigation. Instead, the Court found that the information should have been preserved, that Defendants failed to take reasonable steps to preserve it, that there was nothing to suggest they might recover it, and that Plaintiff would suffer prejudice without the information. Id. at 24–27. The Court therefore assessed sanctions under Rule 37(e)(1), which requires “measures no greater than necessary to cure the prejudice” to Plaintiff. Fed. R. Civ. P. 37(e)(1). Because the Eleventh Circuit has held that an adverse inference instruction “is only available under Rule 37(e)” if the spoliating party intentionally deprived another party of material, ML Healthcare Servs., 881 F.3d at 1308, Plaintiff's request for an instruction under this subsection is not appropriate given this precedent. The Court is concerned, however, that this issue was not raised by the Defendants, and Plaintiff did not have a chance to respond to it. The Court is also concerned that this ruling would leave Plaintiff with no remedy for Defendants' violation of its discovery obligations. To address this situation, the Court is providing Plaintiffs' an opportunity to provide additional briefing on this issue. Plaintiff's supplemental brief on this issue is due within 5 days of the date of this order. Defendants will then be provided 5 days to respond. The Court will then issue a supplement to this order.

C. Seizure and Copying of Defendants' Computers

*4 Plaintiff seeks further relief based on its request for sanctions regarding missing cost-of-goods-sold information. Dkt. No. [163] at 5–6. Plaintiff acknowledges that the Court denied sanctions for this material in its December 5, 2019 Order but notes that the Court warned that it would reconsider its ruling “if Plaintiff uncover[ed] additional information that documents relating to this issue were destroyed after Defendants had notice of this litigation.” Id. at 5 (citing Dkt. No. 162 at 20). Plaintiff requests that the Court allow Plaintiff to “clone” the Bijani Defendants' computers with the aid of a forensic IT expert “to examine if any deleted information may be recovered.” Id. at 5–6.

Defendants resist this proposal. They note that the Court previously denied Plaintiff relief on the cost-of-goods-sold issue. Id. at 7 (citing Dkt. No. [162]). And Defendants oppose a broad search of their computers, which would cover much more of their information than the narrow set of data that Plaintiff seeks. Id.

The Court finds good cause for additional discovery in this case, given Defendants' delays and their failure to produce evidence sought thus far in this case. Plaintiff may obtain the discovery that it seeks at its own cost. However, the Court emphasizes that the procedure for obtaining this discovery must take Defendants' privacy interests into account. To that end, the Court ORDERS Plaintiff to submit to Defendants within 14 days of this Order a written protocol detailing its process for obtaining the information that it seeks. Defendants will then have 5 days to respond to Plaintiff addressing their position on Defendants' protocol. If there are disputes as to the process after the parties confer, the parties are to contact the Court within 5 days after Plaintiff receives Defendants' response. Plaintiff's requested discovery must take place no more than 30 days from the finalization of the protocol.

D. Attorney's Fees

Last, Plaintiff invokes the Court's inherent authority to request attorney's fees in connection with the Court's sanctions order. Dkt. No. [163] at 6 (citing Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). Plaintiff acknowledges that an award of fees must be narrowly tailored to include only fees and expenses tied to the portion of its Motion for Sanctions that the Court granted. Id. Plaintiff requests that the Court order the parties to stipulate an appropriate award of fees and costs, and if they cannot agree, that the Court hold resolve their disagreement. Id. at 6–7.

Defendants argue that fees are not warranted. Dkt. No. [164] at 8. They note that Plaintiff's original Motion for Sanctions was granted-in-part and denied-in-part. Id. And they argue that there should at least be a set-off for the time that Plaintiff spent briefing sanctions that were not granted and for briefing of the product-mix issue, since Defendants have agreed to stipulate to that issue.

The Court finds that an award of fees and expenses to Plaintiff is appropriate, given the Court's imposition of sanctions for Defendants' failure to preserve electronic evidence under Rule 37(e) and their bad-faith destruction of sales evidence. See Chambers, 501 U.S. at 45–46 (“[A] court may assess attorney's fees when a party has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons.’ ” (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258–59 (1975))). The Court ORDERS Plaintiff to submit within 14 days its fees and expenses incurred in obtaining the sanctions discussed here. Plaintiff should tailor its requested fees to those issues that the Court found sanctionable. The Court will allow Defendant 5 days to respond to Plaintiff's submission. If the parties are unable to agree on the amount of attorney fees, the Court will resolve the issue.

IV. CONCLUSION

*5 Based upon the foregoing, Plaintiff's Response Proposing Sanctions [163] is GRANTED in part and DENIED in part. Plaintiff's requested for an instruction on the missing sales records is GRANTED. The Court will determine the appropriate instruction at their pretrial conference.

Plaintiff's requested instruction on the electronic communications with the Chinese supplier is DENIED. The Court is providing Plaintiffs' an opportunity to provide additional briefing on this issue. Plaintiff's supplemental brief on this issue is due within 5 days of the date of this order. Defendants will then be provided 5 days to respond. The Court will then issue a supplement to this order.

Plaintiff's request for additional discovery is GRANTED. The Court ORDERS Plaintiff to submit to Defendants within 14 days of this Order a written protocol detailing its process for obtaining the information that it seeks. Defendants will then have 5 days to respond to Plaintiff addressing their position on Defendants' protocol. If there are disputes as to the process after the parties confer, the parties are to contact the Court within 5 days after Plaintiff receives Defendants' response. Plaintiff's requested discovery must take place no more than 30 days from the finalization of the protocol.

Plaintiff's request for attorney's fees is also GRANTED. The Court ORDERS Plaintiff to submit within 14 days its fees and expenses incurred in obtaining the sanctions discussed here. Plaintiff should tailor its requested fees to those issues that the Court found sanctionable. The Court will allow Defendant 5 days to respond to Plaintiff's submission.

IT IS SO ORDERED this 15th day of April, 2020.