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ILLINOIS TOOL WORKS v. METRO MARK PRODUCTS

April 22, 1999

ILLINOIS TOOL WORKS, INC., PLAINTIFF,
v.
METRO MARK PRODUCTS, LTD., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Schenkier, United States Magistrate Judge.

MEMORANDUM OPINION AND ORDER

The Rules of Civil Procedure — including those governing discovery — seek to promote "the just, speedy, and inexpensive determination of every action." Fed. R.Civ.P. 1. However, it is painfully obvious to litigants and courts that disputes over discovery can render this goal illusory. Whether through over-reaching by the party seeking discovery or recalcitrance by the party responding to discovery requests (or sometimes both), needless discovery disputes all too often disrupt the progress of a lawsuit, inflict additional expense on the parties, and require judicial attention that would be far better spent on addressing the merits of parties' disputes.

This case presents an example of just such a needless and unproductive discovery dispute. This dispute, which has led to substantial motion practice and discovery totally unrelated to the merits of the case, is the direct result of the defendants choosing to respond to legitimate discovery requests with deception rather than directness.

Illinois Tool Works, Inc. has filed a motion seeking sanctions and for a rule to show cause why defendants should not be held in contempt (doc. # 36) for violation of an Order of October 23, 1998 requiring that all the defendants "preserve the integrity of all computers that are issue here without any spoilation of any information contained therein" (10/23/98 Tr. at 4, cited in Pl.Mem., Ex. C).*fn1 In particular, plaintiff asserts this order was violated in connection with a Packard Bell computer in the possession of defendants, which failed to operate when produced for inspection just six days after the preservation order despite functioning properly a few days earlier. Plaintiff originally sought the ultimate sanction of a default judgment against defendants (Pl.Mem.1-2), but then withdrew that request in light of the subsequent disclosure that apparently no responsive documents existing on the computer had been destroyed (Pl.Reply Mem. 1). Plaintiff still seeks a panoply of other sanctions: (1) attorneys' fees and costs incurred as a result of having to subpoena documents from third-parties that should have been produced by defendants; (2) the fees and costs of plaintiff's computer expert; (3) plaintiff's attorneys' fees and costs associated with the document depositions; and (4) plaintiff's attorneys' fees and costs associated with its motion for sanctions. For their part, defendants deny that plaintiff is entitled to any relief, since no documents on the computer were actually destroyed. In addition, defendants have countermoved for sanctions against plaintiff (doc. # 45), arguing that plaintiff's motion was knowingly baseless.

By an Order dated February 24, 1999, this matter was referred to this Court for ruling on plaintiff's motion (and now defendants' counter-motion). In connection with these motions, the parties have conducted investigation and discovery, much of which is attached as exhibits to their legal memoranda. Plaintiff has twice deposed Thomas C. Heinzel, defendants' custodian of records; each side has retained computer experts, who have submitted reports or declarations and have also been deposed at length; and defendants also have offered affidavits of Mr. Heinzel and Mark Pavliny. At a status hearing on April 14, 1999, the parties agreed that the ample paper record submitted provides a sufficient basis for this Court to decide the motions, without the need for in-court testimony.

The Court has now fully reviewed all the materials submitted by the parties in connection with the pending motions. After careful consideration, the Court grants plaintiff's motion for sanctions, and denies defendants' counter-motion for sanctions.

I.

The Court begins its discussion by setting forth its findings concerning the facts relevant to the pending motions.

A. The Discovery Requests in Issue.

Plaintiff is in the business of selling hot stamp and thermal imprinting machines, as well as parts and consumable supplies used with those machines. Two of the individual defendants, Thomas C. Heinzel and Mark Pavliny, formerly were employed by the plaintiff, and thereafter were employed by or otherwise associated with the corporate defendants (Compl. ¶¶ 8-9). Plaintiff alleges that the corporate defendants, Metro Mark Products, Ltd., Metro Mark Products, and Horizon Marking Systems, Inc., sell these same products in direct competition with plaintiff (Id., at ¶ 56). Plaintiff alleges, among other things, that the individual and corporate defendants misappropriated plaintiff's trade secrets, including plaintiff's customer list (Id., at ¶ 55). Plaintiff alleges that the defendants have violated the Lanham Act, 15 U.S.C. § 1125(a), as well as Illinois statutory and common law.

On September 4, 1998, plaintiff served a request for production of documents (Pl. Mem., Ex. A). The document request did not specifically request "invoices," but more broadly sought production of categories of documents that would plainly include invoices. E.g., Request No. 6 ("each document which refers, relates to or comments upon . . . the manufacture, assembly, sale or service of any product or part by any of the defendants"); Request No. 7 ("all documents that refer, relate to, comment upon or constitute any communication . . . between any of the defendants and any third parties, regarding hot stamp or thermal transferring printing equipment and/or parts and/or consumables thereof"); Request No. 10 ("all documents that refer, relate to, comment upon or identify customers of any defendant which were provided with or are using hot stamp or thermal transfer and printing equipment and/or parts and/or consumables thereof"); Request No. 13 ("all customer lists for any product or service sold and/or offered for sale by any defendant"). Moreover, the request was not limited to documents in paper form, but was expressly "intended to seek documents and things as broadly as those words are defined by Fed.R.Civ.P. 34 and applicable case law" (Pl.Mem., Ex. A, at 2).*fn2

Defendant did not object to those document requests (Pl.Mem., Ex. B, Response to Document Request). However, notwithstanding the scope of these requests, plaintiff produced only a single invoice (Id.).

B. The Court's October 23, 1998 Order.

Understandably skeptical about this minimal production, plaintiff filed a motion to compel, which was heard by the Court on October 23, 1998. At that time, counsel for defendants — who has since been replaced by defendants' current counsel — represented to the Court that defendants had "complied fully" with plaintiff's document request (Pl.Mem.Ex. C, 10/23/98 Tr. at 2). Plaintiff indicated that on the morning of October 23, in addition to the one invoice referenced in the written response to the document request, defendants had produced "several additional invoices" (Id. at 3). However, plaintiff continued to express the concern "that there are additional documents that are out there that we will not receive unless we push and request them specifically" (Id.).

In response, the Court directed that defendant's primary custodian of documents, Mr. Heinzel, be made available for a deposition with regard to documents by no later than October 29, 1998, and that the deposition be conducted at Mr. Heinzel's expense (Id. at 3-4). In addition, the Court ordered "all parties to preserve the integrity of all computers that are at issue here without any spoilation of any information contained therein" (Id. at 4) (emphasis added). In response to what the Court plainly perceived as an effort by predecessor defense counsel to hedge in that broad directive, the Court was explicit about what its order meant:

  [I]f it's "don't push the delete button" or if it's
  "don't change the C drive" or "don't pull the plug
  at the wrong time" or "don't take a sledge hammer to
  it," I don't want it spoiled in any way, okay, so
  don't limit it.

(Id. at 5) (emphasis added). Later that same day, plaintiff served on defendants a request to inspect "any and all computers used by any of the defendants since November of 1996" (Pl.Mem.Ex. D). The inspection was arranged to take place at the offices of plaintiff's lawyers on October 29, 1998, the same date on which Mr. Heinzel was to appear for deposition as a document custodian.

C. The History of the Packard Bell Computer at Issue.

One of the computers covered by the request for inspection was a Packard Bell personal computer purchased by Mr. Heinzel in 1994 (Def.Mem.Ex. E, Heinzel Aff. ¶ 2). The computer was serviced twice in 1995: the first time because it was functioning improperly, and the second time to add memory and a faster modem (Id. ¶ 3). There is no evidence that the Packard Bell computer was serviced again at any time between 1995 and the time it was brought to the offices of plaintiff's counsel for inspection on October 29, 1998.

The Court does not find Mr. Heinzel's testimony about the alleged damage to Packard Bell computer, and its allegedly sporadic performance prior to October 29, 1998, to be entirely credible. Perhaps an air compressor fell on the computer in 1997. However, the Court finds it implausible that a desktop computer would simply "fall off" a desk even once — let alone four to five times — in less than two years. Mr. Heinzel offers no details that would explain how such a bizarre event could have repeatedly occurred. Moreover, the Court finds it implausible that Mr. Heinzel would continue to use the Packard Bell computer for business records into late 1998, as he admits he did, if the computer functioned as sporadically as he claims beginning in 1997. Defendants offer no explanation as to why they did not use one of the other computers to which they had access (Pl.Mem.Ex. F, Heinzel Dep. 12-13), or did not buy a replacement computer.

D. The Events Between October 23 and October 28, 1998.

Defendants' memorandum and supporting materials shed no light on what, if anything, defense counsel did to inform the defendants of the Court's October 23, 1998 Order that they "preserve the integrity of all computers that are issue here."*fn3 However, there is no dispute that between the time of the October 23 Order and the time of production of the computer for inspection on October 29, Mr. Heinzel used the Packard Bell computer on several occasions (Pl.Mem.Ex. E-5). A printout from the directory of the hard drive of the Packard Bell computer reveals that various files were accessed on October 25 ...


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