Deleted Text Messages Don’t Lead to an Adverse Inference Sanction. Here’s Why…

EBIN New York v. SIC Enterprise, Inc.

E.D. N.Y. September 23, 2022

Why This Case Is Important

The duty to preserve potentially relevant data extends to when “litigation is reasonably foreseeable.” This broad standard, in today’s big data world, can make it complicated for businesses to clearly communicate when litigation is likely and burdensome to implement processes to find and preserve that data.

Overview

The defendants moved for spoliation sanctions against the plaintiff, alleging failure to preserve relevant data from sources including WeChat and KakaoTalk mobile messages.

The plaintiff filed suit in this trade dress violation and unfair competition lawsuit in Feb. 2019, alleging that the defendant had sold a hair product with packaging resembling their own. Plaintiff issued a legal hold, including sending a letter to its customers requesting they preserve records relating to their products and other products that may have infringed on their intellectual property rights.

During e-discovery, the following occurred:

• April 2020: Defendants moved to compel discovery, arguing that the plaintiff did not produce all relevant data (including from the WeChat app). The plaintiff produced 100,000 pages of documents, but the court ruled that the parties needed to refine their discovery parameters.
• June 2020: Plaintiff still had not produced text messages sent via WeChat and KakaoTalk. Plaintiff used an e-discovery vendor to forensically image 13 employee cell phones.
• Oct. 2020: Plaintiff stated that their e-discovery vendor could not access some of the text messages from the plaintiff’s president because no WeChat or KakaoTalk messages were found. The plaintiff stated that their president received a new cell phone because his old phone, which contained the requested text messages, was damaged.

The plaintiff argued that their president did not intentionally delete responsive data. As a result, the defendants filed a spoliation motion for not preserving the requested text messages.

Ruling

• Adverse Inference Instruction Denied. The court found that the plaintiff had a duty to preserve the text messages, but the “Defendants have not shown that it is more likely than not that Plaintiff intended to deprive Defendants of the ESI or that there was an intent to deprive shown by clear and convincing evidence.” Thus, an adverse inference was not warranted.
• When the Legal Hold Should Have Been Distributed. The plaintiff should have started to preserve data relating to this case back in 2017 when the plaintiff contacted counsel about their feeling that the defendants’ infringed on their trade dress rights.
• Not Enough Circumstantial Evidence. The plaintiff did take some actions to retain and retrieve requested text messages, so the court determined the plaintiff’s conduct was more negligent than intentional.

Legal Analysis

By, David Cohen, Esq., Chair - E-Discovery Group, Reed Smith LLP

Different courts have identified different triggers for when preservation duties attach, ranging from when litigation is “reasonably foreseeable” to when it is “reasonably anticipated” to when it is “likely” or “imminent.” Magistrate Judge Merkl adopted the “reasonably foreseeable” standard here, but declined sanctions, did not impose attorneys’ fees, and reserved ordering any curative measures for lost data because there was no FRCP 37(e) showing of intent to deprive or prejudice from the loss of data.