Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—C.D. Ill.: Dish sanctioned for violating discovery orders; bad faith sanctions avoided, (Oct 15, 2015)

By Michael Menzhuber, J.D., LL.M.

Dish Network, L.L.C. (Dish) was sanctioned by the federal district court in Springfield, Illinois, for failing to: (1) retain documents, as required by a Federal Trade Commission Civil Investigative Demand (FTC Demand) and the North Carolina Demand (NC Demand); and (2) produce responsive documents in violation of a court order (Opinion 80).requiring the production of all materials related to all retailers’ compliance with the FTC’s Telemarketing Sales Rule (TSR) and Telephone Consumer Protection Act (TCPA). The counsel for Dish did not improperly certify Dish’s production of its compliance officer’s (CO) emails because, under the circumstances, the certification was made on reasonable inquiry (U.S. v. Dish Networks, L.L.C., October 13, 2015, Myerscough, S.).

Background. The U.S. Department of Justice and the states of California, Illinois, North Carolina, and Ohio (collectively, “plaintiffs”) brought an action against Dish for allegedly violating the TSR, the TCPA, and state statutes in carrying out certain telemarketing campaigns. In July of 2005, the FTC Demand was issued which imposed a duty on Dish to preserve and retain responsive documents. In March of 2006, the state of North Carolina sent Dish a similar demand for documents related to compliance with federal and state do-not-call requirements. In January of 2011, Opinion 80 was issued which ordered Dish to produce material related to all of its retailers’ compliance with the TSR and TCPA.

Dish failed to retain, in native electronic format, responsive emails sent to and from Dish’s CO for the period from August 2006 to April 2008. However, Dish’s counsel, in a letter to plaintiffs’ counsel stated that Dish had paper files of the CO’s responsive emails. The plaintiffs were given access to these files during discovery. The letter from Dish’s counsel also certified the completeness of Dish’s discovery production.

On December 12, 2014, the court entered partial summary judgment with issues of fact remaining for trial to include: (1) whether Dish had an agency relationship with its order entry retailers; and (2) Dish’s knowledge of ongoing violations of telemarketing laws.

In June of 2015, Dish received a hard drive from a former order entry retailer that contained communications from Dish and the CO for the period, from December 2006 to March 2007, that were not produced in discovery (nondisclosed data).

The plaintiffs sought sanctions against Dish for failing to retain or produce most of its responsive communications with its order retailers, and for Dish’s counsel certification of the production of the CO’s emails in Dish’s discovery responses.

Failure to Retain or Produce. After the court determined that Dish failed to produce or retain some documents covered by the FTC Demand and subject to Opinion 80’s order to compel production, it noted that the resulting prejudice to the plaintiffs was an important factor in determining whether to issue sanctions. It determined that the plaintiffs suffered some prejudice from Dish’s failure to: (1) retain or produce transmittal information and final version of two discovery drafts, because they related to the issue of Dish’s agency with its order entry retailers; and (2) retain and produce certain other documents in discovery.

The court determined that an appropriate sanction was to take, as an established fact, that Dish had communications with all of its order entry retailers that were of the same substantive type and quantity as those contained in the former order entry retailer data. The court, however, declined to impose more severe sanctions for spoliation because there was no evidence that Dish’s failure to retain its CO’ emails in native electronic format, or Dish’s failure to preserve certain documents, was done in bad faith.

Sanctions under Rule 26(g). The plaintiffs argued that sanctions should be imposed, pursuant to Rule 26(g), because Dish’s counsel improperly certified its production of its CO’s emails. The court, however, disagreed. It determined the certification by Dish’s counsel was made on a reasonable inquiry, under the circumstances, because he relied on: (1) Dish’s CO’s statements that were made under oath; and (2) information he received about a conversation between Dish’s corporate counsel and an FTC attorney regarding an agreement to modify aspects of the FTC Demand.

The case is No. 09-3073.

Attorneys: Albert N. Shelden, California Attorney General's Office, Daniel Kadane Crane-Hirsch, U.S. Department of Justice, and Elizabeth A. Blackston, Illinois Attorney General, for United States of America, State of California, State of Illinois, State of North Carolina, and State of Ohio. Catherine Emily James (Kelley Drye & Warren LLP) for Dish Network LLC.

Companies: Dish Network LLC

Cases: ConsumerProtection Privacy IllinoisNews