It seems as if some lawyers just can’t take a hint from the court. (Rosenthal Collins Group, LLC v. Trading Technologies International, Inc.)
Trading Technologies is the owner of two patents relating to software that allows futures traders to enter orders electronically. Rosenthal filed a declaratory judgment action contending that its software product anticipated and, hence, invalidated these patents. Trading Technologies responded with a counterclaim alleging that Rosenthal infringed its patents.
As an opening shot, Rosenthal moved for summary judgment, relying upon the declaration of its technical expert, Walter D. Buist, a computer programmer who had developed the source code for this alleged prior art. Attached to this declaration, as an exhibit, were four removable computer zip disks said to bear a backup copy of the source code originally written by Buist in 1998/1999. Rosenthal asserted that this source code included all of the features of the Trading Technologies patented software. Mr. Buist allegedly found these disks in his barn (we are not kidding).
Mr. Buist was deposed by Trading Technologies in 2006. At that deposition, he testified that, contrary to Rosenthal’s summary judgment claims, the code containing the critical software functions had not been written onto the disks in the 1998/1999 period. Rather, he now stated that he had added it to the disks in 2005 and that he had advised counsel for Rosenthal of the “modifications” he had made.
Trading Technologies seized upon these startling revelations and filed a motion for judgment by default and monetary sanctions. The trial judge, exhibiting great leniency, denied the motion for judgment by default, but did grant the requested monetary sanctions in the amount of $289,234.39. One would think this was a clear message to Rosenthal about altering evidence, but apparently they didn’t get it. Rather than accept the judge’s generosity, Rosenthal defended Mr. Buist, arguing that the proffered evidence was authentic, and filed a motion to vacate the sanctions.
The judge denied the motion to vacate, writing a decision that described Rosenthal’s conduct as “somewhat misleading,” “disconcerting,” “troubling” and “less than forthcoming.” He then granted Trading Technologies’ motion for additional discovery, ordering the production of specified documents and computer hardware and a second deposition of Mr. Buist. Astonishingly, Rosenthal failed to comply with this order.
In view of this failure, Trading Technologies moved for further sanctions. Showing unbelievable mercy, the judge denied this motion, merely ordering prompt compliance with the discovery order.
At his second deposition in 2009, Mr. Buist admitted turning back the clock on his computer to make it appear that the critical files had last been modified in 1998 and 1999, when they had actually been modified in 2006. The new discovery also revealed that several computer disks, produced by Rosenthal, had been “wiped,” the last one being wiped only 90 minutes before it was produced to counsel for Trading Technologies. Moreover, a computer, produced by Rosenthal, proved to have a hard drive that was manufactured in 2008. At this point, Trading Technologies filed a second motion for a default judgment and additional sanctions.
At oral arguments on this second motion for default judgment, Rosenthal’s counsel asserted, apparently with a straight face, that “Buist is a very private person” who had wiped the disks because they “contained personal files that he did not want disclosed, such as his wife’s tax return.” However, in what was undoubtedly a belated effort to distance themselves from Buist and save their own skins, Rosenthal’s attorneys also asserted that neither they, nor their client, had been aware of Mr. Buist’s actions. Following the axiom that the best defense is a good offense, they characterized the allegations being made by Trading Technologies as “libelous,” “audacious” and an “Oliver Stone-esque conspiracy theory.”
His supply of mercy finally exhausted, the judge bought none of this nonsense, holding that if Rosenthal and its attorneys didn’t know what was happening – which the judge strongly indicated he doubted – they should have known. He went on to hold that “monetary sanctions would be insufficient in this situation, where further misconduct occurred even after [Rosenthal] had been sanctioned once for discovery abuses.” He granted the default judgment to Trading Technologies and, for good measure, tacked on another $1,000,000 in sanctions. In a parting shot, he ordered counsel for Rosenthal to pay the costs and fees incurred in litigating this final motion.
THE LESSON TO BE LEARNED: These days, there is no such thing as a secret; so, don’t even think about altering evidence.
Granted, it's a tough economy, but certain of these cases indicate to me that some firms need to be more selective of the clients that they represent, and/or do more legwork to check out the stories their clients tell them. Getting caught red-handed (plus being sanctioned) like this only makes Rosenthal's attorneys look bad. I agree with the judge that an excuse that they "didn't know" what their client was up to is no excuse.