Court Opinion

ID: 4415324
Source: CourtListenerOpinion
Date Created: 2019-07-10 17:00:16.739504+00
Date Added: 2024-06-11T13:35:53.324044
License: Public Domain

PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT
                    ______

                      No. 18-1287
                        ______

                  GN NETCOM, INC.,
                         Appellant

                            v.

                 PLANTRONICS, INC.
                      ______

     On Appeal from the United States District Court
               for the District of Delaware
                     (1-12-cv-01318)
      District Judge: Honorable Leonard P. Stark
                         ______

            Argued on December 11, 2018
Before: SMITH, Chief Judge, McKEE and FISHER, Circuit
                       Judges.

                  (Filed: July 10, 2019)

Daniel F. Jacobson
Elisabeth S. Theodore [ARGUED]
Arnold & Porter Kaye Scholer
601 Massachusetts Avenue, N.W.
Washington, DC 20001
      Counsel for Appellant

Jack B. Blumenfeld
Morris Nichols Arsht & Tunnell
1201 North Market Street, 16th Floor
P.O. Box 1347
Wilmington, DE 19899

Jon S. Dean [ARGUED]
Russell Hayman
McDermott Will & Emery
2049 Century Park East
Suite 3800
Los Angeles, CA 90067
       Counsel for Appellee
                            ______

                 OPINION OF THE COURT
                            ______

FISHER, Circuit Judge.
       GN Netcom, Inc. filed an antitrust lawsuit against
competitor Plantronics, Inc. Plantronics executives deleted
emails relevant to the litigation and instructed others to do the
same. Many of these emails were unrecoverable, prompting
GN to move for default judgment under Federal Rule of Civil
Procedure 37. The District Court acted within its discretion

                               2
when it denied the motion for default judgment, instead
instructing the jurors that they were permitted to draw an
adverse inference against Plantronics because of the missing
emails. However, the District Court committed reversible error
when it excluded GN’s expert testimony on the scope of
Plantronics’ spoliation. Accordingly, we will affirm in part,
reverse in part, and remand for a new trial.
                           I.
        GN and Plantronics manufacture telephone audio
headsets used by individuals who work in customer service.
They have nearly equal market share globally. Plantronics is
U.S.-based and “holds an 80%-83% market share” in North
America, App. 1398, while GN is based in Europe and controls
the market outside North America.
        Plantronics began selling its headsets in the United
States in the 1960s, the first of their kind on the market. GN
began its U.S.-based operations in 1987. In 2000, it acquired
Jabra and began selling Jabra’s headsets, which serve the same
market as Plantronics.
        The parties sell their headsets to customers through
distributors. Plantronics has a Plantronics-Only Distributor
(“POD”) program, which is a voluntary program designed to
foster relationships and create joint marketing efforts with
distributors. A distributor that joins the program becomes a
“POD” and receives incentives such as “favorable credit
terms,” “marketing funds in the form of rebates,” and “website
support.” App. 1306. In exchange, PODs agree to two terms.
First, they may not purchase headsets directly from other
manufacturers, but may do so indirectly (such as from other
distributors). Second, PODs are not allowed to market
competitors’ products on resellers’ websites.
        GN sent Plantronics a demand letter in May 2012 and
filed suit in October 2012, alleging that Plantronics’ POD

                                3
program constituted monopolization in “violation[] of the
Sherman Act, the Clayton Act, and Delaware common law.”
App. 110. When it received the demand letter, Plantronics
“promptly issued a litigation hold to relevant employees and
provided training sessions to ensure compliance.” App. 7.
When the lawsuit was filed, Plantronics updated the hold, held
more training sessions, and sent quarterly reminders requiring
acknowledgment of compliance.
       GN alleges that Plantronics committed large-scale
spoliation after the lawsuit was filed. Despite the litigation
hold, Plantronics’ Senior Vice President of Sales, Don
Houston, instructed Plantronics employees to delete certain
emails that referenced Plantronics’ competitive practices or its
competitors, particularly those concerning GN or its products.
As the District Court noted, the evidence reflects at least three
instances of such spoliation.
       First, in November 2012, about a month after GN filed
its lawsuit, Houston replied to an email chain stating, “Team,
please be careful about competitive statements like what was
said below. I would suggest everyone immediately delete this
message.” App. 184. In October 2013, Houston sent an email
stating, “Given the sensitive nature of this issue and the on
going legal issues, please delete this entire string of emails for
everyone that has been copied ASAP!” App. 178. Houston
admitted that the only legal issue he was aware of was the
lawsuit filed by GN. The underlying email chain referenced a
distributor who met with a Jabra representative and began
selling Jabra headsets to one of its customers, who previously
used only Plantronics headsets. One email in the chain stated,
“I was under the impression [redacted distributor] was a POD
distributor and could not sell Jabra,” and another employee
stated he “want[ed] to be absolutely sure of the facts before I
confront [redacted distributor].” App. 178, 180. Houston and

                                4
two others, Roy Meadows and Jose Gonzalez, deleted the
email chain.
        In February or March 2014, Plantronics’ Associate
General Counsel, Peggy Fawcett, learned of Houston’s
conduct and took several actions in response, including
instituting a litigation hold on Houston’s assistant, in case she
had duplicate emails, and requesting back-up tapes of
Houston’s email account. Plantronics engaged BlackStone
Discovery, its discovery vendor, and Stroz Friedberg, a leading
forensics expert, to try to recover as many of Houston’s emails
as possible. Stroz recovered some of the emails.
        The spoliation, however, continued. In April 2014, for
a third time, Houston instructed employees to delete emails:
“Team this is an inappropriate email, please delete
immediately. Bill should call Lou Ann directly for any
information relating to competition or a competitive
situation!!!” App. 181.
        In addition to instructing others to delete emails,
Houston deleted his own emails. He deleted “more than 40%
of his emails from” November 2013 to February 2014. App. 9.
He took the next step of “double-delet[ing]” them by emptying
his deleted-files folder so that he would not be able to recover
them. App. 9.
        Houston did not act alone. Plantronics executives took
other actions to hide relevant information from GN. For
instance, a senior Plantronics manager asked sales team
members to use code words to refer to competitors, including
“zebra” for GN. At an “All Hands” meeting with marketing
employees, Plantronics’ CEO, Ken Kannappan, stated that he
was “not positive that there were not damning statements in a
variety [of] staff emails that [GN’s] legal team would dig up
that would be ‘emotionally relevant’ in court.” App. 325.

                               5
        Plantronics’ efforts to undo the spoliation fell short.
BlackStone Discovery confirmed that Meadows and Gonzalez
had deleted at least one email chain, but Plantronics never
obtained the backup tapes to determine whether they had
deleted any other emails. Stroz, the forensics expert, provided
Plantronics with “preliminary findings” that were a “work in
progress,” but stated that it would cost Plantronics two to five
thousand more dollars for the firm to complete its analysis.
App. 11. Plantronics did not have Stroz complete its analysis;
it instead destroyed the back-up tapes of Houston’s emails. At
an April 2015 hearing, Plantronics told the District Court that
“there is no [Stroz] report,” App. 246, despite Stroz providing
its preliminary findings months before. In addition, the same
lawyer who stated that there was no report had previously
listed work on the “Stroz report” in billing entries. App. 12.
        Stroz’s preliminary findings included a determination
that Houston had deleted between 36,397 and 90,574
unrecoverable emails, 2380 to 5887 of which were likely
responsive to GN’s discovery requests. While some of those
emails were likely produced by other employees, Stroz
estimated that 952 to 2354 of those emails were permanently
missing and could not be recovered from other Plantronics
employees’ accounts or backups. GN’s expert, Dan Gallivan,
concluded that Stroz’s estimates were conservative; Gallivan
independently determined that ten to fifteen thousand of
Houston’s deleted emails were relevant to the litigation.
        During depositions, Plantronics executives, including
Houston and Kannappan, were either forgetful or dishonest. In
his July 2014 deposition, Houston acknowledged asking others
to delete emails, but stated he could not remember deleting his
own emails. And though Plantronics had admitted knowing
about Houston’s deletions at the time of his deposition, its
outside counsel emailed GN’s outside counsel after the

                               6
deposition, stating, “It is incorrect to assume deletion as you
suggest,” because Houston had testified that he did not
remember. App. 187.
        At a subsequent deposition in September 2015, Houston
testified that he thought the IT department saved all emails and
that he was not instructing employees to delete emails to hide
them, but because he did not “want the dialogue to continue.”
App. 202. On more than one occasion, Kannappan testified that
all of Houston’s emails were recovered. The reports from
Plantronics’ discovery and forensic experts contradicted that
testimony.
        Two months after Houston’s second deposition, GN
moved for a default liability judgment in light of the spoliation.
The District Court held an evidentiary hearing and found that
Plantronics acted in “bad faith” with an “intent to deprive GN”
of documents, App. 33, but nevertheless denied the motion.
Instead of default judgment, the court opted to issue a
permissive adverse inference instruction to the jury at trial, fine
Plantronics three million dollars, and order it to pay GN’s
spoliation-related fees. In choosing a permissive instruction
rather than a mandatory one, the court reasoned that “[a] jury
should resolve the genuine disputes of material fact in this
case.” App. 34–35.
        GN subsequently sought to present evidence of
spoliation at trial, including testimony from its expert,
Gallivan. The District Court denied this request, citing a desire
to reduce “the risk of spoliation taking over” the trial and “the
risk of unfair prejudice given the inflammatory nature of the
evidence.” App. 1044. Instead, the court decided to read
“stipulations” to the jury and limit parties to referencing only
the facts in those stipulations during trial. App. 1043–44. After
considering proposals from both parties, the District Court
settled on seventeen stipulations.

                                7
        At trial, GN proceeded on claims of monopolization,
attempted monopolization, and concerted action in restraint of
trade under the Sherman and Clayton Acts. 1 The trial lasted for
six days. The jury returned a verdict in favor of Plantronics,
finding that GN proved a relevant market—a prerequisite for
its claims—but did not prove all of the elements for any of its
three antitrust claims. GN moved for a new trial, but the
District Court denied the motion. GN appeals.
                             II.
       The District Court had federal question jurisdiction over
GN’s antitrust claims under the Sherman and Clayton Acts and
supplemental jurisdiction over the related state law tortious
interference claim. 28 U.S.C. §§ 1331, 1367. This Court has
appellate jurisdiction pursuant to 28 U.S.C. § 1291. We review
the District Court’s sanctions under Federal Rule of Civil
Procedure 37, as well as its evidentiary rulings, for abuse of
discretion. McLaughlin v. Phelan Hallinan & Schmieg, LLP,
756 F.3d 240, 248 (3d Cir. 2014); Forrest v. Beloit Corp., 424
F.3d 344, 349 (3d Cir. 2005).
                             III.
       A.     Rule 37 sanctions
        Under Rule 37 of the Federal Rules of Civil Procedure,
a district court may sanction a party that destroys electronically
stored information “with the intent to deprive another party of
the information’s use in the litigation.” Fed. R. Civ. P. 37(e)(2).
The court may presume the information was unfavorable to the
infracting party, instruct the jury that it may or must presume
the information was unfavorable, or dismiss the action. Id. A
district court abuses its discretion in imposing sanctions when

       1
         GN chose to abandon its Delaware law claim of
tortious interference before trial, with Plantronics’ consent.

                                   8
it “base[s] its ruling on an erroneous view of the law or on a
clearly erroneous assessment of the evidence.” Grider v.
Keystone Health Plan Central, Inc., 580 F.3d 119, 134 (3d Cir.
2009) (quoting Bowers v. Nat’l Coll. Athletic Ass’n, 475 F.3d
524, 538 (3d Cir. 2007), amended on grant of reh’g (March 8,
2007)).
       We have laid out three factors district courts must
consider when contemplating Rule 37 sanctions:
       (1) the degree of fault of the party who altered or
       destroyed the evidence; (2) the degree of
       prejudice suffered by the opposing party; and (3)
       whether there is a lesser sanction that will avoid
       substantial unfairness to the opposing party and,
       where the offending party is seriously at fault,
       will serve to deter such conduct by others in the
       future.
Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir.
1994). A dispositive sanction is warranted only where “the
non-responsible party’s case is severely impaired because it
lacked the information that was not produced.” Bull v. United
Parcel Serv., Inc., 665 F.3d 68, 83 (3d Cir. 2012).
       When considering evidence of significant spoliation by
Plantronics, the District Court found that Plantronics had a
high degree of fault and that GN was prejudiced, but opted for
the lesser sanction of a permissive adverse inference
instruction. The court made no error of fact or law in reaching
its conclusion.
       The District Court determined that Plantronics “did act
in bad faith, ‘intend[ing] to impair the ability of the other side
to effectively litigate its case.’” App. 23 (quoting In re
Weschler, 121 F. Supp. 2d 404, 423 (D. Del. 2003)); see also
Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1326 (Fed.
Cir. 2011) (holding a party must have “intended to impair the

                                9
ability” of a litigant to put on a case or defend itself to find “bad
faith” (quoting Schmid, 13 F.3d at 80)). Houston deliberately
deleted an unknown number of emails in response to “pending
litigation” and urged others to do the same. Plantronics
executives, including its CEO, were not truthful during
depositions. And the company was not willing to spend a
nominal fee for its expert, Stroz, to fully assess the spoliation
and create a final report. Each of these actions was an
intentional step to interfere with GN’s prosecution of its claims
against Plantronics. Therefore, the District Court reasonably
concluded that Plantronics acted in bad faith.
        Likewise, the District Court reasonably determined that
the spoliation prejudiced GN. When a party moving for
spoliation sanctions cannot offer “plausible, concrete
suggestions as to what [the lost] evidence might have been,”
there should be no finding of prejudice. Schmid, 13 F.3d at 80.
That is not the case here. It is undisputed that there is some
number of emails that were deleted and will never be
recovered. GN has plausibly suggested that those emails might
contain, among other things, important information on the
number of PODs and evidence of coercion of PODs. Indeed,
Plantronics’ own CEO stated that there may have been
“damning statements” in some of the emails. We will never
know whether those damning statements exist or if one or more
of them would have been integral to GN’s case, but GN has
provided plausible, concrete suggestions as to what that
evidence might have been. Plantronics employees’ spoliation,
its executives’ false testimony, and its failure to pay Stroz to
complete its report prejudiced GN.
        Having found that Plantronics acted in bad faith and GN
was prejudiced, the District Court determined that a lesser
sanction than default judgment could avoid substantial
unfairness while also deterring misconduct by future litigants.

                                 10
The court thoroughly examined alternatives to default
judgment and provided due consideration to their fairness and
deterrent value, and it committed no error of law or assessment
of fact in the process.
        GN argues that the weight of authority from district
courts and circuits around the country demands that the District
Court enter default judgment in its favor. In support, GN offers
a laundry list of cases where district courts granted dispositive
sanctions and our sister circuits affirmed the harshest sanction.
GN argues that in some of these cases, the spoliation was less
extensive than what occurred here, but the result was a
dispositive sanction. However, the notion that a list of selected
cases mandates default judgment ignores that a district court’s
inquiry is intensely fact-specific. Several cases that GN cites
involve destruction of the most critical evidence, resulting in
irreparable prejudice. See, e.g., Flury v. Daimler Chrysler
Corp., 427 F.3d 939, 943 (11th Cir. 2005) (dismissing
crashworthiness action where plaintiff allowed vehicle to be
sold for salvage before the defendant could inspect it); Silvestri
v. Gen. Motors Corp., 271 F.3d 583, 585 (4th Cir. 2001)
(dismissing manufacturing defect suit where plaintiff had
vehicle repaired before defendant could inspect it, effectively
destroying the “sole piece of evidence in th[e] case”). The
destroyed evidence is not so clearly central or critical here.
While the emails may have contained information about
additional PODs, helping to prove a piece of GN’s antitrust
suit, any deleted emails are not as central as a vehicle in a
crashworthiness case, and are certainly not the “sole piece of
evidence.” Moreover, while the District Court was free to look
to cases from other circuits to inform its analysis, our sister
circuits have carved out their own tests for the appropriateness
of dispositive sanctions, and those tests are not necessarily
identical to the three considerations we laid out in Schmid.

                               11
        GN points in particular to Telectron, Inc. v. Overhead
Door Corp., 116 F.R.D. 107 (S.D. Fla. 1987), where the
individual who ordered the company-wide destruction of
documents was the corporation’s legal counsel, and he did so
on the day that the complaint and request for production were
served on him personally. Id. at 109. The district court
considered this timeline to reflect “a willful and intentional
attempt to place documentation . . . forever beyond the reach
of [opposing] counsel.” Id. at 109–10. In this case, Houston is
not a lawyer, and the District Court found that his innocuous
explanation for his deletion directive was “somewhat
plausible,” App. 21, suggesting that Houston’s conduct was not
as culpable as in Telectron. And, unlike in Telectron and other
cases where the court ordered dispositive sanctions,
Plantronics’ counsel took steps to remedy Houston’s spoliation
the moment she learned of it. GN’s proffer of cases where there
was “less” spoliation and the courts granted dispositive
sanctions only serves to highlight that these decisions are
extremely fact-dependent and that there can be no bright-line
rule regarding what degree or percentage of destroyed
documents warrants default judgment.
        The District Court appropriately relied on the principle
that a dispositive sanction “is a last resort and should be
imposed if no alternative remedy is available.” App. 35
(quoting Magnetar Techs. Corp. v. Six Flags Theme Park Inc.,
886 F. Supp. 2d 466, 481 (D. Del. 2012)); see also Schmid, 13
F.3d at 79 (“[C]ourts select the least onerous sanction
corresponding to the willfulness of the destructive act and the
prejudice suffered by the victim.” (quoting Jamie S. Gorelick
et al., Destruction of Evidence § 3.16 (1989)). Through that
lens, the court devoted four pages of its opinion to considering
whether a package of lesser sanctions would avoid substantial
unfairness to GN and would deter future misconduct. It

                              12
determined that, because some of the relevant emails were
recovered, a permissive adverse inference instruction would be
effective as it would allow the jury to see the types of recovered
emails and draw conclusions about what the deleted emails
contained. Along with the instruction, the court permitted GN
to propose other evidentiary sanctions for the court’s
consideration. And, both to punish Plantronics and to deter
misconduct of this nature by future litigants further, the court
levied punitive sanctions and costs on Plantronics to the tune
of nearly five million dollars.
       There was no error of fact or law in the District Court’s
examination of whether lesser sanctions would be appropriate
under Schmid, nor in its decision to impose a package of
sanctions in lieu of default judgment. GN asks for nothing
more than a different conclusion based on our consideration of
the same facts and law that the District Court examined. That
is not the standard. Absent a specific error of law or clearly
erroneous assessment of fact, we will not hold that the court
abused its discretion in making the difficult and highly fact-
specific decision of whether and how to avoid a last-resort
dispositive sanction.
       B.     Exclusion of Gallivan’s testimony
       The District Court abused its discretion in excluding

                               13
Gallivan’s expert testimony regarding Plantronics’ spoliation. 2
The testimony would have been highly probative of whether
the jury should adopt the permissive adverse inference, and any
potential prejudice would not have substantially outweighed
the testimony’s probative value; it therefore should have been
admitted. Further, the District Court’s error was not harmless,
as it is possible that the exclusion affected the outcome of the
case.
              1.     The District Court erred in excluding
                     Gallivan’s testimony
       Federal Rules of Evidence 401 and 402 provide that,
unless otherwise proscribed, evidence is relevant and
admissible “if it tends to make the existence or nonexistence of
a disputed material fact more probable than it would be without
that evidence.” Forrest, 424 F.3d at 355 (citing Fed. R. Evid.
401, 402). However, relevant evidence may be excluded “if its
probative value is substantially outweighed by a danger of . . .
unfair prejudice, confusing the issues, misleading the jury,
undue delay, wasting time, or needlessly presenting cumulative
evidence.” Fed. R. Evid. 403.
       “Rule 403 recognizes that a cost/benefit analysis must

       2
          Plantronics argues that because Gallivan was not on
GN’s trial witness list, GN waived its right to appeal the
exclusion of his testimony. However, GN expressed its desire
to have Gallivan testify on more than occasion. After the court
made its decision on stipulations, GN filed a brief reiterating
its desire to have live testimony rather than stipulations. GN
correctly argues that under the rules of evidence, a “party need
not renew an objection or offer of proof to preserve a claim of
error for appeal” if the court issued a pretrial ruling excluding
evidence the party had proposed to include. Fed. R. Evid.
103(a)(2), (b). The issue is amply preserved for our review.

                               14
be employed to determine whether or not to admit evidence;
relevance alone does not ensure its admissibility.” Coleman v.
Home Depot, Inc., 306 F.3d 1333, 1343 (3d Cir. 2002).
However, “[a]s we have explained on several occasions, the
Federal Rules of Evidence suggest a ‘generally liberal
approach to the admissibility of evidence.’” United States v.
Fulton, 837 F.3d 281, 314 (3d Cir. 2016) (quoting In re Unisys
Sav. Plan Litig., 173 F.3d 145, 167 (3d Cir. 1999)). Thus,
“there is a strong presumption that relevant evidence should be
admitted, and thus for exclusion under Rule 403 to be justified,
the probative value of evidence must be ‘substantially
outweighed’ by the problems in admitting it.” Coleman, 306
F.3d at 1343–44. This presumption in favor of admission
requires weighing “the maximum reasonable probative force
for the offered evidence” against the “likely prejudicial impact
of the evidence.” Id. at 1344 (quoting Federal Rules of
Evidence Manual 242 (Stephen A. Saltzburg et al. eds., 7th ed.
1998)). In sum, highly probative evidence is “exceptionally
difficult to exclude.” Id.
        In reviewing a district court’s decision whether to admit
evidence, we “strongly prefer” for the court to have explicitly
undertaken a Rule 403 balancing analysis. Egan v. Del. River
Port Auth., 851 F.3d 263, 277 (3d Cir. 2017). When the court
does so, we review its rationale and conclusion for abuse of
discretion. Forrest, 424 F.3d at 349. If we decide that the
district court implicitly performed the balance, we likewise
review for abuse of discretion. United States v. Eufrasio, 935
F.2d 553, 572 (3d Cir. 1991). If it did not perform the balancing
test, even implicitly, “we undertake to perform the balance
ourselves.” Forrest, 424 F.3d at 355 (quoting Ansell v. Green
Acres Contracting Co., 347 F.3d 515, 525 (3d Cir. 2003)).
        At no point did the District Court undertake an explicit
Rule 403 balancing on the record. However, because no

                               15
application of the correct law to the facts of this case would
warrant exclusion of the expert’s testimony, we need not
determine whether the District Court implicitly conducted a
balancing test. Under both the abuse of discretion standard and
de novo standard, we conclude that Gallivan’s testimony
should have been admitted.
        As a threshold matter, Gallivan’s proposed testimony is
undoubtedly relevant under the Rule 401 definition. The
District Court’s permissive adverse inference instruction made
Plantronics’ spoliation a material issue for the jury to consider
at trial, so any spoliation-related evidence clears the baseline
relevance hurdle of Rules 401 and 402. To exclude Gallivan’s
relevant testimony, then, the evidence must confuse the issues,
mislead the jury, cause undue delay, waste time, be unfairly
prejudicial, and/or needlessly present cumulative evidence,
and the negative impact of any of those conditions must
substantially outweigh the evidence’s probative value. It does
not.
        We must first examine the probative value of the
proposed evidence. As proffered, Gallivan’s proposed
testimony would have tended to show that the scope of
Houston’s spoliation was more significant than Plantronics had
represented, thereby helping the jury decide whether to draw
an adverse inference—as it was instructed it could do. The
District Court explicitly chose to put certain issues of material
fact, such as whether Plantronics engaged in a “massive cover-
up to hide antitrust violations,” App. 34, in the jury’s hands.
By withholding evidence regarding the scope of the spoliation,
the court deprived the jury of the ability to make an informed
decision about the adverse inference, and the instruction was
less effective. See Stevenson v. Union Pac. R.R. Co., 354 F.3d
739, 750 (8th Cir. 2004) (holding that without relevant
evidence related to missing information, “the jury is deprived

                               16
of sufficient information on which to base a rational decision
of whether to apply the adverse inference”).
        Gallivan could have helped provide the jury with a
fuller picture. For instance, GN proffers that Gallivan would
have testified that Stroz’s analytical techniques resulted in an
incorrect estimate on the number of relevant emails Houston
deleted—and that, in fact, Houston deleted up to five times
more relevant emails than Plantronics reported. GN also argues
that Gallivan would have provided the jury with a crucial
expert opinion on why his estimates, rather than Stroz’s, were
correct.
       That fuller picture could have had an impact on the
merits of GN’s antitrust claims. For instance, GN was required
to prove that Plantronics coerced distributors to enter into POD
agreements and to remain PODs. Houston was a key player in
the administration of the POD program. He deleted and
encouraged others to delete at least one email chain that
suggested Plantronics employees confronted PODs that
purchased or even talked with competitors. If Plantronics
employees made similar statements regularly, or directly
pressured distributors via email, it is very likely that Houston
would have been included on or forwarded the email. Whether
Houston deleted hundreds of emails or thousands may have
impacted the jury’s conclusion on how many similar email
chains were lost.
       The dissent minimizes the probative value of Gallivan’s
testimony by listing five stipulations that could have helped the
jury draw an inference about the degree of Plantronics’
spoliation. However, none of the five proffered stipulations
materially address the scope of spoliation or render Gallivan’s
testimony superfluous. Indeed, the only stipulation on the
scope that the District Court read to the jury casts more

                               17
uncertainty on the number of deleted relevant emails: “[I]t may
be that several hundred or even up to 15,000 potentially
responsive relevant emails were deleted or destroyed.” App.
1315. This vagueness left the jury to consider estimates that
were not even in the same ballpark, with no additional
information as to which ballpark was more likely and why.
Gallivan would have provided that additional information. He
would have testified that Stroz’s methodology was flawed,
leading to a low estimate of 2380 to 5887 unrecoverable
relevant emails, and he would have asserted that between
10,000 and 15,000 unrecoverable relevant emails were deleted.
The two experts’ estimates are not close, and, counter to both
experts estimates, the above-referenced stipulation broadens
the ranger further yet to state that only “several hundred”
relevant emails may have been destroyed. The difference from
several hundred to 15,000 could easily have been the
difference between applying the adverse inference and not.
        Gallivan’s expert testimony would have assisted the
jury in narrowing that range, giving it evidence on which it
could base an important decision: whether Plantronics engaged
in a “massive cover-up.” Without Gallivan’s testimony, it is
possible, if not entirely probable, that jurors concluded that
only a few hundred emails were deleted, falling short of a
massive cover-up; however, if they had evidence that fifteen,
five, or even just one thousand emails had been deleted, they
might have taken a very different view on whether to apply the
adverse inference. If found credible by the jury, Gallivan’s
testimony would have made a material fact in dispute—
whether Plantronics engaged in a massive cover-up—more
likely to be true. And, in fact, Gallivan’s testimony could have
assisted the jury in making its determination on some of the
antitrust claim issues, such as whether Plantronics’ POD
arrangements were coercive. The “maximum reasonable

                              18
probative force” of his testimony was high; therefore, the
District Court could have properly excluded it only if that
probative value was substantially outweighed by the
evidence’s potential prejudice or by other risks outlined in Rule
403.
        Gallivan’s testimony did not carry risks that would
substantially outweigh its probative value. First, Gallivan’s
testimony would not have been likely to confuse the issues or
mislead the jury. The jury was presented with significant
instruction by the District Court on the permissive adverse
inference, along with seventeen spoliation stipulations. Adding
the testimony would have provided additional evidence to
expound upon the stipulations and increase the jury’s
understanding of the situation, rather than confuse or mislead.
And, if confusion or misdirection was a concern, the court
could have provided a limiting instruction. See McQueeney v.
Wilmington Tr. Co., 779 F.2d 916, 923 n.8 (3d Cir. 1985).
        Likewise, Gallivan’s testimony would not have caused
undue delay or wasted time. GN estimated that it would only
need about a half hour for direct examination of Gallivan at
trial. Even if that were overly optimistic, and even if cross took
the same amount of time as direct, Gallivan’s testimony would
have required a couple of hours out of a six-day trial. Given the
probative value of the testimony, this would not have
constituted “undue delay” or a “waste” of the court’s or the
parties’ time.
        Gallivan’s testimony would not have been
unnecessarily cumulative. Instead, it would have added to and
further explained the seventeen stipulations that the District
Court read to the jury. It would not have simply rehashed those
stipulations, but provided information to help the jury decide
in favor of or against adopting the adverse inference.
        Further, though the testimony could have had some

                               19
prejudicial effect, that prejudice would not have been unfair.
The testimony about Plantronics’ employees deleting emails
relevant to the litigation might color the jury’s opinion of
Plantronics and prejudice its view of the company on issues
unrelated to spoliation, and additional trial time spent on
spoliation dilutes the amount of the trial devoted directly to the
merits of GN’s antitrust claims. However, “[i]t is worth
stressing that the term ‘unfair prejudice’ . . . is often misstated
as mere prejudice.” Coleman, 306 F.3d at 1343 n.6.
“‘[P]rejudice does not simply mean damage to the opponent’s
cause.’ If it did, most relevant evidence would be deemed
‘prejudicial.’” Goodman v. Pa. Tpk. Comm’n, 293 F.3d 655,
670 (3d Cir. 2002) (quoting 1 McCormick on Evidence § 185
(John W. Strong et al. eds., 5th ed. 1999)); see also
McQueeney, 779 F.2d at 923 (holding that “absen[t] . . . a
showing of particularized danger of unfair prejudice, the
evidence must be admitted”). The potential for jurors to
distrust Plantronics’ employees and the few hours that would
be taken from the merits of the case hardly amount to a risk of
“unfair” prejudice, particularly given that the stipulations
already alerted the jury to the willingness of Plantronics’
executives to destroy and direct the destruction of relevant
evidence.
        Even looking generously at Rule 403’s considerations,
the potential for Gallivan’s testimony to negatively affect
Plantronics does not outweigh, much less substantially
outweigh, the evidence’s high probative value. In excluding
that evidence, the District Court stated only that it was
concerned that live testimony would be inflammatory and
prejudicial without offering specifics. The dissent correctly
notes that we are highly deferential to a district court’s
conclusion on whether to admit evidence under FRE 403.
However, when a court excludes highly probative evidence

                                20
that is not clearly and substantially outweighed by significant
unfair prejudice to the opposing party, we must conclude that
the court abused its discretion. See McQueeney, 779 F.2d at
923. Gallivan’s testimony should have been admitted.
              2.      The exclusion was not harmless error
        We will not reverse if the District Court’s error was
harmless, that is, “if it is highly probable that the error did not
affect the outcome of the case.” Glass v. Phila. Elec. Co., 34
F.3d 188, 191 (3d Cir. 1994) (quoting Lockhart v.
Westinghouse Credit Corp., 879 F.2d 43, 53, 59 (3d Cir.
1989)). “‘High probability’ requires that the court have a ‘sure
conviction that the error did not prejudice the defendant,’ but
need not disprove every ‘reasonable possibility’ of prejudice.”
United States v. Grayson, 795 F.2d 278, 290 (3d Cir. 1986)
(quoting United States v. Jannotti, 729 F.2d 213, 219–20 & n.2
(3d Cir. 1984)). 3 Plantronics argues that GN did not “identify
exactly how more evidence on the issue of spoliation . . . would
have . . . overcome the weight of the facts against GN.”
Appellee’s Br. 53. That is not the standard. GN is not tasked
with proving “exactly” how Gallivan’s testimony would have
altered the outcome of the case. Rather, to the contrary, we
must have a “sure conviction that the error did not prejudice”
GN, or we cannot deem the District Court’s error harmless.
Grayson, 795 F.2d at 290.
       Gallivan’s testimony could have shaped the jury’s
verdict, and the District Court’s error in excluding it was not
harmless. There was evidence of significant spoliation in this

       3
         “In the context of non-constitutional harmless error,
the civil and criminal standards of review are no different.”
Lockhart, 879 F.2d at 59 n.1 (citing McQueeney, 879 F.2d at
927).

                                21
case and allegations that some of the destroyed evidence was
damning to Plantronics’ defense. The District Court instructed
the jury to determine whether Plantronics’ spoliation was a
massive cover-up, whether the missing evidence was damning,
and whether it wished to draw an adverse inference. Gallivan’s
excluded testimony could have assisted the jury in making
those determinations, and thus could have changed the
outcome of the case. We have determined that an error was not
harmless in less weighty situations. See, e.g., Renda v. King,
347 F.3d 550, 556–57 (3d Cir. 2003) (improperly excluding
evidence of a witness’s character for truthfulness was not
harmless); McQueeney, 779 F.2d at 930–31 (improperly
excluding plaintiff’s work records, which were relevant to the
damages determination, was not harmless).
         We do not have the requisite sure conviction that GN
was not prejudiced by the exclusion of Gallivan’s testimony,
so the error was not harmless. Accordingly, we will grant a new
trial. 4

       4
          GN also argues that the District Court abused its
discretion by improperly including stipulations that ignored
GN’s proposed stipulations and cast Plantronics’ efforts to
prevent spoliation and recover lost information in a positive
light. However, GN cites no authorities to support its position,
and other than excluding Gallivan’s testimony, discussed
above, the District Court made no “clearly erroneous finding
of fact, errant conclusion of law or an improper application of
law to fact” that would constitute an abuse of discretion.
Forrest, 424 F.3d at 349 (quoting Oddi v. Ford Motor Co., 234
F.3d 136, 146 (3d Cir. 2000)). With its unbiased and factually
correct stipulations, the court provided a broad, general picture
of spoliation from start to finish, and it did not play favorites
when selecting which pieces to include from GN’s and

                               22
                             IV.
      We will affirm in part and reverse in part, and we will
remand for a new trial.

Plantronics’ proposed stipulations. The stipulations’ greatest
deficiency was the vagueness of the scope of spoliation, which
will be remedied by the inclusion of expert testimony from
Gallivan or others on remand. Nevertheless, the court will have
the opportunity to reconsider whether to utilize stipulations,
live testimony (in addition to Gallivan), or both at the new trial.

                                23
GN Netcom Inc. v. Plantronics Inc., No. 18-1287

SMITH, Chief Judge, concurring in part and dissenting in
part.

       I agree with my colleagues that the District Court did
not abuse its discretion by imposing a permissive adverse
inference sanction, and I therefore join Section III.A of the
majority opinion. I write separately to add two points to the
majority’s cogent analysis of why it was permissible for the
Court to impose this sanction and not a harsher one. Where I
part ways with the majority is in its conclusion that the District
Court impermissibly prevented GN’s spoliation expert, Dan
Gallivan, from testifying. I therefore dissent from Section
III.B.

                                I.

        I begin by directly responding to two of GN’s
challenges to the District Court’s permissive inference sanction
that lack merit.

       First, I reject GN’s argument that the District Court
erred by imposing a permissive inference because it “was the
equivalent of no sanction at all.” Appellant’s Br. 36. The
permissive inference had bite because in explaining it to the
jury, the District Court authoritatively told the jury of
Plantronics’s misconduct and thereby “brand[ed] [Plantronics]
as a bad actor.” Morris v. Union Pac. R.R., 373 F.3d 896, 900
(8th Cir. 2004); see also Boyde v. California, 494 U.S. 370,
384 (1990) (explaining that juries view deferentially
statements of a district court). Moreover, GN seems to suggest
                                1
that the absence of Don Houston’s emails did not prevent it
from winning on the merits—a further indication that the
District Court did not abuse its discretion by declining to
impose default judgment against Plantronics. See Schmid v.
Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994)
(instructing district courts to “select the least onerous
sanction”). By asserting that only default judgment was
appropriate, GN effectively contends that the Court, not the
jury, should have conclusively decided the extent of the
prejudice GN suffered from the spoliation. The jury, however,
was the factfinder, and therefore it was permissible for the
District Court to entrust this assessment to the jury. See
Blinzler v. Marriott Int’l, Inc., 81 F.3d 1148, 1159 (1st Cir.
1996); see also Schmid, 13 F.3d at 79 (stating that one of the
central goals of discovery sanctions is “to restore the accuracy
of the trial” (internal quotation marks and citation omitted)).

       Second, the District Court did not abuse its discretion
by declining to impose a mandatory adverse inference
instruction. Contrary to GN’s suggestion, the weight of
authority in fact supports the District Court’s choice of a
permissive adverse inference. See Schmid, 13 F.3d at 79;
Beaven v. U.S. Dep’t of Justice, 622 F.3d 540, 555 (6th Cir.
2010) (noting that “an adverse inference is usually only
permissive for the factfinder”); Blinzler, 81 F.3d at 1159
(explaining that adverse inference sanctions for the spoliation
of evidence should be “permissive, not mandatory”); Akiona v.
United States, 938 F.2d 158, 161 (9th Cir. 1991) (“Generally,
a trier of fact may draw an adverse inference from the
destruction of evidence relevant to a case.” (emphasis added));
Beck v. Test Masters Educ. Servs., Inc., 289 F.R.D. 374, 380

                               2
(D.D.C. 2013) (stating that “[c]ase law overwhelmingly favors
using a permissive rather than mandatory instruction” and
collecting cases). And other courts’ decisions to impose
mandatory adverse inferences hardly means that the District
Court abused its discretion here. “Whether an adverse
inference is permissive or mandatory is determined on a case-
by-case basis.” Flagg v. City of Detroit, 715 F.3d 165, 178
(6th Cir. 2013). Finally, GN is wrong to contend that a
mandatory adverse inference was necessary because the
spoliation evidence in the record was inadequate for the jury to
rationally decide whether to adopt the permissive adverse
inference. As explained in Part II below, the Court gave the
jury a sufficient evidentiary basis to decide whether it should
adopt the permissive inference.

                               II.

       Without a doubt, Plantronics deserves to be called out
for its substantial discovery misconduct in this case. It
repeatedly flouted its obligations as a litigant, depriving GN of
discovery and failing to take all reasonable steps to preserve
responsive electronically stored information. As the District
Court found and the majority rightly concludes, Plantronics
acted in bad faith. The question for the District Court then
became: what to do about it?

        I dissent from the majority’s conclusion that the District
Court abused its discretion in declining to admit Dan
Gallivan’s testimony under Federal Rule of Evidence 403. In
my view, the majority makes two errors. First, it minimizes
the information regarding the extent of Plantronics’s spoliation
that the District Court provided to the jury via the stipulations.
                                3
These stipulations gave the jury an adequate basis to decide
whether to adopt the permissive adverse inference. Second,
the majority fails to give the required deference to the District
Court’s reasonable conclusions that Gallivan’s spoliation
testimony posed a substantial risk of distracting the jury from
the antitrust merits of the case and that such risk eclipsed the
testimony’s probative value. In sum, not only do I fail to detect
error, I commend the District Judge for his innovative and
effective exercise of case-management discretion. See United
States v. Schiff, 602 F.3d 152, 176 (3d Cir. 2010) (noting that
district courts have “broad discretion” to engage in “case
management both before and during trial”). By remanding, the
majority not only sets the stage for another antitrust trial but
probably for a not-so-mini spoliation trial as well. 1

       The tried and true abuse-of-discretion standard governs
our review of the District Court’s evidentiary ruling because
by implicitly weighing the probative value of Gallivan’s
proposed testimony and explicitly considering the risks of its
admission, the District Court performed a Rule 403 balancing
analysis. See Ansell v. Green Acres Contracting Co., 347 F.3d

1
  I acknowledge the majority’s statement that, on remand, the
District Court may again use stipulations to encapsulate the
parties’ evidence regarding the extent of Plantronics’s
spoliation. But given the majority’s conclusion that “no
application of the correct law to the facts of this case would
warrant exclusion of the expert’s testimony,” it seems
unavoidable that the District Court will be required on remand
to permit live testimony on spoliation, leading to the mini-trial
that the District Court sought to avoid.
                                4
515, 525 (3d Cir. 2003). When the District Court made its Rule
403 determination, it had Gallivan’s report containing the
details of his proposed testimony. The Court implicitly
considered the probative value of Gallivan’s testimony by
concluding that the parties should agree to “stipulations”
regarding the spoliation evidence in place of witness
testimony. The Court explained its calculus that the value of
spoliation testimony was outweighed by the risk that such
testimony would confuse the jury and result in jurors deciding
to punish Plantronics for its spoliation instead of deciding this
case on its merits. Because the abuse-of-discretion standard
governs our review of the Court’s decision to exclude
Gallivan’s testimony, we should not reverse unless we have “a
definite and firm conviction that the court … committed a clear
error of judgment in the conclusion it reached.” In re Cendant
Corp. Prides Litig., 233 F.3d 188, 192 (3d Cir. 2000)
(alternation in original) (internal quotation marks and citation
omitted). In my view, GN has failed to satisfy this highly
deferential standard.

       To be sure, Gallivan’s testimony would have had non-
negligible probative value, but the District Court read five
stipulations to the jury that provided a basis for drawing a
reasonable inference about the degree of Plantronics’s
spoliation (whether it was closer to “several hundred” or
“15,000” deleted relevant emails that Plantronics did not
recover 2). App. 1315. All five of the following stipulations

2
    The majority faults the District Court for unnecessarily
increasing the uncertainty about the number of unrecovered
relevant emails by presenting this range, but GN approved of
                              5
signaled to the jury that it could find reason to mistrust
Plantronics’s representations regarding its discovery
misconduct and therefore infer that Plantronics’s spoliation
was at the higher end of the range:

       (1) “At least part of the motivation for the e-mail
           deletion was to deprive GN of evidence to use in this
           litigation.” Id.

       (2) “By one estimate, 482 of the 487 e-mails containing
           the term ‘GN’ or ‘Jabra’ [the name that GN uses for
           its headsets] were missing from the initial collection
           of Mr. Houston’s emails. The parties do not agree
           as to whether this is a reliable estimate.” Id.

       (3) Plantronics “did not take all steps it could have taken
           to recover the deleted emails.” Id.

       (4) A 17-month period elapsed during which Houston,
           Plantronics’s “senior vice president for U.S.
           Commercial Sales,” may have deleted emails. Id.

       (5) Plantronics did not have backup tapes of Houston’s
           emails for any time during this 17-month period.

this range in the District Court. GN’s lawyer told the Court
that he was “fine” with it informing the jury that “it may be that
several hundred or even up to 15,000 potentially responsive
relevant e-mails were deleted or destroyed.” App. 1291.
                                6
Given that the jury had these stipulations, the District Court
ensured that it had “sufficient information on which to base a
rational decision of whether to apply the adverse inference.”
Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 750 (8th Cir.
2004). Here, the stipulations provided the jury with sufficient
evidence to reach an informed judgment about the degree of
Plantronics’s spoliation and thereby fulfill its fundamental
responsibility to draw inferences based on the record.
Cf. Sheridan v. E.I. DuPont de Nemours & Co., 100 F.3d 1061,
1071–72 (3d Cir. 1996); United States v. Pena-Santo, 809 F.3d
686, 701 n.10 (1st Cir. 2015). I fail to see how this record
provides a basis for the majority to form a definite and firm
conviction that the jury lacked enough information to draw a
reasonable inference concerning the extent of Plantronics’s
spoliation.

       In addition, the majority does not accord appropriate
deference to the District Court’s conclusion that admitting
Gallivan’s testimony posed a significant risk that the jury’s
focus would be shifted from the merits of the antitrust case they
had been sworn to decide. This is a classic example of the sort
of discretionary call that trial judges are far better situated to
make than those of us who are confined to reviewing a cold
record. In my view, the District Court reasonably concluded
that admitting Gallivan’s testimony and rebuttal might result in
“spoliation taking over what is going to be an antitrust trial.”
App. 1044. And GN’s antitrust claims were far from
straightforward—four antitrust claims went to the jury, thereby
requiring its members to make multiple findings from record
evidence concerning, inter alia, commercial decision-making
and economic forces that are hardly a part of the average

                                7
citizen’s daily experience. 3 It was reasonable for the District
Court to carefully limit the amount of spoliation evidence
admitted so that the jury would focus on the merits. 4 While
GN’s lawyer estimated that Gallivan’s testimony would take
about 30 minutes, it is highly speculative for the majority to
assert that addressing spoliation would require only “a couple
of hours.” And in any event, it is a usurpation of the trial
judge’s role for this Court to second guess a determination
made immediately before trial regarding the appropriate
quantum of evidence on an issue, albeit relevant but collateral
to the merits of the antitrust case.

       Not only do I lack a definite and firm conviction that the
District Judge erred, I consider his limitation on the admission
of certain spoliation evidence to have been a sound exercise of
discretion. The abuse-of-discretion standard demands that we
give him the benefit of the doubt on whether to admit

3
  For example, the jury had to assess whether GN established
relevant geographic and product markets, whether Plantronics
had market power, whether Plantronics substantially
foreclosed GN from competing in the headset market, and
whether Plantronics’s POD agreements caused GN to lose
sales.
4
     Notwithstanding the majority’s suggestion, I do not
minimize the probative value of Gallivan’s testimony. Rather,
I conclude that the District Court permissibly determined that
the risk of spoliation testimony sidetracking the jury from the
case’s merits outweighed this testimony’s probative value.
                               8
Gallivan’s testimony. The majority fails to afford him that
deference.

      I respectfully dissent.

                                9