Category Archives: Fraud On The Court

Lying is Still Bad

In the long fought BitTorrent infringement case of Malibu Media v. Tashiro, (S.D. Indiana) the court appears to be close to closing this case with a resolution in favor of Malibu Media. As with just about every other case that has gone through substantive proceedings, the results appear to be either a finding of infringement, or defendants who lie and destroy evidence, resulting in a verdict in favor of the plaintiff.

This case, fought longer and harder than most, has resulting in a few extra points, one being with respect to a long fight about Plaintiff’s expert Patrick Page and efforts to discredit Mr. Paige. Curiously, these seem to have backfired as the court found Plaintiff’s expert Mr. Paige more credible than the expert offered by Defendants.

Based on the relative credentials of the parties’ experts, the Court concludes that Patrick Paige’s testimony is more accurate and more credible. As such, the Court finds it highly likely that thousands of files were deleted and were unrecoverable. This confirms that Defendant Charles did not temporarily delete relevant evidence; instead, he permanently destroyed that evidence. As a result, Charles is liable for spoliation.

But the real substance of this case relates to a husband and wife who the court found lied and destroyed evidence. Much has been written on this case about the lack of evidence, but the heart of the case deals with why the evidence was missing. As summarized by the Court:

Discovery in the federal system is intended “make a trial less a game of blind man’s bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent.” United States v. Procter & Gamble Co., 356 U.S. 677, 682 (1958) (emphasis added). The rules governing discovery contemplate that parties will “obtain the fullest possible knowledge of the issues and facts before trial,” such that “civil trials in the federal courts no longer need be carried on in the dark.” Hickman v. Taylor, 329 U.S. 495, 501 (1947).

[Defendant’s] conduct is simply not consistent with these principles. By deleting files from the Stover drive, [Defendant] chose to conceal—not disclose—potentially relevant information. And by doing so, [Defendant] deprived Plaintiff of the ability to gain the “fullest possible knowledge” of the facts relevant to Plaintiff’s underlying copyright claim. [Defendant] thus flouted the important principles underpinning litigation carried on before this Court and other courts in the federal system, and his decision to do so cannot go unpunished.

In this case it was more than just the husband that got in trouble, but the Court specifically found the wife at fault as well.

[Defendant Wife’s] own testimony thus demonstrates that she repeatedly failed to discharge her duty to reasonably investigate whether her discovery responses were complete and accurate, and sanctions against [Defendant Wife] are therefore appropriate.

Additionally, [Defendant Wife’s] failure to investigate was especially egregious in light of her attorney’s representations to the contrary. … These misrepresentations are hardly consistent with a party’s duties to investigate and disclose relevant facts, confirming that sanctions against [Defendant Wife] are appropriate.

In essence, the court found the husband-wife team acted together on many fronts and they were liable for the bad acts of the other.  Protecting a family member may seem like a good idea, there are consequences when doing so involves lying or hiding evidence.

Based on these considerations, the Court concludes that the [Defendants] have the sort of “close family relationship,” Sebastian, 2008 WL 2875255, at *33, that would support extending a Fifth Amendment adverse inference from one party to another. Thus, when Plaintiff’s counsel asked whether [Defendant] had agreed with his wife to hide the truth in this case, the Court may infer that [Defendant] refused to answer not only to protect himself, but also to protect his wife.

And while the court found also fault with the Defendants’ attorney, he managed to escape without sanctions.

[Defendant’s attorney’s] conduct in this case borders on sanctionable. …. In these circumstances, the Court will exercise its discretion to refrain from sanctioning [Defendant’s attorney].

In summation, the court found the Defendants guilty of perjury with respect to hiding evidence, hiding hard drives and lying about the use of BitTorrent and directed that both husband and wife be found liable under Plaintiff’s claims.

Here, the Court finds by clear and convincing evidence that Defendants have engaged in a similar pattern of misconduct. Defendants spoiled evidence, committed perjury, and failed to discharge their duties to conduct discovery reasonably and in good faith. They lied to the opposing party; they withheld the existence of material evidence; and they deleted potentially damaging computer files the very night before they were to relinquish such files for discovery. Just as in the cases cited above, this extensive pattern of conduct warrants the harshest of sanctions, and the Magistrate Judge accordingly recommends that the Court enter default judgment against both Defendants.

Based on the long record of this case and likely hundreds of thousands in attorney fees, this may result in one of the most significant awards against defendants in any BitTorrent litigation.

 

The case and relevant opinion: Malibu Media, LLC v. Tashiro, et al. 1:13-cv-00205, (S.D. Indiana, May 18, 2015)

 

LYING IS STILL BAD – Indiezone v. Rooke

Indiezone, Inc., et al. v. Todd Rooke, et al., 13-cv-4280 (N.D. Ca.)

In 2013 Indiezone filed suit against a number of former employees claiming they stole certain intellectual property. An arbitration agreement would have required the parties to arbitrate instead of bring their claims in court. To avoid arbitration Indiezone brought in co-plaintiff eoBuy which was not a party to the arbitration agreement. The only problem was eoBuy did not exist and was apparently fabricated for the sole purpose of avoiding arbitration.

In January several of the defendants filed to dismiss eoBuy and argued that arbitration was proper. Rather than concede that eoBuy did not exist Indiezone dug the hole deeper and began to fabricate evidence and make other claims that eventually unraveled under scrutiny. The result was severe sanctions from the court.

It is important to note that Indiezone may have had valid claims against the defendants but in their efforts to avoid arbitration they lied to the Court and as a result their claims were denied.

Judge Chhabria did not pull any punches:

The Court finds that the plaintiffs submitted multiple misleading and false declarations and fraudulent documents… Bad faith of this degree easily supports an award of sanctions under the Court’s inherent powers. See Chambers v. NASCO, Inc., 501 U.S. 32, 47 (1991).

The Court went on to find both the plaintiffs and their counsel liable for costs and fees,

Counsel for the plaintiffs also participated in this bad faith conduct. Despite having been put on notice that eoBuy did not exist … [counsel] continued to file the plaintiffs’ bad faith motions and to support and adopt [Indiezone’s] misrepresentations in his own declarations and through motion and oral argument. [Counsel’s] misrepresentations to the Court far exceed the ethical bounds of advocacy and constitute bad faith. At a minimum, [counsel] has been reckless regarding the truth of his representations to the Court. [Counsel’s] actions throughout this litigation also demonstrate his intent to unreasonably and vexatiously multiply and manipulate the proceedings, including filing numerous motions to amend, filing numerous requests for extension of time, and failing to abide by court order on multiple occasions. Sanctions are therefor appropriate … under the Court’s inherent authority, as well as 28 U.S.C. § 1927.

This case is also dismissed with prejudice, pursuant to the Court’s inherent power, because the plaintiffs have “engaged deliberately in deceptive practices that undermine the integrity of judicial proceedings” and “willfully deceived the court and engaged in conduct utterly inconsistent with the orderly administration of justice.” Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006) (quoting Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 347, 348 (9th Cir. 1995)). Dismissal is warranted in a case such as this one where a party has knowingly submitted false and misleading documents. See Combs v. Rockwell Int’l Corp., 927 F.2d 486, 488-89 (9th Cir. 1991). Moreover, consideration of the five factors discussed in Leon warrants dismissal. See Leon, 464 at 958. The public’s interest in expeditious resolution of litigation and the Court’s need to manage its docket both support dismissal, because the sanctionable conduct has unnecessarily prolonged this case and wasted a tremendous amount of the Court’s time. Given the Court’s finding of bad faith and issuance of sanctions under its inherent authority, a showing of prejudice to the defendants is not needed (although the defendants have certainly labored under the misconduct of the sanctioned parties). Nursing Home Pension Fund v. Oracle Corp., 254 F.R.D. 559, 564-65 (N.D. Cal. 2008) (explaining that “a district court need not consider prejudice to the party moving for sanctions” when acting pursuant to its inherent authority).

 The lesson: Lying is (still) bad. Win a case on the merits.

Related documents:

Motion to Compel Arbitration and Dismiss eoBuy: Indiezone, Inc., et al. v. Todd Rooke, et al., Dkt. 29, 13-cv-4280 (N.D. Ca., Jan. 1, 2014)

Motion for Sanctions: Indiezone, Inc., et al. v. Todd Rooke, et al., Dkt. 104, 13-cv-4280 (N.D. Ca., May 1, 2014)

Order for Sanctions: Indiezone, Inc., et al. v. Todd Rooke, et al., Dkt. 145, 13-cv-4280 (N.D. Ca., Sept. 2, 2014)