ChampionsWorld, LLC v. United States Soccer Federation

276 F.R.D. 577, 2011 U.S. Dist. LEXIS 91883, 2011 WL 3626594
CourtDistrict Court, N.D. Illinois
DecidedAugust 17, 2011
DocketNo. 06 C 5724
StatusPublished
Cited by8 cases

This text of 276 F.R.D. 577 (ChampionsWorld, LLC v. United States Soccer Federation) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
ChampionsWorld, LLC v. United States Soccer Federation, 276 F.R.D. 577, 2011 U.S. Dist. LEXIS 91883, 2011 WL 3626594 (N.D. Ill. 2011).

Opinion

MEMORANDUM OPINION AND ORDER

HARRY D. LEINENWEBER, District Judge.

The parties have filed a number of pretrial motions, primarily seeking sanctions against one another for various alleged misdeeds. The Court will resolve all the motions by way of this order. For the reasons that follow: (1) Defendants’ Joint Motion for Sanctions for Plaintiffs Wholesale Destruction of Evidence [246] is granted in part; (2) ChampionsWorld’s Motion for Sanctions Against Defendant United States Soccer Federation, Inc. [277] is denied; (3) Non-Party John Collins’ Motion to Quash Discovery Subpoena [265] and Defendant USSF’s Motion to Quash Discovery Subpoena Issued to Non-Party John P. Collins [268] are granted; (4) ChampionsWorld’s Motion for Sanctions Against: (A) the Law Firms of Proskauer Rose LLP and Latham & Watkins LLP and (B) Defendants MLS and USSF [278] is denied; and ChampionsWorld’s Motion to Compel the Production of Documents [306] is denied. Defendants, in various pending motions, seek to recover their fees and costs in responding to these motions. Because none of the motions brought by Plaintiff are frivolous, the Court declines to impose fees or costs.

I. OVERVIEW OF LITIGATION

Plaintiff ChampionsWorld, LLC (“ChampionsWorld”) is a defunct sports marketing company that, from 2001 to 2005, sponsored professional soccer exhibitions in the United States involving international club teams. ChampionsWorld filed for bankruptcy and ceased operations in 2005.

Defendant United States Soccer Federation, Inc. (the “USSF”) is the governing body for amateur soccer in the United States. Defendant Major League Soccer, LLC (“MLS”) is a professional first-division soccer league in the United States. ChampionsWorld claims that USSF improperly assumed the power to oversee professional, as well as amateur, soccer in the United States. USSF then used this power to unreasonably restrain trade and to extract millions of dollars in sanctioning fees from ChampionsWorld, which caused the company to fail. ChampionsWorld alleges that USSF’s actions were part of an anticompetitive scheme to protect MLS by preventing other soccer entities from applying for first-division status in the United States. Defendants deny any wrongdoing and argue that ChampionsWorld is trying to make them scapegoats for the company’s poor business strategy and eventual demise. Given the contentious nature of the litigation, it is perhaps not surprising that the parties have become embroiled in various discovery disputes and seek sanctions against one another on several grounds.

II. ALLEGED DESTRUCTION OF EVIDENCE

First, Defendants seek sanctions against ChampionsWorld on the ground that Plaintiff lost or destroyed evidence, including: (1) virtually every email on its servers dated after September 1, 2004; (2) all of its accounting files dated after April 2004; and (3) virtually all of its accountant’s records relating to ChampionsWorld. Defendants seek a number of possible sanctions, including precluding Plaintiff from arguing that it is entitled to recover future lost profits or the lost value of its business and precluding Plaintiff from relying on testimony regarding events that occurred post-September 2004. It also seeks fees and costs in bringing this motion.

ChampionsWorld responds that it took reasonable steps to preserve its data. It acknowledges that it cannot find data from the end of 2004 and 2005, but points the finger at Lino DiCuollo (“DiCuollo”), who had been a Senior Vice President for Legal and Finance at ChampionsWorld. DiCuollo now works for MLS, having been hired by [582]*582that company shortly after the demise of ChampionsWorld.

A. Background

Deposition testimony paints a muddy picture as to who was minding the store in the last months of ChampionsWorld’s existence. DiCuollo, asked if he recalled being in charge of document retention for ChampionsWorld, replied, “I don’t recall that,” but acknowledged providing documents to Plaintiffs counsel, Pryor Cashman LLP, in connection with this ease. DiCuollo testified that he did not destroy any ChampionsWorld documents and was not aware of anyone else doing so. DiCuollo’s job duties while serving as Senior Vice President for Legal/Business Affairs for ChampionsWorld included “filing and maintenance of corporate documents.”

Charlie Stillitano (“Stillitano”), ChampionsWorld’s CEO, testified at his deposition that from 2002 on, the company had a verbal policy of retaining all documents. It was Stillitano’s understanding that all of the company’s data would be saved on the company’s on-site computer, server. Stillitano testified that he did not know why so few documents were produced from the period after September 2004. Employees of the company were instructed to give documents to DiCuollo toward the end of the company’s existence because such documents might be needed in the company’s bankruptcy proceeding, he said. DiCuollo’s brother, Mario De Paola, who was the company’s information technology director, has since died. Stillitano further testified that he did not instruct the company’s accountants, Traphagen & Traphagen, to retain documents. Defendants did receive hard copies of at least some of the 2004 QuiekBooks data kept by Traphagen, but they contend this is mostly financial projection data which is not helpful in determining the cause of ChampionsWorld’s failure.

Stillitano provided an affidavit explaining that in the early fall of 2004, after ChampionsWorld retained Pryor Cashman, he, DiCuollo, and the company’s outside general counsel had lunch with attorneys from the firm and were instructed to preserve all documents related to the lawsuit. Stillitano told outside counsel that the company had a 100 percent document retention policy in place and nothing would be destroyed.

ChampionsWorld contends that at the time outside counsel was retained to bring the instant lawsuit, there was no reason to doubt that DiCuollo was adequately performing his job of maintaining the company’s records, with the assistance of his brother. Defendants argue that it was actually Senior Vice President of Operations Tim Kassel (“Kassel”) who was in charge of document retention. Kassel testified that he preserved data up until the company’s bankruptcy filing in January 2005, but did not know if anyone did so following the bankruptcy.

B. Legal Standard

Courts have the inherent power to sanction a party for failure to preserve evidence that it controls when it could have reasonably foreseen that evidence to be material in a potential lawsuit. Jones v. Bremen High School, 08 C 3548, 2010 WL 2106640, at *5 (N.D.Ill. May 25, 2010). Sanctions “must be proportionate to the circumstance surrounding the failure to comply with discovery.” Crown Life Ins. Co. v. Craig, 995 F.2d 1376, 1382 (7th Cir.1993).

To find sanctions appropriate, the Court must determine: (1) that there was a duty to preserve the evidence; (2) that the duty was breached; (3) that the other party was harmed by the breach; and (4) that the breach was caused by the breaching party’s willfulness, bad faith, or fault. Jones, 2010 WL 2106640, at *5. If the court finds sanctions appropriate, it must impose the least severe sanction necessary to ameliorate the prejudice that arose from the breach. Id.

C.

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276 F.R.D. 577, 2011 U.S. Dist. LEXIS 91883, 2011 WL 3626594, Counsel Stack Legal Research, https://law.counselstack.com/opinion/championsworld-llc-v-united-states-soccer-federation-ilnd-2011.