Commercial Litigation and Arbitration

Expert Spoliation — Sanctions — Loss on the Merits

The patent dispute in ClearValue, Inc. v. Pearl River Polymers, Inc., 2007 U.S. Dist. LEXIS 46919 (E.D. Tex. June 28, 2007), turned on the question whether the defendant’s products had a high molecular weight. At trial, the plaintiffs presented no evidence of any tests showing that the products had a high molecular weight (instead, plaintiffs relied on marketing materials prepared by the defendant that stated that the products had a molecular weight in excess of one million). On cross-examination of plaintiffs’ expert on the third day of trial, the plantiffs' expert admitted that he had reviewed an unproduced molecular weight test showing that the products did not have a high molecular weight. Ordered by the Court to produce the testing, the plaintiffs produced two hitherto hidden tests. District Judge Leonard Davis found that both of the plaintiffs (the corporation and its principal, the inventor) and the plaintiffs’ supervising counsel ‛engaged in a willful, bad faith concealment of highly relevant, discoverable information from [defendant] which severely prejudiced [defendant].“ Pursuant Fed.R.Civ.P. 37 and the inherent power of the court, Judge Davis struck the plaintiffs’ pleadings, including their reply to the defendant’s counterclaim of patent invalidity, and order them — and their supervising (not litigation) counsel — to pay the defendant’s attorneys' fees incurred in the almost two years following the plaintiffs’ expert’s review of the unproduced reports. Quote of note:

Civil litigation in this country is conducted on an honor system. ... Each side must trust that the other has not withheld or destroyed the proverbial smoking gun. When one side intentionally violates this honor code, it damages not only the opposing party but the legal profession as a whole and the entire system of civil justice.

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