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April 30, 2020 Practice Points

Case Terminating Sanctions: A Lesson about Inappropriate Conduct

Severe obstructionism may not be the best course of action.

By Connor Cafferty

The extreme sanction of case termination is available when a party obstructs and fails to participate meaningfully in discovery. The defendants in Epson Corp., et al v. Kravchuk, et al, recently learned this lesson against discovery misconduct the hard way. Nos. 18-15124 & 18-15245 (9th Cir. Dec. 27, 2019) (mem. op.).

Seiko Epson Corporation brought suit against multiple individuals for trademark counterfeiting, trademark infringement, and other claims related to nearly $15 million in unauthorized sales of Epson printer cartridges by the defendants and their related companies. Despite the extensive sales volume of counterfeit goods that the defendants enjoyed, they repeatedly failed to meaningfully participate in litigation in even the most basic ways.

The defendants’ obstructionism was severe. They failed to produce discovery, failed to appear in court, violated various court orders, failed on multiple occasions to appear for a deposition, and failed to respond to basic discovery requests. Despite repeated warnings from the magistrate judge that case-terminating sanctions were a possibility, the defendants’ behavior continued. The magistrate judge commented that in 18 years as a judge, she had “never encountered th[is] level of obstructionism.” Id.

On motion by Epson, the U.S. District Court for the District of Nevada entered default judgment against the defendants as case-terminating sanctions. Suddenly motivated to attend to their legal affairs, the defendants appealed to the Ninth Circuit Court of Appeals, alleging that the district court abused its discretion.

The Ninth Circuit affirmed the ruling, saying that the district court did not abuse its discretion by imposing case-terminating sanctions. The court cited Connecticut General Life Insurance Co. v. New Images of Beverly Hills, which is the authoritative precedent for case-terminating sanctions. 482 F.3d 1091, 1096 (9th Cir. 2007). Connecticut General says that while extreme, terminating sanctions are justified when a party has exhibited “willfulness, bad faith, and fault.” Id. Here, the conduct of the defendants met all three elements required by Connecticut General. They provide a valuable, and expensive, lesson in how a party should not behave in litigation.

Connor Cafferty is a 3L at Brandeis School of Law in Louisville, Kentucky.

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