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Exterro's Weekly Case Law Update: Exploring Intent to Deprive and Spoliation Sanctions Under Rule 37(e) -- First Financial Security, Inc. v. Freedom Equity Group, LLC

Created on February 24, 2017


Former Content Marketing Manager at Exterro

First Financial Security, Inc. v. Freedom Equity Group, LLC (N.D. Cal. Oct. 7, 2016)

First Financial Security, Inc. v. Freedom Equity Group, LLC (N.D. Cal. Oct. 7, 2016)

Why This Case is Important:

This case continues to define the ambiguity around what falls under “Intent to Deprive.”

Summary:

The Court issued a permissive inference instruction for the deletion of relevant text messages and native format data. However, the defendant failed multiple times to produce relevant ESI after being instructed by the court to do so. Regarding the text messages, the defendant conceded that the text messages were deleted, but it was done negligently. Instead of producing native file copies of documents, the defendant produced a spreadsheet.

Ruling:

NO REASONABLE STEPS

The court stated that the defendant had “an obligation to preserve text messages in the anticipation or conduct of litigation, that [defendant] took no reasonable steps to preserve text messages” which “cannot be restored or replaced through additional discovery and that [defendant]’s agents acted with the intent to deprive [plaintiffs] of the use of the deleted text messages.”

Expert Analysis:

“The seminal behavior in this case was undertaken by relatively low-level employees of the defendant, but even so, the court decided that the appropriate relief was a permissive inference (not a mandatory inference) because there was an intent to deprive the use of information in the litigation.”  Hon. Craig Shaffer, United State Magistrate Judge, District of Colorado