End of the Road: GN Netcom Inc. and Plantronics Settle Eight-Year Litigation Saga Beset by E-Discovery Sanctions
On July 12, 2020, United States District Judge Leonard P. Stark of the District Court for the District of Delaware (“District Court”) approved a joint stipulation of settlement filed by GN Netcom Inc., parent of Jabra headphones, and Plantronics. This settlement will end the eight-year old litigation saga between GN Netcom and Plantronics involving allegations that Plantronics had monopolized the relevant market via exclusive distribution deals which required its distributors to only sells Plantronics’ headsets and not those of its rivals.
This case is noteworthy as to e-discovery because of the severe sanctions of $3,000,000 and an adverse inference jury instruction entered by the District Court against Plantronics in 2016 pursuant to then recently amended Federal Rule of Civil Procedure 37(e). This blog post will not recount the full panoply of discovery abuses addressed in the District Court’s July 12, 2016 Order, but, in broad strokes, Plantronics was found to have acted in bad faith in failing to take reasonable steps to preserve ESI which could not be restored or replaced. The District Court’s sanctions order was entered because Don Houston, a former executive of the company, “double-deleted” thousands of his own relevant emails despite the existence of a legal hold. Mr. Houston also directed other employees of the company to delete relevant emails. While the District of Delaware considered entering a case terminating sanction, the court ultimately concluded that punitive sanctions of $3,000,000, in addition to an adverse inference jury instruction, were appropriate to sanction Plantronics’ egregious conduct.
During the trial on the merits, GN Netcom attempted to present evidence of Plantronics’ spoliation by calling an e-discovery expert. The District Court excluded the testimony of GN Netcom’s proposed expert based on the “the risk of spoliation taking over” the case and “the risk of unfair prejudice given the inflammatory nature of the evidence.” Instead, the trial judge read stipulations of fact to the jury and limited reference to the facts in the stipulations. After a six-day trial, the jury found in favor of Plantronics. GN moved for a new trial, the court denied the motion, and GN appealed to the United States Court of Appeals for the Third Circuit.
On July 10, 2019, the Third Circuit granted a motion for a new trial based on the District Court’s refusal to allow the testimony of GN Netcom’s e-discovery expert regarding the significance of Plantronic’s spoliation of ESI. The Third Circuit concluded that the District Court abused its discretion in excluding the expert testimony, as it “would have been highly probative of whether the jury should adopt the permissive adverse inference, and any potential prejudice would not have substantially outweighed [its] probative value.” The Third Circuit further explained that the adverse inference instruction – which the District Court permitted – was rendered “less effective” by the District Court’s decision “withholding evidence regarding the scope of the spoliation . . . .”
Following the Third Circuit’s decision reversing in part and remanding the case for a new trial, the parties were scheduled to start a new trial in late September of 2020. By settling the matter, the parties were able to avoid retrying the case and end this longstanding litigation. It is now close to five years since Rule 37(e) of the Federal Rules of Civil Procedure was amended in December of 2015. The extreme sanctions in the July 2016 Order received significant attention based on the District Court’s analysis of the amended rule. While courts continue to grapple with application of Rule 37(e), the lessons learned from the underlying sanctions order still highlight the critical importance as to the timely issuance of a litigation hold and continued oversight of the litigation hold to ensure the preservation of discoverable ESI.