The Volokh Conspiracy

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Court Affirms >$10M Libel Verdict Against Disgruntled Ex-Employee-Turned-Competitor

The defendant had been barred from presenting his defense, as a sanction for his persistent violation of court orders, including one that he had expressly consented to.


The opinion (in Hoffman v. Clark, written by Judge Greer, joined by Presiding Judge Vaitheswaran and Judge Schumacher) is long and complex, but here's an excerpt:

"Falsehood flies, and truth comes limping after it; so that when men come to be undeceived, it is too late…." This concern became central in a case that started as a relatively common dispute between an employer and a former employee. Jerry Hoffmann is the chief executive officer of Hoffmann Innovations, Inc., which does business as DIY AutoTune. They are our plaintiffs. Scott Clark, who worked for DIY AutoTune, was fired by Hoffman in August 2016. Clark then started his own company, RealTuners, LLC. They are our defendants.

Less than a year later, Hoffmann initiated a lawsuit, raising a number of claims addressing Clark's new company and a noncompete agreement Clark had signed; actions Clark allegedly took using confidential information and trade secrets from DIY AutoTune; and statements Clark had made on social media disparaging Hoffmann and his products and services.

A few months into the litigation, the parties asked the court to file a consent agreement "in an effort to narrow the scope of litigation and avoid additional causes of action." The consent agreement prohibited all parties from making any disparaging statements "about adverse [p]arties to this case, their services, products, employees or abilities—whether verbally or in writing, including via online postings and websites, regardless of the truth or the falsity of such statements."

Between January 2018, when the consent order was filed, and August 2019, when the jury trial began, Hoffmann brought twelve successful motions for sanctions against Clark. Hoffmann repeatedly asked the court to strike Clark's answer and counterclaims as a sanction, and the court gave that remedy after Hoffmann's fourth successful motion for sanctions. For this reason, the jury trial in August 2019 was limited to the determination of whether Clark caused damages to Hoffmann and the amount of any damages. The jury awarded Hoffmann and Hoffmann Innovations a total of $11,000,000 in damages [of which about $10.5M were for libel -EV], and the court awarded Hoffmann attorney fees….

Clark's amount of interference with the judicial process was great. He knowingly and purposely violated the consent order a number of times, he mocked the court and the ongoing litigation in the public, he refused to turn over discovery he was repeatedly ordered to produce, and, by the end, he stopped attending all hearings and even skipped trial—apparently because he did not want to serve the jail time he was ordered to serve for his repeated violations.

Clark even posted that he had "decided to stop participating and start making fun of them again." As he made clear to his followers, Clark refused to recognize the power of the court and did as he wished throughout the proceedings.

Clark's culpability is also great. While it is possible some of his earliest actions were due to a lack of understanding about the confines of the consent order he agreed to, leading up to the trial, Clark made clear that he understood what was expected of him and just chose not to comply.

For example, Clark's posts made it clear he knew he was supposed to turn himself in to serve a jail sentence for one of his contempts, but instead he chose to go on the run. As we noted before, Clark understood what he was expected to turn over regarding Facebook information in response to the court's discovery order and just blatantly told the court it was "not ever going to happen." Clark was repeatedly ordered to attend contempt hearings in person, and he repeatedly participated by telephone so he could not be jailed for his actions, telling the court as much from the phone.