The opinion of the court was delivered by: Arlander Keys, Magistrate Judge
TO: THE HONORABLE JOAN H. LEFKOW
UNITED STATES DISTRECT COURT JUDGE
REPORT AND RECOMMENDATION
This matter is before the Court on Defendant, Auto Wax Company, Inc.'s, motion for sanctions against Plaintiff, Kucala Enterprises, Ltd. For the reasons set forth below, the Court recommends that Defendant's motion be granted. Further, the Court recommends that this case be dismissed with prejudice.
Kucala Enterprises, Ltd. ("Kucala")*fn1 and Auto Wax Company, Inc. ("Auto Wax") are both in the auto care products industry and both manufacture and distribute automobile detailing clay. The initial litigation in this case concerns the validity and enforceability of an Auto Wax patent for a particular type of automobile detailing clay, covered by Auto Wax's `993 and `416 patents (the "Auto Wax Patent"). In August 2001, Auto Wax sent Kucala a letter, which discussed pending litigation between Auto Wax and another automobile detailing clay manufacturer, Mark V Products, Inc. ("Mark V") (the "Mark V Litigation"). Concerned that it would be the subject of a lawsuit for infringement of the Auto Wax Patent, Kucala filed the complaint herein on February 26, 2002, seeking a declaratory judgment against Auto Wax, which would declare the Auto Wax Patent invalid, and thereby allow Kucala to continue to manufacture and sell its own clay without fear of prosecution by Auto Wax. Auto Wax subsequently filed a countersuit against Kucala, alleging that Kucala is infringing the Auto Wax Patent.
Upon motions by both parties, a protective order was entered on November 26, 2002. On December 13, 2002, the district court granted Auto Wax's discovery request, including the request to "inspect the process of manufacture . . ." of clay. Kucala Enters., Ltd. v. Auto Wax Co., Inc., No. 02-C1403 (N.D. Ill. December 13, 2002) (order granting motion to compel). The district court ordered the production to be via computer files or hard copy. Id. After Kucala failed to respond to the request for inspection, the district court granted Auto Wax's second and then third motions to inspect. See Kucala, No. 02-C1403 (N.D. Ill. January 23, 2003) (order granting second motion to compel); Kucala, No. 02-C1403 (N.D. Ill. February 11, 2003) (order granting third motion to compel). Finally, on February 28, 2003, at approximately 3 o'clock in the afternoon, the inspection of Kucala's desktop computer commenced at Kucala's attorney's office. (Pl.'s Resp. at 4).
After discovering that Kucala had installed and used software called "Evidence Eliminator" on his computer, Auto Wax filed a motion for sanctions against Kucala, claiming that it has been severely prejudiced by Kucala's deletion of relevant discovery from his computer. Auto Wax requested an evidentiary hearing on the issue of sanctions. The Court granted Auto Wax's request and heard both parties' arguments, as well as testimony from Kucala, on April 21, 2003.
On February 28, 2003, pursuant to court order, Auto Wax's computer specialist, Jason Velasco, inspected Kucala's desktop computer and filed a report with respect to the inspection. (Def.'s Mot. for Sanctions, Ex. A.) The report states that software called "Evidence Eliminator" had been installed on the computer and was last accessed on February 28, 2003, at approximately 4 o'clock in the morning. Id. The report further states that, between midnight and four o'clock in the morning, 12,212 files were deleted and overwritten on February 28, 2003, and that 2, 968 files were deleted and overwritten on February 25, 2003. Id.
In July 2002, Kucala purchased a software program called "Evidence Eliminator," which he downloaded from the website www.evidence-eliminator.com. (Hr'g at 18; Def.'s Resp. at 3.) The website that sells the Evidence Eliminator software touts its product as "protection . . ." that will "defeat EnCase and other Forensic Analysis equipment. . . ." (Def's Mot. for Sanctions, Ex. A.) The claims made by the manufacturer are that Evidence Eliminator will delete or "clean" computer hard drives of "deadly evidence" that may have been deleted by the user, but still remains embedded in the computer's memory. (Id.) Promoted as "data destruction technology," the software allegedly "destroys's the "unwanted data hidden in [the hard] drives. . . ." (Id.) The language goes on to warn the potential buyer that "[d]eleting "internet cache and history' will not protect you" and that "EnCase . . . can recover evidence from parts of your hard drive . . . that you had cleaned." (Id.) The marketing of the software appears to be geared to internet users who download certain web pages, pictures, and videos from the internet that may lead to investigation by local or federal authorities or by their employers. (Id.) Once installed, a window opens up on one s monitor prompting the user to "[c]hoose the method that suits your policies for the secure destruction of files. Practically, any of these options will keep you safe from snoops." (Id., App. B.)
Prior to the inspection, on February 17, 2003, to be exact, Kucala's attorney asked Auto Wax's attorney to divulge the name of the computer specialist, the procedures the specialist would use, and the computer programs that he intended to use to inspect Kucala's computer systems. (Def.'s Mot., Ex. C at 20.) Not satisfied with Auto Wax's response that the specialist will be creating a "forensic image" of the hard drive, (id. at 22) Kucala's attorney asked for further elaboration, including the method of data extraction, as well as the device to be used and the medium and format of retention. (Id. at 23). On February 25, 2003, Auto Wax's attorney replied and provided greater detail, including divulging the name of the software to be used for the forensic imaging — EnCase. (Id. at 27.)
At the hearing, Kucala testified that his computers were used for personal and business purposes (hr'g at 17), but that no business documents were stored on the computers-everything was "backed up" on a cd-rom. (Id. at 23). Kucala admitted that, prior to purchasing Evidence Eliminator, he started "cleaning his hard drive," or deleting documents, which he deemed "irrelevant," from his computer in July 2002. (Id. at 14-15.) Kucala also testified that "deleting and cleaning are different" and that he "cleaned his temporary internet files and internet cache." (Id. at 16.)
When asked if he had produced all documents on his computer system, he replied that he had produced all printed and electronic documents that were in his possession. (Id. at 15.) He explained that, if the documents were deleted, they were no longer in his possession, and therefore, he could not produce them. (Id.) He testified that it is not in his "normal course of business to print every document and keep it." (Id. at 33.) Kucala had previously admitted (in his motion for reconsideration of the district court's earlier decision denying Kucala's motion for a protective order over third party subpoenas) that certain documents had not been produced, because he had deleted those documents in the normal course of business, but he promised that they would ultimately be produced pursuant to the inspection of his computer. (Def.'s Mot. for Sanctions, Ex. B.) In his motion for reconsideration, Kucala asked that the court deny Auto Wax's third party discovery requests, because the information could be readily obtainable by Kucala. (Id.)
Kucala also admitted running Evidence Eliminator on another computer and to throwing away a third computer at the end of 2002, because it crashed and was no longer of any use to him. (Hr'g. at 16-17.) Kucala admitted that he did not inform the court or Auto Wax of his actions (id. at 23), and explained that he has never been involved in litigation before. (Id. at 23.)
Kucala testified that, contrary to his attorney's advice, (id. at 25, 32) he deleted documents because he was afraid that Auto Wax would not honor the protective order that is in place. (Id. at 25.) Kucala asserts that he received a communication on May 13, 2002, from Mark V warning him that Auto Wax had violated the protective order established in the Mark V Litigation. (Id.) However, when prodded about his knowledge of Auto Wax's ...