Opinion ID: 855433
Heading Depth: 3
Heading Rank: 1

Heading: the district court erred in imposing an adverse

Text: INFERENCE SANCTION AGAINST ASUS ASUS appeals from the district court’s imposition of an adverse inference sanction for spoliation of evidence. This court reviews such procedural matters not unique to patent law under the law of the regional circuit. Sitrick v. Dreamworks, LLC, 516 F.3d 993, 1002 (Fed. Cir. 2008). The Tenth Circuit reviews a district court’s ruling on a motion for spoliation sanctions for abuse of discretion. Burlington N. and Santa Fe Ry. Co. v. Grant, 505 F.3d 1013, 1032 (10th Cir. 2007). PMAA’s pretrial motion for spoliation sanctions against ASUS was referred to a magistrate judge. The magistrate judge found ASUS’s failure to produce the IFDC.exe source code during discovery violated its duty to preserve evidence. However, he also found that “[t]he evidence that Adams lists from other parties does not show that ASUS has willfully spoliated its evidence . . . . In fact, the evidence that Adams obtained from other parties shows just the opposite—other parties also have very little documentary evidence involving ASUS.” Phillip M. Adams & Assocs. v. Winbond Elecs. Corp., No. 05-64, slip op. at 3 (D. Utah July 21, 2010) (“Magistrate’s Sanctions Op.”). Accordingly, the magistrate judge concluded there had been no bad faith spoliation, and thus denied 8 ADAMS & ASSOC v. DELL COMPUTER sanctions. 6 PMAA objected to the magistrate judge’s order. According to statute and the Federal Rules of Civil Procedure, a district court may reconsider a magistrate judge’s nondispositive pretrial order, such as an order denying discovery sanctions, only if such order is “clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); see also Fed. R. Civ. P. 72(a). Following PMAA’s objection, the district court found no clear error in the magistrate judge’s order; that is, it left intact the magistrate judge’s finding of no bad faith. Sanctions Op. at 10. In spite of this finding, the district court determined a sanction was warranted and imposed a broad adverse inference sanction against ASUS. 7 Id. 6 The magistrate judge issued two decisions relating to discovery sanctions. In 2009, the magistrate found ASUS violated its duty to preserve evidence of the IFDC.exe source code, but requested additional evidentiary submission and briefing on whether PMAA had suffered prejudice as a result. In 2010, the magistrate judge denied PMAA’s motion for sanctions, finding there had been no bad faith spoliation by ASUS and an inadequate showing of prejudice to PMAA. With respect to prejudice, the magistrate judge reasoned that both parties could present their evidence to the jury, and “[t]he jury will consider these facts and draw their inferences.” Magistrate’s Sanctions Op. at 6. This was not an adverse inference sanction, however, but simply an analysis that such evidence was relevant, and that an opportunity to present its argument to the jury meant that PMAA suffered little prejudice from the missing evidence. 7 The district court’s decision could be interpreted as making an independent finding of bad faith. Sanctions Op. at 2 (finding ASUS failed to preserve certain evidence with “pinpoint precision.”). If this was the case, the district court abused its discretion by failing to properly ADAMS & ASSOC v. DELL COMPUTER 9 A spoliation sanction is proper under Tenth Circuit law when “(1) a party has a duty to preserve evidence because it knew, or should have known, that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.” Burlington N., 505 F.3d at 1032. An adverse inference sanction in particular “must be predicated on the bad faith of the party destroying the records.” Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997) (emphasis added). The district court committed legal error by imposing an adverse inference sanction absent a finding of bad faith. “A district court by definition abuses its discretion when it makes an error of law.” Koon v. United States, 518 U.S. 81, 100 (1996). Accordingly, we reverse the district court’s imposition of an adverse inference sanction, and consider whether there is adequate evidence to support the jury verdicts against ASUS absent such adverse inferences.