Episode 106: Whether a Lost or Stolen Device Lead to Sanctions under FRCP 37(e)

In episode 106 of our Case of the Week series, we delve into why early preservation of mobile devices is key to avoiding sanctions in a wage-an-hour class action lawsuit. We’ll discuss whether the loss of a cell phone containing relevant text messages can be considered sanctionable spoliation under Rule 37, and emphasize the importance of taking active steps to preserve text messages when there’s even a remote chance they could be relevant, and why it’s up to counsel to know the sources of ESI at issue.

Introduction

Hi, and welcome to this week’s episode of our Case of the Week series, published in partnership with ACEDS. My name is Kelly Twigger. I am the CEO and founder of eDiscovery Assistant and the principal at ESI Attorneys.

Our goal, as always, with the Case of the Week is to choose a decision and talk about practical tips and things that we can take away from that decision that will help us, no matter who you are touching the eDiscovery process. The decisions that we’re finding this year are flying fast and furious, and we are already over 1,500 decisions in our database for 2023.

Let’s dive into this week’s decision from Fowler v. Tenth Planet. This is a decision that comes to us from United States Magistrate Judge Mark Coulson. It is from March 29, 2023, so just over a month ago. Judge Coulson has 27 decisions in our database and writes this decision on referral from the United States District Court judge.

As always, we tag the issues to each decision in our database, and the issues for this week’s case include sanctions, failure to preserve, spoliation, dismissal, and text messages.

Background

This is a wage and hour case alleging that plaintiff is due overtime pay for the period of time that he worked as a line cook, which is an hourly job that required overtime pay after 40 hours a week. The issue in this case is whether plaintiff was a line cook entitled to overtime pay, or a kitchen manager. If he was a kitchen manager, then he was exempt from overtime pay and his claims will fail.

Plaintiff alleges that he was a line cook from May of 2019 to mid-October of 2019 before he became a kitchen manager. In essence, this case is about overtime wages for about a five-month period in 2019.

Facts

What are the facts before us? Our facts are these. Following filing the complaint in September of 2021, defendant served requests for production a year later on September 16, 2022. In those requests for production, the defendant sought text messages from plaintiff to a witness named Zegna. Z-E-G-N-A. There are no facts really saying who Zegna is, but the implication from the Court seems to be that she was in charge of the kitchen managers and responsible for coordination with them.

Plaintiff had his phone stolen from his car in July or August of 2022. Recall that the RFPs from the defendants came in September of 2022, so after his phone was stolen. Plaintiff did not have a backup of his phone when it was stolen, and his counsel had not collected his text messages prior to the phone being stolen.

Basically, the plaintiff just relied having the device as his form of preservation.

Zegna has copies of text messages with the plaintiff starting in December of 2019, but that leaves a six-month gap between May of 2019 and November of 2019 in which there are no text messages. That period, of course, is part of when plaintiff alleges he was employed as a line cook. No text messages exist from May of 2019 through mid-October of 2019, which is when he was alleged he was a line cook and would be eligible for overtime pay.

Zegna and another kitchen manager attested as part of the motion papers that the plaintiff was a kitchen manager for his entire employment. The plaintiff did acknowledge that he had exchanged approximately ten text messages with Zegna during his employment, but argued 1) that any substantive text messages postdated the May to October period before his promotion to kitchen manager, 2) that they concerned matters like onboarding to the new kitchen manager position, 3) they did not include other kitchen managers, and 4) were inconsequential to the case.

The defendants alleged that the plaintiff’s failure to preserve the text messages constituted bad faith, and they asked the Court to dismiss the case or to enter judgment for the defendants.

If you’re thinking what I’m thinking — this one probably doesn’t pass the sniff test for dismissal — you’re right.

Analysis

The Court begins, as always, with Rule 37(e) that governs sanctions for spoliation for failure to preserve. That Rule section requires four criteria that the defendants are required to prove:

1. That the duty to preserve existed,
2. That the ESI was not preserved,
3. That the loss of the ESI was due to the party’s failure to take reasonable steps to preserve it, and
4. The ESI cannot be restored or replaced through additional discovery.

If those four criteria are met, Rule 37(e) allows the Court to determine whether prejudice exists—in this instance to the defendant— and whether the spoliating party acted with the intent to deprive the opposing party of the ESI. We’ve got to have those four criteria, plus prejudice, plus intent. The Court notes further that the burden of proof is on the party seeking sanctions, and the moving party must show that the failure to preserve was motivated by intent to deprive the moving party of the use of the information.

The Court then looks at the changes to Rule 37(e) following the 2015 amendments, and this is important. We’ve talked about this a number of times on the Case of the Week, but the court really does a nice analysis here of how the rule changed in 2015 and why the case law that precedes the 2015 amendments is really no longer relevant.

The Court looks at the language of the Committee Notes following the amendments and states that the amended language, “significantly limits a Court’s discretion to impose sanctions for the loss of destruction of ESI.” According to the Court, therefore, there really can be no dismissal or adverse inference instruction if there’s no intent.

We’ve talked about this numerous times on the Case of the Week, and it’s key that the Court really delineates how that plays out here following the 2015 amendments. The Court goes on to talk about how the case law pre-2015 “lacked clarity and consistency” of what level of intent was required for particular sanctions, and that the 2015 amendments were specifically designed to remedy that problem.

With that as a basis, the Court then turns to the facts of the case and finds that the four criteria under Rule 37 are met. First, that Plaintiff had a clear duty to preserve the text messages, and was more specifically on notice about the relevance of the text messages from conversations with defense counsel that stated that text messages were an issue.

Plaintiff’s efforts to preserve those text messages by allowing them to remain on the device may, in some instances, have been sufficient according to the Court. But where the plaintiff was on notice that those text messages were the primary form of written communication between him and his employer, the Court stated that the plaintiff should have taken additional affirmative steps to ensure their preservation, especially given that losing a phone is such a common occurrence. It’s a common occurrence at my house. Hopefully, it’s not at your house.

Adding fuel to that fire, the Court notes also that plaintiff’s counsel himself emphasized the importance of the text messages during the time period at issue when criticizing defendant’s production of documents before the plaintiff’s phone was stolen, and yet still didn’t take any real steps to preserve plaintiff’s texts. That’s a bit ironic.

As to the availability of getting text messages from another source, plaintiff questioned whether defendants had, in fact, exhausted all avenues to recover the missing text messages. Plaintiff himself did not have access to them from any other source other than his device, which was obviously no longer available.

Zegna attested that at the time she knew about the case, she has worked with her attorneys to recover all of the text messages and was not able to get those from either her phone or another kitchen manager’s phone.

Now, remember that the plaintiff said that he only texted directly with Zegna and not with other kitchen managers, so they wouldn’t be available from anyone other than Zegna’s phone. Interestingly, the Court states that, “Although Zegna does not detail those precise efforts, the Court assumes that Zegna and her counsel have conducted a reasonable inquiry pursuant to the duties imposed by Rule 26(g).” As such, the text messages are not available from another source. That’s sort of an odd statement from the Court given that the defendant has the burden here. But it’s unclear to me whether Zegna is a party. If not, that really changes what her obligations are. Either way, the Court doesn’t really conduct an analysis of whether that burden is met, likely because the motion fails anyway.

With the four criteria under Rule 37(e) met, the Court then next turns to whether there is prejudice. This is really where defendant’s motion starts to crumble.

The Court finds that while the missing texts were relevant, the evidence as to which position the plaintiff was initially hired for is mixed, and the evidence as to whether or not the missing text messages would have supported defendants is mixed.

The Court does go through a fairly detailed analysis — it’s just one long paragraph, and this is a pretty short decision — about factually what evidence was on the table that weighed in favor of finding prejudice to the defendants. The Court found that since the parties agreed that the text messages are not the only evidence on the issue, the Court could not find they were essential to the underlying claim, and therefore there was no prejudice to the defendant.

Since there’s no prejudice, the next step is intent. The Court found that the defendants did not carry their burden by clear and convincing evidence that there was an intent to deprive the defendants of this text evidence. The Court notes that the plaintiff’s failure to take active steps to preserve the text was negligent, and that negligence is not sufficient to establish intent to deprive, which is required for sanctions under Rule 37(e). Nothing in the facts was sufficient to find that the plaintiff acted with intent to deprive since his phone was stolen from his car — circumstances that the plaintiff had no control over.

Clearly, plaintiff should have taken more steps to preserve the data. But those facts do not rise to the level required for intent under Rule 37(e). As such, the Court denied the motion for sanctions and noted that the District Court is in the best position to decide the extent to which the parties can introduce evidence and testimony regarding the missing text messages and the circumstances of their unavailability.

While the motion was denied, the Magistrate Judge kicked it back to the District Judge to make a determination of how to handle the issue of the missing text messages for purposes of trial.

Takeaways

What are our takeaways from this case?

For heaven’s sake, take active steps to preserve your text messages when there is even the slightest chance that they could be relevant.

Kitchen staff are not going to communicate by email. They communicate by text. It is your job as counsel to know and understand the sources of ESI that are implicated in a particular matter and make sure they are preserved. There’s a very simple tool that you can buy and use in ten minutes to preserve texts, and it costs less than $100. This is not a place where you should be skimping on costs in an effort to preserve information.

ESI is, by its very nature, easy to lose or to allow it to be deleted. Defendant here waited a year to issue RFPs for the text messages when it was clear that they wanted them. They had the discussion with plaintiff’s counsel, but you can never be sure whether another party is preserving that information. Why not just issue those RFPs immediately? The texts still existed for eight months after the complaint was filed here. If the defendants had issued those RFPs immediately after the complaint was filed, or even within a few months of the complaint being filed, we wouldn’t be here before the Court on this motion. We’d have the evidence, and we’d know whose side it benefits if anybody.

If you really need ESI to prove your case, you’ve got to sit down early, figure out what you need, who has it, and go and get it. We’ve talked about this in terms of the discovery strategy meeting that needs to be held at the outset of every case. Get someone on your team who knows and understands what sources of ESI are going to be implicated based on who your custodians are. There’s a very easy profile that we use for all of our clients’ cases to determine what sources of ESI are out there. Then you’ve got to speak to the custodians and take active steps to preserve.

Finally, Rule 37(e) requires prejudice and intent to get sanctions. Know what you have to show and who has the burden to show it. There was little to no chance of showing intent here, so perhaps there was another motivation for bringing the motion. Trying to force a settlement through forcing the plaintiff to respond to the motion? Not sure, but if so, that’s kind of crappy. It really makes no sense to bring a motion for sanctions under Rule 37(e) when you have absolutely no basis to be able to prove intent.

Conclusion

Okay, that’s our Case of the Week for this week. Thanks so much for joining me. We’ll be back again next week with another decision from our eDiscovery Assistant database. As always, if you have suggestions for a case to be covered on our Case of the Week, please do not hesitate to drop me a line.

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Thanks so much. Have a great week.