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Dallas Buyers Club, LLC v. Huszar

United States District Court, D. Oregon

February 6, 2017

DALLAS BUYERS CLUB, LLC, Plaintiff,
v.
JOHN HUSZAR, Defendant.

          OPINION AND ORDER

          Michael H. Simon, District Judge.

         United States Magistrate Judge John V. Acosta issued Findings and Recommendation in this case on December 28, 2016. ECF 89. Judge Acosta recommended that Plaintiff Dallas Buyers, LLC's Motion to Strike (ECF 72) be granted in part. Specifically, Judge Acosta recommends: (1) denying the motion to strike Defendant's letter, docketed as an Answer in this matter (ECF 71), in its entirety; and (2) granting the motion in part and striking Defendant's assertions relating to his health and to settlement negotiations between the parties. Judge Acosta also recommends granting Plaintiff's Spoliation Motion (ECF 75) and, as sanctions for the spoliation, entering a default order against Defendant.

         Under the Federal Magistrates Act (“Act”), the court may “accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C. § 636(b)(1). If a party files objections to a magistrate's findings and recommendations, “the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id.; Fed.R.Civ.P. 72(b)(3).

         For those portions of a magistrate's findings and recommendations to which neither party has objected, the Act does not prescribe any standard of review. See Thomas v. Arn, 474 U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act], intended to require a district judge to review a magistrate's report to which no objections are filed.”); United States. v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding that the court must review de novo magistrate's findings and recommendations if objection is made, “but not otherwise”). Although in the absence of objections no review is required, the Act “does not preclude further review by the district judge[] sua sponte . . . under a de novo or any other standard.” Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Fed.R.Civ.P. 72(b) recommend that “[w]hen no timely objection is filed, ” the Court review the magistrate's recommendations for “clear error on the face of the record.” Defendant timely filed an objection (ECF 91), to which Plaintiff responded. ECF 93. Defendant objects to the portion of Judge Acosta's recommendation finding that Defendant intentionally and willfully destroyed evidence and that the appropriate sanction for that destruction is the entry of default against Defendant.

         No party having objected to the portion of the Findings and Recommendation relating to Plaintiff's motion to strike, the Court follows the recommendation of the Advisory Committee and reviews that portion of the Findings and Recommendation for clear error on the face of the record. No such error is apparent. Accordingly, the Court adopts that portion of the Findings and Recommendation.

         With his objections, Defendant offers additional factual information. Construing his pro se submission liberally and giving Defendant the benefit of the doubt, the Court construes the statements in Defendant's Objections as factual assertions by Defendant, even though they are not in the proper form of a Declaration or Affidavit. Additionally, Defendant offers an exhibit relating to his return of purportedly malfunctioning hard drives under a warranty plan and the Declaration of his court-appointed counsel, who was appointed to provide three hours of legal services to Defendant without charge. In responding to Defendant's objections, Plaintiff references some of this new evidence and does not raise any objection to the additional evidence. The Court exercises its discretion to consider this additional evidence. See 28 U.S.C. § 636(b)(1) (permitting a court to “receive further evidence” at its discretion); United States v. Howell, 231 F.3d 615, 621 (9th Cir. 2000) (discussing the Circuit split on whether a district court must or may consider new evidence when reviewing de novo a magistrate judge's findings and recommendation, and concluding that a district “has discretion, but is not required” to consider new evidence).

         DISCUSSION

         The Court reviews de novo Plaintiff's Spoliation Motion. The Court agrees with the Findings and Recommendation that spoliation of evidence occurred. In light of the record as a whole, including the newly-submitted evidence that was not submitted to Judge Acosta, the Court does not adopt the portion of the Findings and Recommendation recommending the sanction of an entry of default against Defendant.

         A. Legal Standards on Imposing Sanctions

         Courts have the authority to levy sanctions for spoliation of relevant evidence. See United States v. $40, 955.00 in U.S. Currency, 554 F.3d 752, 758 (9th Cir. 2009) (“Under its inherent power to control litigation, a district court may levy sanctions, including dismissal of the action, for spoliation of evidence.”). In considering what spoliation sanction to impose, courts generally consider three factors: “‘(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3) whether there is a lesser sanction that will avoid substantial unfairness to the opposing party.'” Nursing Home Pension Fund v. Oracle Corp., 254 F.R.D. 559, 563 (N.D. Cal. 2008) (quoting Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir.1994)). The Ninth Circuit has emphasized, however, that before imposing the most severe sanctions, such as dismissal or entry of default, a “district court should consider the following factors: ‘(1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.'” Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006) (quoting Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 348 (9th Cir. 1995)).

         B. Background

         Plaintiff alleges that Defendant infringed on Plaintiff's rights to its movie Dallas Buyers Club by illegally downloading the movie using BitTorrent software. Defendant owns a small business that provides internet services, including network and email services. Defendant denies that he downloaded Dallas Buyers Club. He contends that he had not even heard of the movie until this lawsuit and that after learning about the movie, he has no interest in seeing it. Defendant also asserts that he has never downloaded a movie using BitTorrent software and would not risk his livelihood or his customer base by engaging in such activity.

         The internet protocol (“IP”) address identified by Plaintiff as infringing on Plaintiff's movie is an IP address associated with a one of Defendant's servers. Defendant operated this server as a virtual machine (“VM”). Using VM technology, Defendant migrated information from his old multiple servers onto two servers operating as VMs. One of these is the physical machine associated with the allegedly infringing IP address (“Infringing Machine”).

         On the Infringing Machine, Defendant installed Tor Network software and created a “Tor Node, ” which facilitates use of the Tor Network by end users by routing information through Defendant's machine. Also on this machine were VMs for two email servers. The Infringing Machine had two hard drives, which were mirrored. Defendant did not use the Infringing Machine as a personal computer ...


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