Media Law Prof Blog

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Louisiana State Univ.

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Monday, November 14, 2005

It's Baaaack.....

The Tenth Circuit has reversed a lower court's dismissal of Proctor & Gamble's lawsuit against an Amway distributor who alleged that the P&G President "worshipped Satan" and plowed profits from more than 40 P&G products into the "Church of Satan." P&G claimed that the distributor, Randy Haugen, sent messages to "thousands" of other Amway distributors saying that the "worship of Satan" statements had been made on the Phil Donahue talk show. The company sued Haugen under the Lanham Act for false representation. The lower court dismissed, deciding to exclude expert testimony, and sanctioning P&G for failing to preserve evidence.

On appeal, the 10th circuit wrote that "[t]he primary focus of P&G's appeal is on the district court's August 19, 2003 order dismissing the case. Although that order cited "three reasons" for dismissing the case, P&G argues, and we agree, that the order was actually grounded on two separate bases: (1) P&G's alleged wrongful conduct and the prejudice allegedly suffered by defendants as a result thereof, and (2) the purported inadmissibility of P&G's expert testimony. P&G challenges both. As outlined in greater detail below, we agree with P&G that neither of these bases justify dismissal and we therefore reverse the order of dismissal and remand the case to the district court for further proceedings."

It continued, "P&G argues that the district court's order of dismissal must, at a minimum, be reversed due to the district court's failure to address on the record any of the Ehrenhaus factors. We agree. As we have said in the past under similar circumstances, the district court's failure to provide "a detailed evaluation of these factors on the record" makes "it . . . impossible for us to "engag[e] in any meaningful review of the trial court's decision." .... Although defendants assert that the district court's order of dismissal incorporated by reference the arguments asserted in their motion for sanction, which in turn addressed the Ehrenhaus factors, it is unclear from the record whether the district court agreed with the defendants' assessment of each of those factors. Moreover, as discussed in greater detail below, our independent review of the record refutes many of the arguments made by defendants in their motion. Thus, "we must hold" that the district court's failure to address the Ehrenhaus factors on the record "amounts to an abuse of discretion."

Further, the 10th circuit continued, "P&G argues that, even aside from the district court's failure to address the Ehrenhaus factors on the record, the sanction of dismissal was inappropriate because there was no basis for concluding that it acted willfully, in bad faith, or with culpability. More specifically, P&G argues that the only action it conceivably failed to take was "to create a computerized database out of all the online IRI data that ever had been available to [it] from 1995 through 1998, even though [it] never actually had accessed, much less downloaded, the vast majority of the data, which were being deleted and replaced continuously by IRI." ...Our independent review of the record on appeal persuades us that P&G was indeed faced with a dilemma regarding preservation and production of the IRI data. As noted, P&G did not possess nor own that data. Rather, the record indicates that the data was compiled, possessed, and owned by IRI.... Although the district court's order of dismissal makes reference to P&G "fail[ing] to preserve relevant electronic data," the district court offered no explanation of what it meant by "relevant electronic data," and what steps it believed P&G could and should have taken to preserve such data. .... Moreover, at no time during the litigation did the district court or the magistrate judge ever address either of these issues....Similarly, the district court expressly addressed the IRI data on only one occasion before entertaining defendants' motion for sanctions and dismissing P&G's case. Specifically, on February 26, 2003, after hearing oral arguments regarding defendants' motion to compel damage-related evidence, the district court simply directed P&G to ensure that it had produced all IRI-related data in its possession. In other words, the district court did not order P&G to purchase any additional archival data from IRI for defendants' benefit.  Given these circumstances, it is simply unclear what the district court considered P&G's duties to have been regarding preservation and production of the IRI-related data. In turn, it is impossible to conclude that P&G acted with the requisite culpability to justify the sanction of dismissal. In its order of dismissal, the district court found "that it would be basically impossible for Defendants to defend this case without the electronic data that has not been produced and apparently is no longer available." App. at 1058. More specifically, the district court stated: "Defendants would need access to all relevant IRI data to determine whether the Satanism message produced lost sales with respect to all the products included in said Satanism message." ...P&G challenges this finding as "groundless." ... In the instant case, P&G notes, defendants "have received all of the information, documents and materials in the possession, custody, or control of P&G and its experts," and defendants also had the opportunity to "purchase[] directly from IRI any additional data they believed was necessary . . . ."....We conclude, after examining the record on appeal, that the district court's finding of prejudice, unsupported by any detailed explanation, is clearly erroneous.... When this litigation began, P&G initially attempted to use the IRI data available to it online for purposes of assessing the damages, if any, that resulted from the Satanism rumors. According to P&G, however, the online data was not organized in a way that allowed for such analysis. Accordingly, its sole remaining expert on damages, Dr. Rosen, requested that P&G purchase archival data from IRI that was formatted in a different fashion than the online data, i.e., by zip code. P&G complied with this request, and Dr. Rosen in turn based his damages analysis on the archival data. Although defendants now assert that it was necessary for them to have had access to all of the IRI online data in order to rebut Dr. Rosen's testimony, this assertion is supported by little, if any, evidence in the record on appeal. In other words, although it certainly would have been preferable if defendants had somehow been afforded access to the IRI data, it is far from clear that such data would have been useful for rebutting Dr. Rosen's testimony, since it was formatted in a different fashion than the data utilized by Dr. Rosen. Thus, we conclude that genuine issues of material fact remain concerning whether defendants were in fact prejudiced by their lack of access to all the IRI-related data, and if so, how much they were prejudiced.  In summary, we conclude the district court's order of dismissal, to the extent it was intended as a sanction for P&G's alleged failure to preserve electronic data and the alleged resulting prejudice, was improper and must be reversed."

P&G's request for a reassignment of the case to another judge was denied. Read the entire opinion here.

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