Episode 99: Use of the Court’s Inherent Power to Grant Sanctions Following Bad Faith Actions in Discovery

In Episode 99 of Case of the Week, eDiscovery Assistant’s Kelly Twigger dives deep into the case of In re Facebook, Inc. Consumer Privacy User Profile Litigation, where Judge Chhabria awarded over $925,000 in sanctions against Meta and their counsel for bad faith and inappropriate conduct during discovery. This decision, handed down in February of 2023, has become a hot topic of conversation, and for good reason. It has set a precedent for how seriously courts are taking unethical behavior in eDiscovery, and how harshly they will penalize those who engage in it. In this blog post, we’ll examine the details of the case and the implications it may have on the future of eDiscovery.

Introduction

Hi, and welcome to episode 99 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. Thanks so much for joining me this week.

We are just one episode away from our 100th episode on the Case of the Week series. At the end of this broadcast, I’ll tell you what we’ve got in store. Thanks so much for sticking with me on this journey through eDiscovery in case law.

We are in the process of setting up meetings for Legalweek, which takes place in New York City March 20 through the 23rd, coming up in a couple of weeks. If you’re interested in sitting down with us to look at eDiscovery Assistant, discuss our roadmap for 2023, or see the newly launching eDiscovery Academy, you can drop us an email at info@ediscoveryassistant.com, and we’ll be in touch to set something up.

I’ll also be speaking on a panel sponsored by Onna on Wednesday the 22nd from 11:30 to 12:30 pm ET regarding emojis and alternative data types. If you’re going to be around, please stop in, take a listen, and say hi.

Finally, we launched a new segment last week called ESI in the News from our blog at eDiscovery Assistant. The goal with that new segment is to really identify issues that we’re keeping track of related to ESI issues in the news that have not yet evolved into case law decisions that can be covered on Case of the Week. We keep track of a lot of information that’s going on there and wanted to put that out in the form of a newsletter for you to be able to continue developing issue spotting for when issues arise for your clients.

All right, let’s dive into this week’s case. This week’s decision comes to us from the In re Facebook, Inc. Consumer Privacy User Profile Litig. This is a multi-district litigation started back in 2019 that was settled in the Fall of 2022. This decision is from February 9, 2023, on the plaintiff’s motion for sanctions and ruled on by United States District Judge Vince Chhabria.

Background

A little bit of background about this case before we dive into the specific facts. This case stems from the allegations that came to light following the Cambridge Analytica scandal. That scandal arose when, during the 2016 presidential election, Cambridge Analytica sent targeted political ads to voters using personal information gleaned from millions of Facebook accounts. Cambridge Analytica had purchased the information from a data scientist at the University of Cambridge who was able to collect the information through an app that he launched on Facebook’s platform.

You’ve seen, if you’re a Facebook user, multiple ways in which you can connect your account to other applications on Facebook, whether it be games, taking quizzes, other kinds of things. Through connecting that app on Facebook’s platform, the scientist’s app interacted with Facebook users and gave him access to their personal information as well as the personal information of their Facebook friends. Through this process, the data scientist, whose name was Kogan, was able to compile a data set that included information on 87 million Facebook users, even though only around 300,000 users had downloaded his app.

After the scandal broke, it came to light that access to users’ personal information was the norm versus the exception, and the Federal Trade Commission launched an investigation into whether Facebook had violated a 2012 consent decree that required Facebook to maintain a reasonable privacy program. Facebook ultimately paid a $5 billion fine and agreed to work to better protect users’ privacy.

This MDL that we’re talking about here encompasses dozens of lawsuits that were filed by Facebook users against the company, alleging that Facebook allowed app developers operating on Facebook to ask users for their personal information. And when a user consented, the app was able to collect vast amounts of the user’s friend’s information without consent. So in effect, if I consented to provide my information through the third party app, the app would then be allowed to collect all of the information from all of my friends on Facebook, even though my friends had not made a similar consent.

Now around 2014—so prior to the Cambridge Analytica scandal— Facebook decided to limit app developers access to friends’ information. Discovery showed that Facebook continued to allow certain business partners access to the earlier API that included friends’ information based on Facebook’s bottom line — purely for profit purposes. Those preferred apps were then referred to as whitelisted apps. The plaintiffs also alleged that Facebook failed to control and monitor app developers and business partners use of the information.

As a follow up to the Cambridge Analytica scandal, Facebook engaged the law firm of Gibson Dunn and two forensic consultant agencies to conduct an investigation into app developers called the App Developer Investigation, or ADI. While unrelated to any pending litigation at the time the investigation was undertaken, Facebook and its counsel asserted privilege over every single document associated with that investigation as part of the discovery in this case.

One note here — almost all of the decisions that were issued by either the special master, the magistrate judge, or District Judge Chhabria in this case had been held back from publication until just a couple of weeks ago, despite many of them being decided over a two year period. Today’s decision from February 8 is the most recent following the party settlement of the matter for $725,000,000 this past fall.

As we’re going through, I want you to pay attention to the facts of this case because it’s very different than other sanctions decisions we’ve seen where counsel didn’t know what they were doing in discovery, as in DR Distributors, or that evidence was spoliated by all of the witnesses, as in Hunter vs. City of Seattle. This case instead sets forth a litany of obfuscation and abuse of discovery by Facebook and their counsel at Gibson Dunn, where they simply refuse to cooperate and provide the relevant data in discovery. That’s the basis of sanctions in this case.

Facts

What are the facts before us on this current motion for sanctions? Well, there’s a lot of them, and so we’re going to summarize.

As I mentioned, we’re before the Court on plaintiff’s motion for sanctions, but one that was invited by District Judge Chhabria. This decision is coming about after the parties have already finalized a settlement. In this particular case, these plaintiffs proposed to represent a class of all Facebook users whose personal information was improperly disseminated or inadequately protected by Facebook from 2007 to the present. That’s a 12 to 14 year span of information.

In the fall of 2019, after the litigation was filed some months earlier, and the motion to dismiss from Facebook was denied, the plaintiffs sought all of the data that Facebook had collected about them from any source, as well as information from the app developer investigation.

What’s important to think about here is that this case and Facebook’s whole platform involves very unique sources of data that are outside the realm of everyday discovery, including very complex databases that store user data. As such, it was very incumbent upon Facebook to cooperate with the plaintiffs to provide an understanding of how these platforms work so that the parties could negotiate the scope of the data to be produced. Instead of that cooperation, counsel for Facebook and Facebook refused to share information with the plaintiffs, misrepresented to the plaintiffs and to the court the extent of effort required to produce responsive information, and used frivolous arguments to delay the production of key categories of information, including the information that plaintiffs asked for that had been collected about them, as well as the app developer investigation.

According to a very long litany of facts that are laid out in this decision, Facebook and its counsel simply spent two and a half years running the plaintiffs around by engaging of a pattern of behavior that included each of the following:

• Twisting the language of orders issued by the Court to take unfounded positions in discovery,
• Continuing to assert attorney-client privilege over documents of the app developer investigation that were not only unrelated to litigation, they were actually created to assuage the public that Facebook took its users’ privacy seriously,
• Failing to identify platforms to plaintiffs housing data directly related to the named plaintiffs that had been ordered for production,
• Both witnesses and counsel engaging in inappropriate deposition conduct where designated 30(b)(6) witnesses for Facebook claimed they had little to no knowledge of topics, even though documents showed them to be essential to the creation of privacy, and
• Counsel repeatedly instructing witnesses not to answer, in violation of both local and federal rules of civil procedure.

In terms of that obfuscation of deposition testimony, multiple witnesses for Facebook refused to provide testimony by claiming they did not recall months or years of work, despite documents that showed them to be extensively involved in the issues that were posed by the 30(b)(6) deposition notice for which they were designated.

Additionally, counsel over designated privileged documents, including 195,000 entries on a privilege log. The Court ordered a sampling of those privileged entries and revealed that 63% of the sample taken were not privileged, and as such, required Facebook to re-review all of the entries on the privilege log. There was also practice by Facebook of copying lawyers in an attempt to shield documents as privileged that the Court determined was not appropriate.

Now, in all of this, there were some very specific things related to pieces of data that were critical to this case and were as important for the plaintiffs to be able to understand. I mentioned earlier that proprietary database.

That proprietary database was called the Hive. Facebook initially claimed that all of the data in the Hive was anonymized, meaning that it could not be tied to a specific user. The Hive was a database that housed all of the information that was collected about various users and allowed it to be segregated, cut and pasted, filtered for APIs to come in and access that information.

Facebook alleged that it would take a full team of engineers working for more than a year to develop tools necessary to identify specific information that could then be retrieved from the Hive. That was Facebook’s position. However, two years later, in June of 2022, and three years after discovery started, the plaintiffs deposed an ediscovery case manager that Facebook put forth as a 30(b)(6) deponent.

Michael Duffy testified that Facebook had preserved a number of tables within Hive that related to plaintiffs very early on in the litigation. In fact, he testified that Facebook had identified those tables related to the Cambridge Analytica with the help of outside counsel, and it had placed 137 Hive tables on legal hold, likely starting in 2018. You can see the juxtaposition of those two positions taken by Facebook’s counsel — they not only don’t line up, but the testimony showed Facebook’s position to the court to be a complete fabrication.

During that deposition, Mr. Duffy also testified that another application called Switchboard had also contained information about plaintiffs, but that application had not been previously disclosed to plaintiffs despite three years of discovery. These revelations came about three years after the plaintiffs asked for the data that Facebook had collected on them, and two years after Judge Corley, the magistrate judge, had ordered the parties to meet and confer regarding the data that Facebook was withholding.

This is just a snippet of the pages of sanction worthy behavior that the Court details in its discussion. We’re not talking again about spoliation here, but rather a complete disregard for Facebook’s obligations in discovery.

Analysis

What is the basis for sanctions? Well, the Court begins its analysis by looking to its inherent powers to sanction Facebook and Gibson Dunn jointly and severally. We’re not talking about Rule 37 spoliation issues here. We’re talking about the Court looking at its inherent powers to be able to take action to sanction bad faith conduct.

According to the Court, “a Court may impose sanctions under its inherent powers when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. A Court may exercise this power by requiring the sanctioned party to pay the opposing party’s attorneys fees.” The Court notes that sanctions requires bad faith and that bad faith can be shown when a party misrepresents the law or facts to the Court, acts for a frivolous purpose, “delaying or disrupting the litigation or hampering enforcement of a court order” or repeatedly making arguments that have been rejected.

The Court’s view of Facebook and Gibson Dunn’s behavior here in this case is summed up by this quote:

The Court finds by clear and convincing evidence that Facebook and Gibson Dunn acted in bad faith during much of this litigation, and their misconduct warrants sanctions pursuant to the Court’s inherent authority. Because the court’s inherent powers must be exercised with “restraint and discretion”, the Court will only sanction Facebook and Gibson Dunn for the worst of their consistently bad behavior, the handling of discovery related to the app developer investigation, and the named plaintiff data. This misconduct would be sanctionable even if viewed in isolation. But their bad faith becomes even more obvious when viewed in the context of the entire litigation. It is also clear that the blame for this misconduct must be laid equally at the feet of both client and counsel. This sustained brazen stonewalling campaign could only have occurred if everyone, or almost everyone, was on the same page.

Specifically, the Court found that Facebook’s blanket assertion of privilege over the investigation documents was bad faith and found that the documents that were reviewed by the Court were highly probative. The Court noted that had Facebook gotten its way, none of these documents would have ever been produced. The Court went on to state that, “Facebook and Gibson Dunn engaged in what can only be described as an effort to gaslight their opponents and the Court over the production of Facebook’s internal communications and the communications with Facebook’s consultants.”

There’s so much good language from this decision — that sometimes discovery violations are blatant where a client shreds a crucial document or threatens the opposing party. Much of the discovery conduct here, however, as the Court notes, was much more insidious. The Court states:

No court ruling can ever be completely clear addressing every conceivable aspect of discovery. Discovery and the court system as a whole depends on the good faith of the parties. Counsel must reasonably interpret a Court’s orders and seek clarification where needed. Facebook and Gibson Dunn did the opposite. They pounced on slight ambiguities or fabricated ambiguities and used them to obfuscate and obstruct discovery for years.

Now, the Court goes into great detail about the conduct warranting sanctions and ultimately awards $925,000 in compensatory sanctions limited to costs and fees incurred solely based on the bad faith conduct that’s at issue. Plaintiffs had sought in excess of $1.7 million in sanctions. Now, this number is high at 925,000, but frankly, it’s lower than some of what we’ve seen. We saw the $2.4 million sanctions that were awarded in the DR Distributors case, and we’ve seen several decisions with sanctions in the several hundred thousand dollars range. This one’s high. Seems like it could have been even higher, but it’s pretty up there.

The Court notes that because its powers must be exercised with “restraint and discretion” it’s only sanctioning Facebook and Gibson Dunn for the worst of their consistently bad behavior and states that “it is also clear that the blame for this misconduct must both be laid at the feet of client and counsel.”

Takeaways

What are our takeaways from this decision? Well, clearly, we had a party here in Facebook and their counsel that were willing to obfuscate every aspect of discovery, and the plaintiffs did here what you have to do when you continuously get the run around from opposing counsel. You’ve got to keep going to the Court. When the Court was overwhelmed by the scope and technical nature of the issues, plaintiffs sought a special master.

We went through on this particular case, the district judge, who upon the scope of the discovery issues, then pushed discovery down to Judge Corley, who at the time was a magistrate judge, and then ultimately Judge Corley retained a mediator in the form of a retired judge who brought in a technical expert in Daniel Garrie. Then ultimately, plaintiffs sought to have Mr. Garrie assigned as a special master, and the Court agreed. All of those were really important steps that the plaintiffs continued to take to keep these discovery issues alive and to educate the Court on the lengths that Facebook and its counsel were going to to obfuscate discovery.

You have to be willing to go to the mattresses. It’s a quote from The Godfather; one that I might have taken from You’ve Got Mail. But regardless, it really is important that you are willing to go to the Court early when you have sufficient information that you’re not getting what you need from the other side.

Second takeaway is this—special databases like the Hive here require an understanding of what data is available and how it can be produced. When you have databases that there’s no way for you to understand without cooperation from the other side, you have to continue to find ways to get that information. Sometimes it’s going out and finding an expert who knows how those databases work so you can ask the right questions.

Here, it took almost three years of being stonewalled before the plaintiffs finally got a 30(b)(6) deposition where the deponent gave up the Hive tables containing information on the plaintiffs had been preserved. Perseverance here was key, and it paid off for the plaintiffs.

When you’re in a dogfight like this one clearly was, make sure that your time charges reflect the work that’s being done so that it’s clear when you can recover and what you can recover if sanctions are ever ordered. In this case, the Court awarded fees for two specific issues only. Documenting time charges accurately when the time is actually undertaken saves a huge amount of time in compiling that data for a sanctions motion and also adds credibility.

As to the role of the judges here and the amount of time that was taken up by the Court and special masters related to the discovery issues, we’ve had a lot of discussion with judges at live events this year between Relativity Fest and the University of Florida Levin College of Law eDiscovery Conference on whether or not there should be an increased role for judges in discovery, particularly when the parties are not cooperating. This case required a district judge, a magistrate judge, and a special master to facilitate discovery, and those types of resources do not exist on a regular basis, and the consensus from judges has been that they don’t want to get any more involved.

Other decisions in this case that were also just released recently document that plaintiffs sought and received the appointment of that special master to delve into the very technical issues here. Don’t be afraid to leverage a knowledgeable special master in situations like this. We typically even retain experts to be able to engage with the other side on what information is available on a regular basis.

Get in there with the data, get in there with the technical information. Find the people that you need to be able to get the discovery that’s required for your client.

Conclusion

All right, that’s our Case of the Week for this week. Please join us next time for a special edition of The Case of the Week as we celebrate our 100th episode. I am very pleased that my colleague David Horrigan, Discovery Counsel for Relativity, has agreed to join me for that 100th episode, and we will count down the top ten takeaways from the first 100 episodes of Case of the Week.

Thanks for joining me. Have a great week. See you next time.