United States District Court, E.D. Virginia, Norfolk Division
Counsel for Plaintiff/Counter Defendant Vir2us. Inc.: Clark
J. Belote Stephen E. Noona Kaufman & Canoles, P.C., Craig
C. Reilly Law Office of Craig C. Reilly, Alden K. W. Lee
Brian A. E. Smith Christina M. Finn Henry C. Bunsow Jeffrey
D. Chen Joseph J. Fraresso Bunsow, De Mory, Smith &
Counsel for Defendants/Counterclaim Plaintiffs Invincea, Inc.
and Invincea Labs, LLC: Nathan K. Cummings Christopher C.
Campbell Scott A. Cole Stephen C. Crenshaw Cooley LLP, Carrie
J. Richey Matthew E. Buccellato Cooley LLP, Scott Sukenick
Cooley LLP, Robert W. McFarland McGuireWoods LLP, Robert M.
Tata Hunton & Williams LLP
OPINION & ORDER
COKE MORGAN, JR. SENIOR UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff Vir2us, Inc.'s
("Plaintiff) two motions seeking disciplinary action
against Invincea, Inc. and Invincea Labs, LLC (collectively,
"Defendant"): an Emergency Motion to Show Cause for
Why Invincea Should Not Be Held in Contempt for Violating the
Court's Order Compelling Discovery ("Show Cause
Motion"), Doc. 430, and a Motion to Strike
Defendants' Exhibits Never Produced During Discovery and
Never Disclosed to Vir2us ("Motion to Strike"),
Doc. 461. For the reasons set forth below, the Court
GRANTS IN PART the Show Cause Motion, Doc.
430, and DENIES the Motion to Strike, Doc.
461, as MOOT.
April 15, 2015, Plaintiff filed its complaint in this action
alleging that Defendant infringed Plaintiffs patents relating
to computer system software security. See generally
Compl. The Parties engaged in discovery; argued at a
Markman claim construction hearing, Docs. 65, 78;
filed discovery motions, Docs. 126, 192, 400; and filed
motions in limine, Docs. 158, 171, 178, 185, 200, 202, 204,
206, 208, 210, 218, 220, 222. Late on May 31, 2016, the night
before trial, the Parties settled the case. See Hearing Tr.
at 2:13-18, June 1, 2016. On June 1, 2016, the Court held a
hearing on the remaining motions, including those currently
pending before the Court. Doc. 466. On June 20, 2016,
Defendant filed its opposition to the Show Cause Motion and
lodged supporting documents with the Court. Doc. 490.
Facts On April 20, 2016, the Parties completed fact
and expert discovery. See Doc. 24 at 2. On May 17, 2016, the
Court conducted a final pretrial conference, ruled on several
outstanding motions, and filed the final pretrial order. Doc.
414; see Docs. 141, 158, 165, 171, 178, 185, 192, 200, 202,
204, 206, 208, 210, 216, 218, 220, 222, 400, 405. On May 24,
2016, Plaintiff filed its Show Cause Motion. Doc. 430. On May
31, 2016, Plaintiff filed its Motion to Strike. Doc. 461.
failure to comply with the Federal Rules of Civil Procedure
and the Court's discovery orders on this issue needlessly
burdened discovery. The April 21, 2016 hearing on Plaintiffs
Motion to Compel, Doc. 126, resulted in the Court's
ordering Defendant to make several statements under oath: (1)
that no investor presentations existed for the period of 2009
through 2013 and that the six (6) produced were the only
remnants, Hearing Tr. at 21:23-23:5, Apr. 21, 2016; (2) that
all Board meeting minutes and presentations containing sales,
product, or competition information had been produced,
Id. at 24:11-25:9, 33:20-35:6; and (3) that the
production of documents after the first deposition of
Management Employee A did not change Defendant's
supplemental answer to Plaintiffs interrogatory No. 5,
Id. at 26:22-27:25. The Court also allowed Plaintiff
to take a limited subsequent deposition of Management
Employee A to address questions that arose when Defendant
produced supplemental documents after her first deposition.
Id. at 32:18-33:3. However, the Court stated at the
pretrial conference that Defendant's certifications
following the previous hearing did not "satisfy the
spirit of the Court's order" because they addressed
only the fact of production, not the substance of the
produced documents. Hearing Tr. at 17:25-18:8, May 17, 2016.
In granting Plaintiffs request to file supplemental damage
and expert reports, therefore, the Court stated, "[T]his
opens the door for you to file anything you want that's
related to these documents which were produced late. Anything
you think that's related to that you can produce or
amend, whatever you want." Id. at 19:21-20:2.
Plaintiff files Motion to Compel
See Doc. 24 at 2
Hearing on Motion to Compel and Motion to
Voluntarily Dismiss Count I of Counterclaim
• Court allowed Plaintiff to take second
Management Employee A regarding documents produced
after her first deposition
Management Employee A declaration #1
Mgmt. Emp. A Decl., Apr. 29, 2016, Doc. 402, Ex. A
Defendant produces 65 Invincea Board of Directors
Doc. 430 at 4 n.7
Defendant produces 54 Invincea Board meeting
Doc. 430 at 4 n.7
Management Employee A declaration #2
• "Invincea produced copies of all Board
presentations and Board minutes from prior to April
• "Right after this case was filed,
Invincea searched its computers and files for
documents mentioning Vir2us and found none."
• "Invincea has repeated that search
several times, and until May 8, 2016, found no
documents mentioning Vir2us that existed or were
created prior to suit."
Mgmt. Emp. A Decl. ¶¶ 8-9, May 16, 2016,
Doc. 392, Ex. 1
Plaintiff files Motion to Enforce Court's Order
Defendant adds 118 exhibits, including 65 Invincea
Board presentations, to Defendant's trial
exhibit list in Final Pretrial Order without
notifying Plaintiff or the Court
Doc. 461 at 1-2; Doc. 491 at 19-20
Final pretrial conference Final Pretrial Order
Docs. 414, 405
Defendant produces 154 documents including Board
meetings, minutes, and presentations
Doc. 431 atl
Plaintiff files Show Cause Motion
After Plaintiffs counsel identifies holes in
production, Defendant produces 26 sets of Board
meeting materials and other documents from
Management Employee B and an engineering
manager's hard drives and e-mail accounts
Doc. 508 at 16; Cooley Counsel A Decl. ¶¶
Management Employee A deposition #2
Defendant adds 19 new exhibits to pretrial exhibit
Doc. 461 at 3
Plaintiff files Motion to Strike
See Hearing Tr. at 2:13-18, June 1, 2016.
Hearing on Show Cause Motion and Motion to Strike
Defendant files Opposition to Show Cause Motion
Management Employee A declaration #3
Mgmt. Emp. A Decl., June 20, 2016, Doc. 493
Plaintiff files Reply in support of Show Cause
Doc. 508; see Doc. 510
district court has broad discretion in determining the
appropriate sanction for a party's noncompliance with a
discovery request." Majestic Distilling Co., Inc. v.
Stanley Stawski Distrib. Co., 205 F.3d 1333, *4 (4th
Cir. 2000) (unpublished table decision); see also Wilson
v. Volkswagen of Am., Inc., 561 F.2d 494, 505 (4th Cir.
1977). Even after parties settle, a court may impose
sanctions "to ensure the proper functioning of judicial
process." Bradley v. Am. Household Inc., 378
F.3d 373, 380 (4th Cir. 2004).
whether discovery sanctions are appropriate requires a
three-step analysis of (1) whether a party violated a
discovery order or Federal Rule of Civil Procedure; (2)
whether the violation was "harmless" or
"substantially justified;" and (3) which sanction
is appropriate for the violation. Samsung Elecs. Co.,
Ltd. v. Nvidia Corp., 314 F.R.D. 190, 195-96 (E.D. Va.
requires parties to disclose relevant information during
Fed.R.Civ.P. 26. Rule 37(c) requires parties to disclose
relevant information under Rule 26(a) and (e) and supplement
earlier incomplete or incorrect responses. Fed.R.Civ.P.
16(f) allows a court to impose sanctions if a party fails to
obey a scheduling or other pretrial order. Fed.R.Civ.P.
16(f)(1)(C); see Fed.R.Civ.P. 37(b). A court may also
"order the party, its attorney, or both to pay the
reasonable expenses-including attorney's fees-incurred
because of any noncompliance with this rule, unless the
noncompliance was substantially justified or other
circumstances make an award of expenses unjust."
A. Defendant Violated Rules 37 and 26.
committed numerous discovery violations during the pendency
of this case.
Defendant Failed to Properly Search for and Produce
Responsive Invincea Investor and Board
interrogatories and Court intervention, Plaintiff requested
all of Defendant's presentations to investors as well as
presentations and minutes taken during Invincea's Board
of Directors ("Board") meetings. See Doc. 508 at 2.
In March 2016, Management Employee A claimed with regard to
the investor materials, "After a reasonable search,
Invincea produced all the written investor presentations,
memorandums offering securities, offering memorandums,
private placement memorandums and similar documents provided
to actual and potential investors and lenders that could be
found in Invincea's files and computers." Mgmt. Emp.
A Decl. ¶ 6, Apr. 29, 2016, Doc. 402, Ex. A. Later,
Defendant claimed that "if there were written materials
for those investor[ presentations conducted early in the
company's history], they just don't exist
anymore." Hearing Tr. at 21:23-23:10, Apr. 21, 2016. No
additional investor materials were ever produced.
Defendant produced sixty-five (65) Invincea Board meeting
slide show presentations on May 9, 2016, Doc. 430 at 4 n.7;
fifty-four (54) Board meeting minutes on May 11, 2016, Doc.
491 at 21; six (6) additional Board presentations on May 20,
2016, Doc. 508 at 16; and twenty-six (26) other Board
presentation documents on May 25, 2016, Cooley Counsel A
Decl. ¶¶ 8-12. The materials were responsive to
various requests for production. See Hearing Tr. at
26:22-27:25, April 21, 2016; Doc. 508 at 2. They were
pertinent to issues including "willful infringement,
induced and contributory infringement, enhanced damages, and
whether and to what extent Invincea copied Vir2us's
technology after Vir2us made presentations to various
individuals who would later hold key Board of Director and
advisor positions at Invincea." Doc. 491 at 16; Doc. 508
at 13. In addition, though Defendant had allegedly searched
its document repositories and some employees' computers
for documents mentioning "Vir2us, " some
presentations Defendant eventually produced contained a
digital graphic of Vir2us's logo in a discussion of
"Emerging Competition." Doc. 491 at 3.
Defendant Provided Varying Justifications for Its Failure to
Produce Company Documents.
compounded its failure to produce company documents by
providing shifting justifications for their absence.
the investor presentations, Defendant's counsel stated
that Management Employee B "had dozens of meetings with
potential investors, but they don't have a unique
presentation for each investor." Hearing Tr. at 22:1-4,
Apr. 21, 2016. Defendant represented that the presentations
were created early in its company history and used "long
enough ago that if there were written materials for those
investors, they just don't exist anymore."
Id. at 22:8-10; Mgmt. Emp. B Dep. 68:11-19; see
also Hearing Tr. at 9:5-10:11, May 17, 2016. Management
Employee A later reiterated this theory under oath, saying
that Management Employee B's laptop had been wiped before
the litigation began such that some materials could never be
produced: "If any existed, they were lost before this
case was filed, before Invincea had heard of Vir2us, and
before Invincea had an obligation to preserve them."
Mgmt. Emp. A Decl. ¶¶ 2, 7, Apr. 29, 2016, Doc.
402, Ex. A; see also Doc. 491 at 9. Later, Defendant
clarified that no laptops had been wiped during the case, but
"if any investor presentations were lost, they were lost
prior to this case being filed." Cooley Counsel B Decl.
the Board presentations and minutes, Defendant insinuated
that it did not previously locate some materials because it
believed they no longer existed. See Mgmt. Emp. A
Dep. 338:22-339:18, May 3, 2016. It also represented that
confusion about where documents were electronically stored
caused the delay in production. Management Employee A
evasively discussed Invincea's storage and search
procedures in her declarations and depositions. See Mgmt.
Emp. A Decl., Apr. 29, 2016, Doc. 402, Ex. A; Mgmt. Emp. A
Dep., May 3, 2016; Hearing Tr. at 10:23-12:5, June 1,
Originally, she declared that "Invincea does not need to
produce copies of additional Board presentations or of Board
minutes because the information that Vir2us is seeking has
already been produced in other documents." Mgmt Emp. A
Decl. ¶ 8, Apr. 29, 2016, Doc. 402, Ex. A.
Defendant's lead counsel also expressed this theory.
Cooley Counsel B Decl. ¶¶ 113, 116.
assisted its counsel in searching electronic documents in two
(2) ways: it provided documents to counsel for uploading to
the firm's Relativity document storage account and gave
counsel access to Invincea's Box.com document
storage account. Counsel's Relativity database allowed
counsel to search the documents' text. Cooley Counsel B
Decl. ¶¶ 80-83. The Box.com database
allowed Defendant and counsel to conduct an allegedly
comprehensive document search: "[I]t's my
understanding thatif it wasn't there, it doesn't
exist." Mgmt. Emp. A Dep. 338:22-339:18, May 3, 2016.
Defendant explained that, consistent with company policy,
Management Employee A believed "throughout this
litigation that any final versions of Board Minutes and Board
Presentations" were stored in the Box.com
account. Mgmt. Emp. A Decl. ¶ 83, June 20, 2016, Doc.
493. Defendant could not satisfactorily explain why the Board
meeting minutes, which "are just simply a typed-up
Microsoft Word document, " were not found during
searches of Defendant's storage databases. Hearing Tr. at
19:23-20:1, June 1, 2016. Defendant claimed that it searched
"the appropriate folders" and used search terms
"like 'minutes'" without success.
Id. at 20:2-7.
Board materials, of course, were not destroyed and were later
produced. A Board presentation produced on May 25, 2016 was
even discovered in the Box.com account, which had
allegedly been thoroughly searched. See Mgmt. Emp. A Dep.
27:7-28:17, May 26, 2016. One of the Board meeting minutes
documents was also found outside the expected storage
repository. Hearing Tr. at 20:7-9, June 1, 2016. Management
Employee A also apparently believed that when she testified
she had "produced certain documents, " she meant
"that she had produced them to her attorneys."
Id. at 10:23-11:6. The materials available in the
Box.com and Relativity databases, some of which
counsel had earlier located but identified as
"cumulative, " should have been timely produced
the revealed Board materials included the roll of the Board
members present at the meetings, crucial information which
would have shaped Plaintiffs deposition strategy.
Defendant's withholding of responsive documents
prohibited Plaintiff from deposing individuals with vital
knowledge of Defendant's pre-suit awareness of Plaintiff
s products. Doc. 508 at 8.
Defendant's general counsel, a partner at Defendant's
lead firm, has regularly attended Invincea Board meetings
since the company was founded. Hearing Tr. at 14:16-15:3,
June 1, 2016; Cooley Counsel B Decl. ¶ 138. The Court
inquired whether Defendant had questioned the partner about
the missing Board meeting minutes and presentations. Hearing
Tr. at 17:6-9. Counsel for Defendant asserted twice that
"it did not occur to [Defendant] to do so" because
Defendant was confident that all ...