Liquor giant Diageo has been sanctioned for destruction of evidence from a key witness in a hard fought trade dress suit by Sonoma winery, Jackson Family Wines, over Jackson claims that Diageo copied the look of its popular La Crema wine.
With the scheduled jury trial less than a month away, a federal magistrate judge on Friday ordered that jurors will be told about the evidence destruction and instructed to make an “adverse inference” for Diageo’s actions. In addition, at the close of the trial, Diageo will have to pay monetary sanctions to Jackson – no matter how the case comes out.
Diageo’s “failure to promptly reveal the destruction, as well as their apparent efforts to cover it up, does not reflect well on defendants,” wrote U.S. Magistrate Judge Jacqueline Scott Corley.
The March trial will focus on accusations that Diageo’s Crème de Lys was purposely created to have a similar look and name to Jackson’s popular La Crema brand.
to Jackson’s La Crema, in order to gain an economic leg up.
Corley said Diageo failed to explain why a third-party market research company used by Diageo produced email exchanges with the Diageo witness that included references to confusion with La Crème, but Diageo did not produce them.
The witness worked on product innovations in the marketing department at the critical time the Diageo Crème de Lys brand was being tested, according to court documents.
Jackson sued in November 2011 alleging Diageo, which produces popular Sterling and Beaulieu Vineyard brands, had created a similar look and feel in its Crème de Lys brand wine as Jackson’s La Crema.
Jackson Family Wines is best known for the Kendall-Jackson brand and was founded by lawyer-turned-winemaker Jess Jackson in 1974. La Crema wine is one of the primier brands for the winery and is among the best selling wine in the country at the $11 to $12 a bottle range.
Corley found that Diageo, eight months after the lawsuit was fined, deleted the hard drive of marketing employee Jennifer Josephson. The company did not disclose the destruction of evidence for another year, until December 2013.
“This involuntary disclosure occurred six months after defendants discovered a ‘gap’ in their production of Josephson’s documents, and five months after they represented to the court that ‘every single document’ for Ms. Josephson had been produced,” Corley wrote.
Josephson worked for Diageo North America as director of consumer planning from 2009 to 2011. Jackson Wines claims that she was on loan from Diageo Chateau & Estate Wines, which is responsible for wine innovations such as Crème de Lys.
Diageo argued that it acted in good faith and lacked culpability because Josephson’s documents were destroyed before the firm was aware they might be relevant.
“The court is not persuaded,” Corley wrote.
As for the monetary sanction, Corley ordered both sides to meet within 30 days of the trial verdict to resolve an appropriate amount for monetary sanctions. If they can’t agree, the court will decide.
Case: Jackson Family Wines v. Diageo North America, No. 11-5639EMC