Sabinsa Corp. v. HerbaKraft, Inc.
Sabinsa Corp. v. HerbaKraft, Inc.
2018 WL 11510663 (D.N.J. 2018)
December 17, 2018
Williams, Karen M., United States Magistrate Judge
Summary
The Court found that Prakruti had spoliated evidence by destroying two sets of samples, withholding information about several sets of undisclosed samples, and making numerous misrepresentations. The Court also found that Prakruti had attempted to suppress or withhold evidence from discovery by imposing a date restriction on ESI searches. As a result, the Court ordered sanctions for Prakruti's spoliation of evidence and failure to comply with the Court's Order, including an award of attorney's fees and costs for the spoliation of evidence, as well as sanctions of attorney's fees and costs and a forensic audit for Prakruti's failure to produce Prakruti Foods discovery.
Additional Decisions
SABINSA CORPORATION, Plaintiff,
v.
HERBAKRAFT, INC. and Prakruti Products Pvt. Ltd., Defendants
v.
HERBAKRAFT, INC. and Prakruti Products Pvt. Ltd., Defendants
Civil No. 14-4738-RBK-KMW
United States District Court, D. New Jersey, Camden Vicinage
Filed December 17, 2018
Counsel
Sean R. Kelly, Katherine Ann Escanlar, Saiber, LLC, Florham Park, NJ, for Plaintiff.Patricia M. Love, Hendricks & Hendricks, New Brunswick, NJ, for Defendants Herbakraft, Inc.
Gregory Albert Krauss, Davidson Berquist Jackson & Gowdey LLP, McLean, VA, Jason B. Lattimore, Law Office Of Jason B. Lattimore, Esq., Morristown, NJ, for Defendants Prakruti Products Pvt. Ltd.
Williams, Karen M., United States Magistrate Judge
ORDER
*1 THIS MATTER comes before the Court by way of motion of Plaintiff, Sabinsa Corporation (“Sabinsa”), seeking an adverse inference against Defendant, Prakruti Products Pvt. Ltd. (“Prakruti”), for Prakruti's alleged spoliation of evidence. [Dkt. No. 141]. Also before the Court are Sabinsa's motions seeking sanctions against Prakruti, including an adverse inference and a forensic audit, for allegedly violating the Court's order and withholding discovery. [Dkt. Nos. 161 and 182]. Sabinsa also seeks an award of reasonable attorney's fees and costs incurred due to Prakruti's alleged discovery misconduct. [Dkt. Nos. 141 and 161]. Prakruti opposes the motions. The Court has considered the motions pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Sabinsa's motions are granted in part and denied in part.
I. Background
The long history of this matter is well known to the Court and the parties. The Court will, therefore, include only the information relevant to the instant motions. Nevertheless, the detailed discussion herein is necessary to justify the sanctions to be imposed and to deter similar objectionable conduct.
Plaintiff Sabinsa is a New Jersey Corporation and Defendant Prakruti is an Indian Corporation. Amended Complaint [Dkt. No. 11], at 2, ¶¶ 1-3. Sabinsa initiated this case in 2014, filing a complaint against Prakruti for patent infringement, alleging 17 claims relating to curcuminoids—components found in turmeric rhizomes. Complaint [Dkt. No. 1]. Sabinsa claimed that Prakruti manufactured and sold Curcuma longa (Turmeric) products that infringed upon U.S. Pat. No. 5,861,415 (“the ’415 Patent”). Id.
Because this is a patent infringement case that requires the testing of non-expired Prakruti-manufactured products to prove infringement,[1] Sabinsa requested discovery of product samples from Prakruti for independent testing. Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 5, ¶ 19. Specifically, on October 24, 2014, Sabinsa sent Prakruti's then current counsel, Fox Rothschild LLP,[2] a letter identifying preservation concerns. Id.
Thereafter, the parties reached a settlement, and on January 7, 2015, the parties executed a Settlement Agreement (“Settlement Agreement”). Settlement Agreement [Dkt. No. 39-2], Exhibit A. The Settlement Agreement dictates “Sabinsa would not sue Prakruti for any sales of the Accused Products before the Settlement Agreement execution date in exchange for which Prakruti would sell only to Sabinsa any of its Accused Products until after the patent's expiration.” June 27, 2017 Opinion Reopening Action [Dkt. No. 75], at 2. The Settlement Agreement defines Accused Product(s) as “any products derived from the Curcuma longa plant that contains curcuminoid compositions/products as enabled, described and claimed in the ’415 Patent, including such Curcuma longa (Turmeric) product offered for sale by Prakruti.” Id.
*2 On October 28, 2016, Sabinsa filed a Motion to Reopen Action and Enforce Settlement, alleging that Prakruti had breached the Settlement Agreement by selling over 5,000 kilograms of Accused Products to third parties. Id. Then, on June 27, 2017, the Hon. Robert B. Kugler, U.S.D.J. issued an order reopening the case “for the purpose of conducting limited discovery to determine if defendants have breached the Settlement Agreement.” June 27, 2017 Order [Dkt. No. 76]. Judge Kugler also issued an opinion, holding that:
what is needed is a demonstration of: (1) how Prakruti Current Product sold to third parties specifically compares with prong 2 of the Accused Product definition, as intended by the parties at the execution of the Agreement; (2) how Prakruti's Current Product falls within or outside of the Accused Product definition, again intended by the parties at the time of the execution of the Agreement; and (3) how the limited discovery granted herein has achieved this demonstration.
June 27, 2017 Opinion Reopening Action [Dkt. No. 75], at 4. Thus the Court reopened the case for the limited purpose of (1) obtaining discovery concerning the products allegedly sold by Prakruti to third parties and (2) determining whether those products constituted “Accused Product” under the terms of the Settlement.
Simply put, the ensuing discovery process has been nothing short of acrimonious. Ultimately, the parties’ disputes regarding Sabinsa's production requests for samples of Prakruti's Curcuma longa (Turmeric) product for testing and for information about Prakruti's post-Settlement product sales resulted in the instant motions. The facts concerning these disputes are divided into two sections: first, the facts surrounding Sabinsa's spoliation motion, which concerns Sabinsa's production requests for samples, and second, the facts concerning Sabinsa's motion for sanctions, which concerns Sabinsa's production requests for information about product sales.
A. Facts Concerning Sabinsa's Spoliation Motion: Prakruti's False Statements Regarding Product Samples and the Subsequent Destruction and Expiration of the Samples
Prakruti represented to the Court and to Sabinsa that Prakruti enacted a litigation hold to preserve evidence on September 9, 2016. December 15, 2017 Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 142-12], at 2 ¶¶ 9-10. At the time of the litigation hold, Prakruti had in its possession and/or control the following curcumin product samples:
Sample Batch No.
Expiration Date
PP/CUR/1605004
April 2018
PP/ORG/CUR/1604001
March 2018
PP/CUR/1511003
October 2017
PP/ORG/CUR/1511001
October 2017
PP/ORG/CUR/1507001
June 2017
PP/ORG/CUR/1607001
Not presented
PP/CUR/1601001
December 2017
PP/CUR/1510005
September 2017
PP/CUR/1510002
September 2017
PP/ORG/CUR/1601001
December 2017
Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 5.
In November 2016, just weeks after Sabinsa filed its motion to reopen the case, Prakruti sent samples of its curcumin product to Prakruti's then current counsel, Amin Talati Upadhye LLP (“Amin Talati”). August 30, 2018 Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 195], at 2 ¶¶ 3-5. Specifically, Prakruti sent PP/CUR/1601001, PP/CUR/1510005, and PP/CUR/1510002 (“the first set of missing samples”), as well as PP/CUR/1605004, PP/ORG/CUR/1604001, and PP/ORG/CUR/1601001 (“the second set of missing samples”), to Brent Batzer, Esquire (“Batzer”). Id. Batzer kept the first set of missing samples in his office, and the second set of missing samples was sent to Eurofins, a global testing laboratory company, for testing.[3] Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 13 ¶ 43.
*3 Discovery was reopened on June 27, 2017. Order Reopening Discovery [Dkt. No. 76]. Thereafter, and prior to the samples’ expirations dates, Sabinsa made multiple requests for Prakruti to produce samples of Prakruti-manufactured curcumin products for independent testing, including production requests filed on December 12, 2016; June 30, 2017; July 7, 2017; and a July 28, 2017 interrogatory requesting Prakruti to “[i]dentify each and every sample of any Accused Product ... in the possession, custody, or control of Prakruti.” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 5-8 ¶¶ 20-27.
In response, Prakruti made multiple representations and promises to Sabinsa and to the Court that Prakruti would produce all samples and if any were withheld, then those samples would still be disclosed. Specifically, on August 2, 2017, Prakruti, through its then counsel, Amin Talati, agreed to “produce any responsive, non-expired samples in its possession, custody, or control,” but objected to producing “samples [that] are past their expiration or ‘best buy’ date as out-of-date samples are not relevant and need not be produced.” Id. at 6 ¶ 22. Six days later, counsel for Prakruti stated “Prakruti will determine if it has any expired samples,” and if Prakruti “intends to withhold any samples, it will disclose this to Sabinsa and provide an explanation for withholding the expired sample(s).” Id. at 6 ¶ 23. Prakruti's counsel emphasized this position again on August 18, 2017, and represented that “if any samples are withheld, this will be disclosed, as would be required under the Rules.” Id. at 6-7 ¶ 23. Then, on September 6, 2017, Prakruti's current counsel, Davidson Berquist, again asserted this position, stating, “if Prakruti withholds any samples on the basis that they are expired, we will provide information on those expired samples. Because Prakruti has not at this point withheld samples on that basis, the issue is not ripe.” Id. at 7 ¶ 23.
On September 13, 2017, Prakruti, through its counsel Davidson Berquist, responded to Sabinsa's interrogatories, identifying five samples. Prakruti's Response to Sabinsa's Interrogatories [Dkt. No. 142-8], at 3-4. The five samples identified correspond to batch numbers PP/CUR/1605004; PP/ORG/CUR/1604001; PP/CUR/1511003; PP/ORG/CUR/1511001; and PP/ORG/CUR/1507001 (this sample has an expiration date of June 2017, and was therefore expired when produced), (collectively “the five disclosed samples”). Id. Prakruti claimed that these five samples constituted “all samples of Curcuma longa (turmeric) product in its possession, custody, or control.” Id. at 3.
Then, a day later, on September 14, 2017, at a time when Prakruti was represented by both Davidson Berquist and Amin Talati, Prakruti “agreed to withdraw its objection concerning expired samples and to produce all responsive samples in its possession, custody, or control.” Sabinsa's September 15, 2017 Letter [Dkt. No. 142-7], at 3-4, n.4. Importantly, Amin Talati was aware of these facts as Sabinsa specifically served Amin Talati with a letter dated September 15, 2017 detailing Prakruti's September 14, 2017 representation. Id. at 4. Sabinsa's September 15, 2017 letter also emphasized that “[r]ecognizing that sample expiration could be an issue, Sabinsa served its discovery request just three days after the opening of fact discovery ... please produce the responsive samples immediately.” Id. at 3-4. Then, effective September 20, 2017, Amin Talati withdrew as counsel on the basis that “Prakruti has refused to follow the advice rendered by Counsel, and insists on taking action with which Counsel has a fundamental disagreement.” Amin Talati's Brief in Support of Motion of Counsel for Leave to Withdraw Appearances [Dkt. No. 86-1] at 1.
*4 On September 22, 2017, Prakruti produced the five disclosed samples. September 22, 2017 Email [Dkt. No. 148-6]. However, based on Prakruti's initial document production, Sabinsa believed that Prakruti had in fact made many additional production batches beyond the five disclosed samples, and on October 27, 2017, Sabinsa asked Prakruti to identify what happened to these missing samples. Sabinsa's October 27, 2017 Letter [Dkt. No. 142-9]. Prakruti responded in a letter dated November 3, 2017, asserting, “Prakruti is not withholding any samples, expired or otherwise ... [and] Prakruti has not destroyed any samples.” Prakruti's November 3, 2017 Letter [Dkt. No. 142-10], at 1.
In a letter dated November 14, 2017, Prakruti represented to the Court that it had produced “every requested sample in Prakruti's possession, custody, or control, manufactured prior to the ’415 patent’s expiration.’ ” Prakruti's November 14, 2017 Letter [Dkt. No. 107], at 4. Prakruti then repeated this representation again to the Court in a letter dated December 4, 2017. Prakruti's December 4, 2017 Letter [Dkt. No. 118], at 4. Specifically, Prakruti represented to the Court that:
Sabinsa continues to claim that Prakruti has spoiled samples of its products. But that is not the case. As noted in Prakruti's November 14 letter to Your Honor, Prakruti produced five separate 10 gram samples on September 22, which represents every requested sample in Prakruti's possession, custody, or control, manufactured prior to the ’415 patent’s expiration.
Prakruti also attempted to support its position with a November 17, 2017 verification of H.N. Shivaprasad, Ph.D., the Director of Technical & Marketing for Prakruti. Verification of H.N. Shivaprasad, Ph.D. [Dkt. No. 141-7]. Dr. Shivaprasad asserted that Prakruti's interrogatory responses were “true to the best of Prakruti's knowledge, information, and belief after a reasonable inquiry.” Id. There was, however, no mention as to what investigation Dr. Shivaprasad or Prakruti undertook to preface this claim. In addition to his verification, Dr. Shivaprasad also submitted a December 15, 2017 declaration and certification attesting that Prakruti “did not dispose of any excess batch samples” and did not “affirmatively destroy[ ]” any samples after July 20, 2016. Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 142-12], at 2 ¶¶ 11-12.
However, contrary to Prakruti's representations, in reviewing privileged communications in January of 2018, Walter D. Davis, Esquire, (“Davis”) of Davidson Berquist discovered a November 2016 communication between Dr. Shivaprasad and Batzer that indicated “that prior counsel may have been sent a number of samples [in November of 2016].” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 12, ¶ 40. The reason why this communication had not been reviewed until January 2018 is because, unbeknownst to Sabinsa or the Court, counsel at Davidson Berquist unilaterally decided to impose a cutoff date for responsive ESI postdating July 2016.[4] Id. at 12, ¶ 41. It was only after Sabinsa discovered and confronted this ESI issue that Davidson Berquist began to review and collect the ESI that Prakruti had originally promised to review. Id.
*5 It was not until January 19, 2018 that Davis contacted Sabinsa's counsel to reveal that Amin Talati had discovered three previously unknown samples in Batzer's office.[5] Id. at 11-12, ¶ 39. That same day, Prakruti produced the first set of missing samples to Sabinsa, all of which were expired when produced. Id. at 13, ¶ 42. According to the first set of missing samples’ certificates of analysis, the samples had expired in either September or December of 2017. Id.
On February 27, 2018, based on late-produced documents from Prakruti, Sabinsa wrote to Prakruti because “it appear[ed] to [Sabinsa] that Prakruti may be withholding additional samples.” Id. at 13, ¶ 43. Again, contrary to Prakruti's prior statements and representations, Prakruti admitted in a March 2, 2018 email that there was yet another sample that had not been accounted for, PP/ORG/CUR/1607001 (“the single missing sample”). Prakruti's March 2, 2018 Email [Dkt. No. 142-6]. Prakruti admitted that it possessed the single missing sample, yet asserted that Prakruti would “not produce [it] to Sabinsa.” Id. Thereafter, Sabinsa filed the instant Motion for Sanctions Based on Spoliation on March 23, 2018. Motion for Sanctions Based on Spoliation [Dkt. No. 141].
In an April 19, 2018 Order, the Court ordered Prakruti to “provide an affidavit and/or certification relating to the existence and/or production of batch numbers” concerning the single missing sample and other unaccounted for samples. April 19, 2018 Scheduling Order [Dkt. No. 155], at 2. Thereafter, Prakruti rescinded its objection and produced the single missing sample on May 14, 2018. Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 13, ¶ 44. Prakruti also disclosed that, in addition to the first set of missing samples, Prakruti had sent additional samples to Batzer who in turn had sent them to Eurofins for testing—namely the second set of missing samples. August 30, 2018 Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 195], at 2-4 ¶¶ 3-13.
With respect to the second set of missing samples, Prakruti initially chose not to produce the Eurofins's testing because Prakruti “classified those results as work product and had no plans to ever disclose them.” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 16, ¶ 52. Prakruti also explained that it could not produce the second set of missing samples because Eurofins had since destroyed them pursuant to a 30-60 day retention policy.[6] Id. at 17, ¶ 57. On August 31, 2018, Prakruti eventually produced the Eurofins tests results to Sabinsa as part of required declarations.
*6 Accordingly, the record establishes that Prakruti made multiple misrepresentations to Sabinsa and the Court. Prakruti withheld information concerning samples and the actual samples themselves, specifically withholding: (1) the single missing sample, (2) the first set of missing samples, and (3) the second set of missing samples. When Prakruti finally produced the first set of missing samples, all samples were expired and the second set of missing samples were never produced as they had been destroyed. These facts form the basis of Sabinsa's Motion for Sanctions Based on Spoliation.
B. Facts Concerning Sabinsa's Motion for Sanctions: Prakruti Withheld Evidence and Disregarded the Court's Order
On October 30, 2017, Prakruti served a supplemental interrogatory response stating that its “product was sold to the following three companies before January 1, 2015: Herbakraft, Novel Ingredients, and TR Nutritionals.” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 31-32, ¶ 112. Prakruti also represented that it “did not sell or export to any of these three companies during the time period after the settlement agreement but before the expiration of the ’415 patent.’ ” Id. TR Nutritionals, however, produced an email that shows that, while Prakruti was working to settle with Sabinsa, Prakruti nonetheless sought to sell its products under a different name, Prakruti Foods (“Prakruti Foods”).[7] Id. at 32, ¶ 113. Thereafter, during the enforcement period of the Settlement Agreement, Prakruti Foods sold TR Nutritionals 1,200kgs of product that Sabinsa alleges to be “Accused Product.” Id. at 32, ¶ 114. Sabinsa later identified further product sales through Prakruti Foods, which ultimately totaled approximately 3,800kgs of what Sabinsa alleges to be Accused Products. Id. at 32-33, ¶¶ 114-116. This evidence forms the basis of why Sabinsa reopened the case.
Accordingly, Sabinsa made several attempts to obtain discovery from Prakruti Foods regarding these sales, yet, Prakruti continuously downplayed any connection between the two companies and argued that Prakruti could not produce or obtain responsive documents from Prakruti Foods. Id. at 33, ¶ 118. For example, on November 9, 2017, Sabinsa requested that Prakruti produce responsive documents from Prakruti Foods. Id. at 35-36, ¶ 125. Prakruti, however, asserted to the Court and Sabinsa that “Prakruti Products has no control over Prakruti Foods and is not in the possession, custody, or control of Prakruti Foods’ documents” and “Prakruti ... and Prakruti Foods are owned by different people,” and that “no individual at Prakruti ... owns any percentage of Prakruti Foods, and no individual at Prakruti Foods owns any percentage of Prakruti.”[8] Id. at 33-36, ¶¶ 118-126.
*7 To overcome Prakruti's position, Sabinsa went to great lengths to investigate the connection between Prakruti and Prakruti Foods, even hiring an Indian legal expert, who investigated and compiled evidence that established that the two companies have an extremely close relationship. Id. at 34, ¶ 120. Based on this evidence, the Court noted that this evidence fails to show that the two companies did not have access to the same information. Id. at 34, ¶ 121; Transcript of April 17, 2018 Hearing [Dkt. No. 158], at 21:13-16. Moreover, the Court noted that Prakruti's claim that the companies are separate is disingenuous. Id. at 22:17-21. Thereafter, on April 19, 2018, the Court issued an Order holding that:
Sabinsa has established a record which conclusively demonstrates that it is entitled to discovery responses from Prakruti Products and Prakruti Foods relevant to the instant action. First, it is undisputed that Vijay Kumar Shetty is the sole proprietor of Prakruti Foods and owns a 32% stake in Prakruti Products. Second, Sabinsa possesses documents, obtained via discovery, which show that Prakruti Products and Prakruti Foods share the same facility, address, phone number, fax number, e-mail address, e-mail domain, stamp and employees/agents. Thus Prakruti Products has possession, custody, and/or control, as that standard is recognized by the Federal Rules of Civil Procedure 34, over Prakruti Food's documents because it has the legal right and/or ability to obtain any documents purportedly maintained by Prakruti Foods.
April 19, 2018 Order [Dkt. No. 155], at 1-2. The Court thus ordered Prakruti to produce “all responsive documents from Prakruti Foods on or before April 30, 2018,” and noted that failure to obey the order may result in Rule 37 sanctions. Id. at 2.
Prakruti, however, failed to comply with the Court's ruling to produce all responsive documents. The day after the ruling, Sabinsa sent a letter to Prakruti requesting the production of lists of searches, custodians, and email addresses. Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 38, ¶ 135. In response, Prakruti produced some documents on April 30, 2018, yet this production, according to Sabinsa, was incomplete with multiple gaps, and Prakruti then requested a month to complete its search and production. Id. at 38-39, ¶ 136. Evidently, Prakruti had applied an undisclosed December 5, 2014 start date to its ESI collection—a start date that postdated invoices for shipments of the allegedly “Accused Product” that had been sold through Prakruti Foods. Id. at 39, ¶ 136. After a second production of Prakruti Foods's documents, Davis admitted that he did not search (1) any additional custodians as Sabinsa requested; (2) any ESI created prior to December 5, 2014; or (3) Prakruti Foods's actual computer system, which is allegedly separate from Prakruti's computer system. Id. at 39, ¶ 137. Davis also admitted that document and ESI collection from Prakruti Foods had been outsourced and he did not even know who conducted the search or what collection methods were employed. Id. Nonetheless, Davis later asserted that the searches for responsive documents were “thorough” and “[w]hile Prakruti's counsel did not physically conduct each and every search ... he certainly did provide guidance to those that did, including Prakruti themselves.” Id. at 40, ¶¶ 139-140.
Moreover, on June 4, 2018, Prakruti again adopted its position—contrary to the Court's order—claiming Prakruti “cannot and could not access Prakruti Foods’ separately stored documents without asking Prakruti Foods for them” since “Vijay Kumar Shetty, declined to provide the documents to Prakruti.” Id. at 37, ¶ 131. Though Prakruti did provide some responsive Prakruti Foods documents, this was merely due to “[Vijay Kumar Shetty's] good will and as a favor to Prakruti,” and Prakruti noted that Vijay Kumar Shetty nonetheless “has consistently refused to provide documents to Prakruti.” Id. at 37-38, ¶¶ 131-132. Ultimately, Sabinsa asserts that discovery concerning Prakruti Foods remains incomplete, particularly documents and/or emails concerning the two companies’ attempts to allegedly cover up orders and sales of product through Prakruti Foods.[9] Id. at 39-38, ¶¶ 131-132.
*8 Accordingly, the record reveals that Prakruti did not produce “all responsive documents from Prakruti Foods on or before April 30, 2018.” Prakruti, therefore, withheld discovery from Sabinsa and disregarded the Court's Order. These facts are the basis of Sabinsa's Motion for Sanctions and Request for a Forensic Audit.
II. Discussion
The Court will first address Sabinsa's Motion for Sanctions Based upon Spoliation, and then consider Sabinsa's Motion for Sanctions for Prakruti's withholding of discovery and failure to comply with the Court's order.
A. Spoliation
1. Analysis and Finding of Spoliation
Sabinsa argues that Prakruti spoliated evidence. Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 21-28, ¶¶ 71-96; see also Sabinsa's Spoliation Brief [Dkt. No. 142], at 8-11. In support, Sabinsa asserts that Prakruti destroyed the second set of missing samples, withheld the first set of missing samples until after they expired, and made numerous misrepresentations.[10] Id. Sabinsa, thus, claims Prakruti should be sanctioned for its conduct as Sabinsa has been unfairly deprived of the opportunity to independently test the samples before they were destroyed or expired. Id.
In opposition, Prakruti claims there was no spoliation as it “has produced every responsive sample in its possession, custody, or control, regardless of whether the sample is unexpired or expired, and has not intentionally made any false statements about its samples to Sabinsa or the Court.” Prakruti's Opposition Brief to Sabinsa's Motion for Sanctions [Dkt. No. 145], at 1. Prakruti writes off the destruction of the second set of missing samples and withholding of the first set of missing samples until after they expired as simple miscommunication and inadvertence. Id. For example, Prakruti claims that Batzer had simply forgotten he had the first set of missing samples in his office. Prakruti's Amended Proposed Findings and Conclusions, [Dkt. No. 214], at 6 ¶¶ 21-23. Furthermore, when Amin Talati withdrew as counsel and Davidson Berquist stepped in, Batzer believed he had sent everything related to the case to Davis, and Dr. Shivaprasad had forgotten about the existence of the first and second sets of missing samples. Id. at 6-11 ¶¶ 21-37. Prakruti thus presents a façade of faultlessness and inadvertence, claiming it simply forgot about samples since they were “out of sight, out of mind.”[11][12] Transcript of September 26, 2018 Oral Argument / Evidentiary Hearing [Dkt. No. 217], at 82:21-83:7.
*9 “ ‘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.’ ” MOSAID Techs. Inc. v. Samsung Electronics Co., Ltd., 348 F. Supp. 2d 332, 335 (D.N.J. 2004). A claim for spoliation requires that the Court conduct a two-part inquiry. The Court first determines whether spoliation occurred and then assesses the appropriate sanctions available to redress the situation. Bull v. United Parcel Serv., Inc., 665 F.3d 68, 74 n.5 (3d Cir. 2012) (distinguishing between the analysis involved in spoliation and spoliation sanctions). The Third Circuit utilizes four factors to determine whether spoliation has occurred: “(1) the evidence was in the party's control; (2) the evidence is relevant to the claims or defenses in the case; (3) there has been actual suppression or withholding of evidence; and (4) the duty to preserve the evidence was reasonably foreseeable to the party.” Id. at 73. The moving party bears the burden of proving these factors. McCann v. Kennedy Univ. Hosp. Inc., No. 12-1535, 2014 WL 282693, at *4 (D.N.J. Jan. 24, 2014).
Applying this analysis to the record presented, Sabinsa has plainly established spoliation factors one and four. See Sabinsa's Brief in Support of Motion for Spoliation [Dkt. No. 142], at 8; Prakruti's Opposition Brief to Sabinsa's Motion for Spoliation [Dkt. No. 148], at 8-13; Sabinsa's Reply Brief in Support of Spoliation [Dkt. No. 148], at 8; Sabinsa's Proposed Findings and Conclusions [Dkt. No. 200], at 17 ¶ 59. The two factors are underscored by the fact that Prakruti sent the two sets of missing samples to its then current counsel, Amin Talati, before the case was re-opened, which emphasizes the foreseeability that the samples were relevant evidence and the fact that Prakruti had control over them. Moreover, Prakruti does not contest that these two factors have been met.
With respect to the second factor, the Court finds that the expired and destroyed samples are relevant to the claims or defenses in the case. Here, the record demonstrates unambiguously that the samples are essential to resolving the case. Specifically, Sabinsa asserts that it “needed the hidden samples before they expired for testing purposes to prove that Prakruti violated the terms of the Settlement Agreement.” Sabinsa's Spoliation Brief [Dkt. No. 142], at 8. And Prakruti demonstrated that the samples were relevant when it sent the samples to its counsel for testing, clearly in anticipation of further proceedings. Accordingly, the first and second sets of missing samples are evidence that is relevant to the claims and defenses. Therefore, Sabinsa has established the second factor.
Lastly, the Court has considered the third factor and concludes there has been actual suppression or withholding of evidence. Under this factor, it must appear that evidence was intentionally suppressed, withheld or destroyed, thus, requiring evidence of bad faith. See Bull, 665 F.3d at 79 (“a finding of bad faith is pivotal to a spoliation determination”). Under this standard, inconsistent statements or misrepresentations regarding the preservation of evidence is sufficient to establish bad faith. Id. at 76-77 (“The key issue, however, is whether the discrepancy between her statements (if in fact there is a discrepancy) was an intentional misrepresentation or—as her counsel insists—inadvertence”); see also Capogrosso v. 30 River Court East Urban Renewal Co., 482 Fed. Appx. 677, 682 (3d Cir.), cert. denied, 568 U.S. 979 (2012) (affirming the trial court's spoliation determination where the trial court found plaintiff disposed of evidence and misrepresented this to the Court; the Third Circuit found “no reason” to justify the disposal of evidence as plaintiff knew “would be essential in her lawsuit”); see also First Senior Financial Group LLC v. “Watchdog”, No. 12-1247, 2014 WL 1327584, at *7 (E.D.Pa. Apr. 3, 2014) (finding that a party's obfuscation or lying can show it acted in bad faith). Nonetheless, the Third Circuit holds that bad faith is not present in circumstances where evidence “has been lost or accidentally destroyed, or where the failure to produce it is otherwise properly accounted for.” Bull, 665 F.3d at 79.
*10 Applying this standard to the record presented, the Court finds Sabinsa has presented ample evidence to satisfy the third factor. Prakruti's misconduct constitutes bad faith, and evidence concerning the second set of missing samples offers a particularly glaring display of bad faith. For example, despite enacting a litigation preservation hold on September 9, 2016, and with the knowledge that Sabinsa had filed a motion to reopen the case on October 28, 2016, Prakruti sent the second set of missing samples to Eurofins in November of 2016, where they were subsequently destroyed. Although Prakruti sent the second set of missing samples for testing, Prakruti failed to take any steps to preserve the samples or to ensure their return after testing. This treatment of the samples is particularly informative, as Prakruti knew the samples would be essential to the case. To this end, Prakruti's intent to destroy the samples is inferred from Prakruti's failure to provide any direction to Eurofins to preserve or return the samples.
i. Prakruti's Misrepresentations
The misrepresentations by Prakruti about the second set of missing samples are numerous, significant, and alone sufficient evidence of bad faith. For example, Prakruti admits that it intended to withhold the second set of missing samples as work product. Yet, Prakruti never mentioned this to Sabinsa or the Court, let alone provided notice of the existence of the second set of missing samples. Also, even if the second set of missing samples was work product, Prakruti falsely represented that it would disclose all samples, even those withheld.[13] See First Senior Financial Group LLC v. “Watchdog”, No. 12-1247, 2014 WL 1327584, at *7 (E.D.Pa. Apr. 3, 2014) (finding that a party's obfuscation or lying can show it acted in bad faith). Prakruti made further false statements concerning the second set of missing samples, including: (1) representing to Sabinsa in a letter dated November 3, 2017 that “Prakruti has not destroyed any samples;”[14] (2) representing to the Court in letters dated November 14, 2017 and December 4, 2017 that Prakruti had produced every sample;[15] (3) representing to the Court in Dr. Shivaprasad's November 17, 2017 verification that Prakruti's representations were based on a “reasonable inquiry”;[16] and (4) representing to the Court in Dr. Shivaprasad's December 17, 2017 declaration that Prakruti did not destroy any samples after July 20, 2016.[17]
*11 Moreover, Prakruti made additional, knowingly false statements concerning other samples. For example, at the time the case was reopened, Prakruti possessed the single missing sample and the first set of missing samples, yet Prakruti made the following representations to Sabinsa and to the Court:
1. On August 2, 2017, Prakruti agreed to “produce any responsive, non-expired samples in its possession, custody, or control,” but objected to producing “samples [that] are past their expiration or ‘best buy’ date as out-of-date samples are not relevant and need not be produced.” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 6 ¶ 22;
2. Six days later Prakruti represented that it would “determine if it has any expired samples,” and if Prakruti “intends to withhold any samples, it will disclose this to Sabinsa and provide an explanation for withholding the expired sample(s).” Id. at 6 ¶ 23;
3. On August 18, 2017, Prakruti repeated these representations and further promised, “If any samples are withheld, this will be disclosed, as would be required under the Rules.” Id. at 6-7 ¶ 23;
4. On September 6, 2017, Prakruti again asserted this position, stating, “if Prakruti withholds any samples on the basis that they are expired, we will provide information on those expired samples. Because Prakruti has not at this point withheld samples on that basis, the issue is not ripe.” Id. at 7 ¶ 23;
5. On September 13, 2017, Prakruti identified the five disclosed samples as “all samples of Curcuma longa (turmeric) product in its possession, custody, or control.” Prakruti's Response to Sabinsa's Interrogatories [Dkt. No. 142-8], at 3;
6. On September 14, 2017, Prakruti “agreed to withdraw its objection concerning expired samples and to produce all responsive samples in its possession, custody, or control.” Sabinsa's September 15, 2017 Letter [Dkt. No. 142-7], at 3-4, n.4;
7. On November 3, 2017, Prakruti represented that “Prakruti is not withholding any samples, expired or otherwise ... [and] Prakruti has not destroyed any samples.” Prakruti's November 3, 2017 Letter [Dkt. No. 142-10], at 1;
8. On November, 14, 2017, Prakruti represented that it had produced “every requested sample in Prakruti's possession, custody, or control, manufactured prior to the ’415 patent’s expiration.’ ” Prakruti's November 14, 2017 Letter [Dkt. No. 107], at 4;
9. On December 4, 2017, Prakruti repeated this representation, asserting, “Sabinsa continues to claim that Prakruti has spoiled samples of its products. But that is not the case. As noted in Prakruti's November 14 letter to Your Honor, Prakruti produced five separate 10 gram samples on September 22, which represents every requested sample in Prakruti's possession, custody, or control, manufactured prior to the ’415 patent’s expiration.” Prakruti's December 4, 2017 Letter [Dkt. No. 118], at 4;
10. And, on November 17, 2017, Prakruti's Dr. Shivaprasad asserted that Prakruti's interrogatory responses were “true to the best of Prakruti's knowledge, information, and belief after a reasonable inquiry.” November 17, 2017 Verification of H.N. Shivaprasad, Ph.D. [Dkt. No. 141-7].
All of these representations where knowingly false in light of the fact that Prakruti had both the single missing sample and the first set of missing samples in its possession. Moreover, even if the Court were to accept Prakruti's excuse that it forgot about the first set of missing samples, such excuses do not explain why the single missing sample was not produced or taken into account when Prakruti made these statements.
Moreover, Prakruti's excuses fail to relieve it or its counsel[18] from such reprehensible conduct. Amin Talati, and specifically Batzer, failed to communicate with Davidson Berquist about the existence of undisclosed samples. Davidson Berquist failed to inquire or investigate the existence of samples prior to making representations to the Court and opposing counsel. Reasonable diligence here should have led counsel to at least search his office and investigate with prior counsel and the client before making a representation. Thus, in light of the overwhelming evidence presented by Sabinsa, Prakruti's position, that it relied on the best information available in making representations, rings hollow.
2. Sanctions for Spoliation
Sabinsa requests a spoliation inference and an award of attorney's fees.[20] Sabinsa's Spoliation Brief [Dkt. No. 142], at 11-16. Specifically, Sabinsa requests that the Court sanction Prakruti with a significant adverse inference that “batch numbers from the first and second sets of missing samples that were never produced (i.e. PP/ORG/CUR/1601001, PP/CUR/1510002, PP/CUR/1510005, and PP/CUR/1601001) are ‘Accused Products,’ as defined in the Settlement Agreement.” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 29-30 ¶ 103.
The Court's options for sanctions after finding spoliation include dismissing the action, precluding arguments and evidence, issuing an adverse inference, and assessing attorney's fees and costs. MOSAID Techs. Inc., 348 F. Supp. 2d at 335. In order to determine whether a sanction is warranted, the Court considers the following factors: “ ‘(1) the degree of fault of the party who altered or destroyed evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party, and where the offending party is seriously at fault, will serve to deter such conduct by others in the future.’ ” Bull, 665 F.3d at 74 n.5 (quoting Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 70 (3d Cir. 1994)).
First, the Court finds that fault rests with Prakruti. When evaluating the degree of fault, the Court considers whether the party “intended to impair the ability” of the other party to present their case. Schmid, 13 F.3d at 80. Here, the record demonstrates that Prakruti allowed the second set of missing samples to be destroyed and intentionally withheld information about several sets of undisclosed samples from Sabinsa and the Court. On multiple occasions, Prakruti falsely and intentionally represented to the Court and opposing counsel that there were no undisclosed samples and that efforts had been expended to verify this claim. Yet the record shows that Prakruti's counsel held on to the first set of missing samples until after they expired and Prakruti made no apparent effort to investigate other samples beyond the five disclosed samples. Thus the expiration, destruction, and overall loss of necessary data related to the samples rests solely with Prakruti.
*13 Next, the Court finds Sabinsa has been prejudiced because plaintiff is unable to obtain and/or independently test the first set of missing samples and the second set of missing samples—specifically, only PP/ORG/CUR/1601001. The degree of prejudice is lessened because Sabinsa was able to obtain the Eurofins testing data for the second set of missing samples, but there is still no relief from the loss of the first set of missing samples. And even with the Eurofins data, Sabinsa still was unable to conduct their own independent testing of these samples. Upon weighing Prakruti's fault and the prejudice suffered by Sabinsa, the Court finds that sanctions are appropriate in this case.
The Court finds that an adverse inference is the appropriate sanction. See MOSAID Techs., Inc., 348 F. Supp. 2d at 337.[21] The imposition of an adverse inference will avoid substantial unfairness to Sabinsa and still provide sufficient deterrence to future bad conduct. Furthermore, an adverse inference will ultimately help to level the playing field since Sabinsa did not have the chance to independently test the expired and destroyed samples. Bozic v. City of Washington, Pa., 912 F. Supp. 2d 257, 273 (W.D. Pa. 2012) (“the spoliation inference serves a remedial function-leveling the playing field after a party has destroyed or withheld relevant evidence”). The exact wording of the adverse inference should be addressed by the parties by way of a motion in limine and must ultimately be determined by the Hon. Robert B. Kugler.
In addition, the Court also finds that monetary sanctions are appropriate given that Prakruti's conduct was particularly egregious. The record demonstrates that Sabinsa went to great lengths to obtain the aforementioned curcuminoid samples. Thus, Sabinsa should be compensated for the “time and effort it was forced to expend in an effort to obtain discovery” to which it was otherwise entitled. MOSAID Techs., Inc., 348 F. Supp. 2d at 339. Under these circumstances, the Court finds that an appropriate sanction to remedy the prejudice to plaintiff is an award of those reasonable attorneys’ fees and costs incurred that would not have been incurred but for Prakruti's aforementioned discovery misconduct. Such fees and costs include, for example, the costs incurred for the time Sabinsa's counsel spent determining that there had been spoliation of evidence, such as reviewing and comparing third-party discovery and sample records, the conferences with the Court concerning the discovery misconduct, the filing of the present motion, and any discovery necessitated because of the withheld, expired, and destroyed evidence. Such fees and costs would not include discovery that Sabinsa would have conducted even if Prakruti had not destroyed or withheld evidence. The Court will address the specific amounts to be awarded following submissions of an affidavit as set forth below. Accordingly, Sabinsa's motion for monetary sanctions is granted insofar as Sabinsa seeks reasonable attorney's fees and expenses incurred in connection with the aforementioned discovery misconduct.
B. Sabinsa's Motion for Sanctions and a Forensic Audit for Prakruti's Failure to Provide Discovery and Comply with the Court's Order
Sabinsa next argues that sanctions should be imposed against Prakruti for defendant's failure to produce discovery from Prakruti Foods, the resources Sabinsa was forced to expend to investigate Prakruti's misconduct, defendant's disregard of the Court's order, and defendant's misrepresentations. Sabinsa's Brief in Support of its Motion for Sanctions [Dkt. No. 162], at 1-2. Sabinsa concludes that it is entitled to attorney's fees and costs incurred in bringing this motion and argues that the Court should issue an adverse inference against Prakruti. Id. at 11-19. Specifically, Sabinsa request an adverse inference “that the shipment of 3,800 kg of [allegedly] Accused Product through Prakruti Foods violated the Settlement Agreement.” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 44 ¶ 159. In opposition, Prakruti asserts it is substantially justified in not producing discovery from Prakruti Foods, claiming it has no control over Prakruti Foods and cannot compel discovery. Prakruti's Brief in Opposition to Sabinsa's Motion for Sanctions [Dkt. No. 176], at 1-2.
*14 Rules 26 through 37 of the Federal Rules of Civil Procedure outline the process of factual discovery in federal civil litigation. Consequences for a party's failure to cooperate during discovery are also set forth in these rules. Specifically, Rule 37 governs when a party fails to make required disclosures or to cooperate in the discovery process and sets forth the appropriate sanctions available to penalize such conduct. FED. R. CIV. P. 37. Rule 37 specifically provides for sanctions against a party, or its attorney, for disciplinary violations, including the award of reasonable expenses and attorney's fees.
When the Court determines there has been a failure to follow a court order to provide or permit discovery, “the court must order the disobedient party, the attorney advising that party, or both to pay reasonable expenses, including attorney's fees, caused by the failure[.]” FED. R. CIV. P. 37(b)(2)(C). Rule 37 sanctions are actionable by the court “not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterent.” Wachtel v. Health Net, Inc., 239 F.R.D. 81, 84 (D.N.J. 2006) (quoting Nat'l Hockey League v. Metro. Hockey Club, 427 U.S. 639, 643 (1976)).
In addition, the court has “inherent power to police litigant misconduct and impose sanctions on those who abuse the judicial process.” Wachetl, 239 F.R.D. at 84 (citing Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)). This power includes “investigating whether a fraud has been committed upon the court and assessing attorneys’ fees when a party has acted in bad faith. Id. (citing Chambers, 501 U.S. at 44-46).
When determining appropriate sanctions under Rule 37, the court should consider all of the circumstances in a given scenario, such as whether the failure to cooperate was inadvertent or in bad faith. See Atwell v. SPX Cooling Technologies, Inc., 2011 U.S. Dist. LEXIS 60456, at *6 (M.D. Pa. June 6, 2011). The court's ability to order sanctions is not limitless, as the “district court's broad discretion to impose discovery sanctions pursuant to Rule 37(b) is limited by two standards[.]” Harris v. City of Philadelphia, 47 F.3d 1311, 1330 (3d Cir. 1995). “First, any sanction must be ‘just’; second, the [s]anction must be specifically related to the particular ‘claim’ which was at issue in the order to provide discovery.” Id. (citing Ins. Corp. of Ir. v. Compagnie Des Bauxites De Guinee, 456 U.S. 694, 707 (1982)). Finally, it must be noted that the choice of the appropriate sanction is committed to the sound discretion of the district court. Hewlett v. Davis, 844 F.2d 109, 113 (3d Cir. 1988) (citing Mangano v. Am. Radiator and Standard Sanitary Corp., 438 F.2d 1187 (3d Cir. 1971)).
However, a party that fails to cooperate in the discovery process may avoid sanctions when the failure to comply was substantially justified or other circumstances make an award of expenses unjust. See FED. R. CIV. P. 37(b)(2)(C). A party is substantially justified in its failure to cooperate in discovery when there is a genuine dispute or if reasonable people could differ as to the appropriateness of the contested action. See Pierce v. Underwood, 487 U.S. 552, 565 (1988).
After review of the submissions and consideration of the arguments presented to the Court during the September 26, 2018 hearing on the motions, the Court is left with the clear and definite impression that sanctions are warranted in this matter. In addition to the foregoing facts and analysis surrounding Sabinsa's motion for spoliation, the record reveals that Prakruti has withheld evidence, disobeyed the Court's April 19, 2018 Order, and repeatedly delayed the judicial process. Accordingly, the Court finds that Prakruti violated Rule 37 as it lacked substantial justification for its failure to comply with the Court's order to produce all responsive documents from Prakruti Foods.
*15 Sabinsa established that Prakruti sought to sell Curcuma longa (Turmeric) products through Prakruti Foods. Prakruti Foods sold this product to several other entities, including TR Nutritionals. Sabinsa also presented extensive evidence establishing that Prakruti and Prakruti Foods are sister companies that share a great deal in common. For example, Sabinsa hired an Indian law expert and presented evidence that the companies share the same brand name, logo, address, phone number, fax number, email address, facility, and stamp. April 13, 2018 Joint Letter re Outstanding Discovery [Dkt. No. 151], at 7. Sabinsa also explained that the two companies share common ownership, are related companies, and that Prakruti lists Prakruti Foods as a “sister” company “where control exists.” Id. Sabinsa thus argued Prakruti has the ability to produce discovery from its sister Prakruti Foods. In opposition, Prakruti admitted that it had access to some Prakruti Foods documents, but Prakruti claimed it did “not have access, possession or control of anything from Prakruti Foods[,]” since they are separate entities in terms of ownership. Transcript of April 17, 2018 Hearing [Dkt. No. 158], at 21:23-22:13.
The Court considered the parties positions and held that the record established that Prakruti has the ability to produce Prakruti Foods's documents. See Sanofi-Aventis v. Sandoz, Inc., 272 F.R.D. 391, 395-96 (D.N.J. 2011) (ruling that numerous ties between two entities, Sandoz and Lek, established the two as corporate sisters showing “a relationship that goes beyond conventional business dealings and at the very least establish[ed] that Sandoz can secure documents from Lek in the ordinary course of business”). The Court thus ordered Prakruti to provide all responsive documents.
At present, Prakruti has argued and represented to the Court, and Sabinsa, a position contrary to this ruling, and, based on Prakruti's briefing, continues to argue this position. Prakruti could have appealed the order, but failed to do so. Thus Prakruti's position on this matter, which forms the primary basis of its claim of substantial justification, is without merit.
Sabinsa has needlessly expended substantial resources to investigate discovery concerning Prakruti Foods, all because of defendant's repeated flouting of the litigation process. There can be no question that Prakruti acted with bad faith in light of the record. Prakruti lost the motion and presented no reasonable justification for refusing Sabinsa's request for discovery from Prakruti Foods. Moreover, Prakruti attempted to undermine Sabinsa's discovery request for Prakruti Foods's document production with a dubious stock transfer that postdated Sabinsa's request and Prakruti's own assertion that there was no common ownership between the two companies. The timing of the transfer, as well as the lack of evidence that the action took place, are all highly suspect and reek of Prakruti's attempt to make true what was otherwise a false representation. These actions, along with the aforementioned facts concerning Prakruti's spoliation of evidence, present a record of bad faith acts. The Court will thus sanction Prakruti for its misconduct. Gallant v. Telebrands Corp., 35 F. Supp. 2d 378, 404 (D.N.J. 1998) (“Where a party has willfully withheld relevant and highly adverse material from discovery, despite specifically tailored and repeated requests for such material, sanctions are appropriate”).
The Court finds that monetary sanctions are appropriate. In fashioning this award, the Court is left with considerable discretion but must ensure that the award is both just and related to the particular claim which was at issue in the order to provide discovery. See Harris, 47 F.3d at 1330.
Here, the record establishes that Prakruti violated the Court's order to produce “all responsive documents from Prakruti Foods” and that Sabinsa went to great lengths to obtain Prakruti Foods discovery, even going so far as to hire an Indian law expert to determine the relationship between Prakruti and Prakruti Foods. Accordingly, the Court finds that an appropriate sanction to remedy Sabinsa's unnecessary expenditures to obtain Prakruti Foods discovery is an award of those reasonable attorneys’ fees and costs incurred that would not have been incurred but for Prakruti's withholding of evidence. Such fees and costs include, for example, the costs incurred for the time Sabinsa's counsel spent determining that Prakruti withheld Prakruti Foods discovery, such as reviewing and comparing third-party discovery, the hiring of an Indian law expert, the conferences with the Court concerning the Prakruti Foods discovery misconduct, and the filing of the present motion, and any discovery necessitated because of the withheld Prakruti Foods discovery. Such fees and costs would not include discovery that Sabinsa would have conducted even if Prakruti had produced Prakruti Foods discovery. The Court will address the specific amounts to be awarded following submissions of an affidavit as set forth below. Accordingly, Sabinsa's motion for monetary sanctions is granted insofar as Sabinsa seeks reasonable attorney's fees and expenses incurred in connection with the aforementioned discovery misconduct.
*16 With respect to Sabinsa's request for an adverse inference, the Court finds that such relief is not proportionate to Prakruti's misconduct in failing to produce Prakruti Foods discovery. However, the Court will grant Sabinsa's request to compel a limited forensic audit. Sabinsa's request for a limited forensic audit “would be focused on uncovering emails to and from Mr. Mallya[22] and his company between November 1, 2014 and March 31, 2015.” Granting this request would be in line with the Court's previous finding that “[Sabinsa] can't trust ... the discovery representations being made ... and there's plenty of reasons for that.” Transcript of April 17, 2018 Hearing [Dkt. No. 158], at 48:16-20. Thus a limited forensic audit is proportionate to address Sabinsa's discovery concerns and to ensure Prakruti Foods discovery is produced.
Consequently, IT IS on this 17th day of December, 2018,
ORDERED that Plaintiff's motion [141] seeking sanctions for the spoliation of evidence shall be, and hereby is, GRANTED. Spoliation of evidence has occurred, and the Court finds that an adverse inference is warranted, however, the contours of same must be determined by the Hon. Robert B. Kugler; and it is further
ORDERED that Plaintiff's motion [141] seeking an award for attorney's fees and costs for the spoliation of evidence shall be, and hereby is, GRANTED; and it is further
ORDERED that Plaintiff's motions [161 and 182] seeking sanctions of attorney's fees and costs and a forensic audit for Prakruti's failure to produce Prakruti Foods discovery shall be, and hereby is, GRANTED, but the request for an adverse inference is DENIED; and it is further
ORDERED that Sabinsa is granted leave to file by no later than January 31, 2019 an affidavit setting forth the reasonable attorney's fees and expenses Plaintiff incurred in bringing the instant motions. Defendants may provide, by no later than March 15, 2019, a response on the issue of reasonableness of the fees and costs set forth in the affidavit submitted by Sabinsa.
Footnotes
The samples are relevant for testing to measure the curcuminoid content and the residual dissolved solvents present in the powder. Sabinsa's Spoliation Brief [Dkt. No. 142], at 8. The curcuminoid content is then measured by high-performance liquid chromatography (HPLC) testing. Id. at 8-9. This testing establishes whether a given sample falls within the curcuminoid ranges claimed in Sabinsa's patent or whether a given sample is substantially the same as Prakruti's pre-settlement Curcuma longa (turmeric) product—both showings are prongs in determining whether a sample meets the definition of an Accused Product. Id. at 9.
Fox Rothschild ultimately withdrew after Prakruti “refused to follow the advice rendered by Counsel.” Fox Rothschild's Motion to Withdraw as Counsel [Dkt. No. 20-1], at 2.
Eurofins received the second set of missing samples on November 22, 2016, and reported the lab results to Prakruti on December 6, 2016. August 30, 2018 Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 195], at Exhibits 1-3, pages 5-10. After testing was completed, Eurofins destroyed the samples pursuant to its 30-60 day retention policy, as Prakruti did not give instructions for the samples to be returned, let alone preserved. Declaration of Walter D. Davis, Jr., Esquire [Dkt. No. 198-1], at 2-3 ¶ 6. Eventually the Eurofins results were sent to Prakruti's current attorneys, Davidson Berquist Jackson & Gowdey LLP (“Davidson Berquist”), on August 31, 2017. Id. at 2 ¶ 3.
On July 25, 2017, “Prakruti agreed that no date restrictions for searches of Electronically Stored Information (ESI) are necessary[.]” Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 12, ¶ 41. Prakruti then reneged on this promise and imposed an ESI date cutoff without informing Sabinsa. Id. Months later, Sabinsa discovered the secret cutoff date when Sabinsa received an email through third-party discovery. Id.
The first set of missing samples had been in Batzer's office at Amin Talati's Chicago office for approximately fourteen months, from November 21, 2016 to January 16, 2018. Sabinsa's Amended Proposed Findings of Fact and Conclusions of Law [Dkt. No. 210], at 14, ¶ 48. According to Batzer, he “placed the unopened package containing the [ ] Set of [Missing] Samples in a file cabinet in [his] office, and thereafter inadvertently did not recall the package was there.” Id. When “asked [ ] to look for any samples” on January 16, 2018, he immediately “found the [ ] Set of [Missing] Samples.” Id. Batzer did not state whether he was asked to look for the missing samples earlier.
It should be noted that of the second set of missing samples, samples of PP/CUR/1605004 and PP/ORG/CUR/1604001 were among the five disclosed samples and the second set of missing samples, so these two samples were ultimately provided to Sabinsa prior to expiration for testing. Thus, only sample PP/ORG/CUR/1601001 was destroyed and never produced.
In what appears to the Court as an attempt to obstruct discovery concerning Prakruti Foods, Prakruti went so far as to initiate a dubious stock transfer to justify Prakruti's position. Vijay Kumar Shetty, the sole proprietor of Prakruti Foods and holder of 32% of Prakruti's stock initiated a supposed stock transfer of his 32% interest to his brother M.R. Shetty during a November 16, 2017 Prakruti board meeting. Id. at 36-37, ¶¶ 125-129. This meeting tellingly occurred only eight days after Sabinsa requested Prakruti Foods's documents and a mere two days after Prakruti asserted the position that Prakruti had no control over Prakruti Foods. Id. Moreover, no evidence has been presented to show that the stock transfer actually occurred as Prakruti refused to produce full meeting minutes, documents relating to the proposed transfer in the meeting minute extract, and other documents relating to the alleged transfer. Id.
As to its claim that discovery remains incomplete, Sabinsa specifically points to an email between Prakruti's agent Amit Mallya and TR Nutritionals in which Amit Mallya stated that “[d]uring this time [i.e. the “2 months to ... resolve[ ] and close[ ]” the Sabinsa litigation] Prakruti would not like to ship the [Curcumin 95%] material under Prakruti products put [sic] ltd. They could ship under the name of ‘Prakruti foods.’ The ownership of Prakruti Foods is different—but since they both share the name Prakruti we needed your advise [sic] on how we should proceed with shipments to SNA and other customers??” Id. at 32-40, ¶¶ 113-139. Sabinsa states that Prakruti has not produced any documents related to the proposal discussed in the email. Id.
It should be noted that samples of batch numbers PP/CUR/1605004 and PP/ORG/CUR/1604001 were among the five disclosed samples and the second set of missing samples, so these two samples were ultimately provided to Sabinsa prior to expiration for testing. Prakruti, however, allowed Eurofins to destroy the sample for batch number PP/ORG/CUR/1601001, thus this sample was never produced as it had been “disposed of.” August 30, 2018 Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 195], at 3 ¶ 13.
Prakruti further argues that spoliation did not occur because Sabinsa fails to establish that the first set of missing samples were expired and that the two sets of missing samples are favorable to Sabinsa. The Court finds these arguments are without merit. The samples’ expiration dates are found on the certificates of analysis that accompanied each sample, and Prakruti's own documents denote expiration dates. For Prakruti to argue that the samples may not necessarily have been expired despite their printed expiration dates and to compare the samples to a carton of milk that is past the expiration date but still passes the “smell test” is a meritless position for this matter. Transcript of September 26, 2018 Oral Argument / Evidentiary Hearing [Dkt. No. 217], at 67:13-72:3. As to the question of whether the samples were shown to be favorable evidence to Sabinsa's position, this is irrelevant to the established spoliation analysis, which is set forth herein.
Aside from claiming the second set of missing samples were intentionally withheld as attorney work product—which Prakruti later produced the test results for after the samples were destroyed—Prakruti did not present an argument concerning the second set of missing samples.
It is important to note that Davidson Berquist admits it received the Eurofins test results “on or about August 31, 2017” from Amin Talati. Davidson Berquist also admits it never investigated what happened to this second set of missing samples until January 2018, the same time the first missing samples came to light. Therefore, the record establishes that Prakruti and its counsel knew of samples beyond the “five disclosed samples” and consciously withheld this information from Sabinsa and the Court until disclosing the existence of the second set of missing samples in 2018.
Prakruti's November 3, 2017 Letter [Dkt. No. 142-10], at 1.
Prakruti's November 14, 2017 Letter [Dkt. No. 107], at 4; and Prakruti's December 4, 2017 Letter [Dkt. No. 118], at 4.
November 17, 2017 Verification of H.N. Shivaprasad, Ph.D. [Dkt. No. 141-7].
December 17, 2017 Declaration of H.N. Shivaprasad, Ph.D. [Dkt. No. 142-12], at 2 ¶¶ 11-12.
Under the Rules of Professional Conduct, “[a] lawyer shall act with reasonable diligence and promptness in representing a client.” N.J. Rules of Prof'l Conduct R.1.3. “Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect the client's interest, such as ... surrendering papers and property to which the client is entitled.” N.J. Rules Prof'l Conduct R. 1.16(d). Had counsel followed the required rules, Amin Talati should have informed Davidson Berquist about the samples received in 2016 and also returned the samples to Prakruti or Prakruti's new counsel. Davidson Berquist should have exercised reasonable diligence in investigating whether samples existed by simply asking prior counsel or Prakruti. In short, a failure in communication between client and counsel does not excuse spoliated evidence.
It bears emphasizing that, contrary to its representation to Sabinsa, Prakruti intended to restrict ESI, meaning Prakruti intended to suppress or withhold evidence from discovery. Thus, although Prakruti eventually produced additional samples, Sabinsa was forced to expend resources to obtain discovery it was already entitled to, and this ultimately led to the eventual disclosure that Prakruti had destroyed and withheld samples. Moreover, Prakruti's discovery misconduct might never have been disclosed but for the discovery by Sabinsa's counsel through document requests to third parties.
Prakruti did not address this issue.
“If a party has notice that evidence is relevant to an action, and either proceeds to destroy that evidence or allows it to be destroyed by failing to take reasonable precautions, common sense dictates that the party is more likely to have been threatened by that evidence. By allowing the spoliation inference in such circumstances, the Court protects the integrity of its proceedings and the administration of justice.” Id.
Mr. Mallya is Prakruti's agent who received the original email that brought about the Prakruti Foods investigation.