Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS—CDIll: Dish Network Sanctioned for Failure to Produce, Preserve Documents in Justice Department, State Action, (Apr 25, 2013)

By Tobias J. Gillett, J.D., LL.M.

In a state and U.S. Department of Justice action against Dish Network, Inc. for allegedly violating the FTC’s Telemarketing Sales Rule (TSR), the Telephone Consumer Protection Act (TCPA), and state statutes in carrying out certain telemarketing campaigns, the federal district court in Springfield, Illinois has ruled that Dish Network, Inc.’s conduct in failing to produce or preserve certain documents and information in discovery warranted evidentiary sanctions (United States v. Dish Network, Inc., April 23, 2013, Myerscough, S.).

In July 2005, the FTC sent Dish a Civil Investigation Demand requesting Dish’s call records, documents related to its telemarketing compliance, documents showing the "marketing materials, directions, and support" Dish provides to entities marking its services, and documents showing that Dish had not violated the TSR. The demand required Dish to retain all relevant documents, and to halt all routine procedures for document destruction. In March 2006, the state of North Carolina sent Dish a similar demand for documents related to compliance with federal and state do-not-call requirements.

On March 25, 2009, the Department of Justice and the Attorneys General of California, Illinois, North Carolina, and Ohio filed a lawsuit asserting that Dish had violated the TSR, the TCPA, and state statutes prohibiting certain forms of telephone solicitations.

In April 2012, the plaintiffs served Dish with a request for call records for certain calling campaigns and documents related to Dish providing consumer leads to any retailer, regional service provider, or distributor. On May 25, 2012, the plaintiffs filed a motion to compel discovery responses for (1) "documents relating to telemarketing lead lists," (2) "a witness who would testify regarding telemarketing lead lists," and (3) the information the plaintiffs had requested about the calling campaigns. The magistrate judge granted the motion to compel discovery as to those responses.

In response, Dish produced screen shots from its Predictive Dialer (PDialer) list processing and scrubbing application. The plaintiffs then asked Dish to produce the information in its native electronic format and to produce the entire contents of the PDialer database. Dish did not provide this information. It also did not provide audio files for nine of 61 automessage campaigns, including ones related to a Zee Sports marketing campaign. Dish did provide additional information from 2011 about lead lists, but not about 2005, 2007, and 2008 lead list sharing incidents. The plaintiffs deposed Dish’s Senior Vice-President of Sales, but claimed that he did not have any information beyond that in the documents already produced about lead lists.

The plaintiffs filed a motion for evidentiary sanctions under Federal Rule of Civil Procedure 27. The court explained that it had discretion whether and how to sanction a party, and that sanctions for failure to preserve or produce documents "are appropriate where (1) the party had a duty to preserve the evidence; (2) the duty was breached; and (3) the other party was harmed by the breach." A plaintiff must demonstrate that the defendant "intentionally destroyed the documents in bad faith" to warrant an inference that the documents would have contained adverse information.

Predictive Dialer information. The court concluded that Dish’s actions with respect to the request for electronically stored information from the PDialer application warranted sanctions. In its response to the motion for sanctions , Dish stated that no electronically stored information ever existed, and provided deposition evidence that the PDialer application merely took input files from various other databases, processed it, and transmitted output files for use by dialers, without leaving a "data trail."

The court noted that the plaintiffs had previously attempted to determine whether records of the scrubbing process existed, but that Dish responded by stating "that it would produce documents relating to the scrubbing of all lists for the campaigns listed in the request." If Dish had informed the plaintiffs that the information did not exist sooner than in its response to the motion for sanctions, the plaintiffs could have demanded access to the system or a copy of it, the court observed. Dish did not make the data available even after the plaintiffs requested the entire contents of the PDialer application. Moreover, the court noted that Dish originally offered for deposition a person with no technical knowledge of the PDialer system, but provided such a person to support its response to the motion for sanctions.

The court found Dish’s conduct "obstructive, contumnacious, and willful." The court sanctioned Dish by precluding it "from using at summary judgment or trial any documents or information about the creation and scrubbing of telemarketing campaigns that [Dish] did not provide to plaintiffs in discovery," and by placing the burden of showing that the information was provided to the plaintiffs on Dish.

Zee Sports audio recordings. The court also found that Dish’s failure to preserve audio recordings of the October 2007 Zee Sports marketing campaign warranted sanction. The court concluded that Dish had a duty to preserve the recordings due to the FTC’s July 2005 Civil Investigation Demand, which required Dish to suspend normal document destruction procedures and retain all relevant documents. The court found that Dish knew the recordings might be relevant because it suspended the Zee Sports campaign when it concluded that it might violate the TCPA. The court concluded that Dish’s claim that it inadvertently lost the recordings was "not credible," and "coupled with [Dish’s] notice of the investigation by the FTC and the Demand to preserve documents, demonstrate[d Dish’s] bad faith and willful conduct."

Therefore, the court sanctioned Dish by "issu[ing] a finding of fact that the Zee Sports campaign contained a direct or indirect sales message and was conducted for commercial purposes."

Telemarketing lead lists. Finally, the court concluded that Dish’s conduct related to the telemarketing lead lists warranted sanctions. The magistrate judge had ordered Dish to produce "documents related to Dish providing consumer leads to any retailer, regional service provider, or distributor," and "to provide a representative to testify regarding the issue of the possible policy and practice of [Dish] sharing leads." In response, Dish had provided e-mails from 2011, but not from 2005, 2007, and 2008 lead list sharing incidents, and tendered its Senior Vice-President of Sales for deposition.

The court observed that Dish had a duty to preserve documents related to lead list sharing due to the FTC’s demand and the filing of the lawsuit. Dish did not preserve the documents, and the plaintiffs were harmed by that failure because Dish "would be liable for its retailers’ unlawful telemarketing if [Dish] provided the retailers with the lead lists."

Moreover, the court found Dish’s conduct was willful. Dish had represented to two other district courts that it did not share lead lists with retailers, and had submitted a declaration to the court in the present case that it did not provide lead lists to retailers, but also stated that it was not Dish’s "general policy" to provide such lists. However, documents produced during discovery demonstrated that it did provide lead lists on at least a few occasions. The court noted that the fact that it may not have been Dish’s "general policy" to provide the lists did not excuse it from providing documents related to those times when it did provide them.

Further, Dish’s Senior Vice-President of Sales provided no more information than that in the documents Dish had already produced. In addition, despite admitting that it had "obtained the assistance of two retailers" to place telemarketing calls to consumers in 2011, Dish did not provide additional documents about those incidents. Since the documents apparently no longer existed, the court concluded that Dish did not retain them despite having an obligation to do so.

Therefore, the court determined that it would sanction Dish by "instruct[ing] the jury that [Dish] failed to preserve information relevant to the litigation and that additional documents related to certain instances of sharing telemarketing lists" had been destroyed. The jury could infer, although it did not have to, "that the destroyed evidence relating to those instances was not favorable to" Dish.

The case is No. 09-3073.

Attorneys: Daniel Kadane Crane-Hirsch of the United States Department of Justice for United States of America. Edward Ellis Weiman (Kelley Drye & Warren LLP) for Dish Network, L.L.C.

Companies: Dish Network, L.L.C.

Cases: ConsumerProtection Privacy IllinoisNews