Sent to you by pakurilecz via Google Reader: Adverse Inference and 
Other Sanctions Warranted for Plaintiff's Failure to Produce Damaging 
Emails that were Eventually Produced by Third Party via Electronic 
Discovery Law by [log in to unmask] (K&L Gates) on 9/19/08 
Metrokane, Inc. v. Built NY, Inc., 2008 WL 4185865 (S.D.N.Y. Sept. 3, 
2008) 
 
In this patent infringement litigation, BNY sought sanctions on the 
grounds that Metrokane failed to produce a series of emails said to be 
highly damaging to Metrokane's case. BNY argued that the recent 
discovery of the existence of these emails through production by a 
non-party came too late to permit BNY to pursue otherwise crucial 
discovery concerning these communications. Metrokane contended that BNY 
failed to comply with various procedural requirements before filing the 
motion, and that it had not demonstrated any misconduct by Metrokane or 
any prejudice. Magistrate Judge Michael H. Dolinger rejected 
Metrokane’s procedural defense, and concluded that BNY sufficiently 
demonstrated discovery misconduct by Metrokane and resulting prejudice. 
Accordingly, the court granted a variety of remedies, including an 
adverse inference instruction. 
 
Discovery in the case closed in June 2007, but disputes about 
Metrokane’s performance let to additional motion practice, including 
the enforcement of a deposition subpoena to the alleged designer of the 
infringing handbags (Mr. Kilduff). The court granted BNY’s motion to 
compel the deposition of Mr. Kilduff in October 2007, and his 
deposition and production of documents occurred in November 2007. 
 
Mr. Kilduff produced, among other documents, a series of emails that he 
had sent to, and received from, various representatives of Metrokane, 
including its corporate principal, Riki Kane. Those emails, which – 
with one partial, if significant exception – Metrokane had never 
produced, were potentially damaging to several aspects of Metrokane's 
case. The emails referred to an order by one of Metrokane's principal 
customers, the department store chain Kohls, which wanted one line of 
the Metrokane totes supplied to it to be in one solid color, like the 
equivalent totes designed by BNY. The emails also contained comments by 
Mr. Kilduff implying his understanding that the solid-color Metrokane 
totes were likely to be confusingly similar to the BNY totes and 
explicitly stating his belief that Kohl's was seeking the solid-color 
version to take advantage of that confusion with BNY's product. This 
statement was inconsistent with Metrokane's contention that the bags 
were not so similar. 
 
During discovery, Metrokane had produced one partially redacted page 
reflecting two of these emails between Kilduff and Metrokane. The 
portion provided by Metrokane contained the statement by Kilduff that 
the order by Kohl's of a solid-color bag reflected that 
Kohls "obviously want[ed] to knock ... off” BNY's bag. The redaction by 
Metrokane, however, concealed a follow-up exchange between Kane and 
Kilduff, in which Kane appeared to state that Metrokane had agreed to 
indemnify Kohls for such infringement. The court observed that the 
statement by Kilduff was potentially helpful to BNY, since it 
dramatically reinforced the notion that Kilduff was aware of confusing 
similarity between the two lines of totes, and it highlighted the fact 
that Kane knew of the similarity and the problem. 
 
Other emails produced by Kilduff, but not by Metrokane, reflected that 
Kane had been clearly insisting before the Kohl's order that the 
Metrokane totes be multi-colored. BNY argued that this indicated that 
Kane was aware that a solid-color tote would potentially infringe on 
BNY's intellectual property rights. In addition, the emails produced by 
Kilduff contained a statement by Ms. Kane – not previously disclosed by 
Metrokane – that "Kohls is 100% indemnified," thus indicating that 
Metrokane had fully indemnified Kohl's by that time. That statement, if 
true, was inconsistent with representations made by Metrokane relating 
to its claim for tortious interference with Metrokane's business 
relationship with Kohl's. 
 
BNY pointed out that the production by Kilduff took place many months 
after the conclusion of discovery and thereby deprived BNY of the 
opportunity to explore these matters with Ms. Kane and other Metrokane 
representatives. BNY asserted it was irremediably prejudiced, and 
sought dismissal of Metrokane's claims. 
 
Opposing the motion, Metrokane offered no evidence to explain its 
failure to produce the cited emails. Rather, it made a vague assertion 
in its attorney's memorandum of law that the company had no written 
policy regarding the retention of documents. The court observed that 
the implication was that Metrokane did not produce the emails in 
question because they were no longer in its system – although Metrokane 
made no direct assertion to this effect, either by competent testimony 
or even by the assertion of its attorneys. Further, Metrokane vaguely 
argued that the emails that it failed to produce might be construed as 
favorable to it, and that in any event BNY was lax in not pursuing the 
question of Metrokane's document-retention policies during discovery. 
 
The court found that the emails were highly relevant and responsive to 
BNY's discovery requests, and that there was no question that, had BNY 
received them in a timely fashion from Metrokane, it would have pursued 
questioning about them with one or more of Metrokane's representatives, 
including Ms. Kane. The court was unpersuaded by Metrokane’s arguments. 
First, in the absence of any evidence from Metrokane, the court could 
not find that Metrokane did not have possession or control of the 
subject emails when called upon to produce relevant documents. “Plainly 
the knowledge of whether the company had access to those emails at the 
pertinent time rests solely with Metrokane, and its failure to proffer 
any evidence pertinent to that question impels an inference that it 
cannot demonstrate non-possession.” 
 
Second, that inference was further strengthened by Metrokane's 
production of a fragment of the emails. If Metrokane’s employees had 
been systematically purging emails from their computer files, the court 
would not expect the company to be able to produce the two emails that 
it did disclose, albeit in redacted form. Third, the court noted “the 
very careful avoidance by Metrokane of any direct representation – even 
in the form of a non-admissible attorney's assertion – that the company 
did not have the unproduced emails in its possession.” Fourth, the 
court observed that, by the time the subject email exchanges occurred, 
Metrokane was “manifestly aware of the potential for litigation with 
BNY.” It continued: “If Metrokane destroyed the emails in question at 
some time thereafter it was in evident violation of its obligation of 
preservation, and may thus be charged with the consequences of its 
spoliation. 
 
Given the evidentiary record, including the complete silence of 
Metrokane as to why it failed to produce the emails in question, the 
court found that Metrokane, at a minimum, was negligent either in 
failing to produce documents available to it or in failing to preserve 
documents that it was obliged to safeguard. However, the court also 
found that BNY had substantially overstated the impact of the 
non-production, which the court found was, in large measure, 
remediable. As a result, the court granted the following remedies: 
• For purposes of pending summary-judgment motions, the court deemed 
Ms. Kane's statement in her email about the indemnified status of 
Kohl's to be binding and included within the summary-judgment record 
• If the tortious-interference claim survived summary judgment, 
Metrokane would be required to make Ms. Kane and any other Metrokane 
witness competent to testify about the indemnification of Kohls 
available for deposition by BNY, with the costs of deposition, as well 
as reasonable attorney's fees incurred in preparing for it and 
conducting it to be borne by Metrokane 
• At trial, BNY would be permitted to offer evidence as to Metrokane's 
concealment of email and would be entitled to a jury instruction as to 
the possible inferences that the jurors may draw from the concealment 
• Metrokane ordered to pay BNY’s expenses, including reasonable 
attorney's fees, incurred in preparing and briefing the sanctions motion 
 
A copy of the full decision is available here. 
 
 
 
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