Second Thoughts on Spoliation Sanction: ITC to Review Final Initial Determination Imposing $1.9M Sanction

In the Matter of Certain Opaque Polymers, No. 337-TA-883, Notice, (December 16, 2014)

On December 16, 2014, the International Trade Commission (“the Commission”) issued a Notice stating that it would review the initial determination of Administrative Law Judge Pender imposing $1.9 million in spoliation sanctions on client and counsel in Certain Opaque Polymers (Inv. No. 337-TA-883).

Previously, on October 20, 2014, Judge Pender found that Respondents Organik Kimya San. Ve Tic. A.S., Organik Kimya Netherlands B.V., Organik Kimya U.S., Inc. (“Organik Kimya”) spoliated evidence in the investigation by destroying and manipulating evidence on one employee laptop, and deleting over 2,700 files from another laptop to prevent Complainant Dow Chemical Co. ("Dow") from gaining access to relevant evidence. As a result, Judge Pender imposed monetary sanctions against Organik Kimya and its counsel, Finnegan, Henderson, Farabow, Garrett, & Dunner, LLP (“Finnegan”) and attorney Ömür Yarsuvat (“Yarsuvat”), jointly and severally. In so ruling, Judge Pender noted that it would be difficult to collect against Organik Kimya, and that Finnegan controlled and oversaw inspection of one of the laptops, never issued a litigation hold memo, never actively sought to preserve evidence, and that counsel should have known that Organik Kimya's explanation of why it destroyed evidence "was not the slightest bit credible on its face."

In response to Judge Pender's decision, Finnegan filed motions and briefing challenging the imposition of sanctions on counsel. The Commission granted Finnegan's motion to intervene for the limited purpose of disputing joint and several liability for the monetary sanctions. In its Notice, the Commission requested briefing from the parties on two issues: 1) "the law governing what types of notice and opportunity to present evidence and argument must be provided to counsel before imposing sanctions[,] … [and specifically] whether and when Organik Kimya's counsel was or should have been on notice that counsel might be subject to sanctions and whether they were given and opportunity to present evidence and argument"; and 2) "duties that counsel may have under ITC rules, ethics rules, case law, and any other relevant sources … including duties relating to the implementation of a litigation hold, a duty to investigate before making a reputation to the tribunal, a duty to avoid willful blindness, or a duty to preserve or take possession of evidence … [including] any duties that may arise when counsel has received notice of allegations that the counsel's client has intentionally spoliated evidence."

Both parties submitted briefing in response to the Commission's request. Finnegan's arguments as to why it should not be sanctioned include that it did not have constitutionally "sufficient notice" that counsel's conduct was at issue or that it was subject to sanctions. In addition, it noted that in the course of its representation of Organik Kimya, it did not have a sufficient opportunity to be heard.

The ITC does not deal with spoliation issues regularly, but as can be seen from this decision, the potential consequences—to both client and counsel—can be huge. Dow has characterized it as potentially "the worst case of spoliation in ITC history." That would be true in purely monetary terms, but the ITC has in the past issued severe evidentiary sanctions against parties found to have spoliated evidence. The Commission is currently considering the briefs, with a decision due within the next couple months.