In Fendi Adele S.R.L., et. al. v. Filene's Basement, Inc., et. al., 2009 U.S. Dist. LEXIS 32615 (S.D.N.Y. Mar. 24, 2009), U.S. Magistrate Judge Michael Dolinger granted plaintiffs' motion seeking monetary sanctions for defendants' (and their counsel's) lackluster efforts to search for and produce relevant and responsive documents and electronically stored information.

This trademark litigation is predicated on plaintiffs' allegations that defendants sold counterfeit versions of plaintiffs' handbags. Plaintiffs served discovery requests seeking information related to the sale of the handbags.  Defendants initially produced just 60 documents and claimed they had no more.  After more documents came to light, defendants, through their counsel, claimed that documents related to the disputed handbags could not be produced because defendants did not retain records that track sales of specific items.  However, a subsequent meeting with defendants' senior corporate personnel revealed that the company indeed had more documents and did track sales of specific items.  In addition, defendants' handbag buyer testified in deposition that she had never been shown a copy of plaintiffs' discovery request and did not know that the underlying litigation involved allegations that defendants sold counterfeit bags.  Further deposition testimony from defendants' controller revealed that certain documents were summarized from the company's computerized database.  Moreover, a consultant hired to review defendants' books and records confirmed the existence of a "sophisticated point-of-sale IT system . . . that could be searched systematically for Fendi Branded goods."  Yet, defendants never searched the system.

Plaintiffs sought and received a court order requiring defendants to supply portions of its database pertaining to relevant transactions.  The court further ordered the deposition of defendants' computer specialist to ascertain what information resided on backup tapes, considering defendants' live tapes were limited to two years.  Defendants' refused to do a word search of the backup tapes arguing that the doing so was unduly burdensome. In response, the court ordered defendants to provide plaintiffs with copies of the backup databases at plaintiffs' expense, and plaintiffs would be permitted to conduct their own search.  Plaintiffs' searches yielded two additional and previously unidentified vendors of plaintiffs' merchandise.  Defendants subsequently produced documents related to those two vendors.  Plaintiffs' then re-deposed defendants' vice-president who had previously testified that defendants only had one vendor supplying them with plaintiffs' handbags. The deponent attributed the discrepancy to defendants' failure to retain documents.

The court held that defendants and their counsel had run afoul of FRCP 26(g)(1), finding that defendants deliberately withheld documents,  systematically delayed in producing documents and failed to determine the accuracy of representations that its document production was complete.  As a sanction, the court awarded plaintiffs their expenses incurred as a "necessary consequence" of defendants' delay.   The court invited plaintiffs to submit affidavits (1) documenting the expenses for which they seek reimbursement, and (2) demonstrating that the documented items of expense are properly reimbursable as attributable to defendants' discovery derelictions. Plaintiffs further sought cost-shifting with respect to the costs associated with its search of defendants' backup databases.  The court denied the request noting plaintiffs' failure to meaningfully discuss the applicable case law, FRCP 26(b)(2)(B) or the proportionality requirements of FRCP 26(b)(2)(C).