Discovery Spoliation Saga Continues in Delaware

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As Plantronics prepares for an October trial on accusations by a competitor that it used “monopolistic” power to control the market for telephone headsets, its lawyers are focused on something totally unrelated to those claims: how to explain to a jury that its employees deleted potentially crucial emails.

It is the latest challenge for Plantronics’ lawyers since a federal judge concluded last July that the company had engaged in bad faith discovery spoliation, and demonstrates the far reaching consequences of discovery.

U.S. District Judge Leonard Stark of Delaware, who is presiding over the case, said at the time he would instruct the jury that “it may — not that it must” presume that the deleted emails — some of which were never recovered — were unfavorable to Plantronics.

GN Netcom filed the case in 2012, accusing Plantronics of violating antitrust statutes by using its large market position to prohibit its distributors from selling rival headsets to large call centers. If it loses, Plantronics would face an unnamed amount of damages, which could be trebled under antitrust statutes, plus it could be forced to overhaul its business strategy.  

Judge Stark has ordered lawyers for both sides to reach an agreement before the end of the month about how to tell the jury about the deleted emails. So far, the two sides remain far apart, according to court documents.

“GN seeks to make spoliation the central issue in this case,” Jack Blumenfeld, of Morris Nichols Arsht & Tunnell, who represents Plantronics, wrote in a brief filed in the case.

Lawyers for GN Netcom said in court briefs that the judge should educate the jury at the outset of the case about what spoliation is and what he determined about Plantronics’ conduct, that they be allowed to present evidence about their findings on the issue and that a second instruction be given to the jury at the end of the case.

“Any one of the thousands of lost documents could have been the key document that forced a critical admission during a deposition, further explained how the marketplace operates, or could have been the ‘smoking gun’ document that proved … GN’s claims,” Michael Farnan, of Farnan Law who represents GN Netcom, wrote in a court brief.

Plantronics wants one instruction given to the jury before they begin deliberations — that the jury be told the missing emails may or may not have been unfavorable. “The only way to have a fair trial focused on the antitrust issues is to limit what the jury hears regarding spoliation,” Blumenfeld wrote.

Stark has made clear the spoliation was a significant offense: He fined Plantronics $3 million and also put them on the hook for GN Netcom’s $1.9 million in attorney fees after concluding that a senior vice president at Plantronics deleted and told others to delete as many as 90,000 emails — some of which were never recovered.

He wrote: “…Plantronics’ high degree of fault, its bad-faith intent to deprive GN of responsive documents, and the prejudice it has caused to GN’s case — along with the difficulties it has created for GN in ‘getting to the bottom of the deletion story’ and its (at times) unwillingness to acknowledge wrongdoing — further merit punitive monetary sanctions.”

A cascade of consequences have flowed from the spoliation sanctions: Since May, it has been barred from doing business with any federal agency after the general services administration made a preliminary finding that it is a non-responsible contractor and proposed “debarment,” which would prohibit it from taking any federal funds.

Plus, the sanctions have provoked a wider campaign against the company: In late June, Bruce Fein, of Del Valle & Fein, wrote a letter to the Securities and Exchange Commission — which he gave to Big Law Business — urging it to investigate Plantronics for violating securities laws by not disclosing the discovery spoliation sanctions handed down within four days. The company disclosed the violations in May 2017, approximately 10 months afterwards, according to Fein.

Fein, who previously served as general counsel to the Federal Communications Commission, said in an interview he does not represent any party in the case and sent the letter as a concerned former regulator who noticed the case because of the “staggering” size of Stark’s sanctions.

He wrote in his letter that the biggest impact may be that the sanctions “substantially increased the probability that Plantronics will lose the antitrust case” because the jury would hear about the spoliations.

George Gutierrez, a spokesman for Plantronics, said in response to the letter that the company seeks to be as “transparent” as possible. He also noted the GSA debarment is only proposed, and the company’s attorneys are attempting to appeal.

The company reported that federal contracts accounted for only $1 million of its $209 million in fourth quarter revenue last year. But Fein argued the debarment process could also affect state and local agencies that use federal money to do business with Plantronics.

Gutierrez acknowledged the impact of debarment, if finalized, could be material.

“Any revenue is not something we can just write off,” he said.

Gutierrez noted GN Netcom had asked for additional sanctions, which the judge denied last month. That made the company “optimistic” that it would prevail on its jury instructions, he said.