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Federal Judge Blasts Alston Clients for Discovery Misconduct
The Recorder
August 15, 2008
Magistrate Judge Elizabeth Laporte
Image: Jason Doiy / The Recorder
Calling the discovery misconduct by defendants in a patent case "among the most egregious this court has ever seen," a federal judge sanctioned thehomestore.com, the National Association of Home Builders of the United States, and the National Association of Realtors on Tuesday.
Northern District U.S. Magistrate Judge Elizabeth LaPorte took the organizations -- all represented by Alston & Bird -- to task for destroying evidence and for claiming they didn't have key documents and source code, then somehow finding them once sanctions were threatened. She also chastised the defendants for having made little effort to preserve evidence to start with.
The order (.pdf) comes in Kevin Keithley's lawsuit against the Web company and two associations for allegedly infringing on his software patent for accumulating, organizing and displaying real estate information with their various Web sites, such as realtor.com and homebuilder.com.
LaPorte ordered the defendants to pay more than $250,000 in monetary sanctions to Keithley's attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner -- and gave Finnegan the green light to ask for more once the firm completes the extra work of analyzing the recently produced evidence. The judge previously granted Finnegan's request for about $150,000 in fees for bringing the motion about the destruction of evidence.
LaPorte also recommended that the jury be given an "adverse inference instruction" that if they find infringement has occurred after the destruction of source code took place, it will apply to the time since the Web sites were launched. She did stop short of granting terminating santions, which Finnegan had also sought.
"This is the first time I have ever been involved in a case where the discovery abuses have been so substantial," said Scott Mosko, a Palo Alto, Calif., Finnegan partner representing Keithley.
An Alston lawyer on the case, Bruce Rose, said the firm had no comment.
LaPorte was particularly irked by the way the defendants handled discovery requests for their source code without making much effort to preserve it after litigation had been threatened in 2001 (the suit was filed in 2003).
Neil Smith, a veteran IP lawyer with Sheppard, Mullin, Richter & Hampton, said saving the source code is essential. "In a patent case dealing with software, everyone should know that the source code is the most important and should be preserved," Smith said.
The chief technology officer at Homestore Inc., Phillip Dawley, said in depositions that an old database with the source code in question had been eliminated during a transfer to a new system after 2001. He also said that there had been a catastrophic computer failure that had wiped out that code in 2004.
Then in April of this year, after the motion for sanctions had been filed by Finnegan, Dawley had a "resurgence of memory" as LaPorte put it, and found that he had backed up some of the source code. Later that month, an engineer found more of the source code in question in a drawer in her cubicle.
LaPorte sniffed that a year and half after the "unambiguous" discovery order was issued, "only the very slowly dawning realization that serious sanctions would be imposed finally resulted in a key IT employee searching a readily accessible drawer."
And then there was the issue of the reports that are generated when people visit the Web sites. First, defense counsel at Alston & Bird told the court that its client didn't store the reports. But later they produced 480,000 of them.
LaPorte said that Homestore and the two associations' lack of a "written document retention policy," destruction of evidence when the computer crashed, and material misrepresentations to the court all added up to a "reckless disregard for their discovery obligation." However, she found that they didn't destroy evidence on purpose, saving them from terminating sanctions.
The case is Keithley v. The Homestore.com, 03-4447.
