5:15-cv-01893
N.D. Cal.Oct 7, 2016Background
- FFS sued FEG for intentional interference with contract and UCL violations, alleging FEG induced ~1,400 FFS sales contractors (led by Gilles Moua and Mai Lee) to leave FFS en masse after May 2014 meetings.
- Discovery focused on texts, phone records, employment applications, and native-format database records concerning contractor recruitment and onboarding; the court ordered FEG to produce these materials.
- FEG failed to produce text messages (admitting they were deleted), phone records (Verizon had routine retention limits), employment-application documents (FEG says no standalone application files exist), and native-format database copies (initially produced a spreadsheet instead).
- After an interim order requiring native-format production or cooperation to create copies, FEG produced a declaration claiming the data resided with third-party vendors (Greystar / Salestrakr) and that FEG lacked possession, custody, or control.
- The court found FEG delayed and procedurally defaulted in raising the third-party custody argument, concluded text messages were intentionally deleted, found prejudice from failure to produce native-format data, but declined adverse inference for phone records and concluded employment-application documents did not exist.
- Remedies: two permissive adverse-inference jury instructions (one for deleted texts, one for native-format database data) and an award of FFS’s reasonable fees and costs for bringing the sanctions motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Spoliation of text messages | FEG deleted discoverable texts; sanction with adverse-inference instruction warranted | Deletions were innocent/habitual; no intent to deprive | Court: texts deleted after preservation duty arose; found intent to deprive; permissive adverse-inference instruction granted |
| Spoliation of phone records | Verizon records lost; adverse inference warranted | Records destroyed in ordinary course; FEG not significantly at fault | Court: no prejudice or intent shown; declined adverse-inference sanction |
| Employment-application documents | FFS sought application files | FEG: no standalone application documents; applicant data stored only in vendor database | Court: credible vendor-based workflow; individual application documents do not exist; no spoliation |
| Failure to produce native-format database data | FFS: FEG misled it and controlled the data; native-format needed to verify spreadsheet | FEG: lacked possession/custody/control; ‘‘computer ignorance’’ and spreadsheet is complete | Court: FEG unreasonably delayed raising third-party custody; conduct rose to gross negligence, prejudiced FFS; permissive adverse-inference instruction warranted |
| Fees for sanctions motion | FFS: entitled to fees under FRCP 37(b) | FEG: failures substantially justified or excusable | Court: FEG not substantially justified; FFS entitled to recover reasonable fees and costs (motion to be noticed with evidence) |
Key Cases Cited
- Glover v. BIC Corp., 6 F.3d 1318 (9th Cir.) (district courts may draw adverse inferences for spoliation)
- Apple Inc. v. Samsung Elecs. Co., 888 F. Supp. 2d 976 (N.D. Cal. 2012) (district courts routinely issue adverse-inference instructions for spoliation)
- Insurance Corp. of Ireland v. Compagnie des Bauxites, 456 U.S. 694 (Sup. Ct.) (sanctions must be "just" under the circumstances)
- Guifu Li v. A Perfect Day Franchise, Inc., 281 F.R.D. 373 (N.D. Cal. 2012) (need to apply discovery sanctions diligently to deter misconduct)
- Dahl v. City of Huntington Beach, 84 F.3d 363 (9th Cir. 1996) (district courts have broad latitude in imposing discovery sanctions)
- Chin v. Port Authority of New York & New Jersey, 685 F.3d 135 (2d Cir. 2012) (low degree of fault and limited prejudice weigh against spoliation sanctions)