might prove fruitless because OSKA is beyond the jurisdiction-and subpoena power-of this

Court. However, TCP also admitted that it has not investigated whether and in what capacity the
Hague Convention might apply to this situation. This information would shed light on whether
retrieval of the documents from OSKA is as straightforward as executing a third-party discovery
request on OSKA, obviating the need to address this issue by issuing sanctions.

Jn light of the parties' statements at oral argument, it appcars that the documents still exist
but are in the hands of a foreign corporation. The appropriate next step is for the parties to seek
the documents from OSKA, not for this Court to proceed toward issuing sanctions. For this
reason, the Court orders Coollite to use all reasonable efforts to obtam the documents from
OSKA. Coollite is ordered to file a report of these efforts with the Court within 21 days. In the
meantime, TCP is to investigate the applicability of the [lague Convention procedures to this
issue. TCP must file a report of such procedures and its efforts to obtain the documents with this

Court within 21 days.

II. Conclusion
For the foregoing reasons, TCP's motion for sanctions is denied in part and granted in
part. Coollite is ordered to use all reasonable efforts to obtain documents from OSKA that are
responsive to TCP's document requests, and Coollite must file a report of these efforts within 21
days. TCP must investigate the applicability of the Hague Convention to the request of

documents from a Chinese corporation, and TCP must file a report of these procedures and its



prejudice is a harsh sanction which should usually be employed only in extreme situations, where

there is a clear record of delay or contumacious conduct, or where other less drastic sanctions
have proven unavailable." Marrocco, 966 F.2d at 224 (citations omitted). In China Ocean
Shipping, the court stated that "there must be at least some finding of contumacious conduct,
dilatory tactics, the failure of less drastic sanctions, bad faith, willfulness, or fault before
sanctions may be imposed by a party who fails to comply with a discovery order."

1999 WL 966443, at *2 (citations omitted).

In this case, TCP argues that sanctions are appropriate because Coollite's conduct resulted
in the spoliation of the relevant evidence. More specifically, (CP argues that Coollite
"intentionally fail[ed] to preserve documents that are relevant to TCP's defenses in this case," and
that Coollite’s actions warrant dismissal of Coollite's claims or barring Coollite from offering
evidence relating to its patents. (Def.'s Mem. at 7, 11-12.) TCP states that Coollite's "fail[ure] to
provide any reasonable basis for its conduct" constitutes the bad faith necessary to support either
of these sanctions. (Def.'s Mem. at 9.) TCP also poinis to the relevance of the unproduced
documents and says that the unavailability of these documents will prejudice TCP. (Def.'s Mem.
at 10.)

Despite TCP's arguments, the Court denies the motion for sanctions based on spoliation
because no spoliation has been shown. Although the documents in question here did at one time
belong to Coollite but do not currently belong to Coollitc, there is no indication that the
documents no longer exist, if only in the hands of a foreign corporation. Also, at oral argument,
the parties admitted that they had not requested these documents from OSKA directly. TCP

suggested at oral argument that requesting the documents from OSKA, a Chinese corporation,

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efforts to obtain the documents from OSKA within 21 days. This case is set for status on the
subject of compliance with this order on October 31, 2006,

ENTER ORDER:

MARTIN C. ASHMAN
Dated: September 28, 2006. United States Magistrate Judge



Ams

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

PRODUCTS, INC., Martin C. Ashman

EASTERN DIVISION

LITETRONICS INTERNATIONAL, INC.)

and COOLLITE INTERNATIONAL )

HOLDINGS LIMITED, )
)

Plaintiffs, ) Case No. 03 C 5733
)
v. ) Judge Wayne R. Andersen

)

TECHNICAL CONSUMER ) Magistrate Judge
)
)
)

Defendant.

MEMORANDUM OPINION AND ORDER

This matter is before the Court on the motion of Defendant, Technical Consumer
Products ("TCP"), for sanctions against Plaintiff, Coolliie International Holdings Limited
("Coollite"), for failing to preserve or for making unavailable documents that TCP requested in
discovery. This matter was referred to this Court by Judge Andersen pursuant to 28 U.S.C.

§ 636(b)(1)(A) and Local Rule 72.1. For the reasons that follow, the Court grants the motion in

part and denics it in part.

I. Background

This case began in 2003, and on September 25, 2003 Coollite and Litetronics
International, Inc., filed an amended complaint alleging that TCP has infringed several patents.
(Def.'s Mem. at 2.) On December 12, 2003, TCP served document requests on Coollite seeking,

among other things, drawings of cold cathode lamp products belonging to Coollite, documents



Copies have been mailed to:

WILLIAM M. LEE, JR., Esq.

Barnes & Thornburg, L.1..P.
One North Wacker Drive
Suite 4400

Chicago, IL 60606-2833

KEVIN R. KRANTZ, Esq.

Stahl Cowen Crowley, L.L.C.

55 West Monroe Street
Suite 1200
Chicago, IL 60603

Attorneys for Plaintiffs

CRAIG L, MOORE, Esq.

STEVEN M. AUVIL, Esq.

Benesch, Friedlander, Coplan
& Aronoff, L.L.P.

2300 BP Tower

200 Public Square

Cleveland, OH 44114-2378

LEON E. LINDENBAUM, Esq.
Kurlander & Associates

155 North Michigan Avenue
Suite 620

Chicago, IL 60601

Attorneys for Defendant


that reference the conception of the patents' claimed subject mattcr, documents relating to the
patents’ research and design, documents relating to any of the sales or offers to sell of the patents’
claimed subject matter, and sales documents. (/d.) After negotiating a protective order, which
the Court entered on June 28, 2004, the parties had continuing negotiations regarding Coollite's
production of responsive documents. (Def.'s Mem. at 3-4.) In early 2004, TCP learned while
deposing officers of Coollite and Litetronics that Coollite had sold its factory in Jiashen, China,
to OSKA Auto Electronics. (Def.'s Mem. at 4.) Laikeung Tsang, Coollite's director whom TCP
deposed, testified that drawings of alleged embodiments of the patents-in-suit remained with the
Jiashen factory after it was sold, as did sales reports. (/d.) Tsang also suggested that production
records and records of revenues would have been kept at the Jiashen factory, and Tsang believed
that Coollite had a document retention policy. (Def.'s Mem. at 4-5,) According to TCP, Coollite
has not produced the drawings or sales and manufacturing records, so on March 11, 2005 TCP
filed this motion urging the Court to issue sanctions against Coollite.' Specifically, TCP argues
that this Court should issue sanctions based on Coollite's spoliation of evidence, which TCP
suggests warrants either dismissing of Coollite's claims or barring Coollite from offering

evidence relating to the patents-in-suit. (Def.'s Mem. at 11-12.)

' Coollite disputes this assertion and states that it produced what documents it had in its
possession in response to TCP's request. (PL.'s Resp. at 2.) Also, Coollite argues that because
TCP's document request number 2 did not specifically request drawings of products, but instead
simply requested everything that refers to the patents-in-suit, Coollite was not obligated to
produce the drawings of the products. (/d.) The Court does not address these issucs at this time.

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IL. Discussion

Initially, the Court finds that this Court can properly decide this motion because it is
within Judge Andersen's referral. Under the referral, this Court may enter orders on discovery
matters. Because the Court's holding on this motion is not dispositive, this Court may properly
enter this order and need not style this decision as a report and recommendation.

Under Federal Rule of Civil Procedure 37, the Court may sanction a party for failing to
comply with discovery obligations. See Fed. R. Civ. P. 37. In addition to Rule 37, the Court also
has inherent authority to sanction a party for discovery abuses. See Chambers v. NASCO, Inc.,
501 U.S. 32, 44 (1991); Greviskes v. Univs. Research Ass'n, 417 F.3d 752, 758 (7th Cir. 2005).
However, the Court's inherent authority should be "exercised with restraint and discretion."
Chambers, 501 U.S. at 44. Under both Rule 37 and the Court's inherent power, the Court has
wide discretion as to the appropriate sanction, and the Court may exercise its discretion by
dismissing claims with prejudice or entering a default judgment. See, e.g., Govas v. Chalmers,
965 F.2d 298 (7th Cir. 1992); Marracco v. Gen. Motors Corp., 966 F.2d 220, 224 (1992), China
Ocean Shipping (Group) Co. v. Simone Metals Inc., No. 97 C 2694, 1999 WL 966443, at *2
(N.D. Ill. Sept. 30, 1999), Although the Court has this discretion and authority, sanctions
imposed "should be proportionate to the offending conduct, and. .. the harsh sanction of default
{should] be reserved for extreme circumstances." China Ocean Shipping (Group) Co.,

1999 WL 966443, at *2 (citations omitted),

For this reason, courts have refrained from issuing sanctions that dismiss a party's claims

without first finding some form of inappropriate conduct or other circumstances such that

dismissal is warranted. With this in mind, the Seventh Circuit has held that "[a] dismissal with

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