Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_00-md-01369/USCOURTS-cand-3_00-md-01369-31/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 28:1338 Copyright Infringement

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE NAPSTER, INC. COPYRIGHT 

LITIGATION

 

This Document Relates To:

 

UMG RECORDINGS, INC. et al., 

Plaintiffs,

v.

HUMMER WINBLAD VENTURE PARTNERS et al.,

Defendants. 

UMG RECORDINGS, INC. et al., 

Plaintiffs, 

v.

BERTELSMANN AG et. al.,

Defendants. 

JERRY LEIBER et al.,

Plaintiffs,

v.

BERTELSMANN AG et al., 

Defendants. 

No. C MDL-00-1369 MHP

No. C 04-1166 MHP

No. C 04-1351 MHP

No. C 04-1671 MHP

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CAPITOL RECORDS, INC. et al.,

Plaintiffs,

v.

BERTELSMANN AG et. al.,

Defendants. /

No. C 04-2121 MHP

MEMORANDUM & ORDER

Re: Motion for Sanctions

The above-captioned actions arise from the litigation involving alleged copyright

infringement by Napster, Inc. and its customers. Now before the court is plaintiffs UMG and EMI’s

(“plaintiffs”) motion for terminating sanctions or, alternatively, for evidentiary sanctions, seeking

sanctions against defendant Hummer Winblad (“Hummer”) for alleged intentional spoliation of

evidence. Having considered the parties’ arguments and submissions, and for the reasons set forth

below, the court enters the following memorandum and order.

BACKGROUND1

The instant motion relates to four actions now pending before this court as part of the In re

Napster Copyright Litigation multidistrict litigation (“MDL”) proceedings, Case No. C

MDL-00-1369 MHP. The history of this litigation is well documented in this court’s previous

orders. The instant motion arises out of plaintiffs’ allegation that Hummer knowingly and

intentionally deleted an undetermined number of emails which they had a duty to preserve and to

produce in response to plaintiffs’ document requests. Hummer denies that they knowingly and

intentionally deleted any emails which they had a duty to preserve. The facts relevant to the instant

motion are summarized below.

The basic timeline of events does not appear to be in dispute. Hummer invested in Napster

in May 2000. At that time, several lawsuits were pending against Napster (collectively “the Napster

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I litigation”). The litigation prompted Hummer to enter into a Common Interest and Defense

Agreement with Napster as part of its investment. On June 1, 2000, deposition and document

subpoenas were issued for Hummer officers John Hummer and Henry Barry in the Napster I

litigation, calling for all communications regarding Napster. Two days later, Hummer officer Ann

Winblad sent an email to nine Hummer employees, copying Hummer’s counsel, with the subject line

“a/c: E-mails regarding Napster and review of our long standing doc retention policies.” The email

read, in its entirety:

Hank has asked me to send this out to everyone.

All emails re napster at this point are related to the litigation and

should contain the “a/c” (attorney communications) symbol in the

subject line and djohnson@fenwick.com should be ccd. We should

not be sending e-mails on this subject anyway. Items from outsiders

such as resumes do not require this.

Hank Barry, [signature information]

Please also be aware of our e-mail policy. As we have all been

required to surrender Napster e-mails, this should reinforce

compliance with our long standing policies.

1. we do not retain e-mails, it is your responsibility to delete your

handled e-mails immediately

2. we do not us e-mail to chat about matters related to public

companies or matters such as the above

3. we do not retain written copies of e-mails in our files

4. our document retention policy is that we do not retain

documents on any public or acquired company and retain

limited information on private companies. all retained

information is stored in central files, pls do not retain other

docs in your own files unnecessarily

5. we do not retain files separate from our central files which are

periodically checked for compliance to policies

Please also review the above policies with any summer associates.

Boyd Dec., Exh. 1 (“the June 3, 2000 email”).

That same month, John Hummer met with Edgar Bronfman, Jr., CEO of Universal Music

Corp., who advised Hummer that the recording companies intended to sue Napster’s investment

firms if the alleged copyright infringement continued. John Hummer claims that Bronfman’s

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statement was part of a larger discussion, and that Hummer did not leave the meeting feeling that

Hummer Winblad was in danger of being named as a defendant in the Napster litigation.

On July 26, 2000, an additional lawsuit was filed against Napster (“the Katz lawsuit”),

naming Hummer Winblad and Henry Barry (among several others) as defendants. Hummer was not

served with this complaint until January 2, 2001. Hummer claims to have first learned about the

Katz lawsuit in Fall 2000. In December 2000, while the Napster I litigation and the Katz lawsuit

were both pending, a hearing took place before this court at which plaintiffs’ counsel were asked

whether they intended to name any additional defendants. Plaintiffs’ counsel responded that they

did not intend to bring suit against any additional parties at that time.

On August 10, 2000, this court entered an order preliminarily enjoining Napster from

“engaging in, or facilitating others in copying, downloading, uploading, transmitting, or distributing

plaintiffs’ copyrighted musical compositions and sound recordings . . . without express permission

of the rights owner.” A & M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896, 927 (N.D. Cal.

2000) (Patel, C.J.). The injunction was affirmed on appeal, A & M Records, Inc. v. Napster, Inc.,

239 F.3d 1004 (9th Cir. 2001), but the Ninth Circuit remanded with instructions to modify the

injunction’s scope. On March 5, 2001, this court entered an order consistent with the Ninth Circuit’s

instructions. See A & M Records, Inc. v. Napster, Inc., No. C MDL-00-1369 MHP, 2001 WL

227083 (N.D. Cal. Mar. 5, 2001) (Patel, C.J.), aff’d, 284 F.3d 1091 (9th Cir. 2002). After

concluding that it was not technologically feasible to comply with the court’s March 2001 order and

continue operating its file-sharing network, Napster ceased operations on July 1, 2001. The Katz

lawsuit was dismissed that same month.

The Napster I litigation continued, however, and during settlement negotiations with other

defendants the following August, counsel for plaintiffs sent a letter to Hummer threatening

litigation. Meanwhile, Hummer was attempting to sell its stake in Napster to defendant

Bertelsmann. In April 2002, during negotiations with Bertelsmann in which Hummer was

requesting an indemnification clause from Bertelsmann, John Hummer stated in an email that “We

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[Hummer Winblad] know we are going to be sued.” Boyd Dec., Exh. 35. The instant action was

filed a year later in April 2003. Hummer was served with the complaint in August 2003.

In February 2004, plaintiffs served Hummer with discovery requests in the instant action

requesting all Napster-related communications up through the filing of plaintiffs’ complaint in 2003. 

Plaintiffs were dissatisfied with the number of emails produced in response to this request,2

particularly in light of document productions from other parties which included Napster-related

communications involving Hummer that had not been produced by Hummer. In July 2005, plaintiffs

initiated a meet and confer process regarding Hummer’s discovery responses which included a

30(b)(6) deposition of Hummer partner Todd Forrest regarding Hummer’s document preservation

and collection efforts. Hummer maintained throughout that its document production was proper and

complete.

In April 2006, near the close of discovery, Hummer produced the June 3, 2000 email to

plaintiffs claiming to have mistakenly neglected to produce it earlier. Based on the June 3, 2000

email and plaintiffs’ perceived problems with Hummer’s document production, plaintiffs now allege

that Hummer personnel continued to communicate with each other via email regarding Napster,

including discussions about issues relevant to the claims and defenses in this action. Plaintiffs

further allege that Hummer personnel willfully deleted all of their Napster-related emails in order to

avoid turning them over in this litigation.

Hummer does not seem to dispute that they deleted any Napster-related emails on the

Hummer Winblad system that were generated after June 3, 2000. Hummer acknowledges that its

personnel routinely deleted emails on their system without regard to whether the deleted emails were

relevant to the instant litigation. However, Hummer alleges that Napster-related email

communication within Hummer Winblad decreased dramatically beginning in June 2000, and any

Napster-related emails involving Hummer Winblad personnel were preserved on Napster servers. 

Hummer further claims that no Napster-related communications were deleted willfully or

intentionally, and that any relevant communications that were deleted were deleted by inadvertence

or mistake.

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LEGAL STANDARD

District courts may impose sanctions as part of their inherent power “to manage their own

affairs so as to achieve the orderly and expeditious disposition of cases.” Chambers v. NASCO,

Inc., 501 U.S. 32, 43, reh’g denied, 501 U.S. 1269 (1991); see also Unigard Sec. Ins. Co. v.

Lakewood Eng’g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992) (excluding evidence as a sanction

for spoliation). This power includes the “‘broad discretion to make . . . evidentiary rulings

conducive to the conduct of a fair and orderly trial.’” Id. at 368 (quoting Campbell Indus. v. M/V

Gemini, 619 F.2d 24, 27 (9th Cir. 1980)).

The district courts’ inherent power to sanction may be invoked in response to destruction of

evidence. If a party breaches its duty to preserve evidence, the opposing party may move the court

to sanction the party destroying evidence. See Unigard, 982 F.2d at 365.

Courts may sanction parties responsible for spoliation of evidence in three ways. First, a

court can instruct the jury that it may draw an inference adverse to the party or witness responsible

for destroying the evidence. See Glover v. BIC Corp., 6 F.3d 1318, 1329 (9th Cir. 1993); Akiona v.

United States, 938 F.2d 158, 161 (9th Cir. 1991), cert. denied, 503 U.S. 962 (1992). Second, a court

can exclude witness testimony proffered by the party responsible for destroying the evidence and

based on the destroyed evidence. See Glover, 6 F.3d at 1329; Unigard, 982 F.2d at 368-69. Finally,

a court may dismiss the claim of the party responsible for destroying the evidence. See Allstate Ins.

Co. v. Sunbeam Corp., 53 F.3d 804, 806-07 (7th Cir. 1995); see also Chambers, 501 U.S. at 45

(“outright dismissal . . . is a particularly severe sanction, yet is within the court’s discretion”);

Alexander v. National Farmers Org., 687 F.2d 1173 (8th Cir. 1982), cert. denied, 461 U.S. 937

(1983) (dictum) (dismissal of claims is a severe sanction and may be warranted for “outrageous”

destruction of evidence).

A party’s destruction of evidence need not be in “bad faith” to warrant a court's imposition of

sanctions. Glover, 6 F.3d at 1329; Unigard, 982 F.2d at 368 n.2. District courts may impose

sanctions against a party that merely had notice that the destroyed evidence was potentially relevant

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to litigation. See Glover, 6 F.3d at 1329; Akiona, 938 F.2d at 161; cf. Unigard, 982 F.2d at 368 n.2

(sanctions may be imposed for “willfulness or fault by the offending party”). However, a party's

motive or degree of fault in destroying evidence is relevant to what sanction, if any, is imposed. 

Baliotis v. McNeil, 870 F. Supp. 1285, 1291 (M.D. Pa. 1994); see also Schmid v. Milwaukee

Electric Tool Corp., 13 F.3d 76, 79 (3rd Cir. 1994) (courts should choose “the least onerous sanction

corresponding to the willfulness of the destructive act and the prejudice suffered by the victim”).

DISCUSSION

Plaintiffs argue that Hummer had a duty to preserve Napster-related emails beginning in May

2000, and that this duty remained in place continuously throughout the request period. Plaintiffs

further allege that the June 3, 2000 email demonstrates that Hummer willfully deleted all Napsterrelated emails in violation of this duty. Plaintiffs also argue that Hummer deceived plaintiffs and the

court in failing to candidly explain the lack of emails produced after June 3, 2000. Finally, plaintiffs

claim that they have been prejudiced by Hummer’s deletion and deception, pointing to emails from

Hummer personnel gathered from other sources showing that Hummer continued generating

probative emails after June 2000. Plaintiffs therefore argue that they are entitled to a default

judgment on their claims against Hummer. In the alternative, plaintiffs request that the court

preclude Hummer from contesting certain issues related to the case, and that the jury be given an

adverse inference instruction regarding Hummer’s document deletion. In any case, plaintiffs

additionally request monetary sanctions.

In response, Hummer argues that it had no duty to preserve Napster-related emails before

learning of the Katz lawsuit, and between the dismissal of the Katz lawsuit and the commencement

of the instant action. Hummer further claims that the June 3, 2000 email was an instruction to

produce, rather than delete, Napster-related communications, and that the portion of the email

concerning document retention was unrelated to Napster. In addition, Hummer claims that Napsterrelated emails within Hummer decreased dramatically following Hummer’s May 2000 investment in

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Napster and that no emails were deleted willfully or intentionally. Finally, Hummer denies any

deceptive conduct and asserts that plaintiffs have offered no evidence of prejudice.

I. Hummer’s Obligation to Preserve Documents

As soon as a potential claim is identified, a litigant is under a duty to preserve evidence

which it knows or reasonably should know is relevant to the action. National Ass’n of Radiation

Survivors v. Turnage, 115 F.R.D. 543, 556-57 (N.D. Cal. 1987) (Patel, J.); Baliotis, 870 F. Supp. at

1290; see also Unigard, 982 F.2d at 365, 369 (upholding the district court’s exclusion of plaintiff's

expert testimony based on evidence plaintiff destroyed two years before filing suit). 

Plaintiffs argue that Hummer had a duty to preserve relevant evidence beginning in May

2000, when it first invested in Napster and became aware of the Napster I litigation. Hummer argues

that it did not anticipate becoming a party to the litigation when it invested in Napster in May 2000,

and that the obligation to preserve documents did not attach until Hummer learned about the Katz

lawsuit in Fall 2000. Hummer also suggests that its obligation ended in July 2001 when the Katz

lawsuit was dismissed, and did not attach again until August 2003 when it was served with the

instant lawsuit. Hummer clearly had a duty to preserve documents from Fall 2000 to July 2001, and

from August 2003 onward. The court must determine, therefore, whether the obligation existed

during the other times at issue.

A. Hummer’s Obligation Before Fall 2000

In support of their position that Hummer’s obligation to preserve attached in May 2000,

plaintiffs point to deposition testimony by Hummer officer Todd Forrest in which Forrest states that,

as early as May 2000, individuals were instructed to keep documents surrounding Napster,

instructions which continued throughout the relevant period. In addition, plaintiffs point to the fact

that Hummer was well aware of Napster’s legal troubles based on its pre-investment diligence, and

entered into a Common Interest Defense Agreement with Napster at the time of investment. Finally,

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plaintiffs point to the June 3, 2000 email as evidence that Hummer was taking specific actions with

an eye toward litigation during this time period.

Hummer claims that no obligation existed prior to the filing of the Katz lawsuit, because

prior to that point litigation was not “imminent.” Hummer’s claim that litigation must be

“imminent” is incorrect. The case cited by Hummer does not stand for this proposition. Rather, that

case states that “[t]here is no doubt that a litigant has a duty to preserve evidence it knows or should

know is relevant to imminent litigation.” A. Farber & Partners, Inc. v. Garber, 234 F.R.D. 186, 193

(C.D. Cal. 2006). The court in A. Farber thus held imminence to be sufficient, rather than necessary,

to trigger the duty to preserve documents. Furthermore, the court in A. Farber did not reach the

issue of when, exactly, the duty attached. The duty to preserve documents attaches “when a party

should have known that the evidence may be relevant to future litigation.” Zubulake v. UBS

Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003). See also National Ass’n of Radiation

Survivors, 115 F.R.D. at 556-57. The future litigation must be “probable,” which has been held to

mean “more than a possibility.” Hynix Semiconductor Inc. v. Rambus, Inc., 2006 WL 565893 at

*21 (N.D. Cal. 2006) (Whyte, J.).

Although Hummer took actions with respect to its Napster-related documents as early as

May 2000 that indicated knowledge of the relevance of the documents to litigation, this does not

necessarily suggest that Hummer should have anticipated litigation against Hummer. Rather,

Hummer’s actions were taken in its roles as an investor in a company that was embroiled in

litigation, and as a third party to that litigation that had been served with a subpoena. It is not

surprising that Hummer acknowledged a duty to preserve documents beginning in May 2000 —

Hummer was under a legal obligation to do so based on plaintiffs’ subpoena in the Napster I

litigation. This also explains the fact that Hummer sought the assistance of counsel in dealing with

Napster-related issues. None of this points to a reasonable expectation that Hummer itself would be

named as a defendant in any pending or future litigation.

The deposition excerpts cited by plaintiffs do not support the contention that Hummer

anticipated being sued as early as May 2000. Indeed, Forrest testified that the first time he

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anticipated being sued by plaintiffs was in August 2001, when Hummer received a letter from

plaintiffs’ counsel threatening litigation. Boyd Dec., Exh. 12, Forrest Depo. at 98:8-13. The fact

that Hummer was preserving documents in response to obligations arising out of a third-party

subpoena does not necessarily suggest that they anticipated being named as defendants.

As for the Common Interest & Defense Agreement between Napster and Hummer, Hummer

claims that it entered the agreement because “[Hummer] and Napster shared a common interest in

Napster’s achieving success in the lawsuit” based on Hummer’s multimillion dollar investment in

Napster. According to Hummer, the purpose of the agreement was “to cloak the Hummer Winblad

entities’ communications with Napster’s lawyers with the attorney-client privilege.” Whether or not

this was a legitimate aim of the Common Interest & Defense Agreement, the fact remains that

Hummer entered into this agreement because it shared an interest in Napster prevailing in the

lawsuit, not because it expected to be named as a party.

However, there is evidence that John Hummer, at least, knew or should have known that

litigation was probable as early as June 3, 2000. Hummer testified to being told by Edgar Bronfman,

Jr., CEO of Universal Music Corp., at that time that if Hummer did not “instantaneously comply

with the injunction, we will sue the venture firm and you people personally.” Boyd Dec., Exh. 13,

Hummer Depo. at 478:13–17. Hummer acknowledges this, but claims that he “did not leave that

meeting anticipating that Hummer Winblad would be sued.” Hummer Dec. ¶ 5. Given the already

pending litigation against Napster and the clear indication from Mr. Bronfman that the recording

industry would be targeting Napster’s investors, Hummer Winblad should reasonably have believed

that litigation against it was probable if it continued its involvement with Napster. Therefore,

Hummer’s duty to preserve evidence attached in June 2000.

B. Hummer’s Obligation Between July 2001 and August 2003

Plaintiffs argue that Hummer’s duty to preserve remained in place during the period of time

between the dismissal of the Katz lawsuit and the commencement of the instant litigation. Counsel

for plaintiffs sent Hummer a letter threatening litigation in August 2001, the month following the

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dismissal of the Katz suit. In addition, John Hummer himself stated, in an email to Joel Klein dated

April 21, 2002, “We know we are going to be sued.” Hummer Dec. ¶ 11. Plaintiffs therefore argue

that Hummer should have known and did know that litigation was likely during this time period.

Hummer denies that any duty existed during this period, claiming that “plaintiffs’ on/again,

off/again litigation certainly made litigation against the Hummer Winblad Defendants a possibility,

but the probability of litigation rose and fell as threats passed with no action being taken.” Hummer

further argues that plaintiffs represented to Hummer and to the court in December 2001 that they

would not add any more defendants to the lawsuit. An examination of the transcript from the

hearing to which Hummer refers, however, reveals that counsel for plaintiffs did not unequivocally

represent that there were no future defendants to be named. When asked by the court whether there

were “any defendants that have not been served that you intend to proceed against,” plaintiffs’

counsel responded “Not at this time, Your Honor.” Hummer Dec., Exh. C at 14:12-14. This left

open the danger of Hummer being named as a defendant.

Hummer also downplays the significance of John Hummer’s statement in his email to Klein,

claiming that this was a “negotiation tactic” employed to secure an indemnification provision from

Bertelsmann in their purchase of Hummer’s shares of Napster. Even if Mr. Hummer’s purported

certainty at being sued in the future cannot be taken at face value, litigation against Hummer was at

least probable enough for Hummer to insist on this indemnification provision before selling its

shares to Bertelsmann, and likely enough to be used as a negotiation tactic. This amply

demonstrates that there was a reasonable probability of litigation against Hummer during the time

period following the dismissal of the Katz lawsuit, and that John Hummer was aware of this

probability.

Hummer should have remained on notice that litigation against them was probable even after

the Katz suit was dismissed. Hummer had already been sued once, and there were several indicators

that they would be sued again. Even after Napster sought bankruptcy protection and ceased being a

party to any lawsuit, the litigation continued, with plaintiffs seeking recovery from the still-solvent

entities that invested in Napster before it ceased operations. As a multimillion dollar investor in

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Napster, Hummer should have anticipated that it would be targeted. This is particularly evident

given the actions on the part of plaintiffs’ counsel to keep the threat of litigation alive during this

time period, and John Hummer’s own statement regarding his fear of litigation.

Accordingly, Hummer had a continuing duty to preserve documents after the Katz lawsuit

was dismissed in July 2001.

II. Sanctions

Once Hummer’s duty to preserve took effect in June 2000, Hummer was required to suspend

any existing policies related to deleting or destroying files and preserve all relevant documents

related to the litigation. Zubulake, 220 F.R.D. at 218 (“Once a party reasonably anticipates

litigation, it must suspend its routine document retention/destruction policy and put in place a

‘litigation hold’ to ensure the preservation of relevant documents.”); see also National Ass’n. of

Radiation Survivors, 115 F.R.D. at 557-58 (“The obligation to retain discoverable materials is an

affirmative one; it requires that the agency or corporate officers having notice of discovery

obligations communicate those obligations to employees in possession of discoverable materials.”). 

Therefore, even if Hummer’s “long standing policies” included deleting emails, Hummer was

required to cease deleting emails once the duty to preserve attached in May 2000. Since Hummer

acknowledges that it did not cease its document policy, the court may impose sanctions for

Hummer’s deletion of documents. Zubulake, 220 F.R.D. 220 (“Once the duty to preserve attaches,

any destruction of documents is, at a minimum, negligent.”).

Plaintiffs have requested a default judgment against Hummer or, in the alternative, an issue

preclusion order and an adverse inference instruction. Plaintiffs have also requested monetary

sanctions independent of any other sanctions the court may impose. The appropriate sanction, if

any, depends largely on the culpability of Hummer and the resulting prejudice to plaintiffs. Baliotis,

870 F. Supp. at 1291; Schmid, 13 F.3d at 79.

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A. Default Sanction

When considering a default sanction in response to spoliation of evidence, the court must

determine “(1) the existence of certain extraordinary circumstances, (2) the presence of willfulness,

bad faith, or fault by the offending party, (3) the efficacy of lesser sanctions, [and] (4) the

relationship or nexus between the misconduct drawing the [default] sanction and the matters in

controversy in the case.” Halaco Eng’g Co. v. Costle, 943 F.2d 976, 380 (9th Cir. 1988). In

addition, the court may consider the prejudice to the moving party as an “optional” consideration

where appropriate. Id. This multi-factor test is not “a mechanical means of determining what

discovery sanction is just,” but rather “a way for a district judge to think about what to do.” Valley

Engineers, Inc. v. Electric Eng’g Co., 158 F.3d 1051, 1057 (9th Cir. 1998).

1. Extraordinary Circumstances

“Dismissal under a court’s inherent powers is justified in extreme circumstances.” Id. In the

Ninth Circuit, “extraordinary circumstances exist where there is a pattern of disregard for Court

orders and deceptive litigation tactics that threaten to interfere with the rightful decision of a case.” 

See Advantacare Health Partners, LP v. Access IV, No. C 03-04496 JF, 2004 WL 1837997 at *5

(N.D. Cal. Aug. 17, 2004) (Fogel, J.) (citing Halaco, 943 F.2d at 1057-58). See also AnheuserBusch, Inc. v. Natural Beverage Distributors, 69 F.3d 337, 348 (9th Cir. 1995) (holding that it is

“well settled that dismissal is warranted where . . . a party has engaged deliberately in deceptive

practices that undermine the integrity of judicial proceedings”); Wyle v. R.J. Reynolds Tobacco

Co., 709 F.2d 585, 591 (9th Cir. 1983) (upholding dismissal where the district court determined that

“the deliberate deception and irreparable loss of material evidence justified the sanction of

dismissal”); William T. Thompson Co. v. Gen’l Nutrition Corp., 593 F. Supp. 1443, 1456 (C.D.

Cal. 1984) (holding that default and dismissal were proper sanctions in view of party’s “willful

destruction of documents and records that deprived [the opposing party] of the opportunity to

present critical evidence on its key claims to the jury”). Given this requirement of extraordinary

circumstances, courts have held that a party’s “failure to preserve evidence that they knew or

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reasonably should have known would be relevant to a potential action and might be sought in

discovery” does not necessarily warrant default or dismissal if these actions “do not eclipse entirely

the possibility of a just result.” Advantacare, 2004 WL 1837997 at *5.

Plaintiffs argue that Hummer engaged in deceptive practices by willfully destroying relevant

documents and subsequently claiming that all responsive documents had been retained and

produced. Specifically, plaintiffs assert that they spent three years attempting to glean an

explanation from Hummer regarding the small number of Hummer Winblad emails produced during

discovery, and that Hummer deceived them during this period by failing to admit to their document

destruction policy and by withholding the June 3, 2000 email until the close of discovery. In

addition, plaintiffs point to the testimony of Todd Forrest, Hummer’s 30(b)(6) witness regarding

Hummer’s document preservation policies. Forrest failed to acknowledge that Hummer was

routinely deleting emails and instead represented that Hummer personnel had been instructed to

preserve Napster-related communications. 

Hummer claims that it failed to produce the June 3, 2000 email due to a mistake as to its

relevance and privileged status, claiming that such errors are to be expected in large-scale document

production. Hummer claims to have belatedly located the June 3, 2000 email in a box of

miscellaneous files during one of a number of repeated searches for responsive documents. 

Furthermore, because Hummer denies any wrongdoing with respect to its document preservation

duties, it denies that it made any bad-faith representations to plaintiffs regarding its production.

It is difficult to say whether Hummer’s conduct in this regard resulted from willful deception

or simple incompetence. Hummer presents a muddled account of its knowledge of its duties and the

means chosen to execute those duties. The June 3, 2000 email may have been withheld based on a

good-faith belief that it was attorney-client privileged (though it is clearly relevant given that it

explicitly discusses the Napster litigation). But this does not explain why Hummer failed to include

it in its privilege log, as plaintiffs point out, and why Hummer suddenly decided to produce it at the

close of discovery. As for Hummer’s representations to plaintiffs regarding its email production,

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Hummer claims that it believed all relevant emails were preserved by forwarding them to the

Napster server or using Napster.com email addresses.

2. Willfulness, Bad Faith, or Fault

“For a dismissal to be proper, the conduct to be sanctioned must be due to willfulness, fault,

or bad faith.” Ahneuser-Busch, 69 F.3d at 348 (internal quotations omitted). As a preliminary

matter, Hummer argues that plaintiffs must prove willfulness, bad faith, or fault by clear and

convincing evidence. In support of this assertion Hummer cites cases from other circuits which have

applied a heightened standard of proof to default sanctions in various circumstances. Maynard v.

Nygren, 332 F.3d 462, 468 (7th Cir. 2003) (applying clear and convincing evidence standard to Rule

37 dismissal based on willfulness, bad faith, or fault); Aptix Corp. v. Quickturn Design Systems,

Inc., 269 F.3d 1369, 1374 (Fed. Cir. 2001) (upholding dismissal based on “extreme litigation

misconduct” supported by clear and convincing evidence); Shepherd v. American Broadcasting

Cos., 62 F.3d 1469, 1474 (D.C. Cir. 1995) (applying clear and convincing evidence standard to

default sanctions based on litigation misconduct); Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1118

(1st Cir. 1989) (holding that fraud on the court was demonstrated “clearly and convincingly” where

party had submitted false evidence and concealed authentic evidence); Pfizer, Inc. v. Int’l Rectifier

Corp., 538 F.2d 180, 195 (8th Cir. 1976) (holding that fraud on the court “must be supported by

clear, unequivocal and convincing evidence”). Hummer points to no Ninth Circuit authority

applying the clear and convincing standard to the exercise of the court’s inherent authority to impose

dismissal or default sanctions, and the Ninth Circuit has not squarely addressed the issue of which

standard of proof is appropriate. Moreover, none of the cases cited by Hummer dealt with the

specific, yet common, situation here — inherent power sanctions resulting from the destruction of

evidence. Accordingly, the court declines to adopt the clear and convincing evidence standard.

Plaintiffs argue that Hummer willfully destroyed relevant documents in order to prevent

them from being produced in this litigation. Specifically, plaintiffs allege that the June 3, 2000

email clearly amounts to an instruction to delete all Napster-related emails rather than comply with

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the outstanding subpoena, and with Hummer’s ongoing document preservation duties in its role as a

potential and actual defendant. Plaintiffs further allege that, because there was no system in place to

automatically dispose of email, each Napster-related email that was deleted was the result of a

conscious decision on the part of a Hummer employee.

Hummer denies that the June 3, 2000 email indicates any intentional deletion of Napsterrelated emails. Rather, Hummer asserts that the portion of the email concerning Hummer’s

document retention policy has “nothing to do with Napster,” despite the portion of the email that

explicitly addresses the Napster I subpoena. Hummer’s claims in this regard do not withstand

scrutiny. Hummer attempts to divide the email into two wholly separate and distinct parts: (1) a

Napster-related message preceding Barry’s signature, and (2) a non-Napster-related message

regarding the company’s “long standing” email policy. Essentially, Hummer would have the court

believe that Winblad forwarded a message regarding Napster from John Hummer, and added a

completely unrelated additional message regarding document retention as a non-sequitur. In seeking

to make this distinction, Hummer glaringly ignores the sentence between the two portions of the

email that explicitly ties the retention policy to the Napster production: “As we have all been

required to surrender Napster e-mails, this should reinforce compliance with our long standing

policies.” Boyd Dec., Exh. 1 (emphasis added). The very first tenet of the policy, “reinforce[d]” by

the requirement to surrender Napster emails, is “we do not retain e-mails, it is your responsibility to

delete your handled e-mails immediately[.]” Id. (emphasis added). This was clearly designed to

instruct the recipients to delete all of their Napster-related emails going forward in order to avoid

surrendering them. Hummer offers no plausible explanation to the contrary.

Indeed, Hummer’s representations regarding its document retention policy are muddled and

inconsistent, and do not suggest an organized effort to maintain Napster-related communications as

required. The confusion is compounded by the fact that Hummer distributed a more formal

document retention policy in 2003. Boyd Decl., Exh. 19. Hummer states that the 2003 policy “did

not exist in June of 2000.” However, Todd Forrest testified that he believed that the 2003 policy

was consistently followed beginning in January 2000. Slaughter Dec., Exh. B, Forrest Depo. at

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19:6–20:1. Hummer further claims, however, that neither Hank Barry nor John Hummer were aware

of the policy before reading it in 2003. The June 3, 2000 email itself, meanwhile, refers to the

document retention policy as “long standing.” Absent a clear explanation for why Hummer

employees were instructed to “delete all emails” in conjunction with being apprised of a pending

subpoena, the court concludes that the June 3, 2000 email served as an command to delete Napsterrelated emails going forward.

Separate from the June 3, 2000 email, Hummer apparently acknowledges that it routinely

deleted Napster-related emails that resided on Hummer’s servers. Hummer’s email software was

configured such that exiting the program prompted a message asking whether the user wished to

permanently delete all the emails in the “Deleted Items” folder. Hummer asserts that its employees

“frequently responded affirmatively to that question without ever checking” what was in their

deleted folders. In addition, the tapes on which Hummer’s emails were backed up were recycled

every three months, and Hummer employees occasionally received emails reminding them to delete

emails. Thus, while Hummer employees may not have individually decided to delete each Napsterrelated email, the policy of deleting all emails and failing to preserve Napster-related emails

continued apace beginning in June 2000 at the very latest.

Despite failing to maintain files on its own servers, Hummer argues that it attempted to retain

Napster-related emails by other means. In particular, defendants claim that Barry “made a conscious

effort” to use his Napster email address for all Napster-related business, and that Barry and Morga

forwarded Napster-related emails to themselves at their Napster accounts, believing that these

messages would be automatically saved by Napster. According to Hummer, procedures were in

place at Napster to retain all of Napster’s emails while Barry was Napster’s interim CEO (from May

2000 to July 2001). Hummer is unclear on what these procedures were, however. For example,

Hummer does not claim that Napster employees were specifically directed to retain all Napsterrelated communications as required by Hummer’s duty to preserve, and does not claim that such

procedures were in place when Barry was not serving as Napster’s CEO. Furthermore, given

Hummer’s affirmative duty to preserve evidence (National Ass’n. of Radiation Survivors, 115

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F.R.D. at 557-58), Hummer’s purported reliance on undisclosed backup procedures at a company

over which Hummer strenuously denies having any control was grossly deficient.

Hummer’s deletion of Napster-related emails may not have been willful, but willfulness is

not strictly required for the imposition of default sanctions. Instead, a default sanction requires

“willfulness, fault, or bad faith.” At worst, Hummer mounted a knowing and concerted effort to

destroy Napster-related emails that it had a duty to preserve and produce. At best, however,

Hummer was grossly negligent in executing its duties to preserve evidence, by failing to implement

a litigation hold and instead relying on Napster to preserve Hummer’s emails. Hummer was

therefore at fault in failing to preserve Napster-related emails.

Hummer’s additional arguments do not change this conclusion. Hummer argues that its

failure to produce documents was due to inadvertence or mistake. Again, mistakes resulting from

gross negligence constitute sufficient fault to impose sanctions. Hummer also argues that the

deficiencies in plaintiffs’ own production render plaintiffs’ allegations inappropriate and unfounded. 

Hummer does not accuse plaintiffs of discovery malfeasance, but rather cites gaps in plaintiffs’

document production to illustrate that documents are inevitably lost or overlooked in large-scale

document production. Any problems with plaintiffs’ discovery responses are irrelevant to the

factual findings regarding Hummer’s production. Documents may be lost and overlooked in largescale document production, but the abject failure to preserve an entire source of relevant evidence is

sanctionable conduct.

3. Efficacy of Lesser Sanctions

Plaintiffs have requested the alternative relief of preclusion and an adverse inference

instruction in the event that the court does not grant a default sanction. If such sanctions would be

effective, a default sanction is inappropriate. Given the standard of applying the least onerous

effective sanction, plaintiffs must justify the default sanction by either showing that (1) no lesser

sanction would adequately punish Hummer and deter other parties from engaging in the same

conduct or (2) Hummer has engaged in deceptive conduct and will continue to do so. Advantacare,

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2004 WL 1837997 at *6 (citing Computer Assoc. Int’l v. Am. Fundware, Inc., 133 F.R.D. 166 (D.

Colo. 1990); TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987); Chism v. Nat’l

Heritage Life Ins. Co., 637 F.2d 1328, 1332 (9th Cir. 1981)).

Plaintiffs point to a number of cases in which courts have imposed default or dismissal

sanctions where no other remedy would be adequate, but plaintiffs make no specific showing

regarding the inadequacy of lesser sanctions in this case.3 For the reasons set forth below, the court

concludes that lesser sanctions would be adequate given the level of demonstrable culpability on the

part of Hummer, and there is nothing in he current representation or conduct to suggest a recurrence. 

 Therefore, this factor weighs against default sanctions.

4. Nexus Between Misconduct and Matters in Controversy

In order for default sanctions to be imposed for Hummer’s destruction of documents, there

must be a nexus between Hummer’s conduct and the merits such that the conduct interferes with the

rightful decision of the action. Halaco, 843 F.2d at 381. In the context of spoliation of evidence, a

nexus exists if the party destroyed documents that were relevant to discovery requests. See

Anheuser-Busch, 69 F.3d at 351; Advantacare, 2004 WL 1837997 at *6 –*7. As discussed above,

Hummer systematically failed to preserve emails on its company servers, thereby destroying

Napster-related communications that resided on the servers during the relevant time period. 

Accordingly, there is a nexus between Hummer’s misconduct and the matters in controversy.

5. Prejudice

Prejudice is an “optional” consideration when determining whether default sanctions are

appropriate.4

 Halaco, 843 F.2d at 382. Prejudice is a significant consideration here, however, given

the dispute over the effect of Hummer’s failure to preserve evidence. In particular, the parties differ

over the number of Napster-related emails that Hummer actually deleted. The fact that a number of

Hummer’s Napster-related emails have been obtained by plaintiffs from other sources, furthermore,

bears on the degree to which plaintiffs have been prejudiced. If all or substantially all of Hummer’s

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Napster-related emails have been obtained by plaintiffs, a default sanction is not warranted.

Plaintiffs contend that Hummer’s document destruction policy resulted in the loss of

“volumes” of documents over the relevant time period. In support of their claim they point

principally to Hummer’s lack of production. According to plaintiffs, Hummer has produced only

approximately 4,000 documents to date in response to discovery requests, fewer than 300 of which

are emails. Plaintiffs also point out that, in response to the Napster I subpoena, Hummer produced

271 emails, 89 of which are purely internal, from the seven-day period from May 20, 2000 to May

26, 2000. This, according to plaintiffs, suggests that there should be many more emails generated

after that time period, and that these emails were destroyed by Hummer. In addition, plaintiffs point

to several emails collected from other sources which, they claim, demonstrate that Hummer was

engaged in communications regarding every aspect of the action. Again, plaintiffs claim that the

limited number of emails that have been obtained indicates a large number of similar emails that

were deleted from the Hummer Winblad servers.

Hummer offers several explanations for the small number of emails. To begin with, Hummer

disputes plaintiffs’ numbers. Hummer claims to have produced 7,147 documents, 1,450 of which

were emails. In addition, Hummer points to the fact that plaintiffs received 2,965 emails from the

Napster bankruptcy trustee, including 2,133 on which Barry was a sender or recipient. Plaintiffs

counter that Hummer’s calculations include emails from sources other than Hummer Winblad’s

servers which were nonetheless produced by Hummer, and that the total number of “humwin.com”

emails remains at approximately 300.

To further account for the lack of emails, Hummer claims that its employees had limited

involvement with Napster after the investment was made in May 2000 and therefore would not have

engaged in Napster-related email communication. Connee Young received a “minuscule amount” of

emails related to Napster after the investment, and Dan Beldy and Ann Winblad had “no

involvement” with Napster after the investment. Furthermore, the June 3, 2000 email advised

Hummer employees to stop sending emails about Napster. These facts, coupled with the fact that

Hank Barry and Alicia Morga used their Napster.com email accounts for Napster-related emails,

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indicate that any Napster-related emails that were generated during the relevant time period resided

with Napster, and were thus produced by the Napster bankruptcy trustee.

Plaintiffs have produced a number of emails collected from sources other than Hummer

indicating that Hummer did not strictly adhere to their asserted practices. In particular, Hank Barry,

Alicia Morga and John Hummer used their Hummer Winblad email accounts to discuss Napsterrelated business after the investment was made. See Compendium of Documents Missing from the

Hummer Winblad Production, Exhs. 165, 181, 183, 185, 186, 188, 216, 231, 238, 241, 245, 248, 267

and 275. Furthermore, as Hummer admits, plaintiffs obtained over 2,100 emails from the Napster

trustee in which John Hummer was the sender or recipient, demonstrating that Hummer Winblad

email communications regarding Napster did not cease after the distribution of the June 3, 2000

email. There was clearly some amount of email traffic on the Hummer servers related to Napster

after the number of produced emails dropped off in June 2000. The precise number, of course, is

impossible to determine given the fact that emails on Hummer Winblad servers were routinely

deleted. As the party at fault for failing to preserve the emails, Hummer would typically bear the

consequences of this uncertainty. See National Ass’n of Radiation Survivors, 115 F.R.D. at 557

(holding that where “the relevance and resulting prejudice from destruction of documents cannot be

clearly ascertained because the documents no longer exist . . . the culpable party can hardly assert

any presumption of irrelevance as to the destroyed documents”) (internal quotations omitted); see

also Computer Assoc. Int’l, Inc. v. American Fundware, Inc., 133 F.R.D. 166, 170 (D. Colo. 1990). 

However, because the court cannot conclude that Hummer acted willfully, the presumption of

prejudice is not appropriate.

Plaintiffs further claim that they have been prejudiced because the Hummer Winblad

witnesses have exhibited “litigation amnesia” in claiming an inability to recall facts that would be

memorialized in the deleted emails. While Hummer denies that its witnesses have exhibited any

significant lack of recollection, plaintiffs would certainly be better off with documentary evidence

than with witnesses’ personal recollections of events and communications that occurred years ago. 

Indeed, Hummer’s own representations to this court illustrate the unreliability of the Hummer

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witnesses’ personal recollections, as neither John Hummer, Ann Winblad or Hank Barry recall the

June 3, 2000 email. Hummer Dec. ¶ 3; Winblad Dec. ¶ 3; Barry Dec. ¶ 3.

Finally, plaintiffs point to specific emails collected from other sources which show that

Hummer personnel were sending communications regarding the relevant issues in this action during

the relevant time period. Plaintiffs claim that the deleted emails would shed further light on the facts

revealed in these documents, and that they are prejudiced by the unavailability of the additional

emails. Hummer disputes the significance of the examples cited by plaintiffs. The dispute over the

specific contents of a particular email that was produced, however, does little to shed light upon the

contents of emails that were destroyed other than pointing to the general issues that may have been

discussed in the deleted communications.5

 As discussed above, the loss of an entire source of

documents significantly hampers plaintiffs’ ability to prepare and prosecute their case.

At this stage of the proceedings , when the full evidentiary record has not yet been

considered by the court or by a jury, the court cannot determine the extent of prejudice created by

Hummer’s failure to preserve its emails. Although Hummer is at fault for deleting emails, plaintiffs

have not shown that Hummer acted willfully in destroying its emails, and there is evidence that the

actual number of emails lost is small. The court will therefore engage in a full analysis of the

evidence regarding the quality and quantity of emails improperly deleted by Hummer at the

Summary Judgment or trial stage. At this point the court can only conclude that plaintiffs have not

produced sufficient evidence of prejudice to justify default sanctions.

6. Summary

Hummer deleted emails which it had a duty to preserve and produce to plaintiffs. These

emails related to the merits of the action, and plaintiffs have been prejudiced by their destruction. 

However, Hummer has shown that they took steps to preserve Napster-related communications,

albeit inadequate ones. Although these steps failed to satisfy Hummer’s discovery duties, Hummer’s

behavior does not constitute a pattern of deliberately deceptive litigation practices that are likely to

continue as the action proceeds, thereby preventing the resolution of this action. In addition, as

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discussed below, lesser sanctions will adequately remedy Hummer’s failure to preserve and produce. 

Therefore, plaintiffs are not entitled to a default sanction.

B. Evidentiary Sanctions

Plaintiffs have requested two forms of evidentiary sanctions. First, plaintiffs request that

Hummer be precluded from contesting all or some of a number of issues related to the parties’

claims and defenses. Second, plaintiffs request that the jury be given an adverse inference

instruction.

1. Preclusion

The court’s inherent authority to impose sanctions for the wrongful destruction of evidence

includes the power to exclude evidence that, given the spoliation, would “unfairly prejudice an

opposing party.” Unigard, 982 F.2d at 368; see also Glover, 6 F.3d at 1329. The propriety of

preclusion sanctions, therefore, depends on the extent to which plaintiffs were prejudiced by

Hummer’s deletion of its Napster-related emails. This analysis must be made in light of the

requirement to impose the “least onerous sanction” given the extent of the offending party’s fault

and the prejudice to the opposing party. Schmid, 13 F.3d at 79.

As discussed above, the full extent of prejudice is unclear based on the record before the

court for the purposes of this motion. However, plaintiffs have shown sufficient prejudice to warrant

some degree of preclusion sanctions. The nature and extent of these sanctions will be determined at

the Summary Judgment or trial stage.

2. Adverse Inference Instruction

“[A] party seeking an adverse inference instruction based on the destruction of evidence

must establish (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 state of mind; and (3)

that the destroyed evidence was relevant to the party’s claim or defense such that a reasonable trier

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of fact could find that it would support that claim or defense.” Hamilton v. Signature Flight Support

Corp., No. C 05-0490, 2005 U.S. Dist. LEXIS 40088 at *9 (N.D. Cal. Dec. 20, 2005) (James, Magis.

J.) (citing Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 107 (2d Cir. 2002)). 

As discussed above, Hummer deleted Napster-related communications which it had a duty to

preserve, knowing that such a duty existed. Hummer’s conduct amounts to gross negligence, if not

willfulness, which is sufficient culpability to justify an adverse inference. Id. at *15. In addition,

the deleted emails were relevant to the action as discussed above. Therefore, plaintiffs are entitled to

an adverse inference instruction. The precise wording of the instruction will be determined at trial.

C. Monetary Sanctions

Monetary sanctions may be imposed where one party has wrongfully destroyed evidence. 

See, e.g., National Ass’n of Radiation Survivors, 115 F.R.D. at 558-59. Plaintiffs claim that they are

entitled to their attorneys’ fees associated with bringing this motion, and with the meet and confer

process involved in determining the availability of Hummer’s Napster-related emails. The court

finds that monetary sanctions are warranted here. Hummer could have forestalled a great deal of

time and effort by simply acknowledging early on that it was not preserving its internally generated

Napster-related communications. 

Plaintiffs are entitled to an award of attorney fees that is reasonable in light of the degree of

Hummer’s culpability. Plaintiffs are ordered to submit a request for a specific amount of fees, with

evidentiary support, for the court’s consideration.

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CONCLUSION

For the above reasons the court hereby DENIES plaintiffs’ motion for sanctions to the extent

plaintiffs seek default sanctions, and GRANTS plaintiffs’ motion for sanctions to the extent

plaintiffs seek a preclusion order, an adverse inference instruction and attorneys’ fees.

Plaintiffs shall submit their declaration and contemporaneous records in support of attorneys’

fees and costs with thirty (30) days of this order. Defendant Hummer shall file its response, if any,

as to reasonableness only within thirty (30) days of the filing of plaintiffs’ submission.

IT IS SO ORDERED.

Dated: October 24, 2006 

MARILYN HALL PATEL

District Judge

United States District Court

Northern District of California

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COURT

For the Northern District of California

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1. Unless otherwise noted, background facts are taken from the declarations submitted with the

parties’ briefs and from this court’s previous orders.

2. The exact number of Hummer Winblad emails produced by Hummer is in dispute. Plaintiffs

claim that Hummer produced less than 300 emails; Hummer claims to have produced 1,450.

3. Hummer interprets plaintiffs’ brief as lacking any argument regarding the inadequacy of lesser

sanctions whatsoever, and explicitly declines to address the issue.

4. Hummer claims that the Ninth Circuit has “found the element of prejudice to be essential” when

determining whether dismissal is an appropriate sanction, citing Wanderer v. Johnston, 910 F.2d

652, 656. However, the case on which Hummer relies for this point concerned sanctions under

Federal Rule of Civil Procedure 37. Id. Plaintiffs have requested sanctions pursuant to the court’s

inherent authority “to manage [its] own affairs so as to achieve the orderly and expeditious

disposition of cases.” Chambers, 501 U.S. at 43. Sanctions imposed pursuant to a court’s inherent

powers is governed by a different set of principles than sanctions under Rule 37. See Unigard, 982

F.2d at 368 (finding that a district court lacked power to impose a sanction under Rule 37, but

properly imposed the sanction as an exercise of its inherent powers).

5. Likewise, Hummer argues that several of the documents fail to show prejudice because they were

preserved. This argument completely misses the point of plaintiffs’ citation of the documents. 

Obviously, the documents that are now in the hands of plaintiffs were preserved—otherwise

plaintiffs would not have them. Plaintiffs do not argue that they have been prejudiced by the

deletion of these specific documents. Rather, plaintiffs claim that these documents illustrate the

types of communications that were not preserved by Hummer. Such a showing is pertinent to the

existence of relevant documents which were destroyed. See Zubulake v. UBS Warburg LLC, 229

F.R.D. 422, 437 (S.D.N.Y. 2004) (holding that the content of emails recovered from other sources

was probative of the contents of lost emails).

ENDNOTES

Case 3:00-md-01369-MHP Document 1134 Filed 10/25/06 Page 26 of 26