$8.5 Million in Sanctions for Willful Disregard of Client Discovery Misbehavior

One of the largest monetary sanctions in U.S. history was imposed on the plaintiff in Qualcomm Inc. v. Broadcom Corp., 2008 U.S. Dist. LEXIS 911 (S.D. Cal. Jan. 7, 2008). Several, but not all, of plaintiffs’ counsel were held to have committed sanctionable acts (or inaction) and referred to the California State Bar for investigation of possible ethical violations. Facts: the corporate plaintiff withheld from discovery “over 46,000 critical documents that extinguished [plaintiff] Qualcomm’s primary argument of non-participation in the JVT” — in other words, extinguished the plaintiff’s principal argument against one of the defendant’s affirmative defenses.

The charge against outside counsel was not intentional concealment but willful blindness — tacit complicity in the client’s discovery misbehavior. The Court “envision[ed] four scenarios” to explain counsel’s role in connection with the client misconduct:

First, Qualcomm intentionally hid the documents from its retained lawyers and did so so effectively that the lawyers did not know or suspect that the suppressed documents existed. Second, the retained lawyers failed to discover the intentionally hidden documents or suspect their existence due to their complete ineptitude and disorganization. Third, Qualcomm shared the damaging documents with its retained lawyers (or at least some of them) and the knowledgeable lawyers worked with Qualcomm to hide the documents and all evidence of Qualcomm's early involvement in the JVT. Or, fourth, while Qualcomm did not tell the retained lawyers about the damaging documents and evidence, the lawyers suspected there was additional evidence or information but chose to ignore the evidence and warning signs and accept Qualcomm's incredible assertions regarding the adequacy of the document search and witness investigation.

The Court rejected the first two possibilities — (1) successful client deception of the lawyers or (2) lawyer ineptitude — as “inconceivable” given the impressive credentials of plaintiff’s outside counsel, the massive nature of the non-production, and the numerous corporate employees involved in the misconduct, “several of whom testified (falsely) at trial and in depositions.” The Court also found “no direct evidence establishing option three” — intentional, knowing involvement by counsel in the client misconduct. The Court held that the lawyers engaged in sanctionable misconduct under scenario four:

[T]he Court finds it likely that ... one or more of the retained lawyers chose not to look in the correct locations for the correct documents, to accept the unsubstantiated assurances of an important client that its search was sufficient, to ignore the warning signs that the document search and production were inadequate, not to press Qualcomm employees for the truth, and/or to encourage employees to provide the information (or lack of information) that Qualcomm needed to assert its non-participation argument and to succeed in this lawsuit. These choices enabled Qualcomm to withhold hundreds of thousands of pages of relevant discovery and to assert numerous false and misleading arguments to the court and jury. This conduct warrants the imposition of sanctions.

This is akin to the ignoring-the-red-flag standard employed in securities fraud cases. The Court imposed sanctions under a combination of Rules 26(g), 37 and 11, and alternatively under the inherent power of the court:

[T]he Court believes the federal rules impose a duty of good faith and reasonable inquiry on all attorneys involved in litigation who rely on discovery responses executed by another attorney. See Fed. R. Civ. P. 26 Advisory Committee Notes (1983 Amendment) (Rule 26(g) imposes an affirmative duty to engage in pretrial discovery in a responsible manner that is consistent with the spirit and purposes of Rules 26 through 37); Fed. R. Civ. P. 11 (by signing, filing, submitting or advocating a pleading, an attorney is certifying that the allegations have factual, evidentiary support). Attorneys may not utilize inadequate or misleading discovery responses to present false and unsupported legal arguments and sanctions are warranted for those who do so. Id. The facts of this case also justify the imposition of sanctions against these attorneys pursuant to the Court's inherent power. See, Fink[ v. Gomez], 239 F.3d [989] at 993-94 [(9th Cir. 2001)] ("an attorney's reckless misstatements of law and fact, when coupled with an improper purpose ... are sanctionable under a court's inherent power").

The Court concluded that “the evidence establishes that Qualcomm intentionally withheld tens of thousands of emails and that the Sanctioned Attorneys assisted, either intentionally or by virtue of acting with reckless disregard for their discovery obligations, in this discovery violation.” Qualcomm was sanctioned financially — in the sum of $8,568,633.24 — with an offset to the extent it made multimillion payments to its adversary pursuant to 35 U.S.C. § 285. The sanctions imposed on the attorneys, in addition to referral to disciplinary authorities, consisted of a finding that “the Sanctioned Attorneys assisted Qualcomm in committing this incredible discovery violation by intentionally hiding or recklessly ignoring relevant documents, ignoring or rejecting numerous warning signs that Qualcomm's document search was inadequate, and blindly accepting Qualcomm's unsupported assurances that its document search was adequate. The Sanctioned Attorneys then used the lack of evidence to repeatedly and forcefully make false statements and arguments to the court and jury. As such, the Sanctioned Attorneys violated their discovery obligations....”

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