Google Inc. v. American Blind & Wallpaper Factory, Inc. - Document No. 240

Google Inc. v. American Blind & Wallpaper Factory, Inc. Doc.
240
Case 5:03-cv-05340-JF Document 240 Filed 12/26/2006 Page 1 of 29
1 KEKER & VAN NEST, LLP

MICHAEL H. PAGE - #154913
2 MARK A. LEMLEY - #155830
KLAUS H. HAMM - #224905
3 AJAY S. KRISHNAN - #222476
710 Sansome Street
4 San Francisco, CA 94111-1704
Telephone: (415) 391-5400
5 Facsimile: (415) 397-7188
6
Attorneys for Plaintiff and Counter Defendant
7 GOOGLE INC.
8
UNITED STATES DISTRICT COURT
9
NORTHERN DISTRICT OF CALIFORNIA
10
11
GOOGLE INC., a Delaware corporation, Case No. C 03-5340-JF (RS)
12
Plaintiff, MEMORANDUM OF POINTS AND
13 AUTHORITIES IN SUPPORT OF
v. GOOGLE’S MOTION FOR
14 TERMINATING, EVIDENTIARY, AND
AMERICAN BLIND & WALLPAPER MONETARY SANCTIONS AGAINST
15 FACTORY, INC., a Delaware corporation ABWF FOR SPOLIATION OF
d/b/a decoratetoday.com, Inc., and DOES 1- EVIDENCE
16 100, inclusive,
Date: January 30, 2007
17 Defendants. Time: 9 a.m.
Courtroom: 3, 5th Floor
18 Judge: Hon. Jeremy Fogel
AMERICAN BLIND & WALLPAPER
19 FACTORY, INC., a Delaware corporation
d/b/a decoratetoday.com, Inc., PUBLICLY FILED VERSION
20
Counter-Plaintiff,
21
v.
22
GOOGLE INC.,
23
Counter-Defendant.
24
25
26
27
28
MEMO. OF POINTS AND AUTHORITIES IN SUPPORT OF GOOGLE’S MOTION FOR TERMINATING,

384709.02 EVIDENTIARY, AND MONETARY SANCTIONS AGAINST ABWF FOR SPOLIATION OF EVIDENCE
CASE NO. C 03-5340-JF (RS)
Dockets.Justia.com
1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION ...............................................................................................................1
4 II. FACTS .................................................................................................................................3
5 A. ABWF knew as early as July 2002 that it needed to preserve
documents. ...............................................................................................................3
6
B. ABWF had no document retention policy and never tried to preserve
7 documents for this litigation. ...................................................................................4
8 C. ABWF’s delay in collecting relevant documents compounded the harm
of ABWF’s failure to preserve documents. .............................................................5
9
1. ABWF did not seriously begin searching for documents until
10 June 2006. ....................................................................................................5
11 2. The delay in searching for documents was due to misconduct
by both ABWF’s litigation counsel and its former CEO, Steve
12 Katzman. ......................................................................................................5
13 D. ABWF never performed an adequate search for emails. .........................................9
14 E. ABWF’s former CEO, Steve Katzman, destroyed numerous
documents after leaving the company, and may have intentionally
15 destroyed damaging documents while at ABWF...................................................13
16 F. ABWF concealed Steve Katzman’s document destruction from Google
and from the Court. ................................................................................................14
17
III. ARGUMENT.....................................................................................................................17
18
A. The Court has broad discretion to sanction parties for discovery
19 misconduct. ............................................................................................................17
20 B. ABWF’s duty to preserve documents attached in July 2002.................................19
21 C. Dismissal is warranted because ABWF’s intentional spoliation and
cover-up tainted ABWF’s entire document production and touched on
22 numerous merits issues. .........................................................................................19
23 D. If the Court chooses not to dismiss ABWF’s claims, it should issue
evidence preclusion sanctions and adverse inference sanctions. ...........................23
24
E. The Court should issue monetary sanctions...........................................................25
25
IV. CONCLUSION..................................................................................................................25
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EVIDENTIARY, AND MONETARY SANCTIONS AGAINST ABWF FOR SPOLIATION OF EVIDENCE
384709.02
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 Advantacare Health Partners v. Access IV, No. C 03-04496 JF,
2004 WL 1837997 (N.D. Cal. Aug. 17, 2004) .................................................................. passim
5 Akonia v. United States,
938 F.2d 158 (9th Cir. 1991) .................................................................................................... 18
6
Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc.,
7 457 F.3d 1062 (9th Cir. 2006) .................................................................................................. 23
Campbell Indus. v. M/V Gemini,
8 619 F.2d 24 (9th Cir. 1980) ...................................................................................................... 18
9 Chambers v. NASCO, Inc.,
501 U.S. 32, reh’g denied, 501 U.S. 1269 (1991) .............................................................. 17, 18
10 Fire Ins. Exch. v. Zenith Radio Corp.,
747 P.2d 911 (Nev. 1987)......................................................................................................... 21
11
Fjelstad v. American Honda Motor Co.,
12 762 F.2d 1335 (9th Cir. 1985)................................................................................................... 20
Glover v. BIC Corp.,
13 6 F.3d 1318 (9th Cir. 1993) ...................................................................................................... 18
14 Halaco Eng’g Co. v. Costle,
843 F.2d 376 (9th Cir. 1988) .................................................................................................... 20
15 Hamilton v. Signature Flight Support Corp., No. C 05-0490,
2005 U.S. Dist. LEXIS 40088 (N.D. Cal. Dec. 20, 2005)........................................................ 24
16
Hynix Semiconductor Inc. v. Rambus, Inc.,
17 2006 WL 565893 (N.D. Cal. 2006) .......................................................................................... 19
In re Napster, Inc. Copyright Litigation, No. C MDL-00-1369 MHP,
18 2006 WL 3050864 (N.D. Cal. Oct. 25, 2006) ................................................................... passim
19 Intellectual Prop. Dev. Inc. v. TCI Cablevision, Inc.,
248 F.3d 1333 (Fed. Cir. 2001) ................................................................................................ 19
20 Nat’l Hockey League v. Metro. Hockey Club, Inc.,
427 U.S. 639 (1976).................................................................................................................. 19
21
National Ass’n of Radiation Survivors v. Turnage,
22 115 F.R.D. 543 (N.D. Cal. 1987)........................................................................................ 19, 25
Paramount Pictures Corp. v. Replay TV,
23 298 F. Supp. 2d 921 (C.D. Cal. 2004) ...................................................................................... 19
24 Roadway Express, Inc. v. Piper,
447 U.S. 752 (1980).................................................................................................................. 18
25 Unigard Sec. Ins. Co. v. Lakewood Eng’g & Mfg. Corp.,
982 F.2d 363 (9th Cir. 1992) ........................................................................................ 17, 18, 21
26
West v. Goodyear Tire and Rubber Co.,
27 167 F.3d 776 (2d Cir. 1999) ..................................................................................................... 19
28
ii
384709.02
1 TABLE OF AUTHORITIES
(cont'd)
2 Page(s)
3 Wyle v. R.J. Reynolds Indus., Inc.,

709 F.2d 585 (9th Cir. 1983) .............................................................................................. 19, 20
4
Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc.,
5 419 F.3d 925 (9th Cir. 2005) .................................................................................................... 23
Zubulake v. UBS Warburg LLC,
6 220 F.R.D. 212 (S.D.N.Y. 2003) .............................................................................................. 19
7
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12
13
14
15
16
17
18
19
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25
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iii
384709.02
1 I. INTRODUCTION
2 This is not your average spoliation motion. For years, American Blind and Wallpaper
3 Factory (“ABWF”) has produced virtually no documents in this litigation. Most tellingly, even
4 though email was “the preferred way of communicating” among ABWF employees, their
5 production of internal emails in response to all of Google’s document requests, spanning years of
6 business, totals only one hundred thirty emails. Google—and this Court—were left to wonder
7 why, until recently. What ABWF wasn’t telling us is that their former CEO, Steve Katzman—
8 who was the only ABWF employee supposedly collecting and producing documents in this
9 litigation—was instead systematically destroying ABWF’s business records.
10 And how do we—and the Court—know this? Not based on Google’s speculation, or
11 inference, or argument, but rather on ABWF own judicial assertions: Mr. Katzman’s conduct
12 was so egregious that ABWF has filed a federal lawsuit against him alleging that Mr. Katzman
13 deliberately erased all of the contents of multiple ABWF computers. In ABWF’s own words:
14 14. At approximately 4:30 p.m. on May 18, 2006, Katzman and American Blind’s
CFO Gerald Curran participated in a telephone conference from Katzman’s
15 office at American Blind. At this time, various property of American Blind,
including files, documents, records, electronic data, computer files, and other
16 proprietary information was located in Katzman’s office and on the two desktop
computers also located in his office (the “Company Property”).
17
15. Later that evening on May 18, 2006, Katzman voluntarily resigned from
18 American Blind.
19 16. At approximately 8:00 a.m. on the morning of May 19, 2006, Joel Levine,
who was chosen to replace Katzman as CEO, entered Katzman’s former office at
20 American Blind and discovered that the Company Property that was present only
the day before was missing from Katzman’s office.
21
17. On or about May 19, 2006, Greg Rupprecht, American Blind’s Vice
22 President of Technical Operations, inspected the two desktop computers that
were in Katzman’s office at American Blind and discovered that all electronic
23 files (emails and documents) had been erased from those computers.
24 ...
25 33. Thereafter, Katzman returned his laptop computer to American Blind.
26
27
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1
384709.02 EVIDENTIARY, AND MONETARY SANCTIONS AGAINST ABWF FOR SPOLIATION OF EVIDENCE
1 34. Following its return, Gerg Ruppert [sic] inspected the returned laptop and
discovered that the entire contents of the laptop—including all electronic data,
2 documents, and files—had been erased from it.1
3 Coupled with the fact that, prior to Mr. Katzman’s departure, no one at ABWF made any
4 serious effort to preserve or to produce relevant documents, the result is that Google has been
5 denied the opportunity to receive many relevant documents.
6 ABWF’s discovery abuses are legion, but can be summarized as follows:
7 • Failure to preserve documents. ABWF took no steps to preserve documents in

8 its possession. ABWF waited four years to collect documents that are relevant to
9 the case. Thus, four years worth of documents were destroyed.
10 • Failure to search email. ABWF never adequately searched their employees’

11 email. ABWF has produced only 130 internal emails in this litigation! This is
12 true even though email was “the preferred way of communicating” at ABWF.
13 • Intentional spoliation by the former CEO after he left ABWF. Steve Katzman
14 was the CEO of ABWF until May 18, 2006. When he left the company, he erased
15 the files on all of his office desktop computers, and took his laptop. When the
16 laptop was returned, it too had been scrubbed of all files. These files were
17 certainly relevant because Katzman was central to this litigation, handling (or
18 failing to handle) all discovery responses personally.
19 • Concealing Katzman’s destruction of evidence. ABWF knew that Katzman had

20 erased his computer files, but never disclosed this fact to Google or to the Court.
21 Instead, ABWF entered into a cooperation agreement with Katzman and sat by
22 while he made blatantly misleading statements during his deposition about his
23 destruction of documents. ABWF also made blatantly misleading statements to
24 this Court so as to conceal Katzman’s wrongdoing.
25
26 1
Declaration of Ajay S. Krishnan in Support of Google’s Motion for Evidentiary and Monetary
Sanctions Against ABWF for Spoliation of Evidence (“Krishnan Decl.”), Ex. T (Complaint
27 submitted in American Blinds and Wallpaper Factory, Inc. v. Steve Katzman, Case No. 06-cv-
13576 (E.D. Mich.), (Docket Item No. 1)) (emphasis added).
28
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384709.02 CASE NO. C 03-5340-JF (RS)
1 Taken together, these egregious acts of spoliation implicate ABWF’s entire document
2 production. Google cannot know what documents ABWF destroyed, but we know from
3 ABWF’s own mouth that the destruction was massive and deliberate. This has denied Google
4 crucial evidence to defend against ABWF’s claims, and has denied Google the ability to
5 effectively cross-examine ABWF’s employees, both in deposition and at trial. ABWF’s
6 admitted deliberate conduct compels dismissal of its claims. Barring that, this Court should issue
7 evidentiary preclusion and adverse inference sanctions on the issues in this litigation that were
8 most affected by ABWF’s destruction of evidence. Whatever course the Court takes, monetary
9 sanctions are warranted.
10 II. FACTS
11 A. ABWF knew as early as July 2002 that it needed to preserve documents.
12 ABWF anticipated this litigation as early as July 2002. On July 23, 2002, Susan
13 Greenspon, ABWF’s trademark counsel and counsel of record for this case, wrote Google a letter
14 accusing its AdWords program of trademark infringement. Krishnan Decl., Ex. A. This Court
15 ruled that that letter sufficiently portended litigation to have created a justiciable controversy.2
16 ABWF and Google communicated about the dispute over the course of the next year. Id.,
17 Ex. B. In July 2003, ABWF made it absolutely clear that it knew the dispute was heading for
18 litigation. On July 11, 2003, Joe Charno, who was then ABWF’s Vice-President of E-
19 Commerce, sent Google another cease-and-desist letter, accusing the AdWords program of
20 trademark infringement. Id., Ex. C. Charno threatened that if ABWF’s demands were not met
21 within 7 days, he would “involve our legal department.” Of course, ABWF’s “legal
22 department”—in particular, outside counsel Susan Greenspon, the author of the July 23, 2002
23 letter—had already been involved in the dispute for roughly a year.
24 Subsequent events confirmed ABWF’s duty to preserve documents. On December 5,
25 2003, Google served ABWF with the declaratory judgment complaint and summons in this
26
2
See Order Denying Motion to Dismiss or Stay (Docket Item No. 20) at 6:1-5 (“A justiciable
27 controversy arose, at the latest, with ABWF cease-and-desist letters, stating that use of certain
keywords in Google’s AdWords program was deemed to infringe ABWF’s registered marks.”).
28
3
384709.02 CASE NO. C 03-5340-JF (RS)
1 case.3 On May 21, 2004, Google served ABWF with its first set of document requests. Id.,
2 Ex. D. Fact discovery closed on August 26, 2006, and expert discovery closes on December 29,
3 2006. Trial is set for May 15, 2007.
4 B. ABWF had no document retention policy and never tried to preserve documents for
this litigation.
5
Despite four years of litigation, ABWF never made any efforts to preserve documents.
6
ABWF does not have a document retention policy, and ABWF employees therefore regularly
7
delete, modify, or destroy documents as they see fit. Additionally, no one was instructed to
8
preserve or retain documents associated with this litigation. ABWF’s employees and former
9
employees testified as follows:
10
• Steve Katzman was ABWF’s founder and former CEO. He left ABWF on
11
May 18, 2006, roughly two months prior to his deposition. Id., Ex. E at ¶15.
12
Katzman testified that, although he assumed ABWF must have had a document
13
retention policy, he did not remember it. Ex. F at 207:22-208:5. Nor was he
14
familiar with any ABWF policies concerning retention or deletion of emails. Id.
15
He also testified that after litigation with Google began, he was never instructed to
16
preserve documents, nor did he instruct anyone to preserve documents. Id. at
17
208:6-14 & 209:11-19.
18
• Scot Powers, a marketing specialist at ABWF, testified that he did not know of
19
any document retention policy at ABWF. Id., Ex. G at 42:7-9. He also testified
20
that he would regularly delete drafts of any analysis reports he worked on. Id. at
21
41:23-42:6 & 42:19-43:2
22
• Michael Layne, ABWF’s Vice President of Internet Content, testified that he has
23
not seen any document retention rules or guidelines at ABWF, and that he was
24
never instructed to preserve emails. Id., Ex. H at 36:9-37:24. He also testified
25
that he is left to his own judgment as to what files to maintain. Id.
26
27
3
See Stipulation and Order Extending Time to Respond to Complaint (Docket Item No. 4).
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384709.02 CASE NO. C 03-5340-JF (RS)
1 Thus, ABWF took no steps to preserve documents in this case. Emails and other
2 documents at ABWF are, and always have been, destroyed in the usual course of business.
3 C. ABWF’s delay in collecting relevant documents compounded the harm of ABWF’s

failure to preserve documents.
4
ABWF’s failure to preserve relevant documents might not have been quite so prejudicial
5
if ABWF had taken early steps to collect all potentially relevant documents, as responsible
6
litigants do. Instead, ABWF waited until June 2006 to perform a serious search for relevant
7
documents—and even then, ABWF admits that at least one employee “did not do a very
8
thorough search.” Id., Ex. V. June 2006 was four years after ABWF knew about the potential
9
for this litigation, two and a half years after ABWF received the complaint, and more than two
10
years after ABWF received document requests. ABWF’s delay in collecting documents
11
therefore caused years of relevant documents to be destroyed. Both ABWF counsel and Steve
12
Katzman—who was ABWF’s CEO for the majority of this litigation—share responsibility for
13
this delay.
14
1. ABWF did not seriously begin searching for documents until June 2006.
15
To date, ABWF has produced roughly 50,000 pages of documents. Krishnan Decl., ¶ 27.
16
But ABWF only began searching for and collecting the vast majority of those documents after
17
May 25, 2006. Id., Ex. E at ¶¶25-26. ABWF first produced 2790 pages of documents on
18
October 26, 2005. Krishnan Decl., ¶ 27. On April 21, 2006, ABWF produced another 156 pages
19
of documents. Id. It was only after June 14, 2006 that ABWF produced the remaining 47,000
20
pages of documents. Id. Thus, roughly 94% of ABWF’s documents were collected and
21
produced only after Mr. Katzman’s destruction spree. There are two reasons why it took ABWF
22
so long to search for responsive documents.
23
2. The delay in searching for documents was due to misconduct by both
24 ABWF’s litigation counsel and its former CEO, Steve Katzman.
25 The first reason is that ABWF initially adopted completely unreasonable positions in
26 discovery, and only abandoned these untenable positions when Google made clear that it would
27 move to compel production. Notably, Google’s first set of document requests, issued in May
28
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384709.02 CASE NO. C 03-5340-JF (RS)
1 2004, contained 41 requests, which comprehensively covered practically every issue in this
2 case.4 Yet, ABWF only produced a paltry 3000 pages of documents between October 2005 and
3 June 2006. In May 2006 Google made it clear that it would move to compel. On May 12, 2006,
4 Google wrote ABWF a 6-page letter raising eleven substantive issues relating to Google’s first
5 set of document requests, ending with this clear message:
6 Finally, as a general matter, there has been a serious disparity in the willingness
of Google and ABWF to produce responsive documents in this litigation. Google
7 has produced well over a hundred thousand pages of documents in response to
ABWF’s document requests, and has refrained from withholding documents
8 based on objections that will ultimately be overruled. By contrast, ABWF has
produced relatively few documents and consistently claims it will produce
9 responsive documents without actually doing so. There are also serious
questions—based on the paucity of documents ABWF has produced—as to
10 whether ABWF has actually performed a diligent search, as required by the
Federal Rules, and whether ABWF is actually producing all responsive
11 documents when it claims to do so.
12 I am more than willing to engage in further dialogue about ABWF’s production

obligations, based on reliable representations as to what will be produced. I am
13 unwilling, however, to entertain another iteration of letter-writing in which
ABWF ignores issues that I raise, narrows the scope of Google’s discovery
14 requests without providing any justification, or claims that it will produce
documents without doing so.
15
Id., Ex. K.
16
Only after receiving this letter did ABWF began a proper search for documents.
17
The second reason for ABWF’s failure to search for documents before June 2005—now
18
revealed in ABWF’s own pleadings—is malfeasance by its own CEO, Steve Katzman.
19
According to Susan Greenspon, outside litigation counsel for ABWF, the typical procedure for
20
responding to document requests was simply to forward the requests to Steve Katzman, and rely
21
on him to gather and produce documents. Id., Ex. E at ¶3. It does not appear that outside
22
counsel exercised any supervision over that process, instead leaving it to the client.
23
As explained in more detail below, Steve Katzman is a bad actor. He stole documents
24
from ABWF when he left the company, and later intentionally destroyed massive amounts of
25
4
26 Id., Ex. I. Google did issue a second set of 13 document requests on May 10, 2006. Id., Ex. J.
But as ABWF itself admits, every single document ABWF produced in this case was responsive
27 to at least one document request from the first set of document requests. Id., Ex. X.
28
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384709.02 CASE NO. C 03-5340-JF (RS)
1 evidence. Katzman left the company on May 18, 2006, due to a change in the management and
2 ownership of ABWF. Krishnan Decl., Ex. E at ¶15. On May 26, 2006, Ms. Greenspon “re-sent
3 the new management all outstanding discovery requests from Google, including those made by
4 letter that had previously been provided to the former management.” Id. at ¶20. According to
5 Ms. Greenspon, she was then “informed by members of the current management, who were also
6 present under the former management, that they had no knowledge of certain of these
7 outstanding requests until we [Kelley Drye, ABWF’s litigation counsel] re-sent them on May 25,
8 2006.” Id. at ¶26. The point here is clear: ABWF now admits that Google’s document requests
9 simply disappeared into a black hole, and blames Steve Katzman, its own founder and CEO, for
10 that failure.
11 Google does not particularly care whether it was ABWF or its outside counsel who were
12 responsible for the document destruction that took place under Katzman’s watch. But because
13 the Court might care, it is worth noting that the “blame it on Katzman” storyline doesn’t quite
14 add up. It was ABWF’s lawyers who did not instruct their client to preserve documents, and
15 who did not even instruct Steve Katzman to collect documents until October 2005. More
16 importantly, it was ABWF’s lawyers who drafted the discovery responses (with or without
17 Katzman’s approval), raised frivolous objections that they would later abandon, and defended
18 Katzman’s inactivity by stonewalling Google.
19 Without rehashing here the entire history of Google’s expensive efforts to address the
20 shortcomings in ABWF’s document production,5 the following round of correspondence
21 illustrates why Steve Katzman was not the only one to blame for ABWF’s delay in collecting
22 relevant documents. On March 28, 2006, Google sent ABWF a four-page letter outlining five
23 categories of documents that ABWF had failed or refused to produce.6 In a responsive letter on
24
5
Some of this history is documented in Google’s two motions to compel document production.
25 See Docket Item Nos. 103 (filed June 8, 2006) and 186 (filed September 7, 2006). The first
motion became moot after ABWF capitulated to the positions Google took in that motion. Judge
26 Seeborg recently granted in part and denied in part Google’s second motion (although four of the
ten issues in that motion did become moot after ABWF abandoned prior unreasonable positions
27 it had taken during the meet-and-confer process). See Docket Item No. 217.
6
28 Krishnan Decl., Ex. L (Letter of March 28, 2006 from Ajay Krishnan to David Rammelt) at
7
384709.02 CASE NO. C 03-5340-JF (RS)
1 April 10, 2006, with regard to three of these categories, ABWF simply stated that it would
2 produce responsive documents. Id., Ex. M. ABWF did not even try to defend its prior objections
3 or positions. Notably, this entire exchange took place before May 26, 2006—the date that Ms.
4 Greenspon first learned that Steve Katzman had compromised ABWF’s document search.
5 Moreover, because ABWF’s counsel stated that ABWF would produce the documents, this is not
6 a situation where ABWF’s counsel did not know the documents existed as a result of Katzman’s
7 failure to circulate document requests. Rather, this was a situation where ABWF’s counsel had
8 simply raised frivolous objections and abandoned them, or where ABWF’s counsel failed to
9 follow up with their client on specific document requests.
10 With regard to the other two categories of documents mentioned in Google’s March 28th
11 letter, ABWF’s response turned out to be a blatant misrepresentation. Google had asked for
12 documents relating to how ABWF selected its trademarks and, more importantly, documents
13 “relating to research, analysis, or investigation as to ABWF’s decisions on how to name its
14 business.” Id., Ex. L at 3. ABWF’s response was that no responsive documents exist. Id.,
15 Ex. M at 2. As it turns out, ABWF had conducted three studies, through a marketing research
16 firm called Kaden Company, on precisely the issue of what it should call the company. Id., ¶28.
17 These studies, which were finally produced on June 15, were well known within ABWF. Id.,
18 Ex. F at 122:1-123:22; Ex. N at 78:17-20; Ex. O at 86:5-86:12. Perhaps Steve Katzman lied to
19 ABWF’s lawyers, and told them that no such documents existed. But Google stressed in its
20 March 28th letter the implausibility of “the position of ABWF—a company that uses several
21 different names to identify itself, claims several trademarks, and spends substantial resources in
22 trademark enforcement and litigation—that it has never internally discussed or analyzed which
23 name or names it ought to use.” Id., Ex. L at 3-4. Why didn’t ABWF’s lawyers question
24 Katzman, or others at ABWF, more thoroughly about document collection? Why did ABWF’s
25
2-4. Prior to outlining these five categories of documents, Google also raised one issue
26 concerning the manner in which ABWF produced documents. That issue was raised in Google’s
pending motion to compel, and Judge Seeborg ruled in Google’s favor. See Docket Item
27 No. 217.
28
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384709.02 CASE NO. C 03-5340-JF (RS)
1 lawyers represent on April 10, 2006, that no responsive documents existed? If Katzman really
2 was a rogue actor who sabotaged ABWF’s document production, he could only have done so
3 because ABWF’s lawyers were willing to cede all responsibility for discovery to him. The
4 resultant delays greatly compounded the harm of Katzman’s subsequent document destruction.
5 D. ABWF never performed an adequate search for emails.
6 Putting aside delays in document collection, ABWF never performed an adequate search
7 of company email. Most ABWF employees emphasize that when they were asked to collect
8 relevant documents, they looked only for correspondence with Google:
9 • Steve Katzman was ABWF’s founder and former CEO. He testified, “ I may
10 have early on been requested to produce e-mails or correspondences that I had
11 with Google, I believe.” Id., Ex. F at 208:17-20. These are all of the emails that
12 he recalls having printed.
13 • Scot Powers is a Marketing Specialist at ABWF. Id., Ex. G at 10:25-11:1. He

14 testified that he was only asked to look for correspondence about or to Google.
15 Id. at 35:4-36:24. As a result, he looked in a folder that he maintained concerning
16 Google, and “printed out the two or three e-mails that I had in there.” Id. This
17 was the full extent of Powers’ search for relevant emails.
18 • Joe Charno was ABWF’s Vice-President for E-Commerce, and was responsible
19 for ABWF’s on-line marketing programs. He testified that when he was asked to
20 search for documents, he “pull[ed] a complete history of e-mail and
21 communication between us [ABWF] and Google.” Id., Ex. N at 279:5-8.
22 • Michael Layne was ABWF’s Vice-President of Internet Content, and ABWF’s

23 Rule 30(b)(6) witness on ABWF’s company name, trademarks, and market
24 research on ABWF’s trademarks. Id., Ex. H at 14:19-24 & 5:16-6:4. He was not
25 even asked to search his email for responsive documents. He was simply asked to
26 produce a single, specific document. Id. at 35:14-36:8.
27
28
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384709.02 CASE NO. C 03-5340-JF (RS)
1 Of course, Google already has all of ABWF’s correspondence with Google. So while
2 that correspondence may have helped ABWF’s attorneys prepare for this litigation, those
3 document search instructions did nothing to aid in the preservation of relevant evidence.
4 To make matters worse, counsel for ABWF do not appear to know whose emails have
5 been searched. In its opposition to Google’s pending motion to compel discovery, counsel for
6 ABWF made a glaring admission regarding the nature of the document search at ABWF. The
7 context of the admission was a discovery dispute over documents related to an online survey—
8 the “American Wallpaper Survey”—that ABWF had performed. ABWF stated:7
9 This is at least the third time a search has been conducted to locate any additional
materials regarding this survey. It was explained to Google that American Blind
10 had concluded that the survey questions and methodology was [sic] most likely
created by a number of ex-employees including Steve Katzman, Sam Stephens
11 and possibly Ron Meyers and that was why no additional materials could be
located. As of the date of this filing, counsel for American Blind has requested
12 that American Blind search the email of these departed employees for any
responsive material, if that is possible and if that was not done in the prior three
13 searches.
14 This admission is stunning. Apparently, counsel for ABWF do not know whose emails
15 are being searched for responsive documents. Moreover, if these individual’s emails were
16 searched in order to find this particular set of documents, the implication is that ABWF did not
17 perform a general search of employee email accounts, using search terms broad enough to
18 capture all emails that are potentially relevant to this case. Indeed, Judge Seeborg recognized
19 this in his ruling on the motion to compel, although he appears to have been less concerned about
20 ABWF’s failure to search emails. Judge Seeborg stated, “It appears that American Blind may
21 not have previously recognized that its obligation to search for documents extended to searching
22 relevant email accounts, but that counsel has now taken steps to rectify the situation.” But as we
23 will see, Judge Seeborg did not have all of the facts in front of him. Not only has ABWF never
24 taken adequate steps to search employee email accounts, but the above quoted statement in
25 ABWF’s opposition was a serious misrepresentation to Judge Seeborg: at the time ABWF was
26
7
See Counter-Plaintiff American Blind & Wallpaper Factory, Inc.’s Opposition to Counter-
27 Defendant Google Inc.’s Motion to Compel Counter-Plaintiff ABWF to Satisfy its Outstanding
Discovery Obligations (Docket Item No. 196) at 9.
28
10
384709.02 CASE NO. C 03-5340-JF (RS)
1 representing to the Court that it would go back and search Mr. Katzman’s emails, it had already
2 filed a federal lawsuit based in part on Mr. Katzman having destroyed the files ABWF was
3 telling the Court it would go search. See infra §§ E & F.
4 Perhaps the most compelling evidence that ABWF never adequately searched for relevant
5 emails is the documents that were actually produced to Google. Putting aside the
6 correspondence between Google and ABWF, and marketing reports emailed to ABWF from
7 Coremetrics,8 ABWF has only produced 130 emails in this litigation! Id., ¶¶29-30. These emails
8 span the course of six years, from 2001 to 2006. Id.
9 Of these 130 emails, 65 were produced three months after fact discovery closed and
10 expose flaws in ABWF’s search for emails. Id. All 65 came “from Michael Layne’s email files”
11 (the “Layne Emails”). Layne was ABWF’s Vice President of Internet Content, but he recently
12 left the company. As the letter accompanying the production of the Layne Emails explains, “It
13 now appears that [when Layne was first asked to search for relevant documents] he did not do a
14 very thorough search.” Id., Ex. V. This alarming admission squares with Layne’s testimony that
15 he was never asked to search his email for responsive documents. Id., Ex. H at 35:14-36:8.
16 Rather, he claims he was only asked to search for a single, particular document. Id.
17 The 65 Layne Emails also reveal that other employees’ email accounts were not searched.
18 At least half of the internal emails produced in this litigation were Layne Emails. But Layne was
19 not a central player in this litigation. Those were Steve Katzman, Joe Charno, and Jeff
20 Alderman. Unlike Layne, they were named in ABWF’s Initial Disclosures, and were
21 knowledgeable about ABWF’s use of Google’s AdWords program. Id., Ex. W. How could it be
22
8
Coremetrics is a company that analyzes ABWF’s various online advertising programs,
23 including the Google’s AdWords program. Krishnan Decl., Ex. F at 183:14-183:17. ABWF
employees could have Coremetrics send them periodic computer-generated reports, by email, on
24 a large variety of sales or marketing issues that Coremetrics tracks (such as the number of visits
to ABWF’s website from a particular search engine, the number of items of a particular brand
25 that ABWF sold, etc.). Id. at 178:18-179:19 & 181:11-182:16. These emails were all sent from
the email address reports@coremetrics.com, included the title of the report in the subject line,
26 contained no text in the body of the email, and included the report as an attachment to the email.
Id., ¶31 and Ex. P (sample email cover page from Coremetrics). ABWF produced roughly three
27 thousand Coremetrics reports on a set of CDs. Id., ¶31.
28
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384709.02 CASE NO. C 03-5340-JF (RS)
1 that half of the miniscule number of emails produced in this action came from the email account
2 of a minor player? It must be that Layne is the only individual whose emails were thoroughly
3 searched. If the emails of Katzman, Charno, Alderman, and others had been thoroughly searched
4 as well, ABWF would have produced much more than 65 non-Layne emails.
5 Ultimately, it simply defies belief that a company as heavily dependent on e-mail as
6 ABWF would only have 130 internal emails, over the course of six years, relating to the issues in
7 this case. Joe Charno, ABWF’s Vice-President for E-Commerce, which included Google’s
8 AdWords program, testified that in the usual course of business “he was copied on tons of
9 emails” because “people like to copy people.” Id., Ex. N at 75:3-76:19. And Steve Katzman, the
10 company’s former CEO testified that e-mail was “our preferred way of communicating.” Id., Ex.
11 F at 209:3-10.
12 Moreover, ABWF produced roughly 350-365 emails that constituted correspondence
13 with Google. Id., ¶29. Many of these emails to or from Google contain, as indicated in the
14 string of prior emails that are included at the bottom of the message, purely internal ABWF
15 communications that were incidentally forwarded to Google. Id., ¶32 & Ex. Q. But most of the
16 time, these purely internal ABWF emails, which are obviously relevant to the issues in the case,
17 were not produced. Id., ¶32. Thus, the purely internal ABWF emails were either (1) destroyed
18 or (2) not found during ABWF’s inadequate search efforts, because ABWF’s employees were
19 only asked to search for communications with Google.
20 Testimony from William Smith, a former ABWF employee, establishes the obvious fact
21 that ABWF did in fact conduct via email a substantial amount of business relevant to this case.
22 Smith was a member of ABWF’s E-Commerce Marketing Group, the division responsible for
23 online advertising, including advertising through Google’s AdWords program. He was
24 responsible in part for determining ABWF’s bidding strategy in Google’s AdWords program.
25 Id., Ex. O at 125:15-22. Smith testified that:
26 • the E-Commerce Marketing Group would have discussions over email, and that
27 he would be assigned tasks via email (id. at 56:13-18);
28
12
384709.02 CASE NO. C 03-5340-JF (RS)
1 • he had sent more than five and received roughly ten purely internal ABWF emails
2 about bidding strategy for Google’s AdWords program (id. at 125:23-127:14);
3 • he would circulate monthly and quarterly reports—including reports analyzing

4 Google’s AdWords program—to the entire E-Commerce Marketing Group via
5 email (id. at 179:4-179:16 & 180:25-181:7);
6 • there were “a lot of emails back and forth” with an outside consultant, Jay
7 Withrow, who, along with Smith, conducted a study on the efficacy of the format
8 and layout of ABWF’s website (id. at 88:19-89:21); and
9 • he would receive e-mail reports from VidiEmi, a company that could track visitor
10 behavior on ABWF’s website (id. at 174:7-175:14).
11 Those emails were never produced.
12 E. ABWF’s former CEO, Steve Katzman, destroyed numerous documents after

leaving the company, and may have intentionally destroyed damaging documents
13 while at ABWF.
14 The most obvious category of document destruction that took place in this case was never
15 even disclosed to Google: Steve Katzman, ABWF’s former CEO, stole untold thousands of
16 documents from ABWF, and then destroyed them. Importantly, Google only learned of the
17 following facts on October 23, 2006, when Google first learned of the lawsuit between ABWF
18 and Katzman. Krishnan Decl., ¶ 33.
19 When Steve Katzman left ABWF on May 18, 2006, he took with him a portable
20 computer hard drive and one of his work laptops, which contained thousands of company files,
21 in order to start a competing business. Id., Ex. R at ¶3. He had also archived corporate records
22 on his home computer. Id. Katzman claims that there were at least 40,000 emails and
23 documents at issue. Id. at ¶5. Importantly, before leaving ABWF, Katzman also erased all of the
24 documents and emails from the two computers in his office. Id., Ex. S at 4-5.
25 For the next several weeks, ABWF’s lawyers attempted to recover these documents from
26 Katzman. Id. at 5-7. Katzman eventually mailed ABWF various emails and documents, which
27 he claimed constituted all of the work-related documents he had taken from ABWF. Id. at 6.
28
13
384709.02 CASE NO. C 03-5340-JF (RS)
1 However, when Katzman eventually returned the laptop he had taken, all of the documents on
2 that computer had also been erased. Id. at 7. On August 10, 2006, ABWF sued Katzman for the
3 theft and destruction of documents, violation of his employment contract, and misappropriation
4 of ABWF’s trade secrets. Id., Ex. T.
5 This series of events is troubling for two reasons. First, documents related to this case
6 have been intentionally destroyed. Steve Katzman knew more about this case than anyone else
7 at ABWF. Prior to leaving the company, he was designated as ABWF’s 30(b)(6) person most
8 knowledgeable for all 25 topics noticed by Google. Krishnan Decl., ¶34. Also, as the only
9 individual responsible for collecting documents for this litigation, he presumably had numerous
10 responsive documents in his possession, which appear not to have been turned over to outside
11 counsel. Thus, although it is unknown precisely which, and how many, documents were
12 destroyed, there can be no dispute that the spoliation was massive and systematic.
13 Second, these documents would not have been destroyed if ABWF had acted diligently in
14 the first place. As explained above, ABWF took no efforts to preserve documents, waited for
15 four years before searching for documents, and relied entirely on Katzman (who claims to have
16 almost no memory of collecting documents, id., Ex. F at 209:11-210:25) to collect documents.
17 F. ABWF concealed Steve Katzman’s document destruction from Google and from the
Court.
18
Perhaps more troubling than the fact that Steve Katzman intentionally destroyed
19
documents relevant to this case is ABWF’s effort to conceal that spoliation. ABWF concealed
20
Steve Katzman’s document destruction from Google and this Court for months, at the time when
21
Google could have learned more information about it. Google deposed Katzman as a third-party
22
witness on August 25, 2006—a mere 16 days before ABWF sued Katzman. At this point,
23
ABWF already knew that (1) Katzman had deleted all the files on his desktop computers at
24
work, (2) Katzman had deleted all the files from the laptop computer that he returned to ABWF,
25
and (3) that Katzman had an evil motive—he was attempting to use ABWF proprietary
26
information to found a business that would compete with ABWF. Yet, in order to cover up the
27
document destruction and the fact that Katzman’s credibility was seriously impaired, ABWF
28
14
384709.02 CASE NO. C 03-5340-JF (RS)
1 paid for Katzman’s representation in his deposition and entered into a cooperation agreement
2 with him. Id., Ex. R at ¶8 & Ex. F at 64:19-66:5. Moreover, Susan Greenspon—the attorney
3 who had drafted letters to Katzman demanding the return of ABWF’s computers—was present at
4 Google’s deposition of Katzman (id., Ex. F at 5:6-8), but said nothing when Katzman made
5 misleading statements under oath. For instance, ABWF allowed Katzman to create the
6 impression that it was in possession of all company files, even though many had been destroyed
7 by Katzman. Katzman testified as follows:
8 Q. Did you have a computer at American Blind?

A. Yes.
9 Q. Did you take it with you when you left the company?
A. No.
10 Q. Is there something -- that was responsive. Is there something more you would
like to say?
11 A. I had several computers in my office. I did have a laptop that I used for
traveling that I had at home that I returned to the company.
12 Q. Does the company now have all of your work computers?
A. Yeah. Absolutely.
13
Id. at 211:23-212:10. Similarly, ABWF permitted Katzman to create the impression that he was
14
not in competition with ABWF, which would have alerted Google to question him more closely
15
on his dispute with ABWF:
16
Q. I am just curious if you have an employer right now.
17 A. I am self-employed.
Q. What are you doing?
18 A. I am exploring various business opportunities.
Q. What kind of business opportunities?
19 A. Pretty much undefined at this point.
Q. Do you have any intention of working full time again?
20 A. At some point, I assume so, yes.
21 Id. at 106:23-107:7.
22 Moreover, ABWF concealed this spoliation of documents from the Court in pursuit of
23 favorable rulings against Google in Google’s recent motion to compel. Below are categories of
24 documents covered in Google’s motion to compel and the corresponding misleading statements
25 that ABWF made to the Court with regard to those documents:
26 Documents related to the “Online Customer Satisfaction Survey.” The Online
27 Customer Satisfaction Survey—which contains all of the feedback that customers provide to
28
15
384709.02 CASE NO. C 03-5340-JF (RS)
1 ABWF via their website—is ABWF’s primary method for obtaining and analyzing customer
2 feedback on its products. Every week, these survey results are emailed to upper management,
3 which included Steve Katzman. The survey results contain negative feedback and criticism
4 about the company that would bear on the strength of ABWF’s claimed trademarks. After
5 Google moved to compel, ABWF did attempt to recreate the raw survey results and produce
6 them to Google. But ABWF never produced documents, such as emails, containing upper
7 management’s analysis and discussion of these surveys. Those documents may well have
8 constituted valuable admissions concerning the weakness of ABWF’s marks, customer confusion
9 over or dissatisfaction with ABWF’s marks and products, and the like. ABWF represented to the
10 Court that “American Blind has repeatedly assured Google that it did not have any other
11 documentation associated with this survey.” What ABWF did not tell the Court was that Steve
12 Katzman likely destroyed that documentation.
13 Documents related to the Kaden Company reports. As explained above, the Kaden
14 Company performed three studies for ABWF analyzing consumer recognition of ABWF’s
15 tradenames, including the trademarks at issue in this case. Although these studies were well-
16 known at ABWF, ABWF claims to have no documents in its possession other than the reports
17 themselves. ABWF claims that it has no emails or documents analyzing the reports results, and
18 no communications with Kaden regarding the parameters of the study. The Kaden reports
19 seriously question the strength of the alleged ABWF trademarks at issue in this case. Id., ¶28.
20 Steve Katzman clearly knew about the Kaden reports and remembers having analyzed them. Id.,
21 Ex. F at 122:1-124:23. Discussions about the report by upper management surely would have
22 included discussion of—and admissions regarding—ABWF’s marks. In its opposition to
23 Google’s motion to compel, ABWF stated that “As of September 19, 2006, American Blind had
24 produced all Kaden documents in its possession and control.” Obviously, ABWF knew that as
25 of September 19, 2006, additional Kaden documents were likely not “in its possession or control”
26 because Steve Katzman had destroyed any documents associated with the Kaden reports that
27 were stored on his computers. ABWF concealed this necessary fact from the Court.
28
16
384709.02 CASE NO. C 03-5340-JF (RS)
1 Documents related to the American Wallpaper Survey. The American Wallpaper
2 Survey was an online survey that ABWF conducted in order to determine what portion of search
3 engine users who searched for the term “American Wallpaper” and clicked on a link to ABWF’s
4 website actually intended to visit ABWF’s website. As with the Kaden reports and the Online
5 Customer Satisfaction Survey, Google requested all documents associated with the survey,
6 including analysis of the survey results. ABWF only produced the raw survey data and two
7 emails reporting the survey results, without analysis. There were at least seven ABWF
8 employees copied on one of the emails, yet ABWF claimed not to have any other documents
9 containing survey analysis. It is with regard to this email that ABWF made the most misleading
10 statement to this Court:9
11 This is at least the third time a search has been conducted to locate and additional
documents concerning this survey. It was explained to Google that American
12 Blind had concluded that the survey questions and methodology was [sic] most
likely created by a number of ex-employees including Steve Katzman, Sam
13 Stephens and possibly Ron Meyers and that was why no additional materials
could be located. As of the date of this filing, counsel for American Blind has
14 requested that American Blind search the email of these departed employees
for any responsive material, if that is possible and if that was not done in the
15 prior three searches.
16 While promising the Court that it would go back and search Mr. Katzman’s email,
17 ABWF intentionally obscured the fact that Steve Katzman’s emails could not be searched
18 because he had deleted them. In so doing, ABWF concealed Katzman’s wrongdoing both from
19 the Court and from Google.
20 III. ARGUMENT
21 A. The Court has broad discretion to sanction parties for discovery misconduct.
22 District Courts may impose sanction as part of their inherent power to “manage their own
23 affairs so as to achieve the orderly and expeditious disposition of cases.” Chambers v. NASCO,
24 Inc., 501 U.S. 32, 43, reh’g denied, 501 U.S. 1269 (1991); Unigard Sec. Ins. Co. v. Lakewood
25 Eng’g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992). This power includes the “broad
26
9
See Counter-Plaintiff American Blind & Wallpaper Factory, Inc.’s Opposition to Counter-
27 Defendant Google Inc.’s Motion to Compel Counter-Plaintiff ABWF to Satisfy its Outstanding
Discovery Obligations (Docket Item No. 196) at 9 (emphasis added).
28
17
384709.02 CASE NO. C 03-5340-JF (RS)
1 discretion to make discovery and evidentiary rulings conducive to the conduct of a fair and
2 orderly trial.” Campbell Indus. v. M/V Gemini, 619 F.2d 24, 27 (9th Cir. 1980); In re Napster,
3 Inc. Copyright Litigation, No. C MDL-00-1369 MHP, 2006 WL 3050864 at *3 (N.D. Cal.
4 Oct. 25, 2006).
5 Courts may sanction parties responsible for spoliation of evidence in four ways that are
6 relevant here:
7 • First, the “Court may enter a default judgment against the party responsible for
8 destroying evidence.” Advantacare Health Partners v. Access IV, No. C 03-
9 04496 JF, 2004 WL 1837997 at *4 (N.D. Cal. Aug. 17, 2004) (citing Chambers,
10 501 U.S. at 45).
11 • Second, “a Court may instruct the jury that it may draw an inference adverse to
12 the party responsible for destroying the evidence.” Id. (citing Glover v. BIC
13 Corp., 6 F.3d 1318, 1329 (9th Cir. 1993), and Akonia v. United States, 938 F.2d
14 158, 161 (9th Cir. 1991)).
15 • Third, “a court can exclude witness testimony proffered by the party responsible
16 for destroying the evidence and based on the destroyed evidence.” In re Napster,
17 2006 WL 3050864 at *4 (citing Glover, 6 F.3d at 1329, and Unigard, 982 F.2d at
18 368-69).
19 • Fourth, “a Court may assess attorney’s fees.” Advantacare Health Partners, 2004
20 WL 1837997 at *4 (citing Chambers, 501 U.S. at 45, and Roadway Express, Inc.
21 v. Piper, 447 U.S. 752, 764 (1980)).
22 When fashioning a remedy for spoliation of evidence, a Court should consider a sanction
23 designed to:
24 (1) penalize those whose conduct may be deemed to warrant such a sanction; (2)
deter parties from engaging in the sanctioned conduct; (3) place the risk of an
25 erroneous judgment on the party who wrongfully created the risk; and (4) restore
the prejudiced party to the same position he would have been in absent the
26 wrongful destruction of evidence by the opposing party.
27
28
18
384709.02 CASE NO. C 03-5340-JF (RS)
1 Advantacare Health Partners, 2004 WL 1837997 at *4 (citing Nat’l Hockey League v. Metro.
2 Hockey Club, Inc., 427 U.S. 639, 643 (1976); Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585,
3 589 (9th Cir. 1983); West v. Goodyear Tire and Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)).
4 B. ABWF’s duty to preserve documents attached in July 2002.
5 A duty to preserve documents typically attaches prior to the filing of a lawsuit. See, e.g.,
6 Unigard, 982 F.2d at 365, 369 (affirming the exclusion of plaintiff’s evidence because plaintiff
7 destroyed evidence two years before filing suit). Indeed, the duty to preserve documents attaches
8 “‘when a party should have known that evidence may be relevant to a future litigation.’” In re
9 Napster, 2006 WL 3050864 at *5 (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216
10 (S.D.N.Y. 2003), and citing National Ass’n of Radiation Survivors v. Turnage, 115 F.R.D. 543,
11 556-57 (N.D. Cal. 1987)). “The future litigation must be ‘probable,’ which has been held to
12 mean ‘more than a possibility.’” Id. (quoting Hynix Semiconductor Inc. v. Rambus, Inc., 2006
13 WL 565893 at *21 (N.D. Cal. 2006).
14 This Court has already found that ABWF created a justiciable controversy with its letter
15 of July 2002, which accused Google of infringement. The standard for a case or controversy in
16 this context is whether a letter or other conduct created a “reasonable apprehension” of litigation.
17 See Intellectual Prop. Dev. Inc. v. TCI Cablevision, Inc., 248 F.3d 1333, 1340 (Fed. Cir. 2001);
18 Paramount Pictures Corp. v. Replay TV, 298 F. Supp. 2d 921, 924 (C.D. Cal. 2004). ABWF,
19 having written a letter that was grounds for a declaratory judgment action, knew that future
20 litigation was “more than a possibility.”
21 C. Dismissal is warranted because ABWF’s intentional spoliation and cover-up tainted

ABWF’s entire document production and touched on numerous merits issues.
22
It is hard to understate the scope of ABWF’s wrongdoing in this case, or the level of bad
23
faith they have exhibited. This is not a case where we can limit the scope documents that have
24
been destroyed. Neither can ABWF dispute that the destruction was willful, having itself filed
25
suit alleging precisely that. ABWF’s entire document production was implicated. Thus, even
26
though the standard is high for issuing a dismissal sanction, it is warranted in this case.
27
28
19
384709.02 CASE NO. C 03-5340-JF (RS)
1 Typically, a court should consider four factors before dismissing a case due to spoliation:
2 “(1) the existence of certain extraordinary circumstances; (2) the presence of willfulness, bad
3 faith, or fault; (3) the efficacy of lesser sanctions; and (4) the relationship between the
4 misconduct and the matters in controversy.” Advantacare Health Partners, 2004 WL 1837997
5 at *5 (citing Halaco Eng’g Co. v. Costle, 843 F.2d 376, 379-80 (9th Cir. 1988)). Additionally,
6 the court may consider prejudice to the victim of the misconduct. Id. These five factors should
7 be considered with regard to the following four instances of discovery misconduct:
8 (1) ABWF took no steps to preserve documents, and as a result, four years worth of
9 documents were destroyed.
10 (2) ABWF never adequately searched their employees’ email, an immense source of
11 evidence in any civil case dealing with corporate conduct.
12 (3) Steve Katzman—the man at the center of document production and ABWF’s one-
13 time 30(b)(6) designee on every topic Google noticed—intentionally destroyed all
14 of his computer files when he left ABWF.
15 (4) ABWF’s lawyers intentionally concealed Steve Katzman’s conduct from Google
16 and from the Court.
17 Extraordinary circumstances. Extraordinary circumstances exist when there have been
18 abusive and deceptive litigation tactics, or when the circumstances are otherwise “extreme.”
19 Halaco, 843 F.2d at 380 (citing Fjelstad v. American Honda Motor Co., 762 F.2d 1335, 1337
20 (9th Cir. 1985), and Wyle, 709 F.2d at 589); Advantacare Health Partners, 2004 WL 1837997 at
21 *5. At the very least, the third and fourth categories of misconduct outlined above were abusive
22 and deceptive litigation tactics.
23 Moreover, the circumstances in this case are “extreme” due to the numerous types of
24 discovery misconduct, and their impact on this case. Importantly, the first two categories of
25 spoliation implicate ABWF’s entire document production. Any document ABWF produced may
26 have been contradicted or rendered irrelevant by other documents that were never produced.
27 Steve Katzman’s malfeasance only compounds the problem. Google simply does not know what
28
20
384709.02 CASE NO. C 03-5340-JF (RS)
1 documents damaging to ABWF were destroyed. This tainted document production therefore
2 completely undermines Google’s ability to cross-examine effectively any of ABWF’s employees
3 and former employees. Thus, Google’s depositions—all of which were of ABWF employees or
4 former employees, and all of which took place after ABWF discovered on May 19, 2006 that
5 Katzman had destroyed all of his documents—were potentially corrupted, as is Google’s ability
6 to cross-examine these individuals at trial. ABWF’s many instances of malfeasance and the
7 resulting taint of almost all of Google’s discovery is unquestionably “extreme.”
8 Willfulness, bad faith, or fault. Two of the four types of discovery misconduct listed
9 above reflect willfulness. The other two—a total failure to preserve documents and to collect
10 emails—demonstrates at least gross negligence. Steve Katzman may have acted alone in his
11 intentional destruction of computer files when he left ABWF, but he was ABWF’s CEO and
12 founder, not a rogue employee, and his acts in that role are ABWF’s responsibility. Moreover,
13 whatever innocence ABWF may have been able to plead at the time is now overshadowed by
14 ABWF’s efforts to conceal Katzman’s conduct from Google and this Court. This is willfulness
15 of the highest order.
16 Efficacy of lesser sanctions. A lesser sanction cannot place Google in the same position
17 it would have been in absent the spoliation. This is because ABWF’s conduct has contaminated
18 Google’s entire document production, and rendered Google incapable of effectively cross-
19 examining ABWF’s employees and former employees. Although Google discusses lesser
20 sanctions in the next section, such sanctions will not be a complete cure. An adverse inference
21 will mean nothing if ABWF’s employees can simply testify in ABWF’s favor, secure in the
22 knowledge that Google cannot meaningfully impeach them. See Fire Ins. Exch. v. Zenith Radio
23 Corp., 747 P.2d 911, 914 (Nev. 1987); Unigard, 982 F.2d at 369 (citing Fire Ins. Exch., 747 P.2d
24 at 914). Neither is it clear that a sanction barring ABWF from entering evidence on a particular
25 issue would necessarily remedy the spoliation. For instance, if Google bears the burden of proof
26 on the issue, and all of the relevant evidence was destroyed by ABWF, a preclusion sanction
27 would not be effective. Moreover, to the extent the sanction is intended to deter litigants like
28
21
384709.02 CASE NO. C 03-5340-JF (RS)
1 ABWF from destroying documents and then concealing it, an evidentiary sanction will not have
2 the same impact as a dismissal sanction.
3 Relationship between misconduct and matters in controversy. Without knowing
4 precisely what types of documents ABWF destroyed, it is hard for Google to state with certainty
5 their impact on this case. The harm of spoliation is somewhat speculative in any case, by
6 definition: if we knew what was in each destroyed document, there would be no harm. But this
7 is a minor obstacle, because ABWF—the party responsible for document destruction—bears the
8 risk of an erroneous ruling on spoliation. Advantacare Health Partners, 2004 WL 1837997 at
9 *4. Moreover, as set forth above, there are multiple instances in which testimony and other
10 documents lead one to expect that documents must exist, and yet ABWF no longer has any.
11 There are at least three extremely important issues in this case where the primary evidence is—or
12 rather was—in ABWF’s possession, and is now lost to us:
13 • Unclean hands and estoppel. ABWF accuses Google of permitting ABWF’s

14 competitors to bid deliberately on ABWF’s claimed trademarks in the AdWords
15 program. Krishnan Decl., Ex. U at 164:17-167:17. As it turns out, ABWF has
16 been bidding on its competitors’ trademarks in precisely the same manner. Id.10
17 The only question is whether ABWF did so deliberately. This type of evidence is
18 likely to be in ABWF’s corporate email. ABWF’s E-Commerce Marketing
19 Group routinely discusses ABWF’s AdWords bidding strategy by email. But it
20 appears that ABWF has destroyed all of the evidence on its bidding strategy.
21 • Strength of marks. ABWF conducted many studies about consumer recognition

22 of its trademarks, and customer satisfaction. ABWF destroyed a substantial
23 amount of this information. The strength of ABWF’s asserted marks will
24 determine (1) whether ABWF can bring an infringement claim on its asserted
25 marks that were merely descriptive, because ABWF must show that those marks
26
27 10
See also, Memorandum of Points and Authorities in Support of Google’s Motion for Summary
Judgment (filed Dec. 26, 2006) at § III.F.
28
22
384709.02 CASE NO. C 03-5340-JF (RS)
1 acquired secondary meaning; (2) whether there was a likelihood of confusion; and
2 (3) damages.11
3 • The cost to ABWF of diverted web traffic. ABWF alone possesses information
4 about the consumer behavior of visitors to ABWF’s website. If visitors to
5 ABWF’s website tend to spend a lot of money there, ABWF will claim
6 correspondingly high damages. Otherwise, ABWF cannot. Even ABWF admits
7 that this is a very complex issue that requires substantial analysis. All of that
8 evidence is in ABWF’s possession. Without it, Google cannot analyze ABWF’s
9 alleged lost-sales damages.
10 All three of these issues go directly to the merits of the case.
11 Prejudice to Google. Prejudice to the victim is an optional factor for the Court to
12 consider. Advantacare Health Partners, 2004 WL 1837997 at *5. Prejudice to Google has been
13 discussed in detail. Google cannot rely on the adequacy of ABWF’s document production. See
14 In re Napster, 2006 WL 3050864 at *12 (referring to prejudice as a significant issue when the
15 impact of the document destruction is in dispute). Thus, Google cannot rely on its ability to
16 cross-examine ABWF’s employees, either in depositions or at trial. Moreover, Google likely
17 lost substantial evidence on three important merits issues: (1) unclean hands and estoppel, (2) the
18 strength of ABWF’s claimed marks, and (3) the cost to ABWF of diverted web traffic. Prejudice
19 to Google is therefore substantial.
20 Because each of the five factors regarding a dismissal sanction weigh in favor of
21 dismissal, ABWF’s lawsuit should be dismissed.
22 D. If the Court chooses not to dismiss ABWF’s claims, it should issue evidence
preclusion sanctions and adverse inference sanctions.
23
If the Court believes that the dismissal sanction is too onerous, evidence preclusion
24
sanctions should issue for the same reasons that the dismissal sanction would have issued. See,
25
26 11
See Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., 419 F.3d 925, 927 (9th
Cir. 2005) (requiring secondary meaning before a descriptive mark will be entitled to trademark
27 protection); Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., 457 F.3d 1062, 1075-76
(9th Cir. 2006) (listing strength of marks as a factor when determining likelihood of confusion).
28
23
384709.02 CASE NO. C 03-5340-JF (RS)
1 e.g., In re Napster, 2006 WL 3050864 at *15. Here, the Court should preclude ABWF from
2 entering any evidence on the three merits issues with regard to which evidence was likely
3 destroyed: (1) unclean hands and estoppel, (2) the strength of ABWF’s claimed marks, and (3)
4 the cost to ABWF of allegedly diverted web traffic.
5 As discussed above, preclusion sanctions are not necessarily sufficient; an adverse
6 inference sanction may also be necessary. Such a sanction will issue if Google can show that:
7 (1) that the party having control over the evidence had an obligation to preserve it
at the time it was destroyed; (2) that the records were destroyed with a culpable
8 state of mind; and (3) that the destroyed evidence was relevant to the party's claim
or defense such that a reasonable trier of fact could find that it would support that
9 claim or defense.
10 In re Napster, 2006 WL 3050864 at *15 (internal quotations omitted) (quoting Hamilton v.
11 Signature Flight Support Corp., No. C 05-0490, 2005 U.S. Dist. LEXIS 40088 at *9 (N.D. Cal.
12 Dec. 20, 2005)). Here, ABWF both had control over the documents at issue and destroyed them.
13 With regard to culpability, ABWF was at least grossly negligent when it failed to take
14 any document preservation efforts and when it failed to search employee emails. Id. (finding
15 gross negligence to be a sufficient state of culpability). But ABWF was also acting willfully
16 when it raised frivolous objections and misrepresented that it had produced “all responsive
17 documents” even though it had not yet performed a search. Meanwhile, Steve Katzman was
18 intentionally destroying documents while he should have been collecting them. ABWF then
19 concealed that misconduct from the Court. The culpability requirement is amply satisfied.
20 Finally, the Court can presume that the destroyed documents were relevant. Advantacare
21 Health Partners, 2004 WL 1837997 at *7-*8. The Court need not merely presume this,
22 however, because we know that the destroyed evidence was relevant to at least three issues in
23 this case: (1) unclean hands and estoppel, (2) the strength of ABWF’s claimed marks, and (3) the
24 cost to ABWF of diverted web traffic. Thus, the Court should infer at summary judgment and
25 instruct the jury to infer at trial that ABWF destroyed evidence favorable Google on each of
26 these three issues.
27
28
24
384709.02 CASE NO. C 03-5340-JF (RS)
1 E. The Court should issue monetary sanctions.
2 “Monetary sanctions may be imposed where one party has wrongfully destroyed
3 evidence.” In re Napster, 2006 WL 3050864 at *15 (citing National Ass'n of Radiation
4 Survivors, 115 F.R.D. at 558-59). At the very least, Google is entitled to “attorneys’ fees
5 associated with bringing this motion,” as this motion was a cost imposed on Google directly as a
6 result of ABWF’s spoliation of evidence. Id.
7 IV. CONCLUSION
8 For the foregoing reasons, this Court should dismiss ABWF’s lawsuit in its entirety. If
9 the Court believes dismissal to be too onerous a sanction, the Court should enter evidentiary
10 preclusion and adverse inference sanctions against ABWF on the issues of (1) unclean hands
11 and estoppel, (2) the strength of ABWF’s claimed marks, and (3) the cost to ABWF of diverted
12 web traffic. In all events, the Court should award Google attorneys’ fees for this motion as a
13 monetary sanction.
14 Dated: December 26, 2006 KEKER & VAN NEST, LLP
15
16
By: /s/ Ajay S. Krishnan
17 AJAY S. KRISHNAN
Attorneys for Plaintiff and Counter Defendant
18 GOOGLE INC.
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384709.02 CASE NO. C 03-5340-JF (RS)

Google Inc. v. American Blind &amp; Wallpaper Factory, Inc. - Document No. 240

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Google Inc. v. American Blind & Wallpaper Factory, Inc. Doc.

1 KEKER & VAN NEST, LLP

MEMO. OF POINTS AND AUTHORITIES IN SUPPORT OF GOOGLE’S MOTION FOR TERMINATING,

3 Wyle v. R.J. Reynolds Indus., Inc.,

9 litigation—was instead systematically destroying ABWF’s business records.

25 33. Thereafter, Katzman returned his laptop computer to American Blind.

5 denied the opportunity to receive many relevant documents.

6 ABWF’s discovery abuses are legion, but can be summarized as follows:

7 • Failure to preserve documents. ABWF took no steps to preserve documents in

9 the case. Thus, four years worth of documents were destroyed.

10 • Failure to search email. ABWF never adequately searched their employees’

18 failing to handle) all discovery responses personally.

19 • Concealing Katzman’s destruction of evidence. ABWF knew that Katzman had

23 destruction of documents. ABWF also made blatantly misleading statements to

24 this Court so as to conceal Katzman’s wrongdoing.

5 effectively cross-examine ABWF’s employees, both in deposition and at trial. ABWF’s

9 sanctions are warranted.

11 A. ABWF knew as early as July 2002 that it needed to preserve documents.

23 letter—had already been involved in the dispute for roughly a year.

24 Subsequent events confirmed ABWF’s duty to preserve documents. On December 5,

3 2006. Trial is set for May 15, 2007.

3 C. ABWF’s delay in collecting relevant documents compounded the harm of ABWF’s

5 set of document requests, ending with this clear message:

12 I am more than willing to engage in further dialogue about ABWF’s production

18 Katzman’s inactivity by stonewalling Google.

20 shortcomings in ABWF’s document production,5 the following round of correspondence

9 follow up with their client on specific document requests.

13 “relating to research, analysis, or investigation as to ABWF’s decisions on how to name its

5 D. ABWF never performed an adequate search for emails.

8 relevant documents, they looked only for correspondence with Google:

12 he recalls having printed.

13 • Scot Powers is a Marketing Specialist at ABWF. Id., Ex. G at 10:25-11:1. He

15 Id. at 35:4-36:24. As a result, he looked in a folder that he maintained concerning

17 was the full extent of Powers’ search for relevant emails.

20 search for documents, he “pull[ed] a complete history of e-mail and

21 communication between us [ABWF] and Google.” Id., Ex. N at 279:5-8.

22 • Michael Layne was ABWF’s Vice-President of Internet Content, and ABWF’s

26 produce a single, specific document. Id. at 35:14-36:8.

8 the “American Wallpaper Survey”—that ABWF had performed. ABWF stated:7

3 telling the Court it would go search. See infra §§ E & F.

8 span the course of six years, from 2001 to 2006. Id.

5 Ultimately, it simply defies belief that a company as heavily dependent on e-mail as

12 Moreover, ABWF produced roughly 350-365 emails that constituted correspondence

19 only asked to search for communications with Google.

23 online advertising, including advertising through Google’s AdWords program. He was

25 Id., Ex. O at 125:15-22. Smith testified that:

3 • he would circulate monthly and quarterly reports—including reports analyzing

5 email (id. at 179:4-179:16 & 180:25-181:7);

8 and layout of ABWF’s website (id. at 88:19-89:21); and

11 Those emails were never produced.

12 E. ABWF’s former CEO, Steve Katzman, destroyed numerous documents after

18 and Katzman. Krishnan Decl., ¶ 33.

4 of ABWF’s trade secrets. Id., Ex. T.

16 almost no memory of collecting documents, id., Ex. F at 209:11-210:25) to collect documents.

7 by Katzman. Katzman testified as follows:

8 Q. Did you have a computer at American Blind?

25 that ABWF made to the Court with regard to those documents:

26 Documents related to the “Online Customer Satisfaction Survey.” The Online

12 Katzman likely destroyed that documentation.

22 included discussion of—and admissions regarding—ABWF’s marks. In its opposition to

1 Documents related to the American Wallpaper Survey. The American Wallpaper

10 statement to this Court:9

19 the Court and from Google.

4 Oct. 25, 2006).

Google Inc. v. American Blind & Wallpaper Factory, Inc. - Document No. 240

Google Inc. v. American Blind & Wallpaper Factory, Inc. - Document No. 240