Archive: August 2021

1
FTC v. Noland (D. Ariz. Aug. 30, 2021)
2
Novit v. Metropolitan School District of Warren Township (S.D. Ind. 2021)
3
Maxus Liquidating Trust v. YPF (Bankr. D. Del 2021)
4
Huntsman v. Southwest Airlines Co. (N.D. Cal. 2021)
5
Manning v. Safelite Fulfillment, Inc. (D.N.J. 2021)

FTC v. Noland (D. Ariz. Aug. 30, 2021)

Key Insight: The day after learning about the FTC’s investigation, defendant Noland instructed his team to use encrypted communications platforms, Signal and ProtonMail, turn on the “auto-delete” function, and to stop using their previous work-related messaging platforms. During depositions, Noland and others failed to disclose the use of encrypted communications platforms and deleted the encrypted messaging apps from the phones so that no communications could be retrieved. The court granted the FTC’s request for an adverse inference based on defendants’ intentional spoliation of evidence under FRCP 37(e)(2), finding the most decisive factor in its analysis was the timing of installation of the apps – just one day after Noland learned the FTC was investigating him. There was a coordinated effort among Noland and his leadership team to deprive the FTC of the use of the encrypted messages in the litigation – by installing the app, using the “auto-delete” function, failing to disclose the use of the app, and deleting the app the day before the phones were to be examined – resulting in an “outrageous maneuver that raises a strong inference of bad faith.”

Nature of Case: FTC, Pyramid schemes

Electronic Data Involved: Encrypted messaging platforms

Case Summary

Novit v. Metropolitan School District of Warren Township (S.D. Ind. 2021)

Key Insight: Plaintiffs filed a motion for sanctions on spoliation related to the video footage from a school bus where plaintiffs’ child suffered injuries. Defendant permitted plaintiffs to view the video of the incident and also produced the footage to plaintiffs in discovery. Plaintiffs later asked for extended video coverage from the date of the incident. Defendant did not have additional video because the bus hard drive had either been looped over, wiped clean, or used for parts. The court noted, “a spoliation sanction is proper only when a party has a duty to preserve evidence because he knew, or should have known, that litigation was imminent, and the movant demonstrates that the evidence was destroyed in bad faith, with the intent to deprive another party of the information’s use in the litigation.” Thus, the court found no evidence to support a blanket accusation of spoliation when defendant preserved the relevant footage, acted reasonably by saving the relevant portion, and placing the bus hard drive back into operation.

Nature of Case: Personal injury, Civil rights

Electronic Data Involved: Video footage

Case Summary

Maxus Liquidating Trust v. YPF (Bankr. D. Del 2021)

Key Insight: The parties had cross motions requesting the production of purportedly (attorney-client) privileged documents at the end of discovery; the Defendants had been producing documents on a categorical basis. The Court had previously issued three discovery opinions that denied the assertions of privilege by Defendant(s). Defendants failed to rebut an argument by Plaintiff (opposing party) that the documents sought were confidential, accordingly, the Court order them to be produced.

In a final argument, Defendants advocated for the requested documents being produced on a document-by-document basis. The Court rejected this given Defendants previous agreement to produce the documents on a categorical basis; the Court granted the Plaintiff’s request for the production of documents.

Considering Defendants’ Motion, the Court implied that it was hypocritical for Defendants to be seeking privileged documents from Plaintiff that were similar to the same documents that they argued against producing to Plaintiff on the basis of privilege. Regardless, the Court ordered Plaintiff to produce some the purportedly privileged documents sought by Defendant. The documents that the Court stated that Plaintiff need not produce were documents not publicly available from an investigation and the tangentially related bankruptcy case concerning Plaintiff.

Nature of Case: Adversarial Bankruptcy

Electronic Data Involved: N/A

Case Summary

Huntsman v. Southwest Airlines Co. (N.D. Cal. 2021)

Key Insight: The parties sought clarification on the scope of plaintiff’s discovery seeking documents relating to Southwest’s practices for verifying military leave. Defendant objected to the discovery requests on the basis of relevance, scope and proportionality, but agreed to conduct a phased search of its custodians’ data for responsive documents. The court agreed with defendant that the requests as written were overbroad given that the certified class was focused on an alleged failure to pay for short-term leave and plaintiff was not entitled to all potential USERRA violations. “Southwest’s approach to using keyword searches and technology-assisted review in tandem does not offend the court’s expectation that the parties conduct a reasonable inquiry as required by the rules.”

Nature of Case: Class action under USERRA

Electronic Data Involved: Email

Case Summary

Manning v. Safelite Fulfillment, Inc. (D.N.J. 2021)

Key Insight: Defendants filed a motion for spoliation sanctions under FRCP 37(e) based on plaintiff’s deletion of certain Facebook messages and emails. Plaintiff claimed he deleted the messages to free up memory on his mobile phone. The court adopted the magistrate judge’s report and recommendations, finding plaintiff’s failure to preserve certain ESI caused prejudice to defendants warranting relief, but did not conclude that plaintiff did so with an intent to deprive defendants the use of the information in litigation. Plaintiff had an obligation to preserve the ESI; he deleted certain messages after he filed his lawsuit; and took no affirmative measures to preserve the ESI despite a duty to do so. The court allowed the introduction of a jury question on the destruction of some of the ESI evidence but reserved ruling on harsher sanctions.

Nature of Case: Employment discrimination

Electronic Data Involved: Facebook, Email

Case Summary

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