Repeated Discovery Failures and Abusive Litigation Tactics Warrant Terminating Sanctions, Treble Damages, Attorney Fees and Permanent Injunction Against Defendant In Patent Litigation Case.
July 27 2017
In TASER International, Inc. v. PhaZZer Electronics, Inc. et al, 6-16-cv-00366 (FLMD July 21, 2017, Order), a Florida District Court took the drastic step of entering a default judgment in favor of Plaintiff Taser, along with an award of compensatory and treble damages, an award of reasonable attorneys’ fees and costs, and injunctive relief because of Defendant Phazzer’s discovery failures and abusive litigation tactics. According to the Court, since the outset of the litigation, Phazzer had engaged in a pattern of bad faith conduct designed and intended to delay, stall, and increase the cost of the litigation. The Court determined no relief other than terminating sanctions would be adequate to address Phazzer’s repeated violations. In the case, Plaintiff Taser filed a complaint against Defendant Phazzer for patent and trademark infringement, false advertising, and unfair competition.
In the order granting the terminating sanctions, the Court began by summarizing the “abusive litigation and discovery practices” it found the Defendant undertook during the litigation. Specifically, the Court noted that after three motions to compel, and after the case had been ongoing for nearly a year, plaintiff “TASER still has not received the most basic information regarding the details and relationships between Phazzer and its manufacturer/suppliers/distributors of the accused . . .[infringing] product.” In addition, the Court noted that while Taser had been attempting to schedule depositions for five months, Phazzer continued to assert that “[e]very one of the handful of critical witnesses associated with Phazzer, a small, closely-held company, are represented to be on vacation, out of the country, in surgery, or convalescing.”
Furthermore, after multiple failures by corporate representative for Phazzer to appear when required, the Court order that a representative of Phazzer must attend a hearing on their counsel’s request to withdraw, cautioning that “[f]ailure to comply with this Order may result in imposition of sanctions, including entry of a default or default judgment against the offending party or counsel.” However, the Court noted that no representative from Phazzer Electronics attended the hearing in clear violation of the Court’s Order. Moreover, in addition to the “flagrant discovery abuse and contemptuous behavior exhibited by Phazzer,” the Court also cited to numerous attempts by Phazzer to derail the litigation by repeatedly attempting to stay the proceedings, and by filing a last minute emergency motion for a protective order.
As for legal authority for its terminating and others sanctions ordered against Phazzer, the Court stated Rule 37 of the Federal Rules of Civil Procedure “allows district court judges broad discretion to fashion appropriate sanctions for the violation of discovery orders.” The Court then noted Rule 37 “authorizes a variety of sanctions, such as, striking pleadings, rendering a default judgment, and holding the disobeying party in contempt of court.” Furthermore, Rule 37 provides that “the court must order the disobedient party, attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.”
Although the sanction of default is seen as a “last resort,” the Court reasoned a party’s “willfull or bad faith disregard” for discovery orders may call for this type of sanction when the party failed to comply with a court order compelling discovery and warning that the failure to comply might result in a default judgment. The Court also noted bad faith may be found through “delaying or disrupting the litigation or hampering enforcement of a court order.” The Court then found that Defendant Phazzer engaged in the above-described misconduct with the subjective intent to abuse the judicial process. Thus, the Court found the imposition of terminating sanctions, along with compensatory and treble damages, attorneys’ fees and costs, and a permanent injunction to be “necessary to adequately punish Phazzer for its wanton and repetitive disregard of this Court’s orders and as a consequence of its willful abuse of the discovery process. The imposition of lesser sanctions would underrepresent the seriousness of the offensive conduct.”
Although an extreme example, this case is a good reminder to parties and attorneys alike that all litigation must be taken seriously and that the discovery process must be respected. Failure to do so can lead to sanctions, up to and including terminating sanctions in particularly egregious cases.