We’re heading into summer with our 70th episode of the Case of the Week series. In episode 70, Kelly Twigger discusses how falsification of evidence in a trademark infringement case led the court to dismiss the matter on a motion for sanctions. The case is For Life Prods., LLC v. Virox Techs. Inc., 2022 WL 1670097 (W.D. Va. 2022) from May 25, 2022 and was presided over by Senior United States District Judge James P. Jones.
Good morning, and welcome to episode 70 of our Case of the Week series, published in partnership with ACEDS. My name is Kelly Twigger, I am the CEO and founder of eDiscovery Assistant, as well as the Principal at ESI Attorneys, and I’m thrilled to be here with you this morning. Thanks so much for joining me.
As you know, on the Case of the Week series, each week, we choose a recently published decision from our eDiscovery Assistant case law database that highlights key issues for you to be focused on in the ediscovery process. And we try to talk about the practical implications of that decision for you, your clients, as well as your practice going forward.
Before I get started today, I want to do a special shout out to Deja Miller, who takes care of us at ACEDS, helps us put together this streaming every week, put together the new introduction that you just saw on this video and is, in general, a wonderful person to work with. Thank you to Deja.
This week’s decision comes to us from the case titled For Life Products, LLC versus Virox Technical, Inc. This is a decision out of the Western District of Virginia dated May 25th, 2022, pretty recent. This is from the Senior United States District Judge James Jones. Judge Jones has 10 cases in our eDiscovery Assistant database, you can take a peek at those if you’re in front of Judge Jones.
As always, we tag the decisions in our database, as well as all the other content with our proprietary eDiscovery issues. The issues assigned to this week’s decision include photograph, dismissal, sanctions, exclusion of evidence, bad faith, cost recovery, and forensic examination. All right let’s dive into the facts of this week’s case.
The underlying case that we’re dealing with here is a trademark infringement dispute, and we are before the Court on a motion for sanctions brought by the defendants that is based on fabricated evidence submitted in support of an amended complaint filed by the plaintiff on September 30th, 2020. As always, we want to pay attention to that date on our timeline.
That first amended complaint, filed in September 2020, alleged various trademark and unfair competition claims, including the fraudulent procurement of a trademark and cancellation of a descriptive trademark against the defendants.
The defendants on this motion for sanctions contend that the amended complaint contained false photoshopped exhibits of the plaintiff’s earlier products, as well as other misrepresentations in an effort to show that the plaintiff had senior rights to the trademark. Both companies are competing over what we’ll refer to as a “rejuvenate” trademark.
The Court really starts out this decision by giving you its answer, and the Court’s answer is this:
“Because of the breathtaking nature and extent of the misrepresentations and their potential effect on the litigation and the administration of justice, I will dismiss the plaintiff’s action with prejudice as a sanction and award attorney’s fees and costs.”
Right out of the gate, we know that the Court dismisses this case based on the breadth of fabrication of evidence that’s at issue here, and that’s what I want us to focus on for purposes of our learning for Case of the Week and what we need to pay attention to with regard to ESI.
Now, timeline wise, we said the amended complaint was filed September 30th of 2020. Just over a year later, on August 6, 2021, the plaintiff’s then counsel filed a motion to withdraw, advising the Court that the plaintiff would then be represented by the current counsel that are on this motion before the Court.
Six weeks later by email, the new counsel, on October 26th, 2021, advised defendants’ counsel that the plaintiff intended to file a second amended complaint and inquired whether it could be filed by agreement.
Included in the email to defense counsel was a red line copy of the first amended complaint versus the second amended complaint. It’s really the second amended complaint that’s proposed to be filed, the red line showing the differences between the second amended complaint and the first amendment complaint.
There’s no information in the decision as to whether or not there were red lines on the exhibits or that the changes to the exhibits on the second amendment complaint were in any way highlighted. I think that’s important.
Defense counsel did not respond to the October 26th email asking for agreement on filing the second amended complaint, but instead, five days later, on November 1st, 2021, filed the Motion for Sanctions that’s currently before the Court.
That Motion for Sanctions accused the plaintiff of fabricating evidence and in particular claimed that the plaintiff intentionally fabricated and falsely represented five exhibits to the first amended complaint.
Those five exhibits included listings of the plaintiff’s product catalogs for the years 2016 through 2020, as well as an image from Amazon.com, which purportedly advertised one of plaintiff’S products with dated customer reviews.
The defendants’ motion for sanctions requested that the Court imposed sanctions, including a dismissal of the plaintiff’s action with prejudice and cancellation of four of the plaintiff’s federally registered trademarks.
We already know from issuing the Court’s decision that the dismissal comes about as well as costs on the sanctions motion will get to whether the trademarks are dealt with by the Court.
A week after the motion for sanctions is filed, the plaintiff moved for leave to file a second amended complaint, which if granted, would remove the disputed exhibits from the consideration and reduce the number of trademarks that the plaintiffs claimed were allegedly infringed by the defendant.
The Court held a hearing on January 7th, 2022, about two months after the motion was filed. At the hearing, the Court specifically asked the parties whether they wanted to offer testimony or do any cross examination of witnesses for materials submitted on the motions. The parties agreed to stand on the materials that were submitted in writing, including expert reports submitted in support of defendants motion for sanctions. The plaintiff did not ask to cross any of the witnesses. That’s important because essentially everybody put in writing exactly what they wanted the Court to hear, so that was all the Court had to go on.
Following the hearing, the Court found the following facts:
- That since 1999, the plaintiff has sold nearly 70 commercial and residential products, ranging from surface cleaning and renewal products to cabinet and furniture restorers to leather and fabric cleaners to spot and stain removers. That included among those sales were six supposed incontestable trademarks for “REJUVENATE”.
- The defendants sell all purpose disinfectants under their REJUVenate trademark. Theirs is capitalized the R-E-J-U-V is capitalized, but the e-n-a-t-e in “REJUVenate” is lower case. That’s the only difference between trademarks.
- Those trademarks that defendants own are sold exclusively to wellness and beauty professionals and businesses, whereas the plaintiff sells primarily to individual consumers.
The Court then found that as COVID-19 cases spiked in 2020, the demand for surface cleaners and disinfectants skyrocketed. Empty store shelves quickly became a defining image of early pandemic days, and it was and continued to be a lucrative time to sell surface cleaners and disinfectants.
The rights to market Rejuvenate branded antibacterial cleaner and disinfectants is thus the ultimate issue in this case.
After the plaintiff had filed its original complaint, one of the defendants responded by asserting four counterclaims against the plaintiff, alleging that the plaintiff’s sale of disinfectant enhanced sanitizer products infringed on their federal trademark for REJUVenate All Purpose Disinfectants for infection control and prevention and biosecurity, which they have apparently owned since 2018. So you’ve got competing trademark infringement claims.
In response, the plaintiff moved to amend the complaint and attached exhibits to the first amended complaint. This is the one filed on September 30th that the defendants claimed included fabricated exhibits that were copies of the plaintiff’s product catalogs from 2016, 2017, 2018, 2019, and 2020, which purportedly contained all of the products available for sale and distribution in a given year. We’re going to find out why that particular fact was important on the amended complaint.
In that amended complaint, the plaintiff specifically alleged that it had continuously sold Rejuvenate Antibacterial Floor Cleaner as early as 2016. We’re talking specifically about floor cleaner now. The product was listed in every catalog that’s attached to the amended complaint, including in a five gallon bucket quantity. The plaintiff also attached an Amazon.com image to the complaint, which claimed that it showed consumer reviews for that antibacterial floor cleaner from March 2017 to January 2019.
The plaintiff also emphasized in the amended complaint that its sales of Rejuvenate branded cleaning products included, “antibacterial cleaners that disinfect surfaces”, specifically antibacterial floor cleaner.
We’ve got the plaintiff filing an amended complaint in response to the defendant’s claim of an alleged infringement of trademark for the floor cleaner. They’re filing images associated with that amended complaint that show that floor cleaner being listed in those product catalogs, together with an Amazon.com page with reviews of the product from clients that supposedly bought the product filed again with that amended complaint.
The defendants then, on their motion for sanctions, assert that each of the exhibits that are filed on the amended complaint were fabricated and that the plaintiff relied on those falsified documents to misrepresent its prior years of sales of disinfectant products and to bolster its claim of infringement.
Now, after the plaintiffs filed its first amended complaint, the defendants became suspicious about what they perceived as a lack of support for the plaintiff’s disinfectant sales claims. They then hired two experts, one was a forensic photographic expert to analyze the first amendment complaints, product catalogs as well as Amazon.com image. That expert specialized in digitally enhanced photography and was often hired as an expert to analyze the authenticity and reliability of images.
You may have seen in the Johnny Depp trial recently the questions of fabrication of images that were raised there and this is a similar kind of situation, although different kinds of fabrication. Point is, be aware when you’re looking at images that there’s a potential that there have been changes to those images that you want to be thinking about when it comes to ESI.
The defendants also hired an expert in regulatory matters involving the US EPA to analyze the antibacterial floor cleaner’s label from the product catalogs that were attached to the amended complaint.
Now, keep in mind that those product catalogs that were attached to the amended complaint were never produced in discovery. We get to that in the Court’s ruling in a little bit.
Now, the photographic expert analyzed the product catalogs filed with the first amendment complaint and compared them to those that were produced in discovery, then he issued a written report. In his written report, the expert concluded that there were numerous alterations throughout the exhibit catalogs, including differences in type, style, font and color, thicknesses of photo borders, label designs, and the sharpness and quality of the images.
He also found several discrepancies between product bottles and their reflections, and he determined that these errors were evidence that the catalogs had been doctored.
In total, the photographic expert found that nearly 30 images had been altered in some fashion, all relating to one product — the antibacterial floor cleaner — which again is the subject of the cross motions for trademark infringement. Based on his experience, the expert concluded that such changes could not have occurred through mere carelessness.
Additional record evidence from the regulatory expert also showed that the exhibit catalogs were fabricated based on evidence of the labels that they could not have existed before 2021, but are included as exhibits of the amended complaint as products for sale from 2016 through 2019. That’s with regard to the catalogs; you’ve got both experts saying there’s evidence here that says that these images were completely fabricated.
Now, with regard to the Amazon.com page, the photographic expert found that the exhibit was not a screenshot of an Amazon.com webpage as the plaintiffs represented but was instead a PDF from Amazon.in in India. The expert found that the Indian flag had been erased from the search bar and that the domain suffix was altered from .in to.com to show that it was from the United States. In his opinion, the expert concluded that it was, “A mistake which he cannot conceive of having happened accidentally.”
Now, the plaintiffs really offered no explanation at all for the altered images in their response to the motion for sanctions. What they did offer was a declaration from the plaintiff’s CEO in which he explained — only thing he really said to respond to these allegations — was that the plaintiff had historically generated multiple, what he called pitch catalogs, and catalogs designed for specific trade shows, and that prior counsel had inadvertently used the wrong catalogs in the first amended complaint.
That explanation, according to the Court, contradicted plaintiff’s earlier representations to the defendant, and to the Court, that the product catalogs contained all of plaintiff’s products made available in a given year. More importantly, according to the Court, the plaintiff had not provided any independent supporting evidence that would corroborate this pitch catalog theory that the CEO included in his declaration. The Court found that there were no pitch catalogs produced in discovery, that invoices provided regarding sales of the floor cleaner product did not support sales of the product, and that there was a reasonable inference that the plaintiffs doctored the catalogs to make it appear as though they were selling a product that it was not selling. Because the plaintiffs did not take any testimony or cross examine any witnesses at the hearing, there was absolutely no effort to explain or dispute this fact.
The Court also found that there was absolutely no legitimate explanation put forward as to the doctored images, and that the CEO ignored the evidence of the doctored images in his declaration. He basically didn’t respond to it at all. The Court went on to identify multiple pieces of additional behavior by the plaintiff that were fraudulent and misleading to the Court with regarding invoicing of sales for hand sanitizer and the lack of sales for four different trademarks that were registered to the plaintiffs. In essence, the Court found that the plaintiff was putting forth all kinds of fraudulent information to try and bolster its support for its trademarks, when in reality it had no sales for products under those trademarks.
The Court really boiled it down factually to this, that the plaintiff, in order to bolster its argument that its products were sufficiently similar to the defendant’s products, relied heavily on the antibacterial floor cleaner sales. The time frame of those sales is critical not only to prevail on its own claims, but also to defeat the defendant’s counterclaims, because unlike the defendants, the plaintiffs does not own a federal registration in disinfectants which would cover the floor cleaner so it must show pre 2018 sales of a sufficiently similar antibacterial product.
In essence, the fabrications of the images and the invoices and the sales information really helped the plaintiffs to meet the elements of their trademark infringement claims and to try and defeat the counterclaims brought by one of the defendants.
In terms of the Court’s analysis, I think one of the things that’s interesting here is the Court never really looks at what we would normally look at here on Case of the Week, which is Rule 37, because we’re not talking about the spoliation of ESI in a context that we normally are discussing on the Case of the Week. Instead, we’re talking about the fabrication of evidence and the deliberate misrepresentation of facts to the Court, and the Court starts with saying that it has the ability to impose the most severe sanction, which is dismissal of prejudice where a party “deceives a court or abuses the process at a level that is utterly inconsistent with the orderly administration of justice or undermines the integrity of the process.”
Now, the Court does note that before exercising its inherent power to dismiss a case, the Court has to consider six factors:
- First, the degree of the wrongdoer’s culpability.
- Second, the extent of the client’s blameworthiness if the wrongful conduct is committed by its attorney, recognizing that we seldom dismiss claims against blameless clients.
- Third, the prejudice to the judicial process and the administration of justice.
- Fourth, the prejudice to the victim.
- Fifth, the availability of other sanctions to rectify the wrong by punishing culpable persons.
- Sixth, the public interest.
The Court then goes through an analysis of each of those six factors, some of which are combined.
On culpability, the Court finds, as is pretty clear from the facts we talked about, that the plaintiff clearly acted in bad faith, and never owned up to their bad conduct even when caught red handed. Although the plaintiff argues that it should have been lauded for bringing the issues to the defendant’s attention, in reality, all that happened was that the plaintiff sent a red line version of the proposed second amended complaint to opposing counsel without any explanation of why an amendment was necessary. Meaning counsel didn’t say, “hey we found out that the images included in the first amendment complaint were not correct. We’re giving you a second amended complaint with the correct images. We’ve also amended the allegations in that second amended complaint that are properly supported by the new images.”
The Court found, based on that failure to do that by the plaintiff, that that factor was met.
Second, the Court looked at blame worthiness, and the blame worthiness is really the degree to which the client was at fault or whether the litigation or misconduct was perpetrated by his attorneys. Here, there was absolutely no evidence that the attorneys did the fabricating of the evidence.
From my perspective, looking at the evidence, we see that the first attorney resigned possibly — I say possibly because there’s nothing in the decision to support this — possibly because he or she learned that the evidence in the first amendment complaint that it filed had been fabricated and the client did not want to own up to that.
The second counsel, upon being hired, within six weeks immediately provided a redline copy of a second amended complaint that corrected the wrongdoings of the first complaint. It makes it look like both attorneys really knew what the client’s behavior was, and they had to put it before the Court to be able to decide the client’s fate.
There are obviously things that could have happened behind the scenes as to whether or not attorneys tried to get the plaintiffs to dismiss their claims, but remember here, because there are counterclaims asserted against the plaintiffs, a dismissal won’t cure the misrepresented evidence put before the Court. Dismissal by the plaintiffs is not the only option here. It’s not an option that will solve the problem.
On blame worthiness, the Court really found that that had been met. That it was, in fact, the client who was responsible for the fabrication of the evidence.
The third and fourth factors really looked to prejudice to the defendant and the Court said that it would be hard to imagine more prejudice to a party than fabrication of evidence that is created with the intent of painting a better picture for one party over the other.
The Court noted that the plaintiff relied on those fabrications of evidence to increase settlement pressure on the defendant by misleading the defendants about its prior hand sanitizer sales. The Court notes that while those negotiations were ultimately unsuccessful, they certainly detracted from other litigation issues and overestimated the defendant’s liability in the case.
As we know from litigating, whenever someone presents something to you, you have a need to take it to your client, but you also have a need to investigate it thoroughly. Here, taking the time to investigate those allegations thoroughly really detracted from the defendant’s ability to move their counter claims forward, so that factor of prejudice to the defendant on the third and fourth factors here really does weigh in favor of the defendant according to the Court.
Fifth and sixth factors are really the availability of lesser sanctions and the benefit to the public. The Court discusses here that whether a lesser sanction would be sufficient to deter future conduct. Really, it wasn’t going to happen. The Court finds that the level of misconduct here was so severe that it is in the public interest to acquiring the defrauding party to forfeit its claims. Essentially, you’ve misled the public so greatly here, and you’ve used up court resources that a lesser sanction isn’t going to cure those problems.
The Court also looked at whether the plaintiff offered any alternative sanction, but the plaintiff did not. The plaintiff also claimed that it cured the existing problems by filing the second amended complaint with new exhibits and that it also had meritorious claims that should be permitted to go forward.
The Court disagreed, said that the plaintiff’s subsequent attempts to remove the fabrication were really irrelevant and that its past conduct is sanctionable and entered the dismissal with prejudice.
The Court had one last quote that I think is important in which it stated:
“Our adversary system for the resolution of disputes rests on the unshakable foundation that truth is the object of the system’s process, and even the slightest accommodation of deceit or lack of candor in any material respect quickly erodes the validity of the process.”
The Court then grants the dismissal with prejudice, also assesses attorney’s fees and costs as within its inherent authority, particularly where the party has litigated in bad faith.
We’ve got a dismissal here and fees that are awarded to the defendant, and the plaintiff’s claims are dismissed. Of course, there’s no particular statement here, but that still means that the defendants counterclaims are going to go forward. Not only do plaintiffs not have any claims, they still have to defend against the counterclaims brought by the defendants here.
What are our takeaways from this case? Well, from an ESI perspective, it’s pretty important. It is that it is incumbent upon you to analyze and question the evidence that’s given to you by your clients and ensure that what you are presenting to the Court is legitimate evidence. It is incredibly easy to doctor electronic information. We’ve seen it in other cases where, I’m not recalling the immediate name of the case, but where emojis were added to electronic evidence that weren’t available at the time of that version of iOS that was used on the mobile device. We’ve seen other instances on our case of the week where information is being doctored. It’s really important that you be aware that that’s a potential issue and that you pay attention to that. It is so easy to alter ESI and it’s your job as counsel to make sure what you put before the Court is legitimate.
It does seem clear here in this case that at some point, both of the counsel for plaintiff, the one who withdrew, as well as the more recent counsel, learned of the fabrication and sought to put it before the Court and let the client take the lumps. That’s really the proper way to proceed when you become aware that information has been presented to the Court that is incorrect, you cannot ethically hide those misrepresentations from the Court and it is in your best interest as counsel to protect you and your reputation by ensuring that. If it’s the client’s behavior, that’s an issue that the client takes responsibility for that from the Court.
In essence, in order to deal with these potential issues with ESI, you need to question what you are told and make sure that you’re putting the puzzle pieces together before bringing a complaint and that you’re questioning any behavior from your client that causes bells to go off, raises red flags, whatever euphemism you want to consider.
Now, it is always true on the case of the week that our Monday morning quarterbacking leaves us unable to know all the facts here, and that’s really the beauty of the attorney client privilege, but at the end of the day, you only have your reputation as an attorney to fall back on. Once that’s tarnished, it’s very, very difficult to put that genie back in the bottle.
There’s a great deal of incentive, whether you’re at law firms or others to have a new client have a significant case. Just heed my advice. Make sure it’s a good case with legitimate evidence before you bring it to the Court. The ramifications are significant.
Know and understand how ESI works and get experts to advise you on these issues. Your job is just to issue spot, to know that there’s a potential issue and then to get an expert. Here in this case, both the image expert and the regulatory expert were key to showing the level of fabrication that the plaintiffs had undertaken, and that would have been beyond what the average attorney can know, as well as what the average attorney could put in front of the court in terms of evidence. A court is always going to want expert testimony on those kinds of issues. Your job is to issue spot and then find experts to assist on those ESI issues, just as the counsel for the defendants did here.
That’s our case of the week for this week. Thanks so much for joining me. I’ll be back again next week with another decision from our eDiscovery Assistant database.
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Thanks. Stay safe and healthy out there and I’ll see you next week.